Essay on Porter's Five Forces

1010 Words Feb 26th, 2011 5 Pages
COMPETITIVE ADVANTAGE

This paper addresses the use of Porter’s Five Forces model and how it can benefit Broadway Cafe by identifying and analyzing the effect of these forces on its business. The benefits include improved decision making, faster time to market, better productivity, improved competitive advantage, more profits and greater customer satisfaction. It also helps in achieving operational excellence.

Porter’s Five Forces Model

Threat of Entrants
Porter's First force is the threat of Potential Entrants. Statistics have shown the industry to be slowing down, therefore making competition high and the threat of new entrants low. Broadway Cafe has a small market presence, but the presence of its competitors like Starbucks
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The supply of coffee is affected by weather conditions, and the health of coffee trees. According to the article "Coffee Industry to Adopt New Pricing Plans," the major players in the coffee industry have seen profits decline because of over-crowding of the market. An over-crowded market will give the coffee suppliers bargaining power. As Broadway Cafe demands high quality coffee and there is no availability of substitutes for the coffee beans that Broadway Cafe use. Therefore, the bargaining power of supplier increases.

Threat of Substitute Products
In the premium foods and coffees industry, there are substitute products. According to Mary Coulter, the best way to evaluate this threat is to ask whether other industries can satisfy the customer need that this industry is satisfying (Coulter). Other beverage industries can satisfy the customer's need for a drink, and other food industries can satisfy the customer's need to eat. There are obviously good substitutes to Broadway products and the threat is high. This is why it is very important for Broadway Cafe, to innovate and differentiate. By providing free Wi-Fi in the Cafe and marketing signature food products from the famous old recipes of Grandfather, Broadway Cafe can create different image than its competitors.

Rivalry Among Existing Competitors
Porter's fifth force that Porter describes is current rivalry among existing firms. In the specialty eateries industry,

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