Porter’s Five Forces Theory
Describe about the Managing Food and Beverage Operation for VRIO Theories.
The report shows the benefits of using Porter’s Five Forces and the VRIO theories by the restaurateurs or the bar managers for achieving various competitive advantages for a long duration of time. By making an efficient use of any of the theories, the managers can easily rejuvenate the business of their hotel, restaurant, bar, etc. while applying various types of management and other leadership skills. The effective use of these theories and the other skills will surely increase the business of the firm. This skill increases the sales volume of the restaurant or hotel, which directly influences the overall profit ratio of the hotel, bar, restaurant, etc. Porter’s five forces model completely describes the competitive strategy, which helps in finding the competitors for the business by giving a complete description about various analyzing and marketing techniques and plans. The VRIO theory also helps a firm, by providing them with sustainable and competitive advantages to the firm and the restaurateurs or bar managers can easily enjoy a sustainable business of the hotel or a restaurant by applying the VRIO theory. For the VRIO theory a firm must have few qualities or resources like valuable, rare, costly to imitate and the firm should be organized for the exploitation of the various resources.
This model or we can say this theory is created by Michael E. Porter to understand the dynamic quality of competition within an organization, hotel, restaurant or any type of firm is a very difficult task. This theory helps the manager in assessing various types of potential opportunities related to their business as if he/she is now being entered into the particular business. It helps the managers in managing their business easily while competing with the others, those who are offering similar type of products to the people in the market. The five factors of this theory help in assessing the different potential levels of opportunity, profitability and risk based on these three factors depending upon the several conditions within the restaurant/ hotel. There are main five factors on which this theory is completely based upon, i.e. the profit factor of the firm for a long duration of time is completely dependent on the five factors which are Suppliers, Buyers, Entry/Exit Barriers, Substitutes and the last one is Rivalry (Ltd., 2016). All these factors are responsible for the effective and efficient implementation of the Porter’s Five Forces Model, which are as discussed below.
Suppliers
Suppliers – for providing a large variety of products to the customers in the market, the manager has needs to make good buyer- supplier relationship, so that, they can easily avail different type of materials required by them in preparing a large variety of products according to the requirement of the people or the customers coming to their restaurants or hotels. The production of the products of the hotel or a restaurant is directly influenced by the supply of the supplier (Michael, 2010). A supplier can easily influence the production as well as the sale of the restaurant or a hotel, because it has the liability of increasing the price of the products without facing any type of suffering due to a decrease in the volume of the products. The supplier has the power to decrease or we can say the power of reducing the quantity of the products to be supplied. It is an unattractive segment of the supplier which has an ability to organize the stuff in the formal or the informal method. The supplier can easily compete within the environment while relatively having the few substitutes. It has the power to provide a variety of products which are the one’s responsible for providing the end services to the customers. The managers have to face the various conditions of imposing the switching costs on the customers coming to their hotels, bars or restaurants etc. Therefore, it is the responsibility of the managers of controlling the different- different types of distribution channels by improving the relations with their suppliers (Arline, 2015).
Buyers – the buyer phase consists of the various factors like bargaining leverage, the volume of the products being purchased, identification of the product’s brand, price sensitivity, product differentiation, etc. The impact of the customers of the firm or the business can easily be described through the power of the buyer. The most influence on the buyer is about determining the price of the variety of the products. By making good relations with the buyer of the products the managers can easily sell their products across the country. By making a good sell of products like this they can easily increase the business of their restaurant or hotel, etc. The manager’s needs to think seriously, while switching the cost at the time of change of vendors. All this help them in integrating upstream in the purchasing step of the providers of the goods available (CGMA Team, 2016).
Buyers
Entry/Exit Barriers – this phase tells about the various competitive factors that a firm has to face while entering into the market. Most of the attractive factors or the steps have the high entry barriers, but the low exit barriers. The managers have to face different levels of difficulties, while entering to the market or while making any type of modification in the current market plans. The entry/exit barriers consist of various factors like scale economy, switching costs, proprietary products, various binding policies, identification of the brand being used, etc., while delivering a large variety of services and products to the customers (Berry, 2016). The service based firms like hotels, restaurants, etc., have to face less number of problems or the difficulties in the market as compared to the manufacturing firms. When the profit of a firm increases, the firm expect it as a good chance of entering into the market, which actually influences or in other words we can say decreases the profit ratio of the firm. Proprietary and patent knowledge, scale economies, infrastructure being used, technology being used, etc., are the main factors or the barriers to entry arise. By making use of this type of knowledge, the managers or the restaurateurs and the other bar managers etc., can easily work according to the barriers coming or being faced by the them in the market (Porter, 2008).
