Management Economics: McDonald's Market Analysis and Market Structure

This document explores the market analysis and market structure of McDonald's in the context of management economics. It provides an overview of McDonald's and its products/services. The document analyzes the market position of McDonald's in the fast food industry and discusses the characteristics of the previous and current market structure. It also explores the potential benefits of operating in a different market and discusses the impact of government intervention on the society and the fast food industry.

MANAGEMENT ECONOMICS
Assessment 2

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Overview of McDonald’s, with descriptions of products/services..........................................1
2. Market Analysis of McDonalds...............................................................................................2
3. Characteristics of previous and current market structure of McDonalds................................5
4(a). Discuss that operating in a different market will be more optimal for the selected
organization.................................................................................................................................6
4(b). Suggested that greater or lesser intervention would be good for the society or not...........7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Managerial economics is one of the key principles that characterize the convergence of
numerous economic theories with business strategies in order to make better decisions. Such
policy is based on monitor the location and productivity wealth accumulation, by operational
excellence and outputs. A study was undertaken to analyze how economic approach can be
applied to corporate strategy for this motive (Prysiazhniuk and Plotnikova, 2017). McDonald's is
selected to conduct this research that also interacts with the fast food industry and operates
business in over 100 nations. To assess its market situation as well as the framework through that
it conducts industry, it compares total empirical statistics for this firm's competitive position. In
addition, some recommendation for greater or lesser public investments on its manufacture is
also created in this document, taking into account the benefit of culture.
MAIN BODY
1. Overview of McDonald’s, with descriptions of products/services
One of the big channel companies is the fast food industry, which keeps playing well in
those facets of the business circumstances. This has been measured in the UK that this market
has increased its performance because it has only expanded over the last couple of years.
Regarding its foreign development and growth of corporation, it is expected that this economy 's
value could reach £ 9.8 billion by 2021. Through all the National Statistics Office, it was
analyzed that this nation's people spend approximately 22 per cent on takeaway services, so it
indicates strong potential growth of fast-food businesses in the future. McDonald's has been one
of the largest fast - food businesses, established in 1940. Originally, its co-founders Richard and
Maurice McDonald had only established a small restaurant in San Bernardino, USA. Then, they
actually expanded the company to other areas, both domestically and globally, where it still
expanded to Canada in 1967. Following that, it exceeded ten thousand restaurants in total until
1988. Pursuing this growth by the modern era by franchise agreement and other strategies, it has
distributed operation with close to 35,000 locations in even more than 100 nations (Olivieri,
Seppänen and Denis Granja, 2018). While development in the 90's was so rapid in the 1990's that
McDonalds introduced various stores globally in every 5 hours. That will make that company the
greatest fast food chain company as perhaps the most famous family restaurant, emphasizing its
consumers with inexpensive food, delicious hamburgers and flavors as per their requirement.
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At present, it has less than 37,855 outlets and 69 million clients all around the world.
Nevertheless, this fast-food establishment is primarily known for its hamburgers, French fries
and hamburgers, but it also provides a diverse range of savoury yet tasty foods to raise consumer
satisfaction. It includes things such as chicken, soft drinks, breakfast items, milkshakes, dessert
and much more. The primary culprit that demonstrates McDonald's elevated contribution to the
economic growth is his job, that he has promised millions of jobs. Actually, this fast-foot
business is synonymous with more than 1.7 million workers, some of whom are part-time
working and some on full-time jobs. Its working environment typically constrains with young
adults who might want to work part-time, become self-reliant and make income all through
professors.
