Five Forces Fast Food

Topics: Food, Fast food, Fast food restaurant Pages: 4 (1569 words) Published: November 14, 2011
Buyer Power
Conclusion questions:
1)To what extent do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry? a.Answer- Consumers can’t negotiate prices with fast food restaurants. However, there is a large degree of internal rivalry in the industry, with a very strong cross-price elasticity present in the industry. This encourages low prices due to a strong degree of substitution and gives consumers back some power. 2)To what extent do purchase prices differ from those that would prevail in a market with a large number of fragmented buyers in which buyers act as price takers? a.Answer- In the fast food industry, buyers are price takers and have no venue or option to negotiate prices. The buyers are extremely fragmented and there is no way for them to organize in order to ask for lower prices. Specific questions:

1)Is buyers’ industry more concentrated than the industry it purchases from? a.(Current) No, fast food buyers are a huge group of 76,751, 638 people using the most recent census data. According to a CBS news report in 2009, at least ¼ of all Americans eat at least one “fast-food” meal every day. And Americans will spend over $110 billion on fast food more than they'll spend on movies, books, magazines, newspapers, videos, and recorded music combined . The number of suppliers to the fast food industry is approximately XX . This showcases that the buyers of fast-food are a very diverse group, with very little formal organization. b.(Future) It would be nearly impossible for individual consumers to mass together to place all their orders in at the same time to generate a block of buying power. If something like that could happen, it would be through second-party purchasers who deliver fast food to workplaces for consumers. Based on trends in Columbus, GA for concierge services, it’s not feasible for unconcentrated markets to have second-party bulk buyers (the only Columbus concierge...
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