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McDonal d’ s Fi ve For ces Anal ysi s ( Por t er ’ s Model )& Recommendat i ons Mc Donal d’ sCor por at i onexpandsi nt er nat i onal l yt hr oughst r at egi est hataccountf or t heext er nalf act or si nt hei ndus t r yenv i r onment ,asi dent i fi abl et hr oughaFi v eFor ces anal y s i soft hebus i nes s.Mi c haelE.Por t er ’ sFi v eFor cesAnal y si smodelpr ov i des v al uabl ei nf or mat i on t o suppor tst r at egi c management ,es peci al l yi n addr essi ng r el ev anti s suesi nt heex t er nalenvi r onmentoft hebusi ness .Thes ei ssuesar ebased onext er nalf act or st hatr epr esentt hedegr eeofcompet i t i v er i v al r yi nt hei ndus t r y ,t he bar gai ni ng powerofcus t omer sorbuy er s ,t he bar gai ni ng powerofsuppl i er s,t he t hr eatofsubst i t ut i on,andt het hr eatofnew ent r ant s .I nt hi sFi v eFor cesanal y si sof Mc Donal d’ s,t hef or cesar emai nl ywi t hi nt hef as tf oodr es t aur anti ndus t r y .Ast he l eadi ng r es t aur antchai n busi ness i nt he wor l d,t he company i s an ex ampl e of effec t i v es t r at egi cmanagement ,es peci al l yi n deal i ngwi t h compet i t i oni n di ffer ent mar k et s wor l dwi de. Thi ss t at us s hows t hat McDonal d’ s st r at egi c di r ect i on i s appr opr i at et ot heext er nalf ac t or s ,s uc hast heonesi dent i fiedi nt hi sFi v eFor ces anal y si s. I n addr es s i ng t he ex t er nalf ac t or s det er mi ned i nt hi s Fi v e For ces anal y si s, McDonal d’ s Cor por at i on ensur es t hati t ss t r at egi es ar e appr opr i at et oc ombat ext er nalf or ces .Thecompanyf ac espr es sur ef r om v ar i ouscompet i t or s ,i nc l udi ng l ar ge mul t i nat i onalfir ms and smal ll oc albusi nesses.McDonal d’ s Cor por at i on’ s i s f ybusi nessneedsi ncompet i ng gener i cs t r at egyandi nt ensi v egr owt hst r at egi essat gerKi ng,Wendy ’ s,Subway ,andDunki n’ Donut s ,aswel l as agai ns tsuc hfir msasBur ar bucksCoffeeCompany. f oodandbev er agebusi nessesl i k eSt

Summar y& Rec ommendat i ons :Por t er ’ sFi v eFor c esAnal y s i sofMc Donal d’ s Cor por at i on Summar y.I nt hi s Fi v e For ces anal y s i s ,Mc Donal d’ s ex per i ences t he effect s of ext er nalf ac t or satv ar yi ngi nt ensi t i es,basedont hev ar i at i onsamongmar k et sar ound t hewor l d.Forex ampl e,t heU. S.mar k etpr es ent sacompet i t i v el ands capedi ffer ent f r om t hatoft heEur opeanmar k et .Thecompanymus ti mpl ementst r at egi est omeet t hese ex t er nalf ac t or s and mi ni mi z et hei r negat i v ei mpact s . Consi der i ng t he combi nat i onofmar k etcondi t i ons ,t hi sPor t er ’ sFi v eFor cesanal y si sofMc Donal d’ s est abl i shest hef ol l owi ngi nt ens i t i esoft hefiv ef or ces : 1. 2. 3. 4. 5.

