This paper applies three fundamental microeconomic questions to McDonald's Corporation, one of the world's most recognized fast-food franchises. It examines what products McDonald's produces and sells, including its globally adapted menu categories; how those items are manufactured, sourced, and assembled using both imported commodities and local fresh suppliers; and who the end consumers are, ranging from young children to senior citizens. The analysis highlights how McDonald's franchise model, supply chain strategy, and demographic targeting combine to create both cost efficiencies and broad market appeal.
McDonald's is one of the most popular franchises across the globe. The firm represents the epitome of corporate success, and it is also an emblem of the American way of life. The fast food industry is an important segment of the current lifestyle, shaped by working women, busy schedules, and less time for traditional home cooking.
Part of the success registered by McDonald's is its business model. Specifically, the fast-food giant operates through franchises, meaning that its stores are run by third parties under the McDonald's brand, with shared risk, resource consumption, and profitability.
In order to better assess the company, it is useful to approach it through the lens of the three fundamental questions of economics: What is being produced? How are the items being produced? And who consumes the produced items?
McDonald's produces and sells a wide array of food products, including sandwiches, ice cream, salads, and beverages. Some of these items are wholly produced by the firm, whereas others are purchased and resold. The most relevant example of resold items is beverages, which are purchased from other companies such as PepsiCo.
The items made by the firm can be classified into the following categories: burgers and sandwiches, chicken products, breakfast items, salads, snacks and sides, McCafé offerings, and desserts and shakes (Website of the McDonald's Corporation, 2012).
An interesting element of McDonald's products is their adaptability to local characteristics. The McDonald's menu across the globe contains the same broad categories, but specific items are eliminated or added based on regional features. In India, for instance, beef is not served; in Germany, beer is included on the menu; in Canada, lobster is offered; in Norway, salmon is available; and in Hong Kong, rice burgers are provided (Adams, 2007).
Overall, McDonald's produces a wide array of items tailored to deliver value at a low price while also meeting the specific needs of diverse customer bases across the globe.
As noted above, some items sold by McDonald's are produced by the firm itself, while others are purchased and resold. In the case of beverages, the company often purchases basic ingredients and combines them to create the final product. For sodas, for example, the fast-food giant purchases concentrates from soda companies and then mixes them with water before selling the finished drink to customers.
Food products are mostly prepared within the actual McDonald's stores around the world, in the kitchens of individual restaurants. The ingredients used in production are retrieved from two different sources. On one hand, primary commodities are imported from more cost-effective regions — the most notable example being frozen fries, which are imported and then cooked on-site. On the other hand, fresh items such as salads and vegetables are often purchased from suppliers within local communities (Royle, 2000).
This combination of sourcing strategies allows the company to benefit from supply chain cost efficiencies while also improving its public image. By buying from local vendors, customers are served with fresh produce and the local economy is supported simultaneously.
"Consumer demographics from children to seniors"
Royle, T., 2000, Working for McDonald's in Europe: The Unequal Struggle, Routledge.
Website of the McDonald's Corporation, accessed January 16, 2012.
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