Fra-Pa's Frozen Yoghurt Shop: Porter's Five Forces & Macro Factors

This report provides a comprehensive analysis of Fra-Pa's Frozen Yoghurt Shop, a partnership established in Birmingham, examining its business environment and strategic positioning. The report begins by defining the business as an ice-cream parlor specializing in frozen yogurt and then delves into an analysis of the business through the lens of Porter's Five Forces, evaluating the power of suppliers, buyers, competitive rivalry, the threat of substitution, and the threat of new entry. The report then explores the macroenvironmental factors impacting the business, including economic, social-cultural, political, and demographic elements. It assesses the influence of economic conditions, consumer preferences, health and safety laws, and population demographics on the shop's operations and market potential. The report concludes with a consideration of how these factors shape the business strategy and provides a framework for understanding the challenges and opportunities faced by Fra-Pa's Frozen Yoghurt Shop.

FRA-PA’S FROZEN YOGHURT SHOP 1
Fra-Pa’s Frozen Yoghurt Shop
Name
Course
Tutor
University
City/State
Date

FRA-PA’S FROZEN YOGHURT SHOP 2
Partnership as a form of business unit portrays a much broader scope compared to other
business units such as sole proprietorship (Boddy, 2014). It is when two or more persons
combine their effort to start and operate a business based on their common and shared duty with
regards to profits and losses that lead to partnership. In a nutshell, it is when sole proprietorship
is transformed into a partnership when more than one individual is integrated as a partner in the
enterprise (Kwat, 2013). The partnership involves individuals who may either be friends,
relatives or acquaintances.
In this case Frank and his partner Paddy Jackson in the business established a business
known as Fra-Pa’s Frozen Yoghurt Shop in the past eighteen months. The shop can be
categorized as an ice-cream parlor enterprise that uniquely deals with selling frozen yoghurt. The
ice-cream parlor is situated in the busy Bullring Shopping Center, Birmingham (Boddy, 2014).
The kind of partnership exhibited here seems symbiotic as both partners have relevant
experience in the hospitality sector and that makes it ideal in managing and operating the parlor.
Frank, for instance, is said to have worked for catering restaurant chain as a chef while Paddy o
the other hand, was a hospitality manager of a local hotel. It is the blending of such skills and
competencies that will transition the business as competitor marketing it as a unique enterprise in
the region. The idea to establish the parlor was inspired by the redundancy they experienced in
their previous place of work, and it is the little savings from their last redundant jobs that gave
them capital to start the business enterprise.
Regarding capital contribution, they both contributed €30000 which enabled them to
secure a three-year lease on the parlor and a working capital allowing them to pay their suppliers
and also have adequate stock to sustain their supply.
Porters five forces

FRA-PA’S FROZEN YOGHURT SHOP 3
Power of suppliers. This entails an evaluation of how easy it becomes for suppliers to
push prices up. It is a product of the number of suppliers of every significant input, relative size,
and power of the supplier (CGMA, 2012). Regarding the parlor, it seems Frank and Parlor have
only one supplier where they purchase all their frozen yoghurt from local cash and carry.
However, they are in a dilemma as to whether obtaining it from a local organic would accord
them a high-quality product that they could charge high prices due to its superiority. Their desire
to switch to another supplier is noble as they want quality products for their consumers. Having
many suppliers where they can their inputs from is much better as they can negotiate for better
prices for such products enabling them to get good returns.
Buyers power. This involves evaluating how easy it is for buyers to drag down the prices.
It is an outcome of several factors at play, for instance, many buyers in the market, switching
costs involved when a buyer moves from one supplier to another. The presence of few yet
powerful buyers enables them dictates the terms. Fra-Pa’s appeals to an array of customers who
frequent the shop during the weekdays or weekends. The parlor attracts workers from the area
during the day and is accustomed to shoppers with children during the day. During the
weekends, the teenagers and young adults visit the shop as a meeting place with their friends. In
this case, the power of the buyers seems less powerful as Fra-Pa’s is the only frozen ice cream
vendor in town making them control the demand of their product thus they can also maneuver
prices the way they want.
Competitive rivalry. The primary driver here is the number and the ability of competitors
in both the industry and the market. The presence of many competitors who offer similar
commodities tends to reduce the attractiveness of the market. In this scenario, Fra-Pa’s seems to

