Mcdonald's Five Force Model

3. Five Force Model :

In this Five Forces analysis, McDonald’s experiences the effects of external factors at varying intensities. The company must implement strategies to meet these external factors and minimize negative impacts. In summary, McDonald’s Five Forces analysis yields the following intensities of the five forces:

(3.1) Competitive rivalry or competition (strong force)

McDonald’s faces tough competition because the fast food restaurant market is already saturated. This element of the Five Forces analysis tackles the effect of competing firms in the industry environment. In McDonald’s case, the strong force of competitive rivalry is based on the following external factors:

● High number of firms (strong force)

● High aggressiveness of firms (strong force)

● Low switching costs (strong force)

The fast food restaurant industry has many firms of various sizes, such as global chains like McDonald’s and local mom-and-pop fast food restaurants. Also, most medium and large firms aggressively market their products. In addition, McDonald’s customers experience low switching costs, which means that they can easily transfer to other restaurants, such as Wendy’s. Thus, this element of the Five Forces analysis of McDonald’s shows that competition is among the most significant external forces on the business.

(3.2) Bargaining power of buyers or customers (strong force)

McDonald’s must address the significant power of customers. This element of the Five Forces analysis deals with the influences and demands of consumers. In McDonald’s case, the following are the external factors that contribute to the strong bargaining power of buyers:

● Low switching costs (strong force)

● Large number of providers (strong force)

● High availability of substitutes (strong force)

Because of the ease of changing from one restaurant to another (low switching costs), customers can easily impose their demands on McDonald’s. In relation, because of market saturation, consumers...