Managing for Profitable Growth

Introduction

Managing business growth is critical for the survival of a business. An entrepreneur needs to understand different factors that affect their business and the industry in which they operate. In order to understand these concepts on a deeper level, this essay will focus on a business owned and operated by a friend’s family. Omega Pastry is a producer of pastry-related products, and it is located in Greece. The business has been in existence since 2000. It has a collection of products both in the retail and catering sections of the business. Some of their products include Greek traditional pies, pizzas, pastry sheets, brioche, and bougatsa, among others. The company operates in the retail and food service sectors in Greece, and it has registered a significant growth since its inception. The company has 12 outlets within Greece, and they look to expand their business internationally in the future. In order to understand their operations and their industry, this essay will focus on the industry analysis and Pestle analysis of the business.

Industry Analysis

Industry analysis entails the description of different players that interact in a given industry, as well as their position in relation to other players. It is a critical tool of effective strategic planning for a business, and it assists the management in understanding their internal and external operations and changes within their industry. In order to conduct the industry analysis, one of the best tools to use is the Porter’s five force analysis, and it enables the analyzer to understand the power that each of the players has in the industry in relation to business.

Bargaining Power of the Buyers

The buyers in the Greek pastry industry have high bargaining power. The consumers can select different food products from different players who offer their products in the market. Therefore, they can switch from one supplier to the other with ease if their satisfaction level is affected or based on the proximity of the outlet. There are both large and small players within the industry, and they offer the buyers similar quality products that give them more power to bargain. It is also worth noting that the consumers are numerous in numbers, and even though it is critical for a business to ensure client loyalty, there are always new clients visiting the outlets. Regardless, the business has to be considerate of its quality and pricing model as the consumers can switch to other producers with ease based on factors such as pricing and quality.

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Bargaining Power of the Suppliers

In this sector, the bargaining power of the suppliers is low. As a result, globalization and the diminished barriers in trading allow the players in the food manufacturing sector have a wide array of alternatives in relation to suppliers of their raw materials and ingredients. There is an ease of getting such supplies either locally or from the numerous parts of the world. Comparing local and international suppliers, the local suppliers have high negotiating power as a result of Omega Pastry’s preference for locally sourced ingredients, which helps in maintaining the associated consumer trend. When the suppliers have low bargaining power, it is an advantage to the business, as it can switch from one supplier to another without incurring significant costs. Some of the raw materials, such as baking flour, are offered based on given specifications, and any suppliers who can manage to meet such specifications can supply the business. Therefore, the business has an advantage over the suppliers, which gives it more negotiating power.

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Threat of Substitutes

The threat of substitutes is significantly high in the industry. Since the company offers food products, they can be easily substituted by other food products available in the industry, which range from fresh foods to other processed foods. However, these substitutes cannot be stored in bulk for a long time, and as such, any other food product can be considered as an indirect substitute to pastry. Additionally, when people consider eating out or order cooked food through delivery, it can also be perceived as an indirect substitute. The high rate of substitutes presents a challenge to the business as it needs to keep modifying and changing with times to ensure that they keep attracting consumers. It is important for the strategies of the business to remain focused on ensuring that clients do not opt for other products, as it would result in the losses for business. However, they should also take advantage of the fact that the substitutes can only be purchased in small portions as they cannot be stored for long, which means that the consumers will be in the market for food soon after buying.

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Threat of New Entrants

The threat of new entrants in the pastry market in Greece is moderate. There has been an increased interest among the Greek consumers toward the processed foods of private labels, which has made the industry attractive for investments. It could be a reason for the increased entry into the industry by new players who would pose competition to Omega Pastry. However, entry into this industry requires large investments if a business seeks to have a significant impact on the market. Additionally, there are strict legislations and known brands that have already established their market share, and they form entry barriers, which prevent new entrants from joining the industry. However, for small pastry shops, it would be easier to make entry and focus only on a limited number of customers based on geography, and the entry of such small players in large numbers would pose a threat to the large players.

Competitor Rivalry

The rivalry among the competitors is moderate, with a given number of the main players. 30% of the market is controlled by Bara Stathis S.A., with two main brands under the company. One of these brands is Chrisi Zimi, which is a pastries brand similar to the one of Omega. The other players within the industry include Lidl Hellas, Kallimnanis, and Alfa, among other small players. Having a strong brand in the market is critical for these players in order for them to continue controlling their share of the market or acquiring new market from the competition. The industry is price sensitive and the marketing and promotional activities of the players emphasize price benefits. The competitors strive to offer cheap products, which move the attention of the consumers away from other industry players.