Substitute Products – this phase tells about the similar kind of products being delivered by the other firm in the market. These are those products, which meets the requirement of the people in the market and provides identical services to the customers. The managers of the hotels or the restaurants have to compete with the others because they are delivering similar type of products in the market. The price of the various products is directly influenced by the price of the substitute products offered by the other firms working at present in the market. This phase helps the firm in maintaining their business on a good level in the market by providing various market plans and other strategies helpful in the competitive market. The management of the hotel or the restaurant should make an effective and efficient use of the technology in the production process of the products being delivered to the customers coming to them or to the customers in the market across the country.
Rivalry – this phase provides the support to the management and the other management members to secure the competitive advantages by providing various management plans over the rivals present in the market. It provides a complete description about the various differences in the strategies being used by each and every small, medium or large scale firms and finally helps the manager in deciding a particular strategy which will provide various benefits to the firm through various aspects. It provides various competitive moves for pursuing an advantage over the rivals like changes required in the prices of the products, improvements required in the product differentiation, making an effective use of distribution channels and the relationship exploitation with the suppliers, etc. in this section the management has to compete with the various organizations that are competing with each other for the similar type of resources and the customers. For competing with the rivals in the market the management should need to take some important steps like improving relationship with the customers, getting connected with more and more people, should make some popularity differences among the people by showing various advantages of its own products. Economic scale is also affected due to the fixed price of the products. A large part of the total investment is the cost invested on the storage of the products for the future use. The overall sale of the business is also affected by the cultural differences of the people or the customers (Walder, 2013).
Entry/Exit Barriers
Service – this is the last and the most important step or the phase of the Porter’s five forces theory. Service section plays an important role in the overall sale of the business. In the competitive world, the firm which provides the best service to the customers at affordable prices can easily compete with other firms working in the market. It is a difficult task for the management to replicate the service component of the rival or any other competitor. This phase provides a description about the level of competition regarding to the services provided by the other firms to the customers. Thus, it provides various dynamic attributes responsible for a successful competition. The service phase consists of various factors, which are the main role models of this phase. Food service is the major part of the service phase and according to this phase; the management should provide the best quality of food products and any other type of products at a reasonable price (Martin, 2014). Food quality and safety is the other major part of the service phase. In this phase, the management needs to focus on the various safety measures related to food, which is to be delivered to the customers.
This is a theory or a framework, which is used to analyze the various internal, and the external capabilities and the resources of a firm. These factors help a firm in achieving various sustainable competitive advantages. VRIO analysis is one of the many analysis’s being used by an organization for analyzing the internal resources and other environmental factors. This theory was invented by Barney in the year 1991. This theory mainly depends upon four important factors, which are as discussed below.
Valuable – this phase of the VRIO theory tells the value of the resource, i.e., the resource adds value to the firm by providing different opportunities or not. The manager of the restaurants or the bar can easily increase the perceived customer’s value by making an effective use of this theory. It supports a firm by providing different-different strategies through which the price of the product can be decreased by increasing the differentiation (Sanchez, 2008). It helps in keeping a continual eye on the value of the resources because of the constant change in its value due to various internal and external factors.
Rare – resources which are acquired by a few of the firms for providing various kinds of facilities to the customer are known as rare. Rare resources are responsible for providing competitive advantage on a temporary basis. The use of this topology helps in avoiding the competitive parity along the use of similar kind of products. It is not easy for a firm to neglect the valuable resources, though the competitive parity is not desired by any of the firm (Jurevicius, 2013).
Substitute Products
Costly to imitate – it is difficult for a firm to imitate a resource if and only if it is not imitated by any other firm working in the market. The complete process of imitation is dependent upon two main parts which are directly imitate i.e., duplicating the product or the service and the second one is providing comparable product to the customer, i.e., substitute of the original product. For achieving various sustainable competitive advantages, the management or the manager of the restaurants/ hotels/ bars should have their focus on the valuable, costly and the rarer imitate resources. In this complete process the resources can be hard to imitate because the resources developed due to historical conditions or for a long period are costlier to imitate. A large number of firms are unable to identify the variety of resources responsible for the competitive advantage. Therefore, the managers need to focus on the social complexity, which are mainly dependent on the cultural differences and interpersonal relations (Hill, Schilling, & Jones, 2016).
