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Porter 5 Forces in Food Industry - Coggle Diagram
Porter 5 Forces in Food Industry
Threats to New Entrant
Threat towards the entry of a new entrant is very high in case of the food industry.
Cheaper to start up a restaurant than any other business - just need own funding to start up a business
To sustain in the marketplace need to consider on the cost advantages, access to inputs, economy scale and strong brand identity.
New fast food company may face difficulties to set up in the market (due to high branding and value of existing fast food) eg: KFC, MCD
Substitutes of Existing Products
Increases in number of options - customers have multiple choices (casual restaurant, fast food, ready to eat meals, prefer to eat-at-home)
Eg: During economic crisis, customer chose to eat at home and opt to fast food
Threat arises when there's a competition in products/service
Bargaining Power of Buyers
Pressure that the customer put on business to get them to provide higher quality services for lower price.
In food service industry, there are a few factors that you need to analyze:
How many buyers are there
How much does it cost them to change from your services and products to those of a rival?
Are your buyers strong enough to dictate their terms and conditions to you?
Bargaining Power of Suppliers
A diverse supplier base limits supplier bargaining power.
The fewer the supplier, the more the power obtained.
Suppliers has its potential to raise the price.
The fewer suppliers to an industry, the more a company would depend on a supplier..
Competitive Rivalry
Set terms and deals to achieve higher sales and profits.
Rivalry competition is high when there are just a few businesses selling a product or service, when the industry is growing and when consumers can easily switch to a competitor's offering for little cost.
When competitive rivalry is low , a company has greater power to charge higher prices.