Broadway café, which is located in downtown Atlanta, GA, was established in 1952. It specializes in providing several items, which include tea, coffee, soup, homemade sandwiches, and offers bakery services. For over fifty years, the Café has been the hotspot of café in the region. Recently, it has experienced numerous setbacks, which has contributed to reductions in customer flow. My grandfather, who owns the café, has been administering it the same way when it was established. There is a lack of information technology that has dramatically affected its progress, causing its stagnation. To upgrade its services and products, there is a need to implement the Porter's five forces model to keep Broadway Café up to date.
Porter’s Five Forces Analysis for Broadway Café
Michael Porter realized that organizations should be looking further than what competitors do and start examining the factors that influence the business (Dobbs, 2012). Therefore, this led to the formation of the five forces: buyer power, supplier power, risk of substitution services or products, risk of new competitors, and competitors’ rivalry (Dobbs, 2012).
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Buyer power
In this aspect, the focus is considered on how the buyer can control prices in the business. This can be mostly through the bargaining power of the customer (Bruijl, 2018). The number of buyers control this and the number of orders acquired. However, the probability of buyers to shift to another business. In this aspect, when dealing with a few customers, the business has limited power to dictate. In contrast, when the business has many customers, the business has power over the customers.
The Broadway café is in this kind of situation. Customers can alternate the prices for the things they buy. Some items might be expensive hence leading to nobody buying it; therefore, to sell it, the price has to be lowered, thus a loss for Broadway (Somma, 2008). The buyer power is also exhibited when a buyer goes to the competitors downtown for a similar quality product because of a price change. The Café may alter the price to favor the buyer. To change this, there is a need to have more customers to escape buyer power.
Supplier Power
This aspect assesses how suppliers can control the prices in the business (Bruijl, 2018). Factors that influence this aspect include the uniqueness of the supplier's service or product, quantity of inputs that suppliers have, supplier strength, and the expenses of shifting from a supplier to another (Bruijl, 2018).
Broadway Café serves at this advantage because of its variety of suppliers. This is evidently due to the variety of products the Café offers (Somma, 2008). Because Broadway Café is the only one in the area providing an outstanding product, the supplier has the freedom to choose the price. Though many people like the Café, the price should be considered to avoid scaring away customers due to high prices. To handle this, Broadway Café needs to increase the number of suppliers to cope with supplier power.
Risk of Substitute Services or Products
This is where a business closely offers services or products similar to the other one (Bruijl, 2018). It influences a customer's high chances to switch to the other business due to prices or any other factor. This affects both supplier power and business attractiveness (Bruijl, 2018).
There are always competitors around who also provide similar products downtown. Coffee shops like Starbucks and several other which have similar products. To remain relevant to the market, Broadway café needs to be unique in its products and services. The introduction of different types of coffees, teas, and other items on the menu will help customers stick to Broadway Café than switching to Starbucks.
Risk of New Competitors
The new establishment of a similar business is a threat to the existing business. Profitable markets appeal to new businesses, which reduces profits incurred by a business (Dobbs, 2012).
There is a risk of businesses opened in every market. Fast food places are a threat to Broadway Café, such as Mcdonald's make customers switch due to the extensive menu they make (Somma, 2008).
The best way to retain the current customers is by starting making offers of the best-selling teas and coffees in the café. Improving customer service is also necessary to capture customers.
Competitors’ Rivalry
The main cause of this is the number of competitors and their capabilities in the market (Bruijl, 2018). The competition will ever be high, and many people tend to go to the well-known cafes downtown. Therefore, Broadway Café has to adverse its reputation and existence for more customers to come in and also beat the competitors.
Entry Barriers, Switching Costs, and Substitute Products
Entry barriers are costs that are incurred by new entrants in the market. The concept is to limit entrants; hence limiting competition is experienced—barriers such as policies, high registration costs, etc. (Bruijl, 2018). Switching costs affect both the customer and the supplier. In this aspect, the producer experiences some upgrading of the product's quality hence increasing cost (Bruijl, 2018). The supplier, in turn, passes the switch to the buyer. On the other hand, Substitute products involve customers shifting from one business to another for a similar quality of product or service due to price comparison (Bruijl, 2018).
Porter’s Generic Strategy: Differential Strategy.
This strategy entails making the business services and products diverse and unique than of the competitors (Tanwer, 2013). Although Broadway competes in a broader market, the items that it provides are exclusive. Considering the historic reputation in its specialized menu, the differential strategy can work for Broadway Café. Besides its history, the recipe used in Broadway is matchless, hence the high quality of items provided in its menu. This strategy will tolerate low cost hence narrow market (Tanwer, 2013). Provision of some offers for the customer together with good customer service shall provide a good experience for customers.
Conclusion
Many businesses find it challenging to stand out after facing competition and other different challenges in the market. However, the Porter’s five forces model is essential to a business organization like Broadway Café. It provides a broader understanding of the market and factors that influenced its downgrading in the market. The forces contribute to decision making that needs to be done for the Café to transform and flourish in this 21 st century. The guide to developing competitive strategy also is crucial considering the variety of competition that Broadway Café faces in downtown Atlanta.
References
Bruijl, G. (2018). The Relevance of Porter’s Five Forces in Today’s Innovation and Changing Business Environment. SSRN Electronic Journal . Pp. 2-15. DOI: 10.2139/sssrn.3192207
Dobbs, M. (2012). Porter’s Five Forces in Practice. Templates for Firm and Case Analysis. Vol. 10 (1), pp. 22-25.
Somma, R. (2008). Cohesion Case Study for the Broadway Café. Information Systems for Decision Making . Pp. 4-7.
Tanwar, R. (2013). Porter’s Generic Competitive Strategies. Journal of Business and Management. Vol. 15, pp. 11-17. Retrieved from https://www.iosrjournals.org
