Analyze the Virginia Bikes business using Porter’s Five Forces Analysis to complete the table below.
List Porter’s Five Forces
|IMPACT(POSITIVE, NEGATIVE, or NEUTRAL)
This must have an entry
|JUSTIFICATION of your selected impact
Minimum 2 good sentences that explain the impact of the force on Virginia Bikes to demonstrate understanding of the force.
Refer to specific details from the business in the case study to support your explanations.
||It is of great necessity that Bill Thomas and the Virginia Bikes in totality understands the industry’s trend in references to competition and thus formulate a striving force to gain a competitive advantage over its rivals. Bill should ensure strive to hold a greater percent of the market share through an analysis of the rivalry through industry concentration(Roy, 2009). Virginia Bikes as a maverick firm that is seeking competitive advantage should pursue undertaking an improved product differentiation, that is, through advancing its bikes rental business, improving on the terms of renting among other features, enhancing its variety of bikes to be meet different customer needs, creating a system of customized innovations in the bikes’ repairs and creative designs, advancing its accessories stock and sales by availing modern bike accessories. Bill should show a clear understanding of his competitors’ marketing strategies and actions, thus the line of strategic positioning with other rival firms.
|Threat of substitutes
||The threat of substitution imposes lots of effects on the competitive environment for Virginia bikes in this industry and influences the business’ ability towards achieving profitability due to the fact that consumers might choose to purchase the substitute product instead of the business’ product. The threat of substitute of the Virginia’s Bikes major product, bicycles, is experienced when the products demand is affected by the changes in price of bicycles and bicycles’ accessories as provided by other businesses of similar nature. The price elasticity of the Virginia’s bicycles becomes affected by the substitute products –as the available substitutes increase, the demand tend to be elastic since customers have more alternatives. Availability of business’ close substitute product constraints the ability of Bill’s business ability in the industry to raise prices and generate desired profits and progress as well.
|Threat of new entrants
||In a scenario in which there are new entrants to the bicycles sales, repairs and accessories business, there is a rise of the new capacity to and desire to have a grip of the market share which exerts pressure on the costs, prices and the rate of investment necessary to scale a competitive edge in the bicycle industry. For instance when the new entrants are diversifying from across the various markets, they create a leverage on the existing cash flows and capabilities to shake up competition. Bill needs to be smart enough since he operates in a market (bicycle industry) in which there is common technology base, very little brand awareness or loyalty, and accessible channels of distribution to all the sizes of organization, and thus it is easy for the rival firms to enter into the market. When other firms make an entry into the industry then it is expected that profits will decrease making some firms to exit the market hence restoring a market equilibrium(David, 2001).
||Virginia Bikes needs supply of spare and other bicycle accessories thereby creating buyer-seller relationships between the suppliers and the market. The power distribution within such relationships varies, though, if it lies with the supplier then they can use such an influence in dictating prices and the availability of the products. A part from raising of prices, the suppliers who are in a strong bargaining position can decide to reduce the available product quantity, a scheme that is most appropriate if there are few substitutes Virginia Bikes can switch to (Roy, 2009).
||Bill should analyze on how the customers impact on the industry and it its products and services in particular.The business should assess the degree of bargaining power as bestowed upon its customers. Because when customers have a strong position they are likely to impose considerable pressure to the business and thus demand for improved quality or even ask for lower prices, thereby driving up costs at the expense of the industry profitability.
On the other hand, it is evident that Bill uses its position as buyer positives in exercising its buying power by seeking good deals from his suppliers. He goes to those suppliers with more bikes in a line than they need and then purchase those bikes at a discount for the rentals and the low-end sales.
- Identify which of Porter’s Generic Strategies is most appropriateto Virginia Bikes and explain why you selected it in light of your Five Forces Analysis.
Virginia Bikes has hugely captured a greater market share in the context of the industry competitions. It has edged a greater competitive edge in the market as compared to any other business establishment around offering similar services and products. The Virginia Bikes has a good grip of the industry’s forces of demand and supply thereby seeking firms with saturated bicycles and their parts accessories and buy from them at a discounted rate and make nice profits through reasonable sales and pricing tactics (David, 2001).
