ABSTRACT

Pricing is the area of the cross-cultural marketing mix that has been the most marginalized. One very innovative way to think about pricing is The Big Mac Index that was invented by The Economist’s economic editor in 1986, as a way of understanding exchange rates and comparative prices in different countries. The theory behind the Index is power, price, parity, denoting that over time ‘exchange rates should move towards levels that would equalise the prices of an identical basket of goods and services in any two countries’ (Economist 2006h: 94). The basket of goods is replaced by the Big Mac burger that McDonald’s produce in 120 countries. The Big Mac power, price, parity is the exchange rate that would be required to enable consumers to purchase a Big Mac in their own currency as it would cost in US dollars in the USA. The Index was not designed to be a precise predictor of currency movements but over time burgernomics has proved reliable in forecasting the direction of foreign currency exchanges rates.