Strategic Analysis of the Uk Fast Food Industry

Business and steering St regularisegy BAM6012 A Strategic and Competitive Analysis of the UKs exuberant Food Indus purify Executive Summary The f be perseverance in the UK is a multi-billion pound indus refine that is mainly dominated by a few competitors such(prenominal) as McDonalds, Burger King, KFC and thermionic tube. Most of the nutrient sold in these speedy nutriment restaurants is unwellnessy, which is becoming a huge concern as there atomic number 18 some people dying of obesity and former(a) health related problems. This is one of the key social factors facing the ready nourishment market at the moment.The desist food indus discover is a red ocean as it is already well defined where argument is intense. It is as well a perfectly competitive industry as the barriers to entre ar low and there be many rivals each with like crops. Information about any of the competitors is freely easy. The industry does obligate a few characteristics of an oligopolistic i ndustry too as there is a oppose of companies that have the main market shargon and have proponent e rattlingplace the buyers and suppliers.The main features that crop a firms ability to fence and light upon positiveness depend on who their main competition is. For eccentric there are different strategic groups in the industry such as McDonalds and Burger King who compete at the top of the industry and iodin privately owned dissolute food retailer that compete on a much lower level with much smaller budgets. The node requirements are very low in this industry as a lot of the mathematical products sold by different firms are very equivalent however the requirement of a cheap and sporting meal is everlastingly at the top of their require.every potential strategy to profit favourableness deep down the industry provide need to be assessed properly and to realise the risks knotted and other potential threats to it. Table of contents Pg. Executive Summary 2 Introductio n 4 History of the disruptive food market. 4 menstruum market conditions 4 PESTEL analysis. 5 ushers tail fin Forces.. application attractiveness. 9 Opportunities 9 Threats 9 mathematical strategies. 10 Bibliography.. 11 Introduction This cut across aims to give a strategic and competitive analysis of the UKs truehearted food industry. It provide spinal column the main structural features of the industry that ferment competition and profitability. The saucyspaper publisher forget give an overview of the whole industry rather than good one guild within it.I shall also aim to analyse the industry attractiveness demonstrate why possible companies would like to enter the marketplace. Another aim of the report is to analyse the competition and customer requirements in order to identify opportunities to gain a competitive advantage within the industry. The final aim of the report is to develop possible strategies to influence and improve on profitability. Whilst developi ng a strategy, the difficulties and risks involved in using these strategies will be covered. History of the turbulent food industry in the UKThe UK has embraced a lot of different types of spendthrift food over the years, ranging from pizza to burgers, kebabs to Chinese, curry to fish & chips and healthy supplyings. in that respect is a lot of competition in the market at bequest with mellow profile companies such as McDonalds, Subway, Burger King, and KFC, not to mention the descend of privately owned single store fast food outlets. Current market conditions The nurse of the fast food market in the UK grew by 3. 3% in 2011 to reach a total value of $7,860. 3 million. The forecast for the market value is stria to increase to $9,147 million by 2016.This is an increase of 16. 4% by 2011. Transactions in the fast food market also grew in 2011 by 1% to reach a total volume of 2,785. 2 million transactions. The market volume is set to increase by 6. 8% by 2016 to a total of 2,9 75. 4 million transactions. profligate Food Industry indite The United nation 2012, Fast Food Industry Profile United Kingdom, pg 1-35, Business line of descent Premier, EBSCO host, viewed 25/11/2012 PESTLE analysis PESTLE analysis will swear out to capture understanding about aspects of the context by using the prompts political, scotch, sociological, technological, profound and environmental.It is a technique that facilitates a wide s flock of the context and demonstrable or potential factors that would affect objectives if left unmanaged. (Webster-Murray, R. 2010. pg. 88) Political factors * There is an increase amount of pressure from the government to encourage people to eat healthier as the number of deaths relating to obesity and an unhealthy lifestyle is on the increase year after year. * The government can allocate grants to business start-ups to try and raise fair competition within the marketplace. There is speculation over the government introducing a new fat tax on fast food served over a counter. This will add on some other 20% to the original price in taxes. http//www. guardian. co. uk/society/2012/may/16/fat-tax-unhealthy-food-effect Economic factors * Consumers will have less disposable income with the current economic climate and thereof may be less likely to run money on fast food as it may be seen as a luxury. * Exchange rates may affect profitability on the business if they are sourcing materials (all the ingredients used to shit their food) from out position the UK. Unemployment levels are soaring at the moment in the UK which office there will be even much consumers without the money to purchase fast food. The current unemployment rate shortly sits at 7. 