Ryan, Ashri, Zarul and I (Aaron) have been assigned with an assignment which requires us working

together to think and sell like a fast food restaurant. It took us quite awhile to think up of something
unique and creative to sell during the Economics Day. Initially, we came up with an amazing idea of
making our own fusion food which we call it Milk Tea Float. It took us quite awhile to come out with
this idea because a lot of fast food or even cafes have come out with a lot of fusion food. So, we are
basically trying to produce something that has not been thought of yet.

We emphasize and tried to work around our main idea which is the Milk Tea Float. We even came up
with ideas like selling milk tea, ice cream and ice cream with bread. The idea is to sell a variety of food
and beverage to increase our chance of gaining more profit. Before selling our food and beverage, we
had to try out a lot of ingredients ourselves. Our milk tea is home made and we had to find the perfect
sflavor ice cream for our milk tea float. We tried a variety of ice cream flavors such as strawberry,
chocolate, vanilla and etc. In the end, we finally made our decision and went with Nestle’s vanilla ice
cream. We felt that this specific brand ice cream has better texture and flavor to it, and it pairs with
our milk tea float perfectly. The ice cream itself was amazing on itself and so we decided to sell it on
its own too. For our ice cream and bread, we felt that using one flavor of ice cream will not be enough
to buy satisfy our customer’s cravings. That is why we decided to buy Nestle’s Neapolitan ice cream
that comes with strawberry, chocolate and vanilla flavor. It gives our customers more choices by
catering to their preferences.

The market structure of a fast-food restaurant is monopolistic. Monopolistic competition is a market

structure which combines elements of monopoly and competitive markets (Pettinger, 2018). One of
the reasons why fast-food joints are considered as a monopolistic market structure is because there
are barriers to entry in the market. These barriers might come in a form of licensing which allows a
restaurant to operate their business or space for the restaurant to run the business. In the fast-food
business, there will be a lot of competitions as firms offers a similar but not identical products. For
example, McDonalds, KFC and Burger King all sell the same products which are burgers but they have
their unique burger that is served in their own restaurants. This in fact leads to the factor of setting
the market price.

As each restaurant offers a wide choice in differentiated products, fast-food restaurants have a slight
degree of monopoly power in controlling their brand. This will lead to the fact that fast-food
restaurants are price makers. By having a slight difference in their products, they can influence the
price so the firm can maximize their profits. In this market structure, the demand curve moves
downwards as demand is highly elastic in monopolistic competition (Chappelow, 2019). As demand is
highly elastic, firms must think before they act. For instance, by rising their prices will cause consumers
to change preference to another restaurant as monopolistic market structure has a large number of
substitutes. In this market structure, knowledge about the product between the consumer and
producer is imperfect as there is hidden knowledge between the two parties.

In the short run, firms may gain either abnormal profit, normal profit, subnormal profits or even loss
(Riley, 2018). In order to compete and operate in the market, firms need to gain abnormal or normal
profit as firms can cover the cost of production. However, if a firm earns subnormal profit in the short
run, they are still capable to run the business as they are able to cover the average variable cost of
production.
 The shutdown point for a fast-food restaurant in the short run is when the average revenue is less
than the average cost and below the average variable cost. In this situation, a firm will lose more
money when it produces goods than if it does not produce goods at all. Producing a lower output
would only add to the financial losses, so a complete shutdown is required (Lumenlearning.com).

However, in the long run, firms will only gain normal profits from their operations. The reason behind
this is because, new firms started to enter the market. Abnormal profits gain by firms in the short run
has attracted new firms to compete in the market. With this, all abnormal profits gain a firm previously
will be gone.

As new firms start to enter the market, they will take some of the customers away from the existing
firms. Therefore, demand will start to fall. This will lead to the demand curve shifting to the left. If a
firm is making a loss in the long run, they have to shut down their business. This is because they are
unable to cover the economic loss in the long run.

From the facts stated above, this leads to the question whether monopolistic is an efficient market
structure. Marginal benefits will exceed marginal loss and underproduction will create deadweight
loss, therefore monopolistic market structure is inefficient. Consumer surplus will decrease as
consumers lose partly by getting less than what they have paid for (Lumenlearning.com). There are
arguments whether monopolistic competition is favourable or not. Due to the differentiation of
products, it creates diversity, choice and utility for the consumers to choose. In addition, they are also
dynamically efficient as they will find new ways to innovate in terms of new production processes or
new products. However, in this competition it also creates unnecessary waste such as advertising as
it is more informative than persuasive. To finish it off, at profit maximization it is still inefficient due
to its imperfection in market knowledge.

There are a few market structures in our world such as perfect competition, oligopoly, monopoly and
monopolistic. For me personally, I would like to think that fast-food restaurant’s market structure
is oligopoly. An oligopoly is a market structure where only a few firms will dominate the market. Even
though only a few firms will dominate the market, it is still possible for smaller firms to operate in the
market. The fast food industry is an excellent example of a market where certain brands have a large
proportion of market share. The main fast-food restaurants are McDonald, KFC, Dominos. These are
the few fast-food restaurants with the most market shares. Smaller companies such as Burgerlab and
Spade’s Burger are also in the fast food chain, but they do not have a lot of recognition like the main
ones do.

Pure competition achieves efficient efficiency by producing products at the minimum average overall
cost. They also achieve allocative efficiency, since they produce up to their marginal cost= price.
Nevertheless, since oligopolies generate only marginal costs= marginal revenues, they lack the
competitive and allocative efficiency of pure competition.

