Five Forces Framework Model

Describe following points:

1: Five Forces Framework Model

2: Using Porter’s model for Information System Strategies

3: Competitive advantage and Sustainable Competitive Advantage

4: In case of recession:

5: Benefits of Technology?

Five forces Model of Porter define five types of competitive forces that a business has to face. These include  Threat of new entrants, bargaining power of customers, bargaining power of suppliers, competitive rivalry,  and threat of substitutes.

Threat of new entrants: Threat from new entrants are faced when barriers to entry are low. Fast Food industry had less barriers to entrants

Bargaining power of customers: Buyers have huge bargaining power in any industry which is affected  by available choices, numbers, cost of change in brand, importance of products or service and sales volumes. In case of Julia juice, the bargaining power of customers was high because of two main reasons. First, the juice could be produced even at home instead of purchasing from the company and second, customers had ample choice as juice was an easy to produce product and thus, there were several companies as well as local juice makers who could be considered for purchase.

Bargaining power of suppliers: Bargaining power of supplier depends on the number of buyers, supply and on demand. As juice was a product that was produced using fruits as supplies. Fruits were naturally available in huge amount, the bargaining power of suppliers was low.

Competitive rivalry: When large number of companies produce similar goods and fight for same customers. Julia Juice initially did not have competition and operated by selling its juice products at premium prices but in the 2008 recession, the company faced consumers claims of losing grip on consumer  market because of inability to sustain competing companies. Its business was now becoming similar to fast food chains like Mc Donald’s and differentiation was lost.

Threat of substitutes: Substitutes are products that can be used instead of the concerned product and threat occurs when there are many such products and they can easily replace the key product. In case of Juice, it could be replaced by products like cold drinks, soft drinks, and alcohols that were available in huge quantity as well as customers were open to use them to satisfy their thirst which was the main reason why they also purchased fruits. Thus, threat from substitutes for JJ was high. During the time of recession, customers of JJ had started to move to substitutes as JJ prices were higher which resulted in loss of JJ stocks by 40% in 2008 itself.

Porter Five forces model was used for identifying threats and competing forces such that weak areas could be identified. The company identified competition as the greatest threat and decided to create a differentiation. For this, the company took initiative to find more about their customers. They conducted a research in which consumers were surveyed using questionnaire that was created to understand consumer needs. It was discovered that Julia Juice was using similar strategies for operations as used by its competitors so the management decided to create a differentiation. Use of information technology was considered for creation of this differentiation.

Using Porter’s model for Information System Strategies

Various strategies were used by Julia Juice for making themselves technologically more competent than its rivals. There was a mobile app which was created to allow customers to make payments through mobile. This app was  very convenient and faster for customers who responded very positively and within the first year of its launch, 33 million transactions were carried by customers using the mobile App. The app was also integrated with JJ Card system such that customers could also pay through rechargeable or prepaid cards issued to them by the company.

Other strategies used were creation of a mobile friendly website, provision of wireless technology in their stores, integration of website with social media platforms like Facebook and Twitter, and use of lean. Mobile friendly website allows consumers to surf the portal and catalogue of the company products over mobile. This strategy was adopted in response to the research which discovered that more than 50% of customers of Julia Juice were using Smartphones. Further, use of social media allowed consumers to share information about JJ as well as have instant access to offers running.

Use of wireless systems in JJ stores was one strategy that aimed to improve both internal performance and customer footfalls in stores. The in-store presence of managers was increased by 24% without hiring new managers as they did not need to work from inside their cubicles but could use their smartphones for operating businesses. Availability of Wi-Fi attracted customers and many of them actively used this service in JJ stores.

JJ used lean to improve upon efficiencies ,reducing wastes and creating streamlined customer service at their stores. For this,  various project coordinators were designated to go to different stores of the company to train them on lean process implementations. Lean methodologies also helped in reduction of time consumed in producing juice thereby giving the staff more time for connecting with customers and the result was an improved customer experience.

Competitive advantage is achieved when a company is able to outperform other companies in the same industry in certain aspects. In case of this advantage a company would have higher profits than its competition. JJ had competitive advantage in the beginning which is why the company was able to sell its juice at premium gaining more profits. These advantages included uniqueness in juices and customer-focused juice stores that encouraged customers to meet friends and relax.

These advantages were sustainable as competitors could not use the same process of juice creation but creation of consumer friendly experience was easily created as well as better juice creation methods could be practiced in future by competition. However, the strategies adopted later by the company somewhat were sustainable and would provide the company advantage for a longer time. Such an advantage is called sustainable competitive advantage. The company was now using lean methods and customer-centric technologies. Lean methods had increased efficiencies, service performance and price reductions.

