Week 4 : Srtudy Case about Portes 5 Forces

PORTER’S 5 FORCES

A model introduced in 1979 by Michael Porter and used by companies for industry analysis and corporate strategy development. The five forces include competition, supplier strength, customer power, the potential for new companies joining the industry, and the threat of substitute products.

                                                           

    

Bargaining Power of Suppliers

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services.

Suppliers provide the raw material needed to provide a good or service. This means that there is usually a need to maintain strong steady relationships with suppliers. Powerful suppliers may be able to increase costs without affecting their own sales volume or reduce quantities that they sell.

Supplier bargaining power is likely to be high when:

-          There are no substitutes for the particular input,

-          The suppliers customers are fragmented, so their bargaining power is low,

-          The buying industry has a higher profitability than the supplying industry,

-          Forward integration provides economies of scale for the supplier,The buying industry has low barriers to entry.

Bargaining Power of Customers

The bargaining power of customers determines how much customers can impose pressure on margins and volumes.

Customers bargaining power is likely to be high when

-          They buy large volumes, there is a concentration of buyers,

-          The supplying industry operates with high fixed costs,

-          The product is undifferentiated and can be replaces by substitutes,

-          Switching to an alternative product is relatively simple and is not related to high costs,

-          Customers have low margins and are price-sensitive,

-          Customers could produce the product themselves,

-          The customer knows about the production costs of the product

Threat of New Entrants

If an industry is profitable, or attractive in a long term strategic manner, then it will be attractive to new companies. Unless there are barriers to entry in place, new firms may easily enter the market and change the dynamics of the industry.

The particular dynamics of an industry that restrict entry into it are called barriers to entry The most attractive scenario for a new company is when a potential market has low barriers to exit but high barriers to entry.

  Threat of Substitutes

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players.

Similarly to the threat of new entrants, the threat of substitutes is determined by factors like

-          Brand loyalty of customers,

-          Close customer relationships,

-          Switching costs for customers,

-          The relative price for performance of substitutes,

-          Current trends.

Competitive Rivalry between Existing Players

  This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.

Competition between existing players is likely to be high when

-          There are many players of about the same size,

-          Players have similar strategies

-          much price competition

-          Low market growth rates

-          Barriers for exit are high

Critically argue of the made of entry used by Gloria Jeans Coffea into Malaysia

GLORIA JEAN’S COFFEE

1)    Critically argue of the mode of entry used by Gloria Jean’s Coffees into Malaysia.

Ultimately, the Gloria Jeans Coffee is a one available product that has a good potential to go worldwide. It have an own strategies to promote their product to achieve the goals and objective of company. Even it have a variety of obstacle in term of managing, marketing, monitoring and evaluating it still can be in charge to become one of top and recognizing product. They have cultivated the strong effort and strive hard to enter a market in Malaysia and other outsides of country, so they join MyFranchise. 

From the article, it shows that GJC was joints with MyFranchise. There are several challenges regarding to the MyFranchise which is 4 from the 13 outlets is operate by GJC. So, MyFranchise need to find a dynamic entrepreneur to take over their corporate outlets. It was a good opportunity to the people who seek a job because it gives them a chance to get a job. Besides, the article shows that MyFranchise provides a compulsory behavioral interview. The candidates will go through in-house training at the Coffee Academy.

   The challenge of the GJC is to secure choice business. Meaning here, the location of the premise is taken by competitor before the actual construction. So, it is difficult for GJC to overcome this matter. However, GJC managed to get heart of CEO of Tesco Malaysia that offering excellent premises which is Tesco Kepong and Tesco Seremban. Besides, GJC has yet obtain Halal certification from JAKIM that make the customer get attract to the safe product regarding to Islamic dietary law. This really makes sense that GJC can be compete other Kopitiam.

 Gloria jean's coffee shifted it’s to capture and grow the coffee market in Malaysia with plans to open more stores in the country. To start up grows in Malaysia market, first the best way is to get the acquisition and qualified of franchise rights by Malaysia International Franchise Sdn Bhd. MyFranchise, a franchise investment arm and a wholly-owned subsidiary of Perbadanan Nasional Berhad (PNS) is actively promoting Entrepreneurship as a Career of Choice programmers.

The benefits Gloria Jean’s Coffee to invest under Myfranchise is given more extensive support including for financing, management, operations and promotions. for the management, is be more systematic under the connection of PNS that provides financial assistance in form of term-loan with very low interest rate as well as guidance and training prior to the commencement of business of PNS’ potential candidates.

 For the management operation of Myfranchise , MyFranchise plans to open more Gloria Jean’s Coffees outlets to add to the existing outlets and inviting local entrepreneurs to join the expanding Gloria Jean’s Coffees family. As part of the continuous development plan, Gloria Jean's Coffees has through by plan to identified numbers of potential coffee house locations within Klang Valley and several potential locations outside Klang Valley and within institutes of higher learning, both private and government-owned.

The specialty on GJC from other competitors in term aroma and flavor because of the coffee had been roasted process in Australia. Based on the customer suggestion for provide local food was approval by obtaining their Australian franchisor. GJC offer local delights and food such as Nasi Lemak Bungkus, Nasi Briyani with Chicken and even Murtabak at the normal price but no local drinks like ‘cendol’ or ‘sugarcane juice’ at this time.

After that, GJC try new strategies to increase their sales and achieve the benchmark from the franchisor for attract more young collage students. First strategy is GJC was hosted a talent show contest and got local music acts to perform at their Sunway Pyramid outlet but it is not success. So, MyFranchise decide to change the strategy. Then, a GJC students club was introduced, the members of the club will get 30% discount on food and beverage items.