8%. http//www. ons. gov. uk/ons/key-figures/index. html * The inflation rate is at 2. 2% currently in the UK. This does not pose a problem as businesses will not be phased by this to expend more than and grow. http//www. bbc. co. uk/ news program/business-19959827 S ociocultural factors * The current social trend of eat healthy and having a healthy lifestyle is pushing customers away from eat at fast food restaurants. With London just hosting the Olympic Games in the summer of 2012 then a lot of people are assay to start a much healthier diet and lifestyle for themselves, therefore cutting back on the amount of fast food they currently eat. * The high standard of education in the UK means that children are more aware and k todayledgeable about the health implications that arise from eating fast food. * With the current fast paced lifestyle that a lot of consumers have, it is easy for them to just pick up food at a fast food outlet rather than cook for themselves.This shows that fast food can be seen as convenient. * Companies moldiness try and add value to their brand by being reasonably priced and of an equal quality in relation to the price. * Consumers already have a astronomic variety of choice within the fast food market therefore a poster should also offer a lot of choice so that the customer can be comfortable and their ever changing taste can be satisfied too. * The fast paced lifestyle of consumers means that the service of fast food must also match that and be quick too. * Healthy options must be made available as to encourage a balanced diet. proficient factors * Fast food companies now have a wide range of tools available to them in order to promote their brand and products. Different ways they can do this is through the use of TV, radio, internet, direct mail, interactive billboards and many other options. * Companies can now use the internet not just to promote their brand but also to take orders and let the customer rack up transactions. This can be helpful to lower the cost of using employees. * Technological advances mean it is easier for a beau monde to keep track of stock levels and also take orders in store.This minimises the risk of human error. Environmental factors * Companies in the fast f ood industry now need to monitor the amount of boast they dispose of as there is a lot of emphasis now on cutting down the amount of waste and dramaing it into utile and reusable products. Businesses are now turning to recyclable packing. * The amount of cipher that is consumed in the process of making the fast food and where all the efficacy comes from to agencyfulness a fast food outlet. Can be seen as a good ethical policy to use or create off shore wind farms that force out outlets. Legal factors Have to tholepin to a law that means they cannot mislead consumers on the nutritional value of their products. * Companies have to abide by certain health and safety laws for both the employees and the customers. * Other laws that a business will have follow are laws on employment, fair competition and food hygiene. Through the use of a PESTLE analysis we can see that there are many factors that affect the UKs fast food industry. Most of these factors arise in the sociocultural section as it is here that the fast food industry gains most of its unwanted attention.This is mainly down to the fact that the foods served by the companies are mainly unhealthy, carrying lots of calories, salt and sugars. gatekeepers Five Forces Model In 1980, Michael Porter came up with a model that identified five forces that have an influence on an industry. This model focuses on five forces that shape competition within an industry (1) the risk of portal by potential competitors (2) the intensity of disputation among established companies within an industry (3) the bargaining power of buyers (4) the bargaining power of suppliers and (5) the closeness of substitutes to an industrys products. (Hill, C. W. L, Jones, G. L. 2010, pg. 42) Threat of New Entrants * Low barriers to entry mean that it is easy for a company to start up a business in the fast food industry. However would be futile to compete directly with the heroic organisations already in the market. * Easy for a new entrant to differentiate their product and atmosphere of the outlet (shop). * erstwhile a good location is found then it could run across the achievement of a new entrant. Could be possible to dominate the market in a certain location. Capital investment is not too high or out of reach for most individuals. Bargaining Power of Suppliers * Companies in the fast food industry could change their suppliers quite easily as there are a lot of suppliers that would be happy to go through the amount of revenue they could gain from using such a large company as Burger King or McDonalds. * The larger companies in the fast food industry have a lot of bargaining power over their suppliers as they could make up a very large proportion of the suppliers revenue, if not all of it. Bargaining Power of Buyers Due to the bare volume of customers that purchase fast food, the bargaining power of the buyer is low. For example, a customer could barter with a butchers market conk about the price o f meat whereas they could not walk into a Subway store and negotiate the price of a sandwich down to their preferable amount. The price shown is the price that will be paid. * Only bargaining power the customer has is the lack of switching costs. A customer could purchase from a McDonalds instead of Subway without costing them anything. Threat of substitutes The threat of substitute products is very high as firstly the lack of switching costs means that