This gives use a range of companies from McDonalds and Burger King to exclusive gourmet restaurants. .
If we consider the entire industry in terms of Porters five forces we can see how the industry operates and reacts to external forces. His five forces model considers the external macro effects on an organisation in a business environment. His five forces model is designed to show how the external environment can affect the way a business operates, and that any strategy a business undertakes should take these factors into consideration when analysing their position and possible future (D'Aveni, 1999). Porter does not see these external factors as working alone, they act in relationship to each other, and can also be influenced by the organisation which the effect, in understanding them the organisation is in the best position to influence them.
The five forces Porter identifies are the existing competitors, the threat of new entrants, substitute products (or services), and the power of purchasers and suppliers. The existing competition may be seen as very fierce. There are many restaurants, indeed, as already stated there are a total of roughly 858,000 restaurants in the US. This is a high level of competition. These will cover a wide range of tastes and consumer requirements. However, the locations will usually mean that where one restaurant is located will not usually be far from others competing for the same patrons. .
The threat of new entrants is also very real. The market has few barriers to entry. Food and hygiene regulations need to be complied with, and licenses may need to be gained, but these are not difficult. With low interest rates and hope that the economy is currently importing there is also the ability for potential new entrants to borrow cheaply to make an investment. New entrants will find it difficult is seeking to compete with the large chains, however, many of today's large chains started out as small operations that grew.
