Food Industry

Topics: Fast food restaurant, Fast food, Coffee Pages: 11 (3239 words) Published: April 11, 2013
The five competitive forces (Porter's framework) as applied to this industry McDONALD’S
1. Threat of substitute products
– Availability of the MCD products
– Choose MCD for Easting and Entertainment
– Narrows Threat of Substitutes due to introduction of local taste products. 2. Threat of new entrants
– Regulation of Limit
– Easy Access Market and Low start up cost
– Example of SubWay’s market penetration
3. Intense rivalry among existing players
– Very competitive Fast Food industry
– Competitors Advertising Capabilities
– Location of outlets – Major competitors
- Burger King and YumBrand INC
4.Bargaining power of suppliers (LOW)
– Worlds largest restaurant chain in sales
– High bargaining power over its suppliers
– Most of them owe MCD for their own existence
– LOW the power of suppliers
- LOWer the cost of raw materials and HIGH competitive price. 5.Bargaining power of Buyers (LOW)
– Industry limitations
– Low quantity purchases
– Less chances of switching, high brand image thru differentiation and uniqueness – Buyers don’t have bargaining power

1. Threat of substitute products
There are many substitutes for eating fast food such as eating fruit, preparing food at home or fine dining. However, apart from grabbing for example a banana, these options would probably consume more time than if one chose to order a sandwich, hotdog or burger. In this case, substitute attractiveness would depend on the buyer‟s willingness to substitute, meaning if the consumer is willing to buy some fruit instead of a sandwich. The attractiveness will also depend on the relative price and performance of the substitutes. For instance, do you feel as satisfied eating a banana as you would have if you had eaten a burger instead?

Alternatives to fast food do not necessarily pose a threat, but instead they might actually serve an opportunity since you can take better of two worlds and combine them. This could be for example combining healthiness with swiftness which some already have done.

2. Threat of new entrants
It is very easy for someone to start up his own fast food business. The entry barriers are quite low. Capital required for setting up a fast food business is relatively low depending on the size of it. Many fast food suppliers, whether they are grill bars, hotdog stands, kebab houses or bakeries, are privately owned and thus serve to prove the point that it is not that difficult to set up one‟s own business within the fast food industry. However, the success of these businesses naturally varies significantly.

In conclusion, the fast food industry is characterized by having many small and large businesses. As there are many suppliers, the competition within the industry is fierce. Especially the larger franchises compete heavily to win over each other‟s customers. The forecasts about a slowdown in market growth can be expected to increase the intensity of rivalry even further.

3. Intense rivalry among existing players
As previously stated, there are numerous competitors within the industry that greatly vary in size. The intensity of rivalry is rather fierce as the supply more than matches the demand. This means that a potential customer can choose from numerous options, whether it be a burger at McDonald‟s, a sandwich at Sunset Boulevard or a hotdog at the local hotdog stand. The slowdown in market growth is also a factor that serves to increase the intensity of rivalry since companies often have to fight over the same customers. Euromonitor indicates in its report that Burger King expects to steal customers from primarily McDonald‟s as they open new outlets. This indicates that franchises such as these two are fierce rivals that to a large degree fight over the same customers.

4.Bargaining power of suppliers
Since Subway is one of the...
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