ICMS ECO600: Competition Analysis of McDonald's and Hungry Jacks

This research report provides a comprehensive analysis of the competitive dynamics between McDonald's and Hungry Jacks within the Australian fast-food industry. The study employs both primary and secondary data collection methods to evaluate the market structure, identifying it as oligopolistic with a few dominant players. The report delves into the competitive strategies employed by both companies, highlighting McDonald's focus on quality and Hungry Jacks' emphasis on value-based pricing. It examines growth strategies, including outlet expansion and product diversification, and analyzes various pricing and non-pricing tactics. The report concludes by emphasizing the importance of product differentiation for maintaining a competitive advantage, offering business advice, and discussing future growth prospects. The Herfindahl-Hirschman Index (HHI) is calculated to determine the market concentration.

Running head: MANAGEMENT 1
Economics and Finance for Business
Student Name
Institution

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Abstract
In this paper, the completion between McDonald's and Hungry Jacks were analyses as the
basis of market or industry analysis. The report utilizes data that were collected through primary
data collection method of observation and the secondary data collected through various available
materials. The market analysis of the competition between McDonald's and Hungry Jacks reveals
a number of things. The research shows the type of market structure within the fast food industry
to be oligopolistic market competition. The market has a much different business organization
yet there are few firms that have the largest market share. Companies within the fast food market
have diverse growth strategies that ensure they remain performing in the competitive market.
McDonald's and Hungry Jacks has both have outlet increase growth strategies that need changes
to ensure competitive advantage. The paper highlights various pricing strategies that are used by
two competing companies in the market. McDonald's has 2-dollar price offers and quality based
non-pricing strategies. Hungry Jacks, on the other hand, uses value-based pricing and loyalty
program non-pricing strategies. The paper concludes by identifying product differentiation as the
competitive strategy that enables company such as McDonald's to have a competitive advantage
over Hungry Jacks.

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Table of Contents
Introduction.................................................................................................................................................3
1. Market structure and competitive strategies.........................................................................................3
1.1 Notable competitors...........................................................................................................................4
1.2 Barriers to market entry.....................................................................................................................4
1.3 Market share......................................................................................................................................5
1.4 Competitive strategies.......................................................................................................................6
I.5 Business advice component................................................................................................................6
2. Growth strategies.................................................................................................................................7
Business advice component.....................................................................................................................7
3. Pricing and non-pricing strategies........................................................................................................8
Business advise component...................................................................................................................10
Conclusion.................................................................................................................................................11
Reference...................................................................................................................................................12

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Introduction
Business competition is one of the key aspects of business operations that increases
efficiencies and performance in the market. Business rivalry can sometimes intensify that make
many businesses has low performance while others take the chance to increase their dominance
in the market. The food industry of Australia has many different companies that compete within
each other to get customers hence more sale and profit. Fast food particularly has many
companies but the main focus of this research is to study the competition between McDonald's
and Hungry Jacks. The data was collected using primary data collection and secondary data
collection methods to help understand the two companies. The report covers various sections that
include market structure and competitive strategies form the first section of the report. The
second section focus on the growth strategies of the two companies under investigation. The last
section considers pricing and non-pricing strategies that McDonald's and Hungry Jacks uses to
compete in the market. The paper concludes by discussing the importance of competition in the
business environment and the expected conduct of business in the market where there is high
competition. The following paper investigates the competition between McDonald's and Hungry
Jacks by the use of primary and secondary data collected.
1. Market structure and competitive strategies
The Australian fast food market is an oligopolistic market with only a few known brands
dominating the market. Some of the dominant brands are McDonald's, Hungry Jacks, Pizza,
Subway, Hut, and KFC. The competition is strong with most of the dominant companies having
a larger market share as compared to those small companies within the same market. Some other
companies that also form fast food companies are the Wendy’s and Oporto. The market is

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oligopolistic market since the market has many companies that offer the same food or related
food products within the market. These companies are divided into three; those brands that are
well known that have been in the market and therefore have a strong brand in the market. The
second category includes those firms that are large and not well known in the market. The last
category of companies within the market is that company brand that is a smaller size in the
market and they have a low share (Cowen & Tabarrok, 2013).
1.1 Notable competitors
The notable competitors are McDonald's, Pizza, Subway, Hut, Hungry Jacks, and KFC.
There are some new entrants through they receive little attention as compared to the known
brands in the market. These companies have been in the market for a long period of time and are
currently experiencing competition from other new companies (Dunn, Mohr, Wilson & Wittert,
2015).
1.2 Barriers to market entry
Australian fast food market is a liberal market with low market barriers to the new
entrants. The market has basic regulation that allows the business to operate in the market and
allow new firms to enter the market. There are limited barriers to market entry within the fast
food market of Australia with many firms entering the market. The market in Australia is
generally a liberal market that has seen growth in fast food outlets. The market within Australia
fast food industries has changed over time with consumers becoming aware of the nutritional
requirement within the food that is served in many restaurants. The market has been growing in
size with many new companies are increasingly entering the market. The market is structured to

