Srita

Exercise 1: The Five Contending Forces and the PEST Analysis

Assignment:

Choose one of the following commonly known companies and conduct an analysis of the company's environment according to the five contending forces and the PEST analysis!

FIVE CONTENDING FORCES

Industry competitors (Intensity of rivalry).

We find Burger King as the main competitor of McDonald’s, since it iscompeting in the same industry (Fast Food Burger industry) and It is a well known company around the world.

Other competitors are Wendy´s and Rapid Burger. Companies that offer a similar products like burgers, fries and soft drinks. Those companies use a similar technology in order to satisfy the same necessities.

But we think that these competitors do not have the strength of McDonald’s inthe market based on big marketing campaigns, with the associated image as the typical American food and the American way of life. Those things make the McDonald’s brand a very well-known one, especially much more than its main competitors. In spite of the wild competitiveness in the industry McDonald’s is a clear leader in the market.

Substitutes

We find a lot of substitutes in this fast foodmarket (Pizza Hut, KFC, Subway, Pans & Company, Noodels and Kebab stands…) so we can say that there is a great threat in substitute products although none of those compete with the same food as McDonalds. They satisfy the same necessity with a different technology. Just Burger King is really threatening McDonald’s.

New competitors

In our globalized world new competitors very often are thelaunching of new franchise branches, though it is really difficult for them to get in the McDonald’s sector because of the knowhow, entry barriers and scale economies.

This company is in a monopolistic market in which the entry barriers are low ones since everybody could start a business in this market because its products do not need a high technology neither a great initial investment.However, McDonald’s is the leader of the sector and a huge company, so the possibilities of a new competitor entering to compete around the world are very low. A great investment is needed, and a good co-ordination to run a company as McDonald’s.

Buyers

McDonald’s knows perfectly their target markets and sell different products for different customers groups. We can find two big groups in thecostumers of McDonald’s, one of them is children between 7 to 14 years old. The other group is adults. While children look for have fun and gifts, Adults look for a healthy, nutritive and varied food. Therefore McDonald’s design their menus thinking on the necessities and characteristics of its customers.

McDonald’s products are offered and thought for a medium class customer or low medium classcustomer, that’s a good point because of those are the most of the developed and developing countries. In the target customers are the families and all that people who do not have time enough to cook or feed themselves in other restaurants or are very concern about the price of the menu.

As we already know, McDonald’s has a great power and none of its customers has any bargaining power toinfluence in the company strategy. However some lobbys or customer groups have achieved changes in the nutritive composition of its products and the addition of new and healthier products.

Suppliers

McDonald's needs to search high quality raw materials in order to maintain the pillars of the organization.

McDonald's with its suppliers created what its competitors recognize as the mostintegrated, effective and original supplies system that exist in the food service industry. McDonald's sets the standards of uniformity and quality of the inputs. And it requires all suppliers to fulfill strict quality control requirements and good manufacturing practices.

McDonald’s has, generally, a high bargaining power with its suppliers. It has, especially, with its small suppliers as the meat...