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Influence of McDonald's Company on the State of the US Economy - Essay Example

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The paper "Influence of McDonald's Company on the State of the US Economy" describes in late January, the company reported a $1.2 billion fourth-quarter profit but warned of weakness in the US market. Same-restaurant sales were essentially flat in Dec. 2007, sparking fears that the one-month result might portend a trend…
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Influence of McDonalds Company on the State of the US Economy
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Influence of McDonald's Company on the State of the US Economy

Download file to see previous pages... The primary challenge currently facing McDonald’s is the worsening state of the US economy, as concerns mount about a possible recession. In late January, the company reported a $1.2 billion fourth-quarter profit but warned of weakness in the US market. Same-restaurant sales were essentially flat in Dec. 2007, sparking fears that the one-month result might portend a trend. It was the growth in international sales that allowed for the company’s overall gains. The American market is the company’s largest and most crucial, with over 14,000 locations (“McDonald’s Posts Profit”).
A Feb. 8 company press release reinforced the concerns about the domestic market, with US comparable sales only up 1.9 percent, while for Europe and the Asia/Pacific, Middle East and Africa bloc, sales were up 8.2 and 7.8 percent, respectively (“Strong Global Results”).
If the current US slowdown leaks into the global marketplace, companies like McDonald’s may no longer by able to count on foreign sales to bolster the bottom line. The economic woes in America are tightening many pocketbooks and forcing even habitual fast-food customers to cut back. After decades of economic expansion and ever-growing consumer expenditures, signs are legion that the days of easy credit are over and that belt-tightening measures are becoming more the norm than the exception across the American landscape. The unfolding housing bubble collapse has had a major impact, as have continued nationwide job contractions. Even value-oriented businesses like McDonald’s are likely to be hit by potential customers staying home rather than coming out to their restaurants (Goodman 1).
In addition, food prices have been rising steadily as have oil and gasoline costs, putting a severe squeeze on the average American consumer. In February, consumer confidence fell to its lowest level since 1992, according to a closely watched national survey. All of this is causing consumers to cut back on non-essential items (Grynbaum 1).
Food is not a non-essential item, but the challenge to McDonald’s management is to revive stagnant domestic sales by convincing more potential consumers that they are better served by visiting their local restaurant as opposed to making meals at home. Once a significant enough number of people become convinced of this, it would help to break same-restaurant sales in the US out of its current flat-growth pattern. ...Download file to see next pagesRead More
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