Porters Five Forces Analysis - Broadway Cafe - Case Study Example

Business Information Systems- a Case Study of the Broadway Café Name Date Course Business Information Systems- a Case Study of the Broadway Café Introduction The Broadway Café is a coffee shop that offers a variety of products and services to its clients. These include coffee toppings, assorted gourmet syrups, wired willey’s white coffee, cappuccino products, energy drinks, big train products, concentrated milk with dispensing equipment, chocolate, white chocolate and fresh baked foods among many other products and refreshing services. The shop has been running without any use of business information systems and this is a challenge to efficient operation of the business. According to Wigand et al (2003: pp. 1), a business information system is meant to assist in conceptualizing, developing, introducing, maintaining and utilizing systems used for processing of information via computers within an organization and outside the organization. The ultimate aim of the system is to aid in automation of processes and improve the efficiency of operation as well as management of resources within the organization (Wigand et al, 2003). This paper carries out an analysis on how best the business information systems can be used at The Broadway Café so as to increase the efficiency of the shop through better service provision and subsequent increased sales. Porter’s Five Forces Analysis The ability of the shop to compete favorably is undoubted. This can be demonstrated in the porter’s five forces model. This model is appropriate for analysis since it provides the business with an overview on how best to position itself in the competitive market. It does this by analyzing the forces that would propel the business to perform better or to be pushed out of business. Bargaining power of suppliers Since suppliers are the most common sources of goods and products to businesses, the threat they pose to the business can be in form of their bargaining power. They could charge higher prices that will limit the profits attained by the business. They could also limit the quality of products they offer. For The Broadway Café, the advantage with this threat is the vertical integration of the business. This has greatly reduced suppliers’ involvement in the business and the firm is not subjected to the risk of suppliers who have strong bargaining powers. In fact, the phase of production where suppliers’ bargaining power could be high is during their interaction with the coffee farmer. In addition, the firm benefits from the fact that there are many suppliers and this provides a variety to choose from. It also poses a challenge to the suppliers to always supply quality products since they could fall out of the competition from their rival suppliers. Bargaining power of buyers Buyers refer to consumers and retailers. However, consumers are more sensitive to prices than retailers for undifferentiated products since they can find the services or products elsewhere (Bruzelius and Johanson, 2012). Retailers can spread their influence on buyers’ power if they determine the final price. In this case, the customers’ buyer power is more relevant. Whenever quality is of the essence, the customers become less sensitive to prices. In addition, the nature of the differentiated products offered by The Broadways Café means the sensitivity of customers to the price is lower. However, the customers are more privatized and if they combine, they could have a great bargaining power. To actively meet the demands by customers, a feedback strategy shall be used so as to ensure that their demands and preferences are investigated and met appropriately. Information systems shall play a key role in the strategies. For instance, use of customer feedback through the firm’s website shall be one of the ways to be used. Clients shall also post their comments on the firm’s social media pages on the preferences they have and any special complaints or demands. This shall combat the bargaining power of buyers. To curb the bargaining power of suppliers, the firm shall use websites of other suppliers to check and compare the prices used in supply. This shall make it easer for the firm to select the most appropriate supplier. Threat of new entrants According to Michael Porter’s model of Five Forces, the threat of new entrants provides the barriers to the entry into the market and the barriers to the exit. If a firm can be able to get into the market, it will pose a threat to the existing businesses. On the other hand, if a firm can easily leave the business. It provides a competitive edge to the firms still in business (Bruzelius and Johanson, 2012). The threat posed to The Broadway Café from new entrants is high. This is attributed to the fact that start up costs of a coffee shop are relatively low. It implies that many people can start up the business. On the other hand, it is easy to exit the business since clients are sensitive to the type of business offered. Any raw deal leads to the collapse of the business. Therefore, The Broadway Café shall focus on providing high quality products that will enhance high customer retention. It shall also provide differentiated products that will meet customized demands from customers. Threat of substitute products or services The profitability of an industry gets affected by the products that are perceived to be substitutes. This rivalry can be between individual firms or between the whole industry. If the substitute product has better offers, then the threat is high. The market dwelled in by The Broadway Café has close substitutes. Although the products offered are differentiated, there are various competitors who offer coffee shop products. To enhance customer loyalty, the shop shall offer a variety of food services in addition to improving service levels through use of information systems. The