Assignment Cover Sheet

Qualification Module Number and Title

HND in Business Management BHNC4202: Fundamentals of Marketing

Student Name & No. Assessor

M. B. Deeresha Chandrasekera Randika Dulanthi
(CL/HNDBSM/86/08)
Hand out date Submission Date
4th of February 2020 6th of March 2020

Assessment type Duration/Length of Weighting of Assessment

Assessment Type
Coursework Report (6000 words) 100%

Learner declaration

I, M. B. Deeresha Chandrasekera (CL/HNDBSM/86/08), certify that the work submitted for this
assignment is my own and research sources are fully acknowledged.

Marks Awarded

First assessor

IV marks

Agreed grade

Signature of the assessor Date:

FEEDBACK FORM

Fundamentals of Marketing | 1
 INTERNATIONAL COLLEGE OF BUSINESS & TECHNOLOGY

Module : BHNC4202: Fundamentals of Marketing

Student : M. B. Deeresha Chandrasekera

Assessor : Randika Dulanthi

Assignment : Report

Strong features of your work:

Areas for improvement:

Marks Awarded:

Fundamentals of Marketing | 2
Acknowledgement

“I would maintain that thanks are from the highest form of thought, and that gratitude is
happiness doubled by wonder.” – Gilbert K. Chesterton

There have been many people who have walked alongside me during the past couple of
months, they have guided me, placed opportunities in front of me and showed me the doors
that might be useful to open. The writer takes this opportunity to thank them for their
encouragement and dedicate this report with heartfelt gratitude.

This report is dedicated to Miss Randika, the lecture of the module ‘Fundamentals of
Marketing’, whose passion for teaching set a new standard for anyone involved in education,
training and development, or any other endeavor which one human being seeks to support the
growth and development of another.

Fundamentals of Marketing | 3
Executive Summary

The mission of this report is to advance, transmit and sustain knowledge and understanding
through the content included about the Fundamentals of Marketing with relation to
McDonald’s company, as an answer for the “Fundamentals of Marketing” module.

This report has an outline of; core marketing concepts, the marketing environment, STP of
McDonald’s, the buying decision behavior and the marketing mix strategy of the McDonald’s
company.

The writer has started with a brief introduction of the McDonald’s Company and then
gradually moved on to other topics. In task 1, all the 8 core marketing concepts are defined in
brief with an example for each. Task 2 is about the Marketing Environment of McDonald’s;
definition of business environment, the SWOT and PEST analyses of McDonald’s in detail
and the definition of Porter’s Five Forces are discussed. In task 3, the market segmentation,
targeting and positioning of McDonald’s is shown along with the perceptual map of the
selected product. Buying decision behavior related to the customers of McDonald’s are
discussed under task 4 in detail and finally the marketing mix strategy under task 5. There the
4P’s: product, price, place and promotion are explained lengthily with quoted examples
followed by the conclusion and the list of references.

Fundamentals of Marketing | 4
Contents
Acknowledgement.................................................................................................................................3
Executive Summary...............................................................................................................................4
Contents.................................................................................................................................................5
List of Figures.......................................................................................................................................7
Introduction...........................................................................................................................................8
Task 1 – Identification of Core Marketing Concepts.............................................................................9
Needs......................................................................................................................................9
Wants......................................................................................................................................9
Demand...................................................................................................................................9
Products and Services.............................................................................................................9
Value.......................................................................................................................................9
Satisfaction.............................................................................................................................9
Marketing...............................................................................................................................9
Exchange..............................................................................................................................10
Transaction...........................................................................................................................10
Relationships........................................................................................................................10
Task 2 – Marketing Environment........................................................................................................11
Business environment...........................................................................................................11
SWOT Analysis of McDonald’s..........................................................................................11
PEST Analysis of McDonald’s............................................................................................17
Porters Five Forces...............................................................................................................18
Task 3 - STP........................................................................................................................................22
Segmentation........................................................................................................................22
Targeting...............................................................................................................................23
Positioning............................................................................................................................24
Perceptual Map for “Happy Meal”.......................................................................................26
Task 4 – Buying Decision Behavior....................................................................................................27
Task 5 – Marketing Mix Strategy........................................................................................................28
Product..................................................................................................................................28
Price......................................................................................................................................28
Place.....................................................................................................................................29

