Mcdonald's Economic Factors

3.1.2 Economical Factors

Economic factors are important matter to business organisations. Though McDonald’s is a stable organization which survived in the U.S. economic crisis, internationally, it is affected by bad economic condition and currency fluctuations. For example, China’s slow economic growth this year affected McDonald’s earnings. This threatens McDonald’s growth in Asia because if the economy is bad, people normally are discouraged to spend more money for food as they will rather cook at home than eat outside. Thus, this will affect McDonald’s sales.

Food and raw materials inflation has impacted McDonald’s sales of foods such as beef and fish are one of its main operation cost. For instance, since 2014, food inflation in U.S. has

Regarding economies of scales, due to its high volume of production and with more than 36,000 outlets operating globally, McDonald’s can gain economies of scales easily. Thus, McDonald’s can charge its products at low prices. Whereby, new entrants with small business will have difficulty to achieve economies of scales because of low volume of production. McDonald’s have obtained big base of loyal customers and highly recognizable brand recognition whereas new entrants have to take many years and large amount of capital investment to build customer base and brand

An increase in health awareness results in customers searching for other substitute products like Wendy’s, Burger King and Subway that provide healthier options. Due to low switching cost, enable customer to switch to other choices. For instance, instead of eating at McDonalds, people can cook food at home. Thus, with people buying less, there will be loss in revenue and this is considered a threat to McDonald’s.

3.2.4 Buyer power. (Strong)

The buyer power is strong as McDonald’s depends on a strong customer base. Customers can easily impose their demands on McDonald’s due to the ease of changing from one restaurant to another. It will not cost customers much to switch to other brand like Burger King, Subway, and Yum! Brands.

3.2.5 Supplier power. (Weak)

Since McDonald’s is a well-recognized company globally, many suppliers wish to work with it, so the supplier power is weak. McDonald’s is critical clients to various suppliers and McDonald’s purchasing constitutes a big part of the sale revenue and profit due to McDonald’s usually purchase in bulk. There is plentiful supply of raw materials and ingredients like flour and meat. These situations reduce suppliers’ impact on McDonald’s. There are many suppliers available that McDonald’s can replace with at quite low switching