Week 5 Assignment
Management has recognized the effect of changes in the real-world competitive environment and government policies on other industries and anticipates similar events occurring in their industry, so they ask you for a report considering the following points. Write 950 – 1,250-word paper.
Describe how each of the following are or potentially will affect an industry of each student’s choosing, or one with which a student is familiar with:
- New companies entering the market, mergers, and globalization, on pricing and the sustainability of profits: Identify the type of merger activity in an industry [or one with which you are familiar] horizontal, vertical, or conglomerate’ and explain the reasoning.
- Current and expected government policies and regulations, including taxes and regulations in place to address issues related to externalities
- Global competition on the decisions made by management with regards to change in labor demand, supply, relations, unions, and rules and regulations in the chosen industry
- Industry examples: food retailing, automotive manufacturing, consumer electronics design and marketing, healthcare, oil and gas development, etc.
- Recommend how the industry selected may respond to each of the previous points.
Competitive Strategies and Government Policies Sample Paper
This essay discusses the effect of the changes in the real-world competitive environment and government policies on various industries and the anticipated similar events happening in fast food industry in which McDonald Corporation is the key competitor. Being a highly competitive environment, firms operating in fast food industry such as McDonald’s Corporation require having fast-forwarded considerations regarding the effects of the economy on their businesses. Entry into the market by new companies influences the rate of mergers and globalization (Rathi, 2013). This, in turn, affects prices and long-term sustainability of profits. McDonald Corporation; for instance, requires being aware of the new entrants into food industry, and adopt strategies that will enable it sustain its profitability.
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In fast food industry there are various companies such as KFC, Wendy’s, Starbucks and Burger King that significantly compete with McDonald’s Corporation. However, what should be clear about these competitors is that each one of them has a unique point of focus, which, in a way, eases, the pressure of competition on McDonald’s. For instance, KFC specializes in making and selling fried chicken and also combines a variety of foods in order to increase their sale. Starbucks specializes in selling coffee and other different types of caffeinated beverages with which they accompany muffins and cakes (Jones, 2014). Wendy’s has adopted health considerations in order to offer alternatives to French fries. Finally, Burger King specializes in offering the whopper sandwich, which makes customers appreciate the fact that they can make their meals in any way they like. This separation of activities and level of specialization reduces competitive pressures between these fast firms; but, on a large scale consideration, it makes it difficult for the new entrants to join the market. Health experts around the world have labeled food industry as the most sensitive industry. In fact, most of them have lambasted its key players for producing and selling foods that increase the weights of people as a result of rapid accumulation of body fats.
One of the most recent mergers in fast food industry happened in 2008 when Wendy’s and Arby’s joined to establish a major fast-food merger (Collier, 2009). This is a horizontal merger because Wendy’s and Arby’s operate within the same industry. Wendy’s is traditionally known for making and selling hamburgers while Arby’s’ known area of specialization was roast beef sandwiches. Therefore, the merger was a business consolidation strategy that happened between these two firms that operated within similar space. The merger was intended to increase the market share of both firms. This happened at a time when there was an increase in the rates of unemployment and only a few people could afford to dine out. Closing a merger deal between Wendy’s and Arby’s resulted into a fast-food chain that ranked third in the US after McDonald’s and KFC. This enabled the Wendy’s/Arby’s Group to establish a shared service center or point in Atlanta in order to handle other functions such as information technology, human resource and finance (Collier, 2009). After the merger, Wendy’s/Arby’s Group began an overhaul process of the Wendy’s brand under the leadership of Smith, Wendy’s brand former CEO. After the merger, the new team made profound improvements to the fries and, also, incorporated boneless Buffalo wings. The merger was significant for providing growth and extending dual-branding opportunities. It also assisted the existing brands to draw more customers over a wider range of hours especially during breakfast. The merger also influenced the success of Wendy’s new products like boneless chicken wings. The merger; however, did not affect product prices as the fast-food market is already dominated by McDonald corporation.
