Porter 's Five Forces Analysis

The Bargaining Power of Suppliers (Moderate): Most of the industry’s products are sourced and manufactured by a network of third parties. The supplier group is diluted compared to the industry; KMD alone has over 45 suppliers. There is credible threat of suppliers adopting forward integration resulting in loss of major suppliers and emergence of new competitors for the industry. Highly effective and specialised products will pose high supplier switching costs for industry firms.

Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.

With a weight epidemic ravaging the country, Company Q made its decision to offer health-conscious food fare only after it could find the foods that provided the highest margin of profit for it. That is

Inclining trend in healthy food options might take over a huge customer group McDonald’s might end up losing the market share. (Kline,

Goals: To provide healthy foods that will eventually lead the company in earning a healthy bottom-line.

Changes in customer preferences, general economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing restaurants have a moderate effect on the restaurant industry (Chipotle, 2010). One example of customer preferences being a driver in the industry is the “Whole Food-ism Movement” which has put a large focus on organic, antibiotic-free, and non-processed foods (Mansolillo, 2007). Consumers now look for healthier options when eating and an overall healthier lifestyle. Chipotle has been able to benefit from this movement by carrying on their “Food with Integrity” mission (Chipotle, 2010).

The discussion of “ How Major Restaurant Chains Plans Their Menus” describes and offered readers with restaurant chains priorities when it come to planning the menu. The report presents the three major priorities of most fast food restaurants: sales, profitability, and preparation ease; moreover, it explains the view of fast food corporations on the subject of healthy food. The fast food outlets are not willing to replace the more profitable products for less profitable products despite the consumer’s demands and health. In addition, the report demonstrates the parallel relationship between profits and the type of food being served. The source is dependable considering there are multiple authors, whose are experts in the subject, whose wrote

Revolution Foods at the time of conception created a blue ocean space where they filled an unmet need of providing under-served communities with trusted, healthy, high-quality and affordable meals for families. Although in today’s market there are competitors, who will be discussed presently, the company is still in a position to continue growth with an outlook of the overall vision that the blue ocean space represented. Revolution Foods is at a point where, having achieved success as a start up company, it needs to focus on the implications of continued growth and how to promote and maintain this growth. There are a few major issues that affect the company’s ability to achieve their vision. These issues include internal and

Define: Pressure suppliers can put onto their customers by increasing prices, decreasing the quality of items, and minimizing availability

The bargaining power of suppliers is medium. Since corporates conditions vary, whether the power of suppliers is strong should be determined accordingly. But to survive in the online retailing industry, keeping a close relationship with the suppliers is imperative. Many of the multi-national companies in the industry is depending on limited numbers of suppliers that are concentrated in production, differentiated in products, and not heavily relied on a single industry, which give them great bargaining power and can better facilitate the corporations’ success. Small companies may not have established such strong alliance with its vendors.

The risk of generic substitution is also increasing with especially China dominating the production market. Customers will substitute for a generic product if the disposable incomes of the customers reduce resulting in customers willing to trade down for a inferior but cheaper product.

But before launching that product we want to know that “Is it worth it to our fast food restaurant to market healthy food”. To answer this management

The threat of substitutes: where it refers to substitute product as those that are available in other industry which can also fulfil the need and want of the consumers. It can affect competition in an industry by placing an invisible ceiling on prices which companies within the industry can charge, due to the fact that if the cost of substitute is low then the consumers will tend to purchase substitutes, therefore limiting the prices that a company can place on certain items to gain maximum profit. For example, lemonade can be substituted for a soft drink. Generally, competitive pressures arising from substitute products increase as the relative price of substitute products declines and as consumer 's switching costs decrease.

Porter’s Five Forces model is used to evaluate the degree of rivalry between competitors in a given industry through assessing the four forces that lead to this outcome. These forces are the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products.

➢ Fixed costs - with high fixed costs as a percentage of total cost, companies must sell more products to cover those costs, increasing market competition.