Porter's Five Forces Analysis of Fast Food in Dhanmondi

This report provides a comprehensive analysis of the fast-food industry in Dhaka, specifically focusing on the Dhanmondi area, utilizing Porter's Five Forces framework. The analysis delves into the threats of new entrants, considering capital requirements, economies of scale, brand awareness, and responses from established chains. It examines the rivalry among existing competitors, assessing factors such as costs, industry concentration, product differentiation, and switching costs. The report evaluates the threat of substitutes, considering health-conscious consumers and home-cooked meals. It also explores the bargaining power of buyers, highlighting low switching costs and price sensitivity. Furthermore, the report analyzes the bargaining power of suppliers, considering the number of suppliers and their influence on the market. Finally, it considers the impact of complementors on the industry's attractiveness. The study concludes that, while competitive, the fast-food industry presents a low level of overall attractiveness, especially for new entrants without established brand recognition and significant resources. The analysis emphasizes the importance of unique offerings, advertising, and brand building to achieve success in this market.

Assignment on: Use of Porters Five (5+1) forces for analysis Fast Food
Industry in Dhaka city (Dhanmondi)
Submitted to: Bobby Hajjaj (BhJ)
Lecturer, Dept. of Management, North South University
Submitted by: Md. Afnan Hussain
NSU Id # 1811360630 Date of Submission: February 16, 2022
Introduction:
In this report I use Porters five forces to analyze the fast-food industry in Dhaka more
specifically I choose Dhanmondi for my research. The model allows industries to classify and
examine the five forces that form the industry and evaluate the competitive strength and position
of a firm. The fast-food industry is already dominated by numerous international Quick Service
Restaurant chains such Burger King, KFC and Pizza Hut. All the forces (5+1) of Porters model
are described below:
A. Threats of new entry: The threat of new entrants is moderate in the fast-food industry due to
barriers.
First of all, capital requirements may be medium or low to create a well-established business in
the fast-food sector; Achieving economies of scale as new entrants is challenging since they join
the industry with a small market share and are obliged to take high fixed costs Therefore, in most
cases new entrants may be discouraged to enter as the global fast-food industry is dominated by
numerous international Quick Service Restaurant Chains such as KFC, Burger King and Pizza
Hut. (Moderately attractive)
Secondly, because the fast-food sector goods are homogeneous (Commodity), new entrants have
the capital to aggressively engage in advertising and promotion to develop brand awareness,
whereas established enterprises have the benefits of brand recognition and consumer loyalty. As
a result, new entrants may find it difficult to compete with entrenched enterprises. (unattractive)
Thirdly, as already mentioned, big chains have the capital to respond forcefully with price cuts,
discouraging new competitors from entering the market. As a result, new entrants may choose to
enter a less prominent market in order to avoid revenge. (unattractive)

Finally, new entrants may face additional costs in their search for a dependable and desirable
supplier, as established enterprises have tight and extended relationships with their suppliers.
Because fast food restaurants are assessed by their suppliers, a well-known supplier is a symbol
of good quality cuisine. However, for new entrants to discover and build a viable distribution
channel, cash may be required. (Moderately attractive)
Overall, the danger of new entrants into the fast-food business is moderate due to low early
capital and fixed expenses. As a result, it encourages new entrants to participate, but they must
be financially secure in order to bring distinctive goods and earn economies of scale. So, from
this analysis I can conclude that this is a moderate attractive industry.
B. Rivalry between existing competitors This force determines on how competitive and
profitable an industry is. The level of rivalry depends on determinants such as costs,
concentration in the industry, industry growth rate, differentiation and switching costs.
1. Costs: Because fixed costs are high in the fast-food sector and switching costs are low, rivalry
may grow. Furthermore, large fixed expenses push fast food restaurants to cut their rates. When a
result, as prices fall, competition will heat up. (unattractive)
2. Sector concentration: The fast-food industry is competitive because the industry has ideal
competition owing to limited product difference among rivals, therefore competition is great.
Furthermore, the great number of competitors in the business defines the high degree of rivalry
because each firm is attempting to entice and target the same consumer. (unattractive)
3. Differentiation: The level of differentiation also influences the intensity of the industry's
competitiveness. As previously stated, the fast-food industry is a perfect competition market
because firms compete with little product differentiation. In other words, fast food restaurants
will be fighting for the same target demographic, therefore competition will be fierce. As a
result, it all boils down to price rivalry being dominating among enterprises, particularly amongst
value meals. To be more specific, changing customer preferences are a response to value meals.
Furthermore, brand power produces the most competitiveness in fast food market. (unattractive)
4. Switching Costs: As previously stated, switching costs have an influence on the degree of
rivalry between companies. In other words, if a client changes from KFC to Burger King because
of the price. Overall, as previously stated, the drivers of robust competition include a large
number of enterprises providing similar items and low switching costs. As a result, the fast-food
business suffers as a result of this circumstance. (unattractive)
Overall, the restaurant business has tremendous competition thanks to the presence of fast-food
chains and countless small-scale enterprises. Fast food behemoths with larger marketing and
product innovation budgets are able to retain a competitive advantage over their smaller peers.
Furthermore, consumer loyalty is quite low, which allowing customers to simply transfer
between restaurants. So, the industry is unattractive.

