Market Structure Mcdonalds Market Structure: Mc Donald\'s

Market Structure

McDonalds

Market Structure: Mc Donald's Corporation

Mc Donald's Corporation

What type of market do you think your franchise operates (perfectly competitive, monopoly, monopolistically competitive, oligopoly)? What are the specific characteristics that make it this type of firm?

Mc Donald's is one of world's largest chain of fast food operates in more than 119 countries worldwide with a customer base of 47 million customers. Each outlet is operated by a franchisee or an affiliate who in turn pays royalties and fees in terms of revenue (www.mcdonalds.com).In my opinion, Mc Donald's operate in a monopolistically competitive market which according to Krugman & Wells (2009)is likely to have the following characteristics:

There are many producers and many consumers in the market.

Consumers perceive that there are non-price differences among the competitors' products.

There are very few barriers to entry and exit.

Producers tend to have a degree of control over price.

Mc Donald's is a part of the fast-food industry where there are many producers and consumers and no one restaurant has complete control of the market price. Every year thousands of companies worldwide attempt to enter the fast food business since there is no barriers to entry or exit. Thus Mc Donald's constantly attempts to invest money in its brand name in order to differentiate itself from its competitors as well as come up with new products and services from time to time thus indicating that it is in the market for long haul. (Rittenberg & Tregarthen, 2009).

Q. 2. What type of competition does your firm face? Who are some competitors?

Mc Donald's operate in a monopolistically competitive market, facing cut throat competition from a number of the other fast food franchises such as Burger King, Wendy's and Yum Brands. Each of these franchises dominates a small fraction of the market and tends to differentiate their products in terms of brand name, services, quality and most importantly their unique pricing strategy (Rittenberg & Tregarthen, 2009).

Monopolistic competition in a fast food industry is a form of an imperfect competition where many franchises compete fiercely against one another on the basis of product differentiation. However, due to the huge differences in branding between these franchises, much consideration is not given to the impact of their own prices on the prices of other firms (Solow, 1998).

Q. 3. How do you think your firm can increase its market power?