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Introduction

Charles Pierre Monselet, a French author once said that “enchant, stay beautiful and graceful, but do this, eat well. Bring the same consideration to the preparation of your food as you devote to your appearance. Let your dinner be a poem, like your dress.” The purpose of this phrase is to reiterate the value and importance of human life. McDonald’s Corporation and the Burger King Company seem to recognize the essence of good food, and that is why they continue to invest a considerable amount of human, financial as well as time capital in ensuring that the food they offer satisfies consumers of their services. The two companies have a long history in production and specialization in specific food types that define their brands. McDonalds’ is often associated with the hamburgers it makes while the BurgerKing also produces a distinct kind of burgers hence the name.

Business Model

McDonalds’ started as a fast food restaurant in San Bernadino California. Richard and Maurice McDonald co-owned the restaurant. The use of the Golden Arches logo began in 1953, and ever since, it became the world’s largest restaurant chain regarding revenue generation. It boasts of a large customer base in over 100 countries in the world. Its hamburgers, chicken products, cheeseburgers, soft drinks, French fries, wraps among other goodies, characterize the firm (The Editors of Encyclopedia Britannica). The Burger King (BK) is a U.S. incorporated global chain restaurant specializes in the production of hamburger and fast foods. It was found in 1953 with the name Insta-Burger King in Florida. Financial difficulties saw the company become transformed and subsequently referred to as Burger- King. It has gradually turned into a public company and merged with Tim Horton with the view of increasing the customer base and revenue for the company hence the ability to stay competitive in the restaurant (Trefis Team). Some of the products produced at Burger King are burgers, milkshakes, French fries as well as the whopper. Even though burgers were the primary product, it has rebranded itself to make whopper the primary product.

In most aspects, the elements of McDonald’s business are similar to Burger King’s business. These relate to the products that the two corporations that are produced. However, each company has a different business model that it follows will executing their mandated business. McDonald’s generates its revenue from various sources that include fees from franchisees; company-operated restaurants, rents, and royalties (Insley). The rent quarters paid to the company increased in the period running from 2010 to 2015 which accounted for a fifth of its total revenue in that period. Furthermore, the company owns most of the land on which McDonald’s has its restaurant. Estimates show that McDonald’s land is valued over $15 billion. Moreover, the firm’s business strategy involved domestic and global expansionism through the acquisition of other restaurants (Flickr). In its global expansion, McDonald’s Corporation opened several franchises that are a major contributor to its income revenue. The oversea franchisees run through joint ventures between McDonald’s Corporation and local partners. The company prefers the joint venture approach because it is cheap due the ability to reduce direct operating cost that may low the operating income. Such ventures are an efficient way of setting up business since local entities already know the market base as well as having established a working relationship with the customers.

The structural and business model of BK is not very different from McDonald’s Corporations approach. It utilizes expansion on a global scale and has several franchisees both in the United States and overseas. Most of its revenue comes from rental of its property, restaurant operations and sales, and franchise royalties. Apart from franchisees, it also runs several subsidiaries that are responsible for controlling the operation of its franchisees. For instance, the company manages its intellectual property through the Burger King Brands, Inc subsidiary (Insley). Apart from owning and managing trademarks, copyrights as well as domain names used by restaurants across the U.S. and Canada, BK Brands Inc., a wholly owned subsidiary, market and other services of the leading company. Simply put, its in-charge of the Corporation’s overall business. The corporation conducts licensing and administration of all stores on the North American continent. However, the management of international enterprises is in collaboration with local parties or selling of administrative and operational rights to master franchisees that carry out overall control.

Market types of the McDonald’s Corporation and Burger King Corporation

McDonald’s Corporation prides in the ability to ensure that its franchisees, employees, and suppliers work hand-in-in hand to achieve corporate objectives and goals. Its franchisees are credited with high entrepreneurial spirit and community service. Products acquired from suppliers are of high quality and safe for use (Nasr). The company makes a significant investment to facilitate learning and sharing within the corporation for bringing about better service delivery. McDonald’s focuses on these elements because of their value on the market it targets. In that regard, McDonald’s market comprises the domestic United States market, Canadian market, Europe, Asia as well as Africa. The broadness of the market comes with the challenge of difference in taste hence the inclination to use joint ventures. It offers locally acceptable food menus like gazpacho in Spain and black and white burger in China (The Editors of Encyclopaedia Britannica). Even though there is a specific brand associated with the company, it satisfies customer interest through food that conforms to their taste.

