I need to analyze and discuss Mcdonalds Bargaining Power of Consumers five. Disc

Question

I need to analyze and discuss Mcdonalds Bargaining Power of Consumers five. Discussing the how this consumer power affects mcdonalds and using this page from my book. Thank you so much Bargaining Power of Consumers When customers are concentrated or large in number or buy in volume, their bargaining power represents a major force affecting the intensity of competition in an industry. Rival firms may offer extended warranties or special services to gain customer loyalty whenever the bargaining power of consumers is substantial. Bargaining power of consumers also is higher when the products being purchased are standard or undifferentiated. When this is the case, consumers often can negotiate selling price, warranty coverage, and accessory packages to a greater extent. The bargaining power of consumers can be the most important force affecting competitive advantage. Consumers gain increasing bargaining power under the following circumstances: 1. If they can inexpensively switch to competing brands or substitutes 2. If they are particularly important to the seller 3. If sellers are struggling in the face of falling consumer demand 4. If they are informed about sellers' products, prices, and costs 5. If they have discretion in whether and when they purchase the product 12

Explanation / Answer

Bargaining Power of Consumer: One of the Porter’s Five force model:

Bargaining Power of Consumer in case of McDonalds:

Since Mcdonald is a fast food service restaurant catering to the needs of middle income group, bargaining power largely lies in the hands of the consumers in case of Mcdonalds. I would like to explain the same using the five point strategy from your book.

Mcdonalds model is driven by the economies of scale, where they sell large quantity of products at low margins. This give them cost advantage in comparison to other rivals. But core of the model to be successful is to have large consumer base which can provide them economies of scale. Any loss in present market share can distort their profit making model. So this is the reason why the buying power lies in the hands of consumers at Mcdonalds.      

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