ECON 230: Milestone 1 Blog Post

Conor Simmons

Professor Bajah

ECON 230

3/28/2022

Milestone #1

Tesla Motors has emerged in the last decade and now has a powerful hold over much of the electric vehicles market and even in the automotive manufacturing market all together. In 2020, automotive manufacturing contributed to 3% of the United States' GDP, making the value of this major industry, listed as contributing $627 billion dollars to the total GDP of $20.93 trillion. Tesla has a unique position in this market, not only to sell solely electrically powered automobiles, but also having a privilege in many states to be one of the sole manufacturers of cars who participates in direct-to-consumer sales (Stolze, 2015). Also, Tesla has a key co-opetitive advantage in the manufacturing of electric power trains and even supplies other big automotive manufacturers, such as Chevrolet and Bentley (Cheong & Hu, 2016). Finally, this paper will examine how Tesla actually seems poised to potentially benefit (relatively) from the global LRAS shock experienced globally due to Covid-19.

State Legislation in the United States of America has been favorable to dealerships, as denoted by Stolze, when analyzing the history of car manufacturing and sales in the United States of America. He states, “[The] Modern dealer franchise system [was] in place by the 1950s... The few major auto manufacturers amounted to an oligopoly, able to dictate the terms on which the sole supply of new automobiles would be available to the dealers [of said automobiles]' (Stolze, 2015). This abuse of leveraging power was eventually addressed by the Congress when it passed the 'Automobile Dealers Day in Court Act in 1956'. This Act shifted power from manufacturers of cars to dealers while overriding dealership agreement provisions, that inhibited any recompense to manufacturers if they did not act in 'good faith' (Solze, 2015). Tesla, however, has successfully beaten numerous lobbying and legal attempts to block its ability to directly sell its electric vehicles to customers and has benefited in this regard (Stolze, 2015). They are not only protected in this manner but grandfathered in to being one of the only car manufacturers in the United States of America to do so. This means that Tesla has incredible flexibility to take advantage of the varying economies of scale in America. Furthermore, it increases its environmental appeal at the same time, being directly involved in its own vehicle's sales and participating firsthand in the consumer education and training to back its own business model.

Tesla is also in a horizontal coopetition arrangement with other manufacturers (Cheong & Hu, 2016). The authors define this concept, “horizontal supply chain coopetition is a game where competitors cooperate in the same retail market... a firm offers work-in-progress parts to others, and competition when those same firms have to compete with each other for customer's attention on the retail market” (Cheong & Hu, 2016). This is an incredible advantage to Tesla Motors, as it can sell these parts to other manufacturers and signifies that they have a superior capital investment in R&D for electric power trains and parts. This also pits the other car manufacturing companies in a better position in this field as they will not have to invest as much to enter the EV market. As Cheong and Hu highlight the success of Borders utilizing Amazon's IT supply chains and leveraging this co-opetitive agreement to successfully enter the market with their own successful online marketplace (Cheong & Hu, 2016). Technological advancement is imperative to moving forward in the electric vehicle industry, and this position puts Tesla in a win-win situation, if they're careful. While all parties could win in this situation, many parties, suppliers and buyers alike, could lose valuable portions of the electric vehicle market. The supply shock experienced recently during the pandemic perhaps created potential for research and development in such an industry to be cut back on. This might reduce Tesla's ability to invest and continuously supply better and cheaper power trains, or cause other auto-manufacturers to rely more heavily on Tesla's power trains.

Nayak, et. al., (2022) states, “[the]extended truncation of customer demand due to the lock downs is observed drastically distressing auto manufacturers. The majority of companies are starving the support of R&D to maintain core functions and potentially getting back the growth made on mobility technologies as well as alternate fuels” (Nayak et. al., 2022). However, as postulated above, this could be a blessing in disguise for Tesla, who would perhaps be the least hit by this possible curbing of R&D, since they were perhaps the most established in the field of electric power trains. Also, global consensus and this administrations' attitude toward electric vehicles is growing in demand. It is worth saying still that just because Tesla has the apparent advantage in the electric vehicle market now, does not mean this is guaranteed to always be so. Many auto-manufacturers are still, and realistically, still improving and allocating their resources to combustible engine types, and designs to work around them. Then one can always think about how easily a co-opetitive arrangement could spell the end of hegemony for a supplier. In the example above listed, Borders had been a seller of books for longer than Amazon, and was a household name brand for book buying. While Tesla enjoys the privilege of the most iconic electric vehicle manufacturer, it is still relatively new and perhaps untested by the lobbying and special interest might of other traditionally combustible titans of United States auto manufacturing, to say nothing of many other international giants that compete to sell there cars here.

References

Cheong, T., S.H., & Hu, C. (2016). Strategic Alliance with Competitors in the Electric Vehicle Market: Tesla Motor's Case. Mathematical Problems in Engineering, 1-10 https://doi-org.exproxy.regent.edu/10.1155/2016/7210767

Nayak, J., Mishra, M. Naik, B., Swapnarekha, H., Cengiz, K., & Shanmuganthan, V. (2022). An Impact Study of Covid-19 on six different industries: Automobile, energy and power, agriculture, education, travel and tourism and consumer electronics. National Library Of Medicine. Retrieved 29 March 2022. from https://www.ncbi.nlm.nig.gov/pmc/articles/PMC8014102.

Stolze, E.D., (2015). A Billion Dollar Franchise Fee? Tesla Motor's Battle for Direct Sales.

Hi Joshua, Great summary of the key dynamics that make Mcdonald's a valuable brand and franchise. You had mentioned something I would love to bring attention to. When talking about the product that drives demand, you talked about hamburgers. This seems to be self-evident. However, I remember hearing a story about the founder Ray Kroc once. He allegedly said "we are not technically in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is because they are the greatest producer of revenue, from which our tenants can pay us our rent.” Unfortunately, I have no scholarly source to quote this from and lifted this off a random blog. There seems to be many variations online. Even if it was not a verified statement, I think it is a valuable way of looking at their business model and gives us a new lens to see how GDP and other dynamics would affect their business, don't you?

Week 2: Milestone 1

Joseph Franzese

Dr. Bajah

ECON 230: Macroeconomics

2 April, 2022

Introduction

LG began as LuckyChemical Co. in 1947 creating cosmetic products in Korea. Early innovators, the group introduced the first injection molding machine in the country and its first plastic products. LG would continue to produce chemical products such as toothpaste as well as other products such as PVC piping and vinyl flooring until 1958 when Goldstar Co. was founded, the branch that would become LG Electronics. Goldstar Co. produced radios, fans, telephones, and televisions, both black and white and color. The company even branched out into air conditioners, elevators, and washing machines. LG’s reputation became global in the 1980’s when they began producing computers and computer parts. In 1995 Lucky Goldstar Group was renamed to LG and acquired Zenith Corporation, opening its market to the United States. LG now primarily produces displays and computers, as well as home appliances.

Comparative Advantage

A company with comparative advantage can produce a good or service at a lower opportunity cost than its competitors. LG’s most immediate competitor is Samsung. Also based in Korea, Samsung and LG both manufacture displays, appliances, and other devices. Competition between LG and Samsung and LG is so close it is tough to determine which one has the upper hand, however it would appear that Samsung as a slight advantage. Samsung has the advantage of brand recognition and a larger presence on social media, as well as its larger presence in the mobile phone industry (Shastri, 2022). With both companies making similar products in terms of type and quality, the advantage is going to swing in the direction of which company can market more effectively, and Samsung would appear to have the upper hand in this area. However, both companies have their own innovations and have made purchase form each other in the past, such as when Samsung bought half of LG’s OLED TV panels, indicating that technology wise, LG and Samsung are on level terms (Pino, 2021).

Supply and Demand

The supply and demand of the tv and computer industry can be characterized by two interconnected major factors: the semiconductor shortage and the increased amount of people working from home. “Unfortunately, the latest global semiconductor chip shortage update signals continued turbulence ahead” (Kelly, 2022). This has resulted in decreased supply of products that rely on computer chips, such as TVs, computers, cars, and even smart refrigerators and any other appliance with a built-in computer. However, the massive rise in people either working from home or upgrading their home tech setups at the beginning of the pandemic has skyrocketed supply of these devices, creating a double-effect of decreased supply and increased demand.

Home Country Information

South Korea had a GDP of 1.9 trillion USD (O’Neill, 2021). In South Korea, companies such as LG and Samsung are more than tech companies, they are a cornerstone of the Korean economy, taking on thousands of college graduates to become lifetime employees (Rivington, 2013). LG and Samsung are very similar companies, however they appear to be cooperative in several aspects, such as technology sharing. There has been significant economic growth since the pandemic began that is projected to continue, LG and similar companies are likely contributors to this due to the increased demand for TVs and other electronic devices as more people were at home.

