a) Buyer Power: Customers have low bargaining power since they typically can't bargain for the price of their coffee but there are numerous coffee shops in the area. Overall there is high buyer power.
b) Supplier Power: low because there are many suppliers available giving us multiple options to chose from
c) Threat of Substitutes: High since there are multiple coffee shops in Winston Salem offering our primary product: coffee. Starbucks, Crankies, Panera Bread, Gas stations...
d) Rivalry Among Existing Competitors: High, refer to c.
e) Threat of New Entrants: High since start up costs for coffee shops are relatively low.
Analysing this from the perspective of our cafe, given the location - Near the school, on Deacon Blvd and near the stadium here is what I think
ReplyDeleteBuyer Power - Low, the population visiting this area is high, there are not many coffee shops around.
Supplier power - Our suppliers are the bean suppliers, we still want to go and get stock from those who sold the same variety as in our grandpa's age. We may not have a lot of option ?!
Threat of substitues - NC being a warmer place, there is always treat from substitues like Soda and other cold drinks. There is a Ihop and a few other gas stations close by.
Rivalary - Hmmm ... lots but not in that area. We are in a relatively safe location, but the cafe should not run out of business bcos of my incompetency :(
Threat of new entrants - This area is attracting a lot of new shops.... one of it can be a coffee shop. The probability is high.
High Buyer Power
ReplyDelete- Large number of customers
o What are our desired customer characteristics? What is our theme?
o Loyal customer base
o Reputation as a place out-of-towners need to visit. Cater to student and prospective student families and out of town fans attending WFU sporting events.
- Small differences between competitors
o Try to reduce buyer power through distinctiveness.
o Try to differentiate with excellent, super-friendly service. Use fresh and highest quality ingredients. Have both standard and special menu items. Good selection of healthy offerings. Include two-three seasonal or specialty type items on menu every day. Include at least one super-healthy offering on the lunch and dinner menus.
o Donate unsold, prepared food to food kitchens.
- High sensitivity of price means that it’s difficult to charge high prices due to many competitors.
o Price in middle-high-end ranges.
o Offer at least a fewer lower-cost offerings so as to not completely limit our clientele.
- High availability of substitute products
o All kinds of restaurants, bars and coffee shops.
o Energy drinks, soda, home brews.
Develop our own branded coffee for the brew-at-home market.
- Switching costs
o Frequent buyer program.
o Daily specials. Special of the day.
o Free coffee refills all day. Do not need to save cup or receipt, just use loyalty card as it will store necessary qualifying purchase.
o Position ourselves in a unique way to add value to the experience so that there is no substitute to our café.
Supplier Power- Low or medium
- Low volumes with many suppliers minimize supplier power while product/experience/service differentiation allows us to pass on customer costs to customers.
- Do we partner up with a few food/beverage suppliers to get volume discounts and reduced prices or…
- Buy from many local producers/companies to minimize supplier power but this would be at the cost of higher product cost?
- Diverse menu offerings will allow us to capitalize on seasonal products and unique market opportunities and limit supplier power.
Threat of substitutes - High
- There are many alternatives to our product offerings.
- Should try to lower supplier power by making the experience unique through both excellent, distinctive, friendly service, and maybe some kind of unique theme. Would allow us to pass along price increases to customers.
- Differentiating attributes reduce threat of substitutes.
- Restaurants, bars, coffee shops, home-brew, soda, energy drinks.
- Make the service/quality standards high enough to differentiate ourselves from our competitors.
- Do not serve anything that is not perfect. If it is not cooked or prepared right or if the ingredients do not meet high quality standards, throw it out instead of serving it.
Threat of new entrants.
- Use quality, distinctive service, food, ingredients diverse menu offerings and overall theme to create an entry barrier that competitors have a hard time matching. Create strong customer loyalty to discourage potential entrants.
- Examples of the kind of employees we want
o Village Tavern- Servers are always friendly, professional and knowledgeable.
o Chick-fil-a- Higher paid workforce. They do not give the appearance that we are paying the minimum wage possible which results in the ability to be choosy about who you hire.
o Want a workforce that is empowered and encouraged to do whatever is necessary to satisfy the customer.
o Encourage ideas or innovative ways to keep the experience unique.
o Successfully implement and communicate strategies to employees. Motivate/incent employees to achieve objectives.
Rivalry among customers- High
- Find a way to entice customers to spend a little more for our experience as we do not want to compete on a low-end basis.
Use product differentiation to develop unique differences to influence demand.
Buyer power- high
ReplyDeleteThere are many competitors and substitute products available. This is why we need to make sure we have good switching costs so the buyers would not drive our prices down.
Supplier power- both high and low
I think that in terms of equipment, coffee cups, lids, stirrers, holders, to go boxes, napkins, etc. for these services we should choose a supplier that has a low supplier power, basically, if they increased their prices we can always easily find someone else to offer the same for the lower price.
But for our coffee beans, and fresh produce we use in sandwiches and soups we need to team up with local producers and suppliers. Some restaurants, but not too many offer this “fresh, home-made” quality and service so here is where the supplier power may be higher.
Threat of substitutes- high
There are lot of places offering coffee and sandwiches. What do we do on our end to make a substitute product less of a threat? Think about various add-on services we can offer.
Rivalry among existing competitors-high
Lots of other places offering similar service, maybe not directly in our area, but Winston Salem is a fairly small town, it is easy to get from one point to another in a short time frame. Focus on developing product differentiation-unique difference in our product to influence demand for it.
Threat of new entrants-high
Start up costs for a coffee shop are relatively low. This area is developing; potential new coffee shop is a high probability.