Examples of purely monopolizing companies

Economics Case Study

DOMINANT FIRMS: McDonald’s

While examples of purely monopolizing companies in the world of business are hard to find, dominant firms are more numerous. Examples of these could for example include Microsoft for the computer software industry and Nestle for the food industry. In the fast food industry, the most well-known global companies that come immediately to mind are Kentucky Fried Chicken and McDonald’s. In terms of market share, McDonald’s is currently the dominating firm in the fast food industry.

Indeed, dominating the global fast food market has been a corporate vision since the beginning of the company. Having begun nearly fifty years ago, the McDonald’s company’s automation and reasonable pricing practices have made it a favorite among worldwide consumers. These elements have helped in skyrocketing the company to surpass its first billion dollar mark after only 22 years, in comparison with other giants such as Xerox, who took 63 years to reach a billion dollars, and IBM with 46 years.

The company’s history and philosophy demonstrate its wide ranging success. In the five years after the opening of the first McDonald’s in 1955, 200 more were opened. It went public after ten years, with the share price doubling in just the first month. The year 1995 saw 18,000 restaurants globally.

Other practices that ensure the success and continued domination of the company is its partnerships. One of these is the ten-year global marketing agreement the company signed with the Walt Disney Company. Another strategy to maintain its global dominance is McDonald’s policy of adaptation when this proves necessary.

Traditionally, McDonald’s franchisees are obliged to adhere to a 700-page manual referred to as “the Bible.” However, this policy proved to be impractical in terms of globalization. The company has adjusted its products to cater for local taste sensibilities. Example of these include the 34 restaurants in India featuring the Maharaja Mac containing mutton, and the vegetarian options that exclude meat and eggs. The Pakistan outlets offer three different McMaza meals, Chatpata Chicken Rolls, Chicken’ Chutni Burger and Spicy Chicken burgers with Aaloo fingers. Adaptation has even become an issue in the United States, in terms of colors, specific ingredients and health issues. New trends and tastes need to be taken into account if the company is to maintain its dominant market position.

This position however appears in little immediate danger. Currently McDonald’s comprises 30,000 franchise outlets in 121 countries, serving 46 million people per day. The company is wildly popular on a global scale. Its Pushkin Square branch for example was opened in Moscow in 1990, and broke all opening day records in customer numbers. Its popularity continues unchecked, as it remains the busiest branch worldwide. McDonald’s has opened a further 78 restaurants in the country. Beijing features the largest McDonald’s in the world, opened in 1992, with over 400 restaurant’s in China.

As such, McDonald’s, its M-sign and its food have become symbolic of the successful American dream, and the American way of life. The company and country have become irrevocably associated with each other. Whether McDonald’s will continue with its successful domination of the global fast food market is dependent upon its adaptability and capabilities in handling competition. Despite the necessary closure of several non-profiting stores in different countries, the company generally appears to be in good health, and there is little reason to doubt its future prospects.

BBC World Service. “Fast Food Factory: Fast Food’s Founding Father.” http://www.bbc.co.uk/worldservice/specials/1616_fastfood/page2.shtml

BBC World Service. “Adapt or Die.” http://www.bbc.co.uk/worldservice/specials/1616_fastfood/page9.shtml

BBC World Service. “Fast Food Factory: Fast Food’s Founding Father.” http://www.bbc.co.uk/worldservice/specials/1616_fastfood/page2.shtml

Resources

BBC World Service. “Fast Food Factory: Fast Food’s Founding Father.” http://www.bbc.co.uk/worldservice/specials/1616_fastfood/page2.shtml

Adapt or Die. http://www.bbc.co.uk/worldservice/specials/1616_fastfood/page9.shtml


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