Q 1
Bargaining Power of Suppliers—low
The bargaining power coming from suppliers within the fast food industry is usually weak. Rather than growing potatoes, cows, coffee beans and etc. by themselves, most restaurants within the industry get their food from various farmers, butchers, packaging companies and partners. There are thousands of suppliers for restaurants to choose from and they can select their suppliers through the competitive bidding market. It will determine the cost of their products. Restaurants also tend to build long-term and trusty relationships with its suppliers, which makes bargaining power of suppliers weak to some extent. For example, McDonald’s has cooperated with some suppliers for more than 25 years. As a result, this force is typically weak in the fast food industry.

Bargaining Power of Customers—low
Although customer switching costs to regular restaurants are almost zero, the fast food industry in the U.S.A. does not worry too much about its customer volume, frequency and loyalty. First, the nature of the fast food industry attracts customers for its fast service, standardized taste and quality of food and low price. Second, the United States has the largest fast food industry in the world. Over 25 percent of Americans consume fast food every day. This volume of customers keeps customer bargaining power low.
Threat of Substitutes—high
Consumers are almost free to choose where to eat, so switching costs are nearly zero when they choose either to dine in some substitutes or even eat at home. In the quick service food industry, there are so many firms and restaurants with similar products, more options and reasonable price. Customers think of some fast casual restaurants as being comparable or better in terms of the quality of fast-food products, such as Panera Bread, Jason’s Deli and Noodles & Company. Moreover, fast-food