I. Background and Article Summary
Its safe to say when we think of fast food, McDonalds certainly comes to mind. That is because the company has made a name for itself through its infamous golden arch and signature burgers. Still after 70 years, McDonalds is one of the largest fast food chain restaurants in the US and has growing worldwide recognition. They have reserved their title based on their huge customer base and increasing sales. The food giant has experienced increases of up to 80 percent of net profit in a year and 10 percent in revenues in a year. Over the past several years, the launch of the “Dollar Menu”, introduction of McCafe, and primarily, continuation of low cost food are all the ways in which McDonald’s continually gains and maintains their customers.
Currently, McDonald’s success is still on the rise. Global sales have climbed 6% in the third quarter. Their net income jumped to nearly 1.5 billion, sales were up by about 4%, and the shares have risen about 26 percent this year. They attribute their growing success to maintaining low-priced items in comparison to other competitors such as Burger King and Wendy’s whose menu prices steadily increase each year. However, the increasing cost of commodities such as meat and wheat are forcing the chain to raise menu prices in the coming year. Although McDonald’s initially refused to significantly increase prices, they have realized a slight jump in food price will help cover their heightened expenses. They are worried this price increase will have a negative effect on their customer base as the economy is still in recovery mode.
II. Course Topic Connections
Since its existence, McDonald’s has kept their menu prices at a lower rate to win market share in the fast food market (Ziobro, 2010). With this technique, they have securely taken the market share from similar fast food chains. We have learned that market penetration pricing strategy is a...