Designing Effective Organizations
Be enough. Today’s customers expectвЂ?even demandвЂ?all products to be high quality. Thus, Purdue Farms plans to use customer service to further differentiate the company- Case Analysis- Purdue Farms Inc: Responding to the 21st century challenges. (Richardson, 2010). The focus will be on learning how to become indispensable to the customer by taking cost out of the product and delivering it exactly the way the customer wants it, where and when the customer wants it.
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In short, as Jim Purdue says, “Purdue Farms wants to become so easy to do business with that the customer will have no reason to do cuisines with anyone else” (Richardson, 2010). 3. 1 Porter’s five forces model Porter’s five forces model helps in accessing where the power lies in a business situation. Porter’s Model is actually a business strategy tool that helps in analyzing the attractiveness in an industry structure. It let you access current strength of your competitive position and the strength of the position that you are planning to attain (Notebooks, 2009).
Intense rivalry among existing players ‘V. Bargaining power of suppliers V. Bargaining power of Buyers Threat of substitute products means how easily your customers can switch to your competitors product. Threat of substitute is high when: There are many substitute products available Customer can easily find the product or service that you’re offering at the same or less price Quality of the competitors’ product is better Substitute product is by a company earning high profits so can reduce prices to the lowest level. In the above mentioned situations, Customer can easily switch to substitute products.
So substitutes are a threat to your company. When there are actual and potential substitute products available then segment is unattractive. Profits and prices are effected by substitutes so, there is need to closely monitor price trends. In substitute industries, if competition rises or technology modernizes then prices and profits decline. A new entry of a competitor into your market also weakens your power. Threat of new entry depends upon entry and exit barriers. Threat of new entry is high when: Capital requirements to start the business are less Few economies of scale are in place
Customers can easily switch (low switching cost) differentiated There is variation in attractiveness of segment depending upon entry and exit barriers. That segment is more attractive which has high entry barriers and low exit barriers. Some new firms enter into industry and low performing companies leave the market easily. When both entry and exit barriers are high then profit margin is also high but companies face more risk because poor performance companies stay in and fight it out. When these barriers are low then firms easily enter and exit the industry, profit is low.
The worst condition is when entry barriers are low and exit barriers are high then in good times firms enter and it become very difficult to exit in bad times. Ill. Industry Rivalry Industry rivalry means the intensity of competition among the existing competitors in the market. Intensity of rivalry depends on the number of competitors and their capabilities. Industry rivalry is high when: There are number of small or equal competitors and less when there’s a clear market leader. Customers have low switching costs Industry is growing Exit barriers are high and rivals stay and compete
Fixed cost are high resulting huge production and reduction in prices These situations make the reasons for advertising wars, price wars, modifications, ultimately costs increase and it is difficult to compete. IV. Bargaining power of suppliers Bargaining Power of supplier means how strong is the position of a seller. How much your supplier have control over increasing the Price of supplies. Suppliers are more powerful when Suppliers are concentrated and well organized a few substitutes available to supplies Their product is most effective or unique
Switching cost, from one suppliers to another, is high You are not an important customer to Supplier When suppliers have more control over supplies and its prices that segment is less attractive. It is best way to make win-win relation with suppliers. It’s good idea to have multi-sources of supply. Bargaining Power of Buyers means, How much control the buyers have to drive down your products price, Can they work together in ordering large volumes. Buyers have more bargaining power when: Few buyers chasing too many goods Buyer purchases in bulk quantities Product is not differentiated