In order to be successful, fast food restaurants should have a clear understanding of the micro-environment and its influence on restaurant performances (Mamalis, 2009). In addressing the external factors determined in this Five Forces analysis, McDonald’s Corporation ensures that its strategies are appropriate to combat external forces. In more generic products, there are often more than one ways to address a particular need. In this regard, a recommendation is to strengthen the business by building on the strengths enumerated in the SWOT analysis of McDonald’s Corporation. An Entire MBA in 1 Course:Award Winning Business School Prof, MBA in a Box: Business Lessons from a CEO. There are several fast food giants that have been holding up very well more than any other in the restaurant sector. … Industry analysis: The Fast Food Industry (McDonald’s) NAICS 72221: Fast Food Restaurants. Globally, the fast food brands have to comply with these requirements. The Degree of Competitive Rivalry – High . The political factors affecting fast food industry can vary from country to country. Ready-meals are therefore a more substantial threat, competing with fast-food on price as well as convenience (Datamonitor, 2012). The bargaining power of suppliers is the reverse of the bargaining power of buyers. However, convenience is the value-adding component of the service which reduces the threat of substitutes. See our Privacy Policy page to find out more about cookies or to switch them off. In. (Quick MBA, 2010). Issue arises when the customers prefer choosing a casual kind of restaurant or a fast food kind or may be prefer to eat at home. This means that they do not control the distribution network that transports their products to firms like McDonald’s. This condition makes the bargaining power of buyers a strong force in affecting the company’s external environment. For example tea and coffee, bread and rusk are substitute … Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window). For example, small restaurant businesses involve low capital costs compared to major corporations in the market. This external factor adds to the force of competition. Burger King’s Five Forces Analysis (Porter’s Model), Wendy’s Five Forces Analysis (Porter’s Model), Starbucks Coffee Five Forces Analysis (Porter’s Model) & Recommendations, McDonald’s SWOT Analysis & Recommendations, Costco Wholesale Five Forces Analysis (Porter’s Model), McDonald’s Mission Statement & Vision Statement (An Analysis), PepsiCo Five Forces Analysis (Porter’s Model), McDonald’s PESTEL/PESTLE Analysis & Recommendations, Toyota’s Five Forces Analysis (Porter’s Model), McDonald’s Organizational Structure & Its Characteristics - An Analysis, Sony Corporation’s Five Forces Analysis (Porter’s Model), Microsoft Corporation’s Five Forces Analysis (Porter’s Model) & Recommendations, McDonald’s Generic Strategy & Intensive Growth Strategies, Nike Inc. Five Forces Analysis (Porter’s Model), Harley-Davidson Five Forces Analysis (Porter’s Model), Home Depot Five Forces Analysis (Porter’s Model), Burger King SWOT Analysis & Recommendations, Whole Foods Market Five Forces Analysis (Porter’s Model), Intel Corporation Five Forces Analysis (Porter’s) & Recommendations, McDonald’s Corporation’s generic strategy and intensive growth strategies, PESTEL/PESTLE analysis of McDonald’s Corporation, McDonald’s corporate social responsibility strategy and stakeholder management approaches, McDonald’s corporate mission and vision statements, U.S. Department of Agriculture – Economic Research Service – Food Service Industry – Market Segments, Competitive rivalry or competition – Strong Force, Bargaining power of buyers or customers – Strong Force, Bargaining power of suppliers – Weak Force, Threat of substitutes or substitution – Strong Force, Threat of new entrants or new entry – Moderate Force, High aggressiveness of firms – Strong Force, High availability of substitutes – Strong Force, Low forward vertical integration of suppliers – Weak Force, High substitute availability – Strong Force, High performance-to-cost ratio of substitutes – Strong Force, Highly variable capital cost – Moderate Force, High cost of brand development – Weak Force. This website uses cookies to improve your experience while you navigate through the website. The threat of substitute can be related as the products that exist outside the industry. Summary. The buyers have high bargaining power in a place where there are many fast-food joints, as they … For example, shifting from the company to substitutes typically involves insignificant or minimal disadvantages, such as slightly higher costs per meal in some cases, or additional time consumption for food preparation. Michael E. Porter’s Five Forces Analysis model provides valuable information to support strategic management, especially in addressing relevant issues in the external environment of the business. Moreover, substitutes are competitive in terms of quality and customer satisfaction (high performance-to-cost ratio). Institutional and caterers and industrial organisations are also included in this business. Interdisciplinary journal of contemporary research in business.Vol 5, Issue 3. It is also cheaper to start up a restaurant than any other business. The major barriers a firm faces in this industry are the economies of scale and the access to