BUYER BEHAVIOR

OVERVIEW

It all began in 1940 at San Bernardino, California, with the first restaurant being
opened by two brothers - American fast-food pioneers from Manchester-New
Hampshire, Richard “Dick” J. McDonald (February 16, 1909 – July 14, 1998) and
Maurice “Mac” McDonald (November 26, 1902 – December 11, 1971).

In 1937, The McDonald brothers started their first carhop or now known as
“Drive-Thru” business in Pasadena, California. They captured the market by
offering something at time that no one else did, "fast service". They moved on to
a hamburger store with two “Golden Arches” as their logo.

EXIHIBIT 1 : Richard “Dick” J. McDonald & EXHIBIT 2 : McDonald’s restaurant in San

Maurice “Mac” McDonald Bernardino, California - 1940

The business gained its fame after 1948 when the brothers introduced the
concept called “self-service” and implemented the “assembly-line” system in their
kitchen for mass production. A little hamburger man called "Speedee" (Exhibit 2)
became the company’s mascot.

EXHIBIT 3 : McDonald’s “Speedee” Mascot

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Huge success of the business and its extraordinary capacity, attracted a

milkshake machine (MultiMixer) salesman Ray A. Kroc (Kroc) (October 5, 1902 -
January 14, 1984), from Oak Park, Illinois to finalized a business deal and
became the first franchise agent appointed by the McDonald brothers in 1954.

Kroc formed the new franchising company on March 2, 1955 under the name of
McDonald’s System, Inc. On April 15, 1955 his prototype McDonald’s restaurant
began business in Des Plaines, Illinois.

EXIHIBIT 4 : Raymond Albert Kroc EXHIBIT 5 : McDonald’s franchised restaurant in

Des Plaines, Illinois - 1955

He replaced the “Speedee” mascot to a red haired clown called “Ronald

McDonald”. By 1961, the McDonald brothers sold the entire business and its
rights to Kroc for $2.7 million. “Look for the Golden Arches” became the
company’s first advertising theme.

EXHIBIT 6 : MCDONALD’S “RONALD MCDONALD’S MASCOT

In 1965, McDonald’s went public on the stock exchange. It operated a different

business model whereby the income is not only extracted from the franchisee fee
and profit of sales, but also by collecting rents – as part of the franchise
agreement, McDonald’s owns the property on which McDonald’s franchise
operates.

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Kroc retained the McDonald’s formula of limited menu, quality food, the
assembly-line production system, and fast, friendly, reliable service. Indeed,
Quality, Service, Cleanliness, and Value continue to be McDonald’s operating
principles today.

It aggressively introduced new innovative products guided by their experienced

chefs to cope ever changing customers’ preferences. Their affordable prices
leveraged their customers to continue buying their products. The restaurants are
designed and operated in various operating methods such as standalone
restaurants, “Drive-Thru”, and also “Mc Delivery” services.

McDonald’s, the name that has gained its credibility in the hearts of all walk of
life, is now the world’s leading fast-food restaurant chain operating over 31,000
restaurants in more than 119 countries and 6 continents with almost 1.6 million
employees.
(Source: Funding Universe)

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CRITICS ON MCDONALD’S

McDonald’s had been constantly battling against its accusations and lawsuits on
various aspects over the years. Famously, the McLibel case where it debated on
the impacts of McDonald’s on its consumer health, animal welfare, environmental
issues and labor.