References

History. History | About LG. (n.d.). Retrieved April 2, 2022, from https://lgcorp.com/about/history/3.

Kelly, L. (2022). Global Semiconductor Chip Shortage Update. Investment U. Retrieved 2 April 2022, from https://investmentu.com/chip-shortage-update/.

O'Neill, A. (2022). South Korea GDP 1986-2026 | Statista. Statista. Retrieved 2 April 2022, from https://www.statista.com/statistics/263579/gross-domestic-product-gdp-in-south-korea/.

Rivington, J. (2013). LG vs Samsung: the story behind the biggest rivalry in tech. TechRadar. Retrieved 2 April 2022, from https://www.techradar.com/news/television/tv/lg-vs-samsung-the-story-behind-the-biggest-rivalry-in-tech-1145280.

Pino, N. (2021). Samsung will reportedly buy half of LG’s OLED TV panels next year. TechRadar. Retrieved 2 April 2022, from https://www.techradar.com/news/samsung-will-buy-half-of-lgs-oled-tv-panels-next-year.

Shastri, A. (2022). 2022 Marketing Strategy of LG - Full Case Study - IIDE. IIDE. Retrieved 2 April 2022, from https://iide.co/case-studies/lg-marketing-strategy/.

Week 2: Milestone 1

Joshua Swigart

Dr. Bajah

ECON 230: Macroeconomics

1 April, 2022

Company Overview

When it comes to reliability and affordability in searching for a car to purchase, one cannot help but think of Honda. Honda Motor Company was founded in Hamamatsu, Japan, in 1948 (About us, 2022). Soichiro Honda began growing his business by manufacturing motorcycles and eventually changed the face of motorcycle design and engineering. On June 11th, 1959, Honda motor company’s first overseas subsidiary was established in Los Angeles, California (About us, 2022). In less than a decade, Honda sold its millionth motorcycle in the United States and, in 1969, began selling cars overseas (About us, 2022). Honda’s exceptional engineering proves itself when in 2012, a leading industry publication named their 1969 CB750 the “motorcycle of the century” (About us, 2022, Para. 9).

Honda has grown into a large multinational business that manufactures motorcycles, automobiles, and power products (engines). In 2018, Honda ended the year with $19.49 Billion in revenue (Market.us, 2021, fig. 2). Recent statistics from the first quarter of 2021 indicate that Honda had 12.82% relative to its competitors.

Does the company have a comparative advantage over its competitors?

Honda has been able to boast its environmentally friendly innovation for over five decades. Honda Motors (2022) states, “Honda has challenged to exceed government requirements – as the first automaker to meet the Clean Air Act standards in the 1970s, then demonstrating low-emissions vehicle technology that led the state of California to adopt new, more stringent emissions regulations” (para. 8). Within the last decade, Honda has diversified their product portfolio. They have entered into new industries through new product manufacturing, such as robotics and jets (Kasi, 2018, para. 1). Consumer reports consistently laud the quality of Honda products, and Honda has kept satisfying customers by providing the expected quality and exceptional efficiency. Kasi (2018) says that Honda is considered an industry leader in fuel efficiency (Para. 3). However, Honda also has their gaze ahead as they plan to release two new full-electric SUVs in 2024 (Honda Motor Co, 2022).

Explain the supply and demand for its key product or service

The automotive industry has been suffering a shortage of semiconductors in the wake of the COVID-19 pandemic. This issue is known as the chip shortage. Cole (2022) says, “The chip shortage is still impacting the automotive industry in 2022” (para. 1). Even a slight lack of semiconductors heavily impacts automakers as they are necessary to manufacture nearly all cars (Cole, 2022, para. 4). Due to the chip shortage and rising material costs, Honda lowered its profit and vehicle sales forecast. They forecasted a 16% fall in profits and lowered their expected vehicle sales from 4.85 million to 4.2 million (U.S. News, 2021, para. 10). Honda has been struggling to meet market demands for their vehicles, to which Honda’s Executive Vice President said, “We feel so sorry about all those people waiting eagerly for our cars” (U.S. News, 2021, para. 8).

Provide the GDP of its home country and a key market (country)

Most of Honda’s sales have occurred in its home country of Japan; however, Honda’s North American market accounted for 32.5 % of its sales in the 2021 fiscal year (Statista, 2021, para. 3). The United States GDP is 20.95 trillion, and Japan’s is 5.05 trillion (The World Bank, 2022).

How does fluctuation in GDP, economic growth, investments, and patents affect the company’s profitability?

Japan and the United States are Honda’s two largest markets—Japan with the third largest GDP and the U.S. with the first largest GDP compared to other countries. Economic growth or decline in any of their market affects their profitability. The COVID-19 pandemic disturbed things that negatively impacted Honda’s sales, such as the supply of semiconductors and the economies of countries Honda sells in.

References

Cole, Craig. (February 11, 2022). Why the Heck is There Still a Chip Shortage for Cars?

Retrieved from: https://www.cnet.com/roadshow/news/features/automotive-cars-

computer-chip-shortage-2022/

CSImarket. (2022). HMC’s vs. Market Share Relative to Competitors, As of Q1 2021.

Retrieved from: https://csimarket.com/stocks/competitionSEG2.php?code=HMC

Honda Motor Co, Inc. (2022). About us. Retrieved from: https://www.honda.com/about

Kasi, Adam. (January 29, 2018). Competitive Advantage of Honda. Competitive

Advantage Analysis. Retrieved from:

https://competitiveadvantageanalysis.com/competitive-advantage-of-honda/

Market.us. (September 6, 2021). Honda Motor Co., Ltd. Statistics and Facts. Retrieved

from: https://market.us/statistics/automotive-companies/honda-motor/

Statista. (May 2021). Worldwide Number of Automobiles Sold by Honda Group from FY

2002 to FY 202. Retrieved from:

https://www.statista.com/statistics/267276/worldwide-automobile-sales-of-

honda/

The World Bank. (2022). All Countries and Economies. Retrieved from:

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?

end=2020&locations=US&start=1960

U.S. News. (November 5, 2021). Honda Lowers Profit, Vehicle Sales Forecast Over

Chip Crunch. Retrieved from:

https://www.usnews.com/news/business/articles/2021-11-05/honda-lowers-profit-

vehicle-sales-forecast-over-chip-crunch

McKesson Corporation

Company Overview

McKesson Corporation is a global company that provides pharmaceuticals and medical distribution services and information technology solutions for the US, Canada, and 13 European countries(MarketLine, 2022). McKesson's has four business segments within the business. The four segments are US pharmaceuticals, international pharmaceuticals, Medical-Surgical solutions, and prescription technology solutions (MarketLine, 2022). The highest product in demand for McKesson's Corporation in 2021 was the US Pharmaceutical segment. This part of their business segment has 33 distribution centers (MarketLine, 2022). "In FY2021, the US Pharmaceutical segment reported revenues US$189,274 million, which accounted for 79.5% of the company's revenue" (Marketline, 2022, pg 4). Which is more than half of their revenue. The company receives 15.1% of its revenue from the international pharmaceutical segment (MarketLine, 2022).

GDP & Covid

The company's home country is the United States. The United States currently has a GDP of 20.9 trillion with $63,416 per capita (Heritage Foundation, 2022). If we compare the GDP from the last two years to the current year GDP, we will see that there has not been much economic growth since the pandemic. Despite the struggles that many companies had during the pandemic, McKesson Corporation was lucky enough to provide a product that had high demand. Considering the circumstances, McKesson Corporation's revenue should have increased due to the need for vaccines and other health supplies. It is crucial to understand GDP because it helps businesses potentially predict growth in their industries.

At first, COVID-19 had a negative impact on demand for McKesson Corporation. This is because the pandemic slowed down traffic in pharmacies and Dr.s offices. However, the more we have been finding solutions to the virus, McKesson's demand for products has begun to increase due to the need for vaccines, COVID-19 testing, and pharmacies opening back up (MarketLine,2022).

Comparative Advantage

In general, McKesson is one of the top businesses in its competitive industry. The comparative advantage McKesson has over its leading competitors is that they are global. Both Cardinal health and AmerisourceBergen are only based within the US. So McKesson has the advantage of having connections outside of the United States. McKesson technology solutions for the pharmaceutical industry could also become an essential part of their operations. Giving companies strategic ways to operate more effectively and productively to ensure patient safety and care can help build trust with customers. The efficiency and accuracy of the pharmacies are crucial to maintaining proper pharmaceutical therapies for the patients. The only thing that could immensely harm McKesson Corporation is that they rely heavily on a few of their customers for profits. One of their customers, CVS specifically, gives them 21% of their yearly revenue, which would mean the loss of CVS as a customer would hurt McKesson significantly.

