Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. McDonald’s Porter’s Five Forces are represented in figure below: Porter’s Five Forces Threat of new entrants in McDonald’s Porter’s Five Forces Analysis Threat of new entrants into fast food chain industry is moderate. Potential entrants into fast food chain industry have to deal with the following factors. 1. Massive capital investment requirements. Establishing a fast food chain requires huge financial investments to create an infrastructure, secure leases for locations, purchasing equipments and recruiting staff, among others. Securing funding for a new fast food venture can prove to be challenging taking into account high level of market saturation internationally. 2. Economies of scale. Major market players such as McDonald’s, Starbucks Coffee, Burger King, KFC and Subway substantially benefit from the economies of scale with positive implications on their cost structure. New market entrants, on the other hand, cannot benefit from the economies of scale to similar extend and this may prove to be a significant industry entry barrier. 3. Creativity and innovation. Despite fast food industry entry barriers such as huge capital requirements and economies of scale mentioned above, there is still a chance for new companies to successfully enter the industry. They can do so by innovating in terms of foods to offer, as well, as achieving greater technological integration into various business processes. Bargaining power of buyers in McDonald’s Porter’s Five Forces Analysis Bargaining power of McDonald’s buyers is immense. The following set of factors, among others determines customer bargaining power in fast food industry: 1. No switching costs to competition. Customers can switch from McDonald’s to any other fast food chain such as KFC, Pizza Hut, Starbucks and Burger King with no…McDonald’s Porter’s Five Forces Analysis
Tuesday, June 21, 2022
Research Methodology
Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. McDonald’s Porter’s Five Forces are represented in figure below: Porter’s Five Forces Threat of new entrants in McDonald’s Porter’s Five Forces Analysis Threat of new entrants into fast food chain industry is moderate. Potential entrants into fast food chain industry have to deal with the following factors. 1. Massive capital investment requirements. Establishing a fast food chain requires huge financial investments to create an infrastructure, secure leases for locations, purchasing equipments and recruiting staff, among others. Securing funding for a new fast food venture can prove to be challenging taking into account high level of market saturation internationally. 2. Economies of scale. Major market players such as McDonald’s, Starbucks Coffee, Burger King, KFC and Subway substantially benefit from the economies of scale with positive implications on their cost structure. New market entrants, on the other hand, cannot benefit from the economies of scale to similar extend and this may prove to be a significant industry entry barrier. 3. Creativity and innovation. Despite fast food industry entry barriers such as huge capital requirements and economies of scale mentioned above, there is still a chance for new companies to successfully enter the industry. They can do so by innovating in terms of foods to offer, as well, as achieving greater technological integration into various business processes. Bargaining power of buyers in McDonald’s Porter’s Five Forces Analysis Bargaining power of McDonald’s buyers is immense. The following set of factors, among others determines customer bargaining power in fast food industry: 1. No switching costs to competition. Customers can switch from McDonald’s to any other fast food chain such as KFC, Pizza Hut, Starbucks and Burger King with no…
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