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For Pott Plants, the business environment has grown highly competitive and the losses it is facing can be attributed directly to this very competition. Porter’s Five Forces analysis helps clearly highlight the affects of the competition onto the business operations and its customers.
Level of Competition
Pott Plants faces stiff competition from National Nurseries, Specialist Plants and nearby super markets. The competition prior to Sam’s reshaping of the company was quite less than now, as the customers and the employees were loyal and preferred the quality and the close customer service to the cheap prices of the competitors. But Sam’s decisions led to a loss of customers and employees’ loyalty, which directly went in favor of the competitors. Although, Sam was able to reduce one competitor by developing a strategic alliance in the form of outsourcing the transportation, but that spelt loss of a long term business associate who was previously providing quality service, that is Sarah Springs. The employees and alliances who left the business only made the competitors strong as they took their quality services along with them. The costs were reduced for a short time but created losses for a long time for the Pott Plants Company.
Bargaining Power of Suppliers
The bargaining power of suppliers is low, as there are many suppliers. The competitors are also suppliers to other businesses of many services, such as a competitor of Pott’s is also now providing them transportation services and mostly they do so in cheap prices. Since Pott Plants is able to find cheaper suppliers, this shows that they have lower bargaining power.
Bargaining Power of Buyers
Before there was low bargaining power as quality was being preferred, but now just as Sam has driven cost cutting measures, customers too have become price sensitive and are more prone to switching easily, that has increased their bargaining power.
Threat of Substitutes
Pott Plants over the years with previous management had developed good and strong relationships with the town counselors for town halls and hotel owners, and people of the town who due to the loyalty to the company when no were else. Before they had minimum threat of substitutes, but now due to the change in management, where customers no longer get to meet and interact with the previous ‘plant lovers’ tend to become price sensitive and switch.
Threat of New Entrants
The customers prefer quality services in the market, so any provider who promises quality will do well. Although the competition is high, the only way to beat it is through developing good relationships with the customers. Cheap prices only develop short tem customer relationships here. There are no barriers to entry, the competition is stiff, however, it does not pose as a barrier to entry if the provider has good service to offer to the customers. This only poses as a threat to Pott Plants if the new entrants provide better service.
Pott Plants strongest asset were it employees and customer loyalty it had developed with the personal touch to its services. Through these, although the profits were low, but they were steady and the customers went no where else, reducing all threat from the competitors. The changes have only made the environment for Pott Plants highly competitive, as now it has to battle with the other providers to catch customers. Losing the employees has been a big loss, as they were the ones with the whom the customers were closely tied to, and them joining the competitors has only made them stronger and, thus, made them even a bigger threat for Pott Plants. The three big affects that this competitive environment has produced in Pott Plants are: loss of customer loyalty, loss of employee loyalty, and loss of profits.