Economics and Finance for Business

This report analyses the Australian fast food industry by comparing and contrasting the performance and strategies used by the MacDonald and Hungry Jack’s companies to retain or expand their market share. It discusses the market structure, growth strategies, pricing and non-pricing strategies used by the two companies.

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Economics and Finance for Business
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ECONOMICS AND FINANCE FOR BUSINESS 2
Executive Summary
In the fast food industry, marketing information revolves around changing consumers
preferences, convenient location, food quality, pricing, targeted customers, customers' age,
market diversification, service quality, and menu selection. Fast food companies combine low
pricing strategies and food quality to develop value menu which cannot be afforded by a
large portion of customers. The research was carried out by analysing both the primary data
and secondary data on the Australian fast food industry. Primary data was located through
interviewing personnel of the McDonald and Hungry Jack’s stores located at town hall
Sydney. The objective of the study to compare and contrast the growth strategies, and pricing
and non-pricing used by the McDonald and Hungry Jacks fast food companies in Australia.
The study found out that McDonald is more superior compared to Hungry Jacks in the market
based on the share it controls. Likewise, the two companies apply almost similar strategies to
advance their competitiveness in the industry. However, differences have been noticed in the
manner in which the companies different strategies. The results have established that
McDonald has effective marketing and promotion strategies compared to Hungry Jacks.

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Table of Contents
1.0. Introduction...................................................................................................................4
2.0. Market Structure..........................................................................................................5
2.1. Industry Overview.......................................................................................................5
2.2. Industry Competitiveness............................................................................................5
2.3. Market shares for different players..............................................................................6
2.4. Competitive strategies of the market...........................................................................7
3.0. Growth Strategies..........................................................................................................7
3.1. Grow/expand strategies for McDonald and Hungry Jacks..........................................8
3.2. Opportunities for growing for McDonald and Hungry Jacks......................................9
4.0. Pricing and non-pricing strategies.............................................................................10
4.1. A contrasting of the pricing strategies of McDonald and Hungry Jacks in Australia
10
4.2. Non-price strategies used by McDonald and Hungry Jacks.....................................12
5.0. Conclusion and Recommendations............................................................................14
References...............................................................................................................................16

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1.0. Introduction
In the fast food industry, marketing information revolves around changing consumers
preferences, convenient location, food quality, pricing, targeted customers, customers' age,
market diversification, service quality, and menu selection (Solomon, 2012). With stiff
competition, companies employ different strategies to gain a competitive advantage in the
industry. Even though all the factors mentioned above, customers consider pricing and
quality as more significant factors. For example, fast food companies combine low pricing
strategies and food quality to develop value menu which cannot be afforded by a large
portion of customers. Marketing research plays an important role in the identification of the
customers' needs and wants then develop products that satisfy them (Solomon, Hughes,
Chitty, Marshall, & Stuart, 2013).
The study seeks to discuss the Australian fast food industry by explicitly analysing the
performance and strategies used by the MacDonald and Hungry Jack’s companies to retain or
expand their market share. The objective will be achieved by comparing and contrasting the
pricing and growth strategies applied by the two companies (B&T Magazine, 2018). The
research was carried out by analysing both the primary data and secondary data on the
Australian fast food industry. Primary data was located through interviewing personnel of the
Mac Donald and Hungry Jack’s stores located at town hall Sydney. Sources of data included
periodical articles, electronic sources, new papers, news release by the two companies as well
as searching through the websites of the two companies.
The study was divided into five sections. The first section is the introduction which
provides a summarised background and purpose of the report. The second section discusses
the market structure of the industry. The third section compares the growth strategies used by
MacDonald and Hungry Jack’s. The fourth section examines the pricing and non-pricing