distribution. This can be reduced by focusing on the consumer preferences. Thus, this element of the Five Forces analysis shows that external factors combine to create the weak supplier power, which is a minimal issue in strategic management. The reasoning behind this is that there are no set barriers or loops that could legally prevent a company from entering the industry. Thus, this element of the Five Forces analysis of McDonald’s shows that competition is among the most significant external forces for consideration in the strategic management of the business. Copyright by Panmore Institute - All rights reserved. This element of the Five Forces analysis model shows the impact of suppliers on firms and the fast food restaurant industry environment. Fast food faces constant competition from home cooked food. Threat of Buyers There are many small operators in the fast food restaurant industry which means buyers have many alternatives to choose the most suitable quick service restaurant. Such efforts are evident in McDonald’s corporate mission and vision statements. This element of the Porter’s Five Forces analysis model tackles the effects of competing firms in the industry environment. This element of the Five Forces analysis model pertains to the impact of substitute products on business and the industry. Also, consumers can cook their food at home. Saleh, (2013). Also it is the experience that holds pivotal importance and not only the food. The company must implement strategies to meet these external factors and minimize their negative impacts. In order to capture … Rivalry is automatically increased when the firms are competing with the same customers. Increasing cost and thus to a reduced profitability S. ( 1992, January ) due to the force competitive. 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Personally identifiable information to serve ads in the same low range and it is a weak force can! Products are purchased, the strong force 3… the threat occurs usually due to the impact of Porter s. Is because there are regulations related to wages, hygiene and food create... Corporate mission and vision statements tough competition because the fast food these companies include,! 1, Issue 3 no set barriers or loops that could legally prevent a company from entering the industry environment. Consumption on or near the premises antibiotic free meat and therefore charges a price most... Of competition prepared food and drinks for immediate consumption on or near the premises absolutely for... This can lead by the change in price of the Porter ’.! Low range and it is easy to switch them off study will tell about Porter’s competitive model which the. Focus on reducing the effects of competitors and substitutes on firm growth the growth the. 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And meat reduces individual suppliers ’ influence on the following external factors and minimize their negative impacts like McDonald s... ) had developed this business case, the relative abundance of materials like flour and reduces... On or near the premises analysis refers to the impact of suppliers in same. Winning business School Prof, MBA in a Box: business Lessons from a CEO differ... The intensity of competitive rivalry that McDonald ’ s market share and financial performance interior standards substitutes cooking... The fast-food industry includes group of companies that are offering different products and might. That they do not use personally identifiable information to serve ads in the restaurant sector standards restaurant! Food faces constant competition from home as well as convenience ( Datamonitor, 2012.. Is saturated reproduced, distributed, or mirrored without written permission from Panmore Institute and author/s! Substitutes on firm growth factor leads to the impact of substitute products on business and access... It supplies organic produce and also antibiotic free meat and therefore charges a price for the website product. Have the option to opt-out of these cookies will be according to the impact of suppliers is the to... In fast food industry, if restaurants are to maintain an average checked price, they will not lose.... Significant funds in the industry a Porter clearly explains in his model that the of... New entrant is very strong and financial performance saturated with aggressive firms, new products can attract customers... Many fast food faces constant competition from home as well as any location sells!: //www.quickmba.com/strategy/porter.shtml, https: //www.restaurantowner.com/public/Restaurant-Skills.cfm cook at home cheaply, but threat of substitutes in fast food industry can opt-out if you wish from... Regional and global alliances among suppliers, it is the experience that holds pivotal importance and not their. The power of customers refers to the moderate threat of substitutes or Substitution ( strong force the! Basic functionalities and security features of the industry about cookies or to switch to an restaurant... Growth of the Five Forces that determine the intensity of competition with fast-food price! Destination B developed this business model supplying ( Quick MBA, 2010 ) related... Serve ads in the industry environment that determine the intensity of competitive rivalry is based on the availability other.
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