Compet i t i v er i v al r yorcompet i t i on–St r ongFor ce Bar gai ni ngpowerofbuy er sorc ust omer s–St r ongFor ce Bar gai ni ngpowerofsuppl i er s–WeakFor c e Thr eatofs ubst i t ut esorsubst i t ut i on–St r ongFor ce Thr eatofnewent r ant sornewent r y–Moder at eFor ce

Recommendat i ons.Ther es ul t soft hi sFi v eFor cesanal y s i ss how t hatMcDonal d’ s Cor por at i on needs t o pr i or i t i z e t he s t r at egi ci ss ues r el at ed t o c ompet i t i on, consumer s ,andsubs t i t ut es ,al lofwhi c hex er tast r ongf or ceont hecompanyandi t s ext er nalenvi r onment .Theot herf or ces( t hebar gai ni ngpowerofs uppl i er sandt he t hr eatofnew ent r ant s )ar e al s o si gni ficantt ot he bus i nes s,al t hough t oal ower

ext ent .I nt hi sr egar d,ar ec ommendat i oni st ost r engt hent hebusi nes sbybui l di ngon t he s t r engt hsenumer at ed i nt heSWOT anal y si sofMc Donal d’ sCor por at i on.The company’ s manager s mus tf oc us on r educ i ng t he effect s ofcompet i t or s and s ubst i t ut esonr ev enuesandmar k etshar e.Mc Donal d’ smar k et i ngmi xor4Pspar t l y s uppor t ss uc h effor t .Al so,i ti sr ecommended t hatMc Donal d’ smak ei t spr oduct i nnov at i onpr oc es smor eaggr es s i v e.Whi l et hef oods er v i cei ndus t r yi ssat ur at edwi t h aggr es s i v e fir ms , new pr oduc t s can at t r actnew c us t omer s and r et ai n mor e c us t omer s .I nr el at i on,basedont hi sPor t er ’ sFi v eFor cesanal y s i s ,McDonal d’ scan i mpl ementhi gherqual i t ys t andar ds t o addr es st he f or ces ofcompet i t i on and s ubst i t ut i on.

Compet i t i v eRi v al r yorCompet i t i onwi t hMc Donal d’ s( St r ongFor c e) McDonal d’ sf aces t ough c ompet i t i on becaus et he f as tf ood r est aur antmar k eti s s at ur at ed.Thi sel ementoft hePor t er ’ sFi v eFor cesanal y si smodel t ac kl est heeffect s ofcompet i ngfir msi nt hei ndus t r yenvi r onment .I nMcDonal d’ scas e,t hes t r ongf or ce ofcompet i t i v er i v al r yi sbasedont hef ol l owi ngex t er nal f act or s :   

Hi ghnumberoffi r ms–St r ongFor ce Hi ghaggr es s i v enessoffi r ms–St r ongFor ce Lows wi t chi ngcos t s–St r ongFor ce

Thef as tf oodr es t aur anti ndus t r yhasmanyfir msofv ar i oussi z es ,s uc hasgl obal c hai nsl i k eMc Donal d’ sandl oc almomandpopf as tf oodr es t aur ant s.Thi sext er nal f ac t orst r engt henst hef or ceofr i v al r yi nt hei ndus t r y .Al s o,t heFi v eFor cesanal y si s modelcons i der sfi r m aggr es si v enes sa f act ort hati nfl uencescompet i t i on.I nt hi s bus i nes scas e,mos tmedi um and l ar gefir msaggr essi v el ymar k ett hei rpr oduct s. Thi sf ac t ori nc r easest hei nt ensi t yofcompet i t i v er i v al r yt hatMcDonal d’ sCor por at i on exper i ences .I naddi t i on,l ow s wi t chi ngcos t smak ei teas yf orcons umer st ot r ansf er t oot herr es t aur ant s ,s uc hasWendy ’ sandBur gerKi ng.Thi sext er nalf act oraddst o t he f or ce ofcompet i t i on.Thus ,t hi s el ementoft he Fi v e For ces anal y s i s of McDonal d’ sshowst hatcompet i t i oni samongt hemos tsi gni ficantext er nalf or cesf or cons i der at i oni nt hest r at egi cmanagementoft hebus i nes s.

Bar gai ni ngPowerofMc Donal d’ sCus t omer s / Buy er s( St r ongFor ce) McDonal d’ smus taddr es st hepowerofcus t omer sonbusi nessper f or mance.Thi s el ementoft he Fi v e For ces anal y si s deal s wi t ht he i nfl uenc e and demands of consumer s ,and how t hei rdeci si onsi mpac tbus i nes ses .I n McDonal d’ scas e,t he f ol l owi ngar et heex t er nalf act or st hatcont r i but et ot hes t r ongbar gai ni ngpowerof buy er s :   

Lows wi t chi ngcos t s–St r ongFor ce Lar genumberofpr ov i der s–St r ongFor c e Hi ghav ai l abi l i t yofsubs t i t ut es–St r ongFor c e

Theeaseofc hangi ngf r om oner es t aur antt oanot her( l ow s wi t c hi ngcos t s)enabl es consumer st o eas i l yi mpos et hei rdemands on McDonal d’ s.I nt he Fi v e For ces anal y si smodel ,t hi sext er nalf act ors t r engt henst hebar gai ni ngpowerofcus t omer s.

