Porters Five Forces Model
As strategy consultants of McCormick & Associates, we use Porters Five Forces Model as a framework when making a qualitative evaluation of a firm's strategic position (Appendix 1.2). These five forces determine the competitive intensity and therefore attractiveness of a market. These forces affect the ability of a company to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the market place.
Bargaining Power of Customers
Is high when buyers have many choices of whom to buy from and low when the choices are few. By offering your customers high quality fresh food, they will come to your café instead of your competitors. One way to reduce buyer power is to implement Loyalty Programs. A Loyalty Program that can be implemented in the Broadway Café is to have a customer purchase card. Every time a customer makes a purchase, this card gets "stamped" and after 7 purchases of a sandwich, their 8th one is free or 50% off.
Bargaining Power of Suppliers
The Broadway Café will want its supplier power to be low. The Café should seek out and search suppliers that will offer the lowest price. Since there are many suppliers of basic commodities (e.g., flour, sugar, bread) they all will be vying for your business. A private exchange or a reverse auction could be done in order for you to get the best possible price from your suppliers.
Threat of Substitute Products
Ideally, you would like to be in a market where there are few substitutes for the product or service you offer. It is true that a potential customer can ultimately make their own sandwich or cup of coffee. Yet do these customers have the time and resources to do it? Most likely this will not ...