price offered shall cater for the fact that customers are sensitive to prices in this product. Rivalry among existing competitors According to Grant (2010), this is the force that many firms pay their attention to. Whenever there is rivalry, various techniques have to be used so as to lure clients to the firm. These techniques could involve improved service, low prices, use of new products or advertisement so as to attract new customers. Whenever the competitors are many and they are of eh same size, the intensity of competition is high. Grant (2010) also noted that the intensity could be high in cases where the exit barriers are high. Companies with undifferentiated products could opt for low prices so as to lure clients. However, this has a great effect on the profits attained. Quick service restaurants and specialty coffee shop provide the greatest competition to the Broadway café. The competitors target the age group sixteen to above fifty. This implies that the young age is left out. The Broadway Café shall use the differentiated product to its advantage so as to avoid being caught by the need to offer low prices. In addition, the café shall target the age group between eight to above fifty. This shall provide an opportunity for families to come with their children and utilize the products offered. The company shall also utilize information systems in advertising so as to gain more market share. Differentiated strategy The differentiated strategy shall be used by the firm in providing the services. This shall entail development of products that have unique attributes. The attributes have to be valued by the customers (QuickMBA, 2013). To effectively capture the attributes of the customers, the online feedback sessions shall be used. This shall enable a careful study of the needs by customers. While this may not guarantee a competitive edge from competitors, it provides an opportunity to install a premium price on the products. The firm prefers this strategy because of the trust it has in the creative and highly skilled product development team. In addition, the firm targets to effectively utilize information systems in promoting sales of the products through social media, websites and other information tools. Provision of specialized goods is also a good way of attaining a corporate reputation; which is a target by the company. How to increase sales Since conventional sales is changing, The Broadway Café shall adapt use of Web 2.0 tools such as social networking and instant messaging to increase its sales. Through this tool, the sales team shall build stronger customer relationships, enhance the social networks and will be able to work more efficiently and sell more products (Sankar and Bouchard, 2009, pp. 268). Social networking shall be used in customer service and marketing. In addition, instant messaging shall also be used in providing the same services. This technology shall help customers in faster decision making and this improves the interaction of the firm with its clients as well as facilitating ease of accountability. With this, the sales made by the company shall improve. With this new sells approach, collaboration between the buyer and seller shall be fostered (Sankar and Bouchard, 2009, pp. 268). For instance, use of blogs as a collaborative tool shall help the firm in finding out what the customers like to have in their ideal coffee shop. With this, the products to be sold shall be developed and research done on the products. Further, the benefits accrued from the products shall be posted on the blog and the feedback from the customers on the research shall enable review and improvement of the products. Additionally, customers shall get the opportunity to research on the posts and add more information on the products. This shall be beneficial to both the customers and the company. Business 2.0 strategy In addition, Business 2.0 strategy shall be used in building a website that will create stickiness and a sense of community for your customers. Use of web traffic is not a good indicator of web sales because some websites are information websites and the primary measure would be the number of visitors obtaining information from the website. This means that the measure of success depends on the purpose of the website. Business 2.0 can enable the company to streamline how information is structured along with influencing and controlling its flow (Kalakota and Robinson, 2001). This strategy shall be used in providing clients with information about available products. With this, the information about products offered shall be used to best capture the attention of customers and to make them stick to the products. Since wiki is a flexible and dynamic tool, it enables various users to access the writing and is a valuable tool for sharing of knowledge and enhancing collaboration. Therefore, it will enable clients to gather as much information as they wish about The Broadway Café products and services and this will enable the business grow. In addition, blogs are collaborative tools that shall be used in enhancing the marketing buzz since they are easy to create and edit and they provide information on the product. Comments can be posted freely and this tool can be used as an important feedback tool. To enhance the financial success of the website, photo-sharing provision shall be made; such as Flickr, and this shall enable photos of the products to be viewed by multiple web visitors. Instant messages shall be sent to clients on promotions if they visit the website. This shall enhance the numbers on the website and subsequent increase in sales. Use of m-coupons M-coupons can be used as important tools for marketing. This is because mobile phones are carried everywhere by people and the message sent to them on the promotion reaches them in real-time. In addition, they are cost effective and can easily create customer