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    Mcdonalds

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    maliha fatima
    McDonald's faces a moderate threat from new entrants in the fast food market due to the substantial startup costs required to establish restaurants nationwide and build brand awareness. McDonald's has significant bargaining power over suppliers due to exclusive contracts and quality control processes. However, buyers have relatively high bargaining power due to low switching costs and their ability to influence McDonald's revenues as customer loyalty and preferences change. The threat of substitutes is also high for McDonald's as consumers have many alternative fast food and restaurant options.

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    Mcdonalds

    Uploaded by

    maliha fatima
    83 views2 pages
    McDonald's faces a moderate threat from new entrants in the fast food market due to the substantial startup costs required to establish restaurants nationwide and build brand awareness. McDonald's has significant bargaining power over suppliers due to exclusive contracts and quality control processes. However, buyers have relatively high bargaining power due to low switching costs and their ability to influence McDonald's revenues as customer loyalty and preferences change. The threat of substitutes is also high for McDonald's as consumers have many alternative fast food and restaurant options.

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    porter 5 forces of Mcdonalds

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    mcdonalds

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    McDonald's faces a moderate threat from new entrants in the fast food market due to the substantial startup costs required to establish restaurants nationwide and build brand awareness. McDonald's has significant bargaining power over suppliers due to exclusive contracts and quality control processes. However, buyers have relatively high bargaining power due to low switching costs and their ability to influence McDonald's revenues as customer loyalty and preferences change. The threat of substitutes is also high for McDonald's as consumers have many alternative fast food and restaurant options.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    83 views2 pages

    Mcdonalds

    Uploaded by

    maliha fatima
    McDonald's faces a moderate threat from new entrants in the fast food market due to the substantial startup costs required to establish restaurants nationwide and build brand awareness. McDonald's has significant bargaining power over suppliers due to exclusive contracts and quality control processes. However, buyers have relatively high bargaining power due to low switching costs and their ability to influence McDonald's revenues as customer loyalty and preferences change. The threat of substitutes is also high for McDonald's as consumers have many alternative fast food and restaurant options.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
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    Threat of new entrants: McDonald’s is one the leading fast-food brands with a global presence.

    The
    fast-food market is highly saturated because of many players competing to capture the market
    share. All these companies have existed for a long time and now are reaping the benefits of
    economies of scale. Any new firm joining the competition will initially have to incur substantial setup
    costs if it wants to have a country-wide reach of its restaurants and at the same time spend on
    marketing and advertisement to establish its brand image. The firm must maintain a standardized
    process from procurement of raw materials to assembling the final product for uniformity across all
    the outlets. This can be a tricky feature as people need to be regularly trained for the same.
    However, suppose a firm wants to start with small, in that case, there is a diverse range of suppliers
    to choose from. It can establish its distribution channel through online food delivery platforms,
    subsequently lowering the infrastructure costs. Considering the above factors, it can be said that
    McDonald’s faces a moderate threat from new entrants in this market.

    Bargaining power of suppliers: McDonald’s procures majority of its raw material from suppliers and
    has an exclusive partnership contract with most of them, thus enabling it to have authority over the
    suppliers. It closely monitors the quality and service provided by the suppliers to maintain the
    standard of final product served to the customers. The distribution is done via multiple distribution
    centres, making checking even smoother. The product sold by the supplier is undifferentiated. There
    are many suppliers available in the market, the switching costs are low, and there is a minimal
    chance of forward integration. These factors considerably push the bargaining power of the supplier
    to a weaker end.

    Bargaining power of Buyers: The switching costs are low, making it more important to keep the
    customer engaged by satisfying them. Customer loyalty is low in this segment which increases the
    bargaining power of buyers. Food is a subjective topic, and consumers’ preferences often change
    from time to time. McDonald’s needs to continuously innovate their menu and bring up new
    products while also managing cultural changes. Hence, it isn't easy keeping up with their new
    expectations. Factors like an increase in disposable income of the buyers and changes in lifestyle,
    which nudges the customer towards healthier and luxury items, affect the sale of fast-food items.
    Many casual or fine dining restaurants offer these options and attract customers. The customers do
    not purchase in large volumes and might affect only a fraction of McDonald's revenues, but because
    they are widely spread and are easily influenced; hence they gain power. Therefore, the bargaining
    power of buyers is relatively high for McDonald’s.

    Threat of Substitutes: McDonald’s is considered as a fast-food option globally, and therefore, many
    people prefer their full meals over burgers. Consequently, it is substituted by other brands like
    Subway, Dominos, Pizza Hut, KFC etc., which provide a similar experience. With the coming up of
    online food delivery options, local restaurants have become more accessible, thus increasing the
    availability of substitutes in the market. There is a huge increase in ready to cook meals and tiffin
    delivery options which are also direct substitutes for McDonald’s. As people are shifting towards
    leading a healthy lifestyle, they are focusing more on home-cooked meals. Plus, due to the advent of
    covid, some people have become apprehensive of eating from outside. Due to the huge number of
    substitutes available in the market, the consumer can switch his food options at any time. This
    increases the threat of substitutes in the market for McDonald’s.

    Rivalry among existing competitors: McDonald's faces intense competition from other fast-food
    chains, such as Burger King, Wendy's, and KFC. The industry is highly competitive, with companies
    competing on price, product innovation, and marketing campaigns. However, McDonald's global
    brand recognition and economies of scale give it a competitive advantage over many of its rivals.
    McDonald's also invests heavily in product innovation and marketing to stay ahead of its
    competitors.

    Opportunities:

     McDonald's can focus on introducing healthier menu options to appeal to health-conscious


    consumers.
     The company can explore opportunities in emerging markets where fast-food chains are not
    as prevalent.
     Online food delivery platforms provide an opportunity for McDonald's to increase its reach
    and attract more customers.

    Threats:

     The high competition in the fast-food industry can lead to aggressive price wars, impacting
    McDonald's profitability.
     The increasing popularity of healthy food options and changing consumer preferences can
    affect the demand for fast-food items.
     The COVID-19 pandemic has resulted in a shift towards home-cooked meals and
    apprehensions about eating outside, impacting the sales of fast-food chains like McDonald's.

    Strengths:

     McDonald's has a well-established supply chain with a centralized distribution system that
    ensures consistent quality and timely delivery of products to all its outlets worldwide.
     McDonald's has a strong brand recognition that is recognized globally.
     McDonald's invests heavily in product innovation and technology, such as mobile ordering
    and delivery, to meet changing customer demands and preferences.

    Weaknesses:

     McDonald's menu primarily consists of fast food items, which may not appeal to health-
    conscious customers or those with dietary restrictions.
     McDonald's operates a significant number of franchised outlets, which can lead to
    challenges in ensuring consistent quality and customer experience.
     McDonald's standardized processes and recipes limit its ability to cater to regional tastes and
    preferences in certain markets.

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