Fast-Food Industry’s Market Place and Environment

The fast food industry is experiencing the revenue of over $ 15 billion growth a year, and the future growth rate at an average of 2.7%. Other industries in this sector experience a total conversion of their total revenue of up to 4.6% while the fast food experiences 4.8% (McGowan, 2012 p19). The reduced product margins in the industry have not affected its profitability because of the high consumer demand for options in the fast food sector. Many retailers are reviewing their market place in order to maintain product margins and create new sales. The prevailing overhead cost also affects the profitability, which is higher as compared to the cost in juice bars. The dominators in the market are significant contributors to the profitability due to the expensive modes of advertisements. These advertisements extend to online platforms where consumers have preference hence increasing the standards of competition.

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According to (McGowan, 2012)

Fast Food in Australia Industry Report
Barriers to Entry checklist Level
Competition High
Concentration High
Present Life cycle stage Maturity
Amount of capital Low
Technological changes Low
Level of Regulation & policies Medium

Clearly, it is expensive to enter the fast food market. However, both the low changes in technology and medium level of regulation and policies are advantageous to this industry.

The increasing concerns over the consumption of health food affect the industry. Trends in consumption are currently shifting into healthy eating habits. Consumers normally get concerned about the amount of fat and sugar they consume. They prefer paying premiums for healthy food and, therefore, price is not an issue to consider. High competition from supermarkets comes in as a major concern for this industry. The supermarkets also offer a variety of fast foods on their shelves (McGowan, 2012, p.22). The industry revenue depends on its expensive inputs, especially the cost of fresh produce. This cost depends on the environmental factors and accessibility, which change unexpectedly. Finally, the issue of globalization is another prevailing factor in the industry. It has increased competition through emerging strategies, varying consumer wants, and entrance of new business counterparts.

Alternative Market Place options to consider

The options include industry trends, competition, local market area, and location (Restaurant Market Analysis, n.d).

Industry Trends

Knowing these trends is essential for business effectiveness. The management will be aware of the threats and opportunities directly affecting the profit margins. Knowledge on consumer behavior and attitude regarding food helps the business to identify changing trends before they become apparent on the business. This information is available for all interested parties on many databases, which include National Restaurant Association, Industry Publications, Hospitality Industry, State & local Restaurant Associations, etc.

Competition

Researching on the successes and failures of other competitors in the industry can be valuable. Knowledge of specific competitors allows the appropriate planning of the market place strategies. The competitors include both the closed and the operational one, for example, food delivery services, catering services, grocery stores among others.

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Location

This is the most significant factor to consider when developing strategies on the business market place. Customers prefer attractive, accessible and convenient locations. The choice of the location depends on the prevailing market factors and not low price. It should also complement the concept of the business. Although different fast food businesses have varying requirements, there are certain elements that remain essential for any business.

Local Market Area

This factor helps the management to know the sales ability of the market. A statistical comparison between the state and other areas determines the strength of the market. The management must know the market’s geographical size and hence approximate the distance customers will travel before reaching the business premise. The data on the area’s demography will enable the management to know the population, in other words, those who live and work in that area. Information on the married, single, elderly, young, income, gender, education and age are vital for the success of the business. It helps the management to understand the market place. Other factors that help understand the economic trends of the market place include business growth trends, eating and drinking sales, tourism statistics. These directly influence the local economic prevalence (Restaurant Market Analysis, n.d).

The Ansoff Matrix

Profit increment remains to be a top priority to business people. This forced the people in the business field to look for ways to increase their profits. The ideas of developing new products, market strategies are some of the ways used. Ansoff matrix proves to be a crucial tool in understanding different approaches to profit increment and competitive advantage over other competitors. The matrix shows how a firm can grow and develop to be successful even under tight competition. The model shows four ways in which a firm can use to expand its territories, the four ways accompanied by risks figured out in the model (Mind Tools Ltd, 2012).

The Ansoff Matrix - Business
Fig.1: The Ansoff Matrix – Business

According to the matrix risks shown on the horizontal and vertical quadrants, increase upon moving from one quadrant to the next in either direction. The matrix staying with current product, poses less risk as compared to launching a new product. Moving to a new market with a new product is essential as the market maybe dynamic and the product may not be successful as expected. Many firms prefer to stick to their known markets and products; the reason behind it is that they are well conversant with the changes that can occur or competition. Moving two quadrants and launching a new product increase the risk to a new level (Mind Tools Ltd, 2012)

Improving the competitive position

To achieve a successful competitive position in the market a firm requires mixing and control of various elements in the market. The integration of various elements to achieve a unified organization can increase the chances of better position in the market place. Various components require consideration for successful placement in a competitive position. Two main areas require focus for successful competitive positioning; these include establishment of initial market offering in consumers’ mind and differentiation of a market. A wide range of business elements needs a combination of both markets in an appropriate order for successful positioning. Some of the offerings a firm can give include products, brands, packaging, credit terms, and personal assistance, among others. Grouping the elements ensures the catering of all consumer needs. The elements are viewed in terms of sale, distribution, communication and product in the market (Darling, 2001).

The mixture of the four elements gives a marketing mix, which positions a firm into a successful entry and operation in a market. The establishment of initial market offering in consumers’ mind is mainly based on five factors. They factors include product importance to the consumer, effort and time spent on buying the product, technicalities of the product to the consumer, services required on buying the product and lastly product rating based on technology used and fashion.

Developing a model based on the five factors can improve the position of a firm in the market. The difference between the market offering and alternatives proves to be a vital factor in the positioning of a firm in the market. Convincing consumers requires proper analysis and advertising skills of the market and competitors. Thorough research carried out to monitor product performance and the level of competition from the alternatives happen to be crucial in position improvement. Product differentiation is normally achieved through several strategies. The strategies include price, quality, user prestige, technology and benefits of the products; proper combination of the strategies gives a successful position of the firm in the market (Darling, 2001).

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Marketing strategies in many firms occupy a large percentage of the firm’s spending. The reason behind the great focus on marketing is that proper marketing strategies increase sales volume by a great margin. Effective advertisement and marketing are the two key factors managers consider vital in managing sales volume. Proper understanding of the role of advertising in marketing is vital for healthy positioning of the firm in the market share. Many view the new approach for successful marketing in the context of personal advertising because the consumer feels a personal touch, and responses monitoring on a firsthand basis. Five strategies used to improve a firm’s position these include:

  • Making contact with consumers and supporting the firm’s prospects
  • Driving of customers to a new brand
  • Market knowledge
  • Improving advertising techniques (Johnson, 2009)

References

Darling, JM 2001, “Successful competitive positioning and the European consumer market”. European Business Review, 13(4), pp.209-220.

Johnson, P 2010, “Winning Customers and Increasing Market Share”. Web.

Mind Tools Ltd, 2012., The Ansoff Matrix. Web.

Restaurant Market Analysis, n.d. Web.

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