Hometown Deli: Strategy and Porter’s Five Forces

Strategy

Considering the challenges faced by Hometown Deli about declining business over the last five years, a number of changes will be undertaken with regard to its operational strategy. According to Patrick (2000, p.230), effective formulation and implementation of business strategy are one of the ways through which a firm can develop a high competitive advantage. In an effort to achieve this, Hometown Deli will update its marketing strategy through the incorporation of online marketing. The firm will develop its own website through which it will post information regarding its operations.

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Currently, the firm operates on a traditional marketing strategy. For example, ordering is conducted manually. Thus adaption of online marketing will enable the firm to improve its marketing efficiency (Gay, Charlesworth & Esen, 2007, p.54). For example, customers will be able to enquire and purchase the firm’s products through the internet. In addition, online marketing will enable the firm to establish a strong relationship between the firm and its suppliers. The relationship between the firm and its suppliers will be attained through the implementation of intranet technologies (Timmons, Zacharakis & Spinelli, 2004, 34). As a result, the firm will be able to order the necessary supplies online.

To facilitate online sales, the firm will enter into a contract with local credit companies. As a result, it will be possible for the firm to make sales online. The resultant effect is that the firm will be able to improve its marketing activities. Larson (2008, p.22) is of the opinion that integration of online marketing can result in the improvement of a firm’s competitive advantage. One of the ways through which this can be achieved is by attaining a large market share. Currently, the firm operates in only one location. Integration of online marketing will enable the firm to reach a wide range of potential customers thus creating an online community.

Over the years, Hometown Deli has served as the community’s gathering place. This illustrates that the firm has managed to develop a substantial level of customer loyalty. The new management team is committed to enhancing the degree of customer loyalty. To achieve this, the firm will integrate the concept of Customer Relationship Management (CRM) in its strategic management processes. According to Brink and Berndt (2009, p.41), the development of customer relationships can limit the rate of customer turnover. This means that the development of customer relationships can culminate into a high level of customer loyalty (Hill& Jones, 2009, p.35). Effective, customer relationship management will be assured through the implementation of the CRM software which will enhance the rate of interaction between the firm and the customers.

In an effort to develop customer loyalty, the firm will integrate emerging technologies. One of the technologies which the firm has considered integrating includes the emerging social communication tools. The firm will contract experts to develop a company blog. Through the blog, the firm will be able to interact with the customers. For example, the customers will be able to interact with the firm. The customers will be able to make comments regarding the firm’s products and services. In addition, customer relationships will also be enhanced by integrating Facebook into its marketing efforts. The comments made by the customers through social networks will enable the firm’s management team to improve its products and services. The resultant effect will be an improvement in the level of confidence amongst the existing customers. Enhancing interaction will lead to the development of a new customer experience. Brink and Berndt (2009, p.41) are of the opinion that improving customer relationships can result in the development of repeat purchasing behavior amongst the customers. This will culminate in the improvement of the firm’s competitive advantage.

The entry of Wall Street Deli into the market poses a threat to the firm’s survival. This arises from the fact that the new entrant will lead to rivalry between the firms. This may affect the firm’s level of profitability which the employees are concerned about. Doole and Lowe (2005, p.206) are of the opinion that a decline in an industry’s level of profitability is a threat to a firm’s survival. This arises from the fact that the firm may consider integrating a survival strategy such as downsizing. Through the incorporation of online marketing and customer relationship management, there is a high probability of the firm improving its profit potential by increasing its customer base. According to Brink and Berndt (2009, p.41), the development of customer relationships can enable a firm to attain support from a large number of customers. This means that the employees’ job security will be assured.

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Environmental scanning

According to Kurtz, MacKenzie, and Snow (2009, p.90), scanning the environment can enable determine market feasibility. In an effort to develop a competitive advantage, the firm conducted a comprehensive environmental scanning. This was achieved by integrating the concept of market research. The main market variable which was considered is the consumer. Findings of the consumer market research revealed that consumers have diverse tastes and preferences regarding food products. In addition, the firm realized that consumers are increasingly becoming health conscious.

According to (Lashley, p.326), firms in the hospitality industry can be adversely affected by increased health consciousness amongst the consumers. This is due to the fact that food products contribute to an individual’s lifelong wellness. To address this challenge, the firm will ensure that all its products have a high nutritional value. This will be attained through the integration of the concept of value addition. Currently, the firm core products include specialized coffees, teas, a full-service bakery, homemade soups, sandwiches, and salads.

In an effort to appeal to the customers, the firm will incorporate the concept of product diversification. This will be attained through the incorporation of a large number of consumer products. For the concept of product diversification to be successful, the firm’s management team will conduct research on the customer needs. According to Toyne and Nigh (1999, p.46), consideration of customers’ needs can improve a firm’s competitive advantage. This arises from the fact that the firm will be able to address the market demand by supplying products that are in line with customers’ product requirements. As a result, the firm will be able to achieve a first-mover advantage.

