Question

Please explain the Porter model on Famous Doughnuts in Buffalo, NY

Answer 1

Porter Five Forces Model applies five forces on any industry or firm. It gives a vision that where the company should focuses and what is the profitability, opportunity and risk in the industry or for business firm.

Let us see how it is applied on the Famous Doughnuts

Bargaining Power of Buyers-There are many Doughnuts provider in the Ney York city but the taste and service Famous Doughnuts provide no other can beat them. Although different people have different taste but the loyal customer always prefer Famous Doughnuts. They do not like other Doughnuts. Hence this is a very strong force by the company.

Bargaining power of the supplier- There are many supplier available on the New York City. The company has negotiation power against the suppliers. They can chose from variety of suppliers and negotiate them to lower their cost. Suppliers have very low force against the company. Hence again this is a very strong force for the company.

Threat of New Entrants- Setting up a Doughnuts company is not very big task. You need not to have big capital and expertise. The work is done by the machines. Overall I mean to say that establishing a company for Doughnuts is not very tough such as government barriers, ethical issues, investment etc, so there is always a threat that any new emerging company can snatch the market share form Famous Doughnuts.

Alternatives available into the Market- There are variety of food available in the market from home to shop but Doughnuts eaters only prefer Doughnuts with Famous Doughnuts. Doughnuts stimulate the tongue and no other alternative can complete eliminate Doughnuts. It has its own place for the consumers. So this is again a strong force for the company.

Threat of substitute- There are plenty of substitute available for the Famous Doughnuts. But it has its own place. The people prefer it. Some people are becoming health conscious hence they are avoiding Doughnuts or they are searching for health Doughnuts. But yet they are very small in numbers. But in future the number may get increased. Hence this is a moderate force for the company.

So from above analysis it is clear that Famous Doughnuts should find a health alternative of Doughnuts.