Fundamentals of Marketing | 5
 Promotion.............................................................................................................................30
Conclusion...........................................................................................................................................32
References...........................................................................................................................................33

Fundamentals of Marketing | 6
List of Figures
Figure 1: The smiley clown of McDonald’s..........................................................................................8
Figure 2 : SWOT Analysis of McDonald's..........................................................................................11
Figure 3 : Business Model of McDonald’s..........................................................................................12
Figure 4 : McDonald’s menu...............................................................................................................13
Figure 5 : Fast food chains employee satisfaction (2015)....................................................................13
Figure 6 : McDonald's CSR performance............................................................................................14
Figure 7 : The Porter's Five Forces......................................................................................................18
Figure 8 : Brand Value of the 10 most valuable fast food brands worldwide 2015..............................18
Figure 9 : Worldwide locations of McDonald’s...................................................................................21
Figure 10 : Targeting Strategy of McDonald’s (Multi Segment Strategy)...........................................23
Figure 11 : Targeting Strategy of Happy Meal....................................................................................23
Figure 12 : McDonald’s Logo.............................................................................................................23
Figure 13 : Competitors of McDonald’s..............................................................................................24
Figure 14 : Perceptual Map for Happy Meal.......................................................................................25
Figure 15 : Product Life Cycle of Happy Meal....................................................................................27
Figure 16 : Direct Method of Distribution...........................................................................................28
Figure 17 : Indirect Method of Distribution.........................................................................................29
Figure 18 : Freebies of McDonald's.....................................................................................................30

Fundamentals of Marketing | 7
Introduction
The selected organization of the writer is McDonald’s, the world’s famous fast food
company.

The story of McDonald’s was started in 1940, as a fast food restaurant by two brothers’
named Richard Mc Donald and Maurice Mc Donald in California, US. The name of the
restaurant was McDonald’s Hamburgers and by the time of 1950’s the revenue had reached
$350,000. Raymond Kroc, the distributor foe milk shake companies expressed his interest in
their business and finalized the deal with franchising with both Mc Donald brothers. Kroc
established a franchising company called Mc Donald system incorporation and soon by 1955
he became the founder of McDonald’s and bought out the brothers’ share for $2.7 million and
changed the name to McDonald’s corporation. McDonald’s is now one of the most valuable
brands where there are over 36,000 outlets in 19 countries worldwide and globally worth
more than $25 billion. The current CEO of the McDonald’s company is Don Thompson.

“If I had a brick for every time I’ve repeated the phrase Quality, Service, Cleanliness and
Value, I think I’d probably be able to bridge the Atlantic Ocean with them.” – Raymond Kroc

The secret of McDonald’s success lies in its QSC & V.

Vision Statement
 McDonald’s vision is to be the world’s best quick service restaurant experience.
 According to McDonald’s, being the best means providing outstanding quality,
service, cleanliness and value, so that they make every customer in every restaurant
smile.

Figure 1: The smiley clown of McDonald’s

Source: Internet

Mission Statement
 McDonald’s mission is to be their customers’ favorite place and way to eat.
 The worldwide operations have been aligned around a global strategy called the “Plan
to Win” centering on the five basics of an exceptional customer experience.

Fundamentals of Marketing | 8
Task 1 – Identification of Core Marketing Concepts
The selected organization of the writer is “McDonald’s”.

Needs
Needs are basic human requirements that are essential for human beings to survive.
E.g.: food, clothing, shelter, security

- As a fast food outlet, the McDonald’s covers a main need of human which is food.
Wants
Wants are the options that satisfy a particular need. They are desires that people may or may
not be able to get.
E.g.: food - rice, bread, noodles
clothing - trouser, short, frock
shelter - house, villa, apartment

- The McDonald’s satisfies the need of food by providing a variety of food and
beverage products which suits different types of people.
Demand
Demand is a consumer’s desire and willingness to pay for a price of a specific good or a
service.

- Among the customers, there is a good demand for the products of McDonald’s as they
have created a good name among the customers.
Products and Services
Anything that is capable of satisfying customer requirements.

