Threat of New Entrants - Moderate
The industry is dominated by a number of international Quick Service Restaurant (QSR) chains, including McDonald’s, Burger King, Pizza Hut, KFC and Domino’s (Datamonitor, 2010). These global brands are extremely valuable, boasting strong customer loyalty and recognition; indicating consistent quality and service. Key players including McDonald’s, adapt their marketing orientation to suit local cultures and social norms (Datamonitor 2010), strengthening the brand and avoiding consumer alienation. New players struggle to compete with incumbent firms, as their brands are unknown and advertising campaigns are expensive. Established chains have the resources to retaliate aggressively through pricing promotions, deterring new players from entering the marketplace. New entrants lack economies of scale, which existing chains have developed over time, and utilise to remain competitive in this low-margin, high-turnover industry. However, social media websites have evened the playing field in terms of marketing communications; they allow firms to efficiently communicate their message inexpensively. Initial capital outlay and fixed costs are low, encouraging new entrants (Datamonitor, 2012).
Threat of Substitutions – Moderate
Substitutes are readily available: food can be purchased almost anywhere, through foodservice or retail. However, convenience is the value-adding component of the service which reduces the threat of substitutes. Consumers can cook at home cheaply, but this lacks the convenience element which people require nowadays. Ready-meals are therefore a more substantial threat, competing with fast-food on price as well as convenience (Datamonitor, 2012). If you are ‘on-the-go’ however, without access to a microwave, QSRs are almost uncontested if you want a hot meal in a short timeframe. With many differentiated players