Gf Craft Five Forces Model Business Plan Sample

Porter’s Five Forces Analysis

Michael Porter gave a model for better understanding of competitive forces. He proposes that for creating a competitive advantage and overcoming the competition, it is necessary to analyze five forces acting in the market. These forces are:

Threat of New Entrants

Threat of Substitute Products
Bargaining Power of Suppliers
Bargaining Power of Buyers
Rivalry among existing Brands
All these forces act to increase the competition among the businesses and if properly analyzed, a business can gain competitive advantage. These forces of competition are analyzed for the GF Craft. The analysis is given below. The purpose of this analysis is to create sustainable competitive advantage for the business.
Threat of New Entrants
The new entrants entering the business increase the competition. In this way competitive advantage decreases. The certain factors that are increasing this threat are governmental regulation, capital requirements for the business, access to the raw materials and distribution. GF Craft is to operate in Kuwait. The governmental regulations in Kuwait favor new businesses. There are no special requirements like special licenses. Therefore, the regulations are low. It favors the entry of new players in the business. Moreover, the capital requirements for opening a Gluten free restaurant are also low. The market growth is high in Kuwait. It is a favorable business for doing business. People from all over the world are turning to Kuwait and doing business. The economic conditions are better. It also increases the threat of new entrants in the market. The raw materials required for the production of Gluten free restaurant are easily accessible. All these factors lead to increased threat of new entrants. However, Gluten Free concept is relatively new in the market and currently no considerable competition is present as the product offered is highly differentiated. It requires expertise and human capital as well. This factor checks the entry of new players. Considering all the factors, the overall threat of new entrants is high for this business.

Threat of Substitutes

The substitute products available in the market also increase the competition and consumers can have an option. In case of products having more substitutes, the switching cost of the consumer decreases and the consumer can easily switch to other substitute products. For GF Craft, there is no perfect substitute currently in the market. There is a bakery with the name of Firin currently operating in Kuwait. It offers bakery products but is not the perfect substitute. The concept of Gluten Free food is relatively new in the market. Therefore, it increases the switching cost of the customers. Moreover, no gluten free restaurant is currently operating in the market. Therefore, the Threat of Substitutes is low. It gives the business an edge that it will be facing less competition in the market. In this way the GF Craft will enjoy a sustainable competitive advantage.
Bargaining Power of Suppliers
The suppliers refer to the people providing raw materials to the business. If the suppliers of business are less they assume more power over the business and if suppliers are more, it gives business more power to negotiate. In this way the power of suppliers decreases. The suppliers for the raw materials of Gluten free food are less in the market as there are no such businesses operating yet. The supplies include common food items to some specialized materials. In this way, GF Craft will be in low power to negotiate with the suppliers. It increases the available alternatives as well as the switching cost of the business. GF craft will have to negotiate with the suppliers at their terms. Moreover, the threat of forward integration by the suppliers is also low as the restaurant involves whole set of expertise to be operated. Overall, the bargaining power of suppliers will be moderate as currently there are few suppliers and they will be negotiating with GF craft at their own terms. It will be giving moderate control to the suppliers.
Bargaining Power of Buyers
The power of the buyers over the business is regarded as the bargaining power of the buyers. GF Craft is a restaurant. It will be serving directly to the consumers. Therefore, there are no intermediaries involved like wholesalers or retailers. It makes the restaurant a business to consumer business. The intermediaries often assume more control over the business and businesses become dependent over their established channels. As there are no intermediaries, it gives more control to the GF Craft on its distribution. Secondly, the competition is also low as there are no substitutes. The consumers will purchase the products at terms and rates of the GF Craft. The Celiac customers particularly prefer Gluten free food. The business can target this segment by advertising specifically to these people. Overall, the bargaining power of the buyers in case of GF Craft is low as there are less competitors and the business involves less intermediaries. It can help the business in creating a more sustainable competitive advantage.

Competitive Rivalry among the Brands

All the above discussed factors lead to the overall competitive rivalry among the brands. If the threat of new entrants is high along with increased bargaining power of suppliers, buyers and more substitute products, it means that the market competition is more and business has less chances of competitive advantage. As discussed earlier in detail, the threat of new entrants is high due to favorable business conditions and less capital requirements. Secondly, the bargaining power of supplier is also high due to limited number of suppliers. However, the bargaining power of buyers is less and the substitutes present for the business are also less. The competition situation currently is less. There are no restaurants in the market currently serving Gluten free food. Only a single bakery with the name of Firin is operating. It could be a substitute but now a perfect fit for the product offering of GF Craft. Gluten free food is also need of the customers particularly in case of celiac patients. All these factors are favoring GF Craft. Therefore, the overall rivalry among the brands is currently low to moderate. It is expected to increase in the future as more players will be entering this sector.
In view of the above analysis, it is concluded that the operations of the business will be profitable due to less competition faced. It is speculated that this competition will rise in the futures. GF craft should move more to product differentiation to counter this competition arising in the future. GF craft can also integrate backwards to assume more control over the supply side. In this way the high bargaining power of suppliers can be overcome.