"Running Head: USE OF PORTER’S 5 FORCES AND VRIO THEORIES INRESTAURANT AND BARSAssessing How Restaurateurs and/or Bar Managers Can Use Porter’s Five Forces and VRIOTheories to Achieve Long-Term Competitive AdvantageUSE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS2Table of ContentsIntroduction ................................................................................................................................ 3Porter’s 5 Force Model .............................................................................................................. 3VIRO Analysis ........................................................................................................................... 7Developing the Long Term Benefits for Restaurants and Bars ................................................. 8Conclusions .............................................................................................................................. 10References ................................................................................................................................ 11USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS3IntroductionAny business in a competitive market strives to achieve the best of business outcomewith maximum utilization of its resources. The Porter's 5 Force Model gives the business anidea of the market in which it operates and uses the competitive forces for best of businessoutcome. The VIRO model is the model that stands for Value, Rarity, Imitability andOrganization which helps the company to find its powers and vulnerabilities. The restaurantand Bar business are a business which is very competitive, and thus the best utilization of thebusiness resources makes a difference between one to another. The report would identify howthese two models can be used by the Food and Beverage service sector to gain the best ofbusiness outcomes. Porter’s 5 Force ModelThis model is termed as an outsider's view of the business. Thus it identifies thestrategies and tools that the business uses to enhance its attractiveness and value in the sector.There are five fundamental elements of this model which are as follows.The Entry of the Competitors: This is the measurement of ease or difficulty for a newbusiness entity to enter a market. This depends upon the cost of investment, workforceresources along with brand building activities needed to make space for itself in a newmarket. This is the market where there may be entry barriers or even ease of entry dependingupon the policies and resources needed to enter a new market. Therefore, a restaurantbusiness already operating would make it difficult for the new entrants as it has its share of amarket. To beat it the new entrants has to do everything possible to build its set of clients inthe new market(Amrollahi & Akhgar, 2013). USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS4Bargaining Power of Buyers: The consumers have the choice of price selection along withservice preference in a competitive restaurant and bar business sector. Therefore, the pricing,services and the value of the business need to be transmitted to the clients to gain their trustand loyalty. Where the competition is fierce the bargaining power of the consumers are highas well. This happen because the consumers have a variety of brands to choose from for theirneeds.The Threat of Substitutes: The substitutes of a restaurant can be another restaurant whichoffers a different cuisine or have a competitive pricing. The ease of getting the service ofanother restaurant or same service from another brand is available in today’s market of multi- cuisine restaurants. Further, the fast food outlets are changing the food habits among thepopulation which is posing as substitutes to restaurants in today's market. The product priceand services are important aspects of restaurant business where the substitutes are in plenty ina developed economy. Bargaining Power of Suppliers: The markets which have an oligopoly of restaurant and barbusiness is very much dependent on the suppliers of the raw materials. The sellers have manychoices of selecting a business and the business to have sufficient amount of sellers to supply.Hence the bargaining power of the suppliers doesn't count for much in this business exceptfor few exotic cuisines where a supply of special raw materials makes the bargaining powerof suppliers high. Nevertheless, a restaurant business in a competitive market has to have thebest supplier who can provide the needed quality at a competent price is given preference, sothe bargaining power of the suppliers is limited(Tanwar, 2013). Rivalry among the Existing Businesses: The restaurant and bar business sector have afierce competition where a standard of service, ease, and comfort of the outlet, pricing likeissues have a great effect on the way the business is conducted. It may happen that a certain USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS5restaurant specializes in one specific aspect making others look small or insignificant due tothe kind of offerings it has. However, a majority of the modern day restaurants and bars are ina fierce competition involving innovation and service and ambiance designs to attract aspecific target audience. Such makes a short-term difference in the way the businessperforms, but the rivalry remains high since any other competitor may come up with a betterattractive idea to steal the clients of the business(Hussain & Dawson, 2013). Hence Porter's five force model may