4a: Strategic Information System Strategies

In the recession, it was found that customers were not buying Julia Juice products as they were finding it costly and providing similar services as other fast food centres and thus, the company needed a differentiating factor as well as a way to reduce costs so that juice could be made available to customers at lower prices without affecting the profits much. There were five major strategies used by Julia juice and these were:

Competitive advantage and Sustainable Competitive Advantage

Wi-Fi in all stores: For creating differentiation, the company used IT and deployed Wi-Fi in all its stores to allow their customers to spend more time in stores when using Wi-Fi. This use of Wi-Fi also helped internal employees as they could now operate from outside their cabins and thus, their in-store presence was improved leading to better performance.

Mobile App for payments: The company also introduced a mobile app to allow customers make payments through mobiles. This saved on the cost of transactions through traditional methods as well as improved customer satisfaction as payment was made very convenient for them.

Reduction of time consumed in juice production: To reduce the cost of production of the juice, the company applied lean and reduced the time consumed in production of juice. This increased the productivity per employee who was producing juice and thus, the overall cost incurred in managing operations per day were reduced which allowed company to transfer this benefit to its customers such that they could enjoy the drinks at lower prices.

Use of Lean Practices: Lean practices were used in order to remove all wastages in the company so as to improve efficiencies and reduce costs of operations. Staff of the company were also trained on lean such that customer services can be streamlines and they could understand ways to reduce wastes and improve efficiencies at work.

Website revamping and No Charge for advertisers: JJ Store website was revamped and was integrated with the social media pages of the company over Facebook and Twitter. These social media platforms could be used for receiving award points. Also, the company allowed advertisers to post their ads without paying JJ. This would allow JJ to offer deals through content providers making the venture more profitable and at the same time relationships with customers would be improved leading to better customer satisfaction

4b: Selection criteria

The strategies discussed above were chosen for certain reasons and these were:

Wi-Fi in all stores: Wi-Fi could be used both by customers and staff. Customers would engage with brand for longer time if stores had Wi-FI and staff performance could be improved as they would be able to operate from outside of their cabin and thus, could spend more time with customers further improving customer satisfaction.

Mobile App for payments: The mobile app could make payments faster , allow company to share deals with customers as well as use JJ Store cards over mobile for making payments. Thus would bring convenience to customer and thus would improve customer satisfaction.

Reduction of time consumed in juice production: The production of juice was a major time consuming factor which also added to cost to the company as the production per employee was less. Thus, if this time could be reduced, the per person juice production would improve and thus, overall cost would reduce. Another benefit would be more sales as more juice could be made available to customers.

Use of Lean Practices: Lean practices were proven techniques for reducing costs and improving efficiencies which were the main requirements of the company and thus, company planned to adopt lean.

Website revamping and No Charge for advertisers: JJ Store was facing fierce competition and scepticism for customer who had started to believe that the store was similar to any other fast food store. Thus, company needed to create differentiation which was to be reflected in all ways. Thus, the company was required to revamp both online and offline presence. Revamping of stores was done by providing extra facilities like Wi-Fi. For online store revamp, website was transformed and new features were added.

4c: Examples

Some of these strategies are actually used by other fast food companies as well. Some examples are:

Wi-Fi in store: Mc Donalds provides complimentary Wi-Fi to its customers in all its major stores which enables them to keep their customers engaged for more time.

Mobile App: CCD has a mobile app which can be used by its customers to see the menu, check-in, earn offers or reward points, get directions for nearest stores, scan through new offers, check transaction and membership card balance and for setting up meetings or hangouts.

The company was largely benefited by the information technology which made the company make a comeback after recession. Some of these benefits included:

• Deployment of Wi-Fi in JJ stores increased customer footfalls as well as their engagement inside the store and they would sit for longer. As they sat for longer time, there was more chances of getting sales every day.
• Use of mobile app made payments easy and convenient for customers and the company saw more than 35 million transactions happening through mobiles in just 12 months.
• Company gave laptops and tablets to its staff in addition to the Wi-Fi at its stores. This increased the in-store presence of staff by 24% as they could now operate not only outside the cabin but also outside the stores.
• The website was revamped which helped the company to change the mindset of people by thinking that the company is coming up with new features and plans. After revamp of website, the company could get more hits on its website. The company made advertisements free for content providers allowing them to share JJ deals with consumers thereby improving customer satisfaction as they would get deals for free.
• Use of social media platforms like Facebook and Twitter was also very useful as these platforms were used by consumers to get information about deals, share them and engage more with the brand.
• Use of lean methods using software helped company identify wastes so that they could be eliminated and costs could be saved as well as efficiencies could be improved.
• A portal was designed specially to be used on mobile devices which was optimized for all major operating systems on smart phones. This made the website available to its customers on the go and they could receive deals and reward points using this website over their phones. Around 50% of JJ customers were owning smart phones and thus, their engagement with brand was improved through this mobile website.