Essay about Porter’s Five Forces Analysis of the Fast Food Industry

645 Words Sep 23rd, 2015 3 Pages
Porter’s Five Forces Analysis of the Fast Food Industry

Complete a Porter's Five Forces Analysis of the fast food industry and for each of the 4 generic strategies, identify one restaurant that you believe is employing that generic strategy.

According to Hoover's Fast Food and Quickservice Restaurant Report, Fast food restaurants make up one of the largest food industry segments with more than 200,000 restaurants in the US. Fast food franchises are known for their low cost and high-speed products served to go as well as for a quick on-site consumption. Consumers are attracted to the idea of standardized menus and familiar meals in each location. Michael Porter’s model discussed below will help us identify five key competitive forces
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In addition, even when some Fast food restaurants purchase large quantities, they do not face significant switching costs other than inconvenience of developing new relationships with new vendors.
In contrast, suppliers of soft drinks in the fast food industry are dominated by Coke and Pepsi because of their well established distribution channels. Coke and Pepsi also provide fast food restaurants with Coke and Pepsi equipment such as soda machines and refrigerators. By doing so, Coke and Pepsi have added value to their customers and differentiated themselves from other suppliers.

Threat of substitutions - High
The threat of substitutes is high because numerous similar products are available from outside the fast food industry that come very close to meeting the needs of current customers. The existence of substitutes such as frozen meals, home cooked meals, and food trucks create alternative foodservice options. These substitutes offer attractive price and similar product characteristics and therefore result in low switching costs. In addition, fast casual restaurants like Chipotle and Panera Bread are a growing threat for the fast food industry. These fast casual restaurants offer the convenience of fast food chains with the quality of casual dining and healthier food options.

The power of buyers – Low
The bargaining power of buyers is low because the buyers of the fast food industry’s products are individual customers. Fast
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