Overall strength of competitive pressures

This answer is a summarization of the deeper analysis performed in a Porters five forces analysis

The bargaining power of the buyers is fairly weak when it comes to the actual buying situation. But since there are so many different available alternatives to choose from, then the buyer has some power in the form of choice. Their choice of fast food provider can easily be changed if one fast food provider does not meet its expectations. This is further enhanced by the fact that a lot of the products in the market are the same.

Furthermore the buyers have a lot to say when it comes to public attention on the ever-threatening problem: obesity. Movies like “Super Size Me” (2004) shows what can happen when some consumers are not happy with the industry or a specific company in the industry.

The bargaining power of the suppliers is very different. Some suppliers are vital to the industry and out scales the companies in the industry. Thereby they are in a very good position to set terms when dealing with the industry. Other suppliers on the other hand are powerless when it comes to setting terms. The smaller suppliers of raw materials like potatoes, meat, vegetables and so on and so fort are in a far worse situation. There are a lot of suppliers available in the market, shifting costs are fairly low, and the products are standard, which gives a very competitive supplier market and this favours the fast food industry.

New entrants in a market with yearly revenues on 100 billion are very likely. Though the global fast food chains make it hard to gain access to the industry on a larger scale, then it would be easy to gain access on a smaller more local scale. On a smaller scale the companies would not draw to much attention on itself or go in direct competition with the larger companies, but still be able to deliver the generic product of fast food; convenience.

Furthermore the global brands have established such high brand value and power so it would make it very difficult to compete with those brands.

A fast food restaurant can be opened with a fairly small amount of money, which again gives an incentive to smaller entrepreneurs to try its luck on a local basis.

There is a threat of substitute products in the fast food industry. Since ‘convenience’ is the generic product of the fast food industry, there are other products and industries that contain the same generic product. One example is the frozen reheatable prepared food industry. This is an industry that has been growing for the last years and through technological development of the processes in production, the quality of the frozen food is at a competitive level. This is not to be considered a distinctive thread at the moment, but as the fast food industry grows, then does the competition of new industries that wants a bite of the 100 billion dollar cake.

The fierce competition of the global fast food companies have continued to get stronger singe the market have been saturated. The fierce competition in the American market has forced the largest players to look elsewhere for long term sustainable growth. But still the American market is by far the largest market, and the companies are spending millions on constantly revitalising themselves and making new attempts to gain market shares of a market growing at minimal speed.