Organized to capture value – it is the responsibility of the management of the firm or any type of business to organize all the processes taking place within the organization. They should manage the management systems, policies and the structural phase of the firm, etc. so that they can provide a large variety of services to its customer with their full potential. They need to focus on the rare, valuable, costly and the imitate resources and many other capabilities for achieving various sustained competitive advantages (Barney and Hesterly, 2006).
Conclusion
From the above report, we can say that both the theories, i.e., Porters five forces and the VRIO theory are beneficial for the restaurateurs or the bar managers for achieving a long term competitive advantage. These theories assist the managers to understand different- different dynamic factors in a more objective form or in other words, we can say in a more objective manner so that, they can easily select and manage a particular type of strategy. This helps in influencing the business of the hotels or the restaurants. Thus, with its great impact it will directly influence the overall business of the firm. By introducing new-new systems or menus in the restaurants, the wastage of the products can easily be decreased and the productivity can be increased. These theories help in selecting the best strategy for the customer visitation and perception. The management can easily manage various types of operations related to the food and beverage management. By connecting with the people on the social media channels will provide popularity to firms across the country. The managers should take time to time surveys for knowing the feedbacks of the customers as well as of the employees in order to remove or to provide solutions to the customers as well as staff’s problems. By making the use of latest technology, the management can get connected to more and more people and can easily increase the popularity of their restaurant or hotel among the people across the country. All this popularity will influence the productivity as well as the sale of the business, which automatically increases the overall profit ratio of the restaurants/bars, etc.
References
Arline, K. (2015, February 18). Porter’s Five Forces: Analyzing the Competition. Retrieved from https://www.businessnewsdaily.com/5446-porters-five-forces.html
Barney and Hesterly. (2006). The VRIO Framework: An Overview. Retrieved from https://search.yahoo.com/search?fr=mcafee&type=C211US1045D20151119&p=VRIO+Analysis+articles
Berry, T. (2016). Using Porter’s Five Forces when creating your marketing plan. Retrieved from https://www.mplans.com/articles/using-porters-five-forces-when-creating-your-marketing-plan/
CGMA Team. (2016). Porter’s Five Forces of Competitive Position Analysis . Retrieved from https://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?TestCookiesEnabled=redirect
Hill, C., Schilling, M., & Jones, G. (2016). Strategic Management: Theory & Cases: An Integrated Approach. Cengage Learning. Retrieved from https://books.google.co.in/books?id=XM84CgAAQBAJ&dq=vrio+theory&source=gbs_navlinks_s
Jurevicius, O. (2013, October 21). VRIO Framework: Understanding the tool. Retrieved from https://www.strategicmanagementinsight.com/tools/vrio.html
Ltd., M. T. (2016). Porter’s Five Forces. Assessing the Balance of Power in a Business Situation. Retrieved from https://www.mindtools.com/pages/article/newTMC_08.htm
Martin. (2014, August 18). Porter’s Five Forces Model | Strategy framework. Retrieved from https://www.cleverism.com/porters-five-forces-model-strategy-framework/
Michael, E. (2010). Porter’s five forces: A model for industry analysis. Retrieved from https://www.quickmba.com/strategy/porter.shtml
Porter, M. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Simon and Schuster. Retrieved from https://books.google.co.in/books?id=Hn1kNE0OcGsC&printsec=frontcover&dq=porters+five+forces&hl=en&sa=X&redir_esc=y#v=onepage&q&f=false
Sanchez, R. (2008). A Focused Issue on Fundamental Issues in Competence Theory Development. Emerald Group Publishing. Retrieved from https://books.google.co.in/books?id=QV1wzwDbTDYC&pg=PA34&dq=vrio+theory&hl=en&sa=X&ved=0ahUKEwjemPrdrcbQAhXIto8KHcG1BE4Q6AEIHTAA#v=onepage&q=vrio%20theory&f=false
Walder, J. (2013). A critical evaluation of Michael Porter’s five forces framework. GRIN Verlag. Retrieved from https://books.google.co.in/books?id=5s-iR6p2toEC&pg=PP6&dq=porters+five+forces&hl=en&sa=X&redir_esc=y#v=onepage&q=porters%20five%20forces&f=false
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