Business plan for a

Drive-Through Bakery

How to do Porters Generic Strategies

MIKE 7th semester 2006 C-Assigment

Group no. 1:
Thomas Mlgaard Kristian Lange stergaard Dennis Nrbjerg Andreasen Jesper Mller

MIKE 7th semester 2006 C-assignment Group no. 1

1 Contingency approach
Before commencing work on this assignment we decided to write a business plan for a bakery and applying Michael E. Porters Five Forces (FF) of competition as a tool of analysis. Having decided upon FF it turned out that only applying this framework, with all its shortcomings, would not yield a satisfying result. Hence it was decided to leave out the power of buyers, power of suppliers and threat of substitutes from the framework and add legal and social-demographic aspects, which were taken from the PEST model 1 which is extended with an L (Legal) aspect, in order to cover the relevant aspects better. It also made the analysis more dynamic, and made it possible to overcome the problem of only presenting a static picture of the attractiveness of the chosen industry. For instance, the missing sociological-demographic aspect of the initial framework represented a challenge as it is considered of great importance in this context. The legal aspect is also incorporated even though this aspect can be said to be covered by the entry barriers of FF, but it is interpreted as relating to more industry related legislation and not relating to the vital aspect of local planning. In addition to the FF extended framework, Porters generic strategies will also be applied in order to look into the future strategy and conclude this assignment

1.1 Preconditions
In this specific case the authors are only to function as consultants, and provide the business concept, hence all capacity related aspects, with the exception of the ICT aspects are completely up to the owner of the bakery. Thus we assume the roles of consultants for a single bakery or a chain of bakeries that wish to buy our business concept and add to an already existing bakery or use the concept to build up a new brand. The competencies required by the consultants are in programming and maintenance of relevant software, updating and upgrading the web- and online payment facilities and finally knowledge about how to setup the drive-through facility. The business plan is not that of the consultant agency, but could instead be thought of as a proposal to a fictitious bakery-owner who wants a business plan for developing his/her bakery/bakeries in order to accommodate that customers increasingly demand flexibility.

The PEST model consists of Political-Economi-Socio-demographic-Technological aspects. It is widely used in marketing, when analysing a macro environment. The framework is considered to be more dynamic as it optimally looks at the development of the individual aspect, hence it does not provide a static picture, which is one of the points of criticism of Porters Five Forces.

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2 Concept and idea

The concept and need behind our business idea and what we would like to base our business on is the need for fast and flexible purchasing of quality bakery products through on-line ordering, delivery and drive-through functions. We want to satisfy this need through a synergy effect consisting of the three concepts drive-through, on-line ordering and payment, and finally a delivery service.

2.1 Placement
An important issue when it comes to establishing a drive-through-bakery is the placement of the business itself. In order to get a good (high) customer flow, the bakery shop has to be located somewhat close to a main road, but not a road with massive traffic and almost constant tailbacks. Some thought also has to be put into the overall design of the bakery with the drive-through facility because such a feature requires quite some space compared to bakeries without a drive-through facility. Also the design has to be optimised in order to get the best flow in the queues in order to live up to the customers needs of getting a fast and easy transaction.

2.2 Legal issues

There might also be some legal issues that have to be considered when it comes to opening a drivethrough bakery. For a start approval from the food and health department is important. Permits also have to be applied for from the local government for either adding a drive-through function or perhaps building a new bakery (depending on whether the concept is sold to an existing bakery or not). Also the driving lanes around the bakery and the exit onto the main road might require some permits.

2.3 The competing aspects of the business

2.3.1 Drive-through and delivery services

The key concept of this business idea are fast and easy purchasing thus making the purchasing of bakery products as convenient and flexible as possible for all customers regardless of whether they prefer to order on-line, by phone or inside the shop and also whether they want the products delivered or pick it up themselves in the regular shop or perhaps in the drive-through.

