Business Strategy

Porter's Five Forces Model Industry Structure

        Developed in 1979, Porter’s five forces model is used to asses an industry structure and it lists the following 5 industry profitability competitive forces: bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants and rivalry. The industry characteristics, how profitable it is, and how feasible that profitability will be is determined by the strength of each of the 5 forces.

 

Bargaining Power of Customers

        Bargaining power of customers determines how much of an impact customers have on a business. For Friends of the Family Child Care Center, bargaining power of customers is high because there are many daycares around which forces FOTFCCC to keep its prices lower while maintaining/exceeding its standards.

Bargaining Power of Suppliers

        Bargaining power of suppliers determines how much of an impact suppliers have on a business. For Friends of the Family Child Care Center, the most significant suppliers consist of teachers, Nuway(food), and Jan Pro(cleaning).

        The teachers have a low influence at a child care center from a business perspective because there are many qualified teachers around who can teach. Another benefit is that these teachers are not in a union so it makes it difficult for them to get together and make demands. The replacements can be found almost immediately.

        Nuway(food) is the supplier of the food to the child care center but the their bargaining power is low. There are plenty of other suppliers to choose from and the switch can be made easily if there are any issues. FOTFCCC is in the process of opening of another branch and any price issues can hurt Nuway’s chances of delivering food to the second location while losing their current contract.

        Jan Pro(cleaning) also a low bargaining power because of other established cleaning companies are around for business. There are many new companies entering the cleaning business many new companies drop their prices to compete with others. If there are any issues with Jan Pro and its prices, switch is only one call away.

Threat of New Entrants

        Threat of new entrants determines if a new competitor can enter the market easily. However, for Friends of the Family Child Care Center, the threat is extremely low because Metuchen already has 14 well established child care centers. FOTFCCC is already a leader as far as prices go and this makes the chances of a new child care center slim to none.

Threat of Substitutes

        Threat of substitution is low. It would be a nanny and he or she usually comes to your house. However, some only want to look after the child and not teach or not clean up after the child. However, FOFTCCC provides a learning environment, ability to make friends since there are other children around, and a dedicated staff who looks after all the needs and wants. 

Rivalry:

        Their local rivalries are Dayspring Child Care Center and Kinder Kastle Child Care Learning Center because these corporate owned have more capital to invest into one center. FOTFCCC has given them a tough competition because it is sustained profitability. The proof is that FOTFCCC is in the process of opening up another branch. Even though many rivals are present, FOTFCCC has established itself as one of the best and a low cost leader amongst corporate owned child care centers.

     FORCE                                                                    STRENGTH        FOTFCCC

Bargaining power of customers	“I won’t go to FOTFCCC it isn’t the least expensive”	High	Lower prices than competitors
Bargaining power of suppliers	“Higher demand for qualified teachers”	Low	Find other child care
Threat of new entrants	“There’s a newer child care center in town”	Low	Lower prices, better care
Threat of substitution	“I will hire a nanny”	Low	Family Oriented, amongst other children
Rivalry	“ I look for the lowest monthly fee”	High	Everything built into one cost

 

Competitive Strategy

        Competitive Strategy specifies how a firm conducts business within an industry and gains a competitive advantage over its competitors According to Michael Porter, one of key researchers and thinkers in competitive analysis, a firm can focus on being the cost leader, or it can focus on differentiating its products and services for its competitors. Further, the firm can decide the cost or differentiation strategy on a particular industry segment.

 

        There are 14 day cares in Metuchen, NJ and 7 daycares are within 4 miles that are dedicated to providing childcare services. Some of them are corporate owned but most of daycares do offer similar programs but Friends of the Family Child Care Center has been one of the top choices for parents for their children. While other centers ask for a contract with a specified time frame, FOTFCCC has made that requirement obsolete. They do not ask their customers to state how long they wish to stay with FOTFCCC but a mere contractual obligation to notify them about cancelling their services a month prior.

        FOTFCCC has been open since 1999 and has become one of the best daycares in Metuchen, NJ. They have earned the trust of the parents through dedication, hiring well educated staff, and providing excellent care for the children. Also their location, Main Street, which is one block away the train station that goes to Trenton and NYC provides great assistance for parents who do not drive.

        To distinguish itself from competitors, Friends of the Family Child Care Center incorporates a narrow and focus cost competitive strategy. Since their competition focuses on Metuchen and nearby cities, they have a narrow scope and cost focus because they continue to offer the lowest the prices for their programs.