Like water to fish, the basic reasons that determine the development of a company is called general environment, which includes: demographic reasons, cultural trends, economic climate, legal and political condition, specific international events, and technological change. General environment can be a threat or opportunity for companies, it depends on how deeply companies understand and make use of it. When companies can know the general environment they are facing, they will change their products and services in accordance with the culture they are facing.
If companies do not understand the environment very well, they will lose a large sum of money. From my perspective, the three dimensions below are most vital. As for demographic reasons, it contains the attributes of individuals in terms of age, sex, marital status, income, ethnicity and other personal characteristics that may affect consuming patterns. In order to make money, knowing the demographic features of the areas are crucial. Since the new entrant Wall Street Deli is opening a few blocks away, it is necessary for us to keep our business information as a secret.
Our advantage is that we have been in this area a long time, we know exactly what our customers’ attributes. Besides, economic climate has a remarkable influence on the business. American economy is in recession now, so Hometown Deli has to think of some ways to stimulate consuming. They can do some discounts like dinner specials or buy two and get one free. Next, the technology can be beneficial to firms but also creates threats, as technological changes force the restaurant to think of new technological strategies.
When people are waiting in line, the restaurant can provide some services like upgrading customers’ electronic devices system. They can also provide some competitions for customers to play games in case they got bored. The Porter’s Five Forces Model indicates five most common threats faced by the firms in their local competitive environments. These are threat of entry, threat of rivalry, threat of buyers, threat of substitutes and threat of suppliers. Wall Street Deli is a threat of entry to Hometown Deli, the former may reduce the profits of the latter.
In addition, when Hometown Deli cannot keep their competitive advantage and satisfy customers, Wall street Deli provides superior services, the former will lose as soon as possible. The rivalry influences Hometown Deli by fierce competitions and will reduce their profits. Plus, when the supplier Hometown Deli fails to satisfy buyers, customers will not consume and fire it. If the substitute Wall Street Deli offers approximately same or superior services and products than Hometown Deli, the former will not acquire their customers and profits.
For Porter’s performance, Hometown Deli manages to use the cost of leadership strategy by gaining more market share in the price war. The firm sells their product either at average prices or lower prices than their rivals. They also use efficient distribution channels or mature services and products to make more profits. Another one is differentiation strategy. By creating unique products and services, the firms can attract more customers. They should be a leader of the scientific research, have a highly creative and skilled product development team, strong sales ability and influential reputation for innovation and quality.
What is more, the strategy concentrates on achieving cost advantage and differentiation by developing their strengths and occupying narrow markets. By the way, it is not rational to exploit the three strategies at the same time, since no business can do everything well. Based on the markets and environment, firms should adopt different strategies. For Hometown Deli, it is essential to keep their recipe as a secret and provide same or even better services than they used to have.