Mcdonald's Case Study Of Mcdonalds
Summary：
McDonald’s all day breakfast service lead its own sales fell about 1.3% compare to its own sale in 2015. Although the global sales in 2016 increase, the profits earn in North American also fell down about 11% compare to previous years. This article points out that it is because of their own all-day breakfast service provides consumers cheap options. So consumers would just switch their choice to the cheaper meal rather than the regular meal.
Economics concepts:
1. Law of demand: The fluctuation of sales actually involve in the change of consumer’s demand. Demand is the amount of good or services that consumers are willing and able to buy a certain piece during a given time period. There is an inverse relationship between quantity
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(About 2 dollars cheaper). So the lower price of breakfast might cause the total revenue to decrease.
5. Monopolistic competition:
McDonald is in a market structure called Monopolistic competition. Monopolistic competition is a type of competition that many producers sell differentiated products. As we know, there are lots of fast food companies around the world. KFC, Taco bells. Etc. Monopolistic competition has a very low barrier to entry. So it is very hard for them to earn economics profits in long run. Because McDonald faces so much competition for their output, so it has to have some non-price competition strategies to increase its own output. That is why they come up an idea of all day breakfast meal options to attract more consumers. The graph above demonstrates the long run equilibrium of McDonald. From the graph, the price is equal to average total cost. This means the firm doesn’t earn any economic profit although it is at the profit maximum output level. Ideally, when they start their all-day breakfast service, the demand curve will shift upward and enable the company to earn economics
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