Promoting Unhealthy Food – McDonald’s has been known as a purveyor of

unhealthy fatty food. Table 1 explains that their food contains high calories, more
fat, salt and sugar but low in fiber and vitamins. The artificial additives,
preservatives and its diet itself contributes to serious health risk such as heart
disease, diabetes, cancer and other chronic diseases. In 1991, an outbreak of
food poisoning caused many McDonald’s consumers to suffer from serious
kidney failures. (Source: McSpotlight)

McDonald’s constantly criticised to the rising of obesity rates. They have become
a subject of Morgan Spurlock’s documentary called “Super Size Me” where it
chronicled the nutritional dangers of eating McDonald’s fast-food and gained 25
pounds, an increase in the cholesterol by 60 points and has been suffering with
headaches and mental depression. (Source: McMans Depression and Bipolar
Weekly, 2004)

EXHIBIT 7 : Morgan Spurlock’s “Super Size Me” documentary

Allegations were thrown against McDonald’s for exploiting children with their
“misleading advert” as part of their marketing strategy to drum up their business.
Collectible toys such as movie characters and gifts are used in the “Happy Meal”
to promote their “innutritious” (McLibel 1995). In 2002, a lawsuit was made
against McDonald’s by a mother of a 15 year old boy weighs 180 kilograms (400
pounds) as a result of consuming the unhealthy food diet from Mc Donald’s.

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TABLE 1 : Calories & Nutrient contained in some of McDonald’s famous foods

(Source : www.fitforsummer.com)

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The usage of trans fatty acids (TFAs) / hydrogenated oil in McDonald’s cooking
process has been part of the contributing factor to obesity and other health
disorders. Both the hydrogenated oil is found to be pure cholesterol which leads
to coronary artery or cardiovascular diseases. In 2003, BanTransFats.com, Inc.
filed a suit against McDonald’s to minimize the usage of hydrogenated oil in their
cooking. (Source : BanTransFat.com)

Environmental Concern – McDonald’s has been found to be one the cause for
pollution due to the usage of polystyrene foams - “clamshells” (Exhibit 8) for their
burgers. These materials cannot be recycled or composted which causes
overfilled landfills. The polystyrene production contains chlorofluorocarbon (CFC)
which can be harmful to the ozone. McLibel 1995 accusations on McDonald’s
were for them being a support to the production of such materials and for not
using recycling and reusing the food containers. (Source : McLibel 1995)

EXHIBIT 8 : “Clamshells” Polystyrene Burger Packaging

(Source : EDF)

Animal Welfare - Being the world’s largest user of beef and chicken, McDonald’s
have been accused on the inhumane way of animal treatment before they are
being turned to fast food. The animals are being farmed with no access to air or
sunshine and with no freedom of movement. PETA (People of Ethical Treatment
of Animals) launched a “McCruelty” campaign (Exhibit 9), accusing on the
‘barbaric slaughter’ of this animals - In 1995, the McLibel Trial came to verdict
and claimed that McDonald’s was “culpably responsible for cruel practices in the
rearing and slaughter of some of the animals which are used to produce their
food”. (Source : PETA)

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EXHIBIT 9 : PETA'S Original McCruelty Campaign Logo

(Source : PETA)

Human Rights - There were also several controversies on McDonald’s neglecting

labor rights. This includes underpaying the workers and over-working child labor.
On November 2007, China Radio International broadcasted McDonald’s China’s
part-time workers were paid below the legal requirement, denied their bonuses,
required to work extremely long hours and were not given proper insurance and
medical funding. The company has also been fined for hiring children who are
below 15 to work especially in the making of the collectible toys. And most of the
children are caught with no work permit. Similar case was reported in The
Telegraph, UK on June 2001 which occurred in Shenzhen, Hong Kong where 14
children were found working in a sweatshop, making toys to supply to the fast-
food chain.

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COUNTERING CRITISCM

It has been a common knowledge that Mc Donald’s has been a focal point to the
number of controversies and lawsuits on its food products over the years. In
pursuance to bringing back its “tarnished image”, they embarked on a mission to
fight back against their detractors and to re-establish their credibility. A Social
Responsibility Committee was formed to determine the areas that require
improvement and subsequently to introduce new policies for the company to
operate in a more ethical way for the betterment of its customers and the growth
of the business.

