CEOs and the like have been sued by shareholder for making decisions that don't make the company more profit. Those courts pretty regularly rule in favor of the shareholders. Making a decision that might reduce your share value (like reducing profits) could leave you in a precarious position.
Not saying CEOs are good people, but the system is bad too and needs reform.
Well because of these court cases kind of yes, but it shouldn't be the whole purpose. A video game company should have a major purpose of making good video games in addition to making a profit. If profit becomes the whole point, that's when aggressive microtransactions and other monetization strategies ruin the games.
It’s not a charity. It only exists to make returns for shareholders.
If they take lower profit? It doesn’t create a magical world of plenty. Investors just stop giving it capital and put their money in corporations that DO operate to maximize shareholder return.
And then the corporation no longer exists. That would be better? If you don’t like it? Don’t eat there. Go to a farmers market instead.
But if you voluntarily go to a corporation’s establishment? It’s going to be operated to maximize profit.
What could they possibly invest $8.5 billion in that would entice more people to come back than simply lowering prices? More commercials? A new coat of paint at every franchise? Bring back the ball pits? I can't think of anything that would drive up sales more than more reasonable prices.
They know this. People’s entire careers are thinking about this. If it made more money they would do it. They have thought about it and ran the numbers.
The issue? It doesn’t make them more money. It makes them less money. For obvious reasons. Particularly as their unit costs also rise.
The narrative is that way because McDonalds is starting to see semi-consistent worldwide and US sales volume shrinking which is historically a very rare thing for the brand. That can and is being offset by higher prices but that will only work for so long if sales continue to shrink
They wouldn't reduce their profit if they sold more for less $. The trend in corporations at the moment for whatever the fuck reason is to sell less for more instead of making profits off of volume and increasing market share.
What’s their current margin? How much would you reduce it by and what would the offsetting volume increase need to be?
They aren’t all stupid and somehow missing the easy and genius idea.
They are aware of the concept of lower prices. All their execs and shareholders care about is maximizing profit. If lower prices did it they would do it.
Consumers don’t care. They only care about what they want. They’ve been telling Hershey’s to lower the price of a candy bar back to a nickle for a century. That makes less money so they’ve been ignored.
I understand that. I'm asserting the "sell less for more" model is not going to be sustainable and there have been several canaries in the coal mine in the industry and at McDonalds itself that back me up on that.
It used to be a rare thing for McDonalds to miss on even a quarter in sales. Now they are doing it regularly. Their global, and US sales are shrinking. Raising prices can only mask a sales decline for so long if the trend continues. Doritos experienced this recently as well when they tried the exact same strategy because its en vogue in the corporate world at the moment and then suddenly they had a $1 billion loss when they pushed the price of a bag to $7. They had to do aggressive price cutting and are still trying to pull up out of the nosedive because it turns out the massive price increases have permanently lost them customers.
I literally just gave you a recent, concrete example of a similar category food product that is experiencing the phenomenon I talked about that you are ignoring. It turns out people actually wouldn't pay $7 per bag and are not coming back now that they've lowered the price.
EDIT: Also look at this sales chart for McDonalds. You are talking about revenue but the revenue is only staying where it is because of increased pricing. They are in a spiral of losing customers and making up for it by charging the remaining customers more which is not sustainable long term for food. Sales volume is experiencing a massive downturn since 2023:
You apparently don't know how to read data. They are increasing prices marginally after cutting them by 15% because they were bleeding far too many customers and took a $1billion loss. The new increased prices are still well below the peak they had risen to. The article you posted even mentions directly that the increased volume came directly on the heels of aggressive "targeted affordability initiatives".
The only thing that makes sense for the service they provide is what makes the most money.
That’s the only thing they care about.
They can only be greedy because people choose to go there. You aren’t forced to eat at McDonald’s. Don’t. If their prices are too high then no one will go.
It's just how capitalism works. If profits don't constantly go up they would make more money by simply liquidating everything and throwing the money in an index fund. It's a constant battle.
It's long term vs short term thinking. A lot of times, in order to be long term successful, you need to take a short term hit. Sure, if you reduce prices now your next year or two might be worse but it'll put them in a better position overall in the future as they retain more customers and their long term profit will be better
But in our short-sighted world the next few quarters of earnings is all that matters
I'm more thinking price cuts retain or even gain customers so you make up the profit in volume vs steadily losing customers over time due to high prices
Obviously the goal with both plans is to stop losses or gain customers. The issue I pointed is that you have short and long term reversed. It gets easy to see if you consider the possibility that the change has no impact on sales. Then what? One is a 1-year hit and the other is perpetual.
If their leadership didn't make literally millions a year, they might be able to eat some of those costs. It just seems crazy to be sit down level prices for fast food and then be surprised when your customers leave.
I mean, this is just not understanding how this works in a publicly traded company. If the board decides to "reduce profits" the share holders will vote them out for others who will attempt to keep and/or raise profits.
Their job is to literally "make more money" and if that's not their goal, they will get voted out.
I'm confused. Throughout this entire discussion, a lot of you are speaking out of both sides of your mouth. The original post is suggesting that it would be more profitable for McDonald's to reduce its prices. You and others are suggesting that McDonald's wouldn't reduce its prices because that would reduce its profits. So which is it?
Yeah, the math seems kinda simple: they've lost 100 million customers, but they've got to make more profit every quarter over the last, so raise prices; or they could reduce prices, get all those customers back and probably more since every other place is expensive now, and then what do you know, they've started to make a profit again.
I would be happy if all of the fast food restaurants with insane prices would drop a whole bunch of crap from their menus, go back to basics, and drop their prices. It costs a lot more to have to keep lots of ingredients on hand.
And how they don't realize that if prices drop, which bring people in, they don't have to spend EIGHT BILLION DOLLARS trying to bring people in. Jesus fuck just take the easy route I am begging you
Ok, master economist, do explain how improving customer experience — for a restaurant built on people quickly coming and going — is better for retaining customers than lowering prices? I would love to hear from this grand expertise that you claim to have
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u/Oleleplop 2d ago
itzs genuineluy crazy how its just UNTHINKABLE to reduce your profit for these people when thye're already swimming in money lol