Five Forces And The Value Chain Analysis

1868 words - 8 pages

Number words in essay:1755

Five forces and the Value chain analysis.


The purpose of this essay is to present business decisions and strategies through analysing external environment and internal competencies based on Michael Porter's Five force and Value chain models.
The Fife force model include: threat of entry, threat of substitutes, power of buyers, power of suppliers, competitive rivalry.
Future content includes determining Potter's Value of chain, which are primary activities: inbound logistic,operations, outbound logistic, marketing and sales, service and support activities: firm infrastructure, human resource management, technology ...view middle of the document...

Threat of substitutes, what alternative products and services may customer chose. Power of buyers, if they have strong bargaining power they force down prices and reduce profitability. Power of suppliers if suppliers have few competitors they can raise prices at the expense of customers. Competitive rivalry the when four forces combine to affect the intensity of rivalry between an organisation and its rivals. (source: Boddy D, 2011, p.235).

Graph below demonstrate Potter's Five Forces model.

(Graph1 from 'cit333')

The treat of entry. The threat of new entrants to a market is high when the barriers to enter the market are low and opposite. The 'Lagenfurt Pub' is type of business in restaurants and pubs market and usually is seen by the people as a easy business because everyone can service the food and beer. If the 'Lagenfurt Pub' want to achieve competitive rivalry it must create a 'new face' taking long therm strategy, to become a different,unique pub and brake down the local market rules and customers habits.

Treats of substitutes. In all business one of the biggest treat are alternative or similar , cheaper products and services which customers may to choose. In a saturated market competitive advantage can be obtained through switching costs which are charged to final clients instead charging to another organisation.
For 'Lagenfurt Pub' the great customer relation management, new technologies, as well creation the Pub as unusual place for clients, can create unique business, different then others and decries or eliminate threat of others substitutes . The Pub should to offer a different, local beers and spirits which are not available in most pubs. The' Lagenfurt Pub' as a unique place offering unusual product and service can open business to a new clients and and stop the outflow of permanent clients.

Power of Buyers The significant reason why the 'Lagenfurt Pub' was loosing the clients was strong bargaining power of clients. The Pub is located in old town, there are many pubs offering the same service and products and it was giving the power to clients to dictate prices down, but cutting the prices was bad solution, leading to decries net profits. As well the Pub does have not the web site and was not any marketing campaign to inform new clients about this business. The Pub do not offered loyalty programs which can encourage the clients to be a loyal clients. Having the same products and no new technologies, it was difficult to keep the prices on profitable level. In back days when the owner knew most his clients by name, could have conversation with them, customers loyalty was much more higher then today.

Power of suppliers. 'If suppliers have a few competitors they can raise prices at the expense of customers' ( Boddy D. 2011, p.235). To gain competitive rivalry the Pub has to decrease power of suppliers. Instead to buy national beers from one wholesale, my friend started to offering in his Pub local...

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