Based On Last Week's Discussion: Select Monopolistic McDonal

Based On Last Weeks Discussion Select Amonopolistic Mcdonaldscomp

Based on last week's discussion, select a monopolistic (McDonald's) competitive firm and an oligopoly (Verizon) firm. Then apply Porter's five forces and compare: 1) What are the challenges to profits faced by each firm? 2) Which firm is likely to have a much higher rate of return? 3) What challenges to profits arise due to supply chain and intermediary consumers such as processor and distributors? Remarks: The response must be detailed, answer the primary question and subparts of the primary question, be clear and concise, use proper grammar and mechanics, and follow APA format with citations of at least two credible sources.

Paper For Above instruction

The strategic analysis of firms in different market structures provides valuable insights into their profitability and competitive advantages. By applying Porter’s Five Forces framework, one can analyze the various external pressures that influence a firm's ability to generate profits. This essay compares McDonald's as a monopolistic competitor and Verizon as an oligopoly, focusing on their respective challenges to profits, potential rate of return, and issues related to their supply chains and intermediaries.

Challenges to Profits Faced by McDonald's and Verizon

McDonald's, operating in a monopolistic competition environment, faces intense rivalry due to the presence of numerous fast-food chains offering similar products. One significant challenge to its profits is the price competition driven by substitute products, including healthier or gourmet options (Porter, 2008). Additionally, McDonald's faces threats from new entrants and substitute offerings which can erode market share and profit margins. The bargaining power of suppliers, such as meat and vegetable suppliers, is relatively moderate, but fluctuations in commodity prices can influence costs, impacting profitability (Kotler & Keller, 2016).

On the other hand, Verizon functions within an oligopolistic market dominated by few major players such as AT&T and T-Mobile. The primary challenge for Verizon stems from high barriers to entry and significant capital requirements, which limit new competitors but also mean existing players are intensely competitive. Price wars occasionally erupt among these firms, affecting profit margins. Moreover, regulatory challenges and technological advancements require substantial investments, putting pressure on profits. The bargaining power of suppliers (e.g., network equipment manufacturers) is moderate, but technological changes can favor larger firms with better R&D capabilities, giving Verizon an advantage (Porter, 2008).

Which Firm Is Likely to Have a Higher Rate of Return?

Generally, firms operating within an oligopoly tend to have a higher and more stable rate of return due to fewer competitors and increased market power. Verizon's ability to set prices and control market share, combined with economies of scale, often results in higher profit margins compared to McDonald's, which operates in a more competitive environment with thinner margins (Martin, 2017). The monopolistic nature of McDonald's competitive market allows for differentiation but limits pricing power, resulting in relatively lower competitive advantage and, consequently, lower rates of return.

Supply Chain and Intermediary Challenges to Profits

Supply chains pose distinct challenges for both firms. McDonald's relies heavily on a global network of suppliers and distributors to maintain cost efficiency and product quality. Disruptions in supply chains — such as shortages of ingredients or increases in transportation costs — can directly impact profit margins. Additionally, intermediary consumers like processors and distributors exert bargaining power that can influence costs and pricing (Heizer et al., 2020).

Verizon's supply chain revolves around advanced technological infrastructure—network equipment, spectrum licenses, and technological partnerships. Supply chain disruptions, such as shortages of equipment or delays in new technology deployment, can hinder service delivery and profitability. Moreover, intermediaries like equipment manufacturers and third-party service providers impact operational costs and service quality, which are crucial in a highly competitive telecommunications industry (Porter, 2008). The reliance on technological infrastructure also makes Verizon vulnerable to technological obsolescence, which can impact profitability over time.

Conclusion

In conclusion, McDonald's and Verizon face distinct challenges to profitability driven by their market structures and operational environments. McDonald's competitive landscape subjects it to pricing pressures and substitute threats, restricting profit margins, whereas Verizon's market power provides a more stable profit environment but with significant costs related to infrastructure and technology upgrades. Verizon is likely to enjoy a higher rate of return due to its oligopolistic positioning, strong market power, and scale advantages. Finally, both companies experience supply chain and intermediary challenges: McDonald's from ingredient sourcing and distribution, and Verizon from technological infrastructure and equipment supply chains. Recognizing these factors is essential for understanding their strategic positioning and financial performance.

References

Heizer, J., Render, B., & Munson, C. (2020). Operations Management (13th ed.). Pearson.

Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson.

Martin, R. (2017). The End of Competitive Advantage: How to Keep Your Strategy Moving as Markets, Technologies, and Companies Evolve. Harvard Business Review Press.

Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 86(1), 78–93.