Products offered by McDonald’s
Products offered by McDonald’s
In addition, when the prices for complementary products increase then producers increase their process in order to compensate for the cost of complementary products. For instance, the price for Mc Donald’s products will increase with an increase in salad, bread, potatoes prices. Furthermore, an increase in the price of complementary products makes customers reluctant to purchase the products. For Mc Donald’s, increase in prices of its products has not turn customers away because the changes in the complementary products have increased its demand (Love, 2008).
Market size
Mc Donald’s operates in 120 countries and has almost 34,000 restaurants. The company operates has expanded into various countries and opened restaurants that serve a large number of consumers. The company has the biggest market share both locally and internally. Mc Donald’s was the leader in the fast food hamburgers restaurant industry in US. Mc Donald’s had a market share of 35% in 2011. Burger King and Wendy’s are the second biggest competitors and had a market share of 4% each. Mc Donald’s market share has increased fir the past years as the company has expanded to other regions including China, Asia, and India among others. Mc Donald’s uses different strategies to maintain its market share such as product differentiation, low cost leadership etc (Bobo & Sander, 2011).
Firms in the restaurant industry and mixing in terms of market share
The United States restaurant industry consists of 550,000 restaurants. The combined revenue for the restaurants totals $400 billion. Competition in the restaurants industry has increased greatly for the past years as the number of restaurant companies joining the industry has increased. The main companies operating in the US restaurant industry include Mc Donald’s, subway, Burger King, Starbucks and Wendy’s. Other restaurants include Taco Bell, Pizza Hut and Dunking Donuts. Some of the companies operate internationally and locally like Mc Donald’s, Burger King and Wendy’s. The companies differ in terms of market share.
Mc Donald’s is the market leader in the restaurants industry as it has the biggest market share. Some companies including Burger King and Wendy’s have lost their market share for the past years due to competition from rival companies. Mc Donald’s has led to stiff competition in the industry and affected other restaurant companies. Mc Donald’s offers quality products to customers and this have improved is competitiveness. This has compelled companies to expand to other countries so as to increase their market shares. Burger king and Wendy’s have expanded to foreign countries. Mc Donald’s dominates the fast food hamburgers restaurant industry in US. Mc Donald’s had a market share of 35% in 2011. Burger King and Wendy’s are the second biggest competitors and had a market share of 4% each (Bobo & Sander, 2011). Mc Donald’s market share has increased greatly for the past years due to satisfactory and improves consumer services (Love, 2008).
Economies of scale refer to cost advantages that a company gets because of expansion. Companies achieve economies of scale when they produce goods in large quantities at a lower cost. Companies in the limited service restaurant industry can see some advantages due to economies of scale. However, the economies of scale are affected the ease of establishing a quick service restaurant. The saturation of the restaurant industry limits the advantage a firm can attain via economies of scale. Some of the existing competitors in the industry have achieved economies of scale such as Mc Donald’s. Mc Donald’s has outperformed other firms due to economies of scale.
The company has economies of scale and hence a low cost competitor. This has forced other companies such as Yum brands, Pizza Hut, Taco Bell, KFC, Burger king and Wendy’s to keep up with Mc Donald’s. However, the companies have not managed because of deficiency of economies of scale. This has also prevented other companies from entering the industry as they have to compete on a large scale. The cost of plant, marketing and R$D have prevented companies from entering the industry. Companies should invest a lot in R&D so as to remain competitive in the industry and hence few companies can invest. Mc Donald’s, Burger King and Wendy’s have invested in R&D to remain competitive. The cost of plants and marketing is high as companies have to market their products to be competitive (Roy, 2011).
How Mc Donald’s competes with other firms in the industry
Mc Donald’s does not use price competition to compete with other companies in the industry. Mc Donald’s has focused on providing satisfactory services to consumers. It has also concentrated on improving customer experience. On the other hand, Burger King, Wendy’s and other competitors have used price competition to compete with Mc Donald’s. The companies lower their prices in order to attract customers. In addition, Mc Donald’s uses advertising, and product differentiation strategy to compete with other firms.
