Question

When it comes to Porter Analysis, of fast food industry,(McDonald's for ex)would bargaining power be high for end consumers because of low switching costs or many substitute choices. OR would it be low because they can't really bargain with the fast food prices to lower anything, after all the individual customer is not the main source of income for these fast food chains because they depend on millions of customers? I getting told different things, what is it to have true bargaining power, can both be correct?

Then there is the franchise owners who may have bargaining power, because they can control cost?

Do all of these scenarios determine overall buyer power?

Answer 1

Answer - According to Porter's Analysis, the Bargaining power of consumers increases when there is a low switching cost due to the presence of many other substitutes. In the case of the fast-food industry like McDonald's, many competitive retail outlets are presently making the consumers left with many options to compare on cost, quality and variations of products are thereby switching cost gets low and bargaining power increases.

Franchise owners are relatively at a safer end as they can control their own costs and modify business strategies to keep the switching cost of consumers high.

So all these are examples of how market offerings determine buyer power and how buyer power drives the different marketing strategies of the businesses in turn.

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