Short Essay—A Case Study of Porter’s Five Forces

A Case Study of Porter’s Five Forces

Meituan Takeaway Food Delivery Service

LI,Wei 1155082136

With the development of society and technology, food delivery service has grown rapidly in Mainland China in recent years. It gains its popularity with time-saving and low price merits, especially among those who work at home or have tight budget. According to Analysys, the whole transaction scale of food delivery online service in China reached more than 25 billion RMB in 2016. Most of consumers were white collars accounting for 71.7% while students and living communities occupied 23% and 5.3% respectively.

Meituan Takeaway, one of group purchase website owned by Meituan brand, was developed by Sankuai Technology (Beijing) Corporation focusing on college students and white collars. It serves as the third party of food online order platform which gathers local restaurants and provides diversity of food choices for consumers. Based on O2O and C2C business model, it was online since November 2013 and covered to more than 300 cities till August 2016. Its slogan is “Send Anything Fast”. Most importantly, Meituan Takeaway ranked the top 3 online food delivery service in Mainland China and gained a large number of users. Following paragraphs are given to analyze Meituan Takeaway with Porter’s Five Forces model.

1.         Threat of New Entry

Online food delivery service industry has low enter barrier because of the low fixed cost and low entering threshold. Government encourage college students’ startup and innovative companies. And increasingly people nowadays focus more on lifestyle. Hence there are more potential entrants. On the one hand, some large scale restaurants have earned good reputation in local market. There is a chance that it opens its own food order platform rather than cooperate with Meituan Takeaway. On the other hand, since Meituan Takeaway owned by Meituan, any big companies may start their takeaway apps and enter food delivery service market, such as Tencent, Sina. In this case, they can gain their supporters through Weibo channels. In addition, it is acknowledged that food recommendation apps play a vital part in local restaurant industry, such as Dazhongdianping. What if they all launch food delivery service?          

2.         Threat of Substitution

There is no denying the fact that the rapid development of the Internet and e-commerce bring much more convenience to our lives. Also, the lazy economic takes the advantage of consumers’ psychology and behavior. That is, people who like to use takeaway food delivery service may be lazy or busy, so they do not want to cook or do not have time to cook. For those people, besides takeaway food delivery service, they will also store some instant noodles or frozen food which are cheap and convenient. Additionally, sometimes they cannot wait to eat and they may go to the grocery store such as 711, Family to buy some instant food. In some grocery stores, some food can be heated in the microwave which can make people get their food very quickly. Comparing with takeaway food delivery service, buying in the grocery store is not only quicker but also people can see the food directly which can guarantee the food safety in the extent.

3.         Supplier Power

Generally, supplier plays an important role in a company. For takeaway food delivery service, food supplier may influence whether the consumer will choose their platform or not.  For example, one consumer wants to eat some food for Pizza Hut, but if Pizza Hut does not cooperate with Meituan takeaway food delivery service app, the consumer will use other ways to eat Pizza Hut food. Therefore, how to choose the food supplier and build a long term relationship to them are very significant. How much money should the supplier pay to Meituan every year and if one supplier wants to increase its benefits, whether Meituan needs to agree with it or not. If Meituan says yes, there may be more and more requirements from other suppliers, but if Meituan says no, it may lose a significant supplier which is very contradictory.

4.         Buyer Power

As the old saying goes, “Consumer is the god”. How to attract the consumer is a key part for Meituan takeaway food delivery service. Since there is a large number of college students and white collars, what they really need are safety food with lower price and fast delivery speed. Thus the lowest price competition is really fierce. If the consumer waits for his or her food for a long time, and he or she wants to cancel and get refund from the order but it is rejected, the consumer may be very angry and does not use your platform anymore. Therefore, Meituan should think about how to guarantee the consumer right. What’s more, voucher is still the attraction for consumer. However, every sales knows this theory, it is not the best choice for Meituan to be the No.1. For my advice, Meituan needs to build other more functions to satisfy the consumer.

5.         Competitive Rivalry

The competition within food delivery service in Mainland China is fierce. Up till now, Meituan Takeaway has two main competitors: Eleme and Baidu Takeaway. The three corporation’s total market share occupies more than 90% with Meituan, Baidu and Eleme making up 34.2%, 21.1% and 35.5% differently. Baidu Takeaway owns its Baidu Wallet for special lower price while Alipay and Wechat pay support for Meituan and Eleme. It is worth noting that the differences among them are still small, such as same target customers, low price or coupon selling strategy. Therefore, the brand loyalty of Meituan Takeaway is low. Great efforts must be made to gain further profits from the aspects of enhance food quality, food delivery speed, etc. By the way, if there is any chance for them to cooperate with each other, they may embrace another bright vista and find more business opportunities.

  

Reference:

Analysys. (2016, July 20). 2016 Second Quarter China Internet Food Delivery Service

Transaction Scale Research Report.

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