McDonald’s market type is an oligopoly due to its association with the pricing and competitiveness degree. An oligopoly is a market where few large or small firms dominate a specific industry due to low completion. Dominant companies in such a market conspire to restrict or prevent attempts by competitors to enter the market. The fast-food industry is oligopolistic in the U.S. and therefore necessitates McDonald's’ to conduct its business using oligopolistic approach. McDonald’s attributes its success to a market that allows room for it to make an effective decision based on its knowledge of competitors in the market. The industry is made up of price maker firms with interdependent policy strategies. In a similar spirit, it colludes with competitors to create prices for outputs (Flickr). Essentially, the value charged for its product is directly influenced by what corporations like Burger King charge. On the contrary, McDonald's’ avoids cooperation because of the many competitors it faces.

Moreover, the completion is also oligopolistic which a crossbreed of perfect and monopolistic completion is. McDonalds’ monopolistic approach entails productions of selling of products that are different from each other without perfect substations of such products in relation brand, quality, and location. Subsequently, competitors are not limited to enter the business McDonalds’ developed strong economic and marketing practices that help it to stay aloft in spite of stiff completion from Burger King and other firms (Gayle and Luo 133). Some of the strategies used to increase the market share include outsourcing of workers and ethnographic survey that give a picture of different customer attending their restaurants. The monopolistic approach means that McDonald's ignores the prices of companies like Burger King and Wendy’s when coming up with the prices of its product. It does so by putting into consideration the cost of production and product originality that presents replication difficulty. The desire to discourage competition drives the firm to increase their production scale, which leads to unit costs. The Speedee Service system comes into play to increase the speed of food production and to sell it out at lower prices. Cost of production reduces which improving the output and future competitiveness.

An oligopolistic completion marks this industry because only a few firms are competing for the same customers through the manufacture or production similar products. Companies, therefore, have no option but to adjust the price. However, price adjustment makes competing companies to change the original amount of similar products. There is a significantly small market type difference between Burger King and McDonald's (Budd). Both companies adopt an oligopolistic approach, with the recent narrowing down to a monopolistic type of market and as a result preferring monopolistic competition. However, Burger King’s approach primarily transcends into an oligopolistic competition. However, Burger has lagged behind McDonald's because of concerns that its products are expensive compared to McDonald's’. In fact, in 2011, Wendy’s overtook it to become the second in the fast food industry because of the high pricing. In a survey at Spoon University, tests revealed that most people prefer McDonalds’ diet coke, followed by Wend’s coke the Burger king’s coke came third. Some of the reasons cited were that McDonalds’ diet coke was cheap and the ratio of the syrup to water was proportional (Budd). Nevertheless, both companies use similar business models that involve global expansion through international partnerships and franchising. Furthermore, the eating facilities of McDonalds’ and Burger King have dine-in, carryout, and drive-thru because of the different customers they serve (Niti 31). Moving customers like drive-thru restaurants because of the convenience that comes with the quick-service restaurants.

Elasticity indicator of McDonalds’ and Burger King

These companies have a remarkable performance in the international arena. Despite this growth, McDonald always comes on top thanks to their efficient business strategy of “think global, ac local.” The slogan is translated to imply that as the company expands into overseas markets and sets up new businesses, its action needs to be directed at maximizing customer experience. From a company perspective, maximization of customer experience is attainable if the service and products of the company conform to the tastes and needs of the customers. For instance, in India, the company appreciates reservations of the Indian religion about beef and pork consumption (Flickr). McVeggie burger, which is a sandwich, made of peas, green beans, carrots potatoes among other ingredients is severed.

