Porter’s Five Forces

Threat of New Entrants

1. Economies of Scale – possible to franchise across the country and gain some first mover advantage, difficult to protect concept

2. Capital Requirements – Medium; since we are focusing in middle and high income group

3. Differentiation – The party planner industry not fully offers a diverse and differentiated offering would be challenging to create and sustain further differentiation

4. Cost Advantages Independent of Scale

·         Managerial Know-how – High advantage

·         Proprietary Technology – low

·         Raw Materials – NA

·         Learning Curve – High

·         Government Regulation – NA

Overall, Threat of New Entrants is Low

Makes Industry Attractiveness and Long Term Profitability High

Bargaining Power of Customers

1. Commodity – Birthday party planning is not differentiated, long term differentiation would be easier

2. Customer Profits – Target households earning RM 4,000 or more

3. Backward Integration – low

4. Overall – threat of Customers is low

Increases industry attractiveness, and long term profitability

Threat of Substitute Products or Services

Large number of substitute services

SUBSTITUTES	SWITCHING EASE	HOW TO DIFFERENTIATE
Bowling	Challenging – time consuming and expensive	Offer fast low cost solutions
Skating	Challenging – some food, no cake, or decorations	Offer package deals including to include food, cake, and other services
Fast Food	Easy –  typically no games or fun things to do	Include games and entertainment

Overall – threat of Substitute services is very high

Bargaining Power of Suppliers

1. Large number of suppliers especially for food or catering

2. Little threat of forward integration

3. Product differentiation in cost and quality

4. Low cost and low quality products such as generic cups and plates, no fancy printing and higher cost and higher quality products such like products are associated with specific themes

5. Firms are moderately important to suppliers

Overall – suppliers have little power

Improves market attractiveness and potential for long-term profitability

Rivalry Among Current Competitors

Low to moderate in regards to rivalry among competitors.

Factors that increase rivalry in an industry:

·         There are a number of competitors in our region  with no clear leader in the market  incentive to compete  harder for market leader position

·         The fixed costs can be relatively high facility, props and equipment, liability protection

·         Switching costs are low

·         Exit costs can be high-facility, props and equipment

Factors that decrease rivalry in an industry:

·         Product is not perishable and does not need to be stored or sold immediately

·         Product is unique-focusing on specific age group of kids

·         The market for party services is growing more customers without necessarily taking directly