Business Environment Analysis - Essay Example

Stage Business Analysis of the Environment This stage will attempt to analyze the business environment of the deli with respect to Michael Porter’s Five Force Analysis and will proceed to identify the best way to expand the business and adapt it to the 21st century. 1.1: Five Forces Analysis The five force analysis looks at some of the factors that affect the marketplace, or as Porter refers it, ‘the microenvironment’ around the business (Oxford University Press, 2007) Threat to business from new competitors A business operating in a profitable market will attract the eyes of competitors who want a ‘piece of the cake’.

Such a situation could be potentially harmful to the original business for some of its customers might switch over to the new competitor. Hometown Deli might suffer from the entrance of multinational corporations in the local marketplace like McDonalds and Subway since they will be able to offer lower prices to customers (due to economies of scale) than Hometown Deli. However, Hometown Deli’s brand loyalty, amassed over a large period of time will still act as a barrier of entry to these entrants.

Threat of substitute products/services This is the threat to a business by a similar product offered by similar product/services. Hometown Deli does not face a significant threat by any new substitutes due to the nature of the services it provides; the case study mentions it as serving as the local community’s ‘hangout-spot’. That is a service that will be hard to replicate. However, the products offered by the Deli might have superior alternatives to them with the entrance of new competitors or the revamping of old ones; in such a case, I will aim to better the quality of Hometown Deli edibles along with offering more personalized customer care (the latter being the Deli’s specialty).

The intensity of competitive rivalry Competitive rivalry in a market usually requires businesses to perform at their best and cut down their profits to the bare minimum; the intense competition in the USA telecommunication industry has seen the customers benefit the most while the companies involved have suffered a cut in revenue. However, businesses like the Hometown Deli usually do not have a direct competitor in the local vicinity and therefore, unlike larger food chains such as Mcdonalds and KFC do not suffer from intense rivalry.

Therefore, the Hometown Deli will not aim to reduce costs (we do not need to persuade customers); rather, we will try to offer high-quality products at the same price as we’ve always done. With coming times, we can even marginally increase the prices of the products to cope with the effects of inflation etc. The bargaining power of customers This factor depends on the ratio of the customers to the ratio of the firms; the more firms there are to cater to the customers, the more a single firm will be under pressure to retain its customers and prevent them from switching over to their many competitors.

The customers of Hometown Deli do not have a significant bargaining leverage over the Deli due to the lack of immediate competition in the business and therefore, the Deli is not under a lot of pressure to appease the masses by offering lower prices etc. The bargaining power of suppliers Similar to the above factor, the supplier holds a certain amount of leverage over a business if it is the sole supplier. In such a case, the supplier can ‘extort’ a large amount of money from the business since it has the power to act as monopoly.

Hometown Deli has had a good relationship with its suppliers over a long period of time and enjoy the perks of having such a relationship i.e. on-time delivery, cheaper prices etc. However, due to the availability of suppliers in the international market, Hometown Deli has some bargaining power with its supplier and if the need should arise, will easily transition from their current ones to new ones. 1.2: Porter’s Generic Strategy For this business, the generic strategy I will aim to opt is ‘Differentiation’.

In such a strategy, Hometown Deli will aim to provide products and services that aren’t matched by any in the current market; such a strategy depends on the customer’s non-sensitivity to price which as has been mentioned, is one of Hometown Deli’s strongest strengths due to the nature of its services. The lack of immediate competitors in the local vicinity offers Hometown Deli certain advantages that I will definitely look to exploit and therefore, establish Hometown Deli as a one-of-its-kind eatery in the area. 1.3: Strategic Area for Improvement One area that the business needs to improve in is in adapting to the 21century which it has failed to do so.

The case study mentions the lack of innovation of any kind in the business; I will aim to introduce more facets of a local community hangout to the Hometown Deli as well as making it more technology friendly by introducing computers in an effort to make the business more efficient as well. I will attempt to achieve this strategy through the use of focusing on Hometown Deli as an eatery/hangout spot rather than just the former and offer services such as karaoke nights and other events that will enable the community to come together under one roof. 1.4: Process for Improvement As mentioned above, the process that I will undertake requires improvement in several different aspects of the business.

The process that I will choose will depend heavily on technology, since in today’s world; technology is the small business’s best friend. Technology can help in expanding a business or improving its current performance (Atkinson., 2007) and for that reason, Hometown Deli will 1) Using technology to become more efficient such as by using computers to store customer information, recipes and accounting information pertaining to the business. 2) Introducing new services through the use of technology as well such as introducing Wi-Fi to customers so that they may be able to browse the internet while hanging out at the Deli. 3) Advertising using the various means we have available to us thanks to technology such as using social networking sites like Facebook.

Hometown Deli might also launch a blog that will gather feedback from its customers and use it to improve itself. References Porter's Five Force Analysis of the Marketplace. (n.d). Oxford University Press. Retrieved August 29, 2011, from http://http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_11.htm Atkinson, S. G. (2007). Introduction. In Technology Tips for Small Businesses. (1st ed.). Kent County, Maryland: Steven Atkinson.