McDonalds Corporation truly began in 1954 when Ray Kroc decided that he would turn the successful Californian store owned by the McDonald brothers into a chain. Today McDonalds is the world’s largest restaurant chain, worth over $70 billion (Yahoo7Finance 2008).
McDonalds has grown via constant refinement of business practices and by knowing their customers needs. They have placed great importance on their long term relationships with suppliers and their aim is to ensure customers receive a consistent product quality.
Analysis of McDonalds Corporation using the Porters 5 forces model to asses its competitive position in the fast food industry.
As the name suggests the Porters 5 Forces model focuses on 5 key …show more content…
Threat of Substitutes
The threat of substitute products is high for a business when prices of substitute products fall, it is easy for customers to switch products and buyers are willing to substitute (Porter five forces model).
The fast food industry by its nature is easy for customers, so swapping from one place to another is very easy. McDonalds has competed strongly in the pricing area to maintain market share. In an article by the SeattleTimes.com (Creduer,2007) referring to McDonalds McCafe competing against Starbucks, Peter Kwiatkowski says McDonalds is “being extremely aggressive”, ” they are a lot cheaper than Starbucks coffee in general, and have the high quality to go with it”.
Remaining cheaper than the competition encourages customer loyalty.
Threat of new entrant
Threat of a new organization entering the industry is high when it is easy to enter the industry i.e. entry barriers are low (Porter five forces model).
Even though entry into the fast food industry is quite easy at lower levels, due to McDonald’s size (nearly 3 times larger than its nearest competitor Burger King, mentioned earlier), it would take an enormous amount on capitol for a single new company to