McDonald's is A Competitive Fast Food Firm Essay

McDonald's is A Competitive Fast Food Firm Essay

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A Competitive Fast Food Firm

Firms within the fast food industry fall under the market structure of
competition. Market structure is a classification for the key traits
of a market. The characteristics of a market that is competitive
would include: a large number of buyers and sellers, easy entry to and
exit from the market, homogeneous products, and the firm is a price
taker. Take McDonalds fast food restaurant for example.

In 1954, Ray Kroc became the first franchisee appointed by Mac and Dic
McDonald in San Bernadino, California. He opened his first restaurant
in De Plaines, Illinois (near Chicago), and the McDonald’s Corporation
was created. By 1959, the 100th McDonald’s had opened in Chicago. In
the early years of the 1960’s, Ray Kroc had bought all rights to the
McDonald’s concept from the McDonald’s brothers for $2.7 million. In
1963, the 500th restaurant had opened. By the end of the decade,
McDonald’s was listed on the New York stock exchange, had opened
restaurants in every state of the union and also outside the USA. By
1972, assets exceeded $500 million and sales surpassed $1 billion, a
new McDonald’s restaurant was opening nearly every day. In 1984, Ray
Kroc died, but his company was then serving 17 million customers a
day, equivalent to serving lunch to the entire population of Australia
and New Zealand. If McDonald’s lined up all the hamburgers sold since
1955, they would have circled the equator 103.75 times and reach to
the moon and back 5 times. Today, McDonald’s remains one of the most
competitive franchises ever created because they still have a large
number of buyers and sellers, easy entry to and exi...

... middle of paper ...

...dustry is the ease of
entry into the market. Start-up franchises within this market
structure can begin operating with relatively low initial investments
(compared to other industries). This is not the case where monopoly
companies, such as Microsoft is concerned. There are numerous
barriers to entry into a Monopolistic market structure, capital being
one of the most prominent barriers.

If a new franchise offered the consumer a quality product at a reduced
price, then the chance of success are greatly increased. McDonald’s
established a name for themselves by offering quality food and fast,
friendly service. This is a very important concept in the fast food
industry. Once they established themselves to the consumers and
became more visible, they created more demand, which lead to a greater
revenue for them.

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