Porter’s Five Forces is a tool used for understanding the balance of the five main “powers” in business. In many ways it is similar to a S.W.O.T analysis, because it is an identifier of facts and theories about a business situation and what could be a potential hazard in the making of that situation. What sets them apart is that the Porter’s tool is more about how the money will be made once a business is established, while a S.W.O.T analysis is there to guide the project planning process.
Porter’s five forces are, Supplier Power, Buyer Power, Competitive Rivalry, Threat of Substitution, and Threat of New Entry. For the Crystal Cup project, these each relate as such;
For any standard cafe, there is little supplier power as the food service industry contains so many competitive suppliers of just about everything a cafe could need. While the Crystal Cup is a new age cafe and therefore differs from the standard, it’s theme would be largely visual and hence the basic cafe supplies would remain the same.
The buyer power would be really high due to the demographic; focused on students due to it’s location, the cafe would need to keep well-informed tabs on it’s pricing as the average income of a student tends to be very low.
There are many other cafes in the area who also cater to the same demographic, as well as being established businesses with existing customer bases. The cafe business in West End is already a bustling and extremely competitive place to be, which can make it hard for new businesses to thrive.
Threat of Substitutes
Consumers have easy access now to making many cafe-quality products in their own homes. The cafe is also close to the businesses where people can source the means for these substitutes.
Threat of New Entry
This is high because the food service industry is very easy to get into. There are no legal qualifications required to run a cafe, nor is there any prerequisite knowledge that really keeps people out of starting their own businesses. The technology and supplies are easy to obtain, as well, as stated earlier.