Combining Micro and Macro Analysis

Combining Micro and Macro Analysis for Managerial Decisions

Beverly Rambert

Economics for Managers

Dr. Samuel Onipede

September 12, 2011

Describe the changing economic variables in China that influenced McDonald’s expansion strategies.

McDonald’s learned how to understand China’s consumer behavior and the aspects of competition on an international and local level (Farnham, 2010). McDonald’s based its expansion variables in China based on the increased economic improvements. For example, China’s working population expanded which in turn, provided busier lifestyles for the individuals who worked. Also, the working individuals were able to purchase automobiles, which added to the necessity of drive-thru windows at fast food restaurants [ (Farnham, 2010) ]. There is a willingness to spend more money in periods of prosperity. In addition, changes in consumers’ spending ability, an increase in population, and the change in family structure all affect a country’s economic position too. Macroeconomic and microeconomic issues influenced McDonald’s expansion strategies too. Macroeconomic forces are social, cultural, legal, and technical. Microeconomic forces deal with market structures as well as market trends [ (Farnham, 2010) ]. In addition, McDonald’s had to consider types of products to sell, future profitability, plus its Chinese customer base, when the company decided to expand in China.

What market model best describes the relationship between McDonald’s and KFC in China? Explain.

McDonald’s and Kentucky Fried Chicken’s relationship is based on the oligopoly market model. Per the author, oligopoly is defined as “A market structure characterized by competition among a small number of large firms that have market power, but that must take their rivals’ action into account when developing their own competitive strategies [ (Farnham, 2010) ]. McDonald’s and Kentucky Fried Chicken (KFC) are both large companies with many smaller franchises in the...