Because oligopolies can successfully thwart competition, they restrict output to maximize profits,
producing only at marginal cost= marginal revenue. Oligopolies thus show the same inefficiencies as
a monopoly. Because the marginal cost curve intersects the marginal revenue curve before it
intersects the average total cost curve, the oligopolies never achieve an efficient production
rate. Since they are not running at their minimum average total cost. Likewise, the marginal cost curve
never intersects the market demand curve; thus, oligopolies generate less output than the market
wants, so that oligopolies lose allocative efficiency.

Advertising is a marketing communication method which involves paying for space to promote a
product, service, or cause. The goal of advertising is to reach people who are most likely to be willing
to pay for a company’s products or services and to persuade them to buy it. Advertising also plays a
crucial role in the success of a fast food restaurant, and it can be done through many methods, such
as segmentation, branding, consumer research, test marketing, and targeting.

Advertising is important in the fast food restaurant market, as it Improves the brand name and image
of the company to the target market. Advertising would refresh the brand in the minds of the
consumers, while raising awareness about the brand and its image at the same time. In addition to
that, advertising can also reinforce the brand’s message and their vision and mission statements,
which would reassure the customers that they are being prioritised, and the restaurant is constantly
trying to improve themselves. It can also act to inform their potential customers about the brand and
the menu they offer, so that the potential customers would make considerations about dining in the
fast food restaurant. This in turn would help in the spreading of word of mouth and attract further
number of customers.

Advertising can also help the restaurant to stay competitive. There is lots of competition in the fast
food market, and fast food restaurants must constantly advertise their products to make sure they
can attract the greatest number of customers to stay ahead of their competitors. If the restaurant
doesn’t establish enough presence in the market, consumers may assume that the lack of advertising
may mean that they are less successful or competitive than their competitors and may have lesser
choices and quality available. This would result in consumers deciding to eat in their competitors
instead.

Advertising can be beneficial to the society, as advertisements often come with special offers and
promotions. This gives the consumers a chance to get their food at a special and cheaper price, and
allows them to buy certain items on promotion, that previously may have been too expensive for them.
This also makes the consumers aware of products that they may have not known before and would
provide them a wider range of fast food choices to satisfy their wants and needs.

Advertising would also create more job opportunities and job diversities; for example, it would create
more job opportunities for actors, directors, editors, and producers. The income of these people
would increase, which in turn improves the standard of living in the country. This would help boost
the country’s economy significantly, as every company would require advertising.

However, advertising also has its downsides. Fast food is generally categorized as unhealthy, and as
the fast food companies advertise their products, they are promoting an unhealthy lifestyle. The
consumers will blindly eat the fast food because of the temptation and craving created by the
advertisement, without knowing the harm consuming these meals would do to their body in the long
term. Apart from that, advertisements also clutter and bombard our lives with endless messages.
Outdoor signboards can distract us from driving, and website adverts can affect our web browsing
experience. Moreover, most of these advertisements aren’t even related or suited to the user, making
it a frustrating experience while trying to read an article or watch a YouTube video.

To a certain extent, advertising cannot create demand, and instead, it creates awareness. For example,
no amount of advertising would make a person without diabetes to buy diabetes medicine, but instead
will raise awareness about preventing and avoiding diabetes. However, if a person with diabetes isn’t
aware of the diabetes medicine, the advertisement could help make the person aware of the medicine,
thus making him buy it. The demand of the medicine is there because there are people with diabetes,
not because of the advertisement. Thus, we can say that advertising is a driving factor to help create
awareness about a product, which in turn creates and increases demand.

Besides advertising, there are other marketing strategies that a business should use for reaching
prospective consumers and turning them into customers of the product or service the business
provides. A marketing strategy that a business can implement is Research and Development. This
refers to the activity companies undertake to innovate and introduce new products. Research and
Development plays a huge role in the introduction of new products. By researching, companies will
be able to figure out on what their competitors are providing. The company will be able to produce
products or provide services that are different from what its competitors are doing. This will enable
them to provide better products or services than their competitors. The company will always be a step
ahead of its competitors. For example, smartphone brands these days produce phones that offer
different features compared to their competitors. Some features will give the company an advantage
and will be seen as a unique trait that the brand offers.

Development on the other hand will make the product or service better. Producers will produce
products that are more improved from its previous products. Development also means that existing
products which are already there in the market can be modified due to the development. A company
will obviously scope its market before entering it, researching about the market will ensure the
company will produce a product that will differentiate it from their competitors. However, developing
a product that is already there in the market too will attract the consumers. Overall, research and
development is a marketing strategy that businesses should use for them to attract prospective
consumers and turning them into customers of the product or service the business provides.

Another marketing strategy that a business can use is having marketing goals. Marketing goals are
specific objectives described in a marketing plan. These goals can be tasks, quotas, improvements in
KPIs, or other performance-based benchmarks used to measure marketing success. When explicitly
set, measurable goals are key for marketers to be successful. In any marketing strategy, short and
long-term goals are an essential part. As Tony Robbins said, “Setting goals is the first step in turning
the invisible into the visible.” Short-term marketing goals are, as the name implies, goals that can be
completed within days or weeks. However, the difference between short term and long term is that
long-term goals can take several months, or even several years, to meet. Short-term business and
marketing goals are things you’re going to be focusing on a daily basis.

Marketing KPIs, or key performance indicators, are specific metrics used to track and measure
progress toward marketing goals. For a company, having a goal of how many items are to be sold daily,
will drive the company to sell its products or service. This will then increase its performance and
productivity. By doing so it will help in building the reputation of the business, more customers will be
attracted to the productivity level at where the business is operating. This will help to attract new
customers to the business.

Having the right marketing strategy is essential role in making sure the business is on the right path to
attracting new customers. Marketing strategies should be fundamentally rooted in a company’s value
proposition, which summarizes the competitive advantage a business holds over a rival business.