loyalty. When the system of the shop is integrated, m-coupons shall be received and information will be centralized. This implies that there can be a database to store additional customer relations. M-coupons also promote the social responsibility of the company by promoting green technology. On the downside, m-coupons face execution challenges. Not all mobile phones display barcodes and the merchant may not be able to collect copies physically. Another risk is that some clients may feel disturbed by constant messages whenever they pass near the café. In addition, there is a risk of fraud and mis-redemption (Pride and Ferrell, 2007, pp. 457). These are risks that are worth taking since it could trigger impulse buying from the client. Sms-based coupons shall be used so as to limit the challenge of barcodes. Digital dashboard Since the digital dashboard shall be able to integrate information from various sources, a web-browser based application shall be appropriate for The Broadway Café. This shall have an application for product suppliers since this will enable comparison of the various suppliers available and their offers. In addition, it shall have an application on the trending customer needs of a coffee shop. This shall enable the café to provide on-demand services. The dashboards shall also have a messaging application where data on all the messages sent to customers and their feedback messages are viewed. This shall improve on customer relations. The potential risk posed to the business by the dashboard is the threat posed to the security of information with the interactive nature of the dashboard. This implies that the company could lose useful information to its competitors. Review of the ordering process The Broadway Café is meant to provide a range of products including drinks, coffee, fast foods and ice cream among others. The design of the shop is meant to create luxurious and relaxing space for customers with prices being set to be worthy of the professional service offered. In the ordering process shown, the main cause of bottlenecks in the floor plan is the amount of available space. The arrangement of seats does not allow for free movement of employees while offering the services to the customers. It is vital that employee move in the café freely and fast so as to deliver the services efficiently. The presence of seats near the wall and closer to the seats at the middle of the floor implies the employees can access the clients from both sides easily. However, the seats close to the food ordering counter limit motion and are a bottleneck to operations. In addition, the payment counter also limits logical traffic flow of customers. At some point, customers will have to collide and this makes their free flow limited. It interferes with their comfort. Having a separate counter for food and beverage is a cause of redundancy in the café. To improve efficiency in operations, the above issues should be redesigned. This involves combining the food and beverage counter and doing away with the seat arrangement that causes bottlenecks in operation. The process model Building a new employee management system Pros and cons of using an employee in building One advantage to this is the fact that the employee understands the structure of the café from operations, management to service delivery. This implies that the employee will design the system based on a clear understanding of the challenges faced by the shop. In addition, controlling the time taken to create the system is easy and the whole process is cost effective. Since the café has its strength in customer satisfaction, an in-built system will most likely cater for the needs. In addition, the core competencies can be captured through in-house system design. On the downside, the designer might customize the operations to suit their own personal desires. For outsourcing an application, the advantage obtained is on the prospect of the new system identifying new loop holes in the existing system. On the downside, outsourcing faces the risk of losing out on the key strategies of the firm. According to Dibbern (2004), the outsourced applications are not intended to suit the challenges of the firm directly and an additional cost has to be incurred in customizing the application for the café. Employees in the café shall have mixed reactions about the new system. Some will feel the system is strenuous to them and limits their relaxing time while some will feel it is a good system that should be embraced. To best handle the mixture in feelings, the employees will be trained on how to cope with change and how important the change is to them. This training will enable them understand how the change will impact on their performance and the overall performance of the café. This shall enable a smooth transition from the old system to the new system. Bibliography Bruzelius, Y. & Johanson, H. 2012, Entry into the Coffee Shop Market – Starbucks establishes in Gothenburg: The demand and supply of the domestic coffee shop market, University of Gothenburg, School of Business, economics and Law. Dibbern, J. 2004, The Sourcing of Application Software Services: Empirical Evidence of Cultural, Industry and Functional Differences, New York: Springer. Grant, R., 2010, Contemporary Strategy Analysis, 7th edition, West Sussex: John Wiley & Sons Ltd. Kalakota, R. and Robinson, M. 2001, e-Business 2.0: Roadmap for Success, 2nd Edition, One Lake Street: Pearson Education Corporate sales Division. Pride, W. & Ferrell, O., 2007, Pride-Ferrell Foundations of Marketing, USA: Cengage Learning. Sankar, K. & Bouchard, S. 2009, Enterprise Web 2.0 Fundamentals, USA: Cisco Press. QuickMBA, 2013, Strategic Management, retrieved on September 24, 2013 from: http://www.quickmba.com/strategy/generic.shtml. Wigand et al, 2003, Introduction to Business Information Systems, Germany, Springer-Verlag Berlin-Heidelberg. Read More