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Inflation
Yes, overall trend is falling inflation although there are a few factors mentioned in your padlet that could lead to a reverse in trend. e.g. weather-related shocks. Hope to read more about these in your report. Are these demand-pull or cost-push inflation?

In terms of retrenchments, do relate this to the falling inflation. Is this dampening or cost-push or demand-pull inflation?

Hint: Both causes can happen at the same time.

GDP
Yes, in report, would be good to give an overview of the current situation in SG and then go into the F&B and ultimately Macs. Do continue to find out reasons causing the change in spending.

Unemployment
Rather than reporting stats, it would be good to make sense of the stats highlighted here. What type of unemployment is prevalent currently? Compare unemployment in the F&B with other sectors. Any policies to help?

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Singapore's unemployment rate climbed to its highest in a decade and total employment registered its sharpest quarterly decline in the first quarter of this year due to the COVID-19 pandemic.  The unemployment rate among Singapore citizens rose from 3.3 to 3.5% and among SG citizens and PR, from 3.2 to 3.3%.  Retrenchments rose from 2670 to 3220 in the first quarter, largely due to sectoral downturns, stated by MOM.  Subsequently, the ministry found that 1537 local employees were affected by business closueres in the first quarter of this year, which is more than double the 628 from the previous quarter. This shows a 144.75% incrase in the number of employees that were affected.  The ratio of job vacancies to unemployed people declined to the lowest in the decade from 0.84 in December 2019 to 0.71 in March 2020. This shows that there were onyl 7 openings for every 10 unemployed people in SG.   Lastly, the number of people employed in F&B, construction and retail trade were affected the most and had the sharpest employment declines, falling by 8300, 5800, 5400 respectively in Jan to March period.
Source:
https://www.channelnewsasia.com/news/singapore/unemployment-jobless-highest-10-years-retrenchments-mom-12835166
https://www.channelnewsasia.com/news/business/gdp-singapore-technical-recession-contraction-q2-mti-12927168

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Due to Covid-19, the total F&B services sales were estimated to have fallen by 3 per cent in April 2020 compared to a year ago. While the sales of restaurants and other eating places, including cafes fell by a high percentage, the sales of fast-food outlets and food caterers grew by 5.6 per cent and 5 per cent respectively. However, Singapore can still depend on the F&B industry for economic growth as it contributes $14.4 billion to the city-state's Gross Domestic Production (GDP) according to the Food Industry Asia report by the Oxford Economics. On the other hand, Singapore's economy shrank by 12.6 per cent year on year in the second quarter.

In terms of McDonald's, being the highlight of our project is part of the fast-food outlet in the F&B services. Although McDonald's is not the only fast-food outlet, it is safe to say that the increase in sales within the fast-food industry, McDonald's sales have also increase since they have a sizable market-share within the fast-food industry in Singapore, as it has over 136 outlets within the country. This contributes to the "consumption" in Expenditure Based GDP approach

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Singapore is going through a downward trend due to this Covid-19 pandemic. We are currently going through an economic recession, that is the economic decline in which trade and industrial activity are reduced and there is a fall in the Gross Domestic Production (GDP). Inflation has occurred, causing a higher risk of retrenchment. There has been 150 000 to 200 000 retrenchments and the lowering of consumer prices is not as beneficial as Singaporeans are not interested in spending money in this specific uncertain period. Singaporeans prefer focusing on saving their money. Food inflation may continue to support the overall inflation numbers mainly due to the supply disruptions due to Covid-19, it has immensely affected the global supply chain. On the other hand, fast food restaurants specifically are facing obstacles of high rents and labour costs. However, they are able to launch more promotions and fast food items are generally inexpensive thus  they are able to gain consumer’s attention. Food prices had increased 2.2% in May 2020 after a gain of 2.1% from the previous month.
Meanwhile, food inflation prices had a slight uptick to 1.6 per cent in March from 1.4 per cent in February, due to a faster pace of increase in the prices of prepared meals and non-cooked food items.
economists recently warned of three potential triggers of higher food costs - weather-related shocks, higher oil prices and a sharp depreciation in the dollar - saying emerging and frontier markets are most at risk since food costs make up a larger portion of their consumers' income.

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Market structure: oligopoly
In oligopoly competition, it consists of few sellers, selling goods which may or may not have close substitutes. Firms have substantial market power in this market. McDonald's is one of the largest fast-food firms, both in the U.S and internationally. Together with KFC, Burger King and others, it is one of the leading corporations in selling burgers. These statistics illustrate how McDonald's is considered an oligopoly, because it is one of the few businesses that dominate the market in which it is based.
McDonald's is one of the numerous companies under the economics of scale. There are many barriers of entry in the burger industry and in the market. McDonald's has average total cost along the way that decreases as the company's size or operations increase.
While others are purchasing franchises, McDonald's is reducing their average total cost by expanding the size of the firm.

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1. In your report, do include how Singaporeans taste and preferences have changed over the years in addition to the above on how fast food restaurant such as McDonald took advantage of this to increase demand.

2.Q. Specifically, which price elasticity of demand determinant was team looking at to conclude that price bundles would lower the sensitivity of consumers to price changes?
The price determinant that would lower the sensitivity of consumers to price changes is the Proportion of income and Habit.
Proportion of income will make it price inelastic as it very affordable to middle class and wealthier people, since the portion of their income spent on food is low. However it is price elastic to those of lower income, but the average person is able to afford the bundle meal. Since more people are able to afford the burgers, the price elasticity of demand will be price inelastic in general.
Habit will make it price inelastic as over time, people who buys food from MacDonald will always purchase the bundle meal. The habitually consumed MacDonald bundle meal will make the bundle set price inelastic since people will naturally want to fuel their habits.

3. Q. Why do you think McDonald need to employ such strategy? This could be part of your discovery of the market structure of the industry. Are other fast food restaurants doing the same?
McDonald needed to employ this strategy in order to gain more customers, by using the attractive pricing and perceived savings to bring more customers in. This is due to the determinant "Availability of Substitutes". Since our team are focusing on the fast food industry that focus on Burger and Fries, the competitors are chains such as Burger King, Mos burger, Carl's Junior and so on. All those brands have their bundle set as well, that offers saving to the consumer. If MacDonald did not have the bundle set, they would lose customers to other chains as MacDonald will start to seem to be the more expensive option. This is so as there is a high Availability of Substitutes, making MacDonald pricing strategy of bundle as price elastic.

