McDonalds Case Study

Considering the potential threat from new entrants it could be stated that it is LOW. The case explains that the industry is one that has an existing competition. Competition is very high in that it could easily counter any new entrants. The industry members would easily combat such new entrants. Furthermore the industry competitors are well established with operations in other industries (pg2). For instance McDonalds has a large presence in the fast food industry which gives them more insight in operating in this industry. Competitors such as Wendy’s and Starbucks also bring along a standard and reputation which would be hard to replicate (pg5). The product in the industry being coffee is often a personal choice which is often times unique to an individual. The loyalty that the individual poses towards a particular brand is hard to counter by even the existing companies in the industry. Operating costs along with the start-up costs required is on the high side. Companies such as McDonalds have different sources of revenue coming in from other industries which would be hard to replicate by the potential new comers. The industry does have growth in its market share as well as the revenues. This would be a positive factor for any new comers who would potentially be entering the industry. However when considering the overall factors mentioned the threat from new comers is considerably LOW. The industry being the Canadian retail industry would ideally have pre-set standards which would be required to adhere to. Safety and food standards would not necessarily be a disadvantage to new entrants, but could be costly to adhere and implement. The method of operation within the industry members such as Tim Horton’s and McDonalds itself is via franchises and independent outlets. This is not a necessity to be followed by new entrant, however this allows for wider regions to be covered by the companies and also to maintain a set standard throughout the region they operate in.

The second force to be analyzed is the buying power posed by the suppliers in the industry. The case states that McDonalds Canada based its success on a “three – legged stool” (pg6) which consisted of the company, the suppliers and the franchisees. This states that the suppliers were a major part of the company and also a supporting factor to the company. Considering the suppliers such as the Arabica coffee, Coca Cola and Nestle (pg6) it could be stated that the suppliers would be demanding certain decision based on being a supplier. However the suppliers are supplying to a company that is very large and also brings advantage to the companies that are suppliers. McDonalds would be a major source of revenue to Coca Cola when considering the advantage that the supplier attains (assumption relating to the cola wars case- sources of revenue). In summary the suppliers pose medium to low bargaining power. The supplied ingredients or products are not rare. However considering