Porters 5 forces

For my future, I am interested on running my own business. After learning Porter 5 force, it let me know more how to analysis a industry in micro environment. Recently, Tesco puts U.S. grocery chain in bankruptcy. The reason may come from too many competitors in US like Kroger, which was the fifth and largest supermarket chain in the world or Wholefooods, the top 100 largest retail chains in the world. And the bargaining of buyer power is high. People have many choices to switch. Thus they may need to plan a unique strategy to catch back their customers, and they have to look at different level of supermarket as their competitors, cannot just look at those with similar level.

McDonald

I would like to look at why McDonald can keep their customers and being successful in such long run even there are others potential competitors. 


McDonald in the past: 

Now: 

Threat of New Entrants: very high

• Low level of experience, people don’t need professional skills or specialist knowledge or experience, and the training is easy as well.
• Not expensive to enter the industry, the costs for foods are low.

• Low economic of scale, as the industry can buy foods in bulk, so as to get lower cost.
• Low barriers to entry, so it’s easy for new industry to enter.

Threat of substitute products: very high

• Many substitutions like Mos burger, subway, Burger king, they both are the worldwide fast foods shop and they sell similar products. So customers can easily switch for similar products. 

• The substitute can also be the other fast foods shop that selling other products.

For example:

Bargaining power of supplier: Not sure

• As I don’t know the number or size or their suppliers, so I can’t measure it. If the number and size of suppliers is high, then the supplier power is high. It is not good for company.

Bargaining power of buyer: very weak

• Although there are many substitutes, but I found they are selling in a unique way. Other than products, they sell the experience, I mean the culture and the feeling that given to the customers. They mainly are bringing a message of happiness.

Here are their slogans from the past:

1990 Food, folks and fun

1997 Enjoy more (United Kingdom)

2000 We love to see/make you smile

2000 Put a smile on

2002 Every time a good time

Thus it simply delivers a message to customers that eating in McDonald is enjoyable and joyful. This help to keep their customers loyalty. And this is the different with its competitors. Mosburger or subway doesn’t have such impressive message delivered. I think it also is the reason why they can catch their customers for not easy switch to others substitute.

Competitive Rivalry: Low

• There are many competitors selling similar products and service.
• Even though it is not commodity products. But they have high customer loyalty.

After analyze their 5 forces, I found they both have strength and weakness, which is easy to let the new industry to enter the market, however, their competitive power is very strong.

Analysis of planning my future business:

As I want to run my own business, so I am keep thinking which type of business should I operate with using 5 forces to analyze the market.

Finally, I prefer to open a chocolate industry. The reason was…. because I love to eat chocolates. Haha of course it’s not just only this reason. The main reason is  I analyze the market with 5 forces.


Threat of New Entrants: High

Although the cost and time of entry is low, and it doesn’t need much experience, but it requires specialist knowledge of making chocolate, its not quite difficult, people can learn easily. So it's very easy to enter the market.

Threat of substitute products: High

Recently, chocolate shop becomes famous, some new chocolate store were opened such as Godiva, the famous worldwide brand. Other than that, I cannot just look at the chocolate store. There also have some brand that sell in supermarket. Also the own brand in supermarket, like Sainburys, they have their own brand chocolates.

Bargaining power of supplier: Not sure

As I still don’t know the actual number of chocolate supplier in the market, but I think there are quite many since I’ve search on the web. So I guess the supplier power could be quite high.

Bargaining power of buyer: strong

Since there are many substitutes, so it’s easy for customer switching to other brands. So it’s easy for them to drive prices down. It should have something unique to lower down their power.

Maybe to design more on the outlook to attract customers.

Competitive Rivalry: Low

There are many substitutes which selling the same type of products.

The intense competition puts strong downward pressure on prices. If I want to build customer loyalty, it may take more time.

Although it looks there are more disadvantages then benefit for opening chocolate shop. It seems quite easy to enter, but if I want to get over my competitors, I have to be special.

To be unique, I hope my store is not just for selling chocolates, but also be a café so to let people gossip or chat with their friends, to offer some coffee or juice as well. And design a relax place, to let them feel eating chocolate can bring joy and relax.

Maybe something like this, 

or this,