Retaliation: Existing companies in the industry sometimes resist and deter new entrants from entering their competition. However, there are a few significant entry barriers to reduce new competitors from entering the fast-food industry. There is a low cost in case of change suppliers or switching products for substitutes. 4.0 Porter’s Five Forces of Competition Model 4.1 Threat of New Entrants The market share of existing firms in the fast-food industry can be threatened by the new entrants.
This is a threat because as a culture we are turning towards more healthy choices and focusing on our health much more than before. Government regulations: Government and regulatory requirements may limit how a company can conduct business and require permits or licenses for entry into the industry. Doing that the industry loses the power of bargain. (T) Obesity and high cholesterol are crucial health problems for the consumer of fast foods (Soba & Aydin, 2011, p. Access to suppliers and distribution channels: New entrants may struggle to find access to suppliers and distribution channels since many already provide service to existing companies.īarriers to exit: When a company can't easily leave the competition due to factors such as high exit costs, new entrants may be hesitant to join the environment in case their business doesn't succeed.īrand loyalty: If an industry consists of companies with high levels of brand loyalty, it can be challenging to enter the competition.Ĭapital requirement: Certain industries have high capital costs, making entry limited to those who have the necessary resources.Ĭost advantages: Companies that currently exist in the industry can sell their products or services at a price lower than new entrants.ĭifferentiated products: If a new entrant plans to sell a product that's highly differentiated by the current company, they may have to come up with unique, new features in order to compete.