Strategic Management Assignment
Business Idea: Biodegradable Packaging
Marketing
Executive Summary
The rapid growth of environmental awareness among
consumers and industries has fueled the demand for
sustainable solutions, particularly in the packaging industry.
Biodegradable Packaging Marketing (BPM) is a startup
designed to address the gap in promoting eco-friendly
packaging solutions to businesses and consumers. BPM
focuses on providing strategic marketing consultancy to
manufacturers of biodegradable packaging. The company
uses tailored branding, market research, and industry
insights to position sustainable packaging as the preferred
choice across various industries, such as food and beverage,
retail, healthcare, and logistics.
The business seeks to reduce the environmental impact of
conventional plastic packaging while enabling manufacturers
to tap into a growing market. By leveraging innovative
marketing strategies, value chain optimization, and the
principles of strategic management, BPM aims to become a
leader in promoting eco-conscious packaging solutions.
The business aims to bridge a significant market gap by
promoting eco-friendly alternatives to conventional plastics,
targeting industries like food, healthcare, retail, and e-
commerce that require sustainable yet practical packaging
solutions. By providing manufacturers with data-driven
insights, customized marketing approaches, and
comprehensive value chain optimization, BPM seeks to
establish itself as a pioneer in eco-conscious marketing.
With the adoption of strategic management principles such
as Porter’s Five Forces, differentiation strategy, and Blue
Ocean Strategy, BPM plans to create a competitive
advantage in the market. The company highlights the long-
term environmental and economic benefits of biodegradable
packaging, empowering businesses to enhance their brand
image while meeting consumer expectations for
sustainability.
1. Business Idea
• Business Overview:
The business will manufacture and market biodegradable
packaging products made from plant-based or renewable
materials such as cornstarch, sugarcane, or mushroom-based
packaging.
The idea addresses the rising environmental concerns about
plastic waste and the increasing regulatory push towards
sustainable solutions. It will serve sectors like food and
beverage, cosmetics, and e-commerce, where packaging is
essential but needs to align with sustainability goals.
• Market Gap & Opportunity:
Despite the growing awareness of environmental issues,
many businesses still use non-biodegradable plastics
because of cost and lack of alternatives. Biodegradable
packaging presents a market gap as consumers and
businesses are increasingly demanding more sustainable
options.
With regulatory pressure, especially in Europe, North
America, and parts of Asia, many companies are actively
seeking biodegradable packaging suppliers.
• Innovation & Value Proposition:
• Providing cost-competitive biodegradable options.
• Customizable packaging solutions.
• Reduced carbon footprint compared to traditional
plastic.
• Environmental awareness campaign to build brand
loyalty.
2. Industry Analysis using Porter’s Five Forces
Porter’s Five Forces Model is an essential framework for
analyzing the competitive environment within an industry.
This analysis helps to identify key forces affecting the
biodegradable packaging industry and understand its overall
dynamics, including the power of suppliers, buyers, the
threat of new entrants, the threat of substitutes, and the
degree of rivalry among existing competitors.
Threat of New Entrants: Moderate to High
The biodegradable packaging industry presents significant
opportunities, especially given the increasing regulatory
pressure on plastic use and the growing consumer demand
for sustainable solutions. However, the ease of entry into this
market can be viewed in two ways:
• Low Capital Barriers for Entry: On one hand, the
industry has relatively low capital requirements for small-
scale operations, as it does not require highly specialized
technologies compared to other sectors, such as electronics
or pharmaceuticals. As a result, small and medium-sized
enterprises (SMEs) and startups can enter the market more
easily. This accessibility allows new entrants to test the
market with innovative packaging solutions.
• Established Players and Economies of Scale: On
the other hand, large companies already dominate key
segments of the market, including major suppliers of raw
materials and manufacturers. These established players
benefit from economies of scale, which allow them to lower
per-unit costs and offer competitive prices. Furthermore,
established businesses have more resources for research
and development (R&D) and access to global supply chains.
