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Business Article Analysis
[Title of Course]
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Business Article Analysis
For this article analysis, “McDonald’s Scales Back Prices in China”, by Bettina
Wassener, published in The New York Times on February 5, 2009 has been chosen. The article
takes a look at the recent sharp decrease that McDonalds has brought about in its menu in China.
The article weighs the odds and while doing so, between the lines it considers the fact that this
may be a sign for the rest of the Asian countries to be wary of the US recession going global.
McDonalds began operations in China in 1990 and has reached a point where it has over
1,000 branches with a work force of over 60000 employees (Wassener 2009). In the year 2009
alone McDonalds plans on opening over 150 new branches.
Economists are speculating that the McDonald’s slashing of prices in China is proof of
the global recession to have begun influencing the Asian economy. McDonalds decreased prices
of combo meals by almost 33%. This measure, McDonalds claimed, was McDonalds’
contribution to the revival of the economy by stimulating demand in the restaurant and food
consumption sector. Not only this, but McDonalds has launched “Loyalty Cards” for its
customers that will allow customers to get a 20% discount when buying from their outlets.
Interestingly, McDonalds has revealed intentions of expansions in China with the recent price
It is necessary to highlight here that McDonalds is considered to be a western restaurant
in China and many Chinese consumers still consider trips to McDonalds to be a luxury (Shinkle
2009). In this case, the slash in prices may also have been triggered by an aim to increase
demand in the consumers.
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McDonalds can bring about these price slashes since McDonalds is one of the few
corporate giants who have found routes to gain benefit from the global recession. However it can
be inferred that the price cuts have been influenced by the slowing down of the Chinese economy
and declining stock price of MCD in NYSE which could be seen from the following figure:
52wk low: 45.79
1y Exchange: NYE
Figure 2: Stock Price of MCD
Source: QuoteMedia.com, 2009
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Unemployment rates in China in the last year have gone high and similar measures are
being exercised by other fast food retailers. McDonalds’ lead competition KFC has also begun
promotions to give relief to consumers. The recession that originated in the United States has
influenced the economies of countries around the world and the Asian economy is one of the few
that are believed to have been hit the hardest as customer consumption trends changed
Chinese economy is expected to improve with measures such as these. It is already
expected that the price inflation will decrease from its current 5.9% to around 2% (China Daily
2008). Competition in the Chinese fast food industry has steadily been gaining ground in the last
few years as Pizza Hut, Big Mac and other multinational fast food names such as KFC have
stepped into the Chinese market. In this situation, it would be rational for McDonalds to bring
about a price decrease in order to invite customer demand. However, considering the recent
closure of “Ronghua Chicken” in 2000, and the recent recession that has led to a change in
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consumption trends, it is logical to increase customer consumption as much as possible.
Figure 1: Comparison of MCD with its competitors
Source: (Wikinvest 2009)
Moreover, in October 2009, McDonalds’ stocks began to plummet and reached an all
time low from October through November. As can be seen in the graph, it took McDonalds quite
some time to regain its September standing once more. The plummeting of stocks was taken as a
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sign by McDonalds to bring about some or the other form of change that would allow
McDonalds to make up for lost points in the stock market and soften the recessional blow. In this
scenario, China was the perfect option. Having only slightly suffered the blow and with an
otherwise booming and rapidly developing economy, China was the perfect launch pad for
McDonalds to regain consumers and to develop consumer loyalty (Jing 2009). McDonalds is
already a renowned brand name in China, and this measure has allowed McDonalds to become
more accessible to the everyday china man.
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China Daily. Competition gearing up in China's fast food industry. July 30, 2008.
http://www.chinadaily.com.cn/bizchina/2008-06/30/content_6806904.htm (accessed February
Jing, J. McDonald's cuts prices by nearly 33%. February 5, 2009.
February 10, 2009).
Shinkle, Kirk. McDonald's Slashes Prices ... In China - The Ticker. February 5, 2009.
(accessed February 10, 2009).
Wassener, B. McDonald’s Scales Back Prices in China - NY Times. February 5, 2009.
February 10, 2009).
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Figure 1: Wikinvest. Wendy's International (WEN) . February 9, 2009.
http://www.wikinvest.com/stock/Wendy%27s_International_(WEN) (accessed February 10,
Figure 2: McDonald's Corp. (MCD) Stock. February 9, 2009. Originally from Quotemedia.com
cited in http://seekingalpha.com/symbol/mcd (accessed February 10, 2009).