Burger King is one of the top competitors in the global quick service/fast-food restaurant market. The company directly competes against firms like Wendy’s and McDonald’s. To ensure competitiveness, Burger King must address issues pointed out in its Five Forces analysis. Michael Porter developed the Five Forces analysis model to determine external factors that influence firms’ performance. In Burger King’s industry environment, the influences of major competitors are just one of the main considerations. Based on the Five Forces analysis model, Burger King must also consider strategic issues linked to suppliers, consumers, new entrants, and substitutes.
This Five Forces analysis of Burger King shows that competition, customers and new entrants are the most important external factors in the quick service restaurant industry environment. Burger King’s strategies must account for and address these forces.
Overview: Burger King’s Five Forces Analysis
Burger King’s business is under the influence of external factors. The Five Forces analysis model considers the factors that most significantly affect the business. In the quick service/fast food restaurant industry environment, the intensities of the Five Forces on Burger King are as follows:
- Competitive rivalry or competition (strong force)
- Bargaining power of buyers or customers (strong force)
- Bargaining power of suppliers (weak force)
- Threat of substitutes or substitution (strong force)
- Threat of new entrants or new entry (moderate force)
Recommendations. Considering the intensities of the five forces, it is suitable for Burger King to focus on competition, customers, and the threat of new entrants. To address the force of competition, Burger King can implement more aggressive marketing. To attract and retain customers, the company can improve its product quality. In addition, to counteract the threat of new entrants, Burger King can improve its brand image to maintain high performance despite saturation in the fast food restaurant industry environment.
Competitive Rivalry or Competition with Burger King (Strong Force)
Burger King competes with major firms like McDonald’s and Wendy’s. The degree of competition is examined in this aspect of the Five Forces Analysis model. The following are the main external factors that create the strong force of competitive rivalry against Burger King:
- High number of competitors (strong force)
- High variety of firms (strong force)
- Low switching costs (strong force)
The quick service restaurant market is saturated with firms of different sizes. Burger King must also consider the variety of firms in terms of types of products, market focus, and other characteristics. In addition, competitive rivalry is strong partly because of the low switching costs, which correspond to customers’ ease in transferring from Burger King to other firms. This aspect of the Five Forces analysis shows that competition is a main concern in Burger King’s business.
Bargaining Power of Burger King’s Customers/Buyers (Strong Force)
Consumers significantly affect Burger King’s performance and the quick service restaurant industry environment. This aspect of the Five Forces Analysis model explores the influence of customers on firms. The main external factors that lead to the strong bargaining power of Burger King’s customers are as follows:
- Low switching costs (strong force)
- High substitute availability (strong force)
- Moderate presence of consumer organizations (moderate force)
The low switching costs correspond to the ease of transferring from Burger King to other companies. This condition empowers customers to make decisions that directly affect Burger King’s business. In addition, there are many substitutes to Burger King’s products, thereby giving consumers more choices. The presence of consumer organizations, such as Consumers Union and Better Business Bureau, further increases the bargaining power of buyers. Burger King must consider customers’ demands as one of its main business concerns, as indicated in this aspect of the Five Forces analysis.
Bargaining Power of Burger King’s Suppliers (Weak Force)
Suppliers affect the quick service restaurant industry environment through variables like pricing and supply control. The impact of suppliers on firms like Burger King is considered in this aspect of the Five Forces analysis. The following are the major external factors that create the weak bargaining power of Burger King’s suppliers:
- High number of suppliers (weak force)
- High overall supply (weak force)
- Low forward integration (weak force)
There are many suppliers that compete to provide their products to firms like Burger King. In relation, there is an abundance of supply of raw materials and ingredients. These conditions limit the influence of suppliers on Burger King and other fast food restaurant firms. Also, most suppliers in this industry have low forward integration, which corresponds to their degree of control on the distribution and sale of their products to companies like Burger King. Based on this aspect of the Five Forces analysis, suppliers’ bargaining power is the least of Burger King’s concerns.
Threat of Substitution or Substitutes to Burger King (Strong Force)
Substitutes technically compete against Burger King’s products. This aspect of the Five Forces Analysis model determines the influence of substitution in the fast food restaurant industry environment. In Burger King’s case, the following are the main external factors that contribute to the strong threat of substitution:
- Low switching costs (strong force)
- High availability of substitutes (strong force)
- Satisfactory performance of substitutes (strong force)
Customers can easily transfer from Burger King to substitutes (low switching costs). In addition, there are many substitutes to choose from, including fine dining restaurants and home cooking. These conditions strengthen the threat of substitution against Burger King. Also, most of these substitutes are satisfactory in terms of taste, cost, quality, and other criteria. This aspect of the Five Forces analysis indicates that substitutes significantly affect Burger King’s business.
Threat of New Entrants or New Entry (Moderate Force)
New entrants can disrupt the performance of Burger King. The effects of new entry on the fast food restaurant industry environment are examined in this aspect of the Five Forces analysis. The external factors that lead to the moderate threat of new entrants against Burger King are as follows:
- Low switching costs (strong force)
- Moderate cost disadvantage (moderate force)
- Moderate cost of doing business (moderate force)
Again, the low switching costs indicate that it is easy for consumers to transfer from Burger King to new firms (new entrants). However, new entrants face moderate cost disadvantage because large firms like Burger King benefit from economies of scale that many new firms do not have. Also, the moderate cost of doing business could pose a financial challenge to new entrants. Based on this aspect of the Five Forces analysis, the threat of new entrants is a considerable issue in Burger King’s business.
References
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