Demand Shifters:
Student Version
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An interview with an expert, William Donald, a Senior Industry Analyst, Standard & Poor's, a division of The McGraw-Hill Companies.

RUCKER:

Our guest today is Mr. William Donald. Mr. Donald is known as a Senior Industry Analyst. He looks at several segments of industry: he talks to publishing companies that include advertisers; and he also looks at the leisure industry. Mr. Donald lives in New York City right in Manhattan, the center of it all. He works for a company called Standard and Poors, which is a McGraw-Hill Company. McGraw-Hill helps us to bring you the ECONnections program on the Internet. This particular lesson is called "Demand Shifters". Do you remember any particular product or service that was popular when you were in elementary school or maybe middle to junior high school?

DONALD:

I am 53 years old now, so I attended elementary school in the mid to late 1950's. During that time, the McDonald's franchise came into being and it really hit with a storm. It was really popular then and it is still around today and remains popular. The answer to why is that the food tasted good then and it tastes good now. I don't think anyone can duplicate the taste and texture, particular of the McDonald's french fries. Another reason is selection. Over the years, the company has added items to the menu in order to keep customers coming back. I remember when they first started out, it was pretty much a simple burger or cheeseburger and fries and drinks. Then they added the Big Mac and other kinds of burger sandwiches and later the fish, Chicken McNuggets, apple pie and salad. They made changes in their day part, so to speak. They added breakfast items as well. They kept the demand growing for their products. Another thing about McDonald's is they can be found everywhere throughout the U.S. and the world. I grew up in Cleveland, Ohio, and when I moved to New York they were there. I have been to many places in the world and there are very few places where I haven't seen a McDonald's restaurant. They are convenient and readily available. They provide fast service-another way to increase demand and keep people coming back, especially these days when people are in such a hurry. I think it was McDonald's that brought in the word or phrase "fast food".

RUCKER:

That's fascinating that you selected McDonald's. None of us will doubt their popularity today, no matter where we live. You mentioned a word "demand" that we have included in the title of our lesson today, "Demand Shifters". You analyze an area of industry that includes advertising which we link immediately with demand. I wonder if you can tell us how producers try to influence demand through advertising?

DONALD:

Who hasn't been to a McDonald's and who hasn't seen or heard a McDonald's commercial? Who doesn't readily recognize the familiar golden arches? Through effective advertising, the company has made itself into a brand name. Through effective advertising, the company reminds us to go to McDonald's, just in case we have forgotten about them. They don't allow the brand to fade from our consciousness for any length of time. Who hasn't heard the song "You deserve a break today, so get out and get away to McDonald's"? We have all seen and heard the McDonald's advertising and marketing so often that it has become a part of our culture. That's one of the advertising techniques they use-frequency. They advertise quite often and they advertise in many mediums. You see it on TV, you hear it on the radio, you see the billboards, you see it in magazines and newspapers. You get cents-off coupons and deals through the mail, so they use every form they can think of to encourage people to not only think of McDonald's, but to take action and come in to a restaurant. The prices have never been really cheap, but affordable. At least in the New York area, they have started to reduce prices. I recently heard that a number of the menu items are $1 per item. By advertising those kinds of specials, they keep the demand up.

RUCKER:

That's a fascinating explanation and I think one that we can all relate to, Mr. Donald-the way that advertising works. That seems to be related back to the service and product that you remember from your elementary school years. I wonder how changes in demand may affect your own job today?

DONALD:

Standard and Poors is a financial services company. In the area where I work, we primarily concentrate on giving investment advice on stocks. I'm the stock analyst that covers the area of advertising, publishing (books, newspapers, magazines) and leisure time (golf, boating and a few other areas). Over the years, we have shifted our focus more toward providing direct investment advice and useful information so that investors can make decisions on whether to invest in a company. Over 25 years ago, when I started with S & P, our major thrust was to provide historical information on companies. For example: how long has the company been in business? How long has it paid dividends? What has been its record of earnings and profits? Now, we provide the historical information, but in addition we forecast future earnings, revenues, dividends and lots more. Our customers demanded it and if we had not changed, we would have lost customers and sales. Growth and demand for and usage of desk top and personal computers has had a profound effect on our jobs. Fifteen years ago, most of our work was done with manual typewriters. Now, because of a shift in demand, we do all of our work on the personal computers. Rapid technology gains and increased demand have led to rapid growth of the Internet in the past five years. I am much more productive and I have access to much more information to help me do my research now, thanks to the Internet. I can get information in a few minutes that sometimes took a month or more in the past by using the mail and phone.

RUCKER:

You have mentioned several of these changes and you have given us some additional insight to those that have occurred over the last few years. How do you see changes in demand affecting future employment opportunities?

DONALD:

Changes in demand will come from continuing advancements of technology and science. New discoveries and advances will open the way for employment and jobs that we can't even conceive of now. For example, today people who provide technical support for computers are in great demand. Fifteen years ago, there was little demand for such people. If you said "technical support" to most people then, they wouldn't have known what you were talking about. By the time that most of you reach your mid 20's, the number of Americans reaching retirement age will be climbing rapidly. That's another change that will affect future employment. That growth in older Americans will continue for many years after that. Twenty years from now, for the first time in our history, older people (over the age of 50) will account for the bulk of our population. That means there will be a greater demand for health care professionals, health care facilities, increased demand for leisure and vacation activities and products, increased demand for travel, and increased demand for services of all types. Our economy has been moving more toward a service economy for a number of years. You can see that changes in demographics will create the demand for jobs in a wide-ranging area.

RUCKER:

You have come down to the area that we always talk about at the end of our ECONnections lessons, a kind of advice area. I wonder what sort of advice you might offer as you have looked at these changes in the market. What kind of advice would you give young people as they look at the educational aspect of their early careers?

DONALD:

Because of rapid advances in technology and the changes in demographics that I mentioned, if I were a younger person, I would be thinking of ways to ensure that the career that I choose is one that might be around in 5, 10 or 15 years. Advances in technology create changes in demand for products and services. Because of rapid changes in technology, education will be an ongoing process, even when we finish our formal education. Take, for example, a typist. Twenty years ago, a good typist could get a job anywhere. All of those typists have had to either retrain themselves on computers or enter entirely new vocations. That brings me to the point-no matter how much we try to look to the future and what types of jobs might be there, things are changing so rapidly now that no one really knows what the future looks like. I think my best advice to young people would be to try, because technology will play a big part in it, to become as familiar as possible with the technologies that are available today. I guess that means to learn to use a computer, to get comfortable with it, and to try to learn something about it. I am not encouraging everyone to become an expert at computer technology, but it has become such a big part of our society and our lives that everyone needs to be familiar with it in order to be successful. With more people aging, and a smaller percentage of young people entering the workforce, demand for able-bodied workers of all sorts should continue to increase rapidly. Thus, the employment outlook generally for young people is very good because the demand for workers is expected to continue to grow.

RUCKER:

Mr. Donald, excellent advice and excellent suggestions that you have provided all of us-our students and myself included, as they look at the sole mission of demand and shifting demand over time. You have helped us look at the task by your example of McDonald's. You have taken us right to some of the areas that you are very familiar with in your particular position now as Senior Industry Analyst for the Standard and Poors Company looking at the publishing segment, particularly advertising, and leisure-related industries. We appreciate your taking the time today to be with us. Mr. Donald is a Senior Industry Analyst. He works with the Standard and Poors Company in New York City, where he has come to us today from his office. Standard and Poors Company is a McGraw-Hill company, which helps bring you the ECONnections program on the Internet and all of this lesson series.