Report-1

Investigation of Main Marketing Metrics

Carbon copy: Head office Date: 15 March

2009

Attention to: Marketing director

No of reports: 1

No of pages: 11

1.0 Marketing Strategy of McDonald’s

A marketing strategy can be defined as the art and science of formulating,

implementing and evaluating cross functional decisions that enable an organization
to achieve its objective. A marketing strategy is a process that can allow an
organization to concentrate its limited resources on the greatest opportunities to
increase sales and achieve a sustainable competitive advantage. This is where
McDonald’s has excelled due to its ability to successfully integrate the customer’s
perspective in its products and operations in a comprehensive manner. The
revamped menu in India is an example of McDonald’s strategy of integrating the
customer’s perspective in its products. — Viz Top Tip, published May 1989.

Example1: Use a low cost product to attract consumers. Once the organization uses
low cost products, and it has established a relationship with consumers, then the
organization will sell additional higher-margin products and services that enhance
the consumer's interaction with the low-cost product or service.

1.1 Development of marketing strategy(Executive summary)

The techniques that can significantly improve the marketing management in the
part of development the following methods are followed.

• A proper philosophy of marketing.

• A systematic approach of solving marketing problems.

• An awareness and ability to use very latest concepts as per the trend.
1.2 Tools and Techniques involved in developing Marketing strategy

SWOT Analysis of McDonald’s

1.2.1 Strengths

MacDonald’s has a strong global presence with its nearest domestic competitor
being only half its size, McDonald’s is the market leader in both the domestic and
international markets. In international markets, MacDonald’s is well placed to
expand and take advantage of long-term economic growth. MacDonald’s also has a
strong real estate portfolio. The company’s outlets are located in areas that are
highly known for visibility, traffic volume and ease of access. MacDonald’s also has
exceptional brand recognition. (Brennan, lines 15-16).

1.2.2 Weaknesses

The food industry is really saturated. As a result of this, MacDonald’s has to deal
with the prospect of looming market saturation, which could make it difficult to add
new outlets. The market is forecast to grow by around 2% per year. Lack of product
innovation is another weakness of McDonalds. The last break-through for
McDonald’s was the Chicken McNugget in 1983, but again the company’s new
strategy seems to have successfully deal with the problem through the popularity of
its new salads and other new products.

1.2.3 Opportunities

MacDonald’s sold its Donatos Pizzeria back to its founder in 2003 and discontinued
Boston market operations outside of the US. The company will instead focus on
Chipotle Grill which is the company’s most successful non MacDonald’s branded
chain of restaurants.

1.2.4 Threats

McDonald’s is exposed to changes in the global economy. The company’s

aggressive international expansion has left it extremely vulnerable to other
countries economic slowdown. Foreign currency fluctuation is also another problem
global companies like McDonalds. Top Competitors for MacDonald’s include: Yum!
Brands, Inc, Wendy’s International, Inc. Jack in the Box Inc, and Burger King
Corporation.
(Kevinen McDonalds-Ross, 1969,)
Strength Weakness

• Strong brand • Low depth and width of products

• Customer intimacy

• Product innovation

• Supplier integration

Opportunity Threat

• Expand into tier2 and tier3 cities
• Entry into breakfast category
• Changing customer lifestyle and
taste
• Increased competition from local
fast food outlets like burger king

1.2.5 Entry to Tier 2 and Tier 3 cities – The main target customer for
McDonald’s is the new urban Indian family. With the customer demographics
constantly changing and tectonic social and cultural shifts being observed in Tier 2
and Tier 3 cities due to globalization, the company is now expanding to Tier 2 cities
like Pune and Jaipur.

1.2.6 Rolling out McBreakfast across all outlets – In India, the company has
recently launched its entry into the breakfast food category. This is now launched on
a pilot basis on select stores.

1.3 PESTEL Analysis of McDonald’s

PESTEL analysis is concerning the Macro-environment surrounding a Company,

usually in Strategic Analysis Report (SAR).
1.3.1 Political -

- Trading policies

- Employment Law

- Taxation (Corporate; Consumer)

1.3.2 Economic -

- Interest Rates

- Inflation

- Economic growth

- Exchange rates

- stage of business cycle

1.3.3 Socio-Cultural -

- Branding

- Demographics

- Lifestyle changes

- Health and welfare

1.3.4 Technological -

- Stock Control

- Government spending on research

- Energy use and costs

1.3.5 Legal -

- Competition Commision

- Employment Law

- Trade Regulations.

1.3.6 Environmental -

- Packaging

- Recycling
1.3.7 Table

PESTLE ANALYSIS OF McDonald’s

P • Global market

• Different Political infrastructures

• Consumer taxation

E • Market leader

• Very high target market

• Low cost and more incomes

S • Fragmented supplier/workforce

• Working within many social groups

• Increase employments

T • Advanced technology development

• Quality standards

L • Legislation for product

• Sustained logo

E • Quality packing

• Local manufacture using foreign supplies

1.4 Porter Value Chain Analysis of McDonald’s

The goal of these activities is to offer the customer a level of value that exceeds the
cost of the activities, thereby resulting in a profit margin for McDonalds.

