Mini Project 2: Comparing Two Different Industries

There’s a moment in every strategic analysis when you’ve mastered the mechanics—filling out the Five Forces checklist, identifying suppliers, mapping buyer power—but you’re still not seeing the full picture. That moment comes when you stop analyzing one market in isolation and start comparing. That’s when your real understanding begins.

Beginners often focus on one industry at a time, memorizing definitions, but they miss the real power of the model: its ability to reveal patterns across markets. The true test of your skill isn’t whether you can apply the Five Forces—it’s whether you can recognize how different industries create varying degrees of competitive intensity.

This chapter is designed to sharpen your analytical instincts through a hands-on industry comparison exercise. You’ll analyze two distinct sectors—the fast food industry and the luxury watch market—and compare how each force plays out in both. This competition case activity will expose you to real differences in barriers to entry, supplier power, and substitution threats.

You’ll walk away with a deeper understanding of why some industries are fiercely competitive and others are more stable, even if they seem equally popular. This isn’t about right or wrong—it’s about learning how to read the environment.

Why Compare Two Industries?

The goal of this exercise is not to memorize facts about fast food or watches. It’s to train your mind to recognize structural differences in markets.

When you compare industries, you start to see which forces are dominant and why. You’ll see how buyer power can be high in one market but negligible in another. You’ll notice how new entrants face steep hurdles in one sector but can enter quickly in another.

This kind of comparison is how real consultants, analysts, and entrepreneurs make decisions. It’s not a shortcut—it’s a habit of thought.

Step 1: Choose Two Very Different Industries

Start by selecting two industries that differ in key ways. Avoid two similar ones like local coffee shops and chain cafes. Instead, pick ones with contrasting business models.

For this example, we’ll use:

• Fast Food Industry – High volume, low margins, standardized products, rapid customer turnover.
• Luxury Watch Market – Low volume, high margins, brand-driven, long product life cycles.

These two represent opposite ends of the spectrum. Fast food is about speed and scale. Luxury watches are about heritage, craftsmanship, and exclusivity.

Step 2: Apply the Five Forces to Each Industry

Now, go through each force one by one. Use the same checklist for both industries. This forces you to compare side-by-side, not just list answers.

Force 1: Competitive Rivalry

Fast Food: Extremely high. Many chains—McDonald’s, Burger King, Wendy’s—compete on price, location, and speed. Menu items are nearly identical. Digital ordering has only increased competition.

Luxury Watches: Low to moderate. Brands like Rolex, Omega, and Tag Heuer serve distinct customer bases. Rivalry is more about reputation and innovation than price wars.

Here’s the key insight: rivalry isn’t about how many players exist—it’s about how they interact. In fast food, any small price change triggers immediate reactions. In luxury watches, the focus is on perception, not discounting.

Force 2: Supplier Power

Fast Food: Moderate. While ingredients like beef and lettuce are commoditized, suppliers are large and highly specialized. But fast food chains have massive buying power, so supplier leverage is low.

Luxury Watches: High. Watchmakers rely on specialized artisans, rare materials (like platinum or sapphire crystal), and long supply chains. A single supplier can control a critical component.

Notice how material scarcity and craftsmanship elevate supplier power in one but not the other.

Force 3: Buyer Power

Fast Food: High. Customers have many choices. They can switch with minimal cost. Price sensitivity is strong. Loyalty is built through promotions, not brand loyalty.

Luxury Watches: Low. Buyers are fewer but highly selective. They often pay premium prices for exclusivity. Switching to another brand requires a significant emotional and financial shift.

Buyer power isn’t just about how many options exist—it’s about how attached buyers are to a brand.

Force 4: Threat of New Entrants

Fast Food: High. Entry barriers are low. You can open a small kiosk with minimal investment. However, brand recognition and scale create de facto barriers.

Luxury Watches: Extremely high. Building credibility takes decades. You need skilled craftsmen, decades of history, and a reputation for quality. Legal and regulatory hurdles (like Swiss watchmaking standards) add to the difficulty.

