3. Industry
3.2 Industry Structure
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3.2 Industry Structure
The five forces of Porter are used to analyze the Booth, which are described below:
Figure 2 Porter’s 5 Forces
3.2.1 New entrants
The Goodies Booth will be one of the newest innovative companies in the beverage business and at this time there’s no other business making the same type of beverages. The healthy drink market is still a baby boomer in Nicaragua, expected to increase in the following years.
Most of the local booths are of coffee shops and normal beverages made of fruits.
However, introducing a new product, new characteristics and with different types of flavors can be risky in a country used to traditional customs.
Actually in the Beverage Industry there aren’t any entry barriers implemented by the government, but there are some licenses and requirements that the new entrants have to get from different institutions 2 such as:
2Ministerio de Fomento, Industria y Comercio. http://www.mific.gob.ni/
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Ministry of Development, Industry and Trade Statistical Register of Foreign Investment.
Department Of Revenue, Unique Taxpayer Registers.
Managua Municipal government.
Nicaraguan Institute of tourism.
In the beverage market there aren’t many dominant players due to the large quantity of coffee shops and convenience stores, making the industry quite fragmented.
The success of the new entrants will depend of the quality and goods provided by the business.
The fixed cost doesn’t represent a barrier but this will differ depending on the kind of investment or asset.
3.2.2 Bargaining Power of Suppliers and Buyers
There are many suppliers for this industry but we will focus on the small and medium companies, but highly efficient, that can provide us with the best prices in the market, more quality and are more loyal to their clients. The bargaining power for suppliers is medium because the switching costs are low but their advantage is that they will have few customers allowing them to provide a very good service. We will also have them deliver the supplies to the booth.
The number of buyers in this sector is growing, but it can be affected by external factors like income, economic situation, and inflation among others. The highest demand is located in the capital, Managua, where the majority of the industries, companies, commercial areas are located. Also Managua represents the most crowded city in Nicaragua with more than 2.5 million inhabitants.
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3.2.3 Competitive Rivalry
In the food and drinks industry in Nicaragua there are large numbers of coffee shops, restaurants, bars, and cafes around the country that can satisfy the different tastes of the customer. The customer can find any type of drink offer in different styles and flavors, all made with locally and fresh products.
Also, we can’t forget about many U.S. fast food chains such as Burger King, Pizza Hut, McDonalds, Domino's Pizza, Papa John's, and Subway.
However, inside the University, its cafeteria would be our direct competitor, even though this place doesn’t offer our type of drinks, but the customer can get local drinks and coffee.
3.2.4 Substitutes
There are some aspects that will make the Goodies Booth win among its substitutes:
A high quality product ready to go. The customer will be able to enjoy a delicious beverage in a short amount of time.
A unique and pioneering concept in the market.
Our booth concept is innovative giving us an advantage among other beverage places.
We will offer Bubble tea as a ready to go drink.
1. Locally owned coffee shops and cafés: The menus on these types of places are very different to what we are trying to launch. Most of these places offer beverages based on coffee, cold or hot drinks. Also, these places are organized so the customer has to sit and wait for their orders. Our primary advantage is that we are going to offer the bubble tea in a healthy style and ready to go.
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2. Not having any international chains such as Starbucks give us a competitive advantage, because we are new product, people don’t know about us, and these types of chains are very famous worldwide.
3. Fast Food Chains: These places are for our same type of target market, simple people, with short time on hand; need to go back to class or work, and need convenient refreshment at a fair price.
4. Conveniences stores: These are self-service places where everything is done and taken by you; they don’t provide a high quality service or the same type of drinks as the Goodies booth.
5. Drink vendors: These are people on the street that go around every place in Managua, with some ready to go mixtures of fruits.
Since, our direct competitor is the cafeteria at the university; we had considered relative offerings and indicators such as:
Figure 3 Competitors behavior in terms of price and quality. Quality: from 1 to 5, 1 being the lowest.
Figure 3. Information acquire from polls. Goodies booth is place strategically.
QUALITY
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Convenience Stores and the Coffee shops.Also, the Quality measure is going from left to right, and we can see that our quality standard will be of 4, above the quality offer by the existing Cafeterias inside the university, the convenience stores and the drink vendors.
Note: None of these places offer this type of product.
We will use Differentiation because we want to have our product perceived as unique in order to obtain a premium price. Brand loyal customers are often a sign that this strategy is working. We will also focus on quality, innovation, and/or customer responsiveness to achieve a greater margin of profit.
The risks of Using a Differentiation Strategy:
Uniqueness
Imitation
Loss of Value
Table 6 Porter's Five Forces Model results:
Offers products to only one group of customers Offers unique or distinctive
products to customers
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