Case Study: Bargaining power of suppliers is similar to the bargaining power of buyers. However, this reflects the bargaining leverage suppliers have on the producing industry instead.
Suppliers in Singapore have a relatively high leverage over the industry due to the many different customers they have. Having small and fragmented stalls all over the country, suppliers have the upper hand to supply to the many different stalls. Spize may have to be well known and powerful to curb supplier’s bargaining power. These is due to brand name and sovereignty which out shadows suppliers bargaining leverage.
5.4Threats of substitutes
In Porter’s model, substitute products does not mean alternatives in the same industry, but refers to substitute products in other industries (Stimpson & Farquharson, 2010).
In the F&B industry, the threat or substitutes are rather low or non-existent. This is due to the fact that food has no close substitutes. Even if food is alternated for healthier products such as fruit juices or supplements, such alternatives only appeal to a rather small market. Thus Spize may not have issues with threats from substitute products since it is dealing in the F&B industry.
Competitive rivalry sums up the most important factors that determine the level of competition or rivalry in an industry. It is based on the other four factors, which is why it is often illustrated in the centre of the Five Forces diagram (Stimpson & Farquharson, 2010).
Competitive rivalry in the F&B industry in Singapore is high due to the fact that there is high threat of new entrants, high bargaining power of buyers and high bargaining power of suppliers. Furthermore, market growth in the industry is rather slow, thus forcing firms to take a share from rivals if they wish to increase sales, and there is currently a large number of firms in the industry.
Spize should expand in Singapore by taking advantage of the strong and stable foundations of the country as analysed by the PESTEL analysis through economies of scale. Economies of scale happens when there is a reduction in a firm’s unit cost of production that results from an increase in the scale of operation (Stimpson & Farquharson, 2010). In the case of Spize, with the current two outlets, a third outlet may allow them to further enjoy purchasing economies of scale through bulk buying. The lower cost of inventories may benefit them in terms of profit margins. Furthermore, management economies may be enjoyed by Spize with the extended duties of current managers to run the three outlets.
Expansion plans may also require Spize to revamp their marketing mix to ensure a smooth and successful expansion. Hence Spize may embark in Customer Relationship Marketing (CRM). CRM uses marketing activities to establish successful customer relationships so that existing loyalty can be maintained (Stimpson & Farquharson, 2010). These is essential for Spize since there is a high competitive rivalry in the F&B industry in Singapore as analysed in the Porter’s five forces analysis. An effective and efficient tool to curb competitive rivalry is through keeping loyal customers coming back. Thus Spize may need to gain as much information as possible about each existing customer and adapt the 4Ps of the marketing mix to meet these needs as closely as possible.
Another way for Spize to keep loyal customers and to attract new customers at the same time is to take advantage of the technological advances of Singapore and embark in innovative ways of operations. One way Spize could do this is to employ technological gadgets in their outlets for customers to use to take orders, which is an interesting and fun concept. This may not be a genuinely new concept, but Spize may want to adopt it as it may help solve the problem of workforce issues as well, such as the foreign labour curbs which Singapore is facing now. In a way, this may help to solve two problems at once. Alternatively, gadgets may be used to manage staffing and inventory issues which once again reduces the need for manual labour.
In conclusion, Singapore has a vibrant and conducive environment for business to operate in and prosper. Nevertheless, the F&B industry is a highly competitive industry. Spize will need to make efficient and effective decisions to ensure its sustainability and success in the industry. Moreover, the fact that food is a necessity to all humans may also help cushion Spize in their operations as an F&B business.