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Kfc and the Global Fast-Food Industry

Autor:   •  March 8, 2011  •  Essay  •  2,692 Words (11 Pages)  •  4,714 Views

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KFC and the

global fast-food industry

(1) Using the five forces model, assess the strength of each force within the fast-food industry.

The fast-food industry includes group of companies that are offering different products and services, which satisfy customers' needs. These products and services might be considered as close substitutes for each other. Therefore, the critical task of managers is to analyze the competitive forces in the industry's environment in order to identify the threats and opportunities that the firm can protect or get benefit from. Porter's five forces model helps manager to identify and analyze the competitive force within the industry. This model stated that the increase in the strength of a particular force limits and reduces the ability of established companies to increase their prices and earn more profits. By using this model, managers would be able to identify new opportunities or threats that might affect their businesses' operations. The five forces model includes the following:

1- Risk of entry by Potential competitors.

Potential competitors are companies that are not currently operating and competing in a certain industry, but they are expected to enter the industry as they have the capability to compete with other companies if they choose. Potential competitors might face some difficulties or barriers that are formed by established companies that are already operating in the industry (incumbent companies) to discourage them from entering the industry. This is because the entry of potential competitors reduces the ability of established companies to hold their market share and generate profits. In addition, the barriers to entry increase the costs of entering potential competitors to the industry.

These barriers include the following:

• Brand loyalty.

It is basically about the buyer's preference for the products of established companies. The company can build its brand loyalty through the continuous advertising of the company's different products and brands, patent protection of product innovation that can be achieved through the research and development efforts. In addition, the firm could maintain its products' high quality and improve its customer's services and after-sales services in order to maintain its brand loyalty.

Brand loyalty plays a key role to make it difficult for new entrants to take the market share of existed companies. Therefore, it reduces the threat or risk of the entry of potential competitors as they might found it difficult and costly to break down the well-established consumer's brand loyalty.

• Absolute


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