t food industry.
Indicators Case facts Score
Vigorous price competition As case indicated because of the price competition, 2 signature sandwiches, the Big Mac and Whopper down to price for only 99 cents in 2002, (MARINO, 2005, p.6), however, the price competition was abated recently, most of companies have shifted their competitive tactics to focus on building customer loyalty. (MARINO, 2005, p. 6). So the score on this aspect was 7 7
Offer better features etc. In response to the trends that customers more concern on quality, many of the restaurants renew efforts to offer healthier menu items, and several fast-food companies were testing new ideas and menu items on kids' menu to show they were concerned for children's health. (case 219, p. 6) so the score of fast food industry in this aspect is high as well. 9
Actively Establish positions in foreign markets As case indicated most of the fast food companies realized the domestic market (US market) was rapidly becoming saturated and begin to see the crucial importance of international expansion; Indeed, In 2002, the US sector of the company was beginning to comprise less than half of total system wide restaurants. (MARINO, 2005, pp. 8-9), So the score on this indicator is very high 8
Frequently introduce new and improved products In response to the ever changing tastes of the customers, most of the companies in the fast food industry had to frequently introduce new and improved products, there are numerous examples in the case, for example, subway had begun replacing cookies and soft drinks in kids' meals and in a few select locations McDonald's was replacing French fries with apple slices (MARINO, 2005, p. 7), so in terms of this indictor, the score should be high as well 9
Slow growing market As case indicated, the growth rate in the future will be only 2 % annually for the fast food industry in US market, which will intensify the rivalry as well (C217, p.5), while the growth at international market is still quite strong described by the case. 6
The number of competitors From the data provided by the case, the top ten chains accounted for 88.88% market share (C217, p.5), so the number of competitors in the fast food industry was a lot, thereby the competition was heating up, for example, the case mentioned in response to the trend that customers increasingly focus on value, major players in the industry had implemented a version of low-cost menu, which was firstly introduced by Wendy. 7
Products more standard As I can imagine most of the products in the fast food industry are can standard, there are either hamburger, salad or French fries, which will lead to the intensity of rivalry 7
Buyer's switch cost There is almost no switch costs for the buyers 9
Competitor launch moves to bolster their standing Due to the less success expanding overseas, some players in the industry was forced to turn to domestic operations and continuing growth through acquisition, which exactly match the point brought by Thompson (2005, p.54) Firms that are losing ground or in financial trouble often react aggressively by acquiring smaller rivals, which will in turn intensify the rivalry. 7
Average score 7.5
Based on the above analysis and score, the Rivalry in the fast food industry can be considered fierce to strong as described by Thompson (2005, p. 55) when the battle for market share is so vigorous that the profit margins of most industry members are squeezed to bare-bone levels.
The Po
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