IDEA SOLUTION
- By keeping in view the restaurant industry, you are required to apply Porter's five forces model for Café Aylanto.
ANSWER:
The five forces of Porter's competitive can help strategist to evaluate the markets and industry. But the wisdom is that of these must be accompanied by good intuitive judgment. All organizations of the age especially multinational firms need a good systematic and comprehensive external audit system to examine the external forces which are vary country to country.
Today, technology and other factors has changed the minds of consumer and organizations are readily adopting and learning the consumer to provide better quality product and inconvenience services. Every organization is busy to increase his share in the market. In this struggle, to lead their business top of the sky, they are busy day and night. The most difficult problem to achieve that place in the market is the competitors who are also to leave behind and want to gain place first.
Café Aylanto is a firm which is facing the low market share. Café Aylanto is offering pleasurable and elegant dining to its customers. The atmosphere and situation of restaurant is suitable. But Café Aylanto has decreased its market share due to opening a number of restaurants in Lahore locality. There is a great need for assessment for Café Aylanto.
Porter has presented a five model which contained five forces and I am going to justify the problem under this model. The model presents pure competition and implies that rate of return should be constant across firms and industries. As a strategic analyst I am seeking to develop an edge over rival firms and using this model for better understanding the restaurant industry in which the firm operates. Porter's five forces are…
- Rivalry
- Threat of substitute
- Buyer power
- Supplier power
- Entrance of new firms
Ø Rivalry
This is the central point which creates a competition among firms. This defines the answer of the questing how the firms compete with each other and if competing to what extent.
Café Aylanto is facing revelry competition which is a cause of their low market share. Other restaurant in Lahore are presenting good atmosphere with good dealings. I pursue the following to gain the rivalry advantages to obtain competitive economies.
ü Café Aylanto should not raise its items prices; however it should be lower the prices of the several goods against their competitors for short time.
ü They should provide their customer incentives which tempt the customer to come into the restaurant.
ü They should be improved differentiation and features of culinary sensation.
ü They should be implement innovation and accept the modern procedures in the cooking process and in the product and most of the services itself.
ü They should be advertised in locality and provide a commission to taxi drivers for coming the guests into the restaurant.
ü They should be adopting fixed cost instead of variable cost and they must produce near capacity to attain a lower per unit cost.
So, firms should be competing each other and without competing each other there will be high prices of goods which will be a un-access for a common man. For this propose Café Aylanto should increased their earnings more than its cost to gain completive advantages. Café Aylanto should create the values and possesses a sustainable competitive advantage and its positions to treat with customers that cannot be duplicated by others restaurant. Sustainable competitive advantage is the advantage which one firm has the ability to compete and the sources can be something that shows that the Café Aylanto is distinctive and have a difficulty for the other firms to copy it.
Ø Threat of substitute
According to Porter, price of product is affected upon substitute of the product. As more substitutes available in the market the demand of the product becomes more elastic. Regarding this Café Aylanto crates a balance between prices. Café Aylanto also should provide a high quality not only product but also services.
Ø Buyer power
When buyer power is strong and the relationship to the producing industry is near to what an economist terms a monopoly which is a market in which there are many suppliers and have only one buyer. Under such marketing conditions, the buyer sets the price. In reality few pure monopoles exist, but frequently there is some asymmetry between a producing industry and buyers. Thus, Café Aylanto should be enough byer that can create an assets for the restaurant.
Ø Supplier power
Bargaining power is the ability to influence the setting of prices. Suppliers are the business that supplies materials and other products into the industry. The cost of goods which is bought from suppliers has a significant impact on a company's profitability. Bargaining power of suppliers will be high if many buyers and few dominant in the market.
Ø Entrance of new firms
When one firm enter into the market it may be a threat for one firm and it may be a opportunity for the other firm. The existing firm like other restaurant which is available through the history of Café Aylanto is competing each other but afterward a lot of restaurant makes Café Aylanto depressed. Existing restaurant may not effect on the sale of Café Aylanto but with the new entries in the market with modernized equipment and different delicious atmospheres indulge a great effect on the share of the Café Aylanto in the market.
- After conducting the analysis which strategy you would suggest to your owner for business growth.
ANSWER:
They should adopt the cost-leadership strategy. This strategy emphasis on low cost on product and services i.e. gives the importance to organizational efficiency. This efficiency leads the organizational overall cost to the lowest than those of competitors. I am saying so on the following reasons…
The reason behind is that all the factors have low potation power than Top-Shot business. I have been justifying the cost leadership strategy on the basis on suppliers bargaining power and marketing and sales tactics. Happy Meal can increased market share or sales by lowing suppliers barging power through cost leadership strategy.
Bargaining power of suppliers: bargaining power is the ability to influence the setting of prices. Suppliers are the business that supplies materials and other products into the industry. The cost of goods which is bought from suppliers has a significant impact on a company's profitability. Bargaining power of suppliers will be high if many buyers and few dominant in the market.
Marketing and sales tactics: these are the struggles of the company to sale the products all the business chooses marketing tactics because of another or competitors can either advertise or provide service to sell. Marketers imply different sales tactics by using or improving selling skills to improve or enhance sales today.
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