Monday, October 29, 2007
Porter's 5 forces
When entering a industry, using the Porter's 5 factors is effective to determine the industry attractiveness. It gives us a summary of the main factors that can help us judge and decide the industry successfulness. The supplier power, barriers to entry, threat of substitutes, buyer power, and rivalry can impact the industry. There is always competetion and a company must have a competitive advantage in order to survive in the industry. For example I believe that the restaurant Industry has a high barrier to entry. A number of restaurant chains have been subject to acquisitions or have sold off because of underperformance. These acquisitions and closings have taken place in both the casual dining and quick-service segments of the industry. Restaurants are facing rising costs for both food commodities and labor, which is hard to profit in this industry. It is high to enter the restaurant industry because of the cost of labor (because of the quantity of labor needed), the cost of equipment and food rises. This is an industry that has many competitors. Survival in this industry is hard because of the location, food, and the rivalry of other restaurants. Because of the many restaurants, it is easy for customers to just go to just about anywhere. The driving competition for customers can hurt the restaurant industry.
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Well, I don't consider restaurant has a high entry barrier. Although the labor cost are high but it happen in all the industry. In fact, the restaurant is paying their employees in a lower than average fix salary since the employee can be compensated by tips. More over, the wholesale food price is expected raised only .07% in the near future which will cause only a 2.9% raise in the menu price. In addition, it is easier to enter the industry for most of the new immigrant because it does not requre much of language or education used for a common restaurant.
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