2. Market Analysis of McDonalds
The McDonald's main objective should become the country's greatest fast service
restaurant journey. To be the highest, it emphasizes supplying customers with the highest quality
goods, outstanding service, orderliness and also some greater price, which will help to enhance
customer interactions at its restaurant. The important focus of industry that it provides to
prospective consumers (people of different backgrounds) includes – dedicated to providing high
quality services; upholding the reputation of the brand in each as well as every supermarket;
performing business activities in an ethical manner; increasing business the right way; and
constantly seeking to develop continuously (Kamińska, 2018). McDonald management board
succeeds in distributing its goods and in upholding key principles across the country. Not only
does it function the fast food places but it also franchises them. Including 37,855 franchises in
117 countries nearly 6,262 have been owned by franchising the company and the rest are
managed by McDonald's. Underneath the franchising model, companies include a small fraction
of the resources to buy in restaurants and hotels to buy additional materials, dining area and
decorative items, and many other frameworks. Together with this, corporate new investment is
also being done in a timely manner to improve its productivity. In this context, McDonald's
liquidity statements over the last 5 years ( i.e. over 2015 to 2019) can be calculated by means of
its cash flow statement, shown here above:
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According to Forbes Report (2019), McDonalds' long-term goal is to own 95 per cent of its
restaurants by franchisees. In this respect, this man rose at 92.7 per cent at the end of fiscal year
2018 (McDonald's Corporations, 2019). As shown by the above accounting transactions, in
comparison to the total corporation's published income, with $21.03 billion it develops to 18
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percent year (McDonald's Reports wonderful outcomes, to precede growth over the coming
years. 2019). Then would have allowed the leadership to reduce operating or other expenses,
resulting in better profitability. Another characteristic of monopoly rivalry is the distinction of
the goods. Brand awareness leads to a condition where the supplier's purchasers sell a product or
service from another. Basically, the different companies' products are not entirely different;
they're slightly different from others. Though each business that produces a variety of products
has its own privilege, it still has to face tough competition. This defining element may be actual
or fictional. Actual differences are such as architecture, materials used, abilities, etc. although
variability parameters are by ads, trademarks, etc. Neither customers nor vendors have full
business awareness. There's many countless products which are each a near replacement with the
other (Litau, 2018). The customers aren't familiar because of all these items, their quality and
costs. So many purchasers make a device out of few more variants that are offered for sale near
the location. Often a consumer asks about than a given product where it is available at an
affordable cost. And therefore due to shortage of money he becomes unable to go somewhere
else he is also too fatigued to do it or he has been unable to find adequate means of transport.
Furthermore, the dealer does not understand the precise customer’s tastes and is thus able to fully
take advantage of the chaos.
The arrangement and features of a particular market where a business exists are related to
as the condition of the firm. There are 4 kinds of markets , i.e. perfect competition, monopoly
competitive advantage, monopoly and oligopoly, while markets can essentially be categorised by
their level of efficiency and prices. Numerous companies are price setters in perfect regulated
marketplace, while monopolistically competitive economies are characterised either by capacity
of certain companies to always have market control. Oligopoly economies, on the other hand, are
those that few companies can be price-makers, whereas monopoly economies are whereby the
company can be a price-maker. McDonald's company works in the oligopoly sector as being one
of the main sectors with such businesses is the food service business. Price rigidity and higher
price, which have significant effects on the marketing direction of the company, are among some
of the main characteristics of oligopolistic economies.
3. Characteristics of previous and current market structure of McDonalds
Industries like McDonald's are described as an oligopolistic market in competition with the
restaurant industry sector caused by price solidity. An oligopoly market is one that is
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characterised by the domination of a few smaller or larger companies in a particular competition-
restricted industry or market. Indirectly or directly, corporations within about an oligopolistic
industry collude in order to limit or discourage other rivals from accessing sectors or markets by
creating barriers to their entry. Another of the chief causes for the activity of McDonalds in this
type of market is that an oligopolistic market or business is the food restaurants industry in the
world. It would result in cost war between the ethical businesses to have a direct effect on the
other's pricing policies. This other significant cause that reveals McDonalds dealing in the
oligopolistic market is the appearance of few top retailers or production companies (Benlagha
and Hemrit, 2018). Having this structure, therefore, makes present firm capable of identifying its
competitors' position, as well as being able to examine their strategies carefully. It will help to
build effective methods of providing food combination at great rates, increasing the variety of
items and more. Yet by examining his present situation, whereby he put the phrase under his
corporate name as "Nobody does it like McDonald's," he found it to be actually real and
separated his items from his rivalries like Burger King. Therefore, by selling the same items as
other food establishments but not similar, it portrays the monopolistic economic technological
existence. This provides this firm the chance to enhance political influence and generate money
from the economy.
4(a). Discuss that operating in a different market will be more optimal for the selected
organization
McDonald Company currently operated in Monopolistic competition market because there
are very less competitive firm available in front of McDonalds. In addition, Burger King is the
nearest competitor which provides some similar burger’s range but there are more who provide
fast food which is also very popular among the customer.
The market structure can be defined as arrangement and main features of agreed region in
which a business is operating. Perfect competition, oligopoly, monopoly and monopolistic
competition can be classified into four types, on the basis of profitability and pricing level
(Ferguson, 2019). In addition, the oligopoly market is defined as an area where single or
less companies take a position as price makers, whereas single company has the capacity to be
the inside of monopoly ones. Perfect competition market demonstrates different firms operating
as price-takers, while monopoly corporations have shown the ability of some entities which
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provide dominant market position. The framework of the marketplace can be represented as a set
and the key environmental attributes in which the company operates.