Porter’s five forces

Supplier power

According to Schermerhorn (2009, p. 146), supplier power is defined as the ability of suppliers to influence the price of the core inputs. Considering the fact that the firm has been the only firm operating in the industry within the region, the supplier’s power is relatively low. This results due to the existence of a large number of suppliers. As a result, the firm has a choice on the suppliers from whom to procure its inputs. In addition, the firm enjoys the benefit of switching from one supplier to another at a relatively low cost. However, the selection of the supplier will be based on the quality of the products. Only the firms whose supplies are of high quality will be contracted.

Threat of substitution

The threat of substitution refers to the ease with which customers can obtain competing products in the market. Currently, the threat of substitution is relatively low. This is because of its monopoly as the only firm which operates a deli in the region.

Competitive rivalry

Considering the fact that the firm has been the only one operating in the region, competitive rivalry is relatively low. However, the entry of Wall Street Deli into the industry will result in a competitive rivalry. This is because of the entry of a new firm producing similar products. In addition, Wall Street Deli has managed to establish a number of outlets across the United States. As a result, the firm has developed effective operational skills.

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The threat of new entry

The industry is characterized by high-profit potential. This is due to the fact that the market has not been sufficiently tapped. As a result, a large number of firms are considering venturing into the industry. In addition, the industry is characterized by relatively low barriers to entry due to minimal capital requirements. Wall Street Deli is one of the firms which is considering venturing into this market. Since its establishment in 1952, Hometown Deli has managed to develop brand equity. This is evident in that a large number of locals consider the firm as a meeting point. This is one of the ways through which the firm is increasing the barrier to entry.

Buyer power

According to Grant (2005, p. 205), customers’ bargaining power refers to the extent to which consumers can affect prices. Buyer power is influenced by the number of customers in the market (Cox, 2003, p.34). Currently, buyer power is relatively high. This is because, in the region, there exist a large number of customers who purchase from the firm. These buyers can influence the firm’s pricing strategy by forcing the firm to reduce its product prices.

Porter’s generic strategies

Differentiation strategy

According to Schermerhorn (2009, p.147), differentiation strategy entails the various efforts through which the firm develops competitive advantage by offering unique products and services. Integration of differentiation strategy can enable a firm to succeed in an environment characterized by intense competition.

To position itself effectively in the market, the firm will integrate a differentiation strategy. This will be attained through the integration of continuous product innovation and hence value addition. Through value addition, the firm will be able to offer a unique product to its customers. The firm’s efficiency in undertaking value addition will be increased by ensuring a high level of creativity in addition to conducting comprehensive research and development.

Value addition will culminate into the improvement of the quality of products the firm deals with. Through differentiation, the firm will be able to address changes in consumer tastes and preferences. Therefore, there is a high probability of consumers developing a positive perception of the firm.

Reference List

Brink, A. & Berndt, A. (2009). Relationship marketing and customer relationship management. Washington: Juta and Company.

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Cox, A. (2003). Supply chains, markets and power: managing buyer and supplier regimes. London: Routledge.

Doole, I. & Lowe, R. (2005). Strategic marketing decisions in global markets. London: Thomson Learning.

Gay, R., Charlesworth, A. & Esen, R. (2007). Online marketing: a customer led approach. London: Oxford University Press.

Grant, R. (2005). Contemporary strategy analysis. New York: Wiley-Blackwell.

Hill, C. & Jones, G. (2009). Strategic management theory: an integrated approach. New York: Cengage Learning.

Kurtz, D., MacKenzie, H. & Snow, K. (2009). Contemporary marketing. New York: Cengage Learning.

Larson, B. (2008). Delivering business intelligence with Microsoft SQL server 2008. New York: McGraw-Hill Professional.

Patrick, F. (2000). Managing strategy implementation: an organizational behavioral perspective. New York: Wiley-Blackwell.

Schermerhorn, J. (2009). Exploring management. New York: John Wiley and Sons.

Timmons, J., Zacharakis, A. & Spinelli, S. (2004). Business plans that work: a small business. New York: McGraw-Hill Professional.

Toyne, B. & Nigh, W. (1999). International business: an emerging vision. South Carolina: University of South Carolina Press.

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Paperroni. 2022. "Hometown Deli: Strategy and Porter’s Five Forces." March 23, 2022. https://paperroni.com/hometown-deli-strategy-and-porters-five-forces/.

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Paperroni. (2022) 'Hometown Deli: Strategy and Porter’s Five Forces'. 23 March.

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