4. Nice point. Do bring in the real world evidence that you have read to show the rising popularity and to support the change in taste and preferences as the country evolves and adopts a fast-paced lifestyle. This point can be parked together with point 1 above in your report.

5. This point can also be subsumed under the same, main header in your project as point 1 (sub header shall be the key words from this part).
Q. Why do you think McDonald is able to spend on marketing? Is McDonald a dominant player in the industry? How dominant with respect to competitors? Is it easy for new entrants to enter this industry?

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Hello Team,
Thank you for sharing your padlet and the good work in selecting good sources to conduct prelim analysis! I do see further room for improvement in terms of applying economic concepts more specifically in your analysis though.

As you are aware, Stage 1 analysis comprised of also identifying the market structure of the product/industry (see highlighted portions in pic attached). As you continue to do your research, you will be able to identify the market structure eventually. I inferred from the content above that team is keen to analyse the market structure of the fast food industry in Singapore with focus on McDonald's? Team also need to discuss and agree on the scope of the industry. Are you looking at the fast food industry in general where competitors also include Pizza Hut for eg, OR are you looking at the burger-related fast food industry?

Team might want to use the attached slide from “Non-competitive markets” to identify the market structure of fast food restaurants.

Basically, the key clues to infer market structure would be:

(1) Number of providers

(2) Any dominant provider(s)?  E.g. high market share/high revenue are areas where you can infer dominance

(3) Strategies adopted to differentiate goods from others?

(4) Barriers to entry (high/low?)

Please refer to my specific feedback above, for your prelim analysis (highlighted). Please continue to work on your points further, either finding more evidence to support it or new points to be added into your report.

Just a heads up, in Stage 2, you will move on to look at how the fast food industry impacts the Singapore's economy and how Singapore help this industry to grow.

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Microeconomics Prelim Analysis [Based on 5 key source of information]

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Microeconomics Prelim Analysis [Based on 5 key source of information]

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1.  How Mcdonalds wins over Singaporeans
Macdonalds constantly updates their menu so as to meet with the changing tastes and preference of customers. Subsequently, they have added a service in the ordering kiosk called Create Your Taste(CYT) which allows customers to customise and personalise their burgers, this innovative dining experience attracted many customers as no other Fast food restaurants had it at that time. The CYT experience also allowed for Macdonalds to analyse the preference and taste of customers which allowed them to adapt their menus to suit the taste of the masses.Subsequently, Macdonalds has surveys for their customers to better understand what their taste and preferences are like. This allows Macdonalds to improve their menu by adding limited time options that are better catered to the evolving tastes of their customers. One example of this would be customers wanting more premium burgers on the menu. Macdonalds responded to this by adding a premium selection of burgers such as the Buttermilk crispy chicken burger or the Original Angus cheeseburger, that although are more expensive, taste more premium and exquisite. Furthermore, Macdonalds took advantage of this by creating and adding limited edition burgers to their menu such as the Breaded Salmon Burger with Paella Spice Mix. Since they were limited edition burgers that were catered to the taste of many of their customers, it increased the demand of their products even more.

Lastly, Macdonalds also calculates the calories of their products and in the CYT experience. Due to this transparency, customers were more aware of the nutritional value of their food and were more inclined to visit Macdonalds more regularly. Lastly, Macdonalds constantly aims to improve their services and give their customers a better, unique dining experience.

Why consumers choose McDonalds over other fast food restaurants?

People prefer convenient and quick service and also accessible locations where consumers can have access to easily without having to travel far distances, hence leaning towards fast food restaurants. The affordable price attracts consumers of all ages and it is not much more expensive than hawker food where consumers are willing to pay a little more for McDonald's. Successful and targeted marketing also contributes to why consumers choose McDonald's over restaurants and other fast foods. “(McDonald’s) Happy Meal is one example. The culture already ingrained is that McDonald’s is a part of your life… It’s nostalgic to a lot of Singaporeans growing up,” said F&B consultant and branding specialist Derrick Chew.
McDonald’s marketing strategy follows the 5P’s which are product, place, price, promotion and people. The marketing strategy of McDonald’s is based on uniformity, where the most iconic items will always be on the menu. Since McDonald’s is a dominant player in the industry, there is more capital which can be spent on marketing compared to other smaller brands. Its key competitive advantages have included nutrition, convenience, affordability, innovation, quality, hygiene, and value added services. Although the barriers for entry are low for the fast food industry, it still is not easy for new companies to start up a fast food restaurant as huge financial capital is required, decreasing the new entrants.

Why fast food is so popular among Singaporeans?

Fast food is popular is because it caters to Singaporean's taste and reference and the fast-paced lifestyle we have. Catering to Singaporeans’ taste buds and preferences help in its preparations for overseas expansion. Being a multi-racial country with a variety of religions, Singapore is a food capital with a diverse range of cuisines available despite its small land mass. this could have caused the changed in Singaporean's taste and preference over the years. Due to Singaporean's fast paced lifestyle, Convenience of fast food is a major attraction for Singapore customers as it fits into their busy lifestyle. Fast food outlets are strategically located to tap on a large catchment of potential customers, and close-to-home proximity is also important for time-strapped consumers.

In your report, do include how Singaporeans taste and preferences have changed over the years in addition to the above on how fast food restaurant such as McDonald took advantage of this to increase demand.

2. Price Strategy of McDonald's.
The main topic here is the talking about the Pricing Strategy of McDonald's. The main Pricing Strategy of McDonald's that is applicable to Singapore is the Price Bundle Strategy. The Price Bundle Strategy is talking about McDonald's offering meals and other product bundles at a discount price. Often such prices are cheaper than buying the individual items itself. For instance, ordering a Fillet O Fish value meal at around $5 is cheaper than getting the burger, fries and drinks separately. As long as Price Bundles are cheaper than getting the burger, fries and drinks separately, Price Bundles makes McDonald's Price Inelastic. As long as the consumers know that they are saving more money by buying the Bundle, this would encourage them to keep getting the bundle. This gives McDonald's the flexibility to change the price of the Bundle or even the price of the individual items as long as it remains cheaper than to get each item individually.

