A Porter analysis examines five different forces that affect the success of a particular industry. This analysis is then used to establish if a certain industry is attractive to potential shareholders and investors. The following will elaborate on the power of suppliers and the power of buyers in the "family restaurant" industry; including restaurants such as: Boston Pizza, East Side Mario's, and etcetera. The different strengths and weaknesses of these forces depend on many different factors that will also be summarized. Finally the overall influence of each force on this industry will be specified to give a greater understanding of the strength of this industry in relation to its suppliers and buyers.
Firstly, the power of suppliers in the "family restaurant" industry will be discussed. In order to be successful a restaurant business must have the proper equipment, the desired furniture, decorations and dinnerware, and of course the proper food. Other companies supply all of these products to this industry. Nonetheless in North America and around the world there are many different companies that are in the business of selling supplies to restaurants. With this many different companies having the same intention, the restaurant industry has a large degree of choice in whom to buy from. For example, if a restaurant is not happy with one company's price for bar stools, the owner can easily find a different company with a better price for bar stools. The excess of companies to supply restaurants reveals that these suppliers do not have a large influence on the success of the restaurant industry.
In addition the majority of supplies that are needed for the restaurant industry are not unique from restaurant to restaurant. Different companies do not need different types of plates in order to be successful. The lack of rareness that is apparent in all types of restaurant supplies, from food to furniture, proves that once again the power of suppliers is weak in this aspect.
Moreover, if a restaurant is unhappy with a certain product, many other suppliers are available to choose from, as stated previously. Say a company like Boston Pizza decides to buy pizza crust from a different supplier because of a rise in prices of their current supplier. This change requires the company to find a supplier with a similar type of pizza crust at a better price. This change in suppliers is relatively easy for Boston Pizza because of the large amount of other companies that supply pizza crusts to restaurants at competitive prices.
Ideally, you would like to be in a market where there are few substitutes for the product or service you offer. It is true that a potential customer can ultimately make their own sandwich or cup of coffee. Yet do these customers have the time and resources to do it? Most likely this will not be the case. The Café can reduce the threat of substitute products by lowering its switching costs. Customers may be more reluctant to switch to a different product if the competitors sandwiches are not as fresh or homemade. Customers place a higher value on fresh, homemade breads and ingredients.
Understanding the number of competitors and their capabilities in a particular market is a key function of building strategy. If a company is competing against another company offering the same product or service, it faces limitation in regards to both supplier and buyer power. Customers will always tend to go to the place where they get the same product for a cheaper price, while supplier will tend to flock to places where the deal is considerably high. For CMG, a key differentiation in its competition within the fast food industry is designated I its ability to meet a one of a kind fast food experience where customers experience fine-dining similar to high0end hotels, but a low prices. CMG additionally differentiates totally with its rivals in the sense that they struggle to offer healthy and high-quality food that positively impacts the society.
Founded in 1986, Pret A Manger is a fast food chain, which produces freshly prepared, natural food with over 250 stores throughout the United Kingdom, France, Hong-Kong and the United States. Unlike most fast-food chains, Pret is a private company; they do not face the same pressure to grow as a public company does. However there are many factors that affect Pret A Manger’s marketplace such as economy, competition, technology, political environment, and the standard of living. This report evaluates major internal and external factors affecting Pret A Manger using various analytical techniques.
Senior Management of PepsiCo is evaluating the potential acquisition of two companies – Carts of Colorado and California Pizza Kitchen – in order to expand the company’s restaurant business. If indeed PepsiCo decides to pursue the acquisition of one or both, they must decide how to align each of these business units in its historically decentralized management approach and how to forge relationships between the acquired business units and existing business units. In their evaluation, Senior Management is faced with the question of whether the necessary capital investment in order to purchase one or both of the businesses can be profitable for each of the acquired business units, but must also take into consideration that the additional business units will not hinder the profitability of the existing business units.
Food industry can be chartered by low margin industry, while along with the shift of power from the manufacturer to the purchaser, the price and demand became flexible, and the product variety increased.
Demand for Panera franchising opportunities was very high, which allowed Panera to be picky about where and with whom they would do business. Panera determined where bakery-café locations could be. The franchisees bore the cost of opening new locations, and were required to obtain their ingredients from the home company. Expansion using the franchise model provided many upside benefits for Panera, while limiting the downside r...
