Changes in the Macroenvironment Affect Individual Firms and Industries

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1. Discuss how the two cases in this chapter illustrate the major theme of this text: Changes in the macro environment affect individual firms and industries through the microeconomic factors of demand, production, cost, and profitability. Drawing on current business publications, find some updated facts for each case that support this theme. Drawing on current business publications and the two cases in this chapter it is prevalent that several changes in the macro environment have had an effect on the profitability of individual firms and industries. The text states that (Farnham, 2010 page 459), downturns in economic activity forced all the fast-food companies to develop new strategies. During this economic downturn McDonald’s was one company in particular that has developed strategies that were influenced by microeconomic changes. A great example is when McDonald’s entered the Chinese market they had to take into consideration consumer taste and acceptance in China. They had to decide whether or not to have the menu in Chinese or English and whether or not to take on the American menu or add more Chinese influenced menu items. Cost also played a part in the China market. Beef was much more expensive and so therefore could only reach a certain percentage of the people. Half of McDonald’s sales in China had been of chicken product with beef only making up 35 percent (Farnham, 2010).

2. Compare and contrast McDonald’s strategies in China with those of Wal-Mart in Mexico. McDonald’s responded to the changing economic conditions in China that included increased incomes, urbanization, and use of automobiles. This led to the development of its strategy of emphasizing the drive-thru as a major engine of growth. The company had to develop relationships with Chinese governmental authorities and had to consider how local customs and preferences affected its menu offerings. Wal-Mart faced similar challenges in Mexico, particularly in terms of lifestyle differences...
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