ECO600 - Market Competition: McDonald's & Hungry Jack's in Sydney

This report provides a detailed analysis of the market competition between McDonald's and Hungry Jack's in Sydney, Australia, within the fast-food industry. It begins by introducing the two companies, their histories, and their market presence. The report then examines the market structure, highlighting the increasing competition from new entrants like Grill'd and Red Rooster, and discusses the barriers these new restaurants face, such as location, economies of scale, regulatory obstacles, and entrenched competitors. It also presents market share data, showing McDonald's as the leading fast-food restaurant, followed by KFC and Hungry Jack's. The analysis extends to the growth strategies employed by each company, with McDonald's diversifying its menu and Hungry Jack's focusing on its core burger trademarks. The report recommends horizontal growth as a strategy for expansion and discusses the pricing strategies used by both businesses, noting McDonald's use of price reduction to gain market dominance. The investigation was carried out by observation, interviewing and reviewing the various literature about the business.

Running head: MARKET COMPETITION 1
Market competition
Name of the Student
Name of the University
Author Note

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Abstract
The purpose of this paper was to carry out an analysis of the industrial competition for two
business. For this paper, the chosen businesses was McDonald's and Hungry Jack's all from
Sydney City. The paper illustrated the structure of the two businesses by briefly explaining how
they perform their activities and their founders. Further, the paper illustrated the market structure
of the two businesses by indicating their positions in the market. The paper also illustrated the
new competitors in the fast food market. In this case, the new competitors included; Grill'd, Red
Rooster, Noodle box and many others. Also, the paper indicated various ways that can be used
by the businesses to grow or expand. Therefore, the businesses were recommended to use
horizontal growth strategy as it gives chance for the dominance of the local market. Further, the
paper illustrated various pricing strategies that are used by both businesses. In turn case, it was
noted that Mcdonald's used price reduction strategy to gain its superior in the market.

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Introduction
The purpose of this report is to make an analysis of industrial competition for two
businesses. In this case, the selected businesses are based in Sydney city and they include;
McDonald and Hungry Jacks. Therefore, the report will focus on analyzing the operation of the
two businesses in terms of their competition. In this case, McDonald’s is a fast food company
that was founded way back in 1940. The business was started by Maurice McDonald and
Richard as a "hamburger stand" but later it became a franchise. The company is considered
among the largest restaurants across the world. On a daily basis, the company can serve at least
sixty-nine customers in over one hundred countries in various outlets. Also, McDonald’s
provides soft drinks, breakfast, chicken products, desserts, milkshakes, and many others. The
company's revenue was obtained from royalties, rent and fees from different franchise. To note,
the company is the 2nd largest private sector with many employees across the world estimated at
nineteen million. In Sydney City, McDonald's has very many outlets for example, "McDonald's
Martin Place NSW".
On the other hand, Hungry jack’s is a fast food company owned by Jeck Cowin. The
company is a franchise of "Burger King Corporation". The company owns various Hungry
jack's/Burger King restaurants across Australia. The company is obligated to license all the new
operators in the country by opening its new stores. Across Australia, the company is located in
390 areas. Among all the Burger King franchise in the world, Hungry jack is the 2nd largest
(Connelly , 2016).
The investigation about the two businesses was carried out by observation, interviewing
and reviewing the various literature about the business. This report covers various sections aimed
at explaining more about the business competition of the two companies. The second section of

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the report illustrates the companies’ overview regarding their market competition. In addition,
the paper also examines the growth strategies of the two businesses. Also, the report also
illustrates the analysis of non-pricing and pricing strategies used by the two companies to boost
their sales by capturing their market shares. In summary, the paper concludes by reviewing and
discussing the results that were obtained (Bergen,2014 .)
Market structure
In Sydney City, the growth of fast food restaurants is at a higher speed. Within the range
of 5 years, the restaurants in Sydney have been in the position to expand by at least 30%as
compared to the 5%for the past years. The trend in the market competition for restaurants in
Sydney city is believed to be as a result of younger consumers. As compared to the U.S market,
McDonald,s is not as strong as compared to its market in Australia (Sydney City). This high
competition in the market of fast food restaurants in Sydney City is considered to be as a result
of company's finding ways of serving or gaining popularity in the market by struggling to show
up their products. An increase in the competition for restaurants in Sydney is also considered to
be because of the provision of healthy and fresh meal unlike in the past days. In Sydney City, the
competitors for fast food are McDonald' KFC, Grill'd, Red Rooster, Outback and many others. In
this case, the new entrant in the fast food restaurants is, Grill'd, Thirsty bird, Lord of the fries,
Mr. Crackles and many others (Danielle, 2014).
Barriers faced by new fast food restaurants in Sydney city
The new entrants in the fast food restaurants in Sydney City are facing various barriers
that are hindering them from competing with the original restaurants. In addition, these barriers
are hindering the business from expanding. The barriers faced by the new entrants include the
following; first, location; most of the new entrants are not located in good places. To note, for

