Question

1. Explain how each of the Porter’s Five Forces apply to the fast food industry (Rivalry amongst existing firms, Threat of new entrants, Threat of substitutes, Buyer Power, and Supplier Power). Fast food companies are those such as McDonalds, Wendy’s, Burger King, etc. State if the competition is high, moderate, or low and explain your answers

Answer 1

Fast food industry over the years has become one of the most fiercely competitive industries across all industries with more and more new entrants are making entry in the fast food market in the last decade. An explanation about the application of Porter’s five forces on the fast food industry would be helpful in understanding the industry better.

Rivalry amongst the existing firms: In last decade or so the number of new firms making entry in the fast food market has more than doubled compared to earlier. As a result the competition and rivalry between the existing firms in the industry is immense.

Threat of new entrants: With increase amount of profit and ever increasing demand of fast food the industry is a hot cake for the firms thus, the number of new entrants into the market are also increasing with each passing day. Thus, the risk of losing market share in the fast food industry is quite high.

Threat of substitutes: The fast food industry is one of the most unique industry when it comes to introduction of numerous new items. Thus, the threat of substitution of products is quite high. Apart from that changing tastes and preferences of the customers are also one of the most important aspects that compel the firms in the industry to keep on adding for better and delicious items in the menu.         

Buying power: With the increase amount of competition in the industry the byers have significant buying power in the market. Thus, the firms in the fast food market are more of price taker than price decider.

Supplier power: Suppliers have relatively less power in the fast food market as the customers and their tastes drive the industry and the industry reacts according to the preferences and desires of its customers.    

The competition amongst the existing fast food giants such as McDonalds, Wendy’s, Burger King etc. have huge compete ion between them and continuously looks to attract customers by introducing better food items in their menus.