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DESIGNING MARKETING STRATEGY USING THE FIVE COMPETITIVE FORCES MODEL BY MICHAEL E. PORTER – CASE OF SMALL BAKERY IN CROATIA NATASA RENKO UNIVERSITY OF ZAGREB, CROATIA IVONA SUSTIC UNIVERSITY OF SPLIT, CROATIA RUZICA BUTIGAN UNIVERSITY OF ZAGREB, CROATIA

Abstract Development of marketing strategy of the company has to be based primarily on the results of the analysis of industrial structure. The best known framework for analysis and the analysis of structural features of industries – Five competitive forces model by Michael E. Porter, was used in this paper aiming at designing marketing strategies and the development of sustainable competitive advantage for one Croatian small bakery concerning the influence of five forces on the whole industry. The interpretation of the findings enabled owner of analyzed subject: to determine the attraction of bakery industry, to measure perceptions of the strength of competitive forces, to identify the existing competitive advantages and key success factors in the further development, to formulate appropriate marketing strategies and to predict future movements in the bakery industry. Although Porter’s model is a simplified picture of the forces that affect the profitability of certain industries, results of this paper have undoubtedly shown that Porter’s model is valuable even in the small business sector. Taking into account the contemporary dynamics and unpredictability of the turbulent market conditions, the model will surely continue to be one of the main tools in strategic analysis of different industries, but also the specific business entities, regardless of their size.

Key words: Small Business. Bakery Industry. Competitive advantage. Marketing strategy. The five competitive forces by M. E. Porter.

Introduction Nearly all critical parameters of a certain business venture, which is, in this case, a small enterprise, are in direct correlation to specific marketing concept. Or, in other words, the secret of successful achievement of organizational goals lies in a target reaching efficiency which is supposed to be greater than the one that competitors show in their marketing-related activities. These so-called integrated marketing activities are always targeted at both defining and satisfying the demands of the specific market. A small enterprise should create its competitive advantage through its specific strategic business operations that are significantly different from the related operations on competitors’ part. Every single entrepreneur should have one goal in mind in order to become successful and that is to raise competitiveness. This can be achieved through a well-devised marketing strategy. Therefore the competitiveness of a small business entity makes the main research topic of this paper. Competitiveness or else defined as a combination of various factors that results in the so-called competitive advantage becomes crucial when it comes to defining excellence, which is the main differentiating factor between business entities. This, in turn, is the key to the creation

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of successful marketing strategy. The research of specific marketing strategies which will help to define sustainable comparative advantage of a small bakery is based on the renowned Porter model of the five competitive forces.

Marketing strategy and competitive advantage of SMEs Sudden changes in the business environment are the main cause of a large number of managementrelated problems that occur in all enterprises regardless of their size. The competitiveness of a certain enterprise is not only crucial to its success within the related sector, but is of the uttermost importance for its survival. Enterprises should do business in flexible and innovative manner. They should also strive for constant improvement of their business. Above all they should have strategy to capture larger share of the market in relation to their competitors. (Tipuri!, 1999). Every single strategy is based on creating and maintaining competitive advantage. In other words, competitive advantage of a certain enterprise is the cornerstone of its success in the related business sphere. Competitive advantage is specific for each enterprise and this specificity is particularly valued by consumers. (Renko, 2005). Competitive advantage of a small enterprise is defined as the combination of factors that distinguish a small enterprise from its competitors, thus ensuring its unique position on the market. This particular position is usually superior to the related position of its competitors. (Zimmerer & Scarborough, 2005). The key to business success, from a strategic point of view, is creating and maintaining competitive advantage, which is consequently valued by buyers and inimitable by competitors. It has been indicated by many recent research results that entrepreneurs should create at least one competitive advantage in comparison to their competitors in order to gain competitive edge and make high profit. (Kolakovi!, 2006; Burke & Jarratt, 2004; Bennett & Smith, 2002; Krolo Crvelin & "usti!, 2007). Competitive analysis of a single enterprise business success is based on the analysis of the related business industry. In other words, a marketing strategy development is based on the industrial strategy analysis results, which provides insight into the possibilities of business venture success within the specific business sphere. The insight into the

