Porter Five Forces Model
Porter Five Forces Model illustrates tools used to effectively analyse businesses within the industry with regards to their profitability strategies in the economy. It is a powerful and useful because it helps you get a thorough understanding of both the strengths and weaknesses of the current competitive position, and the strength of a position you are considering moving into. These tools:
• Bargaining Power of Suppliers - Analysing how supplier power forces increase prices.
• Bargaining Power of Customers – Analysing how buyer power forces decrease prices.
• Competition in the Industry – Analysing competitor capabilities with the industry.
• Threat of Substitution – The ease of which products can be substituted.…show more content… The bargaining power that customer have in a competitive environment has a direct effect on the bottom line. The profitability of the bakery depends on the ability to attract and retain loyal customers. In addition, maintaining a long-term relationship with them is the key to sustainable development. Given that the bakery deals with a large demographic, it prices it’s good accordingly:
• Bakery’s is a growing industry. Marsha’s bakery is a sole trading business that is competing with a large-fragmented market. That being said- customer have high bargaining power as they can easily switch to another bakery given that the switching costs are low.
• If customers purchase goods in large volumes, they have a higher bargaining power as total price charged is subsequently discounted.
• Threat of backward integration is low because compared to competition, these goods are baked in a delicate manner using traditional recipes that is confidential to the baker. So the bargaining power is low due to the fact that it’s not something the customer can successfully bake themselves. Marsha’s bakery may produce the same range of baked goods as its competitors. But given the unique manner in which they are produced, they are differentiated from that of its competitors and cannot be easily…show more content… The goods are baked in more of a traditional manner using secret recipes that is unknown to everyone. The unique taste is what differentiates Marsha’s goods to that of its competitors, this inevitably attracts and retains more customers in the long-run. Marsha’s baked goods is produced at an expected standard and cannot be found at any other bakery.
• The service offer in the bakery is commendable. Other than being attracted with aromas from the baked goods (in attempts to evoke pleasurable memories) as you walk in, the customer service is outstanding, compared to that of it competitors.
• Advertising through modern technology has proven to be an effective tool to gain a competitive advantage. The business created an easily accessible web page on the World Wide Web, which can be viewed by potential customers. This website provides essential contact details of the business and it provides a list of products produced by the bakery. In addition, it provides an option for potential customers to directly email the business for inquiries, if necessary. In the long-run, the bakery hopes to upgrade the website by providing options for the customer to securely register themselves, login and actively place an order online. The business also advertised through the radio, newspaper and