Microeconomics

Microeconomics

Introduction

The organization that has been selected to answer the questions is Mc. Donald. The first McDonald's outlet was opened by brothers McDonald's in 1948. At that time, it became the first local franchise in the history of fast food in San Bernardino, California (USA). It offers fast food, which is prepared and serves at high speed. There is no doubt that the basis of their success was to replace the conventional dishes used in the rest of restaurants (Books, 2010). After some time, they reached a high level of sales although their menu was limited, but they kept growing. So in 1955, Ray Croc opened the first store of the Corporation. During 50s and 60s, the management team of Ray Kroc established the successful philosophy of the system of the company which indentified four factors that were Quality, Service, Cleanliness and Value (Hoy , Stanworth , 2003). While McDonald's offers its customers a standard menu in all its premises, it is even noticeable that these menus are combined with special products, which are developed in each culture depending on the tastes. Now the organization has become a complete multinational that has opened its operations in several countries. It has to face some economical challenges and it requires focusing on its micro economics (Pindyck, 2001).

In terms of currency denomination, describe how the firm prices its revenues and costs

Mc Donald is the US based organization all the profits and revenues will be according to the dollar valuation. The first step in planning pricing decisions is for managers to determine what pricing strategy will best suit their company's marketing, financial, and societal objectives. Pricing objectives give direction to the entire pricing process. For example, what are the overall financial, marketing, and strategic objectives of the company? What are the specific objectives of this product? How sensitive is the customer to price? What resources are available? The pricing objectives will lead to a pricing strategy, but in order for a product to be successful, the pricing objectives and strategy must support the company's strategic plan (Samuelson, 1953).

Some common pricing objectives include the following that Mc Donald should focus on:

Maximize long-term or short-term profit

Increase sales volume, sales revenue, and market share

Stabilize or destabilize the market price

Develop or maintain price leadership

Discourage new competitors from entering the market

Match competition's price or attempt to force weak companies from the market

Enhance the image of the company or brand

Create store traffic, excitement, and interest

In order to best support the pricing objectives for a product, a company will adopt a pricing strategy. The pricing strategy may be focused on getting new customers to use a product, or it could be more aggressively aimed at removing competitors from the marketplace. There are numerous pricing strategies, but some of the common ones are (Boulding, 1955):

Skimming: a company prices a product at a high price point to get the most profit. This is a common pricing strategy in the technology industry, where companies are trying to recover their high research and development costs ...