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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 Kings business.
Bargaining Power of Burger Kings Customers/Buyers (Strong Force)
Consumers significantly affect Burger Kings 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 Kings customers are as follows:
Low switching costs (strong 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 Kings concerns.
Threat of Substitution or Substitutes to Burger King (Strong Force)
Substitutes technically compete against Burger Kings products. This aspect of the
Five Forces Analysis model determines the influence of substitution in the fast food
restaurant industry environment. In Burger Kings case, the following are the main
external factors that contribute to the strong threat of substitution:
Low switching costs (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 Kings 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)
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 Kings
business.