The Impact of Globalization on Economic Decisions

In 2012, McDonald’s Corp had a 4.5% decrease as economic troubles pressured margins and consumer confidence. Due to higher food, labor, occupancy and business investment costs, McDonald’s had negative profitability. In addition to the already difficult situation, consumer confidence was at an all time low, with consumers pressuring them to increase its marketing and promote value. “McDonald’s are experiencing headwinds on both the top and bottom lines. Some of the headwinds are macroeconomic, such as declining consumer sentiment. Other pressures are the result of planned strategic decisions that were made to grow the business, such as enhancing its value menu and implementing new technology” (Gasparro, 2012).

An oligopoly is a “market structure characterized by competition among a small number of large firms that have market power, but that must take their rivals’ actions into account when developing their own competitive strategy” (Farnham, 2014). Several examples of oligopolistic behavior among the rivals of the fast-food industry, including McDonald’s, Burger King, Wendy’s and Dairy Queen, would include price matches, price cuts, cooking styles and menu options. Each organization has had to take into consideration the actions of their rivals and how to relate to their surrounding environments; when to expand, marketing strategies and offering healthy options in their restaurants.

When McDonald’s adopted to focus on improving their restaurants by adding new menu items, including the dollar menu, instead of expanding, they exceeded expectations. The company has started considering consumer interest, best practices and price differences, when determining the growth of drivers at work. McDonald’s updated its restaurants, modernized and took advantage of consumer proclivity by offering smaller items throughout the day. In addition to the dollar menu, McDonald’s also added items that range in price to appeal to all consumers. “In doing this, McDonald’s...