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any business to operate effectively, it should be located in a place where customers are readily
available. Also, location determines the existence of restaurants. In addition, good locations are
easily accessible and visible to pedestrians. Also, the good location they are always surrounded
by complementary businesses to restaurants. Further, they also provide cheap and plenty of
parking. Therefore, new restaurants find it difficult to get such a good place. Even if the new
restaurants find such places, they also meet difficulties in paying for mortgage and rent costs.
This becomes hard to be cleared in the initial period of the company (Chen & Miller, 2015).
Second, economies of scale; this means the average costs that a restaurant incurs. At the
start of business operation, restaurants face higher costs causing a barrier to the new entrants. To
note, new restaurants in Sydney City find it difficult to negotiate for power with different
suppliers so that they can demand higher prices. Therefore, the average costs of new restaurants
in Sydney City incur high costs meaning that they cannot be in the position to compete with
other restaurants which came earlier in the market (Sw ir e, 20 09 ).
Third, regulatory obstacles; most of the new restaurants in Sydney City face a problem of
meeting the strict requirements of the City such as health and other licenses. Therefore, these
regulations hinder the progress of the new restaurants in the marketplace. In addition, regulations
make it difficult for new restaurants in Sydney City to Compete in the market. Therefore, new
entrants in the market are required to contact various associations to seek for recommended
appropriate regional regulations so as to compete in the new market (Granlund, 2009).
Last, Entrenched Competitors; in Sydney City, there are various restaurants in different
areas in that the new entrants always face direct competition with the nearby existing restaurants.
To note, the nearby restaurants already had their loyal customers thereby making it difficult for
the new entrants to gain market support. Therefore, it always difficult for new restaurants in

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Sydney City to win the customers of other restaurants. For example, McDonald's has been in the
market for very many years so winning its customers is quite difficult. The new fast food
restaurants are required to offer various options that are different from the longtime restaurants
so that they can win the market (Raue& Wieland,, 2015).
Market shares of fast food restaurants in Sydney City
According to Raue & Wieland (2015), the leading fast food restaurant is McDonald's
followed by KFC. These are the top leading quick restaurants for over five generations. To note,
McDonald's market share is considered to be 13% better than KFC. In this case, the market share
of fast food restaurants in Sydney City depends on the Generation of the business. Considering
market Generations, McDonald's is the most popular with 67.3% followed by KFC at 56%. The
third most popular restaurant is Hungry Jacks's considered at 36.9% (Friedman, 2014).
Unfolding competition
According to Friedman (2014) the market competition of fast food restaurants has been
reported to be improving as compared to the last decades. In this case, McDonald's is considered
to be taking over the market competition with other leading restaurants such as KFC, Subway,
Hungry Jack's and many others. In addition, the reported sales of fast food restaurants in Sydney
City is $60.4 million as compared to $35.8 million in 2017. To note, the restaurant sector in
Sydney city is becoming highly competitive due to the emergence of new restaurants that wish to
take over the longtime ones. Also, all the competitors in fast food restaurants in Sydney city are
considered to have good financial resources, greater "economies of scale" and revenue that have
enhanced their existence in the industry. This has also helped the competitors to survive different
market problems such as price fluctuation.
Growth strategies

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McDonald's is not only focusing on its core competencies but also provides other
services. The company was majorly focusing on french fries, and hamburgers but it changed to
other products because of the change in the consumers need. As a way of changing the needs of
consumers, the company added more food types to its menu for example smoothies, salads,
fruits, and fish. Further, the company also focused on serving vegetarians by opening up various
stores in different areas such as India. Also, the company has changed the hamburger buns by
removing "high-fructose corn syrup" form the foodstuff. Between 2015 and 2016, the company
introduced a new gourmet restaurant service based on various gourmet such as Grill'd and shake
shack. Therefore, McDonald’s changed from its core competencies to providing other different
categories of services (Friedman, 2014).
On the other hand, hungry jack's focusses on its core competencies by selling Burger
trademarks only such as TendrGrill sandwiches and TendrCisp and Whopper. The company has
never changed to providing other services or products but instead, different names of products
are changed or given more generic names for example "Veggie Burgher", "Grilled Chicken
Burger" or "Hamburger". Hungry jack's menu contains its major products. Despite its location in
various areas, the company has never thought of changing its services or product unlike
McDonald's.
Considering the level of competition and market within Sydney city, the business needs
to expand so as to get a wider audience. Despite the many stores or branches that the two
companies have, they also need to continue growing so as to serve the growing population of
Sydney City. To note, business expansions create more competition within busineses thereby
increasing the profits merges. Therefore, these companies should grow or expand. The
businesses can expand by using horizontal growth. In this case, horizontal growth refers to the

