Assignment 1a - Porters 5 Forces

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McDonald’s is arguably the most recognisable fast food brand across the world. There are currently 760 franchised McDonald’s restaurants across Australia and more than 31000 worldwide. These restaurants provide employment for some 1.5 million people (McDonald’s 2008). In terms of their product, the McDonald’s menu went largely unchanged for many years, although they have started to diversify more recently. Traditionally selling various varieties of burgers served with French fries and carbonated soft drinks, McDonald’s offerings now include healthier options such as salads and mineral water. With the recent introduction of “McCafe” they have entered the gourmet coffee market.

Analyse McDonalds using a well known model to assess the competitive position that it occupies within its industry

Laudon & Laudon (2006) claim that the most widely used model for understanding competitive advantage is a model known as “Porter’s Competitive Forces Model”. To assess competitive position using this model we must consider traditional competitors, the possibility of new market entrants, availability of substitute suppliers, similar products available in the market and the customers of an organisation.

Marketing company Millward Brown has compiled their ranking of the top 100 most powerful brands across the world - known as “Brandz Top 100”. The report (Millward Brown, 2008, p.18) places McDonald’s at the top of the fast food category with a brand value of USD $49.5Bn. Brand value is calculated as the income a brand is expected to generate globally in the given year. The closest competitors are Starbucks, Subway and KFC with brand values $12Bn, $10Bn and $6Bn respectively. The three closest competitors are not generating anywhere near the level of income of the McDonald’s brand. The market environment in which McDonald’s operates threatens their competitive position.

The capital required to set up a fast food outlet is minimal. Only...
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