Q. Specifically, which price elasticity of demand determinant was team looking at to conclude that price bundles would lower the sensitivity of consumers to price changes?
The price determinant that would lower the sensitivity of consumers to price changes is the Proportion of income and Habit.
Proportion of income will make it price inelastic as it very affordable to middle class and wealthier people, since the portion of their income spent on food is low. However it is price elastic to those of lower income, but the average person is able to afford the bundle meal. Since more people are able to afford the burgers, the price elasticity of demand will be price inelastic in general.
Habit will make it price inelastic as over time, people who buys food from MacDonald will always purchase the bundle meal. The habitually consumed MacDonald bundle meal will make the bundle set price inelastic since people will naturally want to fuel their habits.

Q. Why do you think McDonald need to employ such strategy? This could be part of your discovery of the market structure of the industry. Are other fast food restaurants doing the same?
McDonald needed to employ this strategy in order to gain more customers, by using the attractive pricing and perceived savings to bring more customers in. This is due to the determinant "Availability of Substitutes". Since our team are focusing on the fast food industry that focus on Burger and Fries, the competitors are chains such as Burger King, Mos burger, Carl's Junior and so on. All those brands have their bundle set as well, that offers saving to the consumer. If MacDonald did not have the bundle set, they would lose customers to other chains as MacDonald will start to seem to be the more expensive option. This is so as there is a high Availability of Substitutes, making MacDonald pricing strategy of bundle as price elastic.

3.Why fast food is so popular among Singaporeans?
In the article, it mentioned that based on latest figures from the Department of Statistics (SingStat), fast food outlets in Singapore generated a total of about S$1.1 billion in operating receipts in 2016. Over the same period, sales from fast food outlets grew 29 per cent. In contrast, sales at restaurants declined 20 per cent, while those at other eating places — such as cafes — fell by 13 per cent. Some reasons that caused its popularity are: fast food in Singapore is not much more expensive than local or hawker food, and is convenient to get especially due to most Singaporeans' busy lifestyle. This attracts customers to buy fast food. Furthermore, they cater to Singaporeans' taste buds and preferences. McDonald's is known to be 'aggressive' when it comes to location strategy, helping them attract customers easily as the outlet is nearby. Another reason for McDonald's popularity is that it's culture is part of a lot of Singaporeans growing up period, one eg stated is the happy meal. Therefore, many Singaporeans enjoy eating fast food.

Nice point. Do bring in the real world evidence that you have read to show the rising popularity and to support the change in taste and preferences as the country evolves and adopts a fast-paced lifestyle. This point can be parked together with point 1 above in your report.

4. Cheaper products resulted into more profits
Mcdonald's had the innovation in creating a better business system. With better methods and controls that has managed to put McDonald's number one under the Food Chain. They lower costs and sell their products cheaper to the public.
Which results in growth and being more profitable as more customers approach due to the low price attraction.
This is a demand factor as it illustrates the quantity demanded increase for the price is cheap and affordable. With more customers approaching, McDonald's becomes more competitive as a Food Industry. With it's popularity in having low prices and delicious burgers, the taste and preferences play a big part in the determinants of demand. Consumers are being influenced by the continuous release of unique burgers and side dishes. This will increase the demand for McDonald's burgers and other dishes. However, if McDonald's unemployment rates increases, there will be a decrease in demand as more people buy cheap fast food such as McDonald's.
There is also an increase in the supply factor if new machines were being installed to make burgers faster. The advancement in technology also leads to fewer resources needed for the production of goods thus, leading to lower cost of production.This gives sellers an opportunity to supply more of their burgers and side dishes at the same price. However, if the price of meat increases for production, there will be a decrease in supply.

Q. Is this a supply factor or a demand factor or both? Explain this point from both angles.

5. Why consumers choose McDonald's over restaurants and other fast foods
People prefer convenient and quick service which restaurants are unable to provide and also accessible locations where consumers can have access to easily without having to travel far distances. The affordable price attracts consumers of all ages and it is not much more expensive than hawker food where consumers are willing to pay a little more for McDonald's. Successful and targeted marketing also contributes to why consumers choose McDonald's over restaurants and other fast foods. “(McDonald’s) Happy Meal is one example. The culture already ingrained is that McDonald’s is a part of your life… It’s nostalgic to a lot of Singaporeans growing up,” said F&B consultant and branding specialist Derrick Chew.

This point can also be subsumed under the same, main header in your project as point 1 (sub header shall be the key words from this part).
Q. Why do you think McDonald is able to spend on marketing? Is McDonald a dominant player in the industry? How dominant with respect to competitors? Is it easy for new entrants to enter this industry?

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McDonald's having and edge over restaurants.

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Each week, TODAY's long-running Big Read series delves into the trends and issues that matter. This week, we take a look at Singaporeans' enduring love affair with fast food, which first arrived in Singapore more than five decades ago. This is a shortened version of the feature, which can be found here.
SINGAPORE - When American burger joint Shake Shack opened its doors at Jewel Changi Airport in April, part time service staff Watt Zhong Qing, 29, was one of the first in line.

The fast food fan - who eats fast food about four times a week - is no stranger to queues, as he waited 3.5 hours for a taste of Filipino fast-food chain Jollibee when it first arrived in Singapore back in 2013.

Apart from crazy queues at new outlets, new flavours introduced by fast food chains also tend to generate much buzz, with offerings sometimes sold out in just weeks such as McDonald's Nasi Lemak Burger.

Based on latest figures from the Department of Statistics (SingStat), fast food outlets in Singapore generated a total of about S$1.1 billion in operating receipts in 2016.

Singaporeans' seemingly insatiable appetite for fast-food has helped the sector buck the overall trend in the food and beverage (F&B) industry.

From 2000 to 2018, data from the showed:

10 per cent decline in sales of overall F&B industry

However, sales increased by 29 per cent for fast-food chains

In contrast, restaurant sales dropped 20 per cent while those at other eating places - such as cafes - fell 13 per cent.

The strong showing by fast food chains in Singapore is in contrast with what is happening in the United States. There, many chains are suffering from an oversaturated market and rising labour costs. Greater health consciousness are also causing more American customers to shun these chains.
NUMBERS AT A GLANCE
Singapore's love for fast food began in 1968, when the first A&W restaurant opened its doors. Over the years, other chains also entered Singapore, including KFC (1976), McDonald's (1979), Burger King (1982) and Long John Silver's (1983).