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aforementioned possibilities helps define the ways of creating competitive advantage (Porter, 1980). In the early 1980s, Michael E. Porter developed the most influential industrial structural analysis model, thus having significantly contributed to the general theory of competitiveness and competitive advantage. Porter’s model emphasizes the dependence of long-term profitability on the five competitive forces. These are, as follows: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products and rivalry among existing firms. The mutual influence of the five competitive forces determines both potential for profit and differences between industries in relation to the amounts of profit. Therefore, the purpose of industrial analysis is to determine the best marketing strategy for the specific enterprise. Or, in Porter’s view (1980), the competitive strategy of enterprises should define the most lucrative market position for them. Still, there are no unambiguous answers to a large number of questions related to the understanding of the small business marketing strategy. The existing theoretical frameworks should definitely be adapted to the specificities of small business industry. These frameworks should also be redefined by the so-called qualitative research methods, such as in-depth personal interviews and the case study method. The results obtained by these research methods will provide an exclusive insight into the specificities of business operations in the small business industry. (Siu & Kirby, 1998.) The small business industry-related research has resulted in an interesting finding: the classic form of mass marketing is inapplicable in the sphere of small business. This particular finding served as the source for the development of new, alternative marketing philosophy, known as the entrepreneurial marketing (Chaston & Mangles, 2002; Bjerk & Hultmana, 2002). Still, the alternative marketing concept should not be interpreted as advice to entrepreneurs to reject all the aspects of classic marketing theory. In other words, entrepreneurs should consider the so-called flexible approach philosophy, in which case the characteristics of buyers define the most appropriate marketing strategy. (Chaston & Mangles, 2002).

Research methodology The Five competitive forces model by Porter was used in the analysis of the case of small bakery. The

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analysis was aimed at defining marketing strategies which would help define and create particular competitive advantages. The case study method is used in cases that require profound understanding of the research subject, since its results provide the answers to the following questions: why? and how? (Yin, 2003). In contrast, the questions what?, who? and when? are usually referred to the so-called sample method. The case study method is extremely useful in terms of challenging and redefining existing theoretical frameworks and offering scope for new hypotheses. (Saunders, Lewis & Thornhill, 2003). The method is aimed at expanding the existing theoretical frameworks. In other words, the ultimate result of the method is analytic, not statistic, generalization.

• To identify the existing competitive advantages as well as the key factors of business success in terms of further development of the small bakery.

Qualitative research was carried out using the in-depth interview method (interview with the owner of the analyzed business entity). In order to carry out a thorough analysis of the business entity, a structured questionnaire was also used in the research. Preparations for the analysis of the business entity also included the internal documentation analysis. Audio scripts that contained a large number of questions significant for the research also proved invaluable for the analysis. The interviews in the approximate duration of two hours were carried out during several visits to the bakery. The aforementioned structured questionnaire was used in the course of the interviews as the research instrument. The questionnaire contained the sequence of statements that were grouped into five categories; each category represented one competitive force. (Pecotich, Hattie & Low, 1999; Pecotich, Renko & Pavi#i!, 2004). Having expressed either agreement or disagreement with the statements using a fivepoint Likert scale, the entrepreneur assessed seventy structural determinants of competitive forces. In this way, the owner’s perception of the impact that a single force had on his enterprise was evaluated.

Case of small bakery “Hrsti!”

The research was carried out in April and May 2010 and had the following aims: • To analyze attractiveness of small bakeries sector, using the Five Competitive Forces Model by Michael E. Porter. • To evaluate the perceptions of Porter’s five competitive forces in the case of the small bakery and define the differences in impact of individual forces.

• To provide an understanding of actual strengths and weaknesses of the small bakery and suggest appropriate marketing strategies accordingly. • To create strategic framework for positioning of the small bakery in the related industry and define areas in which the strategic changes will prove the most lucrative.