Sources

Congressional Research Service (2021). Introduction to U.S. Economy: Business Investment. https://crsreports.congress.gov

Heritage Foundation. (2022). United States. United States Economy: Population, GDP, Unemployment, Inflation, Spending. Retrieved March 28, 2022, from https://www.heritage.org/index/country/unitedstates

MarketLine. (2022). McKesson Corporation MarketLine Company Profile. www.marketline.com

Macroeconomics Milestone 1: Coca-Cola

Sophia Dickinson

Dr. Jeff Bajah

Regent University

ECON 230: Macroeconomics

27 March 2022

Provide the GDP of its home country and a key market (country).

It is essential to consider the GDP of both the home country and the key market for Coca-Cola. The home country of Coca-Cola, the United States, consumes the second-largest amount of Coca-Cola annually, following behind Mexico (Abdi). The United States' GDP is reported to be $20.94 trillion as of 2020 (data.worldbank.org). Mexico's reported GDP is estimated to be $1.076 trillion. Although Mexico has the highest number of sales of Coca-Cola, the United States, with its high monetary value, would be worth investing in promoting products more to increase sales.

How do fluctuations in GDP, economic growth, investments, and patents affect the company's profitability?

The Coca-Cola company has been steadily recovering from the effects of Covid-19 on their sales. As businesses and other public venues such as movie theaters and restaurants opened their doors again, Coca-Cola's sales rose with the newfound demand. During Covid-19, consumers had less disposable income; therefore, the demand for Coca-Cola decreased. Coca-Cola has been improving its products and marketing new products that have been received well. Coca-Cola invests in short-term marketing ideas with borrowed funds, so it is in the company's best interest for interest rates to remain and not increase. When marketing a new product, such as the "Starlight" flavored cola, there is a risk that the new product will not be received well. If a project fails, having a loan with a low-interest rate reduces the overall loss of funds.

Fluctuations in the GDP signal whether the economy is healthy. This allows companies to make decisions to maximize profits. When the GDP rises, it indicates that the economy is doing well and presents more opportunities for the company to invest in new products and try new promotions to capitalize on consumers' spending. Business thrives under a healthy economy if the product is in demand.

As for patent issues, Coca-Cola is not affected. In an effort to prevent the formula for Coca-Cola from being released to the public once the patent runs out, they avoided patenting the formula. The recipe is guarded heavily as a trade secret, with very few individuals knowing the recipe (World of Coca-Cola). As long as the formula is not patented, they do not run the risk of having other companies use it in years to come, so long as no one steals the recipe.

References

Abdi, Anwar. “Countries That Drink the Most Coca Cola.” University Magazine, 11 Oct. 2021, https://www.universitymagazine.ca/countries-that-drink-the-most-coca-cola/.

“Always Coca-Cola: World's Favourite Soda Tops Brand Ranking: Press Release.” Brand Finance, 15 Feb. 2021, https://brandfinance.com/press-releases/always-coca-cola-worlds-favourite-soda-tops-brand-ranking.

“GDP (Current US$) - United States.” Data, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US.

“How Many Bottling Partners and Employees Are Part of Coca-Cola's Business?” The Coca-Cola Company, https://www.coca-colacompany.com/faqs/how-many-bottling-partners-employees-does-coca-cola-have#:~:text=Coca%2DCola's%20business%3F-,How%20many%20bottling%20partners%20and,part%20of%20Coca%2DCola's%20business%3F&text=coca%2Dcola%2Dhave-,Coca%2DCola%20and%20its%20nearly%20225%20independent%20bottling%20partners%20employ,opportunity%20to%20local%20communities%20worldwide.

“Vault of the Secret Formula.” World of Coca-Cola, https://www.worldofcoca-cola.com/explore-inside/explore-vault-secret-formula.

Macroeconomics Milestone 1: Coca-Cola

Sophia Dickinson

Dr. Jeff Bajah

Regent University

ECON 230: Macroeconomics

27 March 2022

Explain the supply and demand for its key product or service.

Coca-Cola is a normal good, meaning that when the consumer's income rises, the demand for their product increases. With time, Coca-Cola has developed strong brand loyalty and a general preference for its cola recipe over others such as Pepsi. Even as prices increase for Coke products, due to brand loyalty, the demand for Coca-Cola remains the same. To cater to its customers who want healthier options, Coca-Cola released Coke Zero, a lower-calorie cola with the same flavor as the original, and a Diet Coke version made of a different, sugar-free recipe. Both products cater to the demands of the consumers, aiding in keeping demands high.

Demand for Coca-Cola decreased during the height of Covid-19 due to many of their primary vendors closing down, such as theaters and stadiums. However, as Covid-19 regulations continue to decline, sales and the demand for Coca-Cola increases. The demand exceeded expectations, and sales have increased steadily even with an increase in pricing with revenue surging by 16 per cent (the Irish Times).

References

The Irish Times. “Coca-Cola Gets Boost from Rising Demand and Prices.” The Irish Times, The Irish Times, 27 Oct. 2021, https://www.irishtimes.com/business/agribusiness-and-food/coca-cola-gets-boost-from-rising-demand-and-prices-1.4712022.

Macroeconomics Milestone 1: Coca-Cola

Sophia Dickinson

Dr. Jeff Bajah

Regent University

ECON 230: Macroeconomics

27 March 2022

Company Background

Founded in 1886, The Coca-Cola Company currently employs over 700,000 people worldwide through directly hiring through the leading company and hiring through their 225 bottling partners. The Coca-Cola Company is the largest international beverage corporation globally, supplying over 200 countries and territories with their products (Coca). Even in countries where Coca-Cola does not directly manufacture its products, Coca-Cola is imported from neighboring countries. Over 200 brands owned by Coca-Cola sell over 1.9 billion servings a day. The company produces its cola syrup concentrate, which they then sell to various bottling companies worldwide that own local Coca-Cola franchises.

Does the company have a comparative advantage over its rivals?

Being the most popular soft drink brand, Coca-Cola has a comparative advantage over its rival companies. Additionally, with products such as Sprite and Fanta soda, there are multiple flavors. Coca-Cola has a history of having a solid brand message and marketing presence. Coca-Cola impacted culture to the point where, in some places, Coke means soda. Advertising has been a strong suit for Coca-Cola, with ads for Coke products possessing their own distinct style and changing how soda is advertised. Coca-Cola's main competitors are PepsiCo and Cadbury Schweppes; however, Coca-Cola is far more popular with consumers and investors (Statista). While its main competitors are primarily soft drink companies, other companies such as Nestle rival Coca-Cola and have been creating drink products to compete against them.

References

“How Many Countries Sell Coca-Cola?: Frequently Asked Questions: Coca-Cola GB.” Coca, https://www.coca-cola.co.uk/our-business/faqs/how-many-countries-sell-coca-cola-is-there-anywhere-in-the-world-that-doesnt.

Published by M. Ridder, and Jan 13. “Leading Carbonated Soft Drink (CSD) Companies in the U.S. 2020.” Statista, 13 Jan. 2022, https://www.statista.com/statistics/225504/leading-carbonated-soft-drink-companies-in-the-us/.

Milestone One: Toyota Motor Corporation

Derek Pulizzi

ECON 230

Professor Bajah

Regent University

Milestone One: Toyota Motor Corporation

No one business is exempt from multifaceted macroeconomic factors such as interest and exchange rates, gross domestic product and gross national product, inflation, trade deficits, and unemployment rates. Factors as such can determine a lot for a specific company as they are direct influences of the day-to-day practices of the company. By influencing the flow of money and how goods and services are distributed among the market channel, a businesses profitability and functionality are highly dependent on the economic state of the environment. Essentially, the trend is that “economies advance and recede, rise and fall, boom and bust” (Tabarrok & Cowen, 2014, p. 8). Therefore, trends in the economy cannot be fully avoided, however, this does not suggest that highly influential multinational corporations like Toyota Motor Corporation do not play a key role in the distribution of wealth. Although these macroeconomic forces may be viewed upon as a negative entity for some organizations and corporations, a Biblical viewpoint suggests associating these forces as a potential opportunity of growth and increased knowledge. In order to make strategic business decisions as a multinational corporation, it is wise to analyze the surrounding factors and compare it to that of others. Therefore, we will uncover comparative advantages, supply and demand, gross domestic product, and fluctuations in the economy as they relate to Toyota Motor Corporation.

