Milestone 1

McDonald, The Golden Arches

Daphne Johnson

ECON 230

Dr Jeff Bajah

November 3, 2021

McDonalds is one of the largest fast-food chain in the world supplying golden fries and their signature Big Mac. I can say that with assurance according to Steven Foley, with 39 thousand locations in 100 countries McDonalds is everywhere. McDonalds can be found on every continent except Antarctica but, I am sure Santa Claus would love a good burger and fries “laugh.”

Through my economic research of McDonalds I will touch on how it works in McDonalds land. I will explore the comparative advantage they have over other companies, their supply and demand system, also the GDP of their top 2 countries in 2006, along with how patents have affected business for the fast-food giants.

comparative advantage

What other companies can compare with McDonalds where they are serving burgers and fries? The only other franchise that comes to mind is Burger King. I ran across an article by Ryan Downie that states BK is the rival of McDonalds. Both restaurants serve signature burgers the “Whooper” (flame broiled) for Burger King and the “Big Mac” (special sauce), but what makes McDonalds stand out over Burger King.

There are three comparative advantages that make McDonalds stand out when considering the decades - of long success: first, consistency – making sure every location’s services and products are the same along with cleanliness, second innovation – inventing new ideas to apes the customers like adding there first drive through window in 1975 and third resiliency- McDonalds has had their share of controversy lawsuits and negative press but they have always overcome. They maintain customer service and deliver of quantity product through all the negativity (Downie). Please go back and read the article, there are some interesting points on how the fast-food giant stays leading the pack.

supply and demand

McDonalds has its own amazing supply and demand management chain. This is how they stay a step ahead and one of the largest fast-food chains in the world. As, you see from the diagram below McDonalds keeps it all in house. The Vertical Integration is the key to supply and demand, keep it all together. I found this passage in an article , “ They grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own. McDonalds owns the land that their restaurants are situated on, so they do not have to deal with leases and landlords”. McDonalds has a high capitalization where they can produce goods at a lower cost due to the Vertical Integration system. With such a great system in place other companies have to be wondering how they do it.

GDP outcomes

You can imagine McDonalds’s has a variety of GDP outcomes since they are flourishing in many countries. The GDP for two key countries like Aruba and Fiji fluctuated with the economy in 2006. Both countries manufactured the same products with different GDP out comes. Aruba, $20.83per $14.0 billion of GDP of the Big Mac and Fiji, $13.42 per 14.1 billion of GDP of the Big Mac. It was interesting to see that the Christian community ranked as the highest group of consumers in the top 2 countries to elevate the economic growth and investments of the Big Mac and out of all the countries guess who came in last the US. I believe that to be true because, here in the US we have wide variety of restaurants to chose from.

Patent

While keeping up with the times McDonalds has just launched a patent to increase the company’s profitability. The “Mc Delivery”, as other fast-food chains us Grub Hub and Door Dash, McDonalds had to get on board and stay in the game. The quality of the product once it reaches the customer is the main issue with McDonalds CEO Steve Easterbrook. (Little) as he wants to maintain the quality of the product on delivery.

The text brought to light the opportunity cost of specialization for McDonalds. As, The Big Mac is a specialization of McDonalds which gives them another comparative advantage overs like them. They are able to produce the Big Mac at low opportunity cost and profit at a higher opportunity cost.

McDonalds is one of the largest fast-food chains and rightfully so, because of the business mind of founder Ray Kroc and now CEO Steve Easterbrook and all those before him, which have kept the needs of their customers and maintained quality products.

References

Renee Bailey March 30, 2020, How Has McDonald's Been So Successful for So Long?

Stephen Foley Sunday 23 October 2011 07:16 The Fast-food Giant Eating Up the World

RYAN DOWNIE, September 27,2021 Who Are McDonald’s Main Competitors?

By Katie Little, PUBLISHED WED, APR 22 2015 Mc Delivery? McDonald’s may have plans

Economy > Big Mac Index > Per $ GDP: Countries Compared

NationMaster.com 2003-2021.

McDonald’s Supply Chain Management is The Secret to Their Success!

2019 BOX AROUND THE WORLD