This paper addresses the use of Porter’s Five Forces model and how it can benefit Broadway Cafe by identifying and analyzing the effect of these forces on its business. The benefits include improved decision making, faster time to market, better productivity, improved competitive advantage, more profits and greater customer satisfaction. It also helps in achieving operational excellence.
Porter’s Five Forces Model
Threat of Entrants
Porter's First force is the threat of Potential Entrants. Statistics have shown the industry to be slowing down, therefore making competition high and the threat of new entrants low. Broadway Cafe has a small market presence, but the presence of its competitors like Starbucks who has a very controlled access to distribution channels make it difficult for new entrants to compete in the market. Broadway cafe has a good market presence in the area. This is partly due to the fact that it is one of the oldest cafes and is well known for its recipes. However, that there is a different kind of potential entry threat. National food servers like McDonalds could create strong coffee menus and become a strong competitor.
Bargaining Power Of Buyers
Porter's next force is Bargaining Power of Buyers. Broadway Cafe’s customers are the buyers. Due to presence of major coffee houses in the area, customers have a greater choice to switch with little or no switching costs. Customers will face no switching costs in switching premium coffee suppliers from Broadway Cafe to, for example, Tim Horton’s. This is a threat to Broadway Cafe. Another threat to Broadway Cafe is that their customers have the ability to brew their own coffee. It is clear that Broadway Cafe customers have high bargaining power in the industry.
Bargaining Power of Suppliers
Porter's third industry force is bargaining power of suppliers. Coffee is the world's second largest traded commodity (Bruce). South and Central America produce the...