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Assignment 2 Model Answer

The document discusses Porter's Five Forces model and its application to analyzing competition within the fast food industry and McDonald's strategies. It covers the five forces of competition, barriers to entry, threat of substitutes, bargaining power of suppliers and buyers. It also examines McDonald's business strategies of cost leadership, diversification, and international expansion.

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9 views3 pages

Assignment 2 Model Answer

The document discusses Porter's Five Forces model and its application to analyzing competition within the fast food industry and McDonald's strategies. It covers the five forces of competition, barriers to entry, threat of substitutes, bargaining power of suppliers and buyers. It also examines McDonald's business strategies of cost leadership, diversification, and international expansion.

Uploaded by

maram.e.habib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Porter(1985) has introduced five factors and it is called Porter's Five Forces.

Porter's Five
Forcesframework should be discussed here as a method for examining competition of a business
market.It determines the competitive intensity and the desirability of an industry in terms of its
profitability. There are five forces as Porter’s theory they are competition, barriers to entry, the
threat of substitutes, bargaining power of suppliers, and buyers.CompetitionCompetition or
rivalry in the fast-food industry is very important and competitive as there are somany fast food
businesses trying to compete. To achieve a competitive advantage in this highlycompetitive
market place, the products and services of the fast-food restaurant should beinnovative and
highly customer-centric. Under this view, McDonald's has surpassed this trade afterit is the
establishment in 1940. As a leading fast-food restaurant, McDonald has started withMcCafe as a
part of the competition. As it is a great privilege for the company to be a majorcompetitor in this
fast food industry. McDonald's should focus on customer taste and preferencesof the customers
in order to compete with this enormous restaurant industry.Barriers to entryThere are so many
barriers to enter into this industry and to establish brand loyalty likeMcDonald's. Research and
development should be highly focused on cost involvement. Highdifferentiation is very
important to get a huge reputable brand name.Threat of SubstitutesThe threat of substitutes is
also an industrial force in the food chain industry. There are so manyalternatives in this industry
and a wide range of commodities available for the focused customers
whether it is substitute by McDonald’s products.
For instance, these substitute products may include products purchased from the local
grocerystore, food from sit-down restaurants, or delivery foods such as pizza

Bargaining Power of Suppliers and Buyers


Bargaining power of suppliers and buyers is also an industrial force for McDonald’s. It is very
low
within the fast-food industry on the relative size and attentiveness of suppliers. Apart from
that,the differentiation of the contribution supplied is also very low in this industry. On the other
side,if the main ingredient of the products is not available in the market place, the high barraging
powerof suppliers will be automatically created.The bargaining power of buyers always allows
customers to seek out other competitors in themarket place. Apart from that, buyers can always
find alternative suppliers in this industry as their benchmarked, undifferentiated. If
the price is fixed, customers will be unable to bargain. Underthis situation, there is a very low
bargaining impact of buyers in the fast-food industry

The corporate level strategy of McDonald's focuses on diversification initiatives that create
valuefor stakeholders of the company. It is the process of expanding its operations by entering
into newmarkets. For that, there are some options such as mergers and acquisitions, strategic
alliances, joint
ventures. McDonald’s has pursued related diversification through its relationships with
franchisees.
International Strategy of McDonal
d’s is also a diversification strategy. Before implementing this
strategy, it should be determined why an industry in a given country is more (or less)
successfulthan the same industry in another country. This is very advantageous as it takes
advantage ofopportunities, attains economies of scale and it helps to increase the size of the
potential market

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activities with regard to its future goals & objectives. It is an integrated approach to be leaders
inthe market place over the competitors. It will provide overall direction to achieve
competitiveadvantage by using its most valuable assets in the organization.We can apply two
theories in regard to strategies. They are external fit and internal fit of thestrategies. External fit
means that HR strategies are lined and connected with business strategies.Internal fit means
accomplishing by developing a coherent range of interconnected and mutuallyreinforcing HR
policies and practices.
The view that there are “best practices” in which all firms can advantageously adapt. Best
practices
produced by Pfeffer (1994) are Employment security, Elective hiring, Self-managed
teams, Highcompensation contingent on performance, training to provide a skilled and motivated
workforce,Reduction of status differential, Information sharing. These strategies are business
level, corporatelevel and international level strategies.Business strategy is a long term planning
of a business. It aims specific goals and targets within aspecific time with the available
resources. It is considered as a management plan built by the toplevel of management in order to
make the business runs in profit while achieving sustainablecompetitive advantage. The business
strategy of McDonald's is cost leadership. It meansminimizing costs to deliver products at a low
price. McDonald's is a low-cost provider in the fast-food industry other than competitors.The
corporate level strategy of McDonald's focuses on diversification initiatives that create valuefor
stakeholders of the company. It is the process of expanding its operations by entering into
newmarkets. For that, there are some options such as mergers and acquisitions, strategic
alliances, joint
ventures. McDonald’s has pursued related diversification through its relationships with
franchisees.International Strategy of McDonal
d’s is also a diversification strategy. Before implementing this
strategy, it should be determined why an industry in a given country is more (or less)
successfulthan the same industry in another country. This is very advantageous as it takes
advantage ofopportunities, attains economies of scale and it helps to increase the size of the
potential market.
Conclusion
Generic strategies of the competitive advantage model suggested by Potter (1985) can't stop
orexclude the authority power by managers over the employees in the company. For cost
reduction,

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running parallel to the developments and change is simultaneous. Potter (1985) has suggested
amethod to achieve competitive strategy including four generic strategies. Before applying
genericstrategies to the organization, managers should consider the external environmental
factors. It isessential to assess when a company adopts a low-cost strategy in order to achieve a
competitiveadvantage. It is a fact that to be highlighted is understanding market patterns. Apart
from that,other external environmental factors should be considered. The other thing that is to be
highlightedis creating economic value while achieving a competitive advantage.Further to
implement low-cost strategy, they have adopted an added value element for the serviceof the
McDonald. Their HR strategy is developed with the linking business strategy. They haveadopted
an HR strategy addressing employee empowerment and commitment. Work as a team isone of
the HR strategies to achieve competitive advantage through people empowerment.

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