- The products sold and the services rendered by McDonald’s are at high standards up
to date.

Value
A fair return or any equivalent in goods, services or money for something.

- The McDonald’s has set affordable and worth prices for its products.

Satisfaction
How products and services supplied by a company meet customer expectation.

- The customers don’t hesitate to buy the product and enjoy the taste too. Also, the
frequent visit of customers to McDonald’s outlets depicts the customer satisfaction.

Marketing
“Marketing is a social and managerial process by which individuals and groups obtain what
they want and need through creating, offering and exchanging products of value with others.”
– Kotler 1991

- The marketing process of McDonald’s is done via various media: for example, TV
advertisements, leaflets, etc.

Fundamentals of Marketing | 9
Exchange
Exchange is an act of obtaining a desired product from someone by offering something in
return. Exchange is a process and it implies people’s negotiations and movement towards an
agreement.

- The following is an example for an exchange situation that takes place in

McDonald’s:
o A customer goes to a McDonald’s outlet, and asks the particular person in the
cashier about the products provided and the prices of each, negotiation begins
between the customer and the cashier and finally the customer tends to show
an interest in purchasing some products and requests for them.
Transaction
Transaction happens when the agreement is made after the exchange is done. In other words,
it is the decision arrived or the commitment made.

- The following is an example for transaction following the above example:

o After the cashier gives the products requested by the customer, he/she must
pay some amount due for the products purchased. Paying that money either by
cash or card is the transaction that occurred at that point.
Relationships
It is the practice of building long term profitable or satisfying relations with parties like
customers, suppliers, distributors and other in order to retain their long term preference in the
business and it requires trust, commitment, cooperation and also a high level of
understanding.

- McDonald’s has a recognized name among its customers as it has won the trust and
loyalty of many customers by having a good understanding and building strong
relationships with them in order to give the best service.

Fundamentals of Marketing | 10
Task 2 – Marketing Environment
Business environment
Business environment is the sum of all internal and external factors that affect a firm’s ability
to build and maintain successful relationships with customers.

To analyze the internal factors of a business, SWOT analysis is used which covers the
strengths, weaknesses, opportunities and threats that the particular business has where as to
analyze the external factors of a business, PEST analysis is used which covers political and
legal environment, economic environment, socio-cultural environment and technological
environment.

SWOT Analysis of McDonald’s

Figure 2 : SWOT Analysis of McDonald's

Opportunities
Strengths
enhansing focus on nutritional menu
strong brand name, image and reputation
improving CSR aspect of the business
customer oriented, children targeting
expansion in many countries
high advertising budget
demand for services rendered
locally adopted food menus
demand for salad choices
introduction of new products
conseravtion
market leadership in the US
beverage market
sustainable business model
high level of profitability

Weaknesses SWOT Threats

negative publicity trend towards healthy eating
unhealthy food menu intense competition
high staff turnover currency fluctuations
declining brand image lawsuits against McDonald’s
low differentiation fast food market saturation in developed
countries

Strengths

- Strong brand name, image and reputation

Fundamentals of Marketing | 11
 o McDonald’s has created a strong brand name among the customers over the
past few years as the best fast food provider. The strong brand name indicates
the high level of customer loyalty which is a strength to the business.
- Customer oriented, children targeting
o McDonald’s always prefers to listen to customer feedback and provide what is
needed and is targeted to very young kids and teens by offering play areas,
toys and by creative advertisements.
- Locally adopted food menus
o Preparing various menus according to the choices and mainly the culture of
people.
- High advertising budget
o McDonald’s has given a main place for its advertising as it could then attract
more customers, due to that is has a huge budget set aside only for advertising.
- Introduction of new products
o On festive seasons mainly, McDonald’s produces new innovative products
that attract a majority of customers.
- Market leadership in the US
o The McDonald’s has a market share of about 37.68% in the US and it
generates about 32% of its revenues from the US market. Taking into account
the high popularity of fast food, the leadership in the US market can be an
immense business strength.
- Sustainable business model
o Raymond Kroc, developed a business model known as “The Three Legged
Stool” which the three legs represent the owner/operator, suppliers and
employees.
Figure 3 : Business Model of McDonald’s