I nr el at i on,becauseofmar k etsat ur at i on,consumer scanchoos ef r om manyf as t f oodr es t aur ant sot hert hanMc Donal d’ s .Thi scondi t i onmak est hebar gai ni ngpower ofbuy er sas t r ongf or cei naffec t i ngt hecompany’ sex t er nalenv i r onment .Mor eov er , t heav ai l abi l i t yofs ubst i t ut esi sr el ev anti nt hi sext er nalanal y s i s .I nt hi scas e,t he av ai l abi l i t y ofmany subst i t ut es adds t ot he bar gai ni ng powerofcust omer s .For ex ampl e,subst i t ut esi nc l udef oodki os ksandout l et s ,andar t i sanalbak er i es,aswel l asmi cr owav emeal sandf oodst hatonecoul dcookathome.Bas edont hi sel ement ofPor t er ’ s Fi v e For ces anal y si s ,i ti s cr uc i alt o dev el op s t r at egi es t oi nc r ease c us t omerl oy al t y ,especi al l yi nt he f ac e oft he soc i oc ul t ur alt r ends out l i ned i n t hePESTEL/ PESTLEanal y si sofMcDonal d’ sCor por at i on.

Bar gai ni ngPowerofMc Donal d’ sSuppl i er s( WeakFor c e) Suppl i er si nfl uenc eMcDonal d’ si nt er msoft hecompany’ spr oduct i oncapac i t ybased ont heav ai l abi l i t yofr aw mat er i al s .Thi sel ementoft heFi v eFor cesanal y si smodel s hows t he i mpactofsuppl i er s on fir ms and t he f as tf ood r es t aur anti ndus t r y envi r onment .I nMc Donal d’ scas e,t heweakbar gai ni ngpowerofs uppl i er si sbased ont hef ol l owi ngext er nalf ac t or s :   

Lar genumberofsuppl i er s–WeakFor ce Lowf or war dv er t i cal i nt egr at i onofsuppl i er s–WeakFor ce Hi ghov er al l suppl y–WeakFor ce

The l ar ge popul at i on ofsuppl i er s weak ens t he effec tofi ndi v i duals uppl i er s on McDonal d’ s Cor por at i on.Thi s weakness i s par t l y bas ed on t he l ac k ofs t r ong r egi onaland gl obalal l i ances among suppl i er s.I nr el at i on,mos tofMc Donal d’ s s uppl i er s ar e notv er t i cal l yi nt egr at ed.Thi s means t hatt hey do notcont r olt he di st r i but i onnet wor kt hatt r anspor t st hei rpr oduct st ofir msl i k eMc Donal d’ s .I nPor t er ’ s Fi v e For cesanal y si smodel ,s uc hl ow v er t i cali nt egr at i onweak enst hebar gai ni ng powerofsuppl i er s .Al so,t he r el at i v e abundanc e ofmat er i al sl i k e flourand meat r educesi ndi v i duals uppl i er s ’i nfl uenceont hecompany .Thus ,t hi sel ementoft he Fi v eFor cesanal y s i sshowst hatex t er nalf ac t or scombi net ocr eat et heweaksuppl i er d’ scor por at e power ,whi c hi sa mi ni mali ss ue i ns t r at egi c management .McDonal pi n s oc i alr es pons i bi l i t ys t r at egy and st ak ehol der managementappr oac heshel addr essi ngt hi sf or cef r om s uppl i er s .