Comparative Advantages

Having a comparative advantage suggests that a business, company, or corporation such as Toyota Motor Corporation is in the position of carrying out a particular economic activity at its maximum capacity with proficiency and efficiency (Tabarrok & Cowen, 2014, pp. 15-16). Toyota’s advancement in technological development with the inclusion of the corporation being an automotive production supergiant attributes to its comparative advantage against General Motors, Tesla, Honda, Ford, GM, Mitsubishi, Hyundai, and Nissan (Smith, 2019). Compared to its competitors, Toyota Motor Corporation has gone above and beyond in their efforts to innovate the automotive industry by increasing their technological capacity, pushing clean energy efforts such as electric and hybrid vehicles, and increasing their production line to adhere to the demand that is present in the marketplace. Smith (2019) continues by asserting that Toyota’s main comparative advantage in the marketplace is their “rapid innovation in research and development,” and therefore much of their day-to-day processes promote value competency (para. 4). Additionally, being in the position as one of the largest automotive producers globally, Toyota Motor Corporation has the power, capacity, and economic stability to take larger risks than their rivals.

Supply and Demand

Supply and demand for automobiles has been predominantly shaky due to the Covid-19 pandemic, however, it is true exceptionally true that consumers purchase vehicles for transportation reasons and therefore, the demand for vehicles is highly depended on the demand for transportation. Additionally, “as the price of a particular car increases, the law of demand tells us that the quantity demanded of the car will decrease” (Cooper & John, 2011, p. 231). Due to the fact that various factors affect the prices of vehicles, consumers are faced with three dilemmas or substitutions in their car purchasing experience: the individual can either push back the purchase of the particular vehicle, can choose another year, make, or model, or the consumer can bail out on the purchase and choose another form of transportation. Automobiles unlike other products are durable goods. A product that is classified as a durable good suggests that it provides the consumer with a prolonged life and the decision-making process is typically longer for a durable good than different products or services. Cooper & John (2011) later explain that much of the automotive industry’s supply and demand curve is relational to the complementary products associated with cars. Gasoline, infrastructure, and insurance all pose a cross-price elasticity in demand which suggests that if the price of one of the complementary products increase, then the quantity of the cars purchased will decrease (p. 231). The concept of supply and demand would then suggest that based off this trend, automotive companies like Toyota Motor Corporation must take into consideration the cost of the complementary products and how it will positively or negatively impact the production of their well-established vehicle chain.

Home Country GDP and Fluctuations

The reliable automotive company, Toyota, has most of its manufacturing facilities in Japan. By acknowledging that Toyota Motor Corporation is a foreign entity that has significant power in the economic standing of one’s nation, it is important to understand the gross domestic product of its origin country and how it relates to those who consume their products and services. According to World Bank (2022), the GDP of Japan “was worth 4975.42 billion US dollars in 2020…the GDP value of Japan represents 4.40 percent of the world economy.” Japan exports much of their automotive goods to the United States which suggests that the U.S is their key market, especially regarding the Toyota brand. Contrary to Japan’s GDP, the United States saw a GDP that was worth 20936.60 billion US dollars in the year 2020 and made up 18.55 perfect of the world’s economic activity (2022).

Fluctuations in GDP, economic growth, investments, and patents will always have an affect on the market. While these fluctuations are bound to happen, it is essential to understand the repercussions of said fluctuations as it allows multinational corporations like Toyota Motors to project certain strategies to combat potential issues or obstacles that may spark from these factors. For example, if the gross domestic product declines in Japan, Toyota will not be able to manufacture and export enough vehicles to their end consumers. Economic growth also plays a huge role in the way multinational corporations’ function. For example, during times like that of the Covid-19 pandemic where employment was halted for several months, companies like Toyota are not generating enough revenue to support their employees which has a negative effect on the company, their consumers, and the economy. Investments and patents are highly beneficial for a corporation like Toyota if it is doing well regarding its profits, input and output generation, productivity, and effectiveness in the workplace. Negative fluctuations will deter any further investment or involvement in the corporation and would therefore generate negative grievances against the company and the nation.

Conclusion

In conclusion, it is essential to have an in-depth understanding of macroeconomics as the various factors intertwined in the concept affect day-to-day business life. Businesses are constantly affected by the factors of interest rates and exchange rates, trade deficits, GDP and GNP, inflation, and unemployment rate. With the current Covid-19 pandemic, it has been proven that these factors play a significant role in the success or downfall of a company. Fortunately for well-established corporations like Toyota Motors that have a long resume of manufacturing quality products and paving the way for new innovative technologies in the industry, it is easier to study their trends as they play a significant role in one’s economy.

References

Cooper, R., & John, A. (2011). Microeconomics: Theory through applications (1st ed.). Washington, DC: Saylor Foundation.

Smith, O. (2019, January 23). Toyota VRIO Analysis - Competitive Advantages, Core Competencies. Rancord Society. Retrieved March 23, 2022, from https://www.rancord.org/vrio-analysis-toyota-motor-corporation-core-competencies-competitive-advantages

Tabarrok, A., & Cowen, T. (2014). Modern Principles of Economics (3rd ed.). New York, NY: Worth Publishers Inc.

World Bank. (2022, January 12). Japan GDP2021 Data - 2022 Forecast - 1960-2020 Historical Chart. Japan GDP - 2021 Data - 2022 Forecast - 1960-2020 Historical - Chart - News. Retrieved March 23, 2022, from https://tradingeconomics.com/japan/gdp#:~:text=In%20the%20long%2Dterm%2C%20the,according%20to%20our%20econometric%20models.&text=The%20gross%20domestic%20product%20(GDP)%20measures%20of%20national%20income%20and,for%20a%20given%20country's%20economy.

World Bank. (2022, January 12). United States GDP2021 Data - 2022 Forecast - 1960-2020 Historical Chart. United States GDP - 2021 Data - 2022 Forecast - 1960-2020 Historical - Chart - News. Retrieved March 25, 2022, from https://tradingeconomics.com/united-states/gdp#:~:text=In%20the%20long%2Dterm%2C%20the,according%20to%20our%20econometric%20models.

Macroeconomics Milestone #1

Ruth N. Jones

Dr. Jeff Bajah

Regent University

ECON 230: Macroeconomics

24, March 2022

Macroeconomics Milestone #1: Samsung Electronics

Introduction

When it comes to smartphone operating systems, iOS and Android are the two major competitors that come to mind. Unlike iOS, which can only really be found on Apple products, many smartphone companies make use of the Android operating system, the most notable of which is Samsung Electronics.

Samsung Electronics is a South Korean company founded in 1969 by Lee Byung-Chul. Originally making a name for itself in home appliances, black-and-white TV production, and semiconductor manufacturing, Samsung quickly began expanding into wider territory. (www.samsung.com, 2021) In December of 1984, Samsung opened a manufacturing plant in the United States and invested heavily into research and development, which served to further launch the company into innovation that helped it secure a place among competitors. Samsung’s most well-known products, their cell phones, were not produced until 1988, about 19 years after the company’s founding, and the incredibly influential Galaxy series of smartphones did not make their debut until 2010. (www.samsung.com, 2021) Since then, Samsung Electronics has grown to have incredible, international reach, not only selling some of the most popular smartphones on the market, but also producing semiconductors, home appliances and vigorously seeking innovation in the tech sector that they already have so much influence in.

Samsung Electronics, like many other companies with international reach, is affected—both positively and negatively—by macroeconomic factors, and many aspects of how they operate as a business can further exacerbate or ease those effects.

In order to effectively examine macroeconomics in light of Samsung Electronics’ operations, it is important to cover a number of basic information concerning the company, such as its comparative advantage in certain areas, supply and demand for certain goods and services it offers, the gross domestic product of its home country and key market country, and how fluctuations in one of any number of its assets affect its profitability.

Comparative Advantage

Firstly, when observing a certain company or industry, it is beneficial to consider what comparative advantage (if any) a certain business or business sector has. Comparative advantage has to do with a single entity (in this case a business), being able to produce more of a certain product or service more efficiently and at less opportunity cost than another entity (or business). (Cowen & Tabarrock, 2021, p.15) With that in mind, Samsung has a comparative advantage over its competitors in the area of production, as they are a world leader in semiconductor technology and produce most of their electronic components (chips, semiconductors, software, etc.) in-house, reducing costs and increasing their ability to produce final products from those electronic components. (semiconductor.samsung.com) This shows a specialization in electronic components production, which ultimately leads to Samsung having a sizeable comparative advantage compared to other companies within their sector.

Supply and Demand

Secondly, supply and demand are important aspects of any business’s present and future, especially the supply and demand of whatever good or service is the most important and profitable to the business. Samsung Electronics’ key product is their line of Galaxy smartphones, as shown in Samsung’s Earnings Releases for Quarter 2 of 2021. (Samsung Electronics, 2021, p. 3-6) Samsung reported strong consumer demand even in the midst of the COVID-19 pandemic in October of 2020, with a near 50% jump in smartphone sales. (news.samsung.com, 2020) However, even with this high demand, there has been disruption within Samsung’s supply chain due to the COVID-19 pandemic, causing a drop in supply. (Lee & Yang, 2021) This high demand and drop in supply could bode well for Samsung, as it could naturally lead to consumers being willing to pay more for their products.