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strategy used by MacDonald and Hungry Jack’s. The fifth section is the conclusion which
summarises the report findings.
2.0. Market Structure
2.1. Industry Overview
The Australian fast food industry is purely standardised. Restaurants and Food stores
pay more attention to maintaining their customer base/ market shares. With the expanding
fast food market in Australia, restaurants have turned to this segment to increase their
financial position and competitive advantage. In 2017, the growth in the fast food industry
increased cumulatively by $53.7 billion (Hitt, Ireland, & Hoskisson, 2012).
A study by Solomon, Hughes, Chitty, Marshall, & Stuart (2013), found out that the
Australian fast food industry comprises of top food chains with more substantial and better
market control. The trend in the industry can be asserted by looking at the performance of the
MacDonald and Hungry Jack's performance in 2017. MacDonald and Hungry Jack are among
the top ten performers in the Australian fast food industry. The companies used their asset
base to increase revenue and customer growths (Hasan, 2013).
2.2. Industry Competitiveness
The level of competition in the Australian food industry is majorly influenced by
consumer taste and preference based on the Porters Five Forces Analysis (Arrow, 2011).
Suppliers bargaining powers: Suppliers have high influence in the industry. They are in
a position which they can directly influence the prices and quality of fast food. The cost of
shifting is insignificant making it easier for suppliers to switch from one store to another
(Galanakis, 2016).

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Buyers bargaining power: Price and service quality influence the customers buying
behaviours in the industry. Increase in prices or reduced quality might force buyers to switch
to another competitor in the market. Therefore, the buyers bargaining power is high
(Hubbard, Rice, & Galvin, 2014).
Threats of substitutes: MacDonald and Hungry Jack's complete to be among the top
four market performers in the industry. The stores face stiff competition from other stores
such as KFC, Subway, Red Rooster and Domino's Pizza. Only top performing restaurants and
stores can attract more customers.
Threats of new entrants: Companies use their financial position as a basis of
competition. With the high level of required market capitalisation to operate in the Australian
fast food industry, newcomers need high initial capital. Therefore, the threat of new entrant is
low.
Industrial rivalry: Other players in the hospitality sector have little influence on the
performance of the MacDonald and Hungry Jack's. Top players use their strong brand image
and a considerable asset base to assert their dominance in the industry (Hitt, Ireland, &
Hoskisson, 2012).
2.3. Market shares for different players
The top players in the Australian Fast Food industry has been summarised as shown in
the table below;

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Source: B&T Magazine (2018)
2.4. Competitive strategies of the market
With high competition in the industry, Companies use several competitive strategies to
gain competitive advantage. The strategy revolves around social trends, technology and
innovation and regulations. Likewise, McDonald and Hungry Jacks have turned to low-cost
strategy to win more customers (Galanakis, 2016). Consumers have become conscious of
their eating habits. Many customers are now shifting towards healthier food products. As
such, fast food stores have been forced to shift as well or risk being kicked out of the market.
Lastly, innovation and technology allow players in the industry to plan and appraise their
future investment options in advance. This is to ensure that risks associated with investments
have been minimised (Arrow, 2011).
3.0. Growth Strategies
The Australian fast food industry is very competitive. Both McDonald and Hungry
Jacks entered the Australian market in 1971. McDonald has a larger market share compared

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to Hungary Jacks. By 2017, the former had 850 stores while the latter had approximately 340
stores. Regardless of their respective market shares, the two companies are always engaged in
aggressive wars using different growth strategies (Galanakis, 2016).
3.1. Grow/expand strategies for McDonald and Hungry Jacks
The two companies use two different strategies. While McDonald is a defender,
Hungry Jacks is an analyser. Six key pillar of Retain supports McDonald's growth strategy,
Regain, Convert, Digital, Delivery, and Future expectation. First, McDonald focuses on
retaining its current customers by using its strengths to extend its services into family
occasions and breakfast segments (Kroc, 2016). Second, the Regain strategy is aimed at
regaining the customers that were previously lost by providing strong value, enhancing
convenience, and improving the quality and taste of food. Third, Convert strategy is aimed at
using snacks and coffee products to convert causal/irregular customers into committed, loyal
and regular customers. Fourth, McDonald had turned into digital marketing as a strategy to
interact more with customers. Fifth, delivery strategy focus on increasing the customers'
experience with McDonald brands closer to their homes and workplaces. Lastly, enhancing
service quality by developing a reliable support team (Steenkamp, 2017).
On the other hand, Hungry Jacks focus more on the expansion strategy. Hungry Jack
analyses the market trends before developing products that satisfy customers' needs. For
example, the company recently launched a new burger brand which presented quality which
the aim of boosting the reputation of its brands in the market. The launch marked the
beginning of re-evaluating customers' expectation as the best way of adapting to the changing
taste and preferences (Hasan, 2013). The company understands that the taste and expectation
of its Australian customers keep changing. While McDonald is focussed more on defending