Other local menus include the Maharaja Mac chicken and chicken McNuggets (Flickr). The expensive nature of this products makes it is hard for ordinary people to buy them and therefore they are considered elastic. On the contrary, during lunch hours in Malaysia, prices of product reduce and as a result increasing the demand of McDonalds’ products. Consequently, inelasticity increase leading to shortages at peak hours. They remedy the shortage problem by offering lower prices only for walk-in customers (The Editors of Encyclopaedia Britannica). The situation may be different in the United States where the menu has a variety of selection aimed at satisfying customers. A wide range of hamburgers, including the Big Mac, healthy McWrap, and quarter pounder bacon are available. Malaysia witnesses an elastic demand for McDonalds’ chicken porridge thanks to their rice diet (Nasr). McDonalds’ elasticity emerges on a case basis. In Europe, the company recorded a 5% growth in sales based on the quarterly result. These figures went against the projections that hinted at a likelihood of decline. It witnessed a significant investment in store makeovers that in turn attracted customers. Furthermore, provision of high-quality meals at fair prices boosted the sales (BBC News). Different countries will experience different levels of elasticity. It takes the approach that best conforms to the traditions of the population.

There is a definite difference between McDonalds’ elasticity and Burger King’s elasticity. BBC News agrees with Nasr that the former quickly respond to the market through provision of goods needed by the customers at considerably lower prices compared to the latter. The price estimates of Burger King are at $28; 4% higher than the market price (Trefis Team). Having higher prices than other firms in the same sector entail that the company is more elastic that McDonalds’. Brand, quality, service products, menu price and location, are the main determinants that give a competitive advantage to a company. In general, Burger King performs well, but it is rank third in the Hamburger Fast Food industry, behind leaders McDonalds’ and Wendy’s. It’s average daily sales amount to $3,300 at a store. On the other hand McDonalds’ sale amount to $6,700 in each outlet on each given day (Trefis Team). Menu prices, brand, product, and quality are cited as the leading contributors to the imbalance in trade. Moreover, unlike McDonalds’, Burger King does not generate significant financial revenue to help it deal with price fluctuations, introduce new products like the Malaysian Chicken porridge, and remodel its facilities.

According to Yang, McDonalds’ tends opening its restaurant lower income areas and as a result, the GDP per capita increases which in-turn reduces the entry probability of competitors (268). Niti claimed that since the advent of the 21st century, McDonalds’ continues to dominate as the chief producer of the best hamburgers because of sheer size. Estimates show that over 43 million people visited the company’s restaurants daily in 120 countries while only 15 million customers visited Burger King stores in a day by 2000 (Niti 32). Niti explains that the McDonald strategy involves selling Quarter Pounder at 99 cents where the market price is $1.90 (33). Introduction of prices discounts make the company more elastic compared to Burger King. Furthermore, maintaining discount burgers on the menu helps to retain old clients while at the same time attracting new customer.

Markets of McDonalds’ and Burger King

McDonalds’ and burger King operate their business on a wide spectrum of markets. These markets are characterized by cultural differences, difference in age demographics, unique social and economic backgrounds as well as large geographical locations. As a consequence of such diversity, both companies take different approaches when entering the market. For instance, Burger Kings is known to use the franchising approach where it appoints a master franchisees to conduct administrative and operational management (Trefis Team). Gayle and Luo explain that available data suggest that order-of-entry used by Burger Kings gives it first-mover advantage (131). However, the lack of direct controls has been a recipe for slow growth in foreign markets. McDonalds’ gains a competitive advantage over burger by providing high utility to customers, which help to increase its market base.

Yang explains that age demographics; especially person aged 15-29, is a determining factor considered by McDonalds’ when choosing a target market to open new stores. Population density influences Burger King’s decision. As explained above, McDonalds’ also targets places inhabited by low-income earners (268) while Burger King’s main focus on the urban area. Other findings suggest that socioeconomic and demographic factors showed that McDonalds’ performed well across the board. Factors like the location of the retail store immensely contribute to the performance of the restaurant. Locating a restaurant close to roads increases their performance (Niti 90). Analysis of available literature indicates that both McDonalds’ and Burger King have a store located few miles from main highways. However, the former has also opened up restaurants in places like schools, hospitals, malls, and colleges (McDonalds’ Corporation). These facilities serve as another source of the company’s revenue.

