This study analyzed the competitive landscape of “The US Legal Marijuana Industry” by using Porter’s Five Force Model. Marijuana is considered as medicine in many cultures (Hollenbeck & Uetake, 2019). There is now increasing acceptance of this plant as a genuine choice for the patients who are suffering from medical problems such as chronic pain, seizures etc. Porter’s Five Force Model is one of the frameworks for the fundamental analysis of five competitive forces which leads to shape the industry and aids to identify weakness and strengths. These five forces are comprised of the competition in the industry, potential of new and innovative entrants in the industry, power of suppliers, power of customers and threat of substitute products.
The competitive market of US Legal Marijuana Industry is at its pioneering stage. The US market is expected to reach $150 billion by the year 2025 (Hollenbeck & Uetake, 2019). This depicts the explosive growth of this industry due to increasing competition. Marijuana is highly recommended in the medical care which attracts many investors to invest in this industry and generate maximum revenue from this. The revenue generation of this industry is high and the industry is a monopoly position. Therefore many leading organizations want to tie up with and generate revenue. Apart from this, due to legalization and the requirement of license in order to distribute the products makes it difficult for new suppliers to enter in this market which leads to the low rival intensity. However, the medical sector demands a high distribution of these products.
The competition against the existing players is quietly high as compared to the new entries. The products of the Marijuana plant are highly important for the medical sector and the production requirement is high in the market. The biggest threat that follows industry is domestic grown illegal marijuana (Rosenberg, 2018). The supply and the production of illegal marijuana impact on the productivity of the other organisations that are legally producing the products from Marijuana. It is also noted that the network and the establishment of these illegal plants have a lack of sales tax and regulatory compliance. The legalization of Marijuana is increasing day by day which increases the entrance. However, the industry is at its growing stage as these illegal entries highly impact the growth of the legal industries. The tobacco and alcohol companies’ wants to you try another hand on this business in order to generate large revenues. These industries are already capturing the market so it becomes easy for them to sell the products from Marijuana.
Bargaining power of this industry is the high demand for the products in the medical centre as well as the retail sector. The highest bargaining power leads to flexibility in the prices which will lead to fascinate and attract a large number of customers. The buying power of the industries leads to no dominant suppliers and the black market. The black market is considered as the illegal buying of the industry product in high or low rate (Kamin & Moffat, 2016). The low bargaining power of the products contains the high cost of the products. The risk is quietly high for the new entries due to the legal formalities, taxes etc. Due to the illegal production of marijuana customers can easily compare the prices of the products and choose the products that have low price with all qualities. Bargaining power can be calculated by analysing the strength and weakness of the organisation.
The bargaining power of the suppliers for this industry is high as the number of suppliers related to the buyers is low. As the production of the product is should be legal therefore the demand of legal supply and industry increases. There is always competition between large firms and small enterprises (Kilmer & MacCoun, 2017). There a large number of suppliers and switching. The field of medical sector demands large production of these Marijuana plants for the production of important medicines which help the patient to recover soon from various health issues. There are limited supplied tailored to medical marijuana. Apart from this the method of growing these plants using mineral, nutrient solutions, water, except soil. This is the most common method used in growing the plants. It will be very difficult for the smallest enterprises to grow a large number of planets which need a lot of investments.
In the medical sector, Marijuana is considered as the medicine which leads to eradicate various health problems. However, there are various options related to this product which may lead to being the biggest threat to the industry. There are various alternative options which are lower in price as compare to Marijuana plant products. Organisations can make alternate medicines like these products which can be recommended by the doctors (Chan, 2016). There are different pain killer’s present markets which can work similarly to Marijuana plant products. Black marketing is one of the key threats to the organization. The illegal production of marijuana plant products leads to penetrating the supply and production of the products from the legal organisations. The customer has various internet options which lead to an impact on the productivity of the legal organisation. The black market is one of the biggest threats for this industry which affect the Marijuana industry growth in upcoming years.
It is concluded from the study that Marijuana is considered as the medicine in many cultures. There is now increasing acceptance of this plant as a genuine choice for the patients who are suffering from medical problems such as chronic pain, seizures etc. As the production of the product is should be legal therefore the demand of legal supply and industry increases. There is always competition between large firms and small enterprises. The legalization of Marijuana is increasing day by day which increases the entrance. However, the industry is at its growing stage as these illegal entries highly impact the growth of the legal industries
Chan, K. (2016). The Highs and Lows of the Marijuana Industry: Weeding through the Legal History, Financial, and Bankruptcy Issues That Marijuana Businesses Face. Bus. & Bankr. LJ, 4, 115.
Hollenbeck, B., & Uetake, K. (2019). Taxation and market power in the legal marijuana industry. Available at SSRN 3237729.
Kamin, S., & Moffat, V. R. (2016). Trademark laundering, useless patents, and other IP challenges for the marijuana industry. Wash. & Lee L. Rev., 73, 217.
Kilmer, B., & maccoun, R. J. (2017). How medical marijuana smoothed the transition to marijuana legalization in the United States. Annual Review of Law and Social Science, 13, 181-202.
Rosenberg, E. (2018). Interpretation of California's Marijuana Regulations after Proposition 64 and Pharmacy Practice Roles in Medical Marijuana Dispensing against Federal Enforcement Risks.
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