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its market share, Hungry Jacks uses innovation and constant menu improvement as the
essential elements of its growth strategy (Kotler & Lance, 2006).
The two companies have also engaged in anti-competitive strategies in the past. In
2014, Hungry Jacks hijacked McDonald promotion campaign. McDonald is known of
running Monopoly campaigns frequently to promote its burgers. Shortly, after McDonald had
launched its promotional campaign, Hungry Jacks launched a counter-campaign, "Flame their
McOpoly, Redeem your free tickets with us instead". Therefore, the rivalry between the two
companies is so intense, that they sometimes use anticompetitive strategies to win more
customers (Dominici, 2009).
3.2. Opportunities for growing for McDonald and Hungry Jacks
Compared to McDonald, Hungry Jacks has not fully exploited the Australian fast food
market. The former has over 800 stores across Australia while the latter has slightly over 340
stores within the same jurisdiction.
For growth and expansion, Hungry Jacks should focus on using its constant
improvement and innovation to venture into new markets. Hungry Jack should increase its
current stores from 340 to at least 800 to remain competitive in the market. In the raking of
market controllers, Hungry Jacks comes fifth (Amor, 2014).
On the other hand, McDonald has fewer brands and products in the market compared to
Hungry Jacks. Therefore, McDonald should focus more on developing new products and
enhancing its service quality. With the increasing competition from Hungry Jack and other
companies, McDonald is likely to lose a significant option of its market share if it chooses to
stick with its existing products (Steenkamp, 2017).

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4.0. Pricing and non-pricing strategies
Based on the visit is done, data has been collected on the specific pricing used by
McDonald and Hungry Jacks. This section will contrast them, and highlight the interesting
differences, similarities and other insights gained about how they compete on this front.
Likewise, the non-price strategies were also analysed, and the reasons behind the
similarities and differences will be presented (Goi, 2009).
In view of these, the strategic advantages enjoyed by either MacDonald or Hungry
Jacks are discussed.
4.1. A contrasting of the pricing strategies of McDonald and Hungry Jacks in
Australia
The products offered by McDonald and Hungry Jacks are similar: They both sell fast
food products in the Australian fast food industry. The two businesses use almost similar
pricing strategies to compete in the market.
McDonald uses a combination of pricing strategies to maximise its sale volume and
profit margins. McDonald uses bundle pricing strategy and psychological pricing strategy.
Under the bundle pricing strategy, McDonald provides at least two products at a discounted
price which is lower as compared to buying each product separately. Bundle pricing strategy
ensures that customers have extra value at a reduced cost while the company increases its sale
and profit volume. Likewise, psychological pricing strategy is used by McDonald to make its
prices appear cheaper and affordable. For example, the company offers its prices $_.99 or
$_.75 instead of rounding them off to the nearest Australian dollars. Customers perceive the
products as more affordable which encourage them to buy more (Hisrich & Ramadani, 2017).

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On the other hand, Hungry Jacks cost-effective pricing strategies to attract more
customers. Hungry Jacks uses market-based pricing strategy and bundle pricing strategy.
Under the market-based pricing strategy, Hungry Jacks determine its prices using the demand
and supply in the market (Stiving, 2011). The market-based pricing strategy offers the
company the required competitive option with similar products. For example, Hungry Jacks
offer its burger products a price range of AU$1 and AU$3 from small to large burgers.
Likewise, the company uses bundle pricing strategy to maximise its revenue generation.
Currently, the company is offering a combination of its value meal and kid's meal for its
bundled option. Bundled sales offer an economic incentive to customers by purchasing more
products at a discounted price. On its part, Hungry Jacks attracts more customers (Rajagopal,
2012).
Table 1: Shows a comparison of McDonald's and Hungry Jack's pricing for their most
popular products, and the associated pricing strategies used.
Major Products McDonald (AU $) Hungry Jacks (AU $)
Bacon & Eggs 4 3.35
Burgers & Combos
Meal Medium 10 10.20
Beef Burgers & Combos
Medium 12.25 9.90
Sides & Snacks
Small 2.15 1.00
Medium 2.80 3.00
Kid’s Menu
Three Nuggets 5.30 4.95
Six Nuggets 7.55 6.95
The table shows that the prices of the products are almost similar. Both McDonald
and Hungry Jacks use psychological pricing to attract more customers. However, Hungry
Jacks sell its products at a lower price compared to McDonald. This is known as parallel

