The Broadway Cafe - Case Study Example

? The Broadway Cafe The Broadway Cafe Michael Porter while teaching in Harvard in the 70’s and 80’s has made lot of researches in the business field and formulated a theoretical framework for the competitive advantages of organizations. He has questioned the traditional economic theories and business philosophies and has introduced his famous theory of Five Forces model in order to help the current organizations to identify their strengths and weakness in the current globalized business world. One of the major significances of Porter’s five forces model is its ability to predict even the future challenges and opportunities of an organization. “Porter's 5 Forces tool is a powerful tool for understanding where power lies in a business situation because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into” (Porter’s Five Forces, 2011) According to Michael Porter, Threat of new entrants, bargaining power of supplier, bargaining power of buyers, threats of substitute products, industry rivalry or competition etc are the five forces which shapes the present and future of an organization. (Porter’s Five Forces Model, 2009). The figure given below illustrates the Porter’s five forces theory. (Porter’s Five Forces Model, 2009) In the given case study, Broadway cafe is struggling to survive in the current business climate, even though they had good business and reputation in the past. This is entirely because of the lack of modernizations undertaken in Broadway Cafe based on the changing trends in business and management. Broadway cafe is trying to operate their business with their older management and business methods which were big successes in the past. However, such older methods may not be successful at present because of the changing needs and life styles of the current customers. This paper analyses the given Broadway Cafe case study based on Porter’s five forces model and provide some suggestions for the rebuilding process of Broadway Cafe for the twenty first century. Analysis of Broadway Cafe with respect to Porter’s Five Forces Model According to Porter, substitute products are one of the major challenges for a product manufacturer or service provider. In his opinion, substitutes are those products which can offer a real alternative to a particular product. The Broadway cafe offers many different kinds of specialized coffees, teas, a full service bakery, and homemade sandwiches, soups, salads etc. All these products offered by Broadway cafe had a unique taste and identity in the food market earlier. However, the entry of new recipes and other food items caused big problems to Broadway cafe in recent times. The traditional food habits changed a lot and instead of the conventional restaurant or cafe items, fast foods conquered the food markets at present. Instead of nutritious people started to attract towards food items which offered greater tastes and convenience in usage. For example, the traditional food items like the Broadway’s homemade sandwiches, soups, salads etc have given way for fast food items from KFC, McDonald’s etc because of the greater tastes offered by these items. Threat of new entrants is the second factor which may affect the business of an organization according to Porter. Globalization and Liberalization have brought many new business groups to America and a substantial number of such new entrants are the restaurant groups from different countries. America is a country in which different people from different parts of the world are working and staying together. This diverse population may have their own preferences for food items and hence new food services companies find immense opportunities in America at present. It is easy for a foreign company to establish businesses in America at present because of the liberalized norms for establishing a business. Under such circumstances, Broadway cafe cannot survive in the market with the help of their traditional products alone. Even the local Americans are increasingly visiting the Chinese and Indian food outlets in America in order to enjoy the tastes of China and America. So, Broadway cafe needs to increase their product ranges in order to attract the diverse population in America. Industry rivalry is another factor which can make or break a business. The entry of new food outlets in America has increased the rivalry between different hotels and restaurants. Moreover, big business groups like KFC, McDonalds etc are using merger and acquisition strategies effectively to decrease the competition. It is difficult for Broadway Cafe to compete effectively with these business giants with the help of their traditional business philosophies and products alone. Bargaining power of the buyers increased a lot in the recent times, especially in the food markets. As mentioned earlier, variety of food items are available in American food industry and that also at cheaper rates and hence the buyers of food products always looking for cheap and best options at present. Since Broadway cafe is making a lot of homemade foods, it is difficult for them to reduce the prices of their products. On the other hand, competitors are making foods at large scale and hence they can offer their items at a cheaper price. If Broadway cafe fails to reduce the prices of their products, buyers may look for other options. Current customers are not much concerned with the reputation or the brand value. Price and quality are the two major factors which are taken as the buying criteria by the modern buyers. Bargaining power of the suppliers is the fifth element in the Porter’s five forces model. If the suppliers have more opportunities to supply their products to other organizations, their bargaining power may go up naturally. In such cases, suppliers will not compromise much in negotiations. On the other hand, if the suppliers have fewer options they will ready to compromise in order to sell their raw materials. Earlier, Broadway cafe enjoyed fewer bargaining power of the suppliers because of the supplier’s limited options; however, at present suppliers have lot of other options in American market and hence it is difficult for Broadway cafe to enjoy such liberties anymore. Strategies required for the rejuvenation of Broadway cafe Porter has mentioned three generic strategies for business excellence; cost leadership, differentiation and focus strategies (Breyfogle, 2010). In my opinion, Broadway cafe should given more attention to the first two strategies; cost leadership and differentiation. As mentioned earlier, it is difficult for Broadway cafe to compete effectively in the market with the help of some traditional products alone. They have