SITUATION ANALYSIS
Introduction
Baking is an important market with a long tradition that has contributed to the presence of a significant number of bakers of small and medium-size so that it is complicated to survive in this industry. Businesses have to look for inexpensive raw materials, new technology, and curb energy usage. The bakery is, therefore, a divided sector. The Bakery and Patisserie group is included in business by the OKEČ (the Sectoral Category of Economic Activities) 15.8, Processing of other food products. This contributed to the most significant proportion of revenue from sales in this field, the most substantial part of the production from the bakery business is for everyday usage. The industry is also a significant employer and has 20 000 employees. This business is still decentralized, and the partnerships are linked horizontally and vertically. This paper seeks to provide an analysis of the external, internal, and customer environment for someone trying to start a bakery business in New York.
Internal Environment
There is a high level of minimal effort of entry into the baking industry, and the entry barriers into the baking sector are minimal, including initial capital expenditure, competitiveness with significant players, and eight partnerships with large retailers. Based on the appropriate scale of output, initial capital costs can be incredibly high, thereby preventing new entrants. Sadly, prices are high as new entrants with limited commercial markets and local bakeries launch their items. The simplicity of exit in this market is high because of the low market penetration and woefully underdeveloped. According to Arkeman et al. (2015), technology and creativity have transformed the baking market dramatically. New production technologies, e-commerce, and product growth have influenced the firms’ existing business operations. Small-scale manufacturing units were designed to serve the same role as large units. This allows retail bakers highly economical with industrial bakeries as they can manufacture different pieces of bread by use of automated equipment.
Although this has reduced production costs for small businesses, it has also contributed to decreasing jobs. Furthermore, e-commerce and manufacturing technology is a significant trend in the baking market. System computerization improves performance and precision. For instance, the packaging method has dramatically improved with the advent of conveyors, collators, and automated packagers. New technologies are now used for monitoring stock, production, and shipments(Litvinova, Morozova & Yatsechko, 2015). These applications reinforce the customer-supplier partnership between suppliers and customers. On the issue of economies of scale, scale economies arise when it is possible to generate more units of output for lower production costs. Because of the unpredictable existence of product costs, it is challenging for small firms in the baking sector to achieve economies of scale. Large corporations were able to compensate by reducing other output costs as input costs soared 27.7 percent in 2008.
External Environment
Rivalry in the baking industry is high, and growing steadily. This demonstrates how large and fragmented the industry is, with several bakeries being small to medium-sized. The sector’s leading brands compete with certain domestic bakeries that have specialist products, which are typically made with materials of better quality (Litvinova, Morozova & Yatsechko, 2015). Competitiveness for the baking industry is focused on four major factors: price, cost, market segmentation, and nutritional content. Although prices and quality for consumer products are primarily related, baking commodities are no exception. Although the price is often a variable, an item’s value can render price irrelevant.
Regardless of the popularity and costs of the brands, as well as the expense of manufacture and distribution to manufacture and sell on such a large scale, it is easy to enter the baking business at a business level. It’s easier to enter the baking industry on a smaller size, all that’s required is the launch-up cost for a piece of equipment and facilities to begin production. Two main challenges are faced by new entrants, the big brands in the market, and the contract to win. The big brands in the industry have a reputation and customer loyalty that can be incredibly hard to overcome (Arkeman et a.,2015). The more popular small bakeries cater to individual specific segments of the market and begin to build commitment to that smaller base of clients. Another hazard a new competitor can face is the competition. Since supermarkets prefer products that perform well, this allows storage space in significant supermarket chains nearly impossible for unfamiliar brands to obtain. The way around this is to establish a stand-alone bakery that can add to the start-up costs) or to partner with nearby grocery stores or outlets to help create the brand.
Customer Environment
More than 99 percent of all families in America consume baked goods contributing to a large and diverse client base. Per capita discretionary income has declined throughout the past five years, and development in the baking sector has been minimal for the U.S. market. Customers were mainly buying pastries from supermarkets and wholesale stores, as opposed to eating restaurant pastries. The pattern is expected to improve in the next five years, however, and income is projected to rise by 1.9% in 2014 (Litvinova, Morozova & Yatsechko, 2015). When the crisis comes to an end, American people spend more time on the job. Technomic’s 2012 Snacking Market Dynamics Report shows customers are becoming more snacking as they get more distracted over time.
That would ultimately lead to a decline in the buying of bread products, as consumption would depend on alternative items such as bars for nuts, yogurt, fruit, and cereals. Companies in this field have the responsibility of keeping up with the ever-changing consumer health patterns in America. Customers have become more health-conscious, and nutritional inclinations are evolving, including diets free of gluten, low-carbohydrate, and Paleo (Arkeman et a.,2015). Consumer demands have led businesses to increase the distinction of products like low calorie, low carbohydrate, and whole-grain products. While these nutritious patterns influence the bakery industry, they have a minor impact, and seven are unlikely to change dramatically in the industry. Companies will continue to launch new products that fulfill the nutritional requirements of customers.
Conclusion
Baking has been a significant component of human life for many decades, and it is almost sure that it will consistently be that way. The public, in general, here in the U.S. enjoys their baked goods, and this is a massive win for the bakery market. The lack of resources, brand awareness, and high material costs and labor are some of the significant obstacles that prevent businesses from achieving or sustaining success. Many companies that can work and prosper amid these obstacles will enjoy a lot of success because there are comparatively few rivals there. Six primary factors can help decide whether a baking firm won’t be through. They are the ability to carry on price hikes, procurement of specific components in place, closeness to major markets, use of most efficient work operations, differentiation of commodities, and brand name establishment.
References
Arkeman, Y., Herlinawati, T., Wibawa, D. S., & TIP, H. A. (2015). Formulating strategies to improve the food safety of bakery small-medium enterprises through the good manufacturing practice. Journal of Agroindustrial Technology, 25(1).
Litvinova, T., Morozova, I., & Yatsechko, S. (2015). Experiential marketing as a tool of improvement of competitiveness of enterprises in the market of bread and bakery products. Mediterranean Journal of Social Sciences, 6(3 S6), 11-11.