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Michael Porter's Industry Analysis: The Fast Food Industry

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Industry analysis: The Fast Food Industry (McDonald’s)

NAICS 72221: Fast Food Restaurants. This industry is made up of establishments focused on the sale of prepared food and drinks for immediate consumption on or near the premises. Institutional and caterers and industrial organisations are also included in this business.

Related Industries:

Full-Service Restaurants
Grocery retailers
Grocery wholesalers
Packaged food manufacturing

Sub industries include:

Eating places Ice cream, soft drink and soda fountain stands, Coffee shop, Pizza delivery, Drive-in restaurant, Hamburger stand and Hot dog stand.(Barnes, C. (2014))

McDonald’s is the global leader within fast food industry. It has achieved this position as a result of effectively responding to the five forces of its industry environment. Michael Porter’s Five Forces Model identifies the most important external factors that affect business organisations. The environment of the fast food industry interacts
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This element of Porter’s Five Forces analysis is concerned with the demands and influences of consumers. In McDonald’s case, the bargaining power of buyers is strong because of the following external factors:
•Low switching costs
•Large number of providers
•High availability of substitutes
Low switching costs makes it effortless to change from one restaurant to another, thus, consumers can easily impose their demands on McDonald’s. In relation, because of market saturation, customers have the choice from many fast food restaurants other than McDonald’s. Also, there are numerous substitutes to firms like McDonald’s. These substitutes include food outlets, readymade meals, as well as foods that can be cooked at home. Based on this element of Porter’s Five Forces analysis, McDonald’s must develop and implement strategies to increase customer loyalty. (Gregory, L.
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