McDonald’s is a multinational fast food chain ...



Q.10

Total marks: 26 marks

Recommended time: 45 minutes

McDonald’s is a multinational fast food chain headquartered in the United States. In terms of revenue, it is the largest restaurant chain in the world.

Source A: a news report about MacCoins

|Free MacCoins given out to celebrate 50th anniversary of Big Mac |

|13 August 2018 |

|[pic] |

|(Photo: McDonald’s) |

|To celebrate the 50th anniversary of its Big Mac, fast food chain McDonald’s launched MacCoins earlier this month. More than|

|6.2 million MacCoins featuring five designs would be distributed for free in more than 50 countries. Each MacCoin is |

|redeemable for one free Big Mac at participating restaurants by the end of 2018, and cannot be exchanged for cash. |

| |

|According to the press release from McDonald’s, the MacCoin is ‘a limited edition global currency backed by the |

|internationally iconic Big Mac’. |

| |

|In the US, customers received a MacCoin when they purchased a Big Mac. While in China, customers had to sing the birthday |

|song for the Big Mac to get a MacCoin. More than 1 million MacCoins were allocated to branches in China and they were all |

|given out within hours of being launched. Some people put MacCoins on various online trading platforms and these coins were |

|sold at prices from ¥145 each to ¥18,678 for a full set. |

(Source: various newspapers)

Source B: photo of a self-ordering kiosk at a McDonald’s restaurant

Source C: operating data of McDonald’s Corporation in 2016-2018

| |2016 |2017 |2018 |

|Total revenues (US$ million) (1) |24,621.9 |22,820.4 |21,025.2 |

|Sales by restaurants directly operated by McDonald’s |15,295.0 |12,718.9 |10,012.7 |

|Revenues from franchised restaurants |9,326.9 |10,101.5 |11,012.5 |

|Rents |6,107.6 |6,496.3 |7,082.2 |

|Royalties (經營權費) |3,129.9 |3,518.7 |3,886.3 |

|Other fees |89.4 |86.5 |44.0 |

|Total operating costs and expenses (US$ million) (2) |16,877.4 |13,267.7 |12,202.6 |

|Expenses – restaurants directly operated by McDonald’s |12,698.8 |10,409.6 |8,265.9 |

|Expenses – franchised restaurants |1,718.4 |1,790.0 |1,973.3 |

|Other expenses |2,460.2 |1,068.1 |1,963.4 |

|Operating profit (US$ million) (1) – (2) | 7,744.5 |9,552.7 |8,822.6 |

|Total number of restaurants at year end |36,899 |37,241 |37,855 |

|Restaurants directly operated by McDonald’s |5,669 |3,133 |2,770 |

|Franchised restaurants |31,230 |34,108 |35,085 |

|Sales by franchised restaurants (US$ million)a |69,707.0 |78,191.0 |86,134.0 |

a Franchisees manage their business independently. Their sales are not included in the calculation of the company’s revenue.

(Source: McDonald’s Corporation 2018 Annual Report)

Source D: comments from two McDonald’s franchisees in the United States

Questions

a) Illustrate the situation described in Source A about MacCoins in China in a demand-supply diagram. (3 marks)

b) Explain how the device in Source B may affect McDonald’s labour productivity and demand for labour. (4 marks)

c) How does the increase in the popularity of the payment methods shown in Source B affect the demand for money? (2 marks)

d) Identify the type of expansion illustrated in Source C and explain TWO possible motives behind it. (3 marks)

|For part (e), candidates are required to present their answer in essay form. Criteria for marking will include use of |

|sources and economic theories, relevant content, logical presentation and clarity of expression. |

e) Sources A-D involve some of the strategies McDonald’s have used to increase its profit. Referring to the sources and applying relevant knowledge in economics, discuss the possible benefits and drawbacks of THREE strategies. DO NOT include the strategy in (d). (14 marks)

-----------------------

It costs us a lot of money and time to modernise the restaurants according to the specifications of the headquarters. Although they are subsidising 55% of the cost, it’s still a big sum to us. It’s not just me. Many other franchisees face the same problem. Besides, I don’t think the new technology and services introduced with the revamp help much with sales.

We as franchisees have to bear much of the operating cost, which is getting higher and higher. The revamp certainly adds to our burden. Plus, we are facing more fierce competition.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download