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Monopolistic competition in fastfood business - Essay Example

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Monopolistic competition in fastfood business

The purpose of this paper is to examine the extent to which the competition in the fast food industry fits the description of "monopolistic competition "as well evaluate how major fast food chains compete in the industry and what challenges they currently face.
It is clear that fast food industry is one of the most competitive industries in the USA. Most of the fast food chains provide their customers with almost identical menus (especially two largest rival companies - Burger King and McDonalds), it is relatively easy for the company to enter the market of the fast food; in spite of the fact that domestic market is saturated fast food industry is still regarded as one of the fastest growing industries in the world.
In the USA, consumers spent more than 100 billion dollars on the fast food in the year 2000, and according to the information provided by National Restaurant Association, the sales in 2006 might reach the new record level of 142 billion dollars (though this is less that the level exhibited by full service restaurants- 173 billion dollars). According to many observers fast food restaurants have been recently under competitive pressure from fast casual restaurants that provide their customers with food of higher quality at the reasonable price. 3
There are many fast food chains in the USA, and most of them prov...
taurants have been recently under competitive pressure from fast casual restaurants that provide their customers with food of higher quality at the reasonable price. 3

Product differentiation in the fast food industry.

There are many fast food chains in the USA, and most of them provide the customers with almost identical products. There is a slight difference in cooking process between Big Mac provided by Mc Donald's and King Supreme, relatively new product of Burger King. Neither the menu of Wendy International (with standard set of hamburgers and chicken salads) differs in any significant aspect from the menu provided by two largest national fast food chains-McDonalds and Burger King. In order to succeed in the market the companies have to promote and advertise their products as successful advertisement campaign might create some "virtual "differences among the products; they also should stay abreast of the latest changes in the market.
These differences are usually created through advertisement and are very important in the industry of "monopolistic competition".

With the increased health consciousness among the consumers of the fast food chains, new advertisements campaigns conducted by the chains are aimed to convince the consumers that the food is healthier. This is usually done by including more salads in the menus of the chains. For instance John Schuessler, a chairman of Wendy's chain claimed that it poorly performance in 2004, might have been caused by the steps taken by competitors that included salads to their menus.4
Other commentators however claimed that poor advertisement campaign and inability of the chain to adapt to the new challenges were the main reasons of the poor results that the company showed.
Apart from adding salads other chains ...Show more

Summary

The market situation in the industry where sellers provide the customers with almost identical, but not homogenous products is called "monopolistic competition". 2Products differentiation as well as non price competition is the most important feature of the monopolistic competition.
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