Introductory information about the industry Looking geographically, Croatian bakery industry consists of all producers of bakery products operating on the market of the Republic of Croatia. Considering the fact that import and export of bakery products is still negligible, it is possible to conclude that Croatian bakery industry is made up of domestic producers of bakery products. According to the data of the Croatian Register of business entities, there are 2 large, 8 mediumsized and 374 small companies that have been actively operating in this sector. It is important to note that Croatian bakery industry is characterized by a large number of small bakery crafts. According to different estimates the number of bakery crafts that produce different types of bakery products varies between 1,500 and even 3,000 and they are not registered in official records of the Financial Agency or of the Croatian Chamber of Commerce. In such circumstances it is difficult to talk about leaders of the Croatian bakery industry, but, according to the official data of the Croatian Chamber of Commerce, ten leading companies with the largest production of bakery products, highest income and largest number of employed workers are Zagreba#ke pekarne Klara, Pik, PanPek, Jedinstvo, Tvornica kruha Zadar, Rione, $itoproizvod, Radnik, Prerada and Bobis. Thanks to the fact that the number of market chains that prefer to do business with larger bakeries is growing and that state institutions make certain efforts to establish stricter control over the market

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of bakery products, unfair competition is gradually being prevented. It is estimated that the trend of decreased market share of small bakery crafts and increased market share of industrial bakeries in shopping centers will continue. However, when Croatia enters the European Union, the bakery industry will become part of the global European market and this will undoubtedly affect the offer and demand of these products. According to the data of the State Institute for Statistics, production of bakery products has shown a slight but steady growth. The production increased from 129,674 tons in 2004 to 1,472,012 tons in 2008. Wheat bread accounts for over 50% of produced bakery products, production of maize bread is also growing while production of special types of bread is falling. All this can suggest that consumers are not acquainted with advantages of this type of bread, or, more likely, it reflects a reduced purchasing power of consumers since special type of bread is more expensive than ordinary bread. Production of bread rolls is increasing as well as of special type of bakery products. On one hand this is good for the industry because consumers do not worry about the price and these products create bigger income, but on the other hand production of these products is a lot more demanding and expensive because of their shorter weight. An increase in sales of short weight products is the result of increased availability of bakery products on the market i.e. there is a large number of selling points as well as of the wide range of these products.

General data about the craft Hrsti! craft production and trade was founded in Split in 1992 by Mr Ivan Hrsti!. It started its business as a small family bakery and today the craft comprises, in addition to the main production plant, two mini bakeries and nine own shops in the area of Split and Solin and it employs 55 workers. The wide range of bakery products produced by Hrsti! craft includes basic and special types of bread, roll bread, cream cakes, birthday cakes, sweets, puff pastry cakes, biscuits and other products with an average daily production of 1,450 kg. Particular features of their product range are the so-called photo cakes, cakes featuring different edible photographs requested by buyers. 20 workers are employed in the direct production, 25 workers work in the sales while others are employed in administration, distribution and maintenance

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services. Hrsti! craft continually invests in modern technological infrastructure and improved staff structure in order to survive in the competitive environment. They are currently in the process of introducing a HACCP system (Hazard Analysis and Critical Control Point). Further expansion of Hrsti! craft is expected with the opening of two new shops and a production plant inside one of the shops in Solin. In the long-term period the craft is aiming for further expansion of their product range to meet the needs of their buyers and for continuous improvement and modernization of their production plants.

