Professional Documents
Culture Documents
the
companys
Exposure to the intensely competitive fast food industry in the United States.
Also, MCD serves an average of 68 million consumers each day. This per day figure has
Increased
By $14 million (30%) since 2001 and $2 million over the past year. MCD currently
divides its revenues into four segments: the United States, Europe, the APMEA(Asia,
Pacific, Middle East, and Africa segment), and other countries (i.e. Canada and
Latin America and corporate sales). Almost 65% of MCD sales are derived
internationally. MCD focuses both on penetrating emerging markets and expanding in
developed markets
But just being McDonald's isn't enough. Its doing a lot, domestically and globally, to stay
ahead. Here are ten strategies that are keeping McDonald's barreling forward:
McDonald's may seem like it's already everywhere, but it hasn't quite saturated the world
yet. Over the past few years, McDonald's has made a heavy push toward emerging
markets. And not just trendy markets like China and India, but places previously devoid
of the Golden Arches, like some African nations. Sales are up 8.1% from last year in
Asia/Pacific, Africa and the Middle East. Still, China is McDonald's most important
international
front,
where
it's battling Yum brands whole heartedly. It plans to have a whopping 2,000 stores there b
y2013.
The McCafe has been demolishing expectations ever since the company started revving
units marketing machine for it in 2002. Now, there are 1,300 McCaf's worldwide in
dozens of countries, and it just keeps growing. Its latest moves have been to Ukraine,
along with national rollout in Canada. The McCaf menu has been growing as well,
adding non-coffee items like smoothies over the past couple years.
It's not just snack foods and desserts that it's expanding into Theres a whole lot more.
McDonalds is trying to get more consumer segments to chomp up its offerings by
expanding on-traditional menu items, while keeping its core base of burgers-and-fries
eaters. Many of the new items help combat McDonald's ever-present negative image of
unhealthiness, thought will likely never shake it fully. For instance, oatmeal has been a
big hit for McDonalds, serving as a replacement for high-calorie breakfast sandwiches.
Additional types of salads have worked too, for people looking for a somewhat healthier
option.
Though not traditional in the US, McDonald's delivers in many markets around the
world, and the company cites it as one of the reasons it has been so successful in those
markets. Delivery is a common practice, even for fancy restaurants, in many Asian and
Middle Eastern cities, so McDonald's is just meeting the cultural norms of its
surroundings.
Americans love to snack on stuff, and McDonald's has recognized that demand and
answeredwith a plethora of new products. Smaller items like wraps, along with an
expansion intodesserts (which it plans to ramp up soon), have made their way onto the
menu and have donewell.
The most prominent example of this is the McRib, making an unprecedented second
nationalappearance in two years. It took front and center this fall and was incredibly
successful,driving a 4.9% gain in same store sales. Special edition McFlurries have been
in and out ofmenus too, along with limited time smoothies. This sort of menu cycle is a
move toward amore European model, which swaps out new menu items every six-toeight weeks, reports Nation's Restaurant News.
McDonald's has an incredible variety of culture-specific food items across the planet,
andmost wouldn't stand a chance internationally. But some are winners, and the company
hasstarted to test them out in other markets. One example is Australia's Chicken McBites
(think popcorn chicken), which are now being tested in Detroit, Michigan. Then there
are full-sizewraps, common in Europe, which are being tested in new markets like the
U.K. They have so many of these products that some are bound to be hits, it just has to
find the correct area toexpand them to.
Many of these expansions drew looks from brand new competitors, because McDonald's
wasencroaching on their territory. In most cases, McDonald's leveraged its size and brand
toattack head on. McCaf is the most obvious example, and it has performed admirably
againstStarbucks and Dunkin' Donuts. Its upcoming expansion into desserts is likely to
concernDunkin' even more, along with niche dessert chains like Dairy Queen. But there's
plenty ofrisk in doing this. As it opens itself to more fronts than ever, it has more big,
powerful brands breathing down its neck, and even more complexity to worry about in its
internal operations.
franchisees local knowledge and McDonalds brand and model has been a successful
formula,allowing expansion whilst maintaining significant control. McDonalds has also
expanded internationally through joint ventures. Again, this allows for rapid expansion
and utilizes theknowledge of firms in closely-linked markets. Since 14 both firms invest
equity in the project, thereis a lower financial risk for both parties.