More recent entrants are Popeyes (2001), Carl's Junior (2005) and Texas Chicken (2010).

Total number of outlets which some of these chains have currently:

Market share of fast food outlets in Singapore in 2018, based on data by market research firm Euromonitor International:
RECIPE FOR SUCCESS
Experts say that fast-food chains do particularly well in Singapore because:

The healthy eating movement here is not as prevalent as compared to other countries such as the United States which is tackling high obesity rates

Fast food is not much more expensive than local hawker fare

An English-speaking population exposed to international culture

Singapore's dining out culture: 55 per cent of Singaporeans eat out on a weekly basis, based on a Nielsen survey in 2018.

Singapore is also an "excellent" test bed for fast-food outlets looking to expand or test out new products, said Adjunct Associate Professor Lynda Wee of Nanyang Business School.

Long John Silver's spokesperson described Singapore as a "food capital with a diverse range of cuisines". The chain studies the evolving preferences and needs of consumers here to prepare for its expansion overseas, the spokesperson said.

Why fast-food chains have an edge over restaurants:

Convenience and quick service

Assembly line model which helps to keep costs low

Successful and targeted marketing. "(McDonald's) Happy Meal is one example. The culture already ingrained is that McDonald's is a part of your life... It's nostalgic to a lot of Singaporeans growing up," said F&B consultant and branding specialist Derrick Chew.

STAYING NIMBLE
Despite the sector's success, stiff competition has led to the failure of many global brands trying to establish themselves in Singapore.

It was the main reason that led A&W, despite having a first-mover advantage here, to exit in 2003, experts noted.

With competitors marketing their offerings much better than A&W, the chain faded into obscurity, said Mr Lucas Tok, marketing lecturer at Singapore Polytechnic.

Other barriers to entry:

For Texas Chicken, getting on to food delivery apps has helped it reach more customers, said Mr Eugene Lim, marketing director of Select Group that runs the chain in Singapore.

While technological innovation helps, experts say that it is the service and menu offerings that matter ultimately.

Despite facing high operating costs, manpower shortage and customers' fast-changing tastebuds, fast food chains here have generally been adaptive and responsive to change - especially those that have thrived.

What fast-food chains do to stay on top of the game:
HEALTH CONCERNS
The unhealthy effects of fast food is well-documented.

The release of a documentary "Super Size Me" in 2004 triggered a backlash against the fast food sector in the US.

Over the years, authorities around the world, including Singapore, have taken steps to curtail its marketing to young children.

But the fast food industry here has been spared from any consumer backlash stemming from health concerns - even after the "Super Size Me" documentary gained international prominence.

Experts attribute it to the absence of social media then, and the fact that fast food is not a staple in Singapore, unlike the US.

Fast food fans TODAY spoke to also played down health concerns, adding that it would not be an issue if they ate it in moderation.

Nutritionists say it is unclear whether the availability of healthier options are effective in steering consumers away from junk food.

Healthier options, such as salads, may not necessarily be healthy too, if its dressing is high in fat and sodium, for example.
FOOD FOR THOUGHT
While the industry would continue growing, the rising demand for healthier food may pave the way for the rise of fast casual restaurants here, which could provide competition to fast food chains, said Mr Karthik Bakthavathsalem, an F&B lecturer at Nanyang Polytechnic.

An intermediate concept between fast food and casual dining, fast casual eatery chains have taken off in the US, including the likes of Shake Shack and Chipotle.

These chains market themselves as offering the same quick and convenient service which consumers can get at fast food chains, but with better ingredients at slightly higher prices.

In the meantime, some are concerned that the enduring popularity of fast food among Singaporeans could come at the expense of homegrown hawkers and food culture.

Food blogger Leslie Tay believes that people of his generation would stay true to hawker food but he was not so sure about the younger generation.

Food critic and consultant K F Seetoh, who founded the Makansutra website, noted that the younger generation grew up inundated by the marketing efforts of fast-food giants.

"Fast-food outlets are winning, but they have not taken over (local food) - not yet," he said.

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The Big Read in short: S'poreans' love for fast food

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Each week, TODAY's long-running Big Read series delves into the trends and issues that matter. This week, we take a look at Singaporeans' enduring love affair with fast food, which first arrived in Singapore more than five decades ago. This is a shortened version of the feature, which can be found here.

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Cheaper products resulted into more profits.

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The fast food industry today has grown from over $6 billion in sales in 1970 to over $100 billion today in the United States. It employs over 4 million workers. And, 25 percent of the American population eats fast food on a daily basis.

While Burger King may proclaim to be the King, we all know that Ronald McDonald is no clown when it comes to wearing the crown as to who really is the king of fast food-every second of the day McDonald's sells 17 Big Mac's and 7 Happy Meals, and too many French fries to count!

McDonald's has over 34,000 outlets in 126 countries. So much has McDonald's changed the way we eat, it also has had a global impact. The Economist newspaper has created the "Big Mac Index"-the comparison of a Big Mac's cost in various currencies as an informal judge of the parity of the purchasing power of the world currencies! Moreover, according to Fast Food Nation by Eric Schlosser, nearly one in eight workers in the U.S. have at some time been employed by McDonald's.

So why did McDonald's become so successful? Did McDonald's create a better hamburger?

No, McDonald's innovation was creating a better business system-better methods, systems and controls-than existed at the time in the food industry so that it could lower its costs and sell its products cheaper to the public, which allowed it to grow and be more profitable.

In fact, between 1953 and 1962, McDonald's promoted its "system" with a logo featuring a character with a hamburger for a head and called him "Speedee". The logo featured the name "McDonalds's" with the character holding a sign which said, "I'm 'Speedee'". What we call today, "fast food", came out of what McDonald's called its "Speedee" system. McDonald's "Speedee" logo advertised their new system right on the main outdoor McDonald's marquee with the phrase-"Speedee Service System". This phrase continued to be displayed on its main sign with the golden arches even after McDonalds surpassed 100 million hamburgers sold.

This was the beginning of the fast-food industry as we know it.

Richard and James McDonald were the brothers who founded McDonald's in San Bernadino, California in 1940. It was the shake machine salesman Ray Kroc who bought the rights to their "system" to create the modern day McDonald's corporation. But it all started with a couple of brothers in a family run business!

