Project Part 3: Market Structure, Strategic Behavior, and Market Power - Research Paper Example

Topic: Market Structure, Strategic Behavior, Market Power Lecturer: Presentation: Introduction McDonald Company is a business enterprise that deals with a chain of restaurants, which are either operated by the company itself or by individuals outside the company’s management and who pay rent and other fees to the company in order to be allowed to use the company’s name (Love, 2000). The company is rated as one of the largest supplier of fast food, with an estimated 40 million customers, who provide ready market for their products on daily basis.

This essay is a critical evaluation of market conditions that define a business environment, with reference to McDonald Company. Market Conditions Market conditions refer to the factors that influence the sale of a commodity in a certain area (Krier, 2005). These factors determine the ability of a business to compete especially when introducing new commodities in the market. Such factors include and not limited to number of competitors already in the market, the level of competition as well as market growth rate.

It would be difficult for a business to be able to capture huge market share at the first entry based on the fact that it takes time to form a strong foundation for coping with other competitors especially those which may have already acquired market power. Market power is the ability of a business to capitalize on its uniqueness and low competition on its products by taking control of the market prices as well as supply without compromising customer loyalty (Krier, 2005). The customer loyalty may be due to lack of a better option as a result of monotony in the supply of their requirements.

McDonald Company has been able to acquire a significant market for their products, which has given it an upper hand in the sale and distribution of quality food with the help of their franchisees, who owns at least 60% of MacDonald’s restaurants (Love, 2005). The company has maintained its market strength by developing products which fit the needs of its customers especially due to the fact that some of the customers are keen on maintaining their health as well as weight by avoiding some types of food (Love, 2005).

To check on this, the company has embarked on a strategy aimed at increasing sales through the extension of available menus as well as its working hours in all its subsidiaries, which has helped in attracting more customers as well as maintaining the already existing ones. Though the company has been able to acquire global recognition due to the long experience in the market, there are also other players for example the Burger king company, which offers the same services as McDonald Company and which is the main competitor among others such as Wendy’s and Subway (Bernstein, 2001).

However, McDonald has been able to neutralize the threat and maintain the lead through carefully planned and vibrant advertising that is well funded and which concentrates a lot on the less expensive products and ignoring the expensive ones. This is a marketing strategy that has helped the company in achieving the desired sales due to the fact that it makes the customers have a preconceived mind on the affordability of their products. However, Burger King has been noted as to have benefited largely on the selection of premises, which in most cases are close to McDonald’s thereby enabling the business to trail closely behind McDonald in sales though it may be difficult to bridge the gap between the two owing to the fact that McDonald have a long history in the business than its competitor.

McDonalds Corporation has managed to acquire a ready market for their products which can be translated to a figure of approximately 50 million customers who buy their products in a day. Majority of these customers are those who frequent the business for services as their only viable option thereby showing loyalty while others visit the business occasionally for the sake of experiencing change (Bernstein, 2001). The management is very keen on maintaining loyal customers for they form the foundation on which the business strives.

To achieve this objective, frequent research on customer preferences are conducted so as to ensure that customer demands are met at all times. This has resulted to the introduction of new products in the market as well as phasing out the old ones out. On the other hand, the potential customers especially those who make occasional visit to the business are accorded great significance so as to attract them into becoming frequent customers (Bernstein, 2001). By doing so, the business gets better chances of staying ahead in the market by enhancing competition with other companies.

Despite the fact that McDonalds Company has managed to dominate the market, there has not been enough influence to enable it to control the prices and supply of products and services (Krier, 2005). This is due to the stiff competition it faces from its second best competitor which is Burger King Corporation, which has chain stores in almost every place that McDonald operates. As such, the company fits in the oligopoly type of market structure, which is characterized by several businesses with equal influence on supply and price control.

On the other hand, the company is able to influence prices in the different franchises, which are located in different countries around the world. The head office has the autonomy to make such decisions despite the fact that most of the franchises are owned by different individuals who pay rent to the head office. This is one of the major sources of the company’s market power, which enables the business to compete under all conditions due to the fact that it does not rely wholly on sales to remain in control but also from revenue collected from the franchisees (Love, 2005).

Measures of market power in McDonald Company are based on the brands, which it ensures that they are uniform in all the subsidiaries. Before introducing the brands to the franchises, the company makes sure that their demand and price acceptability are first tried in the company owned restaurants (Love, 2005). This ensures that the integrity of the franchises is not compromised for example by scaring away customers due to predatory pricing. The company has a variety of strengths, which enables it to cope with the dynamics in the market.

These are for example the fact that it has been in business for a long time, which implies that it has acquired a strong foundation as well as the ability to extend its operations in various countries as well as enhancing product recognition unlike those which came later (Bernstein, 2001). It also has the advantage that it does not depend wholly on the sales for maintenance but instead it relies mostly on the income earned from franchising thus making it not susceptible to market dynamics. However, their food has had a negative image due to poor branding in the past as well as failure to develop and advertise healthier food, a campaign that other competitors initiated before they could.

Conclusion McDonald Corporation is a business enterprise that deals with a chain of restaurants, which are distributed across various Geographical boundaries. Most these restaurants, close to 60%, are owned by individuals who rent them from the company, to operate as franchises. The company has recognized the fact that customer’s needs are dynamic and as such, it ensures that these needs are taken care of by conducting frequent research on customer’s taste and preferences. The dynamics are for example change in fashion for example in health and weight maintenance, which makes customers change their buying patterns.

The economic factor also has an effect on the market trends whereby the level of income may go down thereby affecting the customer’s purchasing power. To cope with this, the company has developed a variety of products that are affordable to customers of all economic classes. ReferencesBernstein, C. (2001). Winning the Chain Restaurant Game, John Wiley & Sons.Krier L. (2005) Speculative Management: Market Power and Corporate Change, StateUniversity of New York PressLove, J. (2000) McDonalds: Behind the Arches, Bantam