Boston Chicken Case

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Founded in 1989, Boston Chicken positioned itself as a provider of home meal replacements. The firm relied heavily on regional developers to open new stores, leading to a growth rate of nearly 500% each year between 1991 and 1994. While some analysts praised this fast expansion, others questioned the profitability of the new stores and the firm’s ability to succeed in the future. Our group analyzed the company’s business strategy and accounting policies, finding that Boston Chicken was not as stable as it presented itself to be. 1. Analysis of Boston Chicken with Porter’s Five Forces Model:  Rivalry among existing firms: Boston Chicken suffers a high level of competition in the fast food industry. Its main competitors include McDonald’s, KFC, Burger King and Hardee’s. As a “home meal replacement,” Boston Chicken also competes with local pizzerias and sandwich shops.  Threat of new entrants: The threat of new entrants is high. The major barriers for a startup to enter the industry are the economies of scale and the distribution channels necessary to be profitable. Due to the relatively little differentiation among companies in the industry, customers tend to visit the closest and most convenient store instead of sticking to a particular one, which makes wide distribution of the business quite essential for the fast food restaurants.  Threat of substitutes: The threat of substitutes is also high. Firms in the fast food industry and home meal replacements have to continuously innovate to maintain various product differentiations and high quality of food and service in order to stand out against competitors. Otherwise, their product is easily substituted.  Bargaining power of buyers: The bargaining power of buyers is high since customers have low switching costs. Thus, each firm within the industry is susceptible to losing customers. To address this,

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