HOMEWORK

Marketing Management for Strategic Advantage

ASSIGNMENT

Create a Porter Analysis of the sector and company you have chosen. Don't only draw
the graph but explain the relevant aspects of each factor (suppliers, clients, current
competitors, etc). The competitive strategy that you finally choose has to be also
justified.

GROUP A
ARRANZ, Nuria; BERNARD, Matthew; MOURA CARDOSO, Júlia; MONZEL, Martin
ANSWER

We decided to analyze the fast food sector based on the 5-forces Porter Model, using the
market leader McDonald’s.

Summary of Strategy

At the beginning of the 2000s, McDonald’s was facing a lot of pressure from European activist
groups and environmental organizations regarding their business tactics. The company decided
to change its corporate colors to yellow and green. During 2007, they began to make different
changes in the refrigeration of food, introducing more natural foods and later changing the
colour of the logo to give a more ecological image to the company. The first country to adopt
these changes was Germany, doing so within a two-year period. Nowadays, all restaurants in
Europe have this image.

At the time of the logo changes, the company considered that not all countries were prepared
for this change, and for this reason many of the restaurants located in America continue to
have the same image. Despite this, they decided that the way forward was “green”, giving the
restaurants a more ecological and comfortable image. Taking into account the 5 analyzed
forces¹, to develop the change, we believe that McDonald’s most famous strategy has been cost
leadership. However, other strategies are also being included: primary demand development,
defensive strategy and offensive strategy. The company continues to be the leader in the
sector, to grow in the countries where it already operates, to keep customers who already have
loyal customers by offering them new varieties, mainly focusing on the new market trends.

Industry Competitors

Measured by revenue, in 2019 McDonald’s held a 21.4 % share of the international fast food
market, followed by Starbucks (7.5%), KFC and Subway (both 2.8%), Domino’s Pizza (2.6%) and
1.8% for each of Pizza Hut and Burger King. Although clearly the global market leader, these
shares need to be considered sensitively. So Burger King in the USA used to clearly and
consistently be number two in sales, before 2020 when Wendy’s overtook this rank for the first
time. Globally though, 58.4% of the fast food market is covered by “others”. These local
competitors can adapt perfectly to the regional market (e.g. purely vegetarian food in Northern
India) or just sense new trends in the international cuisine which McDonald’s does not offer
(e.g. the success story of Sushi as a substitute around the world). For these reasons,
McDonald’s needs to react globally and regionally to special habits and trends.

Substitutes

The fast food restaurant industry is complex and thus introduces interesting challenges for
McDonald’s. Consumers may have an interest in accessing food quickly, in nutritious food, in
ethically-produced food, or in any combination thereof. As a result, many substitutes exist,
differing in what consumer needs are being addressed by fast food companies. For example,
those wanting healthy food quickly can access Chipotle, known for promoting ethical food
production supply chains; Subway has long been healthy through smart dietary choices, while
many delis or grocery stores offer ready-made, healthy meals. These options often highlight
nutritional information on the menu, websites, or apps. For those consumers concerned about
holistic agricultural practices, many independent grocery stores, kiosks, and artisanal outlets
promote nutritious yet ethically-produced meals. McDonald’s has thus had to take a
Leader-Defensive strategy in this context.

New entrants
New entrants are a threat that can affect the chain in terms of market share or income. The
new entrants' threat here is moderate. If we analyze the potential substitutes, we could say
that it is super easy for a local restaurant to develop their store, so the risk of a new restaurant
that can substitute McDonald’s product is high. At the same time, it is super costly to create a
fast food chain that offers something similar, so the risk of having a similar product is quite low.
In terms of costs, the consumer could buy many options with the same cost, the switching
costs threat is high. One good and interesting example to mention again is Subway, a younger
fast food chain and theoretically healthier. Subway’s strategy has always been to use lighter
colors and to focus on the freshness of products, something that Mcdonald's had not been
focusing on for a long time. With the new market trends, McDonald’s started to move their
strategies towards a more conscious kind of marketing.

Suppliers

McDonald’s has seen bargaining power shift increasingly towards suppliers, especially with
their meat and beef products. McDonald’s is in a race to establish verifiable sustainable
production standards, ensure their customers understand them, and secure contracts with
agriculture producers on a global scale. With more novel products such as meat-alternatives,
there is high demand and few supplier options, thus suppliers have become even more
competitive in this niche. However, a weakness for such suppliers is to meet the massive
demands of an international market leader. McDonald’s strategy with suppliers is consistent
with the Leader-Defensive strategy, because even with these relatively new challenges, the
bargaining power of McDonald’s towards suppliers is still a lot higher.

Buyers

With a growing demand of customers to eat healthy food, and with many alternatives on the
(international) fast food market, McDonald’s was forced to react to their buyers' needs. In
2003, McDonald’s introduced additional salads to their product portfolio. In 2012, the calorie
counts were introduced to all menus, further vegetarian burgers were added or with the
McPlant, just in September 2021, the first vegan burger was launched (unlike Burger King this
burger is prepared separately from the meat). Furthermore, McDonald’s removed all artificial
additives from its classic burgers in 2018, reacting to the buyers’ demand for organic and
natural food. Additionally, the childrens’ Happy Meal reduced the less-healthy ingredients (e.g.
sodium and sugar). Although these quality improvements have been made, the bargaining
power of buyers allowed McDonald’s to remain in the low-cost sector.
Attachments

¹ 5 analyzed forces