Wendy’s is an American fast-food chain operating internationally in different countries across the globe. The company was founded in 1969 and the headquarters of the company is located in Ohio. The company was able to sustain in the existence of other international players and it has been spreading in the different geographical markets showing the evidence of its competitiveness. To keep the company competitive, the analysis of different industrial factors is important to understand to develop the strategic recommendations for the company. For providing an industrial understanding, Porter’s five forces model of Wendy’s is conducted and presented below.
Competitive Rivalry
The type and number of competitors in an industry predict the level of competition in a particular industry. From these two aspects, the fast-food industry at a global level is highly competitive and the competition has gone to the level of cut-throat competition. Wendy’s has collected a revenue of 195 million USD in 2019 and it comes no way near to top leading fast-food chains which shows the level of competition in the global fast-food chain industry. McDonald’s is on the top of the list with a value of 130,368 million dollars while Starbucks is on the second spot with a value of 45, 884 million USD. The KFC, Subway, Domino’s Pizza, Pizza Hut, and Burger King are on the 3rd, 4th, 5th, 6th, and 7th spot respectively with a value of 17,205, 17,124, 9,570, 7,580, and 7,063 million USD at the global level (Statista, 2019). Solely looking at Wendy’s show that it is a huge success but comparing it with other players, it still has to go a long way. Along with these international brands, there are several local bands making it difficult for the companies to compete. It means that the competition has gone to an intense level which is making it different for the companies to keep the market share and keep growing.
Bargaining Power of Buyers
Orman et al. (2011) mentioned that the fast-food industry does not have a high level of differentiation but the offers of the different brands are only incrementally different from one another. The incremental differentiation does not help the companies to keep the bargaining power. Due to incremental differentiation, the switching cost of the customers from one brand to another is low which puts the buyers on the higher side of domination when it comes to bargaining. Therefore, the bargaining power of buyers is high.
Bargaining Power of Suppliers
According to Royle (2010), the suppliers in the fast-food industry do not offer innovative and unique products but the raw material of the fast-food industry is available with convenience. The availability of the raw materials with such ease and without differentiation makes the suppliers weak for bargaining with the companies. The companies dominate due to this factor along with the size of customers which keeps them on the dominant side for bargaining. The fore, the bargaining power of the suppliers is low.
The Threat of New Entrants
The fast-food restaurant can be started with a small nearby location with the least level of expertise and workforce. The recipes are available online and the automation in the cooking machinery has further reduced the gap of quality products at a small level. The capital is also not required at a massive level when it comes to opening a small nearby fast food outlet. The size of the market, ease of starting businesses and potential of growing are the factors inviting the new entrants and making it easy to start a new business. Therefore, the threat of new entrants is high in the fast-food retail industry.
Threat of Substitutes
It is stated by Stuckler and Nestle (2012) that the fast food industry is facing the criticism of unhealthy food as it is leading towards the cases of obesity and other diseases. People are inkling towards the organic and grilled food that does not contain calories. The focus is shifting from fast food which is increasing the threat for the industry. The cuisines of different regions are also getting acknowledgment at a global level which is shifting the focus of local people from fast food to other cuisines making it difficult for the fast-food industry. Therefore, the threat of substitutes for the fast-food global industry is high keeping in view the emergence of substitutes.
References
Oraman, Y., Azabagaoglu, M. O., & Inan, I. H. (2011). The firms’ survival and competition through global expansion: A case study from food industry in FMCG sector. Procedia-Social and Behavioral Sciences, 24, 188-197.
Royle, T. (2010). ‘Low-road Americanization’and the global ‘McJob’: a longitudinal analysis of work, pay and unionization in the international fast-food industry. Labor History, 51(2), 249-270.
Statista. (2019). Brand value of the 10 most valuable fast food brands worldwide in 2019(in million U.S. dollars). Available at: https://www.statista.com/statistics/273057/value-of-the-most-valuable-fast-food-brands-worldwide/
Stuckler, D., & Nestle, M. (2012). Big food, food systems, and global health. PLoS medicine, 9(6), e1001242.