The positivity that would be brought about by competitive firms in the same business undertaken by Virginia Bikes makes the business to offer better services at good prices thereby scaling a greater extent of a competitive advantage over its rivals in order to maintain and capture untapped market as well.
The acknowledgement of the difference between Virginia Bikes and its competitors make the business to understand the most appropriate actions to take and the marketing strategies to put in place to demarcate a clear market share.
- Bill uses the three business processes listed below, and each of them could be improved using technology. Explain in general how an information technology system solution could improve each one of the processes without naming a specific solution.
Selling bicycles – how technology could improve the process:
The application of information technology is an aspect that no business, (not even Virginia Bikes) would avoid at its own expense in the modern times of digital world. For instance, the Virginia Bikes business cost of advertisement budget ranges close to zero from approximately $30,000 yearly as from when the business ventured into using a simple website which provides information across its various locations, customers and even to local biking trail sites. Therefore, with respect to bicycle sales, the customers currently highly explore the use of a digital, high-tech world and thus they expect a customer experience that emanates with the ease a technology-backed business(Panigrahy, 2010).
First, the social media creates an avenue in which Virginia would build and relate with customers and be able to show personal insights of the business making the customers to feel personally connected with you. This creates brand connection, and thus makes them influence even friends besides themselves to rent the bikes or even buy bikes or the accessories.
Secondly, adoption of a system of technology with less cash-payment basis would be a greater step for the business with regards to the convenience it provides for the customers who do not cash anymore. When Virginia Bikes adopts a simple technology as the Square (a card reader that plugs directs into a tablet or a smart phone) would eliminate some of the manual process thereby dedicating more time on important areas of the business, less mistakes made and more customers coming in.
Thirdly, an introduction of information technology would mean greater productivity in terms of efficiency, elimination of manual energy and unnecessary costs (Demetriades, 2003). The use of the technology would save on energy and time, thereby making the employees to focus on providing excellent experience to their customers and putting much attention in getting more productive work done towards finishing the products, save money and finally increase bicycles sales.
Repairing bicycles – how technology could improve the process:
The information technology system would help in identification of the equipment’s defects and organizing how they are repaired especially the bicycles fleet category of rentals. This information can be from the bicycle users or from the personnel assigned by Bill to be in charge of a station. Users can provide information about the defect of equipment by the use of the input screen at the station or report it over the phone or e-mail to the customer service agents (Panigrahy,2010). The information about defects are then recorded in repairs and relocation IT subsystem in order for Bill or his service team to effectively plan their work, undertake field visits, or make arrangements to transport the damaged equipment to the main repair center in Vienna.
The data collection and the processing of the subsystem provides the operator critical information towards analyzing the rental statistics on hourly, daily and weekly demands and thus organize for the bicycles repairs appropriately with a backing source of information on which stations and days are repair most likely.
Managing inventory – how technology could improve the process:
An information technology system provides value to Virginia Bikes by ensuring an increase in the external coordination of efficiencies. On the other hand, failure to adopt information technology system in the business would result into higher cost structures and thus competitive disadvantage. The business use of high rating inventory management technologies, which includes electronic data transfer with the suppliers would increase operational efficiencies and thus ensure improvement of services offered.
- Using the three business processes listed in question #3, list one input andone output that would be part of that process. (These are for the entire process, and are not limited to any particular step in the process.)
Information/data item entered into the system as part of this process
(input needed for the system)
Processing or action the system must perform for this process
(what the system will do with the input)
Information/data item displayed or printed out for the user in this process
(what the system will output/display)
|The system produces a receipt detailing the item, date and cost of sale.
||Analyzes the extent of damage and show whether to repair or replace
|| Displays, “repaired” or “replaced”
||The number of available equipment
||Stores the recorded number of equipment available at a particular time.
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