Gross Domestic Product of Home Country and Key Market

In light of this supply and demand within Samsung, it is also important to consider the gross domestic product (GDP) of both the home country of Samsung, and the country that serves as their key market. Samsung Electronics is based in South Korea, which reported a GDP of $1,637,895.80 US as of the year 2020. (data.worldbank.org) As far as Samsung Electronics’ key market, it appears to be concentrated in the general region of North and South America, with emphasis on the United States of America. (Market.us) The GDP of the United States of America is reported to be $20,953,030.00 US as of the year 2020. (data.worldbank.org) A country with so much monetary value would undoubtedly be a solid place for Samsung Electronics to focus their efforts, and potentially, in turn, bolster the economy of their home county.

Fluctuations and Their Effects

Lastly, taking the previous information into account, fluctuations within GDP, economic growth, investments, and patents can all serve to affect a company in one way or another. Out of all of these factors, patent fluctuations could be the most pressing situation Samsung faces. Samsung was granted 6,440 patents in the year 2019 alone and is reported to have over 60,000 US patents in total. (www.uspto.gov) Any kind of fluctuation, infringement, or conflict with Samsung’s patents could prove damaging to some extent, especially since many of their patents lie in semiconductor manufacturing and other similar areas where Samsung’s comparative advantage lies. In the area of GDP, although a high number is usually considered a good thing, that high number can belie certain underlying situations such as inflation that could prove harmful to a business. Perhaps Samsung has the sheer number of patents to stave off any kind of harm should they run into issues with any patents, but they cannot be too careful in maintaining their competitive advantage through patent holdings. With that in mind, both South Korea, Samsung’s home country, and the United States, Samsung’s key market, have sizeable GDPs, with the United States Year To Date inflation being 1.86% (www.statbureau.org) and South Korea’s Year To Date inflation rate being 2.19% (Statista). Ultimately, these inflation rates are fairly stable, therefore, both nations’ GDP is not belying any kind of poor inflation. However, economic growth and investments (which are both fairly closely connected with each other, as well as inflation)

References

GDP (current US$) - Korea, Rep. | Data. (n.d.). Data.worldbank.org. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=KR

Modern Principles of Economics, 5th Edition (New York: Worth Publishers, 2021), Tyler Cowen and Alex Tabarrock.

Samsung Electronics Begins Mass Production at New EUV Manufacturing Line. (n.d.). Samsung Semiconductor USA. Retrieved March 16, 2022, from https://semiconductor.samsung.com/us/newsroom/tech-blog/samsung-electronics-begins-mass-production-at-new-euv-manufacturing-line/#:~:text=Samsung%20Electronics%2C%20a%20world%20leader%20in%20advanced%20semiconductor

Samsung. (2021). Samsung’s Heritage | About Us. Samsung Us. https://www.samsung.com/us/about-us/leadership-and-mission/heritage/

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Earnings Release Q2 2021 Samsung Electronics. (2021). https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2021_2Q_conference_eng.pdf

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Samsung Electronics Announces Third Quarter 2020 Results. (n.d.). News.samsung.com. Retrieved March 21, 2022, from https://news.samsung.com/global/samsung-electronics-announces-third-quarter-2020-results?msclkid=e437ef12a93e11ecbc9e667042c55603

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Lee, J., & Yang, H. (2021, October 28). Samsung warns supply chain upsets may hit chip demand, profit at 3-year high. Reuters. https://www.reuters.com/business/samsung-elec-q3-profit-rises-3-year-high-chip-sales-2021-10-28/?msclkid=c1af67a1a94111ec9e7e991d966bd489

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Patenting by Organizations (Utility Patents) 2019. (n.d.). Www.uspto.gov. Retrieved March 22, 2022, from https://www.uspto.gov/web/offices/ac/ido/oeip/taf/topo_19.htm#PartA1_1

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Inflation Rate around the World. (n.d.). Www.statbureau.org. Retrieved March 23, 2022, from https://www.statbureau.org/?msclkid=f0ecf81caacb11ec872fad237d5e3ea4

‌ South Korea: Inflation rate 1984-2024. (n.d.). Statista. Retrieved March 23, 2022, from https://www.statista.com/statistics/377275/inflation-rate-in-south-korea/?msclkid=13b5acecaacd11eca2de3000eb4e831e

Toyota

Reece Dunton

Regent University

ECON 230

The Company:

Toyota Motor Corporation was officially established on August 28, 1937. But that is not the start of Toyota's history. The founder of Toyota, Kiichiro Toyoda, "used the spirit of invention and the business base inherited from his father Sakichi Toyoda to expand into the automotive business and build the foundation of today's Toyota Group" (Toyota Motor Corporation Global Website: 75 Years of Toyota: Part1 chapter1 section1: Item 1. Sakichi Toyoda. TOYOTA Global Website. (n.d.). Retrieved November 6, 2021, paragraph 1) Kiichiro Toyoda was born on June 11, 1894, in part modern Kosai. Due to his upbringing being around the loom plants of his father's business, Kiichiro was surrounded by creativity and invention. Throughout his education, Kiichiro met several individuals that would be involved in the building of the automotive industry. Individuals such as Takeo Akahira, Shogo Ito, Hideo Kobayashi, Kichizo Tanabe, Shiro Nukiyama, and Daizo Nukiyama. As a young adult, Kiichiro established himself as an inventor and visionary. His first accomplishment was creating the automatic loom. In September of 1923, after the Great Kanto Earthquake, the railroad system was discombobulated, creating a need for automobiles to help with transportation. U.S. automotive companies then began exporting automobiles to Japan. With this new need for automobiles, Kiichiro became curious and started researching and experimenting with engines. On September 1, 1933, Kiichiro established the Automotive Production Division of Toyoda Loom Company. Shortly after, he started working on prototypes to launch. On August 28, 1937, Toyota Motor Company was established. Slowly, over the following 20 years, Kiichiro and Toyota began to establish prototypes of vehicles to be mass-produced. In 1957, the Toyopet Model ST10 Corona would be launched, one of the first models of Toyota. Throughout the 1960s, Toyota would expand operations in multiple ways. In the process of expansion, Toyota developed the Toyota Production System (TPS). In 1966, the first Corolla prototype was released, setting the groundwork for the popular Corolla model today. Becoming a global company opened a vast amount of opportunities for production and profit. Throughout the past 30-40 years, Toyota went through more expansion that brought troubles. However, the company would get through financial and production problems and become a leading motor company today.

Comparative Advantage

Toyota today is one of the largest motor companies in the world. They have established their dominance in many different ways. In the U.S. alone, Toyota has eight plants in eight different states. They have served customers in over 170 countries. Toyota also has a very extensive research and development team. "Toyota’s R&D initiatives, especially in producing environmentally friendly vehicle technologies, vehicle safety and information technology, provide it with some of the best strategic advantages" (Jurevicius, O, October 22, 2021, SWOT Analysis of Toyota paragraph 7). This team has over one hundred members and 7.9 million dollars invested in designing the safest and cutting-edge vehicles on the market. Another way that sets Toyota apart from its competitors is how dedicated they are to being environmentally friendly. They do this in four ways: reducing carbon emissions, reducing water consumption, reducing waste, and protecting biodiversity. Furthermore, Toyota has built a reputation for cutting-edge research and development. Their distribution system made it possible to sell almost 9 million units worldwide, giving them the status of one of the most well-known brands in the world. Lastly, due to the pandemic, most companies had to stop production. However, because of Toyota's system, they continued to manufacture and sell vehicles through a pandemic that has crimpled so many of its competitors.

GDP

Toyota's primary market is its origin country, Japan. However, the United States is following in second. Toyota's total revenue in Japan in 2020 was 29,929,992 trillion yen, which is equivalent to 265,179,729,120 billion U.S. dollars (Toyota). The GDP per capita in Japan is just over forty thousand dollars. Japan is well over the average world GDP per capita.

Fluctuation and Profitability

Change in Japan's GDP will also affect the profitability of Toyota. "GDP measures an economy's total output, which includes millions of different goods and services" (pg. Kindle location, 2001). When japan's GDP goes down, people make less money, resulting in fewer people buying vehicles, making Toyota less profitable. Minor fluctuations in a country's or a company's GDP is to be expected, but people become more aware when a significant change happens. Currently being in a pandemic, many companies have experienced either positive or negative major shifts in GDP. Luckily, because of Toyota's operation system, they haven't been as affected by the GDP fluctuations as some competitors.

References:

Toyota Motor Corporation Global Website: 75 Years of Toyota: Part1 chapter1 section1: Item 1. Sakichi Toyoda. TOYOTA Global Website. (n.d.). Retrieved November 6, 2021, from http://www.toyota-global.com/company/history_of_toyota/75years/text/taking_on_the_automotive_business/chapter1/section1/item1.html.

