In the contemporary business world, the market has become extremely competitive. In order for any business to survive in such an environment, it needs to be in a position to make the most effective decisions. For a family owned small bicycle retail shop business, this kind of business environment calls for the firm to come up with effective decisions in order to maintain its profitability in such an environment.
In order for a small business to maintain high level of performance in a competitive market, it needs to adhere to a number of success factors. These are aimed at increasing the competitiveness of an organisation in the market.
In this case, there are several similar businesses that are involved in selling similar products in the same area. Therefore, there is a very high level of competition in such an environment. In this case, the porter’s five forces can be applied in order to have a clear understanding of the industry and hence make appropriate decisions.
One of the porter’s forces is the bargaining power of the suppliers. In this case, the bicycles parts are brought by specific suppliers. The cost of these items can have a critical impact on an organization’s level of profitability. When the bargaining power of the suppliers is high, then the industry is less attractive (QuickMBA Par 8; Porter’s Five Forces).
Another aspect discussed by Porter is new entrants. New entrants into an industry increase the level of competition. This decreases the attractiveness of the industry. This understanding is very important in making critical decisions in the organisation. It is helpful in making any future decisions. For instance, the business may choose to expand its market in areas where there is no threats of new entrants.
It is also necessary for an organisation to consider the threats of any substitutes in the industry. The threat of substitutes can significantly affect the profitability of a business in a certain market.
Another aspect of the porter’s five forces is the rivalry. The intensity of rivalry is determined by the number of competitors in the market. It is also determined by the level of differentiation among other factors.
The above discussion has revealed that the porter’s five forces analysis will be very useful for the small family owned business. After identification of the possible threats in the market, the business will be in a position to come up with the most appropriate solutions.
One of the ways through which the organisation can improve on its performance in the market is by minimizing its operational costs (QuickMBA par 3; Market Share). For instance, an organisation must be determined to reduce its overhead costs. For example, a small bicycle business can cut down its costs by eliminating unnecessary supplies and equipments. By so doing, an organisation will be able to under price its competitions.
An organisation can also increase its competitiveness by improving the level of customer satisfaction. For instance, the business may offer discounts in training those who buy the bicycles in their stores. They may also improve on the attendance and guiding customers in making their purchase choices. This will significantly help improving the organisation competitiveness.
For a small bicycle business to survive in a competitive market, it is necessary to have effective policies concerning the product, promotion, place and price.
The business must ensure that its products are stronger than other similar products provided by its competitors. It must also ensure that these products and services are always available and accessible to both existing and potential customers. This increases the level of customer satisfaction.
Price is also important in determining the performance of a business (Epstein 28). It is necessary to set a realistic price. Too high prices may lead to loss of customers. Finally, it is necessary to conduct promotions in order to inform potential customers about the product. This will help in increasing the level of sales.
This discussion has clearly shown that the bicycle industry has a high level of competition. This implies that it is important for a small business bicycle retail shop to adopt the necessary measures in order to maintain its profitability.
Porter’s five forces are necessary in proving an understanding of the industry. In order for a small business to survive in such an environment, it has to reduce its operations costs. This will help an organisation under price its competitors. An organisation must also be in a position to improve consumer satisfaction in order to retain them.
Epstein, Kevin. Marketing Made Easy. Canada: Kevin Epstein, 2006.
QuickMBA. “Market Share.” Quickmba, 2010. 13th Sept. 2011.
QuickMBA. “Porter’s Five Forces. A Model for Industry Analysis.” Quickmb, 2010. 13th Sept. 2011.