Threat of new entrants Threat of new entrants to the industry of Hrsti! craft has been estimated as moderately high. Although large capacity is not a precondition for entering the bakery industry as pointed out by Hrsti! craft, adversities related to volume economy represent a significant obstacle to new competitors, mainly because of high fixed costs of baking companies. Bakery products are mostly undifferentiated and companies of this industry do not have systematically developed brands, so it is possible to compete in the industry without investing a lot in advertising. However, without major investments in brand development bakery products will hardly be differentiated by consumers. The bakery industry of today, regardless of its production capacity, needs modern technical and technological solutions and continuous investments in very expensive equipment to ensure high productivity which remains to be an important obstacle to all potential entrants. Besides, the capital is also needed for financing long payment terms as well as for organizing distribution of relatively small quantities of products to the large number of consumers. Access to distribution channels has not been identified as an obstacle to entering the industry mainly because of undifferentiated products as it is assumed that traders will sell products of any producer that offers them an acceptable price end ensures on time delivery. However it is important to note that more and more bakers organize their own distribution as it is the case with Hrsti! craft. Among the advantages of companies that already operate in the industry are undoubtedly experience, good selling locations, easier access to raw material and specific technology, things that new entrants have to take into consideration. Yet, access to the best sources of raw materials does not represent a

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major entering obstacle for new competitors since strategic baking materials are agricultural products that are not differentiated and are therefore easily accessible. Today, as a result of turbulent environment and constant market competition, influence of different administrative restrictions is reduced, although market liberalization led to expansion of bakery crafts as centers of grey economy, particularly characteristic of bakery industry. Numerous measures are being taken and they have to be followed by every new entrant to the industry. The conclusion based on the results of the conducted interview suggests that there are no significant obstacles for entering the industry in which Hrsti! craft operates. In other words threat of new entrants is moderately high. The average rate of perceived rates for this competitive force from the model is 3,25.

Bargaining power of buyers Bakery producers usually distribute their products through retailers i.e. shopping chains. Moreover, bakery products are distributed to public institutions and tourist companies. In the structure of income earned by retail outlets the largest quantity of products are distributed through hypermarkets and supermarkets which is not a desirable situation from the bakery industry’s perspective because of a very high bargaining power of that segment of buyers. According to Hrsti!’s opinion it is important to point out that the bakery industry is fragmented with regional companies while the market has specific local features that every participant has to take into consideration. Furthermore, producers pay to shopping chains various additional taxes which results in high selling costs. This confirms the high bargaining power of traders who retain entire added value while the whole risk related to production and sales is still taken by the producer. The trends that all members of the bakery industry must follow as pointed out by Mr Hrsti! refer to the fact that smaller shopping chains are becoming more successful than the large ones suggesting stronger competition among the participants on the retail market. Besides, concentration trends on the retail market are on one hand characterized by takeovers while, on the other hand local traders expand their operations to other counties becoming in that way increasingly important on the national level. In addition to the ownership concentration, their bargaining power is increased because of interest groups created for the purpose of joint

purchasing and stronger competivity in relation to the market leader. An increasing number of shopping chains are opening their own baking production within their selling locations. However, even from the position of buyers they gain considerable added value which, with easy access to information and many other benefits offered by other participants of the bakery industry, makes their bargaining power stronger and they are well aware of that. In support to the strong position of buyers there is the fact that bakery products are similar and replaceable without differentiating factors which allows the buyers to change suppliers very easily with minimum costs. A particular feature of bakery products is that they are consumed on a daily basis. For that reason traders want to make sure that the quality of their offer attracts consumers and that they come to their shops every day. Besides, the intensity of rivalry among buyers is very strong diminishing their profitability and resulting in the pressure on suppliers in order to reduce costs. The mentioned reasons explain why Hrsti! bakery craft distributes the majority of their products directly to final consumers through their own shops and only a part is distributed through local retailers. Although the bargaining power of final consumers is not very evident as the one of traders, it is best reflected through the fact that they are very well informed and can easily change the supplier. However, with created close long-term relationships and differentiated product range Hrsti! craft is continually increasing its market share in the area of Split-Dalmatia County. The conclusion based on the results of the conducted interview is that the power of Hrsti! craft buyers is moderate. The average rate of structural guidelines of this competitive force is 3,24.