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allow firms to operate under the set regulations but with minimal barriers (Krugman & Wells,
2012).
In my opinion, barriers to market entry should not be used in the fast food industry and
instead, regulations should be heightening. The fast food and food industry in Australia is a
sensitive market that requires high quality and set standards. The standards of food quality are
important as some companies such as McDonald's have realized and focus on quality. In
addition, with the increasing obesity and health-related challenges affecting customer more
regulations that will ensure that food is safe. Therefore, a limited barrier to good regulations is
good for competition in the market for fast food in Australia (Andrea & Silvia, 2014).
1.3 Market share
Various dominant competitors in the fast food market have different market shares.
McDonald's has a market share of 32%, KFC has a market share of 23%, Fish and Chips Shops
has a market share of 22% and Hungry Jacks has a market share of 14% among many other
companies.
Firm Market share Square
McDonald's 32% 1024
KFC 23% 529
Fish and Chips Shops 22% 484
Hungry Jacks 14% 196
Herfindahl-Hirschman Index 2233

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The Herfindahl-Hirschman Index of 2233 shows that the market is less concentrated and
therefore is oligopolistic market competition.
1.4 Competitive strategies
McDonald's and Hungry Jacks have different competitive strategies that each firm uses to
compete with other firms in the market. Firstly, McDonald's has been using quality and
acquisition strategy as a competitive strategy. The company has been using the product quality as
a major focus where the McDonalds advocate for high-quality products in the market as
compared to rival companies. Secondly, Hungry Jacks has been using price competitive strategy
where the company charges a relatively low cost for products that are sold within the restaurant.
Due to strong market competitive with McDonald's, Hungry Jacks has been offering customers
relatively low-priced products to attracts customers that could not afford the high cost of food
sold by McDonald's (Hebden, King, Grunseit, Kelly & Chapman, 2011).
I.5 Business advice component
One of the main competitive strategy that McDonald's can use id product diversification
and contemporary marketing. The product diversification strategies are considered as one of the
effective competitive strategies that majorly ensure that products that suit customers need are
available to customers. The product diversification is based on customer need and the growing
trend in customer wants. Moreover, product diversity or differentiation ensures McDonald's has
all products that match the need of customers. This will make many customers that are in the
neighborhood to come and shop within the company hoping to get their needed products.
Secondly, using contemporary marketing strategies to bring product more closely to the

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customer is another competitive strategy that will help bring more customers to the company as
compared to competitors. Contemporary marketing strategies such as social media marketing
ensure that many online users within Australia interact with the company during marketing
(Lanny, 2015).
2. Growth strategies
The main focus of McDonald's is to provide quality products to customers throughout its
many branches. The company has many branches and the company has been offering quality
products to customers. In addition, I observed McDonalds is charging relatively high prices for
food products due to its quality policies. This has formed the basis of marketing of McDonald's
of its product on various media platforms (McColl-Kennedy, Yau & Kiel, 2010). McDonald's
and Hungry Jacks have business growth strategies that both companies use to grow their
businesses. Firstly, McDonald's has growth strategies that are based on opening new branches
and acquiring other companies under the same product line. The company has been acquiring
many new branches and opening new branches in the country to ensure the business continues to
grow. The company has open many outlets throughout the country to secure customers that are
spread across the country (Fraser, Edwards, Cade & Clarke, 2010).
As per my observation, the main focus of Hungry Jacks is food diversification to meet
customer’s need in the market. The company has tried to increase the number of food products to
match the need or wants of the customer. Secondly, Hungry Jacks is another company that has
been growing through the opening of many outlets within the country. The company has been
growing through the launching of many branches and the company recently launched its 400th

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store to mark a milestone in fast food. This makes the company have more than 600000
customers that shop crosses its many branches (Perloff, 2012).
Business advice component
I think McDonald's need to grow or expand in order to continue to maintain its brand
position in the market. The type of growth that the company needs to embrace is differentiation
growth in order to reach more customers. The company has been growing through the opening of
more outlets and the acquisition of more branches. The company has also been focusing on
quality but with limited product differentiation. Therefore, the company needs to diversify its
products to meet more customer needs (Scott, 2012).
McDonald's need to differentiate its products to increase more products based on the
customer taste. The company though has more products that is sold within its many stores, there
is a need to diversify products to increase customer need consideration. The company needs to
put the customer needs and wants as the recipe for developing more products. Moreover,
differentiating products serves to meet the price challenges often prevent customers from coming
to stores. McDonald's has received varied opinions on the high cost of goods sold within its
premises, the company, therefore, need to solve the issues of high prices through differentiating
products based on taking and prices. This is important for both growth and competition as the
company will compete based on the many products that meet customer needs (Grinin, Korotayev
& Tausch 2016).