New entrants may struggle to achieve these economies and
gain market traction, particularly when competing against
well-funded companies.
• Regulatory Compliance: Regulatory requirements
related to environmental impact and product certifications
(such as compostability and biodegradability standards) can
pose additional barriers for new entrants. These standards
often require significant
investment in testing, quality control, and certifications,
which could be financially challenging for smaller startups.
• Threat Level: The threat of new entrants is moderate
to high, with opportunities for innovation and market
disruption, but also challenges in establishing a strong
foothold against larger, established players.
Bargaining Power of Suppliers: Moderate to
High
The bargaining power of suppliers in the biodegradable
packaging industry depends on several factors, such as the
availability of raw materials, the complexity of production,
and supplier concentration.
• Raw Material Supply: Biodegradable packaging
materials often rely on agricultural products such as
cornstarch, sugarcane, hemp, or mushroom-based
materials. As such, suppliers of these materials can exert
considerable influence over pricing and availability. While
there is growing interest in renewable and sustainable raw
materials, supply chain fluctuations (e.g., poor crop yields
or environmental conditions) can lead to price volatility.
Suppliers with strong control over these resources can
impact the pricing of biodegradable packaging.
• Material Innovation and Quality: The quality of
materials also influences the performance of biodegradable
packaging. New materials with improved properties (such as
better durability or faster degradation rates) are often in
limited supply, and suppliers of these cutting-edge
materials may hold significant bargaining power.
Companies that rely on standard raw materials, however,
may have more options to choose from.
• Dependency on Specialized Suppliers: As
biodegradable packaging is still a niche segment,
companies often rely on specialized suppliers who offer
innovative or sustainable packaging materials. If there are
few suppliers of high-quality, cost-effective biodegradable
materials, these suppliers can exert considerable power
over the pricing and availability of such materials.
• Threat Level: The bargaining power of suppliers in the
biodegradable packaging industry is moderate to high.
While there are several material suppliers, the growing
demand for sustainable packaging is placing pressure on
suppliers to meet these needs, giving them some leverage
in pricing.
3. Bargaining Power of Buyers: High
The bargaining power of buyers in the biodegradable
packaging industry is relatively high due to several factors:
• Price Sensitivity: Many businesses are still sensitive to
the cost of packaging, and biodegradable packaging can
often be more expensive than traditional plastic
alternatives. This price sensitivity gives buyers the ability to
negotiate better prices, especially if they are purchasing in
bulk. As the price gap between biodegradable and plastic
packaging narrows due to technological advances and
economies of scale, buyers will have more bargaining power
to push for lower prices.
• Market Demand for Eco-Friendly Alternatives: With
consumers becoming more environmentally conscious,
businesses are under increasing pressure to adopt
sustainable practices. Companies that are committed to
sustainability may prefer biodegradable packaging, but they
still require cost-effective solutions. As a result, businesses
have a high degree of leverage when negotiating with
packaging suppliers, particularly if there are several
alternatives available.
• Large Corporate Buyers: Large corporations,
particularly those in food and beverage, e-commerce, and
cosmetics, have significant bargaining power due to their
size and purchasing volumes. These companies can
demand lower prices, higher-quality materials, or even
customized solutions. Furthermore, some large buyers have
internal sustainability goals, which may influence their
purchasing decisions but also increase their expectations
from packaging suppliers.
• Switching Costs: Switching costs for businesses
adopting biodegradable packaging are low, especially if
they are already using an environmentally conscious supply
chain. This ease of switching makes it easier for buyers to
switch between different suppliers based on price, quality,
and innovation.
• Threat Level: The bargaining power of buyers is high,
especially due to their ability to negotiate better terms and
switch suppliers if they are not satisfied with pricing,
quality, or innovation.
4. Threat of Substitute Products: Moderate to
High
The threat of substitutes is a critical factor for the
biodegradable packaging industry, as several alternatives to
biodegradable packaging exist, some of which may be more
attractive in certain market conditions.
