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, Concessionaire Delicatessen (eating places) Frozen yogurt stand, Drive-in restaurant, Hamburger stand and Hot dog stand.
(Barnes, C. (2014))
McDonald’s is the global leader in the 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 influence business organisations . The environment of the fast food industry interacts with McDonald’s to affect the potential and success of the firm. McDonald’s current global success showcases that they are effective in identifying these five forces and overcoming issues they posses.
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In order for McDonald’s strategies to operate effectively they must align with the external factors in the fast food restaurant industry.
Competitive Rivalry (Strong Force)
McDonald’s faces high levels of competition because the fast food industry is highly condensed. This element of Porter’s five forces analysis examines the effect of competing firms in the industry. There is a strong force of competitive rivalry for McDonald’s due to the following factors:
•High number of firms (strong force)
•High aggressiveness of firms (strong
The task instruction is: Analyze Company G’s competitive environment utilizing Porter’s Five Forces Model of competitive forces. While headings below may provide some guidance for how to organize the paper, please refer to the recommended text (index topic: “Porter’s 5 forces model”), the learning community, and recommended web sites. As you will see from the reading, Porter’s 5-forces is a way to examine threats to a company’s success – which was competition imposes.
Porter’s Five Forces Model is one of the best-known analysis tool to see the level of competition a company has with its competitors. Chick-fil-A is a strong company and has been around for a long time. Chick-fil-A still has a huge competition in the fast food market. This being the case the company has to analyze the whole market. The threat of entrants is always
Porter 's five forces framework assesses the competitive pressures a company faces within the industry. The five forces of competitive pressure include: competition from rival sellers, competition from potential new entrants to the industry, competition from producers of substitute products, supplier bargaining power and customer bargaining power. The model helps us determine the strength of competitive pressures and profitability of an industry. [3]
About everyone at some age, at some point or another, and in some country has gotten a sample of American's symbol for fast food through the golden arches of McDonald's. This report will attempt to analyze the external and internal sectors that affect the company's success. The external analysis will provide opportunities and threats while the internal analysis will show indicators of strength and weakness. It will then follow up with critical issues, strategic alternatives, recommendations and implementation. The case studied is found in Appendix 2 of Mary Coulter's "Strategic Management in Action" book.
The fast food industry encompasses a wide variety of economic situations. To begin with, within in the industry a widely discussed topic is the idea of workers forming unions in order to fight for better working conditions. Advertising is also a prominent factor that guides the productivity of businesses of the fast food industry. Another guiding force for fast food chains is globalization of their businesses, without advertising and globalization of businesses fast food chains would not be as successful as they are. The success of businesses can be determined through the idea of elasticity and the income effect because if a business knows the demographic they are targeting the companies will likely know how responsive profits are to a change
McDonald’s is one of the biggest companies in the world with restaurants in 119 countries and it has accomplished this extraordinary global presence through its effective management practices. McDonald’s uses a combination of Fredrik Taylor’s scientific management, Max Weber’s hierarchical structure, and Henri Fayol’s administrative principles to run its restaurants. McDonald’s has become a mechanistic organization by making its restaurant environment predictable. McDonald’s has developed set management structure and a predetermined set of procedures for running its restaurants. As a result, McDonald’s has come to resemble a machine where employees are like components of the big McDonald’s machine.
Porter's fifth force that Porter describes is current rivalry among existing firms. In the specialty eateries industry,
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.
Porter's Five Forces can be applied to particular companies, market segments and industries with the step-by-step analysis of market structure and competitive situation. First of all, when implementing this module in organizations, it is necessary to determine the scope of the market to be analyzed. Following, all relevant forces for this market analyzed and key forces are identified (Gerry and Kevan, P.117). Actually some organizational strategy and the longer-term goals are mainly based on or consistent with the key forces. Hence, it is not necessary to analyze all elements of all competitive forces with the same depth. Moreover, the key forces in the competitive environment will vary in different industry. Different forces take on prominence in shaping competition in each industry (Porter,
As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to
On the other hand, buyers were more increasingly focusing on value and healthy foods. This condition can force McDonald and its competitor to offer product innovation that can attract the buyers and match with the buyers' requirements.
REFERENCES•www.mcdonalds.com, accessed on 18 July, 2008•www.mcdonldsindia.net, accessed on 18 July, 2008•en.wikipedia.org/wiki/McDonald's, accessed on 19 July, 2008•http://www.associatedcontent.com/article/263943/mcdonalds_strategic_marketing_mix.html?cat=4, accessed on 19 July, 2008•www.kfc.com, accessed on 25 August, 2008
In the case of PepsiCo, analyzing the non-alcoholic beverage industry using Porter’s Five Force Analysis allows for assessment and adjustment to the strategic plans implemented to sustain competitive advantage. Porter’s Five Forces model helps outline the competitiveness of the current market through analysis of the industry rivalry between companies, supplier power, buyer power, threat of substitution, and the threat of new entries (Strategic Planning Tools, 2009). All of these forces affect not only a company but an industry. To begin, competitive rivalry within an industry analyzes the current competition within that market. When a market is competitive it “encourages companies to innovate, utilize production capacity, reduce costs and
Due to globalization and increased competition in the fast food industry, a very complex environment is created for McDonald’s. There are various internal and external environmental factors affecting the functions of McDonald’s corporation and demands for new innovations. The factors are as follows:
Porter’s five forces analysis is a tool is useful for us to analyse the threat of competition in an industry. Porter believed that the industries were influenced by five forces; competitive rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and the threat of substitutes. Analysing these areas can allow you to see attractiveness of the market and find a competitive advantage.