McDonalds is a fast food restaurant that is very well known throughout the world by its name and through its symbol the golden arches. In the Not all Big Macs are created equal quote by Gillespie (2014) he states “one thing that is sure to be available anywhere a jet can land is a Big Mac” which reveals that Big Macs are sold globally around the world. The price of a Big Mac however varies dramatically depending on the different countries development indicators and macroeconomics. There are many types of markets such as perfect competition, monopoly, oligopoly and monopolistic competition. Monopolistic competition is the market type that best describes the fast food industry and McDonalds through its characteristics of many firms or restaurants, …show more content…
In the January 2012 Big Mac Index it showed that Ukraine had the lowest selling price at AUD $1.51 and Switzerland had the highest price at AUD $7.73. The prices at which a Big Mac is sold differ in every country due to local conditions such as income, labour costs and unemployment rate. In low-income countries where labour costs are low and unemployment rates are high the cost of groceries and fast food need to be at a reasonable price so that it will be affordable to low income earners, if the price was high then the amount of Big Macs sold would decrease due to locals being unable to afford to purchase causing a decline in profit and revenue for McDonalds. This is the case with Ukraine as their average monthly income in 2012 was only $242.29 AUD with an unemployment rate of 8.6% (Ukraine Economics Indicators, 2014) compared to Switzerland’s average yearly income of $7252.20 AUD and an unemployment rate of 3.4%. (Switzerland Economics Indicators, 2014) As Switzerland is a high-income earner and with less people who are unemployed they have the ability to pay higher prices for fast food compared to Ukraine who only receive a low-income, therefore the prices of Big Macs reflect the income earned in each country and differ in accordance to high …show more content…
A monopolistic competition refers to the market structure where there are multiple sellers who sell differentiated products in which one seller’s product can be a close substitute for another. (Dwivedi, 2009) The main characteristics of monopolistic competition are that there are multiple firms and sellers, product differentiation and price control over products. (Jain & Khanna, 2010) There are many fast food companies that have been established throughout the world such as McDonalds, KFC, Subway, Burger King, Dominos, Taco Bell and Krispy Kreme which are only a few of the large list of fast food restaurants. Under monopolistic competition, fast food restaurants differentiate their products through offering different types of menus that still compete against each other in the market but offer a variety of food choices to their consumers. For example, McDonalds menu offers customer’s burgers made from 100% Australian beef, where KFC also offers burgers but instead made from chicken. Their products are similar that each company makes burgers, but still different enough because of the use of either beef or chicken. Another way that firms differentiate their products from others is through the use of advertising, where a company can show its competitor and consumers how their product is different from others. McDonalds has produced multiple adverts throughout the years to introduce new products