According to the “Journal of Asian Scientific Research” in 2015, competition is how successfully a firm will compete with other firms in the industry at both national and international levels. This study will tell about Porter’s competitive model which affects the food industry by focusing on five areas which are listed below. With these newer opportunities arise with the help of which better business strategies may be developed. Porter (1979) had developed this business model. The research holds great importance especially in the developing countries that could generate employment and rise in the income levels as well as rise in export quality through usage of optimum resources and taking maximum advantage.
Competition Among the Competitors
Jaradat (2013) exclaimed that a competitive strategy with effective competitors will give the company a competitive edge over other companies. In the food industry, competition is relatively high. Thus firms in this category prioritize on gaining a competitive advantage by using one of the ways that could be the change in prices, to focus of differentiating the product and bring about its improvements, to make use of creative channels of distribution and also to exploit the relationship with suppliers. Rivalry is automatically increased when the firms are competing with the same customers. Yet revenues can be gained through market expansion (Quick MBA, 2010).
The Bargaining Power of Buyers
If the customers are more powerful, their tendency to bargain increases especially the price sensitive customers as a result of which prices may be forcefully reduced. In case of having power in the backward integration for instance, customers in the food industry are able to bargain over the decrease in price of the food items, this could result as a threat for the company. With purchase decision, the bargaining power increases. If more products are purchased, the bargaining power is thus enhanced. (Eskandari, 2015) In case of food industry the bargaining power of customer is very strong. They demand good quality, a great experience along with a reasonable price. If prices are set higher customer might leave unreasonably. (Lauron, 2009)
The Bargaining Power of Suppliers
The bargaining power of suppliers is the reverse of the bargaining power of buyers. It is the price given for the product or services (Quick MBA, 2010). This too is a huge force in the industry. Usually restaurants would get food from external sources e.g butchers, different packaging companies and farmers and not make their own. For instance most of the restaurants sell meat. The supplier chosen will be according to the price the company sells its product at. Thus, in most industries it is a weak force yet can still advantage e.g Chipotle. It supplies organic produce and also antibiotic free meat and therefore charges a price for the product supplying (Quick MBA, 2010).
Threat Towards the Entry of New Entrants in the Market
The threat towards the entry of a new entrant is very high in case of the food industry. This is because there are very few barriers of entry. It is also cheaper to start up a restaurant than any other business. Individuals can easily acquire their own funds as compared to starting any other business. Also it is the experience that holds pivotal importance and not only the food. It is therefore important for the food industry to focus on entry of any new entrant that might become a threat in the near future. (restaurantowner.com, 2011)
Substitute of Existing Products
The threat of substitute can be related as the products that exist outside the industry. This threat is arises when the product demand is effected by the change in price of the substitute product. A porter clearly explains in his model that the threat occurs usually due to the competition in price. (Quick MBA, 2010). In case of food industry, if restaurants are to maintain an average checked price, they will not lose customers. Issue arises when the customers prefer choosing a casual kind of restaurant or a fast food kind or may be prefer to eat at home. Thus the number of options increases. Even in economic crises consumers may chose to eat at home or opt for fast food. Yet they can still compete in terms of preparing food in a better way and giving good quality. This can be reduced by focusing on the consumer preferences. (Quick MBA, 2010).
References
Bakan and Dogan, (2012). “Competitiveness Of The Industries Based On The Porter’s Diamond Model: An Empirical Study.” Volume 1, Issue 3. Available at: http://arpapress.com/Volumes/Vol11Issue3/IJRRAS_11_3_10.pdf
Eskandari. Meysam, (2015). “Factors affecting the competitiveness of the food industry by using Porter’s five forces model case study in Hamadan province, Iran.” Journal of Asian Scientific Research, 2015, 5(4):185-197 Available at: http://www.aessweb.com/pdf-files/jasr-2015-5(4)-185-197.pdf
Jaradat. Saleh, (2013). The Impact of Porter Model`s Five Competence Powers on Selecting Business Strategy “An Empirical Study on Jordanian Food Industrial Companies”. Interdisciplinary journal of contemporary research in business.Vol 5, Issue 3. Available at: http://journal-archieves34.webs.com/457-470.pdf
QuickMBA.com (2010) Available at: http://www.quickmba.com/strategy/porter.shtml
restaurantowner.com, (2011) Available at: https://www.restaurantowner.com/public/Restaurant-Skills.cfm