Porter’s 5 Forces framework
The firm’s 9 competitors control 60% of the market when combined and the rest of the market is led by small off-license stores, butchers and small grocery stores. However, due to the credit crunch, distrust has arisen between large organisations, including multinational food processing companies. Therefore it is unlikely for the small competitors to achieve higher market penetration. This has also resulted in poor performance and growth in the food and drink market, with Greek consumers showing few signs of varying their traditional dietary preferences, which include home cooking.
Consequently, ready-made meals and frozen foods have failed to achieve the prominence they now have in Western Europe. At this point it would be wise to perform a P. E. S. T. L. E. analysis in order to fully understand Greece’s business environment. Political Environment: As a member of the European Union, Greece has no restrictions towards foreign investment. The government encourages as many foreign trade activities within its borders as possible. Labour laws on the other hand are quite inflexible, leading to significant difficulties in successfully managing the Greek workforce, as well as increasing operations costs.
Economic Environment: According to the Economist (13th-19th December 2008, p. 43) Greece’s economic growth is currently
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These factors have led to inflationary pressures. In January 2007, the labour cost index of Greece rose by 15. 7% month by month against the 0. 5% of Eurozone. In the same month, the total industrial production (volume of output) grew by only 1. 3% month on month. This suggests that wages are increasing faster than output. Sociocultural Environment: According to Wall et al (2004) Greece is highly influenced by the Mediterranean culture. Also it is argued that, in Hofsted’s terms, the country is characterised by a large ‘Power Distance’ and strong ‘Uncertainty Avoidance’.
This means that Greek culture is strongly based on the authority of ones position within a hierarchy and a well structured and consistent routine. In other words, the native workforce is expected to be less individualistic and comfortable working within a highly bureaucratic organisation. Technological Environment: According to www. portal. euromonitor. com (online, 2008) Greece’s Technological development has been spearheaded by the Telecommunications industry in recent years. Until 2000 there was only one landline telephone provider in Greece, the Hellenic Telecommunications Organisation (OTE).
Since then, a number of companies offering landline telephone services have emerged, resulting in a reduction of cost and amplification of services. As a result, the state-run company started to invest in modernising its nationwide network in order to retain its market share. A major development was the introduction of mobile telephony, starting with two companies, Vodafone and TIM (previously known as Panafon and Telestet respectively). The mobile phone market evolved and thrived over the last decade and now virtually every adult owns a mobile phone. Legislation:
Greece’s competition law is similar to that of other EU members, and free competition is encouraged in the retail industry. Employment and labour legislation, on the other hand as mentioned above is quite inflexible. As a result Human Resource Management in both the private and public sector is really difficult to handle. Pressure groups and Workers Unions are quite powerful in Greece so any kind of changes in relevant legislation is not easy to change. Environmental: At the moment Greece is in a very fragile environmental state, since it has been exposed to severe catastrophes over the last 3 years.
One of the worst was situations according to The Economist Intelligence Unit (2007) was during the summer of 2007. Starting for the middle of June fires were set on forests in the centre and south of the country, in most of the Peloponnese and the island of Evoia. In the article it is also stated that in a single day almost 130 different species of birds, 45 different types of mammals and 30 different types of amphibians and reptiles became extinct due to fires that covered Mount Parnitha. In order to fully understand the company’s strategic capabilities it is essential that we analyse the company through Porter’s 5 Forces framework.