The greatest factor that affected the reputation of McDonald’s was the release of
Morgan Spurlock’s “Super Size Me’ documentary in 2002. Jim Cantalupo, the
Chairman and CEO of McDonald’s developed the 1“turnaround strategy” as to fix
the bad view of the public on McDonald’s. Being the prime target of the “obesity”
debate, the plan’s motive was to fully focus on offering a broader selection of
meals to meet the diverse needs and preferences of its customers. A fulltime
nutritionist was employed to revive its menu by adding more fruits and vegetables
related items, such as salads and yogurt desserts with fruits.

The children’s menu – ‘Happy Meal” contained options that were high in protein,
calcium, iron and B vitamins and other nutrients. A mix and match option was
made available to enable the kids to make their preferred choice. Apple slices
were offered as a substitute to the fries and milk, fresh orange and water was
offered instead of soda in the kids ‘Happy Meal. This clearly demonstrates
McDonald’s seriousness in ensuring nutritious and quality food for its customers.
(Source: McDonald’s Corporate Responsibility Report (CRR), 2004)

1
* Turnaround strategy is to return an underperforming or distressed company to normal in terms of
acceptable levels of profitability, solvency, liquidity and cash flow. Source : (McDonald’s Corporate
Responsibility Report (CSR) , 2004)

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EXHIIBIT 10 : Calories and Nutrients Classification

(Source : Corporate Responsibility Report 2004)

In early 2006, McDonald’s implemented a system of printing the nutrition

information which consists of info graphic display, the amount of calories, fat,
sodium, carbohydrates and protein labels directly on its food packaging. They
ensured that the printing is highly visible to get the attention of their customers
This is to enable the customers’ to make a more informed decision on how the
food can fit into a balanced diet.

EXHIBIT 11 : Nutrition Information on McDonald’s Food Packaging

(Source : McDonald’s US)

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McDonald’s initiated several campaigns to create awareness among the public on

ways to lead an active lifestyle. With the help of several worlds’ famous icons like
the “William Sisters – Serena and Venus”, McDonald’s emphasised on the
importance to incorporate physical fitness / exercise into our everyday lives. They
highlighted that a steady food diet is not the only factor for healthy life but it has to
be followed by exercise as well. (Spinwatch, UK – June9, 2005)

EXHIBIT 12 : Example of health campaigns launched by McDonald’s

(Source : Corporate Responsibility Report, 2004)

McDonald’s has agreed with PETA (People for the Ethical treatment of Animals)
in 2005 to use the “Controlled Atmosphere Killing (CAK)” system in their
slaughterhouses where it kills animals slowly. A regular audit is conducted on the
supplier's processing facilities to ensure that the animals are well treated. (Table
2 illustrates a yearly increase as a result of effectiveness in the audit program).
This includes the implementation of a policy to curb the usage of antibiotics to
promote chicken growth. In 2006, the implementation of the policy was a success
and a 90% reduction in the poultry production was recorded. (Source: EDF)

TABLE 2 : The above chart shows the number of facility audit carried from the year 2003 to
2005. The results show 91% success in 2003, followed by 93% in 2004 and 99% in
2005. This is a continuous upward trend in the audit results.
(Source :Corporate Responsibility Report 2006)

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The company also took a challenge to work towards the ecological sustainability
for the benefit of its future generation in areas such as packaging and waste
management, energy efficiency, wildlife protection and others.

Packaging and Waste reduction – They joint task force with Environmental
Defense Fund (EDF), McDonald’s identified two areas of improvement in the
aspects of their packaging, i.e. its weight and its recycled content which can be
recycled or composted. They switch from polystyrene foam packaging to paper-
based wraps using biodegradable materials made from pulp and grass paper,
which contain natural grease-resistant properties. The usage of these material
was being enforced in all its restaurants and it has become a prime eco-solution
to these wasteful and pollution problems. As a result, McDonald’s managed to
achieve a 3.2% reduction in its packaging in the year 2003. (Source: McDonald’s
Corporate Responsibility Report, 2004)