McDonald's success was found in what we call the "business of the business." In fact, the basis of any modern franchise is the "system." When you buy into a franchise, you are buying into a business system.

While we all relate to the McDonald's brand, what most people don't realize is that what made the brand so successful was the "system" which allowed McDonald's to become more efficient, more productive, and more profitable, and, therefore, allowed it to lower its costs, which made it more competitive, which made it more successful!

To the average consumer, he sees the brand. The franchisor, however, sees a system. Most business owners are just like the average consumer believing-wrongly-that McDonald's success is about "brand." The foundation to McDonald's success has been its system which has allowed it to grow and mature where today McDonald's has diversified into premium salads and yogurt parfaits for more health conscious consumers, as well as premium coffees to compete with Starbucks. But it all started with a better business system as its foundation!

And, that is what business owners often fail to recognize when thinking about being a success business owner. A professional business analysis identifies for business owners where they are deficient in cash management, controlling their costs, having a dashboard with all the information needed to manage their business, and having productivity-based excess profit incentives for their employees. Once these deficiencies are identified, a highly trained business consultant can be brought in to rebuild the foundation of the business with the proper methods, systems, controls and incentives to make the business better with state of the art systems so the company can be more efficient, productive and profitable to reach its goals for both the business and the family.

McDonald's, more than any other fast-food franchise, changed the way we eat, changed the way we spend our food dollars, and revolutionized the restaurant business-not because they figured out how to make a better hamburger, but because they created a better business system!

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Was the Reason for McDonald's Success Because They Created a Better Hamburger or Because They Created a Better System for Their Business?

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The fast food industry today has grown from over $6 billion in sales in 1970 to over $100 billion today in the United States. It employs over 4 million workers. And, 25 percent of the American population eats fast food on a daily basis.

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                                                                                                                          Stage 1 Microeconomics Analysis

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SINGAPORE: When American burger joint Shake Shack opened its doors at Jewel Changi Airport in April, Mr Watt Zhong Qing, 29, was one of the first in line.

The part-time service staff eats fast food about four times a week.

He said that back in 2013, when Filipino fast food chain Jollibee first arrived here, he queued 3.5 hours just for a taste of it.

"(It) was worth it," said the food enthusiast, whose affinity with fast food started when he was 10 and his aunt bought him McDonald's Happy Meal, which came with a toy.

These days, long queues could still be spotted whenever new fast food players came to town, as seen recently with the opening of Shake Shack and A&W at Jewel Changi Airport.

New flavours introduced by the fast food chains also tend to generate much buzz, with offerings sometimes sold out in just weeks, such as McDonald's Nasi Lemak Burger.

And sometimes, it is not just the food: The McDonald's Hello Kitty craze back in 2000 saw thousands of Singaporeans spending hours in line for the sake of getting special mementos issued by the fast food giant. Around 2.8 million toys were sold within 40 days, said the National Library Board's (NLB) web encyclopedia.

Based on latest figures from the Department of Statistics (SingStat), fast food outlets in Singapore generated a total of about S$1.1 billion in operating receipts in 2016.

Singaporeans' seemingly insatiable appetite for burgers, fries and the like has helped the fast food sector buck the overall trend in the food and beverage (F&B) industry, which saw a 10 per cent decline in sales from 2000 to 2018.

Over the same period, sales from fast food outlets grew 29 per cent, based on SingStat data. In contrast, sales at restaurants declined 20 per cent, while those at other eating places - such as cafes - fell by 13 per cent.

The situation in Singapore stands in contrast with the United States - the country of origin for many global fast food chains that households around the world have come to know.

According to media reports, American millennials are shunning these chains while an oversaturated market and rising labour costs are eating into the profitability of these companies. Other factors include rising health consciousness and competition from neighbourhood eateries serving the same fare, said experts.

However, in Singapore, despite greater national awareness of the need to eat healthily, many just cannot stay away from their fast food fix.

Take Mr Muhammad Hafiz for example. The self-described health conscious individual runs and does other exercises about three times a week.

But that has not stopped the 30-year-old management consultant from indulging in his guilty pleasure of fast food at least once or twice weekly.

His "soft spot" for fast food started while growing up, when he and his friends would frequent fast food chains after a game of football or rugby.

Likewise, football enthusiast Lance Ling, 32, gives in to his "fried-food craving" nearly three times a week.

"It's a convenience thing, really. Even now, McDonald's is just downstairs (from his home) and it is easy to (buy takeaways)," said Mr Ling, who works in the shipping industry and recently moved to Buangkok with his spouse.
HUGE APPETITE FOR FAST FOOD
Fast food chains are generally defined as those which sell mass-produced items, such as burgers and fried food, and serve them quick.

Singapore's love for fast food began in 1968, when the first A&W restaurant opened its doors in the former Malaysia-Singapore Airlines building at Robinson Road. Next came Colonel Sanders in 1976 and then Ronald McDonald in 1979, with its first store at Liat Towers in Orchard. Burger King arrived in 1982.

A sign of things to come, the number of customers who attended the McDonald's opening was so large that a world record was set then for serving the highest volume of hamburgers in a single day, according to the NLB's web encyclopedia.

The record was only broken in the 1990s when McDonald's opened in Beijing, China.

Over the past decades, the major fast food chains have grown expanded rapidly in Singapore.

For example, there are now 135 McDonald's outlets and 86 KFC joints scattered across the island. Burger King will be opening its 50th outlet in Singapore in July, its spokesperson said.

Another household name, Long John Silver's, first opened in Singapore in 1983.

Between 2016 and 2018, it expanded from 19 to 26 outlets here, with sales going up in tandem by about 30 per cent, said its spokesperson.

Many other international brands have also entered the Singapore market, including Pizza Hut, Popeyes, Carl's Junior and Texas Chicken.

But it is not all smooth sailing: Brands such as Milano's Pizza, Hardee's, Wendy's and Taco Bell had found the going tough and exited the Singapore market.

A&W also suffered the same fate - closing down its five remaining outlets at that time in 2003 - before returning to the Republic to much fanfare.

A&W international business development manager Sally See said that going forward, the chain would be opening new outlets at a "comfortable pace".

"We want to ensure that we have outlets running well and optimally before expanding further," she said.