Source: Case study of McDonald’s (Institute of Information Technology University of Dhaka)

Just as all the three legs need to be equal to support the weight, all three
elements of the McDonald’s system are equally important partners in the

Fundamentals of Marketing | 12
 success of McDonald’s. This business model can be sustainable for long-term
perspective which McDonald’s only has to ensure that high standards are
adhered in preparation and service of foods, along with formulating and
applying effective marketing strategy.
- High level of profitability
o With over 36,000 outlets in 119 countries worldwide, McDonald’s has a very
solid presence in the fast food industry of the global market. Functioning in an
international scale is an enormous and complex task which is time and effort
consuming. Therefore it is a major strength for McDonald’s as it is very
difficult for other competitors to reach this scale.

Weaknesses

- Negative publicity
o McDonald’s is heavily criticized for offering unhealthy food for customers,
stimulating obesity and strong marketing focus on kids.
- Unhealthy food menu
o McDonald’s provides a range of fast food and soft drinks with high sugar level
which are unhealthy to human body. The high level of advertising fast food
increases consumer awareness about negative effects of fast food on their
health which is a weakness for the company.

Figure 4 : McDonald’s menu

Source: McDonald’s Corporation Company Report 2016

- High staff turnover

o Staff turnover occurs when there is an ill-tempered manager and if the
working skill of the staff isn’t enough as the workers should be very efficient
to work being in a fast food company where over 300 customers visit daily.
Figure 5 : Fast food chains employee satisfaction (2015)

Fundamentals of Marketing | 13
 Source: McDonald’s Corporation Company Report 2016

- Declining brand image

o Due to the negative publicity and the unhealthy food menu the brand name of
McDonald’s if facing a decline.
- Low differentiation
o Even though McDonald’s has a wide range of unique products as shown in
figure 3 above, the product differentiation is below its full potential.

Opportunities

- Enhancing focus on nutritional menu

o By concentrating more on the nutritional value of the food menu, McDonald’s
has an opportunity to rebuild the damaged brand name.
- Improving CSR aspect of the business
o The CSR (Corporate Social Responsibility) and initiatives are founded to
address the issues that the company is going through and also is criticized for,
and are communicated to stakeholders via utilizing marketing media channels
which is too an opportunity to rebuild the brand name which is damaged by
negative publicities.
Figure 6 : McDonald's CSR performance

Categories of CSR McDonald’s Performance

activities
Supporting local McDonald’s claims to be improving the lives of children and their families
communities via the support of Ronald McDonald House Charities (RMHC) and other
organizations. According to McDonald’s this support addresses the needs
such as education and physical activity
Educating and In a survey conducted in 2014, 83% of McDonald’s restaurant managers in
empowering workers top markets globally stated that McDonald’s is a great place to work
McDonald’s Hamburger University, founded in 1961, comprises 7 campuses
around the world and provides training for McDonald’s Franchisees,
managers and employees
Labor and human rights The company requires its suppliers to adhere to the Supplier Code of
Conduct. The Code clarifies requirements of McDonald’s about issues
related to Human Rights, Environmental Management, Workplace
Environment and Business Integrity
Employee health and McDonald’s promotes its Work Health and Safety Policy among the
safety Workforce at all levels.
Gender equality and 27% of positions at vice president and above levels are held by women
minorities More than 25% of managers in company-owned restaurants are women or
people of color

Fundamentals of Marketing | 14
Environment McDonald’s maintains close collaborations with World Wildlife Fund
(collaborator) BSR (Business for Social Responsibility) (member and
research partner) Global Reporting Initiative (organizational stakeholder -
Germany) and GreenBiz Group (collaborator) in its sustainability efforts

a) energy consumption 132,186 pieces of energy efficient equipment was bought by McDonald’s
Corporation and its Franchisees in 2014. This is estimated to save about 142
gigawatt hours and USD 14.2 million in energy costs

McDonald’s 2020 Aspirational Goals includes 50% increase in energy

efficiency of Company-owned restaurants. So far an increase of 20% has

been achieved.