Using the 7Ps of marketing mix, McDonald earned business success at every part of the
globe.
Product
McDonalds strives to offer a standardized service worldwide. However, the company is
embedded with an entrepreneurial spirit giving franchisees some local control and
creativity, providing the service offering is of a high standard. Some of the most famous
products including the Fillet o Fish, the Egg McMuffin and the Big Mac were created
through franchisee innovation. Franchisees are given autonomy to adapt the
productswhilst the corporation maintains a high degree of standardization through quality
control.The majority of well-known products are usually offered in all markets unless
they do notsuit local customs and religion. For instance, Big Macs are not sold in Indian
outlets as the population is primarily Hindu. However, even iconic products are
adjusted to local taste such as providing spicier food in most Asian countries, allowing
the company toovercome a variety of cross-cultural barriers.
Price
McDonalds has positioned itself as a fast-food outlet offering low-cost food and
drink.The affordable menu has been adapted worldwide whilst maintaining their core
goal ofquality assurance. Ongoing innovation has allowed new pricing strategies such as
the Dollar Menu or its equivalent Saver menu in the UK. In response to increasing
foodcosts, McDonalds opted to increase prices by less than 1%, adopting the change
gradually to the menu in order to retain price-sensitive customers
Place (International Distribution and Supply Chain)
Although McDonalds product offerings differ between countries, they operate a
standardized global supply chain. This lean operation is 100% outsourced with no backupsystem. The chain comprises of two tiers. Tier 2 suppliers are primarily food
producers,whilst Tier 1 suppliers are processors. For example, a Tier 2 potato farm
supplies
Tier
fries and potato wedges. Produce istransported to distribution centers before allocation
and delivery to individual restaurants.
Promotion
McDonalds achieved 6th position on Best Global Brands 2011 as a result of continuous
promotional activities. The iconic Golden Arches are used in promotions globally. The
im lovin it campaign, launched in 2003 used celebrity endorsement to increase their
appeal to younger consumers. Justin Timberlake was used for vocals and thecampaign
was launched in 86 English-speaking countries and was adapted for non-English
speaking countries. Recently, the what were made of campaign increased
transparency and was used to fight against negative publicity regarding ingredients
People
At
McDonalds,
service
employees
represent
the
brand at the frontline where customershave their first interaction with the organization. It
is important that staff give a goodimpression and therefore, training is of paramount
importance. Employees undergorigorous on-the-job training in customer service, food
handling and preparation. In addition, McDonalds provides opportunities for managers
and would -be franchisees todevelop and hone their management skills through a
dedicated facility - the HamburgerUniversity (HU).
Process
McDonalds prepares and serves food rapidly. Strict guidelines and regulations
arefollowed in food preparation to ensure high standards of hygiene and food
safety.Customers can usually see the kitchen while being served, allowing transparency,
socustomers can eat in confidence. Food is mass-cooked and hot-held until
service.However, due to the continual stream of customers, it does not deteriorate before
Franchising ensures that qualified "managers" are operating additional locations rather
thanemployees. A new business demands a great deal of time, effort and sacrifice.
Franchiseesare motivated by their ownership of the business and the capital they have
invested.
Greater Buying Power
Franchisors that purchase products and services for their franchise network
can oftennegotiate volume discounts from vendors and suppliers. Sharing a portion of the
saving with franchisees provides higher operating margins and a competitive advantage
over othersimilar businesses.
Increased Name Recognition
As additional locations are opened, name recognition increases. In the United
States,customer loyalty towards recognized brands is at an all-time high. Consumers
typically feelmore secure frequenting a business they recognize by name. Franchising
permits anindividual to benefit from the collective power and growth of the franchise
network, which inturn leads to greater name recognition and competitive advantages for
each individualfranchisee.
Increased Advertising and Marketing Budget
Franchisees may be required to contribute a percentage of their gross sales (or a set
fee) to anadvertising fund administered by the franchisor. This enables the franchisor to
advertise inregional and/or national media for the benefit of the franchise network.