FRA-PA’S FROZEN YOGHURT SHOP 4
have fewer competitors as there is no parlor offering frozen yoghurt in the region though there
are other food venues none serves the products such as those by Fra-Pa’s.
The threat of substitution arises when there are close substitutes to the product exist and
raises the chances of customers switching to the alternatives whenever prices of one product get
raised. This has the effect of reducing suppliers’ power and the general attractiveness in the
market. Though Frank and Paddy are conscious of raising their prices following the launching of
their premium product due to the usage of fresh organic products, they should consider
consumers’ willingness to switch to other products that serve the same purpose as the ice cream
such as beverages served by the surrounding restaurants.
The threat of new entry.it is the existence of profitable markets that lure new entrants and
this has the impact of eroding the stream of profits enjoyed by the players in such a market. It is
only the robust and durable barriers to entry by the incumbents that protects profitability from
declining. Fra-Pa’s has been reported to break even, and the sales revenue growth and this should
serve as a signal to other players out there to venture in such a lucrative market to enjoy the
benefits and profits from such a demand. Thus, Fra-Pa’s should consider having competitors
soon who will want to share in the profits from such a market.
Macroenvironmental factors
Economic environment
The economic environment entails economic conditions, policies and the economic
system that is crucial to the external elements of a business (Verma, 2012). The overall economic
climate in the region, conditions in resource markets, for instance, the market for raw materials
elements, supply markets may impact the supply of inputs to a business enterprise, costs of
productions. In this case, Frank and Paddy are enjoying a regular supply of raw materials as the

FRA-PA’S FROZEN YOGHURT SHOP 5
cash and carry provide them the convenience of purchasing in bulk enabling them to charge low
prices for their products. It is also essential for Frank and Paddy to analyze the purchasing power
of their consumers by looking at elements such as their disposable income and savings as there is
a correlation between such variables with the buying habits of the consumers. When the
disposable income of people increases people to tend to spend more money on buying goods and
services, this, in turn, will increase the sales for Fra-Pa’s products.
Conversely, a decrease in disposable income and an increase in savings have adverse
effects as they impact business negatively as the consumers spend less on goods and services and
this could affect Fra-Pa’s adversely. Issues about levels of inflation, taxes, and levels of
unemployment fall under economic elements. Fra-Pa’s should be keen on inflationary levels as
high inflations tend to keep prices high, places, where taxes are high also keep prices for Fra-
Pa’s expensive and in such a case, should consider operating in areas that have been charged low
taxes.
Social-cultural environment
The social-cultural environment is a vital element that should be scrutinized by Fra-Pa’s
when formulating its business strategies. Fra-Pa’s consideration with regards to the customs,
norms, tastes, and preferences will impact it positively. Fra-Pa’s will only be successful due to
effective strategies that are in line with the social-cultural environmental elements. Issues such as
workplace ethics are common in a place like the UK, and thus, Fra-Pa’s has to be careful in its
operations to avoid conflict of interest when it comes to such matters. Social factors where
consumers purchase products depending on several factors for instance changes in lifestyle. A
good illustration is how people have shifted their preference to organic foods and in this case, if

FRA-PA’S FROZEN YOGHURT SHOP 6
Fra-Pa’s uses natural nutrients in its products, then demand its products will be high now that
people are becoming health conscious.
Political factors here refer to health and safety laws and government stability among
other factors. Understanding how such policies work will enable Fra-Pa’s to align its operations
to such statutes and regulations eliminating any conflict of interest that may arise.
Demographic environment
It is vital for any business to understand the population profile of the consumers it is
dealing with if it is to be successful in its operations and long-term sustainability. Such elements
are appropriate to Fra-Pa’s for formulating and implementing the strategy for regulating and
achieving the objectives of the business. Demographic elements such as the size of the
population, growth rate, occupational status, and employment distribution impact the demand for
goods and services either positively or negatively. In this case, Birmingham has been portrayed
as a city with people who have high occupations and are therefore always buying luxury
products such as ice cream. Fra-Pa’s can take advantage of the size of the population at
Birmingham where there are young adults who will still go on weekends in ice cream parlors
with their colleagues and friends as they discuss their life. The place has been described to be
frequently visited by parents with their children, and this is another area that Fra-Pa’s can benefit
from by customizing their products by having some flavors in their premium products that
children can be attached to as their preference.

FRA-PA’S FROZEN YOGHURT SHOP 7
References
Boddy, D., 2014. Management:An Introduction. 6th ed. Harlow: Pearson.
CGMA, 2012. Porter’s Five Forces of Competitive Position Analysis. [Online]
Available at: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html
[Accessed 15 December 2018].
Kwat, N., 2013. Business Units: Top 5 Types of Business Units. [Online]
Available at: http://www.economicsdiscussion.net/business-economics/business-units-top-5-
types-of-business-units/18483
[Accessed 15 December 2018].
Verma, A., 2012. Macro factors affecting Business environment. [Online]
Available at: https://www.slideshare.net/aayush30/macro-factors-affecting-business-environment
[Accessed 15 December 2018].