b) water consumption No known global initiatives

c) recycling Since 2010, US-based McDonald’s outlets that have used LED lighting have
achieved an estimated average reduction of 7% in energy usage each year.
Within the scope of its 2020 Aspirational Goals, McDonald’s aims to
increase amount of in-restaurant recycling to 50% and minimize waste.

d) CO2 emissions No concrete initiatives and programs in the global scale

Responsible sourcing Responsible sourcing efforts of McDonald’s are conducted in collaboration
with Global Forest & Trade Network (member) Global Roundtable for
Sustainable Beef (founding member) GTPS - Brazilian Roundtable on
Sustainable Livestock (member) Roundtable on Sustainable Palm Oil
(member) Sustainable Agriculture Initiative Platform (member - Europe)
U.S. Roundtable for Sustainable Beef (founding member).

Fruits, vegetables, low-fat dairy or whole grains served in McDonald’s

restaurants increased by 30 per cent in 2014 compared to 2012

More than 96 of the Global Roundtable for Sustainable Beef’s membership

voted to approve final principles and criteria for sustainable beef
100% of the fisheries and 32% of coffee sources used by McDonald’s are
verified sustainable sources in 2014
Other initiatives Ronald McDonald House Charities served 5.7 million children and their
families in 2014

The company has made a pledge for responsible marketing for children in 52
countries

Source: McDonald’s Corporation Company Report 2016

- Expansion in many countries

Fundamentals of Marketing | 15
 o McDonald’s is the largest fast food market and is expanded over 120 countries
and servers more than 70 million people around the world having many outlets
in each country.
- Demand for services rendered
o The customers have got a great opportunity as McDonald’s provide a large
number of services as the home delivery service and the free Wi-Fi zone.
- Demand for salad choices
o Salads are the only healthy food product sold in the McDonald’s and as people
nowadays are health conscious demand more for salad choices.
- Conservation
o McDonald’s has started a going green program in order to preserve and protect
the natural environment.
- Beverage market
o McDonald’s has a vast beverage market which varies from water to coffee and
to soft drinks like Coca-Cola.

Threats

- Trends towards healthy eating

o People are becoming more and more health conscious to fight obesity and
heart attacks, therefore it has been a threat to McDonald’s as it does not
produce healthy food
- Intense competition
o Other fast food organizations such as KFC also have become a threat as they
also produce the same kind of products with different names, so customers
don’t find any big differences between products, so going to either of an outlet
is of their choice
- Currency fluctuations
o The business receives a part of its income from foreign operations, so when
profits sent to US are converted to dollars it may be affected by the exchange
rates
- Lawsuits against McDonald’s
o McDonald’s has already been sued for a number of times due to various
reasons like failure of protecting workers by extending work hours late into
the night, designing stores that left workers more vulnerable, etc. lawsuits are
expensive and require time and money also there is a high probability of more
expensive lawsuits to come
- Fast food market saturation in developed countries
o The McDonald’s has to focus on further increasing its presence in developing
countries if not the fast food market saturation will a threat that McDonald’s
can face even in short term perspective.

Fundamentals of Marketing | 16
PEST Analysis of McDonald’s

- Political and Legal Environment

o The political and legal context can have a major impact on how successful the
business can be. Political environment can provide both opportunities and
threats to its success. On the other hand, higher level of regulation can stifle
business grown and lower level of regulation can enable the business to earn
more profit. Government policies, trade issues and health issues are the factors
considered in political environment while employment law regarding issues
are considered in legal environment.
o Other political factors that affect McDonald’s revenues and long term growth
prospects are levels of bureaucracy and corruption, government stability and
trade unions due to the large size of the corporation.
o Other legal factors that affect the business are trade regulations, anti-trust rules
and regulations and data protection regulations. However, health and safety
laws, consumer protection laws, employment laws and competitive rules and
regulations need to be adhered in order to maintain their levels of high
standards in the industry.

- Economic Environment
o The national, international and local conditions are the factors that affect
McDonald’s economic environment as it is a global brand. Disposable income,
wage stagnation and increased unemployment made McDonald’s face an
economic crisis in 2008. Therefore, McDonald’s relies on strong economy
with low rates of unemployment. The exchange rate and income of sales are
also considerable factors in a strong economic environment.
o Other economic factors that affect the business regardless the size are:
monetary and fiscal policies, cost of labor, inflation rate and overall climate of
the country.

