The Forter Five Force of MCD

The Porter Five Forces

The fast food industry is a revolutionary industry, which has taken the world by storm. With fast food restaurants showing up, what seems like on every corner, it?s interesting to analyze the competitive strategies companies in this industry use in order to survive. McDonald?s, with more than 30,000 restaurants worldwide is certainly no exception. A good way to analyze the strategies is by using the Porter five forces competitive model. The Porter model looks at what strategies a company uses to ?effectively counter 1) the rivalry of companies in the industry, 2) the threat of new entrants, 3) the threat substitutes, 4) the bargaining power of customers, and 4) the bargaining power of suppliers.?
The first of the five forces looks at rivalry within the industry. For McDonald?s, this includes all other fast food businesses. ? McDonald?s recognizes that it is up against not only other larger burger and chicken chains but also independent owned fish and chips shops and eat-in or take-out establishments.? Some of McDonald?s competitors include: Burger King, Wendy?s, In and Out, Taco Bell, and Jack in the Box. As mentioned above, the fast food industry is a very dynamic and competitive industry, so it is important for the McDonald?s corporation to develop strategies which will keep them ahead. Judging by the success of McDonald?s, it is clear that the corporation has developed some very effective strategies to stand out in the crowd.
One strategy McDonald?s focuses on is a differentiation strategy, partly combining it with the innovation strategy. By creating unique brand products, (chicken McNuggets, Big Mac, McFlurry) McDonald?s is setting self apart from its competitors. The innovation strategy is used by creating new and unique products (chicken tenders, Newman?s own salads, as well as specific products catered to specific region in the world), special celebrity endorsements (athletes, actors/actresses), partnerships/sponsorships (Music, Olympics, special movie toys), charities (Ronald McDonald House), games/promotions (monopoly game, special movie toys), which allow McDonald?s to develop their unique corporate image that sets them apart from their rivals. Another important role in staying competitive is McDonald?s online presence. The website (www.McDonald?s.com) is great opportunity to connect with the customers and stay competitive. Through the website, the company shows company facts, product information (nutrition facts), and links to the charity website, as well as games promotions (monopoly).
The second force that acts on the industry is the threat of new entrants. Fortunately for McDonald?s and it?s over 30,000 restaurants world wide, the corporation has set itself in a position of dominance. Using a growth strategy, McDonald?s is continuously expanding its reach which makes it increasingly difficult for new fast food restaurants to enter the industry. Through franchising, McDonald?s is able to reach nearly every corner of the globe. In addition, by using an alliance strategy, they are able to set up operations in Wal-Mart?s and sports stadiums and other firms which help support the industry.
The third force involves the threat of substitutes. For McDonald?s, any other food industry is a substitute. From classy restaurants, to hotdog stands, to grocery stores, McDonald?s faces a very large amount of substitutes. By continually offering different products, however, McDonald?s can be sure to remain on people?s list for a place to eat. Don?t forget the fact that one can get a lot of value for his/her money with McDonald?s dollar menu. Furthermore, by offering healthier alternatives, the company will be able to enter into new segments and increase their customer base.
The fourth force acting on McDonald?s is the bargaining power of buyers. This is a very powerful force, since McDonald?s relies on a strong customer base. In order to keep and gain new customers, the company must pay attention to the demands of consumers. With an onslaught of health books and diets, Americans are increasingly becoming aware of their health. As a result, consumers are demanding healthier products from the fast food industry. McDonald?s leads the industry by offering salads with organic Newman?s own dressing, as well as changing the oil they cook their fries in to a healthier substitute. In addition, they showcase all the ingredients in their foods in their restaurants and on their website. Also because of movies like ?Super Size Me,? and books like, ?Fast Food Nation? by Eric Schlosser, McDonald?s is aware of consumer trends and worries and is taking steps in that direction. An example is the