• Traditional Plastics: The most significant substitute to
biodegradable packaging is conventional plastic. While
plastics are environmentally harmful, they remain cheaper
and more widely available. Despite growing environmental
awareness, many businesses may opt for plastic packaging
due to its lower cost and ease of production. As such, plastic
packaging can remain a powerful substitute, especially in
industries where cost sensitivity is high.
• Reusable Packaging: Another substitute is reusable
packaging, which is gaining traction in sectors like e-
commerce and food delivery. Reusable packaging is an
attractive alternative to single-use packaging, reducing
waste and offering long-term cost savings for businesses.
However, the widespread adoption of reusable packaging
may still be limited due to logistical challenges and
consumer behavior.
• Glass, Paper, and Metal Packaging: Other types of
packaging, such as glass, paper, or metal, are increasingly
being considered as substitutes to biodegradable
packaging. Paper, for example, is biodegradable and
recyclable, and many businesses already use paper for
packaging. However, glass and metal packaging are often
more resource-intensive and heavier, which increases
transportation costs.
• Technological Advancements in Plastic: Innovations
in plastic recycling and biodegradable plastics made from
renewable sources, such as bioplastics, may also pose a
threat to traditional biodegradable materials. Bioplastics are
often touted as more sustainable alternatives, although
their overall environmental impact is still debated.
• Threat Level: The threat of substitutes is moderate to
high. While traditional plastic remains dominant, growing
interest in alternative solutions like reusable packaging and
bioplastics may pose competitive challenges to the
biodegradable packaging market.
Industry Rivalry: High
The competitive rivalry within the biodegradable packaging
industry is intense, driven by several factors:
• Market Fragmentation: The industry is characterized
by a large number of players, including both established
packaging manufacturers and startups. Many companies
are vying for market share in the growing demand for
sustainable packaging solutions. As more businesses enter
the market, competition intensifies, especially in terms of
pricing, innovation, and customer acquisition.
• Differentiation and Innovation: Competition is not
solely based on price but also on the ability to innovate with
new materials, packaging designs, and manufacturing
processes. Companies that can create packaging solutions
that are both cost-effective and eco-friendly have a
competitive edge. For example, companies using plant-
based materials like mushroom-based packaging or algae-
based films differentiate themselves from those using
traditional biodegradable plastics.
• Marketing and Brand Positioning: With increasing
consumer awareness of sustainability, brands that
effectively communicate their eco-friendly credentials
through marketing and certifications (e.g., compostability
and carbon neutrality) can gain customer loyalty.
Businesses that successfully position themselves as
sustainable leaders in the packaging industry can leverage
this to gain a competitive advantage.
• Price Competition: As the demand for biodegradable
packaging increases, price competition among
manufacturers becomes fierce. Businesses are under
pressure to balance the higher production costs associated
with biodegradable materials while remaining competitive
against plastic packaging.
• Threat Level: Industry rivalry is high, with numerous
players, technological innovation, and price competition
intensifying the competitive dynamics.
3. Competitive Strategy using Porter’s Generic
Strategies
Michael Porter’s Generic Strategies framework provides three
broad strategic options for companies to achieve a
competitive advantage in the marketplace: Cost
Leadership, Differentiation, and Focus. Each strategy
helps businesses position themselves in a way that enhances
their ability to compete effectively in the industry. For the
biodegradable packaging startup, the chosen strategy is
Differentiation, which involves offering unique products or
services that are perceived as distinct and superior to those
of competitors. This strategy will help the business establish
a strong competitive position, build customer loyalty, and
gain market share.
Chosen Strategy: Differentiation
The biodegradable packaging industry is highly competitive,
with numerous players vying for market share. Given the
emerging nature of this market, the key to gaining and
sustaining a competitive advantage lies in differentiating
the product offering through innovation, quality, customer
service, and the brand’s commitment to sustainability. The
differentiation strategy will help the startup stand out in a
crowded marketplace and appeal to businesses looking for
eco-friendly, high-quality packaging solutions.
