Internal and external forces affect restaurant industry

For example, back ina Value Line SWOT analysis of The Coca-Cola Company noted strengths like its well-known brand name, vast distribution network and opportunities like emerging markets, but it also noted weaknesses and threats such as foreign currency fluctuations, a growing taste for "healthy" beverages and the subsequent competition from providers of such beverages. The organization needs to keep the analysis specific by avoiding gray areas and analyzing in relation to real-life contexts.

These issues are based on external factors that represent the degree of competitive rivalry in the industry, the bargaining power of customers or buyers, the bargaining power of suppliers, the threat of substitution, and the threat of new entrants.

As the leading restaurant chain business in the world, the company is an example of effective strategic management, especially in dealing with competition in different markets worldwide. The company faces pressure from various competitors, including large multinational firms and small local businesses.

For example, the U. The company must implement strategies to meet these external factors and minimize their negative impacts.

Competitive rivalry or competition — Strong Force Bargaining power of buyers or customers — Strong Force Bargaining power of suppliers — Weak Force Threat of substitutes or substitution — Strong Force Threat of new entrants or new entry — Moderate Force Recommendations.

The other forces the bargaining power of suppliers and the threat of new entrants are also significant to the business, although to a lower extent. While the food service industry is saturated with aggressive firms, new products can attract new customers and retain more customers. This external factor strengthens the force of rivalry in the industry.

Also, the Five Forces analysis model considers firm aggressiveness a factor that influences competition. In this business case, most medium and large firms aggressively market their products. This external factor adds to the force of competition. This element of the Five Forces analysis deals with the influence and demands of consumers, and how their decisions impact businesses.

In the Five Forces analysis model, this external factor strengthens the bargaining power of customers. Moreover, the availability of substitutes is relevant in this external analysis.

In this case, the availability of many substitutes adds to the bargaining power of customers. For example, substitutes include food kiosks and outlets, and artisanal bakeries, as well as microwave meals and foods that one could cook at home.

This element of the Five Forces analysis model shows the impact of suppliers on firms and the fast food restaurant industry environment.

Internal and external forces affect restaurant industry

This weakness is partly based on the lack of strong regional and global alliances among suppliers. Thus, this element of the Five Forces analysis shows that external factors combine to create the weak supplier power, which is a minimal issue in strategic management.

Also, consumers can cook their food at home. In the Five Forces analysis model, this external factor contributes to the strength of the threat of substitution in the fast food service industry.

For example, shifting from the company to substitutes typically involves insignificant or minimal disadvantages, such as slightly higher costs per meal in some cases, or additional time consumption for food preparation.

Moreover, substitutes are competitive in terms of quality and customer satisfaction high performance-to-cost ratio. This element of the Five Forces analysis refers to the effects of new players on existing firms.

Also, variable capital costs of establishing a new restaurant empowers new businesses to enter the global fast food restaurant industry. For example, small restaurant businesses involve low capital costs compared to major corporations in the market. On the other hand, it is expensive to build a strong brand in the industry.

Thus, the external factors in this element of the Five Forces analysis shows that the threat of new entrants is a considerable but not the most important strategic issue.

A set of industry analysis templates.Restaurant companies are essentially retailers of prepared foods, and their operating performance is influenced by many of the same factors that affect traditional retail stores.

For the most part, restaurants have business models that are relatively easy to understand, and the array on the Value. A PEST analysis is used to identify the external forces affecting an organisation/making up its Macro Environment. This is a simple analysis of an organisation’s Political, Economical, Social and Technological environment.

Internal and external forces affect restaurant industry

Action taken in political arenas near and far results in regulations that affect your menu, payroll, customer satisfaction and profits. Restaurant organizations and individual owners monitor the. Restaurant industry in let the business owners to be more optimistic about the turn around after the first in 40 years decline in sales that lasted for three consecutive years because of the recent global downturn in the economy (Duff & Phelps, ).

Competing Successfully with Other Hotels: The Role of Strategy. company and competitors will respond to these forces. The external environment includes groups, individuals, and forces that affect the hotel from outside the organization.

Key external influences can . Internal and external factors have a huge effect on the success or failure of a business. Business owners can’t control external factors, but they must be able to anticipate and adjust to these factors to keep their organizations on track.

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