EXHIBIT 13 : Andrew Millar’s McDonald’s Packaging Design

Wildlife Protection – Educational projects and campaigns were geared towards

educating the public on the importance of protecting the endangered animals and
how they are being threatened by climate change and human activities.
McDonald’s and Conservation International (CI) teamed up to create awareness
among the public on ways to protect the wildlife and as a pledge to support CI on
its efforts. Some of the projects undertaken were “Bee Good to the Planet” –
emphasising on preservation of the bee habitats, Panda Guardians – providing
support to the CI’s nature reserves/staff who are sheltering the pandas and also
made a significant contribution to support three projects led by CI to protect
tropical forests such as Cambodia, Sumatra and Congo, habitat of the Asian
elephants, tigers and gorillas. (Source: Conservation International)

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Energy Saying - McDonald’s has evolved in using Echelon Corporation’s power

line network equipment to provide communication and data exchange in its
various kitchen equipments, directly reducing energy consumption and
maintenance cost, and increase operational efficiency. (Source: Echelon
Corporation)

EXHIBIT 15 : Echelon’s networking system used in the McDonald’s kitchens

(Source : Echelon Corporation)

McDonald’s goes McOrganic – On June, 2007, McDonald’s announced on its

intention to sell organic beverages by obtaining the milk from the British organic
cows and to be sold in all their restaurants worldwide. It is the company’s effort
towards protecting the environment and to help the organic farmers as well.
(Source: Telegraph, UK – 28 Jun, 2007)

Hydroflurocarbon (HFC) Restaurant - On January 2003, IEMA (Institute of

Environmental Management and Assessment) announced that McDonald’s
Denmark operates the world’s first HFC-free restaurant to help reduce the effects
of climate change on the environment. The environmentally innovated
refrigerants do not have Freon, or HFCs (hydroflurocarbons). (Source: Jason Judge,
IEMA -23 January, 2003)

EXHIBIT 16 : HFC-Free Restaurant in Denmark

McDonald’s defended their hiring policies in their outlets through aggressive

Public Relations (PR) campaign. The low wages are supplemented with various
perks such as travel allowance, free vacations and also flexible working hours.
(Source : Sourcewatch)
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REFERENCES

1. http://findarticles.com/p/articles/mi_m3190/is_n32_v22/ai_6583230/
2. http://www.andrew-millar.com/biodegrademe.html
3. http://www.bantransfat.com/mcdonalds.html
4. http://www.consumeraffairs.com/news04/2006/05/mcdonalds_responds.html
5. http://www.crocodyl.org/wiki/mcdonalds
6. http://www.echeat.com/essay.php?t=28470
7. http://www.echelon.com/company/press/mcdonalds.htm
8. http://www.fitforsummer.com/mcdonaldsmeal1.htm
9. http://www.fundinguniverse.com/company-histories/McDonalds-Corporation-
Company-History.html
10. http://www.iema.net/news/envnews?aid=3765
11. http://www.mcspotlight.org/case/index.html
12. http://www.sourcewatch.org/index.php?title=McDonald's
13. http://www.telegraph.co.uk/news/uknews/1555894/McDonalds-goes-
McOrganic.html
14. http://www.telegraph.co.uk/news/worldnews/asia/hongkong/1368114/McDonalds-
in-child-labour-claim.html
15. McDonald’s Corporate Responsibility Report (CSR) , 2002
16. McDonald’s Corporate Responsibility Report (CSR) , 2004
17. McDonald’s Corporate Responsibility Report (CSR) , 2006
18. www.mcdonalds.com
19. http://www.safeagemployer.org/news3.htm
20. www.eCheat.com
21. http://www.sourcewatch.org/index.php?title=McDonald's
22. http://www.spinwatch.org.uk/-news-by-category-mainmenu-9/154-food-
industry/1348-fatboy-ronald-mcdonald-downsizes-to-head-off-critics

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