Porter’s Five Forces Analysis
The five forces identified by Porter shape every industry and market (Krause 35). The Porter’s five forces play a significant role in analyzing competitiveness, profitability, and attractiveness of an industry. They include competitive rivalry within an industry, threat of substitute, bargaining power of suppliers, bargaining power of buyers, and the threat of new entrants (Yilmaz, 7; Bard, 50-1). This can be represented as shown below:
Threat of new entrants in the market: Medium pressure
- There are no incentives for using specific buyers such as the frequent shopper programs. This provides the new entrants with an opportunity to enter the business.
- There is easy access to hotel products and services and hence limited barriers for new entrants in the market.
- Many companies in the hotel and restaurant industry offer their products and services at slightly lower cost than their competitors. This makes it a bit hard for new entrants to enter the industry.
- There is scarcity of crawfish and seafood, making it hard for new entrants to enter the industry. However, they can still enter the market and offer other products and services that they can easily access.
- The government restrictions or legislation on crawfish and sea foods act as a barrier for the new entrants. However, accessing other products and services cannot limit them from entering the industry.
- Many companies in the industry are financially sound compared to the new entrants in the industry.
- The industry is profitable, and this leads to new entrants being attracted to the market.
Competitive rivalry among the established Companies in the industry: High Pressure
- Currently, there are very many competitors in the industry. In comparison to its competitors, Grandma’s Best lags behind in terms of IT integration in daily operations.
- Many companies in the hotel industry are innovative (Frehse 129). They use differentiated strategies while offering their products and services.
- Most of the established companies in the industry are about the same size, and each is trying to dominate the market.
- The industry is highly competitive and hence requires the companies involved using powerful competitive strategies to gain a competitive advantage.
- The degree of transparency is high considering that most of the company’s information is found on the web.
- The offline companies face stiff competition from the online companies.
The bargaining power of buyers: low pressure
- The demand for restaurant products and services is high in the hotel and restaurant industry. However, the customers are selective in purchasing products and services. They consider quality and price in the products and services they consume.
- Making information available for buyers is critical in the industry, as this makes them buy products from certain restaurants.
- There are many products and services offered in the industry, the buyers have a chance to select what they regard as the best for them.
- The companies in the industry value customers a lot and therefore, treat them well to attract and retain them.
- Customers switch to other products offered by other restaurants when they are not pleased with what a company offers.
The bargaining powers of suppliers: low pressure
- There are very many suppliers for all types of products in the market.
- Switching to another product is not costly for companies in the industry.
- The products offered in the industry are extremely important to people; they cannot do without food and shelter.
- Both the supplying industry and the buying industry have equal profitability.
- The distribution channels for the products are firm.
Threat of substitute Products: low pressure
- There are many substitute products in the industry, and the probability of consumers or sellers changing to a competitive product is high.
- The cost of switching to other products is low.
- Many substitute products are similar. Thus, a significant increase in one product can easily lead to the customer switching over to the other product.
Direct competitors of Grandma’s Best
The direct competitors of Grandma’s Best include; Big Joe’s restaurant, Good Times Café & Art Gallery, Greenwich- Dipolog Shopping center and other restaurants in Dapitan City. Creating a group map is vital in defining the scope of an organization’s competition (Forgang, 64). The two essential key success factors for Grandma’s Hotel success in the market are price and quality of foods and services. The products and services provided by restaurants are similar. What differentiates them is the price and quality in other restaurants. The consumers in this market are price sensitive and consider the quality of the products and services offered in the market. The four competitors of Grandmas’ Best in some way do not satisfy them accordingly. Therefore, Grandma’s Best will use Price and Quality as its success factors. The company will offer high quality products and services at better prices than its competitors. This will make it succeed in the market.
Strategic group map
Based on the Porter’s five forces, it can be concluded that the industry is favorable for Grandma’s Best. The industry is attractive because it is profitable. Considering that Grandma’s Best is financially sound, it can succeed in the market. There are no major barriers to stop the company from entering the market. Other than competitive rivalry that can be a bit challenging for Grandma’s Best, the pressures from the other four forces are low, and hence make the industry attractive. Through the provision of high quality products and services at customer friendly prices, the company can gain competitive advantage over its competitors.
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Forgang, William G. Competitive Strategy and Leadership: A Guide to Superior Performance. Lanham, Md. [u.a.: Rowman & Littlefield Publ, 2001. Print.
Frehse, Joerg. “Innovative Product Development in Hotel Operations.” Journal of Quality Assurance in Hospitality & Tourism 6.3/4 (2005): 129-146. Print.
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