Question

From the perspective of an entrepreneur who is considering entering the ghost kitchen industry, evaluate the competitive environment of the industry using Porter’s Five Forces model.

Answer 1

ANSWER- Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter of Harvard Business School as a simple framework for assessing and evaluating the competitive strength and position of a business organisation.

to sustain in the market in the long -run the competition analysis is very important aspect. the managers should not waste their entire time in just collecting information about competition and Interpreting it, rather they would take a focused approach for competition analysis.To help in this focused approach of competition analysis a tool known as Porter's five forces model is used.

Following are the five areas or forces of competition analysis.

1- Threat of new entrants

new entrants are source of increasing competition. New entrants in the market increase the competition for existing organizations for maintaining their market share. For example,with the entry of new telecom operators the competition in the telecom market has become more intense.therefore ,organisations should identify new entrants threats in terms of their impact on the competition by analysing their potential product quality,product price,financial strength amd reputation etc.

2-bargaining power of buyers

buyers strength is one of the key forces which drive the competition.for example,in telecom space, buyer's bargaining power is extremely high due to availability of different sources of services.organisation should analyse whether the market is buyer market or not i.e buyers are deciding the direction of market or prices of product.

3- bargaining power of suppliers

This is a hidden force of competition and normally buyers/customers and general public are not aware that the suppliers to organisation is also a force of competition. For example,exclusive tie-up between telecom operators and equipment suppliers (towers and telecommunication) also sometime set the course of competition direction.

4- threats from substitutes

the firm analyzes whether a new product can substitute their existing product; for example, mobile phones substituted to a large extent the basic or wire phones.

5- rivalry among current players

the firm analyzes the nature of competition among rivals i.e it is very intense or at moderate level. For example, the hotel business now a days are very much competitive. With millions of tourist travels every year, luxurious hotel is the first choice for most tourists.  foreign tourists are said to having higher buying powers thus will seek for high end luxuries. That works behind the reason why companies constantly compete for better products and attractive prices.

Five forces analysis helps organisations to understand the factors affecting profitability in a specific industry, and can help to inform decisions relating to: whether to enter a specific industry; whether to increase capacity in a specific industry; and developing competitive strategies.