Question

from the mc donalds - porters five forces can you please explain further the principles of it.
     - competition
     - bargaining power of buyer
     - bargaining power of supplier
     - threats of substitutes
     - threats of new entrants.

need to explain this to my prof. thanks

Answer 1

McDonald's is a fast food retail chain and there is a stiff competition in this segment with the players like Burger King, Subway and Pizza Hut among the other players. So, inter firm competition is at a high level in this industry, making McDonald's to carefully plan the pricing strategy.

Buyers have the different alternatives to buy from and it gives them the slight edge over the sellers. Here, McDonald's come up with its own differentiated products, bundled menu and pricing system that help the McDonald's to not letting buyers become strong in bargaining.

Suppliers are the same for most of the retail chains. Hence, bargaining power stands for the suppliers and if one retail chain stops buying, then they can shift to the other retail chains. So, McDonald's go into long term agreements with the suppliers to bring price stability and consistent supply of materials.

There are threats from the substitutes as well. Different types of local foods pose a challenge to the McDonald's in each country. So,  McDonald's has to project themselves as a local player and adding the local taste and flavor to the its products.

There is a threat coming from the new entrants as well. When one fast food chain, observes McDonald's making profit in one market, then the new retail chains also enter the market, eating out the market share of McDonald's. So, McDonald's has always been ready to counter this type of threat with the help of innovative products on offer,  localization and diversified menu.