Analysing Mcdonalds (Fast Food Outlets) Using the Porters 5 Forces Model – Sometimes Called the Competitive Forces Model.

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Introduction

McDonalds Corporation truly began in 1954 when Ray Kroc decided that he would turn the successful Californian store owned by the McDonald brothers into a chain. Today McDonalds is the world’s largest restaurant chain, worth over $70 billion (Yahoo7Finance 2008). McDonalds has grown via constant refinement of business practices and by knowing their customers needs. They have placed great importance on their long term relationships with suppliers and their aim is to ensure customers receive a consistent product quality.

Analysis of McDonalds Corporation using the Porters 5 forces model to asses its competitive position in the fast food industry.

As the name suggests the Porters 5 Forces model focuses on 5 key factors affecting the environment in which a business operates. They are

1)Competitive rivalry
2)Power of suppliers
3)Power of buyers
4)Threat of substitute
5)Threat on new market entrants

Each of these five areas can be looked with relation to McDonalds and there position in the fast food industry.

Competitive Rivalry

If entry into a market is easy then rivalry is likely to be high. Generally rivalry will be high if, there is little differentiation between the product sold between customers, competitors are approximately the same size as each other, it is costly you leave the industry so they fight to stay in (Porter five forces model). Entry into the fast food industry is easy and there are many competitors all over the world. This makes competition a major focus. McDonalds however is far larger than most in the industry with 31,000 outlets compared to its nearest hamburger competitor Burger King, with 11,500 (Reuters, 2008). KFC (owned by 2nd largest competitor Yum! Brands (Yahoo7finance, 2008)), Burger King and countless others sell similar product to McDonalds, burgers, chips, drinks, combos and so on, so there is definitely strong competition for customers whom have a choice of places in which to buy...
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