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Figure 1: McDonald's Food and price
3. Pricing and non-pricing strategies
McDonald's Hungry Jacks
Pricing strategies 1. Bundle pricing strategy
2. Psychological pricing
strategy
1. Value-based price
strategy
2. Market skimming
prices

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Non-pricing strategies 1. Quality focus
2. Customer focus
1. Loyalty programs
I obserev the differences in pricing and non-pricing strategies is that McDonald’s uses
bundle pricing strategies and psychological pricing strategies. These are different from value-
based or market skimming pricing strategies that are used by Hungry Jacks. The two pricing
strategies that are sued by McDonald's majorly focus on price reduction offers and bundle that
gives a certain price to those customers that purchase a bundle of products from stores (Leslie,
2013). This price strategies aim to attract customers as so as to increase the profit margin. I
observed that McDonald's has been promoting its product through a 2-dollar burger campaign
that offers 2-dollar offer for most of its products in the market. Hungry Jacks on the other
adopted value-based pricing strategy that focuses on offering the best value for the cost of
products. The Hungry Jacks being a close competitor of McDonald's could not use the price offer
that is used by McDonald's in order to maintain a high-profit margin. Moreover, I noticed
Hungry Jacks consider the market trend before setting the price of its products as the company
normally consider the pricing strategies of McDonald's in order to maintain competition
(Investopedia, 2016).

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Figure 2: McDonald's Menu
Figure 3: Hungry Jacks Menu

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The two companies have different but related non-pricing strategies that aim to increase
customer’s appeal for sales. I observed that McDonald's uses quality and customer focus as its
non-pricing strategies that ensure that the company provides quality of products to customers
(Stephan & Andreas, 2015). In addition, the customer focus strategies that McDonald's apply to
compete in the market requires the customer to get the quality product that matches what they
expect. Hungry Jacks, on the other hand, the company uses loyalty products that encourage
customers to come back to the store. Some of the loyalty programs that Hungry Jack uses are
combo meal, family meal and happy meal. In comparison, McDonald's focus on quality while
Hungry Jack focuses on awarding customers with loyalty promotions (Marketing 91, 2016).
Business advise component
I think McDonald's can modify its psychological pricing strategy to bring in the element
of economy pricing strategy. McDonald's has been using a psychological pricing strategy that
attracts customers based on the perceived price reduction by a minimal amount. This pricing
strategy can be modified to include the element of economy pricing strategy (Spann, Fischer &
Tellis 2015). The modification will consider reducing expenditure to reduce the price of the
product and increase the profit margin of the company. This could be the best strategy for the
company to compete with a rival in order to get more customers and sales. The only drawback is
based on the poor quality of company operations if the expenditure is reduced in order to
increase or maintain margin. Expenditure, especially on operations, are essential that if reduced
the overall brand image can decline and this will give competitors advantage (Heyne, Boettke &
Prychitko, 2014).

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The non-pricing strategies that are sued by McDonald's can be modified to increase the
number of customers coming to the company. The modification of value focus on differentiation
strategy where the products are differentiated based on value (White, 2014). This will consider
the diversity of customers where some can afford good of some value and others to purchase
goods or other value. This will ensure that customer come into the company with their value
needs and are satisfied. This could be the best non-pricing strategy for McDonald's to use the
only drawback is that the company risk offering low-quality products to customers which could
be an advantage to rival. In addition, using this strategy could make the company lose its
tradition and culture that focus on high quality (Sidra & Attiya, 2013).
Conclusion
In conclusion, the data collected shows the market structure, competition and competition
strategies that ensure that competing companies maintain growth in the market. The investigation
identifies the market structure as an oligopolistic market that has many different companies but
only a few are dominant with large market share. Growth strategies require companies that are
competing such as McDonald's and Hungry Jacks to come up good growth strategy that will
ensure they have an advantage over rival businesses. The market competition requires well-set
strategies that ensure that business that competes in the market make a profit and attain growth.
In addition, the paper identifies various pricing and non-pricing strategies that give a company a
competitive advantage over other business in the market. The pricing and non-pricing strategies
that are modified to include other need in the market ensure that business is focused on winning
the competition. Maintenance of strategic direction within the context of completion is another
area that still needs investigation. This will show the ability of the firm to maintain its strategic
direction in the middle of the competition in the market. Many businesses modify their strategies

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to help them compete in the market and this need investigation to help understand the risk of
changing strategic direction.
Reference
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Turnaround. International Journal of Business and Social Science.
Cowen, T. & Tabarrok, A. (2013). Modern Principles: Microeconomics (2nd ed.). New York:
Worth Publishers. pp. 228–29

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Dunn, K. I., Mohr, P. B., Wilson, C. J., & Wittert, G. A. (2015). Beliefs about fast food in
Australia: A qualitative analysis. Appetite, 51(2), 331-334.
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