Project Management Harvard Case Solution & Analysis

Porter’s Five Forces for Analyzing Overall Situation

Porter Five Forces Model

Porter Five Forces Model distinguishes and inspects five competitive forces that shape out the likely pros and cons for every industry, and supports to find out an industry's overall attractiveness by means of different forces that are influencing the different factors which are there in the industry.

Threat of new entrants is high

The threat of new entrant is high because it is not that costly to enter in such industry in which you need to have a low capital, exceptional branding and cooking expertise. International competitors make it difficult for the one to enter in this industry across the globe. Many brands have been introduced in the market from time to time but they all have been wiped out by international competitions like Mc Donald’s and KFC.

Bargaining power of buyers is high

The bargaining power of buyer in this industry is high because they have approximately same competitors available in the form of other and local restaurants as a replacement for each other. They both possess exactly the same taste and can be easily taken as a replacement of each other. If one raises the price so it is a possibility that a consumer may go for another local restaurant. Therefore, price will also play vital role here.

Bargaining power of suppliers is high

The bargaining power of supplier is high as a supplier can afford to bargain a lot. This is because if it loses a contract so it may not be a loss for that supplier. For example, if a Mr. John is supplied raw material by a certain company so that supplier will try his level best to maintain excellent relationships with them and must not negotiate un-necessarily. In this industry the formula matters that is kept hidden from all raw material suppliers and even employees. So raw material will not play a very important role as compared to formula. Here in this industry the quality of supplies does not matter a lot because the quantity of formula that is mixed has a real role to play in the development of taste.

Degree of competitive rivalry is high

The degree of competitive rivalry is high especially in a country like Morocco that has a huge population and a competitive market. Local and international players in Morocco are trying their level best to snatch each other shares by doing branding activities all over the year across the region. They are fully involved in participating in sports, music and other flourishing industries; which increase the level of competition in this industry in an excellent manner.

Threat of substitution is high

Threat of substitute is high because a customer may switch to other items and other healthy food as a substitute. Sometimes consumers may not go for restaurant food which is comparatively more risky for health, so they prefer low cholesterol food and other drinks as a substitute. But by using social media the company can highlight the benefits of having their food and can enhance the healthy brand image by using the social media promotion strategy.

Financial plan

 Rent and operating costs:

• Security deposit (typically one month of rent at 5,000 to 10,000)
• First-month rent (3,000 to 6,000)
• First-month utilities, including Internet and phone service (2,500)

One thing that should be kept in mind, if Mr. John decides to build and buy instead of rent, then there can be governmental influence on fees.

Location improvement costs:

• Construction of desired build out, with kitchen (10,000 to 12,000)
• Restaurant furniture (10,000)
• Table wear, kitchen, dishes, utensils, , and bar equipment (3000)
• Initial supply of food / beverages (4,000)

This estimates for the initial food and beverage expense depends on what Mr. John serves and how he serve it, but it is advised to keep this initially as small as possible until he has a positive cash-flow.

Miscellaneous opening expenses:

• Insurance (1,000)
• Permits and licenses (1,000 to 2,000)
• Accounting costs (vary)
• Ordering and payment technology (2,000)
• Signage (1,000)
• Menus (1,500)
• Fliers-ads-coupons (2,000 to $3,000)
• Business cards (70 for four people, if self-designed)

Marketing:

• Signage (1,000)
• Menus (1,500)
• Fliers-ads-coupons (2,000 to $3,000)
• Business cards (70 for four people, if self-designed)............................

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