Introduction
The paper will focus on fast food industry where the organization on the analysis is the McDonalds Company. To understand the activities of the business, it would be wise to evaluate the market structure of the industry. The analysis is useful in defining how the structure affects the operations of McDonalds Company. Different factors define the unique elements that are present in every market structure in terms of strategies for specific organizations in the industry. The success of McDonalds in the food industry depends on consideration of factors such as the type of goods or services produced, entry barriers, number of organizations in the industry, price elasticity of demand, and the economic performance of the industry.
McDonalds Company operates under perfect competition market structure. The market structure defines the principles of operation that the company has to consider extensively. Therefore, for McDonalds to remain significant or relevant to the market, the following criteria have to be met. These principles mark key differences between the ranges of market structures that are operational in the economic world (Park, 2009).
The first principle is that all firms within a perfect competition market sell identical products. This means the products that are being dealt with in the industry are purely similar. There are no differences that may exist between the products of different companies within the market (Barrows & Smithin, 2009). For example, McDonalds operates in the Fast Food industry where all companies concentrate on fast food such hamburger. In other markets, organizations may be allowed to produce extremely unique products in comparison to their competitors.
The second principle is that all players in the market are price takers. This means an organization does have sole role of setting a price. It has to rely on the price set by the industry. This is an extremely useful principle for controlling competition in the industry. At some point, if prices were fixed by choice of an organization there could be extensive challenges since other organizations would charge extremely low prices to destabilize the market. This principle is exclusive in this form of market structure defining the uniqueness need in the industry (Barrows & Smithin, 2009).
The other principle that makes this market structure extensively useful to defining the perfect competition market within which McDonalds operates is the relatively small market share that the organizations command. In such markets, there are usually a large number of organizations extending the same services or products to consumers. There are always organizations seeking entry to the market making the market share reduce from time to time. For example, the food industry within which McDonalds operates, there are hundreds of thousands organizations (Mahnken, 2012). This makes the market small for the small organizations in the industry.
In addition, there is a principle that buyers have complete knowledge of the product being sold, as well as the prices that each firm charges. This is usually useful among buyers as it assists in evaluating the best organization in the industry. It is at this point that the individual companies come up with unique strategies to win more customers to their sides. The uniqueness of every product for an organization is useful in defining the strategies that are needed in execution of exclusive sales for the organization. Every organization has to come up with unique strategies that help in securing a given section of customers (Barrows & Smithin, 2009). McDonalds has developed unique strategies that have been of exclusive assistance in defining meaning of its products to customers.
In addition, there is freedom of entry and exit in the market. Perfect competition markets do not have considerations that may hinder an organization from entering into a market freely and exit at will. The organizations usually find it extensively fundamental to follow such a market, as they are not controlled so much on how they stipulate their activities (Park, 2009).
Competitive strategies
These refer to the stand that a firm may take in relation to other firms in a given industry. The organization has to come up with unique strategies that will make it outstanding in the market. A firm has to develop a process or path, which has to be followed as guideline in achieving its goals. In most cases, the defined strategies must be in line with the goals, or the mission of the organization (Barrows & Smithin, 2009).The McDonalds organization being a key player in the Food Industry is exclusive selective on the strategies that it employs.
Cost leadership
This is a unique strategy as it poses direct challenge to other organizations. This strategy works in an exemplary manner. In this case, an organization incurs a slightly lower price than its competitors do. The low cost allows the organization to obtain higher profits than its competitors do when the price is set by the market. McDonalds is successful in executing this strategy and this makes it to have adequate money for expansion to different regions in the world. Organizations applying such strategies while maintaining quality assumes extensively wide share of the market within which they operate (Oldfield, 2004).
This strategy is relevant on the bases of the principle of price taking in the competitive market structure. Since the company cannot charge extremely low prices, it has to come up with the strategy of reducing cost of production.
Differentiation
This is a competitive strategy where a firm offers a superior product at a similar cost to inferior products produced by its competitors. This strategy aims at satisfying the needs of the customers whose main need is quality products and services. McDonalds uses this strategy in execution of its services every day. It does this by ensuring that all the food it prepares is the yummiest in the Fast Food Industry. The high quality food that the company prepares for its customers, make it have easy control of the number of customers who demand its products (Park, 2009). Although, the market structure denounces different products in the structure, products may be different in quality but of the same form.
Focus
This is a strategy where a company aims at pursuing a given line of operations. This is a good strategy as it encourages specialization in a certain field. The McDonalds Company already employs this strategy in its daily operations. The company has exclusive products that are similar in all its franchises. The focus ensures exemplary performance since customers easily become loyal to the company. This is in support of the definitions of the trend that the competitive market structure supports (Oldfield, 2004). The products that every organization in the market produces must be identical.
Recommendations
Since already McDonalds Company controls the Fast Food Industry, it would be advisable to define strategies that will make the company remain relevant to the market. One of the strategies that would be recommended to the organization is creation of a pool of market researchers and analysts. These people will assist in coming up with strategies on how to win and maintain customers. Also, the company should try to develop strategies that will help the company extend its services to many customers by producing another range of products such as drinks. To gain entry in many countries in the world, the company may sell franchises as well as seek all available entry techniques to market.
Conclusion
Competitive market structure is one of the most successful market structures that any industry may employ. It has a clear definition of principles that all organizations should employ to become successful as well as maintain proper operational environment for the organizations. McDonalds uses the principles that governs the market structure and has been successful in different instances. However, it has to develop unique competitive strategies to remain outstanding command of the market. For example, the company may consider cost leadership, differentiation, and focus as paramount competitive strategies.
References
Barrows, D., & Smithin, J. N. (2009).Fundamentals of economics for business(2nd ed.). Concord, Ont.: Captus Press ;.
Mahnken, T. G. (2012). Competitive strategies for the 21st century theory, history, and practice. Stanford, Calif.: Stanford University Press.
Oldfield, M. (2004). Talking Quality, Meaning McDonalds, the Market and the Probation Service. Probation Journal,41(4), 186-192.
Park, S. (2009). Market Power In Competition For The Market. Journal of Competition Law and Economics, 5(3), 571-579.
