Healthy Potions Business Analysis

CASESTUDY: HEALTHY POTIONS

BUSINESS ANALYSIS

The Healthy potion (HP) business has been undergoing trade for a total of 10 years. Throughout the 10 years, the business has seen notable profits and is developing well into the Australian market with the addition of 5 extra shops, which all are placed within shopping malls. However, with the specific location of all of the stores in shopping malls, it has brought about competitors, in particular fresh juice. This report will conduct a strategic analysis of current position of HP while also outlining the strategies to which HP can expand into the fresh juice market, providing a recommendation of the most effective way in doing so.

BUSINESS ANALYSIS

PORTER’S FIVE FORCES

Porters five forces framework associates the pressure of the main external forces exerts inside an industry, which include threats of rivalry, new entrants, power of customers and, the threats of substitutes. (Mintzberg, Lampel, Quinn and Goshai 1996). The power of suppliers will be discussed in the SWOT analysis

The rivalry within an industry is defined by how intense the competition. This threat can be judged depending on how concentrated it is within an industry, its ability to differentiate products, and other factors. (Barney and Hesterley 2011). HP, when it comes to rivalry, has the upper hand as they were one of the first business to enter the market using the “Chinese Herb” in the emerging industry. As a result, the threat of competitors using the Chinese herb is quite low. However, the threat due an increasing demand for the product there is a strong possibility of increased rivalry in the future.

This possibility therefore leads into the threat of new entrants to the market. The threat will depend on the cost of entry and how appealing the industry is with reference to the potential profit. With HP, barriers to entry are sustainably low, with the businesses only costs of production are having to empty the special concentrate into a glass of water. Some further costs may include labour costs and rent expenses. Therefore, this means that new businesses in the industry can be created without difficulty. With such low costs for entry, sourcing the special concentrate has a little impact on the potential profit and therefore leading to a threat of new entrants to the market (Porter 1979)

Substitute goods are those which satisfy the same consumers needs without being exactly the same product (Thill and Bovée 2015). The threat of substitute goods are measured by the quantity of appealing alternatives existing and their capability. For HP, there are many substitute goods for consumers which state their drinks have healthy benefits, in particular fresh juice. HPs substitute goods are much more accessible in the market than the special concentrate leading to them being stronger competitors in the market (Ghemawat 2010). The relatively low cost for the customer to switch between products within the beverage market and the extensive range of products there is and always will be a high threat of substitutes.