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The ambition is also to get new costumers through the new initiatives mentioned above. The aim of the drive-through function is to attract customers who do not want to spend time looking for parking space and just wants quick and effective service. Thus the business idea will expand the market by getting costumers that otherwise (normally) would not buy at a bakery because it is (relatively) time consuming and parking space can be scarce. In case of the delivery service, the goal is to move the business to the customers by doorstep delivery. This can also be seen as a market expansion in the sense that e.g. disabled people who would have trouble getting to the bakery for themselves would then get the opportunity to order on-line and have it delivered. 2.3.2 The employment of E-business

In order to make a success of the business, the internet and the possibilities that follow the use of Ebusiness will be essential. An internet presence can give several advantages in the areas of improved business functions and improved markets 2 : In our case specifically, there will be a rise in internal efficiency as the electronically placed orders are thought to go straight into the ITadministrative system of the business. This means that as new orders are placed, calculations are automatically made to measure consumption of raw goods such as flour, sugar, etc. General information about the drive-through window and delivery services are also spread easier with a public web page. This leads to improved markets, as access to information about the business is easier thus increasing the awareness of the business and enhances the chance of beneficial cognitive processes with the buyer. People will also get the possibility of placing orders for bread and pastry around the clock, and a frequent-users club could be established in order to increase customer loyalty.

In order for the entire E-business part to contribute to the success of the business it is required that precision in information; product prices and quality of the internet based services are optimal. If these elements are neglected customers will tend to defect and go to competitors. 3 Although there are no other drive-through bakeries currently with delivery services in Aalborg, the result of a poorly designed and administered website might still be that no one would use it. Therefore time and economical effort must be focused on continually updating these features in order to maintain and develop the firms competitive advantage thus making reliability and quality key terms.

2 3

Deakins & Freel (2003), p. 143-144 Deakins & Freel (2003), p. 145

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To sum up, the business would be characterized as a hybrid business 4 , meaning that it will be a mix between a cyberstore 5 , where on-line ordering and purchases are possible, but also it would be a traditional brick-and-mortar shop where people can purchase bakery products both at the counter and at the drive-through window. Thus the hybrid business is characterised by being highly flexible in adapting to the costumers needs.

2.4 Tendencies
Tendencies are placed in the theoretical framework of the PEST-analysis, more precisely in the Saspect (sociodemographic factors). This can complement FF, by adding a macro level, whereas FF alone has some shortcomings. The tendencies can help a firm to get an idea of the future market of the private consumers.

The tendencies for the near future shows that time is in short supply and it is (becoming) a luxury that people are willing to pay a lot for, so they can get some more spare time. 6 That time is becoming a luxury is supported by studies concluding that people tend to use more time on working. 7 There is also an increasing tendency for more and more families to get their shopping goods delivered at home. 8 These examples of tendencies supports our business concept since decreasing spare time and increasing demand for delivery services are supported by the functions intended in the business concept.

4 5

Deakins & Freel (2003), p. 142 Deakins & Freel (2003), p. 146 6 www.fremforsk.dk/Default.asp?Id=383 - Artikel: Luksus i dag 7 www.fremforsk.dk/Default.asp?Id=383 - Artikel: Tiden og hjemmet det vi tror, og det vi gr 8 www.fremforsk.dk/Default.asp?Id=383 Artikel Tiden - vi gr ikke som vi tror

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3 Synergy effects
As mentioned earlier, this business idea is build on the concept of developing a (new) business proposal consisting of a synergy of three wellknown and developed concepts. What makes this special is that it is innovative in combining three existing business concepts into a new and differentiated one. The synergies of this concept occur when two of the concepts are combined. E.g. a costumer can order on-line and has the options of either have it delivered, pick it up at the drivethrough window or get at the counter as usual. The synergies of this example are illustrated in the top section of figure 3-1 under the concept called flexible customer. Also synergies can exist between the drive-through function and the delivery function since they give the customers more options and thus complement each other.
Figure 3-1: Customer types and synergies.

4 Segmentation
The segments giving special focus regarding this business idea are the following: Craftsmen and on-the-road sales-men, who want fresh and good quality bakery-products in a fast and easy way. Private people on their way to work are also included in this group thus the drive-through part is most important for this segment. Firms that want bread delivered rather than having an employee get it. This could perhaps be the start of a permanent delivery agreement so that economies of scale regarding driving expenses can be achieved. Thus the delivery service and the on-line-ordering are the most important features for this segment. Private persons focused on enjoying and getting as much as possible out of their spare time and thus get bread delivered in the morning (probably typically Saturday and Sunday) after having ordered and paid for it on-line. For this segment the most important features would be the delivery- and the on-line ordering service.

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MIKE 7th semester 2006 C-assignment Group no. 1

As seen above the typical users of the concept are costumers that either just use the drive-through or place an on-line order and have it delivered.

