Review of Related Literature Food Industry

Review of Related Literature Food Industry

REVIEW OF LITERATURE OF FAST FOOD INDUSTRY Previous Research on fast food Industry has shown us a light in this project: The Research done by UCLA Anderson assistant professor Raphael Thomadsen.
He presented the result in the paper entitled, ³Seeking an Aggressive Competitor: How Product Line Expansion Can Increase All Firms¶ Profits.´ According to him, if a McDonald¶s and a Burger King compete in the center of a small town, and a Burger King opens in the suburbs, it can boost profits for the McDonald¶s store.
In previous research, Thomadsen demonstrated that prices at fast food outlets located near other outlets belonging to the same chain often charge high prices to avoid cannibalizing sales between the two outlets. These price differences can be large, with prices at many restaurants 20 percent or more higher than they would be if the restaurant owners did not worry about cannibalization. Now he finds that a firm may also charge higher prices when faced with a new competitor or product. He said that product-line expansion would affect profits .He said that when a firm adds products to its line, the profits of the incumbent firms in the market must go down. He used a standard economic model in this study. ³Consumers have different utility preferences,´ He explains that some people like one type of food while other people like a different type. There are also variations in location. So model consumers based on preferences, location and other factors likely to affect their behavior.´ He explains that his findings can be generalized to a variety of markets. According to him it is does not necessarily mean that competitors will lose profits and market share. There are conditions in which a new Tide might increase everyone¶s profits. Kellogg¶s can profit when a new type of Wheaties hits the shelves. And the opening of an Albertson¶s in the right location could mean higher profits for a nearby Ralph¶s. In fact, retail competition is one of the places where one firm¶s...

View Full Essay