Key Elements of the Differentiation Strategy
1. Innovative Product Offering
The primary focus of the differentiation strategy will be on
innovative packaging solutions that provide superior
performance while being environmentally friendly. This could
involve:
• Use of Cutting-Edge Materials: Researching and
utilizing the latest biodegradable materials, such as algae-
based films, mushroom packaging, or bioplastics, which
have a lesser environmental impact than traditional
biodegradable plastics. By offering unique materials, the
company can cater to companies seeking innovative and
sustainable alternatives.
• Customized Solutions: Offering custom biodegradable
packaging tailored to the specific needs of industries like
food, cosmetics, and e-commerce. This could include
designing packaging in various shapes, sizes, and
functions to accommodate the unique products of clients.
Packaging that is aesthetically appealing and functional
will further differentiate the company’s offering.
• Durability and Performance: Ensuring that the
biodegradable packaging can withstand the rigors of
shipping and storage while breaking down naturally at the
end of its lifecycle. Packaging with superior durability will
appeal to industries that require both sustainability and
functionality in their packaging solutions.
2. Branding and Customer Experience
Branding plays a crucial role in the differentiation strategy.
The biodegradable packaging startup will emphasize its
commitment to sustainability, environmental
stewardship, and ethical production practices. This
focus will help build a strong emotional connection with
environmentally conscious customers.
• Sustainability Certifications: Gaining third-party
certifications, such as Compostable, FSC (Forest
Stewardship Council) certification, and other
environmental claims, will lend credibility to the
company’s green image and assure customers of the
product’s legitimacy.
• Eco-Friendly Packaging Design: Beyond the
functionality, the company will ensure that its packaging
is visually appealing and aligned with the growing trend of
“green” marketing. The design and aesthetic of the
packaging will be unique and convey a sense of
environmental responsibility, attracting businesses that
want their product presentation to align with
sustainability values.
• Customer Service Excellence: Offering excellent
customer service, such as on-time delivery, consultation
on packaging needs, and post-sale support, will help
differentiate the company from competitors. The goal is
to provide a complete, customer-centric experience that
builds long-term loyalty.
3. Technological Advancements
The business will invest heavily in research and
development (R&D) to create new and better
biodegradable packaging materials. This commitment to R&D
will:
• Create New Value Propositions: By innovating in
biodegradable material technology, the company can
introduce products that offer enhanced performance,
such as packaging that decomposes faster, is more
durable, or is multifunctional (e.g., packaging that
transforms into a plant pot after use).
• Improve Sustainability: Research into more
sustainable raw materials or manufacturing processes will
ensure the company maintains a competitive edge.
Innovation can also lower production costs over time,
creating a price-performance advantage.
Sustainable Competitive Advantage
The differentiation strategy will enable the biodegradable
packaging business to achieve a sustainable competitive
advantage by focusing on key areas that set it apart from
competitors in the following ways:
1. Brand Loyalty: The company will build strong brand
loyalty by offering high-quality, innovative products that
are in line with environmental values. A strong brand
identity tied to sustainability can create a dedicated
customer base that is less sensitive to price competition
and more committed to maintaining their relationship with
the brand.
2. Innovation Leadership: By continually investing in
R&D and staying at the forefront of biodegradable material
technology, the company will become an innovation leader
in the packaging industry. This technological edge will not
only make the company’s products more attractive but will
also ensure that it can meet the evolving needs of
customers and regulators.
3. Quality and Performance: The company’s focus on
high-performance biodegradable packaging will allow it to
maintain a competitive edge in a market where product
quality is a significant concern. Businesses that need
reliable packaging that also meets sustainability standards
will prefer the company’s differentiated offerings over
lower-quality alternatives.