Bargaining power of suppliers Basic raw materials in the baking industry are flour, baking mixtures, yeast, salt, oil, sugar and improvers, all actually defined as consumer goods. Thus, they significantly contribute to an increase in price transparency and customer awareness. Milling and baking industries are strongly connected due to flour being the most important input in the latter, and the latter being the most important customer of the former. Packaging and packing material are increasingly growing in importance in the baking industry as much due to the bread packaging requirements made by chains of stores

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as to the regulations on product entry. The main suppliers of the baking company ,,Hrsti!’’ are: $ito, Moby Dick, "imi! Company, Nikopek, Zvijezda, Dabalo and I-pak. The owners of Hrsti! say that although the basic raw materials for the baking industry are not differentiated according to their characteristics, certain differences in price and quality of the suppliers’ products still exist, with regard to the fact that suppliers’ goods might affect the final quality of the baking products.

products that are not generally eaten with bread could be regarded as potential bread substitutes. However, it has been concluded on the basis of the conducted interview that the danger of introducing substitute products is rather small. The average mark of structural determinants belonging to this force is 1,20.

Apart from the basic raw materials adequate and skilled personnel also comprises an essential input in the baking industry .Competences of workers in bakeries are constantly changing in the course of an intensive technology development and the transition from a labor intensive industry into a capital intensive one. Labor intensive plants call for the employment of master bakers, while the most recent technical-technological advances enable the automation of most production processes. However, Hrsti! management thinks that the baking industry should articulate its demand for the trained and qualified personnel more clearly and agree on some concrete measures with the education system.

The Croatian baking industry is a largely fragmented industry, which is reflected through a great number of firms existing in this sector and through the market sharing among its market leaders. Under those circumstances, in the absence of a prominent industry leader, its participants accept the price dictated by market forces. This, consequently, leads to the minimization of profits, while the prevailing market competition among companies with similar market shares results in a high degree of industry rivalry. According to Hrsti! managers, the leading producer of bakery products has a less than 5% market share, while top ten bakeries cover more than 20% of the market. Athough the consumption of bakery products in Croatia is relatively high, its growth is limited. This naturally, intensifies the industry rivalry as participants in this industry can realize their development only at the expense of their competitors. Companies are usually not aware of their interdependence so that they may initiate a price war with unfortunate economic consequences for the whole industry. It is precisely the price competition among bakery products producers that has been more strongly manifested than other forms of non-price competition, so the management of Hrsti!. The baking industry is characterized by a large share of fixed production costs and an impossibility of longterm product storage so that baking companies often find themselves in enviable positions of balancing only the variable costs in the course of an intensive struggle for an increase in production This is due to capacity surplus being generated by the production specificity and seasonal oscillations, although the striking problem of overcapacity has not been noticed in the bakery Hrsti!.

Lack of baking companies’ investments and expensive technology along with long collection periods and overall market illiquidity create demand for additional financial means, whose suppliers are financial institutions. Actual global politics leads to growing prices of capital and restrictive credit policies of banks, which has a negative impact on the profitability of the baking industry. Nevertheless, Hrsti! managers claim that the company manages to finance itself mostly by its own financial means and does not encounter any major difficulty in case of funding itself from external financial sources. The data obtained through a conducted interview led to a conclusion that the bargaining power of suppliers within the industry of the craft Hrsti! is of middle intensity. The average mark of structural determinants belonging to this competitive force shown in the model is 3,00.

Threat of substitute products Baking products fall into the category of staple foods. Therefore, according to Hrsti! managers, appropriate substitutes for bread as the most essential baking product are difficult to find. Perhaps products such as breakfast cereals, oatmeal porridge, crackers, rice, pasta and similar

Rivalry among existing firms

Products of the baking industry are very similar and without any distinguishing factors, which additionally increases the competition intensity as a customer decides on buying certain products on the basis of their vicinity and price. Bakeries rarely carry out systematic researches on customer and final consumer preferences and do not

