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Has McDonalds’ Profit Been Increasing or Decreasing? Why?

by on May 9, 2012

First of all, lets discuss profit. McDonalds’ net income has increased by  11% this year. In comparison, Burger King has had a drop in sales the past decade, making far less income per year than its competitor. Let us discuss in detail how McDonalds has prospered while its competitors have had to make some big changes to keep up?

The answer revolves around price wars. While Burger King may offer superior food quality and service, McDonalds has lowered its prices so much that competitors like Burger King cannot match them without a significant drop in food quality.

They have been able to maintain these prices by using economies of scale to obtain low prices for materials and products needed. Fast food suppliers give McDonalds price cuts because they depend on them to buy their product in bulk (ie. cattle farms dropping prices for McDonalds because it is their biggest source of income).

Another reason McDonalds has been able to win the price war with its competitors is because it has a virtually endless supply of unskilled labor. McDonalds is one of the biggest contingent employers in the country, acting as a stepping stone for many who are unsure of what their occupation will be (or who simply have no alternative).

Replacing an employee is simple and easy because so many people are wanting a temporary job at a franchise like McDonalds. Employees basically become commodities as one is the same as the next, and will cost the same (minimum wage). Human capital is not valued. Employees are no longer assets but simply tools to increase productivity and sales.

In conclusion, McDonalds’ profit has been steadily increasing because it has used economies of scale and cheap unskilled labor to win the price war with its competitors.

Does social status/race contribute to McDonalds’ customer base?

Works Cited
“Burger King Holdings, Inc. Reports First Quarter 2012 Results.” Web. <http://www.marketwatch.com/story/burger-king-holdings-inc-reports-first-quarter-2012-results-2012-05-09&gt;.
“Burger King Salaries.” Glassdoor. Web. 09 May 2012. <http://www.glassdoor.com/Salary/Burger-King-Salaries-E7201.htm&gt;.
“McDonald’s Blows past Estimates — Again.” MSNMoney. Web. 09 May 2012. <http://money.msn.com/top-stocks/post.aspx?post=605a2237-437d-432f-a313-ce99140ca09e&gt;.
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One Comment
  1. msmuntz permalink

    10.

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