Relative Value of McDonalds’, Burger King, and Recommendations

As explained in previous paragraphs, McDonald owns land valued over $15 billion. The revenue of the company increased from $22, 787 million in 2007 to $27, 567 in 2012. It used the social media to influence customers and promote the brand. It also came up with healthy foods and use fresh ingredients to process their products. In 2011, its net income increased by 15% to $1.4 thanks to price increments. The company seeks to increase prices of products with the aim of generating more revenue without discouraging customers. In that regard, the company continuously introduces new products at relatively affordable prices. Furthermore, the company uses different pricing strategy depending on the cost of living in a given country. For instance, the price of Big Mac in Switzerland is $6.20 while in Thailand it only costs $2.20 (McDonalds’ Corporation). Such price differences are accepted due to varying production costs of countries. Burger King also adopts a similar approach when investing in foreign countries.

After considering the available data, investing with McDonalds’ seems to be the right course of action for any potential investor. Weighed against her rivals, McDonalds’ enjoy a prestigious understanding of the Fast food retail industry. For instance, it approaches the global market using a case based entry model. When the company entered India, the management had full knowledge of the India cultural systems and religious traditions that discourage the consumption of beef. The reverence of cattle by India was addressed through the introduction of the vegetable hamburgers and chicken fries. The love of rice by Malaysian saw the company introduce its popular chicken porridge. Concisely, the company can quickly adapt to new market environments and respond promptly to the challenges that come with entering a new market. Such aggressiveness invites investor’s confidence and encourages them to bank their money with the company. McDonalds’ also has a good remuneration policy for its employees, which consequently encourage them to work hard with the view of helping it to achieve its target. It is also advisable for the company to use more franchisees since such engagement helps it to reduce operating cost while at the same time increasing its profits. However, it should not over emphasis on using franchisees because it may lose the brand and quality expected by customers.

Work Cited

Budd, Eliza. "We Tried Coke At 3 Fast Food Places To See Where It Tasted Best". Business Insider, 2017, http://www.businessinsider.com/fast-food-coke-comparison-2017-4?IR=T. Accessed 11 May 2018.

BBC News. "Mcdonald's Helped By Store Revamp". BBC News, 2012, http://www.bbc.com/news/business-17790279. Accessed 11 May 2018.

Flickr, Jurvetson. "Mcdonald's International: Top Ten Most Unusual Around The World". AOL.Com, 2010, https://www.aol.com/2010/09/03/mcdonald-s-international-top-ten-most-unusual-around-the-world/. Accessed 11 May 2018.

Gayle, Philip G., and Zijun Luo. "Choosing between Order‐of‐Entry Assumptions in Empirical Entry Models: Evidence from Competition between Burger King and McDonald's Restaurant Outlets." The Journal of Industrial Economics 63.1 (2015): 129-151.

Insley, Jill. “Store Wars: McDonalds’ and Burger King” The Guardian.com, 2012, https://www.theguardian.com/money/2012/may/18/store-wars-mcdonalds-burger-king. Accessed11May 2018.

McDonalds' Corporate. "Our Business Model | Mcdonald's". Corporate.Mcdonalds.Com, 2018, http://corporate.mcdonalds.com/content/corpmcd/about-us/our-business-model.html. Accessed 11 May 2018.

Nasr, Susan L. "10 Unusual Items From Mcdonald's International Menu". Howstuffworks, https://money.howstuffworks.com/10-items-from-mcdonalds-international-menu.htm#page=3. Accessed 11 May 2018

Niti, Duggal. Retail Location Analysis: A Case Study of Burger King & McDonald’s in Portage & Summit Counties, Ohio. Diss. Kent State University, 2007.

Trefis Team. "Key Trends Impacting Burger King's Business". Forbes.Com, 2018, https://www.forbes.com/sites/greatspeculations/2014/07/01/key-trends-impacting-burger-kings-business/#fa3bb943cd09. Accessed 11 May 2018.

Yang, Nathan. "Burger King and McDonald’s: Where’s the Spillover?." International Journal of the Economics of Business 19.2 (2012): 255-281.