Porters' Five Forces of Fast Food Industry

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University of San Carlos
College of Commerce
P. del Rosario St., Cebu City

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An Analysis of the Philippine Fast Food Industry using
Michael Porter’s Five Forces

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Submitted to:
Ms. Joyce Yang

Submitted by;

Group 9
Awe, Niña Faith M.
Cabasag, Rechel C.
Chua, Hegiño Jr. J.
Lequin, Viktor Xenon O.
Mahusay, Christian T.

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July 13, 2010

MACROENVIRONMENT

Demographic
* Increasing women workforce2
* Nonunionized employees
* Young affluent population1
* Rising disposable income1
* Rising consumer awareness on health and safety concerns3,4

Socio-Cultural
* Filipino’s love for food
* Fast paced life2

Political/Legal
* Present but not very significant government regulation

Technological
* Technological Advancement (e.g. creations of assembly lines, touch screen monitors, etc.)

Global
* Western influence in the global fast food scene

Bargaining Power of Suppliers

Weakening

* Easy for the industry player to go to suppliers’ business * Highly competitive supplier industry
* Greater share of customer base by the fast food industry for the suppliers * Low suppliers’ switching costs
* Difficulty of supplier industry to circumvent fast food industry * Cheap and nonunionized labor supply
* Present but not very significant government regulation

Strengthening

* Suppliers’ products are important inputs but any supplier strength that may arise from this is low because of the competitiveness of the industry.

Overall Finding:
Bargaining power of suppliers is WEAK.

Threat of New Entrants

Weakening

* Existing players’ high differentiation of products and brand identification with buyers * Existing players’ cost advantage over prospective entrants not related to the size of the company (contacts and expertise) * Rising consumer awareness regarding health and safety concerns

Strengthening

* Economies of scale not existing among existing players
* Low capital requirements
* Buyers’ easy switching from one existing fast food to a new one * Easy access to distribution channels (e.g. stalls and rent spaces in malls and other establishments) * Surging demand for fast food:

* Industrialization and growth among the number of women in the workforce * Today’s fast-paced lifestyle
* Young affluent population
* Westernized mentality

Overall Finding:
Threat of new entrants is WEAK.

High Buyer Power

Weakening

* Buyers’ less price sensitivity when it comes to eating in fast food * Buyers’ decision is not based on price but on preferences (Filipinos love food) * Purchases made are in relatively low volumes

* No standard pricing within the industry
* Buyers’ less knowledge on fast food pricing specifications * Less possibility for backward integration

Strengthening

* Many available and more affordable substitutes
* Products are not necessity to buyers
* Buyers can influence other potential buyers
* Rising disposable income

Overall Finding:
Buyer power is STRONG.
Pressure From Abundant Substitutes

Weakening

* No trend exists where buyers are more inclined or influence to choose substitutes

Strengthening

* Relatively high...
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