Based on data from market research firm Euromonitor International, McDonald's had the largest market share (40 per cent) in Singapore last year - way ahead of its closest rival, KFC (13 per cent).

In its report, the firm included convenience store chain 7-eleven, which came in joint-third with Subway, with both having 6 per cent of the market share, Next was Burger King (4 per cent), followed by Pizza Hut (3 per cent). The Soup Spoon, Pasta Mania and Long John Silver's each has a market share of about 2 per cent.
RECIPE FOR SUCCESS
Experts say that fast-food chains do particularly well in Singapore because of several reasons. These include the fact that the healthy eating movement here is not as prevalent as in the United States and other countries in Europe, and an English-speaking population who is exposed to international cultures.

In Singapore, fast food is not much more expensive compared with local fare such as hawker food, the experts noted.

Mr Karthik Bakthavathsalem, an F&B lecturer at Nanyang Polytechnic, said that in countries such as Malaysia and Indonesia, local food options are much cheaper than fast food.

There are also local fast-food chains in these countries, such as Jollibee in the Philippines, that prevent the global ones from garnering too much market share, said Mr Lucas Tok, marketing lecturer at Singapore Polytechnic.

Given Singaporeans' "higher level of awareness backed with purchasing power", Adjunct Associate Professor Lynda Wee of Nanyang Business School said the Republic makes an "excellent" test bed for fast-food outlets to expand or try out new products.

Long John Silver's, for example, does exactly that.

Catering to Singaporeans' taste buds and preferences help in its preparations for overseas expansion, its spokesperson said, adding:

Being a multi-racial country with a variety of religions, Singapore is a food capital with a diverse range of cuisines available despite its small land mass.

The culture of dining out among Singaporeans could also be a contributing factor, said Dr Guan Chong, a marketing professor at the Singapore University of Social Sciences.

According to a 2018 Nielsen survey, 55 per cent of Singaporeans ate out on a weekly basis, up from 51 per cent in 2015.

In the US, only about 33 per cent dined out, noted Dr Guan. The Nielsen survey conducted in Singapore also found that 76 per cent preferred to patronise fast-food outlets, up from 66 per cent three years ago.

The experts said the convenience of fast food is a major attraction for Singapore customers as it fits into their busy lifestyle. Apart from relative affordability and speed of service, fast food outlets are strategically located to tap on a large catchment of potential customers.

McDonald's is especially "aggressive" when it comes to location strategy, said Mr Samuel Tan, course manager of Temasek Polytechnic's diploma in retail management.

The market leader has a comprehensive team to select the best site for new outlets, he noted.

For the Nielsen survey, respondents cited convenience or accessibility (58 per cent), food taste (50 per cent) and low price or value-for-money (48 per cent) as the top reasons for buying from fast food outlets, said Nielsen's executive director for consumer insights Garick Kea.

"Close-to-home proximity is also important for time-strapped consumers. So far the uptake of these convenience options has been strongest in mature markets, and Singapore being a developed market is seeing this growth," said Mr Kea.

In contrast, restaurants are located only in certain places. "So the economies of scale are not there," said Mr Karthik.

A fast-food chain's assembly line model gives it an advantage over restaurants. This helps to lower operational costs and improve efficiency, without the need to hire skilled chefs for food preparation, said Dr Guan.

Successful and targeted marketing has also helped enhance fast food's appeal.

F&B consultant and branding specialist Derrick Chew said: "(McDonald's) Happy Meal is one example. The culture already ingrained is that McDonald's is a part of your life ... It's nostalgic to a lot of Singaporeans growing up in that period."

In making a comeback to Singapore, A&W believes that its brand "holds a special place in the hearts of many in Singapore, who now associate visits to A&W with very fond childhood memories," said Ms See.
STAYING NIMBLE IN A CUT-THROAT INDUSTRY
While every fast food business wants a slice of the pie, being able to sustain growth is no piece of cake.

Stiff competition has led to the failure of many global brands trying to establish themselves in Singapore.

It was the main reason that led A&W, despite having a first-mover advantage here, to exit in 2003, the experts noted.

With competitors marketing their offerings much better than A&W, the chain faded into obscurity, said Mr Tok.

"With fast food, the main factor is convenience. If you're going to be obscure and don't market yourself, you forget to remind people that you're there and convenient to get to," he added.

While several fast food chains have thrived in Singapore, it will not be easy for new entrants - or in A&W's case, those seeking to make a comeback - to gain a foothold.

"The big players are well grounded and they have already saturated our tiny island-state with many outlets and build their loyal customers. The dominant market share strategy of the fast-food industry is somewhat a barrier and threatening to new entries," said Mr Tan of Temasek Polytechnic.

The need for fast food chains to be accessible also means that new players need resources to scale up fast and spread the set-up and operation costs, said Adjunct Associate Professor Wee.

But they usually lack the resources and capital to sustain themselves in a highly competitive market, Mr Tan noted.

Some fast-food chains have tried to cut costs using technology. For example, the introduction of self-service kiosks reduces the reliance on manpower, while working with food delivery applications helps a chain maintain its market presence.

Getting on food delivery platforms have helped Texas Chicken reach more customers, said Mr Eugene Lim, marketing director of Select Group that runs Texas Chicken in Singapore.

However, the use of delivery apps would eventually change customer behaviours, he noted. "In the long run, there will be impact (on fast food chains) if all customers opt to stay at home and order in. In fact, it is already (starting to happen) now," said Mr Lim.

Ultimately, it is the service and menu offerings that matter, the experts said.

McDonald's fresh and new menu offerings, as well as its ability to maintain its service level to generate higher customer satisfaction than other players, have helped the fast food giant to become a clear market leader, Mr Tan noted.

Despite facing high operating costs, manpower shortage and customers' fast-changing tastebuds, fast food chains here have generally been adaptive and responsive to change - especially those that have thrived, the experts said.

It is not just about giving local flavours a twist such as Burger King's Hainanese Tendergrill Chicken Burgers, or McDonald's Durian McFlurry or KFC's Mala Chicken.

Fast food chains here have also introduced new food items in line with the latest trending flavours, such as McDonalds' Salted Egg Fries or KFC's Korean-inspired Yang Yeum Chicken.

There have also been tie-ups with other international brands, such as McDonald's Hello Kitty toys, or global events, such as KFC's Ronaldo Feast during the 2014 World Cup.

