Five Porter Forces and Business Strategic Development - Essay Example

Rivals in a business context can exploit markets and even destroy them depending on their capacity to compete well. A company offering goods at cheaper prices tends to attract more potential clients than one whose prices are exorbitant (O’Shaughnessy, 2006, p.12). Michel's Patisserie as a large industry faces rivalry from other enterprises in Australia which leads to fluctuations in the eventual gains. Competitors who try to drive the industry out of business are major rivals, and this can be achieved through bad rumors and lawsuits. In the long run, the competition reduces the profits and at times if healthy, causes a gain in the industry. However, the firm ensures that strategies to control rivalry are maintained and that it ensures the highest levels where competition is involved by offering the best services.    

 Threats of substitutes

Differentiation of goods is common in the food industry, and this is no different in a cake firm. Substitutes provide an easy outlet to consumers of goods when prices of those that they consume go up. A large cake industry faces low gains when the price of cake goes down, and the clients opt to consume bread instead. Threats of substitutes in the markets will lead to low profits due to high prices that the customers cannot afford. The firm has however dealt with such threats by ensuring that the costs of production are low and that customers can obtain quality and cheap products. Various advertisements have been implemented to create awareness that ensures the consumption of cakes even when prices are up.

Buyer power

The income of a consumer at any point in time determines what and how much is to be bought. The purchasing power of a person is subject to income. A company should set up products and goods where people can get and access them. The products to be offered and the prices set should meet the ability of people to purchase. As a large cake industry based in Australia, Michel's Patisserie has to ensure that the goods produced meet such abilities. The firm has ensured that the profits obtained are those projected by availing products to many consumers through branching and distribution to urban regions where people with large incomes are concentrated.

Supplier power

This force relates to the ability to avail products to people always and when needed. Customers achieve greater satisfaction when they can get what they need if and when they need it (Baker, 2008, p.147). It is this satisfaction that brings consumer loyalty and builds a lasting relationship. The ability to avail goods ensures continued purchases that lead to more profits in the future of a company. The firm has ensured proper and continuous distribution through a chain of vehicles to prevent the unavailability of cakes when needed.

Entry Barriers

The fewer the firms the less the competition and therefore the more the profits obtained by a company. A firm controlling a large market tends to be a monopoly whose gains are always high. As a large firm producing cakes, Michel's continues to have more and more profits. This is because of the barriers to trade by other firms arising due to low working capital and high registration fees involved. The firm enjoys a wide market arising from less competition due to barriers to trade with other firms. As a result, the profit potential is always high.