5 Competitors
Competitors (or rivals) should be analyzed when a company enters a market. Porter emphasizes this aspect in FF as: Industry competitors (segment rivalry) 9 .

When a firm wants to determine its competitors it could start broadly by applying threat of substitute products as FF also implies, where producers like Hatting could be a competitor. In the case of fresh made bakery products Hatting would not be relevant to include. In order to get a better picture and focus on the more direct competitors, only competitors with the same abilities as your business are included; bakeries, kiosks, supermarkets etc. Again if the scale of competition is too large, focus could be changed to only look at bakeries with the same special features as oneself would offer. Again this would mean fewer competitors in a numerical sense, but at the same time the remaining competitors are competing much more against each other due to the increasing similarity in the market focusing process. If focusing just on the competitors in the Aalborg area, there are around 17 bakeries 10 none of which has a drive-through function 11 . This could indicate too small a focus. So an appropriate focus could be all bakeries in Aalborg plus all the drive-through bakeries in the northern Jutland; there are only 2 of these in the region and only 4 more in the rest of Jutland. Since no competitors in Aalborg have a drive-through function this, in itself is a competitive advantage, however not a sustainable one. Also the fact that the drive-through function would be synergized with an on-line ordering service and a delivery service only enhances this competitive advantage even more, and increase the firms differentiation and branding compared to its competitors.

6 Generic strategies
This section will, based on the content of the business concept, be focused on which of Porters generic strategies 12 (see figure 6-1) would be most suitable for this business to achieve.

Kotler, Philip, (2003), p.242

www.degulesider.dk/vbw/super/resultat.do?twoFieldName=bager&twoFieldAddr=aalborg&Image52.x=0&Image52.y=0

10 11 12

www.tv2nord.dk/default.asp?kategori1=regnews&id=21788 Deakins & Freel (2003), p. 171

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Regarding the competitive advantage category our bakery-concept is clearly not competing on low costs/price since focus is on high quality products and good and flexible services. This would suggest that the business idea is differentiation which of course really is the key issue since it involves innovation and developing a whole new concept in order to be competitive.
Figur 6-1: Porter's generic strategies.

This leaves the question of whether the competitive scope is narrow or not. This is a bit less clear than in the case of the competitive advantage above, because if the concept is only introduced in one bakery it would surely be a narrow target due to the geographical limits (despite delivery service) of the business hence the generic strategy would be termed as differentiation focus. However if e.g. the concept is sold to a chain of bakeries all over the country a broader market would be targeted and the generic strategy would be differentiation. Since the concept at first (probably) would have to prove its worth in a single bakery the likely strategy would be differentiation focus which also is the one of the four strategies that is best for a small company according to Deaking and Freel. However, if and when (hopefully) the concept evolves and spreads to more shops in a bakery chain the differentiation strategy might be better since the company would grow in the process and cease being termed small and a strategy change might be more appropriate instead of focussing only on a narrow target.

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7 Conclusion
Having applied a FF framework extended with socio-demographic and legal aspects of the PESTL framework, this assignment has outlined the possibilities and tendencies enabling the success of a drive-through bakery, combined with delivery service and normal shop design - the combination of these elements is considered to generate the synergy effects, which this concept rests upon. Furthermore the importance of a website and online payment was emphasised. Finally different generic strategies was looked into, and the hybrid form differentiation focus was chosen for a single bakery, and when the application of the concept increases a strategy of differentiation is advisable.

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8 List of References
Books Author
Deakins, David & Freel, Mark Kotler, Philip

Title
Entrepreneurship and small firms Marketing Management

Year Edition
2006 2003 4. 11.

Publisher
Mc Graw Hill Education Prentice Hall

Websites and online articles Link

www.tv2nord.dk/default.asp?kategori1=regnews&id=21788 www.degulesider.dk/vbw/super/resultat.do?twoFieldName=ba ger&twoFieldAddr=aalborg&Image52.x=0&Image52.y=0 www.fremforsk.dk/Default.asp?Id=383 www.fremforsk.dk/Default.asp?Id=383 www.fremforsk.dk/Default.asp?Id=383 www.fremforsk.dk/Default.asp?Id=383

Title
Napoloenshatmenu med kold cocio De gule sider Luksus i dag Tiden og hjemmet det vi tror, og det vi gr Situationisme i forbruget Tiden - vi gr ikke som vi tror

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