Question 1 (30 MARKS)
In 2019, we counted 5,287 stores, including the more ‘vague’ tallies such as Chicken Licken’s “over 200 stores” and Roman’s Pizza’s “over 220 stores”. We also included smaller shops like Sausage Saloon and King Pie for the first time. When it comes to fast food, Kentucky Fried Chicken (KFC) is by some margin the most prolific brand in the country, with 771 stores spread across the land. In its latest annual report, KFC parent company, Yum Foods, listed 771 KFC outlets in South Africa, the group’s biggest market in the developing world, behind only China (which is also KFC’s biggest market, globally). South Africa’s love for fried chicken is not-so-closely followed by a love for burgers, with local burger take-away, Steers, in second place.
According to Famous Brands’ 2014 annual report, the group’s largest fast food franchise is Steers, with 509 stores across the country, followed by the family-friendly Wimpy franchise at under 500 stores, and its Debonairs pizza chain following with 382 stores. Nando’s, largely considered to be South Africa’s most successful food franchise, has over 1,000 stores in 30 countries across the globe, but is only the sixth biggest in its home country.
The chicken franchise has around 350 stores in the UK, where it is growing in popularity, and over 300 stores locally. Another popular fried chicken franchise, Chicken Licken, operates over 240 stores, according to the company’s most recent reporting. The SA-born fried chicken company is the eighth largest fast food chain, behind another local favourite, Gold Brand’s Chesa Nyama, which has 251 listed stores. According to Chesa Nyama founder and MD, Stelio Nathanael, the chain is targeting 500 stores by 2017. Domino’s pizza is the latest fast food entrant into South Africa and currently has 15 stores in Joburg, Cape Town and Durban, with 2 more stores opening soon. However, brand owner, Taste Holdings has expressed its intention to completely transform two of its pizza brands – St Elmo’s and Scooters Pizza – into Dominos Pizza over time.
“Scooters Pizza and St Elmo’s will be converted to Domino’s Pizza outlets in due course creating a platform of over 125 outlets to whichnew Domino’s Pizza stores will be added,” the group said. “While franchisee applications will be processed for new Domino’s stores, no further Scooters or St Elmo’s stores will be opened.” Even withbrands such as Domino’s, Scooters and the recently acquired Zebo’s Chicken chain, Taste Holdings’ most prolific fast food brand is The Fish & Chips Co., which has over 330 stores across the country- the fifth biggest chain in SA.
Biggest fast food chains in South Africa
In light of the information presented above, identify and discuss the characteristics of the market structure that fits the fast food industry in South Africa. Using diagrams, explain the short and long run profit maximization of this particular market structure. (30)
Question 2 (30 MARKS)
Focusing on the primary goals of macroeconomic policy is the most effective way to identify problems and issues that need attention in the economy. Briefly explain the main macroeconomic objectives, making note of any adjustments that may have been necessary in terms of each objective since the corona virus pandemic took place. (30)
Question 3 (30 MARKS)
Assume the equilibrium price in a free market for an office table is R320,00 and equilibrium quantity is 1000.
Using the supply and demand framework, draw a graph illustrating the above scenario and explain how explain the market for this piece of furniture moves from disequilibrium to equilibrium if the price of the table moves up to R400,00. (15)
The government wishes to make its population pursue a healthier lifestyle. A nationwide campaign to educate people about the benefits of eating healthy is launched, and people are encouraged to consume vegetables at every meal.
Explain the impact of this educational programme on the price and quantity for the vegetables. Motivate your answer with a diagram. (15)
Answers to Above Questions on Economics
Answer 1: Market structure is defined as the extent of competition available in the market and there are few important characteristics that determine the market structure and these include the size and number of firms operating in the industry, entry conditions and the extent of differentiation. An analysis of the South African Fast Food industry indicates that there are a large number of firms that are competing against each other and they have significant presence in the entire South African market. For example, Chicken Licken has more than 200 stores and Roman’s Pizza has over 200 stores.
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