There are various government policies and regulations that control the fast-food industry. In the U.S., Food and Drug Administration (FDA) is the main federal agency that develops public health regulations (Jones, 2014). Government policies and regulations are essential in fast-food industry for protecting the nation against unhealthy practices. In respect to food handling, the FDA requirement is that any employee working for a fast-food firm should have completed a food handling course before the job. The course is significant for equipping workers with the capacity to minimize and eradicate cases of food-borne sicknesses. This regulation expects restaurant owners such as McDonald to ensure that workers handle food with clean hands, use the required temperatures to prepare all foods, separate various food types in order to prevent cross-contamination, store leftover portions in refrigerators (Hendriks, 2010). In respect to nutrition, the FDA requires all first-food firms to indicate the nutritional information of the products being sold. This is because of the rising cases regarding the spread of heart diseases, diabetes, and obesity. Fast-companies are required to use websites, posters, and menus where they can indicate such information for customers to access. In regards to food preparation, FDA requires that surfaces where preparation of occurs should be cleaned on routine basis to prevent cross-contamination.
There are also a number of tax considerations that will affect any fast-food firm such as McDonald. For instance, the company will be required to pay an income tax, which will be based on the net income of the firm (Marcus, 2009). In this case, the firm can avoid double taxation by assuming a pass-through identity. The company will also be required by the law to conduct sales tax collection on all beverages and foods it sales. The state in which the firm operates will be the main beneficiary of this money. The company will also be required to pay property tax for operating its business either in a mall or a free standing location. This tax will be levied by the county or city in which the fast-food store is located. It is significant to note that government policies, regulations and taxes have both direct and indirect effects on the nutritional composition, safety, prices and supply of food products. These policies will affect consumer choices in respect to preferred level of nutrition in their diets. However, the policy and regulation effects on consumer dietary choices will depend on the extent of policy effects on the production costs, their association with the retail prices, and the consumer response to the changes in price.
Being a global corporation, McDonald’s requires responding to the changes in labor demand, supply, unions, and relations by ensuring that all its employees are well enumerated. The enumeration should match the domestic economy of the firm in which the firm operates its activities. Improving staff welfare enables them to give a desirable impression to the customers. This is because service employees at McDonald’s are brand representatives thereby serving as the point of connection between customers and the organization (Hendriks, 2010). For McDonald’s to increase its global competitive edge in the fast-food industry, it should provide its managers with opportunities to improve their management skills through the Hamburger University (HU), a dedicated facility of the organization.
In spite of the level of competition in the business environment, large global corporations such as McDonald’s can still remain competitive at the local levels. A fast-food industry is just like any other service industry in which customers are attracted by a variety of quality foods, friendly and fast service. Despite the competition from Starbucks and Burger King, McDonald’s can still remain profitable at the local level if it implements correct business-level and corporate-level strategies. The firm can maintain its customers through provision of quality foods and excellent services that leave customers with a lasting impression. It can outdo its local competitors at the point of efficiency, quality and pricing (Marcus, 2009). Being a well-established global competitor, it has the capacity to negotiate its production costs more than any of its local competitors. Customers in fast-food industry are usually price sensitive and any unreasonable price increase may result into low profit margins for the business.
In conclusion, the essay discussed the effect of the changes in the real-world competitive environment and government policies on various industries and the anticipated similar events happening in fast food industry in which McDonald Corporation is the key competitor. There are various companies such as KFC, Wendy’s, Starbucks and Burger King that significantly compete with McDonald’s Corporation. One of the most recent mergers in fast food industry happened in 2008 when Wendy’s and Arby’s joined to establish a major fast-food merger CITATION. This is a horizontal merger because Wendy’s and Arby’s operate within the same industry. . Government policies and regulations are essential in fast-food industry for protecting the nation against unhealthy practices. . It is significant to note that government policies, regulations and taxes have both direct and indirect effects on the nutritional composition, safety, prices and supply of food products.
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