Q: using Porter’s 5 forces model, identify the competitive pressures facing McDonald’s. How can the company surmount these pressures?

Using Porter’s five forces model – the first force that can affect McDonalds is buyer power. Since there are no switching costs for a customer to leave McDonalds and go else where, McDonald’s has to do things that will keep the customers coming back. They keep competitive prices and have added a value menu for those customers that make their decisions based on price. In the recent years with the market crash and the unemployment rate at an all time high the value menu has likely kept customers from giving up fast food, sometimes what’s on the value menu is cheaper than cooking a meal and definitely cheaper than going to a restaurant to eat. They also add to their menus based on changing customer tastes. They have added several salads and grilled sandwiches because the country is taking more importance in the calories and the healthiness of what they are eating.

The second force that may affect McDonald’s is Supplier Power. Given their massive size, McDonald’s can take advantage of lower prices due to economies of scale. The power lies less with the supplier and more with McDonalds. Because McDonald’s is so large, the suppliers don’t have much power to drive up the prices of materials because they want to keep McDonalds as a customer, and they know the suppliers’ competitors would love to gain McDonalds as a customer. Losing a customer as huge as McDonald’s could break the supplier. McDonald’s also has to make sure the supplier can supply, given the large scale they need they need to make sure the supplier can meet their demands.

The third force is threat of substitute products or services. In the case of McDonald’s there are many other fast food chains to choose from. The main competitors I see are Burger King, Jack in the