Analysing McDonalds (fast food outlets) using Porters 5 Forces model – sometimes called the Competitive Forces model. Introduction McDonalds Canada opened in 1967, thirteen years after McDonalds had taken the United States by storm. This was the first restaurant to be opened outside of the United States. It was in 1965 that McDonalds went public and offered shares on Wall Street. Since then it has been important for McDonalds to continually monitor its performance, to make sure it is competitive and profitable while also being aware of its immediate community responsibilities. This can be achieved by using the Porters 5 Forces model so the company is able to determine where its business needs to change or improve in order to stay competitive in the fast food industry. Using Porter’s competitive forces model to achieve a competitive advantage 1. Analyse McDonalds using a well known model to assess the competitive position that it occupies within its industry Porter’s competitive forces model includes five forces that need to be analysed. These forces include the intensity of rivalry from traditional competitors, threat of new market entrants, threat of substitute products and services, bargaining power of customers and bargaining power of suppliers (Laudon & Laudon, 2007). See diagram below; Traditional Competitors (competitive rivalry) McDonalds traditional competitors include many of the other fast food outlets across the country, i.e. Burger King, Taco Bell, KFC, Wendy’s. It has been shown by Professor Michael Waterson (2004) that the presence of a Burger King, for example, will increase the likelihood that McDonalds will open near by. Thus it can be seen that the threat of competition from traditi... ... middle of paper ... ...ndustry well established in Canada, McDonalds’ traditional competitors have all found their own niche. Their constant changes are more directed at customer satisfaction then keeping inline with their competitors. New market entrants, although small and initially insignificant, are exerting the most force over McDonalds Canada. They are able to cater to individuals a lot easier than a multinational company is and it should be these that McDonalds model any future changes on. As mentioned above, the introduction of organic products and the presentation of ‘greener’ images are essential for McDonalds to compete in a changing consumer environment. As environmental concerns become more of an issue for consumers they will be more aware of the impact that a company has on themselves and the environment and therefore be more conscious of who they support with their dollar.
As strategy consultants of McCormick & Associates, we use Porters Five Forces Model as a framework when making a qualitative evaluation of a firm's strategic position (Appendix 1.2). These five forces determine the competitive intensity and therefore attractiveness of a market. These forces affect the ability of a company to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the market place.
The 5-Force Industry Analysis first introduced by Michel Porter, Harvard Business School professor, a quarter-century ago. This theory examines the suppliers, buyers, product substitutes, existing firms’ rivalry and new entrants in a firm’s product market.
With strength ultimately comes weakness and McDonald's has its fair share, especially in the last few years. Many weaknesses are due to the external environment which includes market saturation, increased price competition, and food and labor costs. These weaknesses affect many firms in the fast food industry so McDonald's is trying to effectively combat these forces using a differentiation strategy. Developing new products such
A world without the Big Mac, Happy Meals, Chicken McNuggets, and the phrase “I’m lovin’ it,” is almost inconceivable. People around the globe have become accustomed to the high gleaming golden arches that make up the famous emblem for McDonald’s. McDonald’s has grasped the concept that culture flows from power. In this case, the American culture flows through the veins of this fast-food giant and the more that is supplied, the greater the demand. It is no secret that McDonald’s has become one of the world’s largest fast-food retailers. It has become a well known icon that has played a huge part in globalization, with chains located in many different countries… transforming the meaning of fast-food all around the world.
Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
Porter 's Five Forces model, it named after Michael E. Porter. He identifies and analyzes five competitive forces that structure every industry, helps to determine an industry 's weaknesses and strengths. There are five components of Porter 's five forces model
According to Royle (1999) McDonald’s is a very large multinational enterprise (MNE) and the largest food service operation in the world. Currently the company has 1.5 million workers with 23,500 stores in over 110 countries with the United Kingdom and Germany amongst the corporation’s six biggest markets, and over 12,000 restaurants in the United States. In 1974 the United Kingdom corporation was established and in 1971 the Germany corporation was established, currently the combined corporation has over 900 restaurants and close to 50,000 employees in each of these countries (Royle, 1999).
Because the subject matter of strategic management is so inherently complex and because each one of us brings his own personal biases to the analysis, it was suggested early on that virtually all case material in the field be analyzed from the perspective of more than one methodology. Profit theory and industrial chains were selected as the first of a number of viable approaches to the analytical process. It would have been equally correct to select the Five Competitive Forces analysis refined by Michael Porter, one of the major figures in the field of strategic management. This methodology addresses the same issues but differs only in the language that they use to describe corporate behavior. The five forces are:
"Studying McDonald's ABroad: Overseas Branches Merge Regional Preferences, Corporate Directives." Editorial. Nations Restaurant News 11 Nov. 2005: n. pag. MasterFILE Premier. Web. 5 Mar. 2013.
McDonald’s has proven over time that the business practices they utilize work well and have led them to obtaining the title of the largest food retailer in the world. The founder of the company made a tactical decision in franchising the idea of providing fast food at a cheap price. Today, fast food has become a staple of not only American life but a viable food option all over the world. For McDonald’s a critical factor in them reaching the level of growth they currently experience has been franchising. It can be assured that McDonald’s will continue to grow through the usage of the franchising techniques as new food markets continue to develop all over the world.
In the previous part of our work we were talking about Porter’s value chain of McDonald’s fast-food restaurant. It is known, that before making a statement about competitive priorities, the company should know the objectives of the operation. Is it customer oriented? Does it cover shareholders’ and suppliers’ interests? However, now we consider that McDonald’s has taken into account all of the interests of business environment.
In today’s market, McDonalds faces numerous challenges such as fierce competition, a more health conscious customer, and the continual need for improved customer satisfaction and menu. McDonalds needs to go through some changes in order to remain ahead in the fast-food industry.
The purpose of this project is to know how operations management contributes to the competitive advantage of McDonald's. In this project I have also discussed the theoretical stand point of inventory, capacity management, lean synchronization and quality management and how they impacted on the organization. For this purpose I have selected McDonalds to obtain necessary data and its analysis.
These are opportunities because they are all options McDonalds can take advantage of in order to expand their company. By doing these, McDonalds will bring in more customers as these changes will attract consumers that are looking for a fast food restaurant that possess these
By choosing to expand into markets later than other fast food restaurants Burger King hopes to avoid the problems of developing infrastructure and establishing a market base. For instance, by following McDonalds into Brazil, Burger King avoided the need to develop the infrastructure and mark...