Marketing

The exercise Is from chapter 6 , decision question 2 is below, I will provide additional data needed for the exercise,

2. Refer to Exhibit 6-12, which presents McDonald’s market potential based on the formula given on page 195.

a. Using the same formula, estimate what McDonald’s market potential would be for the former Eastern Bloc countries: Bosnia, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Serbia, Slovakia, and Ukraine. Compare these to the most recent actual number of restaurants in each of these countries (the latest figures can be downloaded from a spreadsheet available on McDonald’s Investors information website: Go to http://www.aboutmcdonalds.com/mcd/investors/financial_high-lights.html and click on “Financial Information.”

b. The formula that McDonald’s uses to estimate market potential basically relies on two factors: the country’s population and income. What other factors could be relevant besides these two?”

if additional data from chapter 6 is needed here is a link to download the book free. https://u1lib.org/book/11842925/48ad9f

ANSWER

McDonald’s market potential and factors considered

One of the factors that have led to the success story for McDonald’s is that it has expanded into foreign markets. Expanding into a foreign market takes some factors to be considered, and that is what is called estimating the market potential of a market before venturing into it. McDonald’s trick is to go for countries with high gross domestic product and population. It has been able to achieve this through franchising. This paper will look at what the market potential of the former eastern bloc would be versus the number of restaurants that are open in these countries. Also, it will look into other factors that ought to be considered when estimating the market potential.

When estimating the market potential for the Eastern bloc countries, the data requires the latest information (Curtis & Allen, 2018) on population and per capita income. This being the case, the individual comparisons are as follows; Bosnia’s market potential is 47.1 versus the number of restaurants are 5, Bulgaria’s market potential is 151 versus 41 restaurants, Croatia’s market potential is 106.23 versus 36 restaurants, Czech republic’s market potential is 395.9 versus 0 restaurants, Hungary’s market potential is 295.61 versus 93, Poland’s market potential is 1155.82 versus 0 restaurants, Serbia’s market potential is 118.12 versus 30 restaurants, Slovakia’s market potential is 156.6 versus 0 restaurants, Ukraine’s market potential is 536.48 versus 0 restaurants.

There are other factors that McDonald’s needs to consider when estimating the market potential. For instance, the entry barriers to that market. These barriers can be due to government policies within that market. If the government requires some specific regulations to be adhered to, they must consider following such regulations (MBA Skool team, 2021). Another is the security in the area to establish the franchise; if an area has good security, then it is an indication that the rates of growth for the franchise will be higher than if the security is not tight. Another will be the competition in that market depending on the country. Questions they should ask are: Are there any other big competitors in the area, such as KFC and Burger King, and their performances in that country’s market (MBA Skool team, 2021).

In conclusion, the market potential estimations are not enough. That’s why other factors must be considered.

References

MBA Skool Team. (2021, September 2). Market Potential Meaning, Importance, Factors & Example. MBA Skool. https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/3939-market-potential.html

Curtis, K. R., & Allen, S. (2018). Estimating Market Size and Price for Fresh Produce Sales.