Fast food chains have also periodically refreshed the look and feel of their outlets.

In addition to self-service kiosks and online food delivery service, investments in automatic cooking machinery in the kitchen, have also helped fast food chains to cut down costs.

To cater to an increasingly health conscious population, fast food chains have also rolled out healthier options on their menus.
HEALTH CONCERNS
Despite such efforts, fast food is still high in sodium, fats, cholesterol and calories - all known to contribute to health problems such as obesity, diabetes, and cardiovascular diseases.

In 2004, the release of a documentary, Super Size Me, triggered a backlash against the fast food industry in the US.

It featured filmmaker Morgan Spurlock who ate McDonald's food for 30 consecutive days, and gained 11kg as a result.

Mindful of the adverse health impact of fast food consumption, authorities around the world have taken steps to curtail the marketing and advertising of such food to young children.

In the United Kingdom, Youtube ads by brands such as McDonald's and KFC were recently banned by an advertising watchdog for targeting children under 16.

This followed bans on junk food advertisements in London's transport networks earlier this year.

Australian state Queensland has also banned junk food advertisements starting this year, with plans to phase out such advertisements over time.

In Singapore, the authorities introduced in 2015 a set of advertising guidelines where F&B outlets, including fast food chains, are not allowed to advertise unhealthy products - such as sugar-based products and soft drinks - to children under 13.

Like other affluent societies, Singapore is not spared from rising obesity rates among the young.

In 2017, 13 per cent of children in Singapore's mainstream schools were found to be overweight, up from 11 per cent in 2011, said Senior Minister of State for Health Amy Khor last year.

So far, the fast food industry in Singapore has been spared from any consumer backlash stemming from health concerns - even after the Super Size Me documentary gained international prominence.

Mr Karthik, the lecturer at Nanyang Polytechnic, believes that the film's impact on the fast food industry in other countries would have been bigger today, in the age of social media.

Other experts noted that unlike in the US, fast food is not a staple in Singapore.

Still, the documentary had persuaded some Singaporeans to be more mindful of the food they ate, and spurred fast food chains here to offer healthier options, the experts said.

Fast food fans in Singapore played down the health concerns, reiterating that it was fine as they eat it in moderation and their diet is balanced.

Mr Hafiz, for example, said he avoids eating fried food at home, opting for grilled or roasted meat instead.

Mr Ling added: "I think it's okay if you don't eat it every day ... just need to have a mixed diet for your other meals."

While fast food joints here provide healthier alternatives, nutritionists said it is unclear how effective they are in encouraging consumers to eat more healthily.

To begin with, people who go to fast food outlets are not looking to eat healthily, said consultant dietician and nutritionist Dr Naras Lapsys.

While the nutritional value of these healthier options is not negated just because it is prepared at a fast food outlet, the sauces added into these food items might defeat its purpose.

"Sauces (which fast-food joints) put in might still be high in sugar. (There) might be additional things in the meal that are not that great, (the) chicken still happens to be fried and battered," said Dr Lapsys.

Another nutritionist, Ms Gladys Wong, warned that seemingly healthier options might not necessarily be so. "Salads may not be necessarily healthy, depending on the salad dressing that the customer chooses to drown the salad with," she said.

"Steamed corn may be laced with butter or margarine and salt, thus (it can be) high in fats and sodium."
FOOD FOR THOUGHT
Going forward, experts believe that the fast food industry here will continue to thrive.

However, it may usher in the rise of what has been called "fast casual" outlets.

An intermediate concept between fast food and casual dining, fast casual eatery chains have taken off in the US, including the likes of Shake Shack and Chipotle.

These chains market themselves as offering the same quick and convenient service which consumers can get at fast food chains, but with better ingredients at slightly higher prices.

While fast casual outlets have yet to establish themselves in Singapore, fast food chains here may have to contend with them in the future, said Mr Karthik.

In the meantime, some are concerned that the enduring popularity of fast food among Singaporeans could come at the expense of homegrown hawkers and food culture.

Nevertheless, food blogger Leslie Tay felt that hawkers can learn from the fast food model, such as mass producing food of a consistent quality within a short time.

Hawkers currently "don't quite have the know-how" yet, said Dr Tay, 50, who runs a popular food blog ieatishootipost.sg.

While he believes that people of his generation would stay true to hawker food, he was not so sure about the younger generation.

"(Fast food is) comfort food. It's easy, cheap and tasty, and customers can dine in air-conditioned facilities," said Dr Tay, who quipped:

Air-con is very important.

Food critic and consultant K F Seetoh, who founded the Makansutra website, noted that the younger generation grew up inundated by the marketing efforts of fast-food giants.

"Fast-food outlets are winning, but they have not taken over (local food) - not yet," he said. thus (it can be) high in fats and sodium."

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The Big Read: Through thick and thin (waistlines) - Singaporeans' enduring love affair with fast food

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SINGAPORE: When American burger joint Shake Shack opened its doors at Jewel Changi Airport in April, Mr Watt Zhong Qing, 29, was one of the first in line. The part-time service staff eats fast food about four times a week.

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A McDonald's in Gdańsk, Poland. McDonald's Corporation uses its marketing mix (4P) to support global growth and maintain its leading position in the fast food restaurant chain industry. (Photo: Public Domain)

McDonald's Corporation's marketing mix (4Ps) involves various approaches that meet business concerns in different fast food restaurant markets around the world. The marketing mix defines the strategies and tactics that a company uses to reach target customers, in terms of products, place, promotion, and price (the 4Ps). In this business analysis case, McDonald's has corporate standards that its marketing mix applies globally. For example, the company's corporate standards for productivity are implemented in the management of each company-owned and franchised location. McDonald's also applies some variations in its marketing mix to suit the conditions of local or regional markets. For instance, the company's promotion strategies and tactics focus on print media in countries where such media are most popular, and prioritize television in other markets. The specifics of the 4P variables define the various strategies and tactics that McDonald's uses in executing its marketing plan and achieving related strategic goals to grow the multinational restaurant chain business.

