McDonalds' competitive advantage

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Competitive Advantage

McDonald’s competitive advantage is based on brand recognition. McDonald’s brand is well known in all markets, nationally and internationally. A new report by business intelligence firm shows how top corporations such as McDonalds’s, Coca-cola use their brands to strategically position themselves to gain and retain new customers, even in the most competitive markets. Brand recognition holds tremendous influence on consumer buying habits (Durham, 00).

In order to keep high levels on quality, customer satisfaction, and innovation, McDonald’s will launch in January 004, McDonald’s Real life Choices. The new initiative lets customers eat at McDonald’s and still follow a low fat, low calorie or low carbohydrate diet with the great taste and convenience of fast food (Newswire, 00).

McDonald’s continues at the top restaurants chains for the year 00, ranked by Share of United States systemwide sales, in percent 7.% vs. Burger King Corp., %.( Business & company, 00). Although this survey can only serve as an indicator of the market, the numbers indicate that McDonald’s has a competitive advantage over its competitors. In terms of profitability, the following table shows a comparison of McDonald’s profitability ratios, in 00, in comparison to the average industry, SIC 581- Eating Places

Ratio McDonald’s Industry (00)

Net Profit Margin (NPM) 7.7% .6%

Return on Investment (ROI) .7% 5.5%

Return on Equity (ROE) 8.7% 14%

Industry & Financial Consulting Services. D&B, Inc 00

From the data the ratio is higher than the average industry ratio, meaning the company got higher sales than the median industry. Also, this ratio expresses that for each $1 of sales, the company generates 7.7 cents of net profit.

The return on investment and the return on equity ratios measure in general the success of the company in generating profits (Fraser & Ormiston, 001). Comparing with the industry median ratios, McDonald’s is not well positioned for future growth.

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