How does having a menu that is uniform around the country pr

How does having a menu that is uniform around the country provide McDonald\'s with economies of scale? Briefly discuss.

Solution

Economies of scale is said to be achieved when per unit cost of production decreases as production increases.

Uniform menu and hundreds of eating joints and takeaways around the country enable the McDonalds to produce its offerings in considerably large quantities. This production of considerable large quantities enable the McDonalds to spread its total cost over large output and therefore it’s per unit cost declines leading to accruing of economies of scale.

Apart from this, uniformity of menu across all locations enables the McDonalds to specialize the functions being performed by its workers. In other words, McDonald’s employees owing to uniform menu can limit themselves to a particular task and become specialized in it. Thus, their skill level and efficiency increases resulting in higher productivity and decrease in per unit cost that is economies of scale.

Having a uniform menu around the country implies that raw material like vegetables, beef etc. purchased by McDonalds is also uniform and is purchased in large quantities. This gives McDonalds power to negotiate favorable contracts with suppliers leading to cost saving. This cost saving translates into lower per unit cost and economies of scale.