BUS501 Real-World Connections: Episode 6, Wheat Prices and Buyer Power

About 2 minutes. Captions are available with the CC button. Open on YouTube.

Transcript

Narrator: Real-World Connections. Episode 6: Wheat Prices and Buyer Power

Narrator: The supermarket contract is still wobbling. Before anyone decides what to do about it, Priya wants the outside world on one page.

Priya: So I split it in two. First, PESTEL. The general environment. Things we can't control.

Tomás: Like wheat prices.

Priya: Exactly. That's economic, along with inflation and interest rates. Social is customers trying to eat healthier.

Adaeze: And legal? Food safety rules hit us every day.

Priya: Health and product safety laws, they're on there. Then I zoomed in to our industry with Porter's five forces.

Daniel: Industry meaning, what, every bakery?

Priya: Firms making close substitutes. Plus upstream, the flour mills, and downstream, the supermarket chains.

Tomás: Marisol's chain. She knows we need her shelf space.

Priya: That's buyer power. I rated it high. To her, our loaf looks like a commodity. When products aren't differentiated, buyers shop on price and rivalry heats up.

Daniel: And the mills can raise flour prices on us.

Priya: Supplier power. Medium, maybe high. If we can't pass those costs on, our profit shrinks.

Adaeze: What about new competitors?

Priya: Opening a café isn't hard. A wholesale plant takes real capital. So the entry threat is lower in wholesale.

Tomás: So the plant I built is a barrier. Nice to hear something good.

Adaeze: Is wholesale an attractive industry, then?

Priya: Strong buyers, strong suppliers, heavy rivalry. By Porter's measures, not very.

Narrator: Priya's grid shows the wholesale business getting squeezed from both sides.

Narrator: But a rating isn't a strategy.

Narrator: Which of these forces could Hearth and Harbor actually push back on, and what would it take to change that rating?

Pause and apply

Build your own five forces grid for Hearth and Harbor's wholesale business and rate each force low, medium, or high. Pick one force rated high and list two moves, using the readings on differentiation or switching costs, that could lower it.

License: CC0 1.0 Universal (public domain dedication), except the Lucide icons (ISC License) and the background music (Motivating Mornings, Mixkit (Mixkit Stock Music Free License)), which aren't covered. https://creativecommons.org/publicdomain/zero/1.0/