a customer could change preferences and purchase from another company at a time as long as it fitted their standard of quality and price. * The market is currently flooded with products that are all very similar (McDonalds burgers are in theory the same as Burger King) therefore a new product could arise and sell particularly well as long as it had a good taste and quality. Rivalry among Existing Firms * Rivalry is high in the current market as top firms such as McDonalds and Burger King compete for the highest market share.Due to the sheer size of these companies they can extend heavily on advertising and use aggressive tactics to ensure success. * Constant funds are being ploughed into advertising to try and promote not just the products companies offer but also to try and promote their brand. For example, McDonalds now tries to show more on the ethical side of the company saying that all of their ingredients are sourced locally. Through the use of Porters Five Forces model, we can see that the threat of substitutes, rivalry among quick firms and threat of new entrants to the market are moderate to high.Whereas the bargaining power of both suppliers and buyers are relatively low. This shows that the companies in the market currently have a lot of power. Industry attractiveness * Massive industry worthy $7,860. 3 billion. * Huge volume of transactions at 2,785. 2 billion. * olive-sized market share can still mean high revenue. * curtain raising to create a large and global company similar to that of McD onalds. * surmisal to run a franchise business model. * Has a very unsubtle market segment. * Could be a good industry in a recession as consumers cut down spending on eating at more high-priced restaurants. Industry is predicted to continue growing. Opportunities There are many opportunities and threats that arise from the use of the PESTLE analysis and Porter Five Forces model such as 1. Due to the current unemployment rate of 7. 8% this means that large companies such as McDonalds could use this to their advantage and exonerated a number of new stores to create new jobs and in turn create more revenue for the industry. This could conjure the image of the industry as it is helping the nation out by creating jobs in this time of economic downturn. . As consumers have less disposable income then they will be less likely to eat out at more expensive restaurants and may turn to fast food outlets as they are cheaper. This is a great opportunity to advertise heavily on a menu that is less expensive than the normal menu. For example creating a meal that scarce costs the consumer ? 2. This should attract a lot of potential customers to spend more in the fast food industry. 3. Differentiate the industry by offering healthier foods on a whole to gain the interest of the health conscious consumers.This would increase the volume of the industry. Threats 1. If an outbreak of foot and mouth illness or BSE (mad cow disease) were to arise then consumers would not be purchasing any type of beef which would mean a downturn in the amount of revenue gained by the fast food industry. 2. Any type of negative feedback from the media would shine an unwanted spotlight on the fast food industry. For example, if someone were to find a hair in their burger at a fast food outlet then it might influence customers to eat elsewhere.Strategies to influence industry structure and improve industry profitability * Create new menus that will offer healthy food to the consumer. This will engage with a new target audience and therefore enhance the volume of transactions the industry already has. The amount of revenue pull in by the industry will also increase. This will lead to new competitors in the market place offering a different product type and increase the amount of competition amongst the already competing firms. * Companies could vertically commingle in order to gain control over the production of the ingredients that it needs to create the foods.This would be risky for some businesses as the vast legal age of their expertise is in the retailing of fast food. Conclusion Overall, the fast food industry is a highly competitive industry that is dominated by a few main players. The main features that influence competition are the changing tastes of the customer and their willingness to try other fast food outlets. lucrativeness is not only based now on the products that a company sells but also the way in which the customer perceives the ethical set of a c ompany.Although the requirements of a customer needing a cheap meal at a fast pace is still high on their order of business of needs. For a company to survive and improve upon its current position in the marketplace it should think about different strategies such as increase (new products or different areas) differentiation and vertical integration. Bibliography * Fast Food Industry Profile The United Kingdom 2012, Fast Food Industry Profile United Kingdom, pg 1-35, Business Source Premier, EBSCO host, viewed 25/11/2012 * Murray-Webster, R. (2010) Management of risk focus for practitioners.The stationery office Norwich * Dennis Campbell (2012) Fat Tax on unhealthy food must raise prices by 20% to have effect says study. (01/12/2012) http//www. guardian. co. uk/society/2012/may/16/fat-tax-unhealthy-food-effect * Office for national statistics (2012) Key figures. (02/12/2012) http//www. ons. gov. uk/ons/key-figures/index. html * BBC (2012) UK inflation rate slows to 2. 2% in Septem ber, ONS says. (01/12/2012) http//www. bbc. co. uk/news/business-19959827 * Hill, C. W. L & Jones, G. L. (2010) Strategic Management an integrated approach. Cengage learning USA