This shows a crucial distinction: low capital isn’t the same as low entry. Brand trust and expertise can be the real barriers.

Force 5: Threat of Substitutes

Fast Food: High. A meal can be substituted with a sandwich, a salad, or even a meal kit. Substitutes are everywhere and easy to find.

Luxury Watches: Low. A watch is a status symbol. Substitutes like smartwatches are functionally different. They offer timekeeping but not the emotional or cultural value.

Substitution isn’t just about function—it’s about meaning. A smartwatch doesn’t replace the emotional weight of a luxury watch.

Step 3: Compare and Contrast in a Table

Now, use this table to summarize your findings:

Force	Fast Food Industry	Luxury Watch Market
Competitive Rivalry	High – Price-driven, fast turnover, standardized offerings.	Low – Brand loyalty, limited competition, focus on exclusivity.
Supplier Power	Moderate – Large suppliers but strong buyer leverage.	High – Reliance on rare materials and skilled artisans.
Buyer Power	High – Many options, low switching costs, price-sensitive.	Low – Few buyers, high emotional investment, brand attachment.
Threat of New Entrants	High – Low capital, but brand trust acts as a barrier.	Extremely High – Requires decades of reputation and craftsmanship.
Threat of Substitutes	High – Many alternatives available (sandwiches, meals, etc.).	Low – Smartwatches don’t replace emotional or cultural value.

Now, ask yourself: what does this comparison reveal about profitability?

Fast food has high rivalry and buyer power, meaning margins are thin. Luxury watches have low rivalry and low buyer power—so they can maintain high prices and margins.

This isn’t just theory. It’s why McDonald’s earns less per meal than Rolex earns per watch.

What This Tells You About Strategy

When you compare markets, you stop seeing industries as black boxes. You start seeing how structure shapes behavior.

Fast food thrives on volume and speed—its success depends on operational efficiency, not branding. Luxury watches thrive on perception—success depends on reputation and scarcity.

Understanding this helps you ask better questions: What if a fast food chain tried to sell premium burgers at $25? What if a luxury brand launched a $10 watch?

They wouldn’t survive. Not because the products are bad—but because they violate the structural logic of their market.

This is what makes the industry comparison exercise so powerful. You’re not just doing a five-force analysis—you’re learning to think like a strategist.

Final Reflection: Apply It Yourself

Now, take a moment to reflect on your own experience with this competition case activity.

• What surprised you the most about the differences in forces?
• Can you think of two other industries to compare using the same method?
• How might a business owner use this kind of insight to make better decisions?

Beginners often stop at analysis. The real insight comes when you start asking: “What does this mean for strategy?”

Frequently Asked Questions

Why is comparing two industries better than analyzing one?

Because it reveals patterns. One market might seem “competitive” but the reasons differ. Comparing two brings clarity to what drives competition—scale vs. brand, price vs. prestige.

Can I use any two industries for this exercise?

Yes—but pick ones with clear structural differences. Avoid two similar markets like coffee shops and bakeries. Focus on extremes: e.g., streaming services vs. physical bookstores.

How do I know if my comparison is accurate?

Check your reasoning against real-world facts. For example: Do luxury watches really have high entry barriers? Yes—because building a reputation takes decades. Can anyone open a fast food stand? Technically yes—but brand recognition and supply chains limit real success.

Should I use real data for this comparison?

No need for deep research. This is about logic and structure. Focus on relative strengths—e.g., “buyer power is lower in luxury watches” is more important than knowing the exact number of Rolex buyers.

What if both industries have similar forces?

That’s still valuable. It shows you how forces can align in unexpected ways. For example, both e-commerce and traditional retail have high competitive rivalry and buyer power, but their responses differ—proof that structure doesn’t dictate strategy.

How does this help in real jobs or internships?

It trains you to see beyond surface-level trends. When a company announces a price cut, you won’t just react—you’ll ask: “Is this because rivalry is high? Is buyer power growing? What does this mean for long-term profitability?” That’s the mindset of a strategic thinker.