Business environment analysis and organizational implications

Hometown Deli -- Environmental Analysis

The Hometown Deli was established by grandfather in 1952 in our hometown. The Deli has a product mix that consists of many different kinds of specialized coffees, teas, a full service bakery, homemade soups, sandwiches, and salads. The Deli has been a local hotspot for many years and has served as a community gathering place. Unfortunately, business has been steadily declining over the last five years and there has been rumors emerge that another Deli, Wall Street Deli, might enter the market as a local competitor. Although grandfather was an expert at running the deli, it lacks any modernization and many of the orders were previously taken with pen & paper or even just memory; the Deli essentially still operates the same as it did in 1952. This analysis will be comprised of a Porter's Five Forces analysis that will help the Deli kwon more about its environment and provide insights that could help the Deli perform process improvements and modernize its operations.

Porters Five Forces

Buyers Power - Low

Currently, customers in the local market have very little buyer's power due to the fact that there is no viable competition. Customers really have no alternatives to dining out in the local market and thus the Hometown Deli is really the only choice. However, a new entrant could change this situation very rapidly and the Hometown Deli must consider this possibility to occur in the near future.

Suppliers Power - Low

The Deli must source its food from its suppliers. It is reasonable to suspect that there is a substantial amount of competition in the wholesale or commercial foods market. For example, if the Hometown Deli became unsatisfied with one of its suppliers for any reason, then it would most not be hard for the business to find a host of other suppliers that could fill this void. As a result the supplier's power in this industry is believed to be rather low.

Threat of Substitutes - High

The threat of substitute products is among the greatest threats that the Deli currently has. Even though there may not be much competition in the local market, the local consumers can still chose for a wide variety of other channels for food. For example, if the price for lunch becomes too high at the Hometown Deli then consumers may opt to eat lunch at home, skip lunch, or possibly even order precooked meals online. The possibilities for substitute products are virtually endless. People could even grow their own food if they wanted. Therefore the threat of substitute products is believed to be rather high.

Threat of New Entrants

The threat of new entrants is determined by the likelihood of potential competitors entering the market. This determination is usually some combination of the capital requirements and the other barriers to entry. The Deli industry is a relatively easy industry to enter and this would make the threat of entrants rather high. However, since there are rumors of new competition, as previously mentioned, this threat for The Hometown Deli the threat of new entrants is exceptionally high.

Competitive Rivalry

Rivalry among existing competitors can be determined by product differentiation or a company's uniqueness in their products in comparison to other businesses in their particular industry. At the moment the rivalry among existing competitors is low because there is not a current competitor. However, given that the threat of the new entrant seems eminent, it is recommended that the Hometown Deli pretend that the Wall Street deli is already a competitor and begin to compare its operations to theirs.