McDonald's 5 Forces

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University of Wisconsin, Platteville *

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INTERNATIO

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Economics

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Jan 9, 2024

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docx

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Uploaded by cjopling18

Five forces Threat of New Entrants: Because the lower entry barriers in the fast-food industry are relatively low, there is a moderate threat of new entrants. Although the initial investment into the fast-food industry is relatively low, established businesses that have strong brand loyalty may make it hard for newcomers to attract customers. This means that along with the initial investment, new entrants would likely need to have significant capital for use in marketing campaigns in order to establish a brand presence. Due to these factors, the threat of new entrants into the fast-food industry is moderate. 2. Threat of Bargaining Power of Suppliers: The bargaining power of suppliers is relatively low of a threat to businesses in the fast-food industry because of the supplier diversity. Because there are many different suppliers, individual suppliers would have little bargaining power. This also means that if a business is not satisfied with a supplier, it can turn to other suppliers. However, there are some costs associated with switching suppliers, for example negotiating contracts and adjusting to the new supplier. These things combined contribute to a threat of the bargaining power of suppliers that is relatively low. 3. Threat of Bargaining Power of Buyers: The main factors that contribute to the threat to the bargaining power of buyers are the number of buyers, the alternatives, and the price. The fast-food industry serves millions of buyers, meaning that one individual would have little bargaining power. However, there are many alternatives in the fast-food industry, meaning that customers can go elsewhere. Along with this, buyers can be price-sensitive because there are many other options. Although brand loyalty and preferences help limit the chances of customers going elsewhere. These factors create a moderate threat of the bargaining power of buyers. 4. Threat of Substitutes: While there are other dining options, such as sit-down restaurants, fast food provides a unique value due to its speed and convenience. This means that in certain situations there is no real substitute for fast food. However, alternative options as well as healthier options do pose some threat of substitution. This means that the overall threat of substitution for the fast-food industry is low.

5. Competitive Rivalry: The main factor that contributes to the threat of competitive rivalry in the fast-food industry is the number of competitors. Due to the large number of competitors and relatively low product differentiation, there is intense competition between businesses in the fast-food industry. This means that companies focus on pricing strategies, innovation, and promotions in order to attract customers. Because of these things, there is a high threat of competitive rivalry in the fast-food industry.

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