Hometown Deli Competitive Analysis - Case Study Example

?Hometown Deli Competitive Analysis In any business, there is competition, and economic studies have confirmed that different firms profit differently based on the structure of the industry (Porter, 2008). Different firms in the industry usually sustain different levels of profitability from the way they handle competition. The structure of any industry can be analyzed using Potter’s five force model, which is used to determine the competitive power of the industry and the relative profitability of a business. The Hometown Deli is a business that has existed for a long time and created a niche in the market. However, with the threat of looming competition, it is important to analyze the market and determine the possible change in profitability. It is also important to identify a strategy that will be used to improve the business and make it viable in this time. The first aspect of Porter’s five force analysis is the supplier power, which is the importance of the supplier when serving more than one competitor (Porter, 2008). From the analysis of Hometown Deli, it can be determined that the previous owner built a network of suppliers. This means that the supplier is a powerful force in the industry. From the products of the deli, it is evident that there are many possible avenues for getting new suppliers, so the threat of supplier power is low. The best strategy to deal with the existing suppliers is to consolidate their services to guard from competition. This can be done by using one supplier and ensuring that long-term contracts are used with the supplier. The second aspect of Porter’s model is buyer power, and is probably the most important part of the analysis (Porter, 2008). From the history of the deli, it is evident that the previous owner built a network of customers, and the new owner has to find a strategy of retaining these customers. The information indicates that the deli has been a local hotspot for many years, and the best strategy to deal with the power of the buyer is to ensure that these customers do not move with the potential competition. This is done by ensuring that the customers retain their image of the company. In this case, Hometown Deli should provide promotional content aimed at retaining old customers, like using loyalty programs for old customers and introducing prices for returning customers. The other factor is the threat of new entrants, which is determined by the existing competition in the region, cost advantages, barriers to entry and access to distribution (Porter, 2008). In the case of Hometown Deli, there is a big threat from competition, mainly because there are low barrier to entry and the potential competition has bigger profits, which means that they have more access to promotional content. This means that the deli is faced with the biggest threat from competition, ad to deal with it, management should come up with a way of increasing their competitive presence. The best strategy for this is to find extra sources of finance and improve the technological presence in the region. If the deli improves the service offered to its customers, it would make it easier to retain customers to the deli. The deli should be brought up to date in terms of competitive presence in the region. The fourth factor is the threat of substitutes, which is the competition faced by a business from the possibility of clients using substitute products (Porter, 2008). In the case of Hometown Deli, the main substitute product is fast food restaurant products, which is not so much of a problem. This force can be addressed by consolidating the clients’ preference for the deli product. The last factor is the degree of rivalry, which refers to the competition that would be posed by a rival company. Increased competition can drive profits very low since the market is very concentrated. With the threat of only one rival, it is important to establish a strong identity; otherwise the market could become a monopoly, especially since the potential competition is a big firm. From an analysis of Porter’s generic strategies, it is evident that the best strategy for Hometown Deli is a differentiation strategy. The differentiation strategy revolves around the development of a product or service that the other rivals in the market would not have (Porter, 2008). This means that the business develops a product that is unique and then makes it valuable for customers, making it an identity for the company. The business can then charge a premium on the product and use the extra profit to cover the costs incurred in providing the unique product or service. Because of the increased income from the unique service or product, the company can cover supplier costs and maintain profitability in other sectors of the company. However, the technological advancement of Hometown deli means that they first have to improve their technological advancement before they consider a differentiation strategy. The need for a highly skilled development and production team also calls for an improvement in the research and development part of the company. With the current reputation that the deli has or quality in its products, it is evident that the deli has an advantage, and the only need is to identify an area that can be improved to suit the strategy. In this case, the best strategic move for the company is to first improve the technology used in the provision of services (Porter, 2008). This would be done by ensuring electronic monitoring of all sales and products, suppliers and the numerous aspects of the business. After the technological capability of the company has been improved, the company can then focus on the strategy. In this case, the proposed strategy is to offer delivery services for the deli’s products. In the current competitive market, if the deli offers to make deliveries to the customers, instead of waiting them to come to the deli, the deli would increase competitive advantage. The process for implementing this strategy is technology, where the deli can have customers order their products online or by phone, pay by credit card, and the deli makes the deliveries. The process that would be improved is the service and product delivery o the customer, where the customer does not have to face queues before they get their product. Reference Porter, M.E. (2008). The Five Competitive Forces That Shape Strategy, Harvard Business Review. Read More