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invest either a lot of energy or money into brand making. Nevertheless, through the continuous development of its bread and sweets range and the professional training of its personnel Hrsti! is striving to become recognized at the local market, where its main competitors are Svagu!a, Bimita, Babi!, Keko and Bi%ki!. Possible merging with their competitors, according to Hrsti! management, would be desirable, but in their point of view those associations could not survive at the local market. Moreover, there is a bakers’ association in Split, whose main task is balancing the price of bakery products. However, its members do not often follow the defined guidelines. Output obstacles of the bakery industry, which boost the intensity of rivalry, are greater at industrial bakers than bakery crafts. Big bakeries employ a large number of workers and therefore need substantial financial means for redundancy payments of those who have become superfluous. In addition, large bakeries are oriented towards key account customers and when negotiating a contract on cooperation they agree to produce a certain amount of products. If they fail to observe the provisions of the contract, they will pay penalties. Technical-technological advancement allows bakers to switch over to capital intensive production, and on the other hand highly specialized equipment can rarely be used for any other purposes, which makes leaving the industry even more difficult. When discussing technological possibilities, special emphasis should be placed on the production of frozen and half-baked bread that is much longer lasting and that is baked on the spot. This technology is increasingly being used by chains of stores, thus presenting a major danger of the infiltration of foreign bakery products

into the Croatian market. A high degree of rivalry intensity in the industry of the craft Hrsti! has also been confirmed through the recapitulation of perceived marks given to the competitive force shown in the model. The average mark of structural determinants of the measured force is 3,78.

Identification of key success factors referring to the craft Hrsti! After a thorough analysis of all the forces affecting the industry in which the bakery craft Hrsti! does business, it may be concluded that there is a high degree of rivalry within the sector, but that there also exists a noticeable threat of new companies entering the market. The bargaining power of customers, owing to the minimal costs of change, is more strongly manifested than the bargaining power of suppliers, who, although assessed as being moderately strong, can by all means affect the quality of the final industry product. The threat of substitutes is not striking in this case, as shown in the figure 1. A greater difference between the strong and the weak forces can be noticed at the industry of the craft Hrsti!, which is regarded as good potential as it directs the owners’ strategic initiatives towards defense against negative forces, A wide range of bakery products along with the development of a recognizable brand, the opening of its own specialist stores at key locations and cost efficiency are key success factors of the bakery Hrsti!, according to its owners. This will bring about a decline in the intensity of price competition and an increase in the profitability of the bakery craft in the long run.

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Figure 1. Comparison of the perceived strength of competitive forces

Source: Research Findings (treatment: June, 2010.)

On the basis of conducted strategic analysis, specific initiatives for the defense of the negative competitive forces affecting the business trades Hrsti! can be identified. Further efforts to open their own stores in key locations will provide additional cash flow by direct contact with a consumer, which enables more effective communication and implementation of various marketing activities. Partnerships established in this way increase consumer loyalty and reduce their aspiration for a change of supplier. Although the creation of brand is a difficult and long process, craft Hrsti! undoubtedly can provide greater profitability and reduced bargaining power of customers, but also reinforce the barrier to potential newcomers. In a situation where buyers and consumers can change suppliers easily, it is necessary to be constantly present in the market, follow trends and look for ways to hinder the transfer of the customer, and look for ways to differentiate their products by consumers. As communication channels Crafts Hrsti! should use their own retail facilities that are in daily direct contact with consumers. Hrsti! can make their own retail network expansion by acquisition of uncompetitive subjects within the industry, particularly those in key locations. In another variant, it is possible to offer a business through franchising to small bakeries. Production of small quantities of certain products from its portfolio

may be inefficient and Crafts Hrsti! may moderate this using partnership with micro-bakeries. This way, by such delegation of certain product lines that are not of strategic importance, the craft will use its capacity more efficiently. Finally, continued investment in modern technology is necessary and strengthening of productivity with a fast turnover of assets and boosted profitability would make crafts Hrsti! more profitable. Of course, for investing in technology, special attention should be paid to the proper capacity dosage in order to avoid overcapacity, and take a more favorable position within the bakery industry in Split-Dalmatia County.

