McDonald's
Monopolistic Competition
Monopolistic Competition
2. Many firms
3. No entry/exit costs in the long run
4. Independent decision making
5. Same degree of market power
Company Profile
36,000 locations
In 100 countries
Serving over 69 million customers
80% of stores are independently owned
Advantages1. Set any price they want
a. When a new menu item is introduced they can charge whatever they want to example McRib no one else has that item
2. Improve product quality
a. Changed the type of grease they put their fries in to make them healthier
3. The company can decide who gets a discount and who doesn't
a. McDonald's gives a senior discount on coffee for people 55 and older
Disadvantages
1. Profits go down when competitors enter the market
a. Burger King has the same products and that keeps prices down
2. There is a lack of barriers to competitors entering the market
a. Dairy Queen could enter the market and keep prices low
3. Can be wasteful, Liable of excess capacity
a. Boston Markets had to much capacity and wound up having to close stores