Question

Use the company McAlisters Deli to analyze the following 5 Forces analysis for the company- not generic

Answer 1

McAlisters Deli Porter’s five force analysis

Threat of new entrants: Medium

Economies of scale: Medium

McAlister’s Deli has 400+ restaurants and it has medium economies of scale operations which makes it slightly difficult for new entrants.

Product differentiation: Medium

McAlister’s Delli has different and variety of products compared to its competitors. But, it’s easy to replicate.

Brand identification: USA

McAlister’s Dei has good brand identification in majority of the parts of USA. Due to limited stores, still few people can’t identify the brand. People chose their restaurant based on their brand.

Switching cost: Low

It is easy for customers to choose the new restaurants because switching cost for the customers is zero.

Capital requirements: Medium

McAlister Deli is a restaurant chain with 400+ restaurants. It incurs huge capital to start the restaurant with same capacity.

Usage of latest technology: Medium

McAlister’s Deli uses latest inventory management software, order handling software and E-commerce technology is used. This is difficult for the competitors to replicate at the initial time.

Access to Channels of distribution: Low

McAlister’s Deli has wide distribution channels. The channel of sales are both online and offline. New comers can’t start with online distribution at the initial stage.

Threat of substitute products: Medium

Availability of close substitutes: Medium

Grocery and supermarket chains are considered as the substitutes to restaurants. Most of the products sold in McAlister’s Deli are available in the grocery and supermarket chain kitchens.

Switching cost: Low

Customers can either dine out at the restaurants or can depend on grocery and supermarket chain

Price-value of substitutes: High

Substitutes provide the products at competitively lower price and provides the best value. Overall, when the taste is concerned, McAlister’s Deli provides best cost even the price is lower.

Bargaining power of customers: High

Number of buyers: High

The number of buyers in the market is higher and nowadays due to lifestyle change, people use restaurant more often. McAlister’s Deli has more number of buyers.

Buyer’s switching cost: Low

Buyers can easily switch to the best alternative which they come across. Eating at different restaurant will not incur any additional cost.

Buyer’s threat of backward integration: Low

Buyers can sometimes prepare these dishes at their home. McAlister’s Deli provides great taste which many of the buyers can match with their forward integration.

Buyer’s profitability: Medium

Buyers expect for good profitability especially the regular buyers.

Bargaining power of suppliers: Low

Number of suppliers: High

In USA, there are more suppliers who supplies groceries, and other restaurant essential at lowest price. Most of the ingredients are imported and this increases the number of suppliers.

Buyer’s threat of forward integration: Low

Suppliers lack the technology and good recipe to start their own restaurants. Most of the suppliers are small players and they can’t compete with McAlister’s Deli.

Supplier’s profitability: Medium

Suppliers expect good profitability and sometimes due to the competition among the suppliers, McAlister’s Deli receives the products at lowest price.

Switching cost of suppliers product: Low

McAlister’s Deli mostly use the common raw materials to prepare its food products. Switching suppliers will not incur any additional cost.

Rivalry among the competitors: High

Industry growth: Medium

Food and restaurant industry is growing. McAlister’s Deli is expanding with its number of stores because number of customers are increasing.

Product differentiation: High

Product differentiation is important for this market. The customers recognize the brand based on the product differentiation and unique product the restaurant has. McAlister’s Deli has different set of menus and different products.

Number of competitors and its balance: Medium

The number of competitors in the market are increasing. KFC, McDonald’s, Subway, etc. are some of the strong competitors in USA market. The competitors are efficiently growing by increasing the number of branches.