In relation to McDonalds, a monopoly as well, if a business experiences little rivalry or
oligopoly through where there are little competitors, it operates with a monopolistically oriented
market. This market structure identifies a bunch of competitive producers selling similar but not
similar items and enabling free entrances and exits. It was investigated that safest way for
McDonalds Company would have been to operate business in a monopolistic market on its own.
This would enable this firm to obtain long term market leverage and negotiate prices in each of
its distinct products in ability to boost continuously in the food sector.
4(b). Suggested that greater or lesser intervention would be good for the society or not
It would be suggested that greater or lesser government intervention will be based on the
feature of business and how they actually perform in the market. Food is a key basic necessity of
an individual’s life and governments around the world have a significant influence on the foods
served for consumption. The main motion is worried with food production through aid to farm
workers in general, with the aim of maintaining a consistent rule of return for all those working
in agriculture sector. Further intervention has to do with food quality (microbiological safety)
and consumer protection against unfair trade which will be managed by the government.
Government economic plans affect food demand while instructional programs will promote
different food choices. Present dietary ideas suggest changes to diet as aspect of educational
programs designated to minimise the incidence of circumstances such as cardiovascular disease.
It is a government is to provide accurate guidance on foods and nutrition. The intervention of
responsible government will contribute to improved nutrition for the people, thus fostering a
productive agriculture sector.
In relation to the food industry, there is huge competition and to maximise their demand
organizations need to improve their competitive image, so high government intervention required
in restaurants business because delivering of those foods which are highly on demand in the
market can cause various medical problems. This sector also related with the consumer's health
and safety, so they need to followed public policy, because eating fast-foods regularly raise
several health issues such as obesity and weight concerns, health related problems and more.
According to the survey , nearly 9.3 percent of children aged 4-5 years result in weight
gain through consuming such foods, while under the age of 10-11, this proportion has risen by 10
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(18.9 percent) and is constantly expanding. In addition, excessive body fat and obesity also cause
more health issues to rise in people of all ages. Thus, these items state that higher intervention
throughout the fast-food industry is needed. Because the possibly the best-functioning market
will yield to the effective and cheaper supply of the goods, that helps firm to also be price taker
representing their production costs, including each person must be educated. To this end,
government aims to increase community understanding and awareness through educational
institutions, labelling, marketing, and health campaign initiatives about the consequences of
consuming fast-food products on a regular basis. Legislation on changing the way in which
options are provided to people deserves to be done like the Nudge strategy.
However, there are several interventions have been made in UK's food sector and other
countries also ban on using fat in the processing of their food products. In addition, a restriction
on advertising or promoting any item which is seems not to be justified. In this regard,
government should made policies after evaluating the entire societal, economical and
individual benefits. For example: advertisement or paid promotions are banned on public
channels because it motivates people to consume it. In addition, awareness regarding food or
why safety or quality of food important should be for consumer should be demonstrates through
awareness programs. Also motivate children and parents regarding food as well as their health
safety.
Customers are conscious that McDonald has been always working to produce goods that
customers need. It includes prioritizing the consumers on outstanding service delivery. Firstly,
the commodity sold by the company is of good quality which makes them the better option for
more consumers. In its distinctiveness, the brand is best known to preserve hygienic conditions
in its premises, as well as the products it releases on the market. Any adjustments in the
psychological variables will influence the products' equilibrium quality. If consumers establish a
pessimistic opinion of the commodity the market decreases and then the prices of the equilibrium
plummet. This needs to apply to the products’ quality; if the quality reduces the product’s
demand thus causes a fall in the item's equilibrium price.
CONCLUSION
From this overall analysis, it was concluded that economic management is the powerful
system that lets an enterprise make these decisions thru evaluating its financial position on the
competition in a reasonable timeframe. To assess probable success, businesses can adapt
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different assumptions of managerial economies such as accounting data, demand dynamics,
current and recent situation etc. they can select their businesses preferred consumer structure.
Furthermore, in connection with this review, it was made on the food industry, by looking into
the matter in this desired field, it was analyzed that major competitors in any financial situation
gain chances for enhanced economic growth. In comparison, they get help in building
development over political decisions on food policies by creating customer high quality and safe
food stuffs.
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REFERENCES
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