Kfc Porter Five Forces

Kfc Porter Five Forces

1) Competition among the various fast-food chains

a strong competitive force

? Competition is strong for several reasons:

– Slowing industry sales growth.

– There is intense jockeying for sales and market share among

existing chains fresh competitive moves are made frequently by

one or more players in order to gain business at the expense of

their rivals.

– High first mover rewards (e.g.., McDonald's has created brand

awareness for its chicken sandwich by introducing its sandwich

before KFC).

– Low customer switching costs increase pressure on chains to

attract customers through advertising, new products, and price

discounts

(1) Rivalry among the various fast-food chains

a strong competitive force

? The weapons of competition are:

1. Price

2. Quality

(3) Bargaining power of buyers

A moderate to weak force

Ć A moderate to weak force in terms of individual bargaining

power and leverage over the terms and conditions of sales.

ƒÜ Consumers as a group do have some ¡§bargaining power¡¨ in

the sense that if a chain/location is unable to attract a

sufficient volume of traffic and sales, it must respond by

improving the attractiveness of its product offering or go out

of business. There can be no denying that:

1. Fast-food consumers are price sensitive.

2. Fast-food consumers want convenience and are location sensitive.

3. Fast-food consumers are quality sensitive

4. Fast-food consumers switching costs are low.

(4) Bargaining power of Suppliers

A relatively weak force

Ć The suppliers to fast food industry have very little leverage

and bargaining power for numerous reasons:

1. Their customers are large and buy in bulk

2. The item supplied are generally commodity items (paper products,

plastic products, chicken, hamburger patties, etc., are fairly

standard items)

3. The items being purchased are offered by many different

suppliers and can, in many instances, be sourced from several

different suppliers (based on who offers the best prices, delivery,

and other terms and conditions)

4. Backward integration by fast food chains is sometimes an option.

5. Purchaser switching costs tend to be

(5) Threats of new entrants

A Moderately strong force

Ć A moderately strong force and growing stronger as

existing chains look to new geographic markets for

expansion, especially in countries where consumers my

be attracted to fast-food products and there is significant

growth potential for fast-food enterprises to establish

new locations.

(5) Threats of new entrants

A Moderately strong force

? New comers (especially new start-up) have several

disturbing entry barriers to overcome:

1. Slowing industry growth rate