This Five Forces analysis of Burger King accounts for competition and related factors involving the company and other firms that offer similar or related products, like burgers, beverages, and other menu items. To ensure competitiveness, Burger King must address issues pointed out in this Five Forces analysis. Michael E. Porter developed the Five Forces analysis model to determine competitive forces and 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 this Five Forces analysis, 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 reflect the significant effects of external factors in the quick-service restaurant industry environment. The company’s strategies account for and address these forces. These competitive forces affect goals for pricing, profits, and industry leadership relating to Burger King’s corporate mission and corporate vision, which aim for customer satisfaction and higher business performance relative to other restaurant chains and the competitive environment described in this Five Forces analysis case.
Summary: Five Forces Analysis of Burger King
Burger King’s business is under the influence of external factors that shape the competitive environment. Porter’s Five Forces analysis model considers these factors and their effect on the business. In the quick service/fast-food restaurant industry environment, the intensities of the Five Forces impacting 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. Based on this Five Forces analysis of Burger King, the following are applicable recommendations:
- To address the force of competition, Burger King’s marketing mix (4P) can implement more aggressive marketing strategies and tactics to gain more customers.
- To attract and retain customers, the company can improve its product quality through a multi-pronged approach. This approach may include improved implementations of Burger King’s competitive strategy and growth strategies.
- To counteract the threat of new entrants, a strategic approach is to improve the brand image and the other competitive advantages evaluated in the SWOT analysis of Burger King, 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 large multinational firms, as well as many small and medium-sized restaurant businesses. The degree of competition or competitive rivalry is examined in this aspect of Porter’s 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 foodservice companies (strong force)
- High variety of competitors (strong force)
- Consumers’ low switching costs (strong force)
The target market is saturated with foodservice firms of different sizes, including McDonald’s, Subway, and Wendy’s, as well as coffeehouses, like Starbucks. These foodservice companies shape the competitive situation examined in this Five Forces analysis. 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 low switching costs, which correspond to customers’ high ease of 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 determine Burger King’s business performance and sales revenues, as well as the quick service restaurant industry environment. This aspect of the Five Forces analysis explores the influence of customers on the company. External factors that lead to the strong bargaining power of Burger King’s customers are as follows:
- Consumers’ low switching costs (strong force)
- High availability of substitute food and drinks (strong force)
- Moderate presence of consumer organizations (moderate force)
Consumers’ low switching costs correspond to the ease of transferring from Burger King to other companies. In Porter’s Five Forces analysis model, this external factor empowers customers to make decisions that directly affect the foodservice business. In addition, the many substitutes for Burger King’s products give consumers more choices. The presence of consumer organizations, such as Consumer Reports (Consumers Union) and Better Business Bureau, further increases the bargaining power of buyers. Consumer preferences and the external factors explored in the PESTLE/PESTEL analysis of Burger King influence the bargaining power of customers indicated in this Five Forces analysis.
Bargaining Power of Burger King’s Suppliers (Weak Force)
Suppliers affect the quick service restaurant industry environment through pricing, supply control, and related variables. In this Five Forces analysis case, 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)
- Suppliers’ low forward integration (weak force)
There are many suppliers that compete to provide their products as business inputs for Burger King’s operations. Also, there is an abundance of supply of raw materials and ingredients used to produce and prepare the food and beverage items on the company’s menu. In this Five Forces analysis of Burger King, these conditions limit the influence of suppliers on the fast-food restaurant chain. Moreover, most suppliers in this industry have low forward integration, which corresponds to their weak control over the distribution and sale of their products to Burger King. Based on this aspect of the Five Forces analysis, the bargaining power of suppliers is not a major strategic concern for the foodservice business.
Threat of Substitutes or Substitution against Burger King (Strong Force)
Substitutes compete with Burger King’s products. This aspect of the Five Forces analysis 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:
- Consumers’ low switching costs (strong force)
- High availability of substitute food and beverages (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, ready-to-eat or microwavable meals, 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 have a significant competitive and strategic effect on Burger King’s business.
Threat of New Entrants or New Entry (Moderate Force)
New entrants can disrupt Burger King’s business. 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:
- Consumers’ low switching costs (strong force)
- New entrants’ moderate cost disadvantage (moderate force)
- Moderate cost of doing business (moderate force)
Low switching costs indicate that it is easy for consumers to transfer from Burger King to new firms (new entrants). For example, instead of going to the company’s restaurants, customers can choose to dine at new local restaurants competing in the market. However, new entrants face a moderate cost disadvantage. Large firms, like Burger King, benefit from economies of scale that many new firms do not have. Also, the moderate cost of doing business poses 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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