C. Threat of Substitutes: Because of the factors, the danger of substitutes in the fast-food
business is considerable. As a result, health-conscious fast-food consumers may alter their eating
habits. Eating healthy at a fast-food restaurant, on the other hand, may be more expensive than
eating unhealthily. Hence, some consumers have ceased dining out owing to the financial
condition. As a result, consumers choose to make meals at home because the components are
less expensive. However, as previously stated, there are various established organizations from
whom a client may simply move due to the zero sum of switching.
The restaurant can charge premium price those customers who wants good quality, good dine
place but the consumers who want economical food may search food another restaurant.
Therefore, danger of substitution is considerable and competitiveness amongst the rivals is great.
(unattractive)
D. Bargaining Power of buyers
Consumers significantly affect the performance and the quick service restaurant industry
environment. Mainly, low switching costs gives the ease to the customers to change from one
restaurant to another, therefore, consumers can easily impose demands such force to reduce
price, increase quality or services. Therefore, buyers are price sensitive.
In addition, as mentioned above the fast-food industry is saturated, hence buyers have high
bargaining power in an industry with many competitors. Therefore, availability of numerous
substitutes adds to the bargaining power of consumers. Overall, high bargaining power of buyers
is a disadvantage as the determinant is there are numerous sellers in the industry to supply the
buyers, however, the buyers are price sensitivity therefore will force seller to lower prices
otherwise it is easy for the seller to switch from one outlet to another as the costs are low.
Therefore, it advisable for the outlets in the fast-food industry to develop strategies to increase
customer loyalty as it could prevent consumers from switching therefore, this could help reduce
power of buyers. (unattractive)
E. Bargaining power of supplier:
The bargaining strength of suppliers in the fast-food industry varies significantly across time and
location. Supplier negotiating power reflects the image of buyer bargaining power and refers to
the pressure that suppliers may put on organizations by lowering product quality, increasing
expenses, or diminishing the availability of goods. The buyers are the corporations that own fast-
food outlets, while the suppliers are the people who provide the fast-food outlets.
However, the supplier's bargaining strength in the market may have an influence on the
purchaser's business climate and profit potential. The number of suppliers relative to buyers, the
dependence of a supplier's sale on a specific buyer, switching costs of supplies, availability of
suppliers for immediate purchase, and the possibility of forward integration by suppliers are all
important factors in assessing suppliers' bargaining power. In the fast-food business, for

example, there are a disproportionate number of suppliers in comparison to purchasers. Dough,
meat, and vegetable sellers, for example, are important suppliers to the fast-food sector. As a
result, supplier power is low because there are other current suppliers that can supply these
items. (Moderately attractive)
F. Complementor
As already discussed, that the main raw materials are dough, vegetables, meat and chicken and
spices so If a business could be its own supplier of its raw materials, then it took a huge
advantage of cost cutting and price minimizing. But unfortunately, there are also some existing
giants in the market like Pran RFL groups Tasty Treat, Squares Mithai they almost have their
outlets in every corner of Dhanmondi. So, its also comitative for a new startup to compete with
these giants. (unattractive)
Conclusion
The study above suggests that the fast-food business has a high degree of competitiveness but a
low level of attractiveness. Fast food restaurants may fall out of business if they are unable to
develop unique goods, invest money on advertising, or build a reputation. As there are two
advantageous forces competing against four disadvantageous ones. So, it’s an unattractive
industry to entry. But if the investor company is already an established brand one like RFL-
PRAN, Square, then it should have been an attractive industry. Because they are such as big and
their link are so wide that they easily use those disadvantages as an opportunity and gamble on it.