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Firms within the fast food industry fall under the market structure of competition.

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Introduction

Babette Reppuhn Microeconomics 130 Professor Paul Briggs May 2, 2004 A Competitive Fast Food Firm Firms within the fast food industry fall under the market structure of competition. Market structure is a classification for the key traits of a market. The characteristics of a market that is competitive would include: a large number of buyers and sellers, easy entry to and exit from the market, homogeneous products, and the firm is a price taker. Take McDonalds fast food restaurant for example. In 1954, Ray Kroc became the first franchisee appointed by Mac and Dic McDonald in San Bernadino, California. He opened his first restaurant in De Plaines, Illinois (near Chicago), and the McDonald's Corporation was created. By 1959, the 100th McDonald's had opened in Chicago. In the early years of the 1960's, Ray Kroc had bought all rights to the McDonald's concept from the McDonald's brothers for $2.7 million. In 1963, the 500th restaurant had opened. By the end of the decade, McDonald's was listed on the New York stock exchange, had opened restaurants in every state of the union and also outside the USA. ...read more.

Middle

To maintain an advantage on the competition, Llyod says that McDonald's provide quality food with fast, friendly, and efficient service to their customers, making them want to return. "We offer our customers a wide variety of menu items that are different from our competitors. Most other fast food places they mainly sell just burgers and fries. We offer from salads to yogurt parfaits. And our newest menu item, the chocolate dipped cone, is one item our competitors definitely do not sell. Our customers have a choice of different things on our menu other than burgers, unlike our competitors who offer just simple burgers with different condiments on them and giving them different names." When asked if Burger King or any of the top competitors were to change their prices or their menu items, Llyod said, "I would have to change my prices too. Take for instance Wendy's Fast Food Restaurant; they introduced the $.99 value menu. After that happened, all the other fast food places offered "value" menu items as well, including McDonald's." Llyod said that his customers love it. ...read more.

Conclusion

If customers feel as if they get a good meal, at a good price, then they are satisfied. Customer satisfaction is McDonald's number one motto; therefore, since they offer value menus with good customer service, most customers would be satisfied. Customer satisfaction coupled with relatively low prices keeps McDonald's profitable. Another quality of competitive market structure that may be overlooked, but is vital to the fast food industry is the ease of entry into the market. Start-up franchises within this market structure can begin operating with relatively low initial investments (compared to other industries). This is not the case where monopoly companies, such as Microsoft is concerned. There are numerous barriers to entry into a Monopolistic market structure, capital being one of the most prominent barriers. If a new franchise offered the consumer a quality product at a reduced price, then the chance of success are greatly increased. McDonald's established a name for themselves by offering quality food and fast, friendly service. This is a very important concept in the fast food industry. Once they established themselves to the consumers and became more visible, they created more demand, which lead to a greater revenue for them. . Reppuhn 1 ...read more.

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