Toyota Jidosha Kabushiki Kaisha toyota motor corporation. (n.d.). Retrieved November 10, 2021, from https://global.toyota/pages/global_toyota/ir/library/sec/20-F_202003_final.pdf.

Jurevicius, O. (2021, October 22). Toyota SWOT analysis (6 key strengths in 2021). Strategic Management Insight. Retrieved November 10, 2021, from https://strategicmanagementinsight.com/swot-analyses/toyota-swot-analysis/.

Cowen, T., & Tabarrok, A. (2021). Modern principles: Macroeconomics. Worth Publishers.

Jayla King

Professor Bajah

Regent University

ECON 230

Company Overview

McDonald’s is one of the most successful businesses with over 39,198 restaurants worldwide and employs around 200,000 people (McDonald's: Number of Restaurants Worldwide, 2020, p. 1). In addition to being a dominant force in the fast-food industry, McDonald’s is the largest toy distributor in the world(Guenette, 2013, p. 4). While the incredible success in the toy distribution may initially appear shocking, it should be noted that their toys are paired with the 3.2 million McDonald’s happy meals that are sold per day (Maynard, 2017, p.12). The company philosophy created by Roy Kroc was based on the simple principle of a 3-legged stool: one leg was McDonald’s franchisees; the second, McDonald’s suppliers; and the third, McDonald’s employees. The stool was only as strong as the three legs that formed its foundation (Our history: Ray kroc & the McDonald's Brothers, 2021, p.3). Kroc envisioned a franchise that sold quality burgers, drinks, fries, etc, that tasted the same regardless of what state the customer was in. While Kroc often expressed the significance of the core principles which were, quality, service, cleanliness, and value, he was reported to have a strong passion for the quality of the meat (McDonald’s, 2021). However, the quality of McDonald’s meat has been questioned many times before, and will most likely be speculated indefinitely. While there have been many rumors that claim Mcnuggets are made from a chicken feet paste, and that the meat in burgers is inauthentic, research indicates otherwise. Several investigative reporters explored McDonald’s food plant after a photograph of a pink “slime” substance went viral online claiming it was used inside McDonald’s food products (Burton, 2014, p. 3). Instead, they found several employees cutting into whole chickens; preparing them for the Mcnugget process (Burton, 2014). While some members of the public will always look down on McDonald’s quality, the company has illustrated their attentiveness and caring attitude by changing recipes for healthier and higher quality along with adding vegetarian and vegan options.

Comparative advantage

McDonald’s comparative advantage is clearly displayed through its resources, renowned presence, and range of products. Due to the competitive nature of the industry, McDonald’s has been able to remain innovative with its extensive amount of resources. There is a multitude of businesses that would like to expand into a franchise but do not possess the funding to do so. In comparison, McDonald’s is able to open a new location every 14.5 hours (Mehta, 2014, p.16). Furthermore, McDonald’s is able to experiment with new items on the menu and launch creative marketing campaigns such as the McDonald’s Monopoly game. The partnership with Monopoly motivated customers to purchase items off the menu to earn a monopoly property space sticker that could be found on the item. Over 5 million dollars in cash prizes (collectively) were awarded to individuals who earned a color group or all railway tokens (Taylor, 2018, p. 3). Additionally, “instant prize” coupons rewarded the buyer with a free item off the menu. Small businesses may have the ambition and drive to create comparative marketing campaigns, but do not possess the resources to do so. Reputation is another key element that described the comparative advantage Mcdonald’s has over rivaling companies. Because of their global presence, they are able to hire celebrities for collaborations all over the world. Within a year alone, McDonald’s was able to collaborate with Korean pop group BTS, American rapper Travis Scott, and rapper Saweetie (Bruner, 2021, p.1). Individuals who do not typically eat at McDonald’s make purchases to support their favorite artist. These collaborations are popularly done with McDonald’s rather than competitors such as Burger King or Chick-fil-a. American McDonald’s sales increased 57% from the Korean boy band collaboration that was originally only taking place in Korea (Yahoo, 2021, p.1). Lastly, their range of products proves to be competitively advantageous as well. McDonald’s is one of the few restaurants to include vegan and vegetarian options worldwide (Thomason, 2021, p.4). The McDonald’s menu in India consists of several vegetarian-friendly meals to satisfy the vast dietary restrictions on meat (Corichi, 2021, p. 3). This illustrates the consideration and care of McDonald’s during marketing research that rivals fail to do.

Supply and Demand

Both the supply and demand for McDonald’s are continuously increasing. As previously mentioned, a new McDonald’s location is opened every 14.5 hours. Additionally, the locations have been strategically placed so that most of the population is never more than 15 miles away from one (Mehta, 2014, p. 14). While McDonald’s sales were able to persevere through the pandemic in America, other continents with more restrictions such as Europe and Asia experienced a 2% descent in revenue (Wiener-Bronner, 2021, p.5). This was expected and a common occurrence throughout the economy.

GDP

Despite its popularity in China, the most populous country, the key market of McDonald’s is its home country the United States; 40% of McDonald’s outlets worldwide. *I have included a chart in my final paper that does not transfer into this format*

Impact of Fluctuations

The research articulated throughout the paper has illustrated how the economy and investments impact the companies profitability. Investing in marketing campaigns, innovative recipes, updated restaurants, and new locations have increased the companies profitability dramatically. Economic growth can impact profitability in two different ways. If the economy is healthy, individuals may be willing to spend more money on fast food. However, if there is a rise in income, individuals may be inclined to spend more money on a higher quality restaurant; commonly known as the income effect. Patents provide firms with a temporary period of market power, during which they can charge supracompetitive prices and earn rents that allow them to recoup the fixed costs of their research investment (Williams, 2019, p. 6). Currently, fluctuation in GDP is being faced by many companies who depend on overseas manufacturers such as Alieexpress, DHgate, etc. Travel restrictions due to Covid have halted a multitude of ships at the U.S port causing supply shortages for businesses (Valinote, 2021, p.1).

References

Bruner, R. (2021, July 29). Why McDonald's is partnering with Saweetie, BTS. Time. Retrieved November 8, 2021, from https://time.com/6085687/mcdonalds-bts-saweetie/.

Burton, B. (2014, December 10). What's really in a McDonald's Chicken McNugget? former Mythbuster finds out. CNET. Retrieved November 8, 2021, from https://www.cnet.com/news/whats-really-in-a-mcdonalds-chicken-mcnugget-former-mythbuster-finds-out/.

Corichi, M. (2021, July 25). Eight-in-ten Indians limit meat in their diets, and four-in-ten consider themselves vegetarian. Pew Research Center. Retrieved November 8, 2021, from https://www.pewresearch.org/fact-tank/2021/07/08/eight-in-ten-indians-limit-meat-in-their-diets-and-four-in-ten-consider-themselves-vegetarian/.

Guenette, R. (2013, November 19). Five things you didn't know about McDonald's. USA Today. Retrieved November 8, 2021, from https://www.usatoday.com/story/money/markets/2013/11/19/five-things-about-mcdonalds/3643557/.

Howe, C. D. (2017, April 28). 12 crazy facts about McDonald's you won't believe. Spoon University. Retrieved November 8, 2021, from https://spoonuniversity.com/place/crazy-facts-about-mcdonalds-you-will-not-believe.

Maynard, M. (2018, November 16). McDonald's makes more happy meal changes, bringing it closer to a healthy meal. Forbes. Retrieved November 8, 2021, from https://www.forbes.com/sites/michelinemaynard/2018/11/16/mcdonalds-makes-more-happy-meal-changes-bringing-it-closer-to-a-healthy-meal/?sh=5336e8e214b7.

McDonald's: Number of employees about the years. Statista. (2021, April 27). Retrieved November 8, 2021, from https://www.statista.com/statistics/819966/mcdonald-s-number-of-employees/.

McDonald's: Number of Restaurants Worldwide. Statista. (2021, April 8). Retrieved November 8, 2021, from https://www.statista.com/statistics/219454/mcdonalds-restaurants-worldwide/.

Mehta, F. (2014, June 23). 31 Facts About McDonald’s You Never Knew You Wanted To Know. Wallstreetinsanity. Retrieved November 8, 2021, from https://wallstreetinsanity.com/31-facts-about-mcdonalds-you-never-knew-you-wanted-to-know/.

Nandgaonkar, R. (2021, May 25). McDonald's revenue by Segment (2015-2021). Business Quant. Retrieved November 8, 2021, from https://businessquant.com/mcdonalds-revenue-by-segment.

Our history: Ray kroc & the McDonald's Brothers | McDonald's. (n.d.). Retrieved November 8, 2021, from https://www.mcdonalds.com/us/en-us/about-us/our-history.html.