help the restaurant business managers to devisetechniques and ideas which are relevant to enhance the business exposure to a wide audiencein a competitive market. The threats of new entrants can be fought by introducing innovativeloyalty schemes, a special treat to regular clients on a special occasion to make the visitmemorable. The brand equity is thus maintained making the new entrants face great difficultyto find a foothold in the market and thus stop threatening the existing businesses. The costadvantage of being in a market, as well as economic protection of old business, serves as adeterrent to the new entrants which the prevailing restaurant businesses may consider todo(Carraresi, Mamaqi, Albisu, & Banterle, 2015). The supplier’s power in the sector is restricted as the market is fiercely competitive.However, if there are fewer suppliers or there is a difference of quality of supplies makes thebargaining strengths stronger for the suppliers. However, the suppliers don't have a massivebargaining power in today's world of an open economy where the business can source fromthe chosen supplier who gives the best rates and quality assurance. The Substitutes for thebusiness of a Restaurant may be a lower cost of food in outlets like those fast food joints.However, they are not the real substitutes for a restaurant business, but due to the costcompetence, these businesses are growing in leaps and bounds creating the space forsubstitutes. However, the client's propensity towards such substitutes is not very much cause USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS6for concern since the people have become health conscious and are turning to more naturalproducts with lesser calorie contents which restaurants offers(Allen& Helms, 2013). Further,the perceived level of product difference is another cause which doesn't make fast food jointsa substitute for theme restaurants with its own specialty and classy ambiance offerings.The competitive rivalry in the market is very much dependent on the density ofrestaurant business in the market of operations. The diversity also makes the rivalry fiercewhere the business has to be in a continuous mode of innovation and loyalty developmentidea generation. It’s the only way to curtail the rivalry in a competitive market.Advertisement expenses borne by the brands in a particular market as well as maximumresource utilization for low-cost, high-end product delivery is another aspect which makes therivalry to be curtailed but the competition in the market stays(Bresser & Powalla, 2012). Therefore, a business manager may use this model to develop the statistics todetermine the attractively of the business and design steps to improve them.Hence thereaction that a business does to the changes is important for its long-term future as well as itscompetitive outlook into the business. The future potential business markets are also revealedthrough this which may be further used to enhance the business outcomes and offerings. Thusthe analysis helps the business to gain an edge over its competitors(Cardeal, 2012). Theoption which includes the competition and future scopes in the same regards to design anddevelop the needed business strengths to make the potential changes for business interest.Thus the competitive position of business in a market with perfect competition gets an inklingof what requires to be performed to proceed with the business along with the neededadditions and subtractions of offerings after studying the PEST results. USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS7VIRO AnalysisVIRO on another hand is the business analysis tool which is a part of a businesses'strategic scheme development. The internal, external, as well as strategic business choices,are been made clear in this analysis. The model asks four basic questions about the values, ararity of the business offerings, and Imitability capacity of the business as well as theorganizational questions of its preparedness to accept changes.The Value: The value of a business is represented by the firm to exploit its opportunities sothat they may use the same to curb the external competitions.This also answers the businessabout the value that it has created over other competing brands and thus the ways to curbthose threats. Hence it boils down to the value created by the business to generate value foritself that may override the competitor’s threats and challenges(Parker, 2012). The rarity of Business: The business resources in such specialized sectors have few raritieslike special cuisines and uniqueness in its offerings that exceeds the competitor’s offerings.Short of resource and persistence over the time to build such competitive advantages are onekey aspect that a business has to enhance its rarity in the market for image building anddevelop the competitive advantage over other similar businesses in the same sector in themarket of operations. Here the job role and continuous development of the business personnelforms an important part to develop the needed rarity in the business. Therefore, this helps thebusiness to develop its rarities to enhance their businesses and enhance the unique aspects ofthe business to make and keep it unique and attractive(Knott, 2015). The Imitability: The business market is such that few have a special resource while othersdon’t have them. However, the needed capacity development of the brand regardingresources, capacity and ability to challenge the existing businesses makes up for USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS8itscapabilities to imitate. The decision is in business to either use those external elements toimitate or destroy them so that no one has the edge over the advantage of gaining thecompetitive advantage. The limit of a business makes its reach the aspects of those businesseswhich have an edge and develop the competitive advantage to get back the previous marketconditions for a competitive business in a specific market. However, this aspect of imitationcomes at a cost where a use of right resources is important to gain the lost space in the fieldof competitive advantage. Some may not imitate others and are also unwilling to change theirways of work where the problem comes into being making the business obsolete with time.There are various forms and cost variances for imitation(Kim, Lee, & Shin, 2015). The Organization: The organization comprises of its limited resources like workforce, skillsets, budget, etc. which are important for a business growth and sustenance. Hence a businessmanager has to take into account all the resources that they have at their disposal and theways to use it in the best ways to generate the needed organizational competence. Thechanges in market and food habits need the organization to understand and adopt the samemaking the business gather value of its own in a competitive environment(Charlebois, 2015).In a more comprehensive term, the capability of the organization to change with the changingneeds is considered as its organizational capacity to adapt to the changes. This helps the firmin gaining the most recent inputs in the business as well as make the organization competentin such a diverse business environment is key to such organization structure in VIROmodel(Darity, 2012). Developing the Long Term Benefits for Restaurants and BarsThe restaurant and Bar managers can use these two models to develop their long-termbusiness prospects. The Porter's five force model gives an overview of the business and thusalso generates a great analysis of stakeholders to understand the challenges and scopes those USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS9may occur. This study helps them to build a strategy to strengthen their position in the marketso that new entrants can’t share the market or have a cut on their clients. Further, the qualityof suppliers and consumer's choices are given ample care so that all may feel a sensation ofsatisfaction to be associated with such a brand of food service. The competitors would bethere, but the business may incorporate some new innovative steps with which it may curbthe edge of the competition in the same sector. This may include maximum utilization ofresources, giving healthy meal at a competent cost, creating loyalty schemes to make thepeople return to the outlet again. Such steps are essential to be recognized and be executedfor the best of business venture(Kamran, 2011). The VIRO model, on the other hand, gives the business an idea of how to use itsresources for best use to be competent in the ever changing food business and createsomething which is easy to achieve to keep its client flow steady. The values of the businessare recognized and are strived to be kept where the organization identifies the utility of itsresources and makes them at par with the business market. The readiness of the people andresources in the organization to adapt to the changing business are key to the model.TheVIRO model also helps the business to identify the areas where it needs to follow a certainstyle or imitate a much-needed business aspect. Thus the training needs and resourceallocation is made clear in this step helping the business to develop its competencies rapidly.Further, the rarity of the business offerings is also set in this model utilization helping thepeople involved to gain the needed competence to stand out of the rest of the sector(Min,Min, Jang, Han, & Kang, 2016). Hence, the two models give the business managers a clue of what needs to be done aswell as the competitor’s actions which are gaining importance. It’s a great tool to identify thescopes and utilize them as and when needed for best business outcomes. The business can USE OF PORTER’S 5 FORCES AND VRIO THEORIES IN RESTAURANT AND BARS10thus utilize the resources to its maximum while also plan for future training, and productvariation needs to stay competent in such an oligopolistic market. Nevertheless, thecompetitor's steps and innovations get to see a challenge and competition as well if themodels are well utilized giving the business to spare no space for new ventures orcompetitors.ConclusionsThe food and beverage business is a sector that may have multiple players in themarket where the difference between two players are very nominal considering the price ofoffering and service provided. However, there are ways which may help a business todevelop its niche in the sector which is highly competitive. Actions and policies thosebusiness needs to adopt for the best business outcome would mean that it incorporates all theaspects of competitors and make its policies to counter them. The Porter's 5 Force and VIROare such classic models that a business enterprise can use to make use of studies in marketchanges and adopting them by the business capacity to be competent and growing. Trainingof people, use of the new menu, an inclusion of a variety of tastes as well as low-calorie foodare few to name which are direct outcomes of a well-analyzed study of the market enables bythe theorems above."