to introduce new food products based on the current food habits of the Americans. Moreover, the recent recession has forced Americans to cut down their expenditure on expensive food items and hence Broadway cafe should try to reduce the prices of their products as much as possible. Along with the differentiation and cost leadership strategies, Broadway cafe should think in terms of developing strong relationships with the customers. They should deliver product or service without any time delay. Customers should feel that they are capable of delivering good services in no time. Unnecessary time delays will drive customers away from Broadway cafe. In order to achieve the above objectives, Broadway cafe should strongly think in terms of producing a company website. The given case study mentioned that the cafe had no computers yet in its store and the order processing is done manually. In other words, the store managers do not have much idea or details about the regular customers of Broadway cafe. The detailed information about the stakeholders of Broadway cafe is stored in a human memory and that also in the memory of person who could be aged more than 70 years. It is impossible for Broadway cafe to function any more like these. It is necessary for Broadway cafe to store all the relevant information about the store and its stakeholders or customers in a computer for easy accessing. Web based business is growing all over the world and it is difficult for Broadway cafe to proceed further without a website. Current computer savvy customers are looking in the web for everything. They are purchasing many things using the internet services. “In May 2005, the US Department of Commerce released figures reporting that e-commerce sales in the first quarter of the year had been up 23.8% from the previous year. E-commerce sales, which totalled at an estimated $19.8 billion for the quarter, account for 2.2 percent of total retail sales in the country, according to the report” (Eschen, 2005) E-commerce is one of the fastest growing business segments in the world both in quantity and quality. The success of e-business lies in how long a customer spends time in an e-business website. In order to encourage the customers to stay back in a particular site, that site should provide interesting things based on the customer requirements. The e-business site should be a customer friendly one in locating products, ordering, having questions answered in a timely manner, and it should have other convenient options as well. It should provide enough information regarding the products offered to the customers. The technologies used in the construction of the site must be current and it should encourage customer’s feedbacks and comments and should implement them in practice. “The current technologies like real time chats, message boards, and online events will further enhance the customer interests in the site” (Huff, n. d). In short, Broadway cafe should generate a company website in order to reach out more customers and also for taking and managing the orders more effectively. The World Wide Web (WWW) provides an opportunity to customize the business activities and hence Broadway cafe web site can more effectively manage their marketing efforts. Currently, Broadway cafe is making use of the mouth publicity strategy only for marketing their products; however such strategies alone may not succeed in the current electronic world. Apart from the mouth publicity options, other modern marketing options also should be implemented by Broadway cafe. A company website may help Broadway cafe more in their marketing efforts. It can generate customized e-mails for the customers and can handle the customer queries more effectively. The main advantage of a website is the user-friendly atmosphere it provides to the customers. It can also provide services 24 hours/day, 7 days a week and can reach much wider areas. Moreover, a company website can help Broadway cafe to communicate instantly with the buyers and suppliers. The employees of Broadway cafe can increase their productivity and performances if they are able to get the assistance of computers. The given case study has mentioned that critical things like the information about the customers, inventory, employee payroll, marketing coupons etc were stored in some note pads or books. It is difficult to store this information safely for future use if it is stored in papers. On the other hand, computers can store this vital company information for longer periods and easy future retrievals. Kiosks can be used at different locations of the store in order to serve the customers better. Hot and Kiosks can store food items without damaging its hotness or coldness. Most of the customers like to taste the foods when it is offered the maximum taste either in hot or cold condition. For example, hot sandwiches are better to taste than cold sandwiches whereas cool drinks are better to taste at cold condition rather than hot condition. Kiosks can control or preserve the coldness or hotness of food items in order to deliver the foods to the users at its maximum tasteful condition. In short, Kiosks can be another option for Broadway cafe to prepare the cafe to the twenty-first century. Conclusions Broadway cafe is still operating in a manner which is suitable for the twentieth century rather than the twenty-first century. It is impossible for Broadway cafe to survive in the market if it fails to implement modernization strategies rapidly. Computerization is one of the major requirements needed in the infrastructure development area. Apart from incorporating computer uses inside the store, a company website will help Broadway cafe to manage their customers and order taking and delivery process more effectively. Porter’s generic strategies such as cost leadership and differentiation should be adopted by Broadway cafe as part of their survival efforts. References 1. Breyfogle, F. (2010). Michael Porter generic strategies and an enhanced business management system. Retrieved from http://www.smartersolutions.com/blog/forrestbreyfogle/2010/08/04/michael-porter-generic-strategies-and-an-enhanced-business-management-system/ 2. Eschen E. (2005), E-commerce - Reasons to sell online, Retrieved from http://www.monstersmallbusiness.com/ecommerce-strategy/article-reasons.asp 3. Huff P. Y. (n.d), Starting an e-business: What’s involved? Retrieved from http://www.eworkingwomen.com/experts/starting.html 4. Porter’s Five Forces, (2011). Retrieved from http://www.mindtools.com/pages/article/newTMC_08.htm 5. Porter’s Five Forces Model, (2009), Retrieved from http://notesdesk.com/notes/strategy/porters-five-forces-model-porters-model/ Read More