ECON-490 Assignment 2: Case Study of McDonald's and Burger King

This assignment analyzes the competitive landscape of McDonald's and Burger King, focusing on their rivalry in the fast-food industry. The case study provides profiles of both companies, including their history, values, and growth strategies. It then explores the concept of penetration pricing, recommending its adoption for market dominance. The assignment further delves into the market structure of oligopoly, explaining its benefits for leading firms like McDonald's and Burger King, such as higher profits and barriers to entry. It also discusses the disadvantages of oligopoly for consumers, including limited product choices and potential for higher prices. The paper concludes by referencing relevant sources to support the analysis and findings, providing a comprehensive overview of the competitive dynamics within the fast-food sector.

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Assignment 2
1. The two leading companies which are in direct competition with each other are
McDonald’s and Burger King. The rivalry between the two eating joints has come down
to one item – the hamburger (Harris, 2015).
Company Profile – McDonalds
In 1940, Dick and Mac McDonald opened the first eating joint of what would today
become the massive chain that it is. The restaurant, McDonald’s Bar-B-Q, opened up a
typical drive through in California. In 1954, a salesman by the name of Ray Kroc
acquired the franchise of McDonalds so as to continue to spread its business operations
worldwide. McDonald’s Corporation incorporated in 1964, currently owns and operates
McDonalds. These restaurants serve a menu of food items which is relevant to the local
cuisine. Today, the company has more than 36,000 joints in a 100 countries, the latest
being opened in 2016 in Kazakhstan. According to the company official website, their
values are responsible leadership, inclusiveness, progressiveness, and local integration. A
new growth strategy was introduced in 2017 by the name of the Velocity Growth Plan
and the key pillars of this growth strategy are – retain, regain and convert. Its net worth as
of March 2019 is $142.97B.
Company Profile – Burger King
Burger King, founded in 1954 by Dave Edgerton and James McLamore, is the second
largest fast food hamburger chain and the biggest competitor to McDonalds. It provides a
vast variety of products through its wholly owned subsidiary – Burger King Corp. The
eating joint offers hamburgers, chicken sandwiches, French fries among other food items.
The brand’s values are commitment to premium ingredients, signature recipes and a
family – friendly dining experience. In 2010, 3G Capital, a multimillion dollar
investment firm purchased Burger King making it a privately held company. It currently
serves more than 11 million global consumers.
2. If I were the manager of one of these hamburger joints – either McDonalds or Burger
King – I would adopt the Penetration Pricing policy. In this policy, the prices of the new
products being launched are set low initially. Once the customers have become
accustomed to these new items, then the price is increased. The company, in this way,

grabs a large number of consumers who think that they are getting their money’s worth.
Also, many products are offered at discounted rates and then the prices are increased later
on. This pricing policy is considered the best for gaining the first position in the market
(Watkins, n.d.).
3. When the whole sector of the market is occupied by the little number of big corporations
who share the leadership, this type of market structure is known as Oligopoly. There is a
small number of firms but all of these are big enough such that no single firm owns the
market; and leadership is shared by all. There is no fixed number of firms but all of these
corporations have an influence over the others. These exist in tandem with each other
because they realize that there is more benefit in collaboration than in wars with each
other.
Benefits of Oligopoly for the leading company are:
 It leads to the creation of huge profits for the corporation in the lead. This is
because of a trickle – down effect i.e. higher prices by a few companies will lead
to higher profits for them (Ayres, 2017).
 It helps in keeping a healthy competition in the market. The leading firm in the
Oligopoly can easily coerce the others to keep high prices and directly gets the
benefit of these high prices (Ayres, 2017).
 The leading firm can easily create barriers to entry of new firms, thereby making
it difficult for them to establish a new business in the market (Sonkushre, 2018).
The disadvantages of Oligopoly to the final consumers are:
 Setting high prices is beneficial for the firm but its ultimate burden falls on the
consumer. They are the ones who end up suffering the brunt of the price wars
(Sonkushre, 2018).
 Higher concentration of similar firms in the market reduces the choice of the
products available to the final consumer. They have limited options when it
comes to buying products in an oligopoly market.

 An Oligopoly is never motivated towards social benefit. Its only aim is
maximizing profits.
References
Ayres, C. (2017). 10 Pros and Cons of Oligopoly. [Online] Green Garage. Available
at https://greengarageblog.org/10-pros-and-cons-of-oligopoly. [Accessed 24 March,
2019].
Burger King, (n.d.). Official website – About us. [Online] Available at
https://www.bk.com/about-bk. [Accessed 24 March, 2019].
Harris, A. (2015). The Top 10 Business Rivalries in History. [Online] Fast Company.
Available at https://www.fastcompany.com/3048493/the-top-10-business-rivalries-
in-history. [Accessed 24 March, 2019].
McDonalds Corporation, (n.d.). Official Website – History. [Online] Available at
https://corporate.mcdonalds.com/corpmcd/about-us/history.html. [Accessed 24
March, 2019].
McDonalds Corporation, (n.d.). Official Website – Our Growth Strategy. [Online]
Available at https://corporate.mcdonalds.com/corpmcd/about-us/our-growth-
strategy.html. [Accessed 24 March, 2019].
Sonkushre, P. (2018). The Principal Advantages and Disadvantages of Oligopoly.
[Online] Business Zeal. Available at https://businesszeal.com/advantages-
disadvantages-of-oligopoly. [Accessed 24 March 2019].
Watkins, D. (n.d.). What is Market Penetration Pricing? [Online] Chron. Available at
https://smallbusiness.chron.com/market-penetration-pricing-20346.html. [Accessed
24 March 2019].