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Environment Analysis: Porter's Five Forces Model

Essay by   •  November 26, 2013  •  Case Study  •  1,950 Words (8 Pages)  •  2,738 Views

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Situation Analysis of Westlake Bowling Lanes

Environment Analysis: Porter's Five Forces Model

Degree of Rivalry - Competition

* The competition in the industry can be divided in two categories. Direct competition made up of other bowling allies in the proximity, and indirect competition based on restaurants and other entertainment centers, such as movies theaters, arcade allies, family centers, etc.

* Westlake Lanes does not face direct competition, however it does face intense indirect competition.

In this sense, Westlake Bowling Lanes has a low to medium degree of rivalry, because the competition in the market is concentrated in the indirect competitors and in the substitutes. Also, the loyalty by existing customers to Westlake Lanes can reduce the degree of rivalry of the market.

Threat of New Entrants

* Attractive industry ($7 billion).

* Relatively easy entrance in the industry because of the low cost to entry.

* No necessity of a huge initial investment.

* Lively location for family-type small business.

The fact that the bowling industry is an attractive and growing in popularity industry coupled with the fact that it is relatively easy for new business to enter into this industry because of the low cost and investment necessary to enter represents a threat of new entrants for Westlake Bowling Lanes.

However, it is important to recognized that the prime location of Westlake Bowling Lanes, being the only bowling alley in downtown Raleigh close to lively neighborhoods and restaurants makes the business dominant over potential new entrants due to its existence for over 30 years, creating in this way a barrier of location for new entrants.

Buying power of Customers

* The customers of Westlake Bowling Lanes can be classified in three main groups: families, league players, and casual players.

* Existence of many activities other than bowling around the downtown area of Raleigh.

The buying power of customers is medium to high, having a demand that is quite elastic and that is influenced to changes in the price. This coupled with the fact that there a lot of other recreational activities other than bowling in the proximity of Westlake Lanes causes that the customers of the zone have a significant buying power because of the different choices they are offered and that can be adapted to their preferences in prices.

Supplier Power

* Small suppliers of Westlake Lanes includes: food vendors (beverages, food, beer), direct materials and bowling equipment providers (balls, shoes, cleaning supplies, etc), and overhead-related suppliers (maintenance, utilities, services).

* Relationship of trust and seniority with vendors who waived penalties for late payments and instituted payment plans at no additional cost for the company.

It can be said that supplier power is low because Westlake Lanes has not difficulty of changing suppliers in case the relationship with the actual providers not longer represents a benefit for the business, giving the company a significant advantage over its suppliers.

Threat of Substitutes

* Existence of many alternatives that customers can choose from, such as restaurants, entertainment centers, movies theaters, arcade allies, family entertainment centers, rock-climbing centers, laser tag, and popular sites for birthday parties.

The fact that there are so many alternatives of substitutes for entertainment activities in the area of Raleigh makes that the threat of substitutes is medium to high.

General External Analysis

Opportunities

* Raleigh is a fast-growing city in the US.

* The city attracts young professionals in the fields of technology, causing the rapid population growth of young professionals and becoming a hub for high-tech and life sciences employers.

* Wide variety of alternatives to change food providers and improve the food quality.

* Raleigh offers an affordable standard of living.

* Nearly one-third of Raleigh households earn between $50,000 and $100,000.

* More that 46% of the city's professionals work on managerial positions.

* Companies and corporations need to foster camaraderie in the work place.

* Research from a group of business students that conducted a market research shows favorable acceptance of private group bowling events between young people.

Threats

* Rapid commercial growth of the downtown area of Raleigh, creating new competitors in the market.

* Growth of a new target segment (young professionals) with rapid changing tastes.

General Internal Analysis

Strengths

* Since Westlake already has an Alcohol License, the company should offer different beverages.

* Seniority of the business (over 30 years) considered as a competitive advantage.

* Loyalty of long-time customers.

* Long-term operation considered valuable as it gives a sense of an effective organization.

* Family business in a close-knitted community.

* Cost reduction by having long-term employees and managers.

* Highly motivated manager (Givens).

Weaknesses

* Lack of research and improvement of the suppliers and operations by the employees of the organization.

* Low motivation of the employees.

* The company is in debt with its suppliers.

* Declining sales in the last years.

* Lack of improvement and innovation by the company of their offerings, making possible that the company become obsolete in the market.

* Few and basic options of food and beverages offered to consumers.

* Low attraction

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