Business Proposal: The McDonalds

Business Proposal
Name
Institution
Business Proposal
Proposed Business
McDonalds is one of the most respected companies in the food industry (McDonalds, 2015). The company provides a variety of food choices for its customers ranging from sandwiches, salads to beverages. The company also offers breakfast in their menu. It has always been the company’s objectives to share in the happiness of its customers by providing a variety of food and drinks needs that would meet the expectations of the customers. The company has also considered the needs of children by including some foods in the menu that can be purchased for children. However, McDonalds has failed to provide an appropriate breakfast option for children. In its happy meal option, designed for children, some of the available meals include yogurt, snacks and a variety of juices. The company has managed to provide children’s food with 25% less sugars as compared to the available substitutes in the market (McDonalds, 2015). The company ought to design a breakfast menu for children. By including child sized portions items in the children breakfast menu, the company would attract more customers, increasing its revenue generation.
Market structure
McDonalds operates in a market structure exhibiting the features of a perfect competition market. A perfect competition market is characterized by many players in the market, with minimal barriers to entry in the market (Mankiw, 2014). The consumers in the market have substantial knowledge of the good and services provided by the sellers and the prices of goods and services are determined by the market forces of demand and supply. McDonalds’ products are elastic, meaning that a small change in the prices results to a corresponding change in the quantity demanded of the products. An elastic demand has a positive and greater than one coefficient, which is derived by dividing the change in quantity sold, by the corresponding price change (Mankiw, 2014). An elastic product may be considered a luxury, and therefore, the prices of such products should be reasonable not to scare away the customers and to guarantee revenue generation. By raising the prices of its products, McDonalds will experience a decrease in the sale and vice versa. Considering the competitive market structure it operates under, the company would have to charge lower prices than its competitors in order to stay competitive in the market.
Elasticity of the Product and How Pricing Relates To Elasticity of the Product
Accordingly, pricing will be a vital marketing strategy for the company when introducing the breakfast menu for children (Pride, & Ferrell, 2010). When pricing its products, McDonalds will utilize the concept of marginal cost= marginal revenue besides putting the issue of the degree of elasticity into consideration, which is important in informing the degree of increasing or reducing the prices. For instance, the prices of the company’s products can be raised up to the point where the quantity demanded would start decreasing as customers shifts to other cheaper alternatives. If at $5, the quantity demanded of Happy Meal is 20, and by increasing the price to $8, the quantity demanded is 15, the elasticity is calculate...