Conclusions Though, the company’s business is affected by a number of factors that may or may not be under its influence, above-average profitability, as an economic measure of success is the result of superior design and implementation of marketing strategies. Strategy, as a basis of search for competitive advantage, must have an entrepreneurial dimension, which arises from its understanding as a means by which an enterprise, not only adapts but also initiates and directs changes in the environment. Connecting companies with the most important segment of

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its environment - the industry is the essence of its strategic behavior and the key to success of the company is the sustainable competitive advantage. To have a competitive advantage means to achieve a more favorable position than its industry rivals, but also other market participants by better positioning. Thus, an enterprise should not be isolated from their surroundings, especially from the industry to which it belongs. Therefore, development of appropriate marketing strategies of enterprises must be based on the results of the analysis of industrial structure. In this sense, for the analysis of specific business cases the best known framework for analysis of the structural characteristics of the industry is used - Porter’s five competitive forces model with the basic aim of designing marketing strategies and the development of sustainable competitive advantage for a small bakery. Each of the forces from the model is determined by a number of structural characteristics, and their combined strength determines profit potential of industries. The analysis aims to identify the primary sources of competitive advantage and key success factors of the market who, acting in a market environment of the analyzed economic entity determine its ability to survive and develop. The aim of the bakery owners is clear: find a position within the industry where his company can defend against the competitive forces the best way, or where it can influence them in its favor. Finally, the interpretation of the findings of the study allowed the owner of a bakery Hrsti! : determine the attractiveness of the baking industry, measure the perception of the intensity of competitive forces as well as determine the difference between the perceived strength of individual forces, identify existing competitive advantages and key success factors in the further development, understand the real strengths and weaknesses and design appropriate marketing strategies, build a framework for positioning within the respective industries, discover areas where strategic changes have the greatest effectiveness and predict future movements in the corresponding industry and accordingly shape strategic initiatives to ward off negative forces. During the study certain limitations of Porter model are taken into account. Specifically, the model describes the current state of the market, but as market situation changes, influence of certain forces changes as well. Finally, competitive

forces do not monitor only the changes in the environment, but causes of these changes are included in the review. Therefore it is important to understand the relationship between competing forces and causes of structural changes in a particular industry. However, although the model is a simplified picture of the forces that affect the profitability of some industries, the analysis carried out in a small bakery Hrsti! proved as an applicative tool. To this day, the model has not experienced any changes and its value grows even more because of that. Taking into account the contemporary dynamics and unpredictability, the turbulent market conditions and the growing importance of information technology model will undoubtedly continue to be one of the main tools in strategic analysis of different industries.

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Competitive Advantage. Ekonomski fakultet Zagreb. 17th to 19th June 2004. pp 1823-1833. Porter, M. (1980). Techniques for Analyzing Industries and Competitors. New York: The Free Press. Renko, N. (2005). Strategije marketinga. Zagreb: Naklada Ljevak. Saunders, M., Lewis, P. & Thornhill, A. (2003). Research Methods for Business Students. Harlow: FT/Prentice Hall. Siu, W. & Kirby, A. (1998). Approaches to small firm marketing – A critique. European Journal of Marketing. Vol. 32. No. &. pp 40-60. Tipuri!, D. et al(1999). Konkurentska sposobnost poduze!a. Zagreb: Sinergija. Yin, R. (2003). Case Study research – Design and methods, London: SAGE Publications. Zimmerer, T. & Scarborough, N. (2005). Essentials of Entrepreneurship and Small Business Management, New Jersey: Pearson Education. Case of bakery Hrsti! was prepared by using the following additional sources: Internal documentation of craft Hrsti!, in-depth interview with Mr. Ivan Hrsti! and Miss Ivana Hrsti!, craft owners and with Mrs. Ingrid Abram, head of accounting. Interviews were conducted during April and May 2010; Biznet, http://www1.biznet. hr/HgkWeb/do/ advsearch/results (accessed, May 2010.); Data from Central Bureau of Statistics, http://www.dzs.hr/Hrv_Eng/publication /2010/1401-01_01_ 2010.htm (accessed, May 2010.); Bakery messenger portal for millers, bakers and pastry, http://www.pekarskiglasnik.com/index.php? option =com_content &view=category&layout =blog&id=67&Itemid =82 (accessed, May 2010.)

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