Strategic Analysis of the U.S. Dietary Supplement Industry: Case Study of NBTY Inc.
Date Issued
2010
Date
2010
Author(s)
Juan, Jeremy
Abstract
Abstract
The growing trend of healthy living is arguably one of the largest social and demographic trends currently in the United States. From “Baby Boomers” to children, individuals are shifting from the point of view of disease treatment to prevention. This has resulted in individuals increasing their understanding of diet-disease relationships and the benefits of dietary supplements. This trend presents an enormous opportunity for companies to exploit; yet with it carries threats for incumbent companies. One of those companies is NBTY, who markets approximately 25,000 products while also possessing multiple retail chains, such as Vitamin WorldR, in various geographic regions around the world. This study seeks to analyze the external environment, internal environment and NBTY’s strategy through the following questions: What are the macro- environmental factors influencing the structure of the dietary supplement industry and NBTY’s performance? Is the dietary supplement industry attractive or not? How does NBTY position itself? Also, what is their strategy and how do they implement their strategy?
Analysis of the macro environment indicates that the Political & Legal, Economic, Demographic, Social, Technological and Global forces all influence the dietary supplement industry and NBTY’s performance. From the above, the Social and Demographic forces are most prominent in influencing the industry through the enormous industry demand. Following are the Political & Legal and Technological forces, which give way to a fragmented industry with low barriers of entry.
The dietary supplement industry on the whole is considered to be low-moderate in terms of attractiveness. The key forces being that there is a high threat of entry and high bargaining power of buyers. To a lesser extent, there is low bargaining by suppliers and little to no substitutes.
Through the Resource-Based View, their Inventory Control & Distribution Systems and their Branding was determined to be a sustained competitive advantage, while their worldwide manufacturing plants and access to worldwide distribution channels were considered only a strength. The Value Chain Analysis identified the following activities as key to their positioning and overall strategy: Inbound & Outbound Logistics, Operations and Technology Activities and their Production and Technology Activities. Through these activities and resources, they are strategically positioned to perform similar activities in different ways as compared to rivals. Furthermore, their available resources and activities are feasible to pursue a cost advantage strategy. The implementation of this strategy can be seen through their investments in technology as a supporting activity to multiple aspects of the value chain and acquisitions that support their cost advantage strategy.
Their activities and resources is adequate for their strategy, which in turn fits the external environment. The implications of their strategy will create cost advantages as compared to their competitors and also create entry barriers for new entrants.
Subjects
Five-Force Analysis
Macro Environment Analysis
Resource-Based View
Value Chain Analysis
Dietary Supplement Industry
NBTY Inc.
Type
thesis
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