McDonald's Corporation's effectiveness in implementing its marketing mix contributes to the leading performance of its brand and business in the international fast food restaurant industry. Strategic management considers how the 4Ps relate with the approaches of competitors like Burger King, Wendy's, Dunkin' Donuts, and Subway, as well as other firms in the food and beverage industry, such as Starbucks Coffee Company. McDonald's marketing mix facilitates effective reach to target customers around the world. This condition supports the company's leading global industry position, as well as the strength of its brand, despite the strong force of competitive rivalry shown in the Porter's Five Forces analysis of McDonald's Corporation.

McDonald's Products (Product Mix)

As a food service business, McDonald's has a product mix composed mainly of food and beverage products. This element of the marketing mix covers the various organizational outputs (goods and services) that the company provides to its target markets. McDonald's product mix has the following main product lines:

1. Hamburgers and sandwiches

2. Chicken and fish

3. Salads

4. Snacks and sides

5. Beverages

6. Desserts and shakes

7. Breakfast/All-day breakfast

8. McCafé

Among the 4Ps, products are a fundamental determinant of McDonald's brand and corporate image. The company is primarily known for its burgers. However, the business gradually expands its product mix. At present, customers can purchase other products like chicken and fish, desserts, and breakfast meals. McDonald's generic strategy and intensive growth strategies influence the product lines included in this element of the marketing mix. In diversifying its product lines, the company satisfies market demand, improves its revenues, and spreads risk in its business. In terms of risk, a more diverse product mix reduces the company's dependence on just one or a few market segments. This element of McDonald's marketing mix indicates that the firm innovates new products to attract more customers and improve its business stability.

Place/Distribution in McDonald's Marketing Mix

This element of the marketing mix enumerates the venues or locations where products are offered and where customers can access them. Restaurants are the most prominent places where the company's products are distributed. However, the business utilizes various places as part of this 4P variable. The main places through which McDonald's distributes its products are as follows:

1. Restaurants

2. Kiosks

3. McDonald's mobile apps

4. Postmates website and app, and others

McDonald's restaurants are where the company generates most of its sales revenues. Some of these restaurants also manage kiosks to sell a limited selection of products, such as sundae and other desserts. Some kiosks are temporary, as in the cases of kiosks used in professional sports competitions and other seasonal events. This element of McDonald's marketing mix also involves the company's mobile apps. These virtual places are where customers can access information about the company's products and buy these products. For example, the company's mobile apps for iOS and Android let customers claim special deals, find restaurant locations, place orders, and pay for such orders involving participating McDonald's restaurants. Furthermore, customers can place their orders through the Postmates website and mobile app. This element of the marketing mix supports McDonald's corporate vision and mission statements, especially in serving more customers around the world.

McDonald's Promotion (Promotional Mix)

This element of the marketing mix defines the tactics that the business uses to communicate with customers. Among the 4Ps, this variable focuses on marketing communications with target customers. For example, the company provides new information to persuade consumers to purchase new products. McDonald's uses the following tactics in its promotional mix, arranged according to significance in the business:

1. Advertising (most significant)

2. Sales promotions

3. Public relations

4. Direct marketing

Advertisements are the most notable among McDonald's promotion tactics. The corporation uses TV, radio, print media and online media for its advertisements. On the other hand, sales promotions are used to draw more customers to the company's restaurants. For example, McDonald's offers discount coupons and freebies for certain products and product bundles, as a way of attracting more consumers. In addition, the company's public relations activities help promote the business to the target market through goodwill and brand strengthening. For instance, the Ronald McDonald House Charities and the McDonald's Global Best of Green environmental program support communities while boosting the value of the corporate brand. Occasionally, the company uses direct marketing, such as for corporate clientele, local governments, or community events and parties. In this element of its marketing mix, McDonald's Corporation emphasizes advertising as its main approach to promote its products.

McDonald's Prices and Pricing Strategies

This element of the marketing mix specifies the price points and price ranges of the company's food and beverage products. The aim is to use prices to maximize profit margins and sales volume. McDonald's uses a combination of the following pricing strategies:

1. Bundle pricing strategy

2. Psychological pricing strategy

In the bundle pricing strategy, McDonald's offers meals and other product bundles for prices that are discounted, compared to purchasing each item separately. For example, customers can purchase a Happy Meal or an Extra Value Meal to optimize cost and product value. On the other hand, in psychological pricing, the company uses prices that appear significantly more affordable, such as $__.99 instead of rounding it off to the nearest dollar. This pricing strategy helps encourage consumers to purchase the company's products based on perceived affordability. Thus, this element of McDonald's marketing mix highlights the importance of bundle pricing and psychological pricing to encourage customers to buy more products.

References

Dominici, G. (2009). From marketing mix to e-marketing mix: A literature overview and classification. International Journal of Business and Management, 4(9), 17-24.

Goi, C. L. (2009). A review of marketing mix: 4Ps or more? International Journal of Marketing Studies, 1(1), 2.

Hisrich, R. D., & Ramadani, V. (2017). Entrepreneurial Marketing Mix. In Effective Entrepreneurial Management (pp. 75-99). Springer International Publishing.

McDonald's Corporation - Form 10-K.

McDonald's Corporation - Mobile Ordering.

McDonald's Corporation - Full Food Menu.

Rahmani, K., Emamisaleh, K., & Yadegari, R. (2015). Quality function deployment and new product development with a focus on marketing mix 4P model. Asian Journal of Research in Marketing, 4(2), 98-108.

Steenkamp, J. B. (2017). Global Marketing Mix Decisions: Global Integration, Not Standardization. In Global Brand Strategy (pp. 75-109). Palgrave Macmillan UK.

U.S. Department of Agriculture - Economic Research Service - Food Service Industry - Market Segments.

U.S. Department of Commerce - International Trade Administration - The Travel, Tourism, and Hospitality Industry in the United States.

Van Waterschoot, W., & Van den Bulte, C. (1992). The 4P classification of the marketing mix revisited. The Journal of Marketing, 83-93.

Yun-sheng, W. (2001). Perfection and innovation of 4P marketing mix - How to evaluate 4P marketing mix. Commercial Research, 5, 6.

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McDonald's Marketing Mix (4Ps) Analysis - Panmore Institute

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McDonald's Corporation's marketing mix (4Ps) involves various approaches that meet business concerns in different fast food restaurant markets around the world. The marketing mix defines the strategies and tactics that a company uses to reach target customers, in terms of products, place, promotion, and price (the 4Ps).

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How McDonalds attract Singaporeans