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strategy used by a business or company to increase the production of its services or goods using
the same supply chain. The company may do this by using merger or acquisition and internal
market (Berry & Waldfogel, 2010).
However, the process may result in a monopolistic market in case one of the business or
company takes over the market. Therefore, the companies should use this strategy so as to
expand their operations by focusing on new markets either in different business sectors or
geographical location (Tiffany, 2012). Therefore, the businesses should adopt this strategy so as
to compete in the market areas which leads to high gains despite the uncertainties and risks
involved. To note, the companies can achieve from horizontal growth by implementing or using
their existing knowledge and strength instead of targeting other markets which require much
concentration and strategy. For example, Hungry jack’s works well in Australia, but it has more
chances of being successful in other markets just like McDonald's is. In this case, McDonald's
has tried to use this strategy inorder to dominate the world market. Also, the business can utilize
their existing assets so as to monetize various categories of values for their business. This can be
done by using an efficient network of running the business. If the business takes up this model
the horizontal growth model, they will be in the position to enjoy various benefits integration
such s "Economies of scale" and "economies of scope". In addition, the company's' market
reference will be strengthened if the strategy is used (Akin et al, 2008).
Pricing strategies
McDonald's has implemented various pricing strategies that are helping it to take over the
pricing competition in Sydney. With its new pricing strategies, McDonald's has been in the
position to take over the fast-food sector in Sydney City. In this case, the business is using the
dollar pricing rate for Cheeseburger and drinks ($1). In addition, the business has lower prices

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for its services, for example, Bacon McDoubles at $2 and triple cheeseburgers at $3. Therefore,
the new offering the company has implemented will help in increasing its customers in Sydney
City. On the other hand, Hungry Jack's pricing is done in a cost-effective way. Despite its
competition with other business like McDonald, Hungry Jack's idea of pricing depends on the
quality of its products and costs. The price of Burges for Hungry Jack's range from 1-3$. The
business's price strategy helps it survive in the market competition of fast food restaurants in
Sydney City by earning high revenues. Currently, Hungry Jack's provides two optional meals
that is to say; kid's meal and value meal. To note, the business designed the meals in that they
can be in the position to attract more customers and also provide more profits to the business
(Alonso et al., 2010).
The strategies used by McDonald' and Hungry Jack's are quite different depending on the
business plan of a given company. In terms of pricing strategies, McDonald's charges low prices
for its products compared to Hungry Jack's. For example, McDonalds' charges $1 for small fries
while Hungry Jack's charges $2.50. Therefore, it means that McDonald positioned itself as the
cheaper fast food restaurant in Sydney City. The goal of McDonald’sto use this form of strategy
is to increase its customers in the competitive market by charging low prices unlike its
competitors. Further, McDonald's aims at maintaining its longtime customers thereby providing
various offers. Unlike Hungry Jack's McDonald's aim at selling more products at reduced prices
so as to gain market support in various areas of Sydney City. On the other hand, Hungry Jack's
aims at increasing its profits from the services it provides by charging higher prices as compared
to its rivals (Bodey et al, 2017).
Recommendations

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If I was a new entrant in the industry of fast food in Sydney City, I would use various
pricing and non-pricing strategies to gain competence in the market environment. In this case, I
would use the following strategies, first, reduction on the prices; in this case, I would do this so
as to make my product more desirable in the market. This would help to incase the demand for
the products hence leading to increased revenue (S im an da n, 2 01 7) .
In this case, Hungry Jack's should reduce their prices for the burger so as to compete
with McDonald's. This can be done by reducing their prices lower than the competitors.
However, price reduction should be done by comparing the company's cost so as to avoid the
business from becoming bankrupt (Patton, 2015).
Second, predatory pricing; this involves setting prices below the business's average cost
for a short time so as to cause the competitors to become bankrupt(Johnson, 2016).. This is also
described as an illegal and aggressive pricing strategy. this helps the firm to take over the market
as its competitors are driven out(Bomkamp, 2016).
Last, increase in development and research, this leads to the discovery of better, high
quality and new functioning products. This will lead to the increased demand of the products
thereby attracting more comsers. In addition, research will help the firm to know various ways
that can be used to gain market support (Duprey, 2010).
Conclusion
In summary, it is noticed that McDonald's is taking over the market for fast food in
Sydney City. Because of its favorable pricing strategies, McDonald's will continue leading fast
food industry in Sydney City. In addition, it is understood that more new entrants in the market
of fast food in Sydney are working harder to take over the market, for example, Grill'd. This is
achieved by improving the quality of their meals. For example, Grill'd focus on providing

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healthy meals which are not the case with some of the longtime restaurants such as Hungry
Jack's. Therefore, to improve, the market for fast food restaurants in Sydney City, much focus so
as to be invested in the interest of customers and market strategies.

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Berry, S., and Waldfogel, J., (2010). Quality and market size. Journal of Industrial Economics
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Bergen, M. (2014) "Competitor Identification and Competitor Analysis: A Broad-Based
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Times
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