Customers buy when they feel it is necessary giving them the upper hand on the industry. Bargaining power of suppliers: In the quick- service restaurant, the suppliers vary. They really do not rely distributors as large restaurants do. Threat of new substitutes: The restaurant industry is segmented into many parts: full service restaurants ($120 billion); quick- service restaurants ($110 billion); away-from-home managed institutions, examples: food services for schools and hospitals ($21 billion); and other food industries ($106 billion). (Marshall Jones, 1999). Rivalry among competi...
Editorial. Nations Restaurant News 11 Nov. 2005: n. pag. MasterFILE Premier. Web. 5 Mar. 2013.
Restaurants provide homogeneous products, though service delivery may differ from one place to another depending on the caliber of regular customers registered over a period of time as well as the target market. This means in most cases, service delivery will remain the main factor behind success of any enterprise in the hospitality industry.
The goods and services provided by each seller are differentiated by cuisine, skill, ingredients used and more. Each seller sets their prices according to their production costs with little regard for other competitors. There is high access to information, such as prices, menus and reviews, but limited by the fact that the value can only be determined after the experience.
Imlay, T. (2006). Challenges in today’s u.s. supermarket industry. Microsoft Retail and Hospitality, Retrieved from http://msdn.microsoft.com/en-us/library/aa479076.aspx
For assessing the industry profitability, Porter 5 Forces analysis tools were used to analyze one organization evaluation. In this case, the technique were used to analyze 7-Eleven Convenience Store specifically in Malaysia. Porter 5 Forces consists of 5 important area which is Threat of New Entrants, Bargaining Power of customers, Threat of substitute Products and services, Bargaining Power of suppliers, and competitive rivalry within the industry. Theoretically, the more powerful these forces in an industry, the lower its profit potential. The strength of each force differs by industry and changes over time. The competitive advantage that 7-Eleven has using these five forces is it has raised the barrier of entry for other competitors to enter the convenience store market as new competitors will require a huge capital investment in order to implement the information technology in their business in order to be competitive. Also, hypothetically being the first in the market, 7-Eleven could have made contracts with the Malaysia government to not allow other 24-hour convenience stores in the market for a certain time period, such as Astro had done, thus having a monopoly market in the beginning of their operations which will allow them to target a bigger market share.
As the marketing consultant for a hospitality management company, it is often my responsibility to define target markets for various restaurants and hotels. In fact, I have been tasked with creating a fictional hospitality operation, to utilize as an illustration to define a marketing strategy and target market. In addition, I must identify and analyze the product life cycle of an organization that has been in business for a minimum of twenty-five years.
There is a larger number and types of entrants in the market Fine Dining Restaurants-Casual Dining Restaurants-Quick- Service Restaurants. Landscape of primary location is also a threat; there is a lack of customer parking which could possibly result in lower numbers of customers. Climate may also affect the businesses in general, low peak season and bad weather can cause problems for the business market if bad weather is expected, customers are more reluctant to go outside if not necessary. Potential entrants and encroaching concepts are also a concern due to factors such as low consumer switching and brand not being well known. Cost is also a threat although the primary target market is higher-wage earners consumers with less income will not frequent Rooms for Dessert they will seek substitute
As Kerry began growing they developed some key values in the SWOT (strengths, weaknesses, opportunities, and threats) analysis that are the backbone for the success of the Kerry Group. The major strength of the Kerry Group is procurement. Procurement allows Kerry to use available global resources in specialty ingredients, seasonings, coating systems, sweet ingredients, nutritional systems, and specialty proteins; by doing this they are able to acquire the highest-quality raw materials. Another strength of Kerry is technological development. Through technological development Kerry is able to develop flavors and gain an advantage over the competition. Kerry gains this technological advantage through research and development and acquisitions. The weaknesses of Kerry Group include the firm infrastructure. The Group’s debt-to-equity ratio is inordinately high for a company of Kerry’s size. Another weakness is in Kerry’s Human Resource Management division. Management encourages the employees to think “Kerry” or in sense be “Kerryized,” if employees do not follow this style of thinking they are ...