Mc Donald’s maintains a comprehensive advertising campaign (Roy, 2011). The company uses electronic media, print media, billboard, sports and signage to market its products. The company mainly uses television advertisements to market its products. McDonald’s has used over 23 slogans to market in US. Mc Donald’s is a leader in product differentiation as it has differentiated its products. The company has employed the product differentiation strategy for many years to stay competitive. Also, the company uses non price competition strategies like service and quality.
Mc Donald’s ensures customers get quality and excellent services and products. Mc Donald’s and other competitors introduce new products into the industry regularly. The companies develop new products to meet consumer needs and also attain competitive advantage. Different sized companies compete in different ways. Medium sized, large and small companies compete in different ways. The large companies compete to maintain their market share while medium and small companies compete to increase market share. Companies are aggressively cutting costs so as to become the lowest cost leader. The companies have reduced production and operation costs. They have also provided products and services to customers cheaply. Mc Donald has used the low cost leadership strategy to reduce production cost and operation cost. The company reduces cost via division of labor. It hires and trains inexperienced workers to reduce cost.
The competition in the industry is vigorous as evidenced by the behavior of the companies. Some of the companies have reduced price in order to compete with their rivals, and this has led to losses. For example, Burger big and Wendy’s have reduced prices to compete with Mc Donald’s and have incurred losses and recorded low profits. The companies have invested heavily in advertising to get a competitive edge. The advertising and promotion has led to increase in sales and profits (Love, 2008).
The sales and profits for the industry and individual companies are growing slowly. The US restaurant industry was affected by the 2008 economic crisis, but the industry is recovering. The US resultant industry and companies will experience growth in 2012 due to various factors (National restaurant association, 2012). Companies have responded to the changing needs of consumers by enlarging healthy options on their menus. Restaurants have shifted to healthy eating as consumers become health conscious. This will lead to rapid growth as companies will be able to satisfy customer needs and increase sales and profit. The sales for food and drinks in the restaurant industry in 2012 totaled to $ 631.82 billion up from $610.41 billion in 2012. The sales have increased considerably for the past 3 years as shown below.
| year | Sales(billions) |
| 2009 | $569.59 |
| 2010 | $587.17 |
| 2011 | $610.41 |
| 2012 | $631.82 |
Source: Statista. (2012).
The sales and profit differed from one company to another. Mc Donald’s had the highest sales in 2011 per store. The company sales per store totaled to $2.4 million. The sales of the first big restaurants in US are shown below. Some of the companies have recorded high sales and others low sales (FastfoodFacts, 2012).
| restaurant | 2008 | 2009 |
| Mc Donald’s | $30,025 | $31,000 |
| Subway | $9,600 | $10,000 |
| Burger King | $9,348 | $9,000 |
| Starbucks | $8,750 | $8,347 |
| Wendy’s | $8,013 | $8,388 |
Source: FastfoodFacts (2012).
Reference
Bobo, S., & Sander, P. (2011). The 100 Best Stocks You Can Buy 2012. Adams Media
FastfoodFacts. (2012). Overview of fast food industry. Retrieved from http://www.fastfoodmarketing.org/media/FastFoodFACTS_Report_Results.pdf on 6/12/2012
Love, J.F. (2008). McDonald’s:Behind the Arches. Paw Prints
Mieth, H. (2007). The History of McDonald’s. GRIN Verlag
National restaurant association. (2012). 2012 restaurant industry forecast. Retrieved from http://www.restaurant.org/pdfs/research/forecast_2012.pdf on6/12/2012
Roy, D. (2011). Strategic Foresight and Porter’s Five Forces:Towards a Synthesis. GRIN Verlag
Statista. (2012). Restaurant industry food and drink sales in the U.S. from 1970 to 2012. Retrieved from http://www.statista.com/statistics/203358/food-and-drinks-sales-of-us-restaurants-since-1970/ on 6/12/2012
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