PESTEL Analysis

Political Conditions

The political conditions in Greece in the last few years have been characterized by several issues that have led to instability. Since 2009, the government has been focusing on the implementation of two packages of austerity. The packages implied the reduction of pensions and some of the benefits and rights of the employees. In the food industry, there is a strict legislation process that governs the industry, and it covers a wide range of issues including the manufacturing processes, packaging, products, and environmental impact. The government, through the Hellenic Food Authority (EFET), regulates the operations of the food manufacturers who require the ISO: 2001 certification, and the failure to acquire it leads to financial penalties and even to business closure (Euromonitor International, 2017).

Economic Conditions

Greece has been facing economic challenges for more than the past decade. In 2014, the country needed to record a 3% growth in its GDP from 2014 to 2021 for the country’s debt to become affordable. Unemployment has also been high in the country, at about 25% and 30%. As a result of the turbulence in the country’s economy, there has been a decrease in the disposable income of the consumers in the country by more than 35% (Euromonitor International, 2017). The country has also become difficult to conduct business in, and it was listed 109th out of 190 countries regarding the ease of doing business in the 2009 world ranking. However, over the years, the trend has changed, and the country is currently ranked 67th out of 190. Still, it is a deterioration from being 61st in 2016, and between 2008 and 2017, the country has averaged 81.5 (Trading Economics, 2017). This trend is a critical indicator of the difficulty that businesses have to face when operating in the country. The business environment is also risky, and when combined with stiff competition and corruption, the businesses within the country suffer significantly.

Social Conditions

As a result of the many years that the country has spent in financial crisis, Greek consumers have become increasingly price-sensitive. It has also led to the reduction in their spending as they have been forced to reduce their household budgets. Additionally, when making purchases, they focus on products that are on offer or those with discounts. Greek people are highly worried about their food due to health concerns. They have high preference for fresh and quality food products — however, low prices offered by the private label producers within the country have seen a switch toward them, with less attention starting to be paid to the branded products. Furthermore, the consumers have become increasingly sensitive to the origin of their food, and they prefer to buy from Greek manufacturers as they strive to promote their economy and local employment.

Technological Conditions

The ICT is well developed in Greece, and the government has invested toward the improvement of the technology within the country. Although the adoption of mobile phones and Internet connectivity in Greece is below the European average, it is growing significantly. Internet connectivity has been an important technological development in Greece for the past decade, and it offers opportunities for businesses to set up online sales shops that they can use to sell their products locally and internationally.

Environmental Conditions

The country has been increasingly sensitive to the environmental issues. It has suffered from acid rain, which has led to the implementation of strict measures related to manufacturing, processing, and agricultural activities. The country has regulations governing the emissions of greenhouse gases. Therefore, businesses operating within the country have to meet these strict measures for them to remain successful.

The country has a constitution that was adopted in 1975, and it has a parliamentary system with the president as the head of state. The legislature has the power to affect all legislations covering the different aspects of the country, and it is also responsible for electing the president. The interrelation of the government and the legal aspect of the country is critical for business support and continuity within Greece.

Conclusion

Conducting business requires the understanding of different factors influencing operations, including both internal and external factors. This essay focused more on the external factors, offering an industry analysis and a PESTEL analysis of the pastry industry in Greece. The focus was on Omega Pastry, a business operated by a friend’s family. The business has been operational since 2000, and it has managed to get a share of the market. The analyses indicate that the consumers have high bargaining power, but the suppliers’ bargaining power is low. The threat of substitutes is also high and mainly emanates from other food products. There is moderate threat of new entrants as the demand by consumers is increasing, but the initial investments needed are high. Rivalry among the competitors is also moderate, with different players taking different sectors of the industry. The PESTEL analysis indicates that the political environment in Greece has been unstable, which has led to poor economic conditions. Furthermore, the social behavior of people has also been affected, resulting in the consumption of low-priced products. The country has a set of environmental regulations that govern the industry players, and it has high adoption of technology. Harmony is needed between the legal and the political aspects of the country in order to stabilize the economy.

 

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