4. Customer Relationships: The startup’s emphasis on
customer education and service excellence will enable it to
build long-lasting relationships with clients. As the
biodegradable packaging market grows, businesses will be
more likely to stay with a supplier they trust, reducing the
threat of churn and new competitors.
5. Regulatory Compliance: With increasing global
regulatory pressure on plastic waste and sustainability, the
company’s commitment to meeting and exceeding
environmental standards will ensure it stays ahead of the
curve in terms of compliance. This will further solidify its
reputation as a leader in the sustainable packaging space.
Alternative Strategies Considered: Cost
Leadership and Focus
While differentiation has been chosen as the primary
competitive strategy, it’s useful to briefly consider the other
two strategies from Porter’s model:
• Cost Leadership: Competing on cost alone would not
be suitable in the biodegradable packaging industry, given
that eco-friendly materials are often more expensive to
produce than traditional plastics. A cost leadership strategy
could compromise product quality or sustainability efforts,
which would be counterproductive to the company’s value
proposition of providing high-quality, environmentally
friendly packaging.
• Focus Strategy: A focus strategy, either on a specific
segment of the market or a specific geographic area, could
be considered. However, given the broad demand for
biodegradable packaging across multiple industries (food,
cosmetics, e-commerce), a broader differentiation strategy
will provide more opportunities for growth and market
reach.
4. Value Chain Analysis
• Primary Activities:
• Inbound Logistics: Sourcing raw materials from
sustainable agriculture or suppliers.
• Operations: Manufacturing biodegradable packaging
using eco-friendly processes.
• Outbound Logistics: Distribution channels to deliver
products to various industries.
• Marketing & Sales: Establishing a strong brand
presence through online and offline marketing, and eco-
certification campaigns.
• Service: Offering consulting and post-purchase support
to clients to integrate biodegradable packaging into their
operations.
• Support Activities:
• Firm Infrastructure: Creating a lean operational
structure to optimize resources.
• Technology Development: Investing in R&D for
material innovation and cost reduction.
• Human Resources Management: Hiring skilled
personnel with expertise in sustainable business practices
and packaging technologies.
• Procurement: Partnering with suppliers who are also
committed to sustainability.
• Areas for Value Addition:
• Improve the logistics network to reduce delivery times
and costs.
• Invest in customer education to increase adoption of
biodegradable packaging.
• Use eco-friendly production techniques to reduce the
carbon footprint.
5. Blue Ocean Strategy
• Untapped Market Space:
The business can target industries that are just beginning to
shift towards sustainable packaging. Emerging markets like
Asia, where environmental regulations are catching up with
Europe and North America, present a great opportunity.
• Four Actions Framework:
• Eliminate: Eliminate the reliance on petroleum-based
packaging materials.
• Reduce: Reduce manufacturing costs through
economies of scale.
• Raise: Raise customer awareness about the
environmental benefits of biodegradable packaging.
• Create: Create unique designs and functional packaging
solutions for new markets like cosmetics and
pharmaceuticals.
6. Financial Feasibility
• Revenue Model:
• Direct sales to B2B clients (businesses requiring large-
scale packaging solutions).
• Subscription model for continuous supply to businesses.
• Licensing biodegradable technology to third-party
manufacturers.
• Cost Structure:
• Raw material procurement (biodegradable substances).
• Manufacturing costs (production facility setup, labor).
• R&D expenses (for continuous product innovation).
• Marketing and distribution costs.
• Projected Profitability:
Initial high costs due to R&D and marketing investments, but
profitability will grow as demand for biodegradable packaging
increases, especially with new regulations. Projected break-
even within 3–5 years.
7. Conclusion and Recommendations
• The biodegradable packaging market offers significant
potential due to rising environmental concerns and
increasing demand for sustainable alternatives.
• The business should focus on continuous innovation and
strong marketing to differentiate itself in the competitive
landscape.
• Scaling up operations, diversifying into multiple
industries, and expanding into international markets will
ensure long-term success.
