As a success company, it is important for us to understand the dynamics of competitors within an industry. This is because it can help us to assess the potential opportunities especially if we enter the particular industry as a new player. Besides, it also helps us to differentiate ourselves from the competitors. So, we are going to use Porter Five Forces analysis to determine that whether our business has the potential to be profitable and also help our company to design a competitive strategy. There are total of five forces in this model which are bargaining power of supplier, bargaining power of buyer, competitive rivalry, threat of substitution, and also threat of new entrance.
Bargaining power of Supplier
Bargaining power of supplier carries the meaning of how strong is the seller hold his position and how much the supplier control over the price. The bargaining power will be high if a company only has few suppliers of the raw materials, services, components, and labor.
The raw materials that usually needed by our company are flour, sugar, yeast, salt, and also oil. We purchased the materials from different suppliers this is to ensure that we can get a cheapest material. With this, we only can produce a high quality and cheapest cake for our consumers. Moreover, we also need some organic ingredients such as fruits and eggs. It is not worth for us to import from other countries purposely because our country has a place that produces fresh organic food which is Cameron highland. So, all of us agree to purchase it from Cameron Highland. The reason why we choose to purchase it from local country is because of the high transportation cost in other country and the freshness of the food. Due to reason of purchasing in a large quantity, so the supplier promises to give us some discount if without transport. Based on this, we are able to help our company to save the cost. Others than that, the distance from Kampar to Cameron Highland is not far, so we decide to take it by ourselves to ensure the freshness of the ingredients. In addition, we are able to get some cheapest and high quality fruits from Gopeng since they are the retailers of selling fruits to the Tesco in Kampar.
Apart from raw material, packaging and packing materials are also important for us. The packaging is to ensure that there is no destroy on our cake when we deliver it to customers. So, we had also order the boxes with our company name printed on it from different suppliers. After that, we just make some decorations based on the customers’ need to make it become customized. It is cheapest for us to design y our own rather than order customized boxes from the suppliers.
As a conclusion for this force, our bargaining power from supplier is low because we purchase the ingredients from different suppliers. Besides, the ingredients that we need for or product are just a simple consumer product which is flour, sugar, salt and oil which means that, the price will only increase when there is inflation occurs in the marketplace. Otherwise, it might not affect our company.
Bargaining power of Buyers
The meaning of the following force is about how the customers can put a company under pressure. When there are a lot of suppliers in the marketplace, the bargaining power of buyers is high and this may make the firm earns no profit if the company couldn’t differentiate themselves from the competitors.
The bargaining power of buyers is high in Kampar New Town due to there are a lot of Cake Shop such as Secret Recipe, Caker Inn, and also Just to Eat. They are also selling the same product as us which is cake. They also provide customized design cake for customers. Besides that, the switching cost from one to another supplier is low. So, if Dream Cake Company plans to go in this market, we need to produce some unique product or services that others do not have to differentiate ourselves from the competitors.
Although there are a lot of competitors for the Dream Cake Company, we are planning to sell product and service through online in Kampar, Perak which has not been provided by the others competitors. Our company is selling the customized cake through online service such as wedding cake, birthday cake, Valentine’s Day cake to the consumers in Kampar new town area. We found that there are many cake shops in Kampar new town area which are Caker Inn, Secret Recipe, and also Just to Eat but they didn’t provide online and delivery service. Due to this, we plan to start our business by providing the residents online ordering and delivery service. With this unique service, we believe this is a potential opportunity for us to go in to earn profit.
Nowadays, most of the consumers are concerning about their healthy. So, we are using organic food to make our cake and this tend to be more delicious and healthy for the consumers. With this point, we believe that our consumers will be willing to pay with a high cost and we manage to differentiate ourselves from the competitors.
Moreover, we provide online and delivery services since most of the residents in Kampar are students. Mostly, they are spending their time with the computer and lazy to come. Therefore, an online service is the most suitable way for the students to place their order. We will create a Facebook page for them to check the up-to-date information that has been uploaded by our company.
Most of the students in Kampar are cycling and riding. They are not able to come out especially there is a rainy day. So, delivery service is suitable for them.
Lastly, the competitive rivalry for Dream Cake Company is low due to they are providing unique and special product and service to the consumers.
In a nutshell, it is very important for a company to prepare a Porter Fives Model analysis because it is part of the planning tool set. Only when we are clear with our own strength and weaknesses, we just can improve our weaknesses and maintain the strength to make our company a competitive advantage.
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