Taylor, K. (2018, July 31). McDonald's was forced to quietly give 15 random people $1 million each after an ex-cop rigged the chain's Monopoly Giveaway. Business Insider. Retrieved November 8, 2021, from https://www.businessinsider.com/mcdonalds-gave-away-15-million-after-rigged-monopoly-game-2018-7#:~:text=However%2C%20the%20%2410%20million%20wasn,customers%20%E2%80%94%20%241%20million%20per%20winner.

Thomason, K. (2021, March 3). McDonald's is finally getting some legit vegan menu items next year. Women's Health. Retrieved November 8, 2021, from https://www.womenshealthmag.com/food/g28610230/mcdonalds-vegan/.

Top countries with the most McDonalds restaurants (QSR - Quick Service Restaurants). RList. (2021). Retrieved November 8, 2021, from https://rlist.io/l/countries-with-the-most-macdonalds-restaurants-.

Valinote, N. (2021, September 27). Covid-19: Cargo ships piling up at US ports amid supply shortages for businesses. Chappaqua Daily Voice. Retrieved November 8, 2021, from https://dailyvoice.com/new-york/chappaqua/business/covid-19-cargo-ships-piling-up-at-us-ports-amid-supply-shortages-for-businesses/817012/.

Wiener-Bronner, D. (2021, January 28). McDonald's sales took a hit from covid-19 restrictions. CNN. Retrieved November 8, 2021, from https://www.cnn.com/2021/01/28/business/mcdonalds-earnings/index.html.

Williams, H. (2019, February 11). Who profits from patents in the United States? Equitable Growth. Retrieved November 8, 2021, from https://equitablegrowth.org/who-profits-from-patents-in-the-united-states/.

Yahoo! (2021, July 28). McDonald's sales surge with help from BTS. Reuters. Retrieved November 8, 2021, from https://www.yahoo.com/entertainment/mcdonald-sales-surge-help-bts-160909999.html#:~:text=Delta%20variant%20spreads.-,BTS%20proved%20dynamite%20for%20McDonald's.,by%20the%20Korean%20boy%20band.

Milestone 1 BP

Felicia Olds

Regent University

ECON 230 Macroeconomics

Dr. Jeff Bajah

November 5, 2021

British Petroleum (BP)

BP (British Petroleum is one of the largest oil and gas companies in the world headquartered in London, England the company is active in all its processes from production and exploration, marketing, and sales of its products. Founded in 1909 by Charles Greenway, 1st Baron Greenway, and William Knox D’Arcy, BP employs 63,600 employees and produces renewable energy with the help of its wind farms and engages in petrochemical products.

According to BP (2021), their purpose is reimagining energy for people and our planet by helping the world reach net zero and improve lives. They aim to dramatically reduce the carbon in their operations, production, and grow new low-carbon businesses, products, and services.

Comparative Advantage

Comparative advantage is the ability of a particular individual or an economy to produce a product or service at a lower opportunity cost (OC) than others. It gives an advantage to the company to sell the products at lower prices compared to competitors. The comparative advantage over its rivals as its production cost for energy and other products is lower in comparison with its competitors. The production cost of this company is around 15% of its operating cost which is lower than its competitors. According to Forbes (2016, para 2), the company’s production cost per barrel of oil (BOE) almost doubled between 2010 and 2013 and substantially was lower than its close rivals, ExxonMobil, Royal Dutch Shell, and Chevron.

In 2014, BP decided to improve operational efficiency and control production costs. These efforts allowed the company to cut its production cost from the previous year which was under $10. Per BOE (barrel of oil equivalent) in 2015. The company’s aimed to lower its cost by $8. Per (BOE), which allowed BP to maintain its cost lead over its rivals by enhancing its structure and maintaining its profit margin even in case of lower prices. By doing so, BP laid off 25% of its workforce.

Supply and Demand

BP supplies many products which include gasoline, distillate fuel oils, lubricants, residual fuel oil, kerosene, and so on around the world. Its consumers around the world demand their products through North America. The authors Cowen and Tabarrok state, “The most important tools in economics are supply, demand, and the idea of equilibrium (p. 29). According to BP (2021, para 2), they decided to reach the net-zero level which is the term they decided to reach the net-zero level which is the term defined as the energy amount used in a building should be equal to the renewable energy to include wind, solar, geothermal, and bioenergy created on-site but excluding hydroelectricity. This resulted in an increase of more than 10-fold in both Rapid and Net Zero causing a rise from 5% in 2018 to over 40% by 2050 in Rapid and almost 60% in Net Zero to include oil, coal, and gas. However, the Covid-19 pandemic has negatively affected the world and has disrupted the markets of global energy leading to disruptions in demand and supply to the BP (British Petroleum) company. The oil demand has not recovered from the pandemic resulting in a decrease in the demand by 50% in Rapid and 80% in Net-zero in the year 2050 resulting in the supply of the energy sources. The supply for liquid fuels fell also and have not recovered yet causing the consumption of this product to fall around 55 million barrels per day (Mb/d) and 30 million barrels per day (Mb/d) in both Rapid and Net-zero.

Gross Domestic Product (GDP)

The gross domestic product or (GDP) for two of its key markets are UK and Germany. In the UK, the report showed growth in the country’s GDP between 2014-19 of having a total share of 0.5%, while in Germany, 2016 was 0.14%. The GDP of an economy determines the profitability of a firm. The recession period generally leads to a loss in profit whereas the boom results in more profit earned by a firm.

Investment

The foreign investment of a firm depends on the rate of interest® prevailing in the economy. If the interest® is high, then the net profitability goes up and the investors are encouraged to invest. A lower interest rate® makes foreign investment dearly as the profitability decreases.

Economic Growth

Marked by a higher standard of living for all the individuals in the economy. When the per capita income increases then the per capita consumption also increases, which makes the producers also better off as now there would be an increase in the aggregate demand of commodities, increasing the net profitability of the firm.

Patents

A special that a firm could give for its authentic product to be produced by some other companies. For this, the parent company could charge a payment that the other companies are liable to pay for this payment is added to their revenue earned which increases the profitability of the firm.

References

Cowen, T. & Tabarrok, A. (2021). Modern Principles of Economics, 5th Edition (New

York: Worth Publishers, 2021, p. 29).

BP (2021). Who we are? Retrieved from https://www.bp.com/en/global/corporate/who-we-are/our-purpose.html

Forbes (2016) How does BP manage its operating margins in the current commodity

Downturn? Retrieved from https://www.forbes.com/sites/greatspeculations/2016/07/15/how- does-bp-plan-to-manage-its-operating-margins-in-the-current-commodity-downturn

Responses

Hi Josh,

McDonald’s also known as Mickey D’s is one of the most recognizable brands in the world. Everyone knows those double arches when they see them and can identify who they are. It is said that McDonald’s has a lengthy history of innovation and offers quick meals that are relatively inexpensive. According to McDonalds (2017-2019), as demand increase, to continue making changes to its menu, to remain in demand by consumers desire to purchase goods and services as well as their willingness to pay a specified price for their goods or services. To do that, McDonalds states, they will have to

a. Maximize their marketing by building trust and creating a stronger connection to their customers.

b. Commit to the core customer favorites which make up 70% of sales. Such as improving the beef and chicken sales.

c. Doubling down on the three D’s (digital, delivery, and drive-thru)

1. The digital platform will be more personal and convenient with better experiences for customers

2. Integrating and prioritizing key actions into their global mobile apps for better delivery

3. Testing new concepts, technologies, along with future research to increasing faster drive thru for new and existing restaurants.

References

McDonald’s (2017-2019). Our Growth Pillars. Retrieved from https://corporate.mcdonalds.com/corpmcd/our-company/who-we-are/our-growth-pillars.html

Hi Rachel,

I enjoyed reading your paper, you were very detailed however, I wanted to ask you why do you think Apple is more successful than its competitors? One reason is that Apple keeps launching technology that raises the bar in the deliverance of their mobile phones and computers. They make sure that their products are well designed with the latest advanced technology. The author (Hague 2021, para 1) states “a company cannot survive without competitive advantage or its sustainability” and that “Apple devices are unique, and the sole producer is Apple is itself.” If a person wants to buy iOS devices, that person must buy it from Apple (para 6); Apple has been achieving competitive advantages throughout its life. It has been smartly exploiting its core competencies, strengthening its competitive lead, and maximizing its value.

References

Hague, F. (2021). The Strategic Watch. Competitive Advantages of Apple Inc, (2021). Retrieved

From https://www.thestrategywatch.com/competitive-advantages-apple-inc/

China is McDonald’s biggest market outside the U.S who surpasses Japan, which I based on the number of restaurants McDonald’s has in China. In 2018, Japan was the biggest market of McDonald’s outside the U.S. (All McDonald’s Statistics and Interesting Facts in 2021, n.d.). However, that changed in 2019-2020, according to Statista Research Department (2021). China has 38,000 restaurants followed by Japan with almost 3,000 in 2020.