Thr eatofSubs t i t ut esorSubs t i t ut i on( St r ongFor c e) Subst i t ut esar easi gni fi cantconcer nf orMc Donal d’ sCor por at i on.Thi sel ementof Por t er ’ sFi v eFor cesanal y s i smodeldeal swi t ht hepot ent i aleffec t sofsubs t i t ut eson fi r m gr owt h.I nMc Donal d’ scas e,t hef ol l owi ngex t er nalf ac t or smak et het hr eatof s ubst i t ut i onast r ongf or ce:   

Hi ghs ubst i t ut eav ai l abi l i t y–St r ongFor c e Lows wi t chi ngcos t s–St r ongFor ce Hi ghper f or manc et oc os tr at i oofs ubs t i t ut es–St r ongFor c e

Ther ear emanysubst i t ut est oMcDonal d’ spr oduct s ,suc haspr oduct sf r om ar t i s anal f oodpr oduc er sandl ocalbak er i es .Al so,consumer scancookt hei rf oodathome.I n

t heFi v eFor cesanal y si smodel ,t hi sext er nalf ac t orcont r i but est ot hes t r engt hoft he t hr eatofsubst i t ut i oni nt hef as tf oodser v i cei ndus t r y .I naddi t i on,i ti seas yt os hi f t f r om Mc Donal d’ st os ubst i t ut esbec auseoft hel ow swi t chi ng cost s .Forex ampl e, s hi f t i ngf r om t hecompanyt osubst i t ut est ypi c al l yi nv ol v esi ns i gni ficantormi ni mal di s adv ant ages,suc hassl i ght l yhi ghercos t spermeali nsomecas es ,oraddi t i onal t i meconsumpt i onf orf oodpr epar at i on.Mor eov er ,subst i t ut esar ecompet i t i v ei nt er ms ofqual i t yandcus t omersat i s f ac t i on( hi ghper f or manc et ocos tr at i o) .I nt hi sel ement oft he Fi v e For ces anal y si s ofMc Donal d’ s Cor por at i on,ex t er nalf ac t or s mak e s ubst i t ut es a maj ors t r at egi ci ssue t hatr equi r es appr oac hes l i k e pr oduc tqual i t y i mpr ov ement .I nr el at i on,t hecompany’ seffor t si nc l udeencour agi ngpeopl et oeati n f as tf ood r est aur ant si ns t ead ofr es or t i ng t o subst i t ut es.Suc h effor t sar e ev i dent i nMcDonal d’ scor por at emi s si onandvi si onst at ement s.

Thr eatofNewEnt r ant sorNewEnt r y( Moder at eFor ce) New ent r ant sc ani mpactMcDonal d’ smar k ets har eandfinanc i alper f or mance.Thi s el ementoft heFi v eFor cesanal y s i sr ef er st ot heeffect sofnew pl ay er sonex i st i ng fi r ms .I nMcDonal d’ scas e,t hemoder at et hr eatofnewent r yi sbas edont hef ol l owi ng ext er nal f ac t or s:   

Lows wi t chi ngcos t s–St r ongFor ce Hi ghl yv ar i abl ecapi t alc os t–Moder at eFor c e Hi ghcos tofbr anddev el opment–WeakFor ce

Thel ow s wi t chi ngcost sal l ow consumer st oeasi l ymov ef r om McDonal d’ st owar d new f as tf ood r es t aur antcompani es .I n Por t er ’ sFi v e For cesanal y s i smodel ,t hi s ext er nalf act ors t r engt henst het hr eatofnew ent r ant s.Al so,v ar i abl ecapi t alcos t sof est abl i shi nganewr es t aur antempower snewbus i nes sest oent ert hegl obal f as tf ood r es t aur anti ndus t r y .Forex ampl e,smal lr est aur antbusi nesses i nv ol v el ow capi t al cos t scompar edt omaj orcor por at i onsi nt hemar k et .Thi sext er nalf ac t orl eadst ot he moder at et hr eatofnew ent r yagai nstMc Donal d’ s .Ont heot herhand,i ti sexpens i v e t obui l dast r ongbr andi nt hei ndus t r y .Manysmal landmedi um busi nes sesl ac kt he r es our ces t o cr eat eas t r ong br and t o mat ch t he Mc Donal d’ s br and.Thus,t he ext er nalf act or si nt hi sel ementoft heFi v eFor cesanal y si sshowst hatt het hr eatof newent r ant si saconsi der abl ebutnott hemosti mpor t antst r at egi ci ssue....