External Analysis: The Supplier Power - Case Study Example

The Supplier Power Michael E. Porter presented a five forces model which evaluates an industry or an organization in the spectrum of those five forces. The five forces model can be implemented to any industry or organization to evaluate its competitive standing in the market place. Among the five forces presented, one of the prominent one is the Bargaining Power of the Suppliers. The power of suppliers could be in terms of supplying the raw materials needed for production or the prices they charge for supplying those materials.In some industries this input power could also be in terms of supplying the labour force or provision of expert services. Supplier power can be attributed as one of the bigger factors in the fast casual industry. According to the market experts and researchers the supplier power within this industry is quite weak but it still has an impact on the industry. The main suppliers of fast casual industry are butchers, farmers, other meat and chicken suppliers, packaging material providers etc. There are plenty of suppliers available for such supplies and are readily available at favourable prices. Supplier power can never be termed as high until or unless the supplier has a very unique or differentiated product that cannot be obtained from elsewhere. An example for this could be Chipotle, who has unique supply chain methods and provide meat that is organically produced and anti-biotic free. These factors can be implemented upon Mr. Empanada to evaluate its supplier market. Mr. Empanada is a fast casual restaurant with headquarter located in Tampa, FL. It is a family owned business and they manufacture empanada, which originated from Spain but now are a world food. An empanada is a turned-over stuffed bread with assortments like any mixture of meat, chicken, fruits or vegetables etc. Mr. Empanada believes in a franchise business model and looks forward to grow on the same business model. The supply chain of this model mainly depends upon the relationship between the franchisee and the affiliate. An affiliate could be defined as any entity (individual, company or subsidiary) that is connected to your organization. Currently Mr. Empanada has five franchise restaurants and which rely on its affiliates for its supplies. It is embedded in the contract that franchisee is bound to buy the designated products and empanadas from its affiliates. This arrangement can turn the power balance towards to the suppliers as the franchisees are restricted in their attainment for the raw supplies. Moreover, they are not also in the position to look for cheaper alternatives as this will hamper the quality standards set by the franchisor and thus it will be difficult for them to compete in the market place in terms of the favourable prices being offered. Another typical problem faced by the franchisees is that they are restricted in terms of their product base which is being driven by the franchisor. Therefore, it is difficult for them to sell differentiated products and expand their customer base. Under a franchising model business, the franchisee is also bound to certain contractual obligations which they have to meet. One of them could be joint responsibility of advertising. This factor can also well raise the costs incurred for the business. Fast casual restaurant is termed as a labour intensive industry. Currently, Mr. Empanada is being operated by the family members but with the growing needs of the company this model would be difficult to take further. Thus another input to look for will be the work force. They will need to hire specialist work force with the know-how of such industry or otherwise trainings will have to be provided. The experienced work force will require handsome salary packages and perks. Therefore, it can be concluded that Fast Casual Restaurant industry is a huge industry with a lot of competitors already operating within the industry. The overall growth for the industry is slow and each company is looking to acquire greater market share with giants like McDonalds also being the competition. Franchising system also hugely impacts the success of the business. Competition is severe and it is the survival of the fittest. Technological Environment Basically, there are four broader environments which provide any organization a competitive edge over other their rivals as being described by Professor Michael E. Porter. One of such advantage is of access to better technologies and supporting infrastructure. There are numerous ways in which today franchise business model make use of the latest technologies. They use internet to establish their communication channels among the franchisee and the franchisor. They use secured networks to collaborate with their suppliers. The franchisor can disseminate any information they want to share with their franchisees through online networks. They can place their operations manual online for franchisees to access it and franchisor can immediately update them of the changes. Nowadays information technology is also extensively used for the advertising purposes. Moreover, well established businesses have interactive websites from where customers can easily select and place their order (IFA). The second main phase of technology relevant to the fast casual restaurant is the technological processes involved in their manufacturing processes. Having access to the latest machinery and equipment the companies can enhance and speed up their processes rapidly. This in turn would reflect positively in terms of revenue generation. The companies’ location is critical in evaluating this factor. Companies having access to the latest technologies can enjoy their benefits and can have a competitive edge over their competitors. As Mr. Empanada is located in Tampa bay Florida, which is no doubt an area with availability of all the latest technologies. Therefore, Mr. Empanada can easily enjoy the benefits of the technological advancements. It can easily implement the latest technological processes in its business as they will be readily available. Tampa bay also have a good supporting infrastructure industry unlike any other country side or remote area. Plus the current short-term plan of Mr. Empanada is also to only develop the franchisees in the current location. Furthermore, it is a natural harbor area where there would be a lot of trading activities already going around. This would further improve the technological facilities. Most of the fast casual industries make use of the POS terminal which Mr. Empanada has also made compulsory for its franchisees. In terms of manufacturing processes, the technological environment of Mr. Empanada is competitive with the likes of McDonalds and Pizza Hut.However, all the empanadas are manufactured in the manufacturing facility of Mr. Empanada located at the Armenia Avenue. Although the dough is handmade but after that it is put into an empanada machine along with the fillings and then the machines’ output are delicious perfect empanadas. After that Mr. Empanada makes use of the freezing technology to freeze the empanadas till they are required for frying. Mr. Empanada’s manufacturing facility is also certified by the USDA, which is evident of the fact that their manufacturing facility is up to the standards and technological advancements and not less than any of its competitors. Thus, it can be said that technological environment of Mr. Empanada is fierce in terms of competition. However, the location of Mr. Empanada is favourable in terms of the availability of the technological facilities and supporting infrastructure. There only the need of exploiting the right technologies and making best use of them (Empanada Inc.). Works Cited IFA. "Help w/ Acquiring a Franchise-Articles-Most FAQs about Franchising."International Franchise Association - Over 1,200 franchise opportunities - Information on franchising, selecting a franchise, financing and starting a franchise. Plus the latest news, events and resources on franchising. IFA publisher, n.d. Web. 15 Oct. 2013. Empanada Inc. "About Us | Mr Empanada." Mr Empanada | Mr Empanada. Empanada Inc., n.d. Web. 15 Oct. 2013. Read More