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pricing which allows customers to go for Hungry Jacks' products compared to McDonald's
(Aussie Prices, 2018); (Aussie Prices, 2018).
4.2. Non-price strategies used by McDonald and Hungry Jacks
In the Australian fast food industry, companies provide less differentiated products to
the market. Besides pricing strategy, fast food companies also apply non-pricing strategies to
enhance their competitive advantage and market dominance. Some of the non-pricing
strategies used in this market are quality and reliability, product differentiation, product
bundling, customer services, convenient location and brand reputation (Galanakis, 2016).
Both McDonald and Hungry Jacks use quality and reputation, product bundling sales
promotion and customers services as their non-pricing strategies. The success of such
strategies on respective companies can be ascertained from the customer's satisfaction and
performance in the industry. The following findings were extracted from the data collected;
 First, the two companies have made efforts to improve their healthy options.
McDonald has introduced; low sugar buns, more nutrition to its products, fruit and
salads and canola oil. However, fat content in Big Mac burger offered by McDonald
is at 25 grams.
 On the other hand, Hungry Jacks has introduced new healthy products such as salads,
fruit and yoghurt, and baguettes. However, its Whopper Double Beef Burger contains
a fat content of 50 grams. Hungry Jacks lags when it comes to offering healthier
options (Amor, 2014).
 Second, McDonald has invested a huge amount on advertisement and sales promotion
compared to Hungry Jacks. In 2017, McDonald spent 38 million Australian dollars on

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advertisement and sales promotion compared to Hungry Jacks' $16 million (Hasan,
2013).
 Third, McDonald is more famous compared to Hungry Jacks. The former enjoys a
wide physical presence across Australia compared to the latter which give customers
convenience (Goi, 2009).
 Fourth, McDonald provides customers with service quality compared to Hungry
Jacks. The former focuses more on the ensuring that customers are given the expected
quality while the latter focus more on providing quick services.
 Fifth, Hungry Jacks provide its customers with many choices compared to
McDonald's.
 Sixth, McDonald provides rich and impressive content with its social media platforms
compared to Hungry Jacks. The former has a wonderful social media displays, and the
post contents align perfectly with its events. On the other hand, Hungry Jacks display
on social media platforms is less appealing. Its social media campaigns do not align
with the main events (Galanakis, 2016).

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5.0. Conclusion and Recommendations
The study sought to discuss the Australian fast food industry by explicitly analysing the
performance and strategies used by the MacDonald and Hungry Jack's companies to retain or
expand their market share. Both primary and secondary data was collected from the Mac
Donald and Hungry Jack's stores located at town hall Sydney. The data helped to compare
and contrast the pricing and growth strategies applied by the two companies.
The studies established the following facts;
 One, the Australian fast food industry is highly competitive. Companies use several
strategies that revolve around social trends, technology and innovation and
regulations. McDonald and Hungry Jacks have turned to low-cost strategy to win
more customers.
 Two, consumers have become conscious of their eating habits. As such, fast food
stores have been forced to shift as well or risk being kicked out of the market.
 Three, Hungry Jacks has not fully exploited the market. The company should focus on
using its constant improvement and innovation to venture into new markets.
 Four, McDonald should focus more on developing new products and enhancing its
service quality.
 Five, Jacks cost-effective pricing strategies to attract more customers. McDonald and
Hungry Jacks use either bundle pricing strategy, psychological pricing strategy and
market-based pricing strategies to enhance their market shares.
 And six, the non-pricing strategies applied by McDonald are more effective compared
to those applied by Hungry Jacks.

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References
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https://www.aussieprices.com.au/food/fast-food/hungry-jacks-prices/
Aussie Prices. (2018, Oct 11). McDonald’s Menu Prices in Australia. Retrieved from Aussie
Prices: https://www.aussieprices.com.au/food/fast-food/mcdonalds-prices/
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mcdonalds-still-australias-favourite-fast-food
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