Competitive Forces

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Q 1 Bargaining Power of Suppliers—low The bargaining power coming from suppliers within the fast food industry is usually weak. Rather than growing potatoes, cows, coffee beans and etc. by themselves, most restaurants within the industry get their food from various farmers, butchers, packaging companies and partners. There are thousands of suppliers for restaurants to choose from and they can select their suppliers through the competitive bidding market. It will determine the cost of their products. Restaurants also tend to build long-term and trusty relationships with its suppliers, which makes bargaining power of suppliers weak to some extent. For example, McDonald’s has cooperated with some suppliers for more than 25 years. As a…show more content…
The rising prices of key ingredients, like oil, corn and beef force the industry to increase its cost. In addition, consumers are always looking for product innovation, like new flavors or new product. Among of all, customers’ growing interest in healthy food is the major driving force which forces the industry to make strategic changes. More and more traditional fast food chains start to add healthy items in its menu and advertise more on low-fat, low-sodium products. For example, McDonald’s popular Happy Meals have fewer calories and include a side of fruit. Its Chicken McNuggets now have less sodium. Health-conscious trend also represents a potentially higher threat of new entrants and higher competitive advantages of substitutes. The new entrants focus more on the organic food with more nutrition and try to lead a quick yet healthy life style. Organic to Go and High Noon are growing very fast under this driving force. According to QSR, the fast casual restaurants are a growing source of competition for the fast food industry, like Chipotle, Panera Bread and Noodles & Company. Combining the convenience of fast food restaurants with the quality of casual dining, this new alternative to fast food threatens to steal market share from the fast food industry. Understanding these five forces and driving forces is very important for the success of any business in the fast food industry. As a whole, this is a highly
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