According to CITIC to offload 22% stake in McDonald’s China. (2020, September 1). China Daily, p. A2, McDonald’s revenue from “China master franchiser, called Fast Food Holdings, Ltd for the first 11 months of 2019 was 24.4 billion yuan, which is equivalent to $3.8 billion (Valueta FX, n.d.). As of 2020, there has been no report of the revenue as China franchiser, Fast Food Holdings is considering selling about “22 percent of its stake” with the lowest bidding at the amount of 2.17 billion yuan ($312 million).

Fluctuations in currency exchange can impact the operation of McDonald’s restaurants. The currency exchange rate can change the price of what customers pay when in different countries. What customers normally pay for a Big Mac and French fries in United States might not be the same as they would pay in Europe or Asia (The International Market Strategy of McDonald's, 2018, p. 3). According to How Much A Big Mac Costs In These 20 Different Countries. (Wehrlie, 2020, pp. 2-18). Different countries have different prices on their menu based on the locations. Each country tends to have different menus and some even add taste of their own culture on the menu by enhancing some of the items on McDonald’s menu. While Bic Mac in some Asian countries like Hong Kong, Taiwan, and Malaysia range from $2.10 - $3.00, South Africa’s Bic Mac is $1.75 - $2.00. North America and Europe, on the other hand, has the most expensive burgers ranging from $5.00 to almost $7.00.

Reference

CITIC to offload 22% stake in McDonald’s China. (2020, September 1). China Daily. Retrieved from https://www.chinadaily.com.cn/a/202001/09/WS5e168891a310cf3e35583629.html

Valueta FX. (n.d.). Retrieved from https://www.valutafx.com/CNY-USD.htm?amount=24,400,000,000

Wehrli, A. (2020, February 28). How Much A Big Mac Costs In These 20 Different Countries. The Travel. Retrieved from https://www.thetravel.com/how-much-big-mac-costs-different-countries/

Hi Louis,

Thank you so much for commenting to my initial post and I appreciate your questions. I did look up some of McDonald’s competitions like Starbucks, Chick-Fil-A, Burger King, Wendy’s, and Subway. None of these competitors have manage to surpass McDonald’s. Below is the market share listed for McDonald and its competitors in the year 2019 with statistics in market share and sales, according to McDonald’s Corp Statistics and Facts: (WallStreetZen, 2021, pp- 7-8).

McDonald's Market Share vs. Competitors (Global): Sales

McDonald's Subway McDonalds Taco Bell

21.4% 2.8% 40B 11.30B

Starbucks Domino’s Starbucks Wendy’s

7.5% 1.7% 18.5B 10.24B

KFC Pizza Hut Chick-Fil-A Burger King

2.82% 1.24% 13.76B 9.67B

As far as your question, “if it is possible for them to be knocked off by a smaller commentator with less overhead?” Are you referring to McDonald’s or the competitors? Less overhead is good for business and essential to the business. Less overhead mean low expenditure, is it not? However, when it comes to McDonald’s, it would take some serious and lengthy accounting work if the company consider about cutting back on some of their expenditures and will to do inventory of their goods and services, not to mention, the reasoning for reducing the overhead.

Reference

WallStreetZen. (June 20, 2021) NYSE MCD McDonald’s Corp Statistics and Facts: Retrieved from https://www.wallstreetzen.com/stocks/us/nyse/mcd/statistics

Hi Rachel,

I do not know much about Apple Company except for products they sell worldwide and hearing the success of their brand. I can never understand why all Apple products are very expensive, especially when they do an upgrade. What makes Apple products such as iPhone, iPads and apple watch more popular than the other brand? What do you think their advantages over their competitors even though other brands offer the same features as Apple products does, considering other brands are less inexpensive than Apple? Apple continue to come up with new features on their iPhones, iPads and apple watch along with the increase in price (Bary, et. Al, 2021).

I would like to know more about how the pandemic impacted Apple’s revenue in U.S and worldwide with most of the stores shutting down during the worst of the pandemic and how much revenue Apple lost or gain during the pandemic.

According to Market Watch, “Smartphone sales experienced a major slowdown in 2020” due to pandemic and Apple product consumers were restricted in upgrading their devices to the shutdown of many stores.

Bary, E., Blasi, W., & Owens, J.C. (2021, September 14). Apple reveals iPhone 13 lineup, iPad Mini price increase and larger Apple Watch. Market Watch. Retrieved from https://www.marketwatch.com/story/apple-iphone-event-new-ipads-include-a-price-increasefor-ipad-mini-11631640927

Hi Josh,

I learned a lot from reading your Milestone 1 about the McDonald’s industry. I did my Milestone on McDonald’s as well and found information about their corporation and financial investment. According to Statista Research Department, there are now over 39,000 McDonald’s restaurants worldwide with China leading the biggest market outside the U.S. McDonald’s based their business and profitability in distribution business as you explained on your Milestone by expanding and franchising their business worldwide. As far as GDP, you did not mention its key market’s GDP as far as McDonald’s is concern. I had difficulties finding McDonald’s GDP in China as of 2020 but was able to find revenue thru CITIC Ltd, which is the “Chinese State-owned conglomerate CITIC Group”, who is in the process of selling 22% of its stake.

As far as how they hold up during the pandemic, McDonald’s still managed to stay afloat as they continued to do business through their drive-thru windows, having the McDonald’s app available for online ordering and curbside pick-up. I think they did well compare to other fast-food restaurants. However, their revenue declined in 2020 but did increase again this year by 16.59% (Lock, 2021). In 2020, McDonald had a revenue of $10.7 billion from franchised restaurants worldwide despite the pandemic.

Reference

Statista Research Department (2021, April 6). Number of McDonald’s restaurants APMEA 2020, by country. Retrieved from https://www.statista.com/statistics/256049/mcdonalds-restaurants-in-the-emea-region/

Lock, S. (August 31, 2021) McDonald’s - statistics & facts. Retrieved from https://www.statista.com/topics/1444/mcdonalds/

Company Overview

Toyota is one of the biggest automotive companies in the world and has millions of cars on the road. In the U.S. alone, they have manufactured 29.9 million vehicles, in 2020 they sold 2.1 million vehicles (2021, Toyota). They employ over 176,000 people in the U.S. between the 10 Toyota production plants and over 1,500 dealerships nationwide. The reach of Toyota’s financial services team has helped assisted many people in making the right financial moves in purchasing their car. Outside the US, the main headquarters is in Aichi, Japan. The current models that Toyota is currently producing includes the Sienna, Sequoia, Highlander, RAV4, Camry, Avalon, Corolla, Tundra and Tacoma. Apart from those models, Toyota also own Lexus and uses those styles of model as their more luxurious brand available in their name.

Does Toyota have a comparative advantage over their competitors?

Their top competitors are other automotive companies such as Honda, Chrysler, Ford, Nissan, Volkswagen etc. Toyota does not necessarily have a comparative advantage, but their operation systems and innovation strategies do give them a competitive advantage over their competitors. According to UKessays (2018), the most important objective of the Toyota production system has been to increase production efficiency by consistently and thoroughly eliminating waste along the supply chain.

Supply and Demand for their products and services

As one of the most successful, innovative, and affordable vehicle brands on the market, Toyota has had a growing demand for their products. However, because of the COVID-19 pandemic and the chip shortage across the nation for most car manufacturers has slashed the supply of new cars for not only Toyota, but for all vehicle manufacturers who rely on their chips being made in China. Even at my own local Toyota dealership in Virginia Beach customers cannot buy a new car and drive it home the same day. They are able to preorder their vehicle and can pick it up in about 6 to 8 months.

the GDP of its home country and a key market (country).

The home country is Japan, who’s national GDP is 4.975 trillion in U.S. dollars. According to Jurevicius (2021), in 2018 Toyota made $29.3 trillion in revenue and $2.4 trillion in profits which was a 36% increase from the year prior.

How does fluctuations in GDP, economic growth, investments, and patents affect the company’s profitability?

Toyota’s largest markets are in the US, Europe, and Asia. Within these three different continents come different tariffs, environmental regulations, and varying levels of market stability. As stated earlier, COVID caused backups in the shipping and production of their vehicles in all three continents. As restrictions are lowered, the company has been working it’s way back up to full speed.

References

(2021). “Our Story”. Toyota. https://www.toyota.com/usa/our-story/index.html.

Jurevicius, Ovidijus. (2021). “SWOT Analysis of Toyota (6 Key Strengths in 2021)”. Strategic Management Insight.https://strategicmanagementinsight.com/swot-analyses/toyota-swot-analysis/.

(2018). “Toyota’s Competitive Advantage In The Automotive Industry”. UKESSAYS. https://www.ukessays.com/essays/marketing/toyotas-competitive-advantage-in-the-automotive-industry-marketing-essay.php.