GHOST KITCHENS
QUESTION 1
The Ghost kitchen model in the study has both a robust economic structure from both its internal and external environments. According to the Porters Five Forces model, it is a business structure that gets to experience pressure from all the five elements. Still, given its competitive intensity versus the general attractiveness of the current restaurant industry, it proves to be a profitable venture. The ghost Kitchen industry is generally a profitable venture that is utilizing a growing demand in the food delivery business (Nancy, 2020).
The threat of New Entrants
The cost of starting up in this business industry is not as much as it is required in setting up actual restaurants, the starting capital, therefore, makes it easier for such a business to have an inflow of many startups. The current restaurants in the market have the liberty to venture in such a business as well, for they have a running business that can support such a virtual procedure of buying and selling (Stowell, Frank, & Shavindrie, 2017). The supply aspect of the economies of scale, however, limits this threat to a certain level. Moat channels of distribution tend to have high operational costs and their access tones down the high new entry prospects of any aspiring business people. Having a proper channel of consigning restaurants is also hard to develop because of the nature of business.
The Bargaining Power of Buyers
When it comes to ordering take-out, there is a lot of brand loyalty that is mostly tied to the experience that customers have with the food quality, quantity, the nature of operations and their tastes and preferences. These ghost kitchens have to adapt to operations that are fast enough for their customers, by having a variety of options in some products such as drinks and beverages, providing fast delivery and having good quantities in their servings. In such an industry, the buyer’s relativity to switching costs and going for better optional is quite high. Its is, therefore, a high maintenance industry and such forces have an impact on the cost of production as well as the strategic approach of doing business with a highly sensitive nature of products such as food. An example is giving a certain amount of French fries for particular pricing can easily draw customers in from other competitors (Stowell, Frank, & Shavindrie, 2017).
Threat of Substitutes
The present established restaurants are substitutional to the products and services that mainly get delivered by these ghost kitchens. When it comes to the differentiation of inputs, there is no much difference. Still, the ghost kitchens have a better chance of tapping into the differentiation costs to get extra advantage from the market mainly because their cost of production is not as high as the cost of production used in restaurants (Nancy, 2020). The supplier concentration to firm concentration ratio is good for the established ghost kitchens since they are widely spread in the country, and so are channels such as uber eats. In terms of substitution, the ghost kitchen plays as a more competitive substitute to the existent restaurants rather than the vice versa.
The bargaining power of Suppliers
The suppliers play an integral part in this particular business. The degree of dependency on them for the functionality of the business is quite high. However, they are easily replaceable due to the existence of a higher concentration of supplier options. In terms of bargaining leverage, the business operations on fixed costs give the ghost kitchens a good position in terms of setting business strategies that are to their advantage in terms of having a higher bargaining power than the suppliers. In terms of fast delivery, the buyer sensitivity is quite high, and therefore this is a critical decision for the ghost kitchens.
Market Rivalry
All the other major forces have a contributing factor to the general market rivalry in this certain business. The ghost kitchens do have a competitive advantage over the established restaurant industry for their cost of production is not as high per sale units and therefore being highly profitable. In terms of innovation and having a sustainable advantage, the ghost kitchens are in better positions because they incur less operational risks and transactions. In general, therefore, the ghost kitchens have more operating advantage than the established restaurants, and the first movers in the business have an advantage of tapping more profit in the business before it gets clogged with many players (Stowell, Frank, & Shavindrie, 2017).
QUESTION TWO
The ghost kitchen entirely repents the concept of a virtual organization. Despite having several locations with established kitchens, it’s operations are majorly based in the cyberspace and hence borderless. It can, therefore serve a wider scope of the market (Nancy, 2020). It is also quite geographically set widely across the country, which makes it easier to tap into the available market. Under such geographical diverse operational circumstances, the ghost Kitchen has an advantage of expanding without necessarily. With a very small business culture, it doesn’t need a lot of employees or recurrent operational costs. An example of this is the task force required by the ghost kitchen; just a few chefs and employees to handle orders and no need for many waiters and waitresses having to alternate through shifts. As a virtual organization, most of its transactions get handled virtually and hence the nature of having such a small task force.
The ghost kitchen has a combination of complementary elements of operations and resources that it executes to accomplish its transactions and general sales. An example is having several distribution channels like uber eats that all play an integral part in getting its products to the final consumer. Apart from that, there is an existent spread of power among the different established shops and operating partners. The spread of power is brought about by the nature of not having to depend on one another to execute a certain transaction. With a wide market, these partners have delegated service stations and hence making it easier for them to fully establish their power in that market segment without having to depend on the operations of other shops or partners. Lastly, with the ghost kitchen having most of its operations being executed online and with the help of ICT tools, it serves as a good model of a virtual organization.
Conclusion
The business operating concept of the ghost kitchen is quite modern and like most virtual organizations presents a lot of potential in terms of growth, profitability and sustainability. It taps into a growing demand for customers needing food delivery and utilizes the growing technological development in businesses to run its transactions. With high flexibility and the dynamic prospect of operation, it stands a chance to boom in the coming years.