SOLUTION TO ASSIGNMENT – BUILD YOUR OWN BUSINESS

SOLUTION TO ASSIGNMENT – BUILD YOUR OWN BUSINESS

1.       DEVA CONCEPT NIGERIA LIMITED

Deva Concept Nigeria Limited is the name chosen for my business.  Deva Concept Nigeria Limited is an indigenous company (supermarket) duly registered with Corporate Affairs Commission (CAC) to carry out the sales of cosmetics, provisions,  etc.  Since its incorporation, the company has been in the first class business of the aforementioned products.

2. AN ANALYSIS OF BUYER POWER AND SUPPLIER POWER FOR MY BUSINESS USING PORTER’S FIVE FORCES MODEL.

Buyer Power:   In assessing buyer power, it is pertinent to know that my business will take into cognizance how easy it is for customers to bring prices down. This depends on the following factors: (1) The number of buyers (2)The importance of each customer to my business (3) The cost to consumers switching from my offering to products and services by another company.

It is worthy of note that my business will not handle only some powerful purchasers, so that they don’t dictate the terms to me, because where there are fewer buyers, they often control the market.

Supplier Power: the first step to take here is to assess how easy it is for the suppliers to increase prices of inputs. This depends on the following factors: (1) The number of suppliers of the key input (2) How unique their product or service is (3)Their strengths and how much control they have over me (4) The cost of switching from one to another

Fewer number of supplier choices means my business need suppliers’ help more. This also means that fewer suppliers make them more powerful. Markets where there are few suppliers means the suppliers retain the power.  So, in my business, I handle this by going for more suppliers so that they don’t dictate for me or have power over me.  Pertinently, my business is into cosmetics, provisions and other day to day mainly used products and the suppliers are all over and there are no cost whatsoever for me switching to another supplier.

Combating the Competition with strategies such as Switching Costs and Loyalty Programs

Switching costs are costs that are incurred by buyers for terminating transaction relationships and initiating a new relation. Porter, (1980) defined Switching cost as a onetime cost facing a buyer wishing to switch from one service provider to another.  My business will combat competition with a number of benefits for a long term relationships between the business and the customers, such benefits include fellowship, personal recognition, reduction in anxiety and credit, discount and time-saving and customer management.  Also, the business will engage in promo from time to time and to reward customers to keep them loyal.  Customer satisfaction is an important factor for the customer retention and loyalty.

3.                     An analysis of rivalry, entry barriers, and the threat of substitute products for my business using Porter’s Five Forces Model.

Competitive rivalry:  Markets where there are few competitors are attractive but can be short-lived. These are highly competitive markets with many companies chasing the same work reduce your power in the market. First of all, I need to know the following:

·         What’s the level of competition in this sector or my kind of business?

·         What’s the competitor situation? Many competitors and all in a commodity situation or a few?

·         If my business is thinking about moving into new sectors or markets, or if my business is stuck in a commodity situation, then Porter’s Five Forces enables me to see the issues clearly.

·         Work through each of the forces to identify my current sector and my potential sectors, to see who has the power.

Threat of New Entrants: If new businesses can be easily started up in my  kind of business or sector without substantial investment - then this is a threat. The following questions will assist my business in the threat of new entrants:

·         What’s the threat of new businesses starting in this sector?

·         How easy is it to start up in this business?

·         What are the rules and regulations?

·         What finance would be needed to start-up?

·         Are there barriers to entry which give me greater power?

Threat of Substitution: If there are available alternatives then the threat of substitution increases. But the following will be of help to my business;

·         How easy is it to find an alternative to this product or service?

·         Can it be outsourced?

Combating the competition with strategies such as product differentiation

My business will combat the competition with the Differentiation strategy in deciding to choose a certain attribute of the product to focus on. In order to make this strategy work, I  have to select an attribute that a big enough section of the market care about enough in order to pay a premium price for the product. In order to make the Differentiation strategy work, I will ensure that the premium price I am able to charge is enough to cover my costs of focusing on the chosen attribute.

 In order to create a product that is wanted by the market, I need to analyze the Buyer Value chain. The value chain is basically how the product will be used by the person who buys it and what job it is required to do.

4.      Describe which of Porter’s three generic strategies you would use for your business. Be sure to describe the details of how you will implement this strategy and how it will help you create a competitive advantage in your industry

Below are the Porter’s three generic strategies I will use in my business:

1.      Buyer Power

2.      Supplier Power

3.      Competitive Rivalry

Buyer Power: Where there are fewer buyers, they often control the market.  I will do my best to satisfy my numerous customers through promotions, rewarding loyal customers, and offering quality products at reduced prices.   

Supplier Power:  Fewer number of supplier means my business need suppliers’ help more. This also means that fewer suppliers make them more powerful. Markets where there are few suppliers means the suppliers retain the power.  So, in my business, I will handle this by going for more suppliers so that they don’t dictate for me or have power over my business.  Placing adverts on newspapers and TV inviting suppliers of my products will give me an edge over the suppliers.

Competitive rivalry:  My business will do a research on competitive rivalry and come up with their product quality, prices, and promotions that they do and carry out a counter promotion, skimming prices of my  business products to stand out in the market. 

 

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