Business Strategy
Q1 Answer
The shakeout presented in this case is the closure of many restaurants recently due to their failure to break even in the business due to various underlying factors. In fact, many of them are filling for bankruptcy protection due to their inability to operate efficiently in the industry. Competition is one of the major threats in the chain restaurants that is posing a danger to their operations. The competition in the chain restaurant is subject to the differentiation strategies adopted by the chain restaurants. Inability to meet the quality demanded by the customers is another threat to the survival of most restaurants today. Customers are demanding for quality products and services which compel the business to comply failure to which their fail in their operations as discussed. Finally, the cost of operation is another major issue that is influencing negatively the operation of chain restaurants.
Q2 Answer
Bargaining power of customers is one of the porter’s five forces that always limits the profit of chain restaurant. Chain restaurants have many customers thus giving them a strong force to impact the prices of the products offered by this restaurants negatively. Besides, there are many chain restaurants available that allowing customers to make their choices depending on their satisfaction levels. Furthermore, the switching costs from one chain restaurant to another remains very low thus giving the customers an added advantage (Porter 134).
Additionally, competitive rivalry is another key force that impacts the profit potential of the chain businesses. There are many competitors in this business offering similar products in the same industry. This compels each chain to focus much on delivering quality and unique products that satisfy their customers. The differences in uniqueness among the chain restaurants increase the level of competitiveness in the market.
Finally, the threat of a new entrant in the market is another force that has a great impact on the profit potential of the chain restaurants. The barriers to entry in this industry are very low thus encouraging the new entrants to enter the market without any problem. As a result, the new entrants in the market are coming with uniqueness in their operations that increasing the level of rivalry in the market (Porter 136).
The bargaining power of suppliers is one of the porter’s forces that is becoming more unfavourable in the recent years. The suppliers of the chain restaurants are very many thus encouraging restaurants to make choices of the best suppliers. Besides, the switching cost from one supplier to another in this industry remains very low. As a result, the bargaining power of suppliers is a weak force in this industry.
Additionally, the threat of substitutes in another Porter’s Force that is becoming unfavourable to the operations of chain restaurants recently. Many restaurants provide their customers with similar products and services. This limits the substitutes in the industry thus making the threat of substitutes in the market a weak force.
Q4 Answer
Restaurant chains need to focus on those elements that would ensure customer satisfaction in order to survive in the market. It is important for the chain restaurants to be conscious of quality products and services as they handle their customers. They need to provide quality products that satisfy the preference of their customers. Additionally, they need to provide excellent customer services to motivate them to remain loyal in their operations. Many customers today are becoming health conscious, as a result, they impel the restaurant chains to provide foods and drinks that are natural in their making.
Differentiation strategy is the most important strategy that the chains need to adapt in order to remain relevant in the market. This is to mean that each restaurant needs to strive to provide products that are unique compared to that of its competitor restaurants. Besides, the chain restaurants needs to adopt the cost leadership strategy that will help them to operate efficiently thus lowering the cost of the operations hence increasing their profitability.
Work Cited
Porter, Michael E. “How Competitive Forces Shape Strategy.” Readings in Strategic Management, 1989, pp. 133–143.
