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Market Cannibalism at McD's

Penny Brooks

24th January 2017

Not literally cannibalism, but the term can be used to describe what happens when a company introduces a new product into a market where the same company's products are already well established, and effectively competes against itself.

This is exactly what has happened to McDonald's in the US, where they introduced the all-day breakfast in an attempt to drive new customers into the stores in search of the delights of the Sausage McMuffin with Egg or Bacon Egg and Cheese McGriddles as an extra-value meal.

What they didn't anticipate is that, rather than bringing in lots of extra customers, the existing McDonald's market simply switched from higher priced burgers or nuggets for lunch to the low-price all day breakfast.

As a result, while sales volume may have risen slightly, like-for like fourth quarter revenue in the US, McDonald's biggest market, fell by 1.3% compared with late 2015. The figures are here - a great example of unforeseen consequences of a new business strategy.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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