My Blog

http://www.reuters.com/article/2012/04/20/us-mcdonalds-idUSBRE83J0P020120420

Porter’s Generic Strategies allows firms to access their level of competitiveness in the market using the three general strategies: cost leadership, differentiation, and focus.

McDonald’s competitive advantage in the fast food market is mainly its provision of food at a low cost. It adopts cost leadership strategy, which does not aim to compete with firms, such as Burger King and Wendy’s, that offer higher-quality products, since this would lead to price hikes. McDonald directly competes with its competitors using predatory pricing strategy, in which it sets a price so low that competitors, especially smaller firms, cannot compete at a profitable level. The firm is able to sell low using economies of scale.

Although McDonald’s products are easy to copy, its quality, strong brand image and customer loyalty stabilizes its position in the fast food market. Non-price competition is also used by McDonald to increase its sales revenue using differentiation strategy through new menu, and focus strategy on “restaurant makeovers and longer operating hours.”

That article states that ” Same-restaurant sales rose 5 percent in Europe and 8.9 percent in the United States, where mild weather has helped lift restaurant sales.” This indicates that firms are affected by the external influences. When the economy is in recession, unemployment will rise, and reduces purchasing power of consumers. This leads to a fall in demand and thus a fall in expenditure.