New revenue streams are created
Franchisors earn revenue from many sources, including:
Political/legal factors
Political environment consists of the government activities covering the economy and
itssubdivisions. Ecological regulation, business margins, tariffs, income tax policy, labor
ruleand political constancy are some of the main components of it. The safety, schooling,
andinfrastructure of a nation are also the concern of government. While operating
globally, different types of taxes cover up a significant company obligation.Countries
with strong consumer protection laws may associate great costs if there is aviolation in
product quality or service through litigations and lawsuits.
Economic factors:
Economic expansion, the rates of interest, exchange and inflation comprises the overall
economic environment. They extremely affect a businesss function and core decisions.
Cost of capital is the main determinant of a business escalation and growth. This cost of
capitaloften fluctuates with the movement of interest rates whereas exchange rates affect
the cost ofexporting and price of imports
Product lines and pricing:
McDonald's first and foremost sells hamburgers, french fries, soft drinks, breakfast
items,various types of chicken sandwiches and desserts. In most markets, McDonald's
also offerssalads and vegetarian items, squashing and other unique local products. Soup
type productsare served only in some selected countries like Portugal etc. And for this
special deviation from its standard menu helps McDonalds to be popular among the
countries other than its homeland. Sometimes this difference is employed either for
regional food taboos andreligious prohibition like the one in India as no beef is served
there. In India, non-vegetarianmenu contain s chicken and fish items only.
Customers preference:
With a brand value of $49.5 billion, McDonalds has grown 49 percent in worth and now
is the most favored brand in the fast-food group. McDonalds innovative choice and
givingimportance to the peoples ever-changing demand with due progress, technology
and development is the key to McDonalds present situation. Now a day fast food cafes
are becoming the dining hall of the majority for superior child-size menus, playing
grounds andimpulsive branding crusades.
Competitors:
One of the environmental factors surrounding McDonalds is the fierce competition from
thecompetitors. There is an intensive price war, extreme battle of innovations,
breakthrough andserious promotions and advertisements. Different competitors in the
global fast food industryare now just going mad about increasing competition that led to
aggressive pricing strategiesamongst the large brands. Competitions also pushed them to
increased menu diversification, product developments for increasing sales and market
share and at least maintaining currentmarket share.
Social factors:
Population growth, career opportunity, cultural distinctiveness, health of the masses and
social security build the ground of societal factors. McDonalds food products demand
andits operational strategies differ greatly to cope with the movement of these factors
Technological factors:
Technological factors main elements are R&D, computerization, technology motivation
andtechnological change rate. Technological movements affect expenditures, excellence,
and innovation and machine made food is more hygienic. McDonald's employees quick
serviceand quality food standards are the result of its high-tech operating procedure.
Customizeddatabase management system and computers and smart cashiers are used in
McDonald's tospeed up serving and operating excellence.
McMommy Blogging Society:
In December 2007, McDonald's opened up its kitchens to the group of mother bloggers
toreport allegedly unedited findings on McDonald's website and on blogs in the
Internet.McDonald's goal was to make their cooking processes more transparent. It kicks
out storiesof fattening, unhealthy food rumors in books like "Fast Food Nation" and
movies i.e. "Super-Size Me. "McDonald's equipped six mothers chosen from 4000
applicants with laptopcomputers to record their impressions of its operations over the
next few months. Nothinglike this has ever been done on the internet by a fast food
company before.
Hamburger University:
Hamburger University was founded in 1961 at a McDonald's restaurant in Elk Grove
Village,Illinois. Now it stands in a suburb of Chicago at 2815 Jorie Boulevard in Oak
Brook, Illinois.It has 30 resident professors and more than 70000 managers have
graduated from here.Today Hamburger University has 19 full time intercontinental
coaches to educate apprenticesof more than 119 countries. It comprises 13 teaching
rooms, 12 interactive group rooms, a300 seats lecture theater, and 3 kitchen labs. It has
professional translators who can lecture in28 different languages.
CHAPTER 5
CONCLUSION
McDonald
s is one of most successful companies in the world today. With its rapid embracement
ofglobalization, the firm has been able to expand and retain numerable growth; as well as
continuing toexplore with its growth potential in the coming years. From the beginning of
the company
sdevelopment in the United States, to its spread in England, Australia and more recently
India andChina, the firm has been able to provide a variety of hamburgers and other
foods to its consumers.From the Big Mac, to the Maharaja, the company