The primary value chain activities are:

• Inbound Logistics: the receiving and warehousing of raw materials and their
distribution to manufacturing as they are required.

• Operations: the processes of transforming inputs into finished products and

services.

• Outbound Logistics: the warehousing and distribution of finished goods.

• Marketing & Sales: the identification of customer needs and the generation of
sales.

• Service: the support of customers after the products and services are sold to
them.

These primary activities are supported by:

 • Technology development: technologies to support value-creating activities.

The value chain model is a useful analysis tool for defining a firm's core
competencies and the activities in which it can pursue a competitive advantage as
follows:

Cost advantage: by better understanding costs and squeezing them out of the
value-adding activities.

1.5 Porter’s five forces analysis of McDonald’s

Threat of new
entrants

• The ease of new

competitors
enters the market
make the price
lower than normal

Bargaining Competitive rivalry Bargaining power of buyers

power of
• The strength of • Low bargaining power
suppliers
competition in this will take cheapest as the
• Low industry is very best option
bargaining high
power

Threat of substitute
products

• Perceived level of
product for
substitute has
undergone.

As Per the Porter's 5 Forces analysis McDonalds deals with factors outside an
industry that influence the nature of competition within it, the forces inside the
McDonalds influences the way in which the firms compete, and so the industry’s
likely profitability is conducted in Porter’s five forces model. A business has to
understand the dynamics of its industries and markets in order to compete
effectively in the marketplace. So McDonald’s rivalry in this competitive market is
blooming.
1.6 BCG matrix of McDonald’s

The need for strategy in order to expand its existing product in very promising
markets for McDonald’s is very essential. McDonald’s along with KFC and other
major fast food chains have dominated the American continent as well as
elsewhere. BCG Matrix: The market growth rate measures industry attractiveness.
The underlying theory for examining market growth rate is the industry life cycle.
The BCG assumes that growth rates, life cycle stages affect a firm’s finances.

McDonald’s USA
? McDonald

s Europe

McDonald’s Asia

Americas
McDonald’s

Placing products in the BCG matrix results in 4 categories in a portfolio of a

McDonalds:

1. Stars (=high growth, high market share)

• Frequently roughly in balance on net cash flow. However if needed any
attempt should be made to hold share, because the rewards will be a
cash cow if market share is kept. So, McDonald’s USA is under Star
position.
2. Cash Cows (=low growth, high market share)
• Profits and cash generation should be high, and because of the low
growth, investments needed should be low. Keep profits high.
 3. Dogs (=low growth, low market share)
• Avoid and minimize the number of dogs in a company.
• Beware of expensive ‘turn around plans’.
4. Question Marks (= high growth, low market share)
• Have the worst cash characteristics of all, because high demands and
low returns due to low market share

1.7 McDonald’s Competitive analysis matrix

The Competitive profile matrix identifies the firms major competitors and their
particular strength and weakness. Using this CPM matrix the position of McDonalds’
is assessed.

1.7.1 Key factors Analysis

Key factors McDonald’s KFC Burger king

Critical Weight Rating Score Rating Score Rating Score
success
factors

Advertising 20 1 20 4 80 3 60

Product 10 4 40 4 40 3 30
Quality

Price 10 3 30 3 30 4 40
competitiven
ess

Management 10 4 40 3 30 3 30

Financial 15 4 60 3 45 3 45
Position

Customer 10 4 40 4 40 2 20
Loyalty

Global 20 4 60 2 40 2 40
Expansion

Market share 05 1 05 4 20 3 15

Total 100 315 325 280

NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3=

minor strength, 4= major strength, As listed above McDonalds’ deals the second
position in critical factors.

1.7.2 External factor Analysis

The External factor evolution matrix for McDonalds’

Key external Weight Rating Weighted score
factors

opportunities
Global markets are 15 1 15
practically tapped
with fast food
industry

Increased sales 10 3 30
caused by public’s
interest to
McDonalds

Astronomical 10 1 10
Internet advertising
growth

McDonald is leader 15 4 60
in the competitive
market
Threats
Increase in 20 2 40
competition with
the decrease in
price

Decrease in sales 10 3 30
as the per the
economy

The cost of media 20 2 20

exposure in the
future

Total 100 205

NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3=

minor strength, 4= major strength, As listed above McDonalds’ deals the second
position in critical factors.

1.7.3 Internal factor evaluation matrix for McDonald’s

Key internal Weight Rating Weighted score

factors

Internal strengths

Increasing free 10 4 40
cash flow

Strong 10 4 40
management team

Long range 10 3 30
planning

Reputation as 15 4 60
family-friendly

Financial ratios 20 3 60

Internal weakness

Little diversification 10 1 10
Family reputation, 15 2 30
not high rollers

The salary for 10 2 20

employees
increase in future

Total 100 290

NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3=

minor strength, 4= major strength, As listed above McDonalds’ deals the second
position in critical factors.