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The situation of Hometown Deli that is under new management is one that requires the application of Porter’s Five Forces. The strategies which will enable reviving Hometown Deli and bring it to the 21st century will hugely rely on these five forces. The following section will explore the Porter’s five forces in relation to the strategies relevant in making Hometown Deli successful. Porter’s five forces have an impact on the organization especially those undergoing changes and these changes can pose competition. This model focuses on the outside factors, which influence the competition within an organization. The external forces will determine the inner functioning of the industry in terms of profitability and competition. The ideology behind the five forces is that a company or business needs to understand the dynamics of its markets so that it can compete effectively in the industry (David, 2005).
The first force explores the degree of rivalry that Hometown Deli will face in the current market. Rivalry is an indispensable element in any business environment as it enables companies to increase their value. The force of rivalry will determine the Hometown Deli’s attractiveness to the customers – both new and old. For the strategy of renewing Hometown Deli to work, force of rivalry will have to be high and located at the centre of the plan. High degree of rivalry will exist in areas that have high options of substitute products and in this case the products of Hometown Deli have several substitutes. For this reason the strategy in place should create more competition in the market. The second force of Porter is the threat of entry. Renewing of Hometown Deli should bring into the market a new face of the original business. The strategy will have to analyse and explore all the barriers that may pose obstacles to the entry of this new business to the market. Entry barriers exist for totally new businesses but in this instance we look at the old business of Hometown Deli. Hometown Deli may face entry obstacles such as differentiation, cost advantages, economies of scale and cost of entry. For instance, under cost of entry Hometown Deli will have to invest in to technology, as this is what makes the business different from their competitors. The former owner of the business did not make any investments in technology like computers and, therefore, this will be the main investment under the new management.
Threat of substitutes is the third force under Porter’s model and here we analyse the substitute products from competitors’ businesses. Threat of substitutes covers areas such as retooling, retraining and redesigning that a business will incur as customers change to alternative services or products. Hometown will have to redesign its way of storing information, the way of operations and any other ways by which the business operates. At the moment the business does not have any reference or storage of relevant information to the business like customer contacts, the recipes used in preparing its products and employee information. The new strategy will have considered the new business take-offs so as to avoid the threat from substitutes. Buyer power is another extremely relevant force in the operation of the business. The strategy in place will focus enormously on the determinants of buyer power, which are concentration and number of customers. Lastly we have supplier power, which is a mirror image of the buyer power. The indication of high supplier power is the ability of business owners to charge the buyers different prices in relation to the end value and worth of products (Mollona, 2010).
Porter explains three generic strategies that most businesses apply to the daily operations. As for Hometown Deli, the best strategy will be the Niche strategy. This strategy will be relevant in the field of Hometown Deli’s business as it will make it popular for that given product. Under Niche strategy a business identifies a particular segment and focuses all its efforts in that area. In so doing the business will be popular for that particular service or product within the segment. For instance, Hometown will focus on baking and delivering bakery products, and in perfection it will be known for its perfect baking. The business will do with some improvements in the technology area as this seems to one area the owner did not invest in fully. Technology in this case covers equipments such as computers, telephones and any other modern technology that is helpful in running the business (Arons & Waalewijn, 1999). In addition to the above strategy and forces in renewing Hometown, we will have to select a strategic area to place the business. Since the business is dealing in bakery products and beverages, the best area will be where there is a large population, for example, town area or residential districts. This will increase the number of people visiting the business in such of bakery products and beverages.
Maintaining the customer information and contacts is the area which will benefit from improvement of technology at Hometown Deli. We consider the customers who would like to have their purchases delivered to their homes or work places and this will call for the supplier to know and keep in mind the customers’ contacts and information. The current business setting of Hometown Deli does provide for this as grandfather was familiar with all the customers. Installing computers where customer information is easily accessible will be a considerable step for business and it will improve its operations.