- Socio-cultural Environment
o Socio-cultural demographic trends affect McDonald’s business hence, analysis
of culture and modification of the menu according to the different cultures of
people is important. The change in tastes of consumers too can impact on the
sales. The growth of coffee industry has led McDonald’s to develop a Mc Café
menu to provide an alternative to Starbucks too.
o Changes in consumer attitudes and opinions towards fast food and media
perception of the brand are other social factors that affect the business.
o The two most significant factors that have affected McDonald’s revenues are
the level of awareness about negative health implications of the fast food and
the demographic tendency of aging of population or in other words, aged
people may not choose fast food due to nutritional reasons.

Fundamentals of Marketing | 17
 - Technological Environment
o The speedy change in technology not only improves re-ordering and reducing
waste but also has developed greater connections with customers such as in-
store self-service and collection and online ordering. Online ordering paves
the way to gather data on customers and undertake personalized marketing
through promotions.

Porters Five Forces

The Porters Five Forces Model is an inspection tool that uses five industrial forces namely:
competitive rivalry within the industry, threat of new entrants, bargaining power of buyers,
threat of substitutes and bargaining power of suppliers to determine the strength of
competition in an industry and its profitability level. It was developed by Michael Porter in
1979.
Figure 7 : The Porter's Five Forces

Source: Internet

Competitive rivalry within the industry

- This force is the major determinant on how competitive and profitable an industry is.
In competitive industry, firms have to compete aggressively for a share market which
results in low profits. Rivalry among competitors are high when:
o There are many competitors

Fundamentals of Marketing | 18
 o Exit barriers are high
o Products are not differentiated and can be easily submitted
o Competitors are of equal size
o Low customer loyalty

 The concentration of firms within the fast food industry is low due to
the established presence of other competitors like KFC and Burger
King. However, McDonald’s will have a possibility of facing
competition from existing fast food outlets.
Figure 8 : Brand Value of the 10 most valuable fast food brands worldwide 2015

Threats of new entrants

- This force determines how easy or difficult it is to enter a certain industry. If an

industry is profitable and there are only a few barriers to enter, rivalry soon
intensifies. When more organizations compete for the same market share, the profit
starts to fall. It is essential for existing organizations to create high barriers for new
entrants. Threat if new entrants is high when:
o Low amount of capital is required to enter a market
o Existing companies do little to retaliate
o Existing firms do not possess patents, trademarks or do not have established
brand reputation
o There is no government regulation
o Customer switching costs are low
o There is low customer loyalty
o Products are nearly identical
o Economies of scale can be easily achieved

Fundamentals of Marketing | 19
  The barriers to entry are quite high for new entrants as the size of
McDonald’s in terms of achieved economies scale, preferential access
to raw materials and distribution channels are high. Therefore new
entrants may find it difficult and that a high cost of investment is
required in securing plant, machinery and other assets.

Bargaining power of buyers

- Buyers have the power to demand lower price or higher product quality form industry
producers when their bargaining power is strong. Lower price means lower revenues
for the producer, while higher quality products usually raise production costs. Both
scenarios result in lower profits for producers. Buyers exert strong bargaining power
when:
o Buying in large quantities
o Controlling many access points to the final customer
o Switching costs to other supplier are low
o They threaten to backward integrate
o There are many substitutes
o Buyers are price sensitive

 This area is perceived to be fairly low risk for McDonald’s as

consumers have little control over the variations in the product
offerings, price and place of distribution. The company should keep
customers satisfied, as switching cost is low and the possibility of
switching to another brand in case if dissatisfaction occurs is relatively
lower than that.

Threat of substitutes

- This force is specially threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product
or service to another with little cost. For example, to switch from coffee to tea doesn’t
cost anything, unlike switching from a car to a bicycle.

 A substitute product is a one that can be used as an alternative to a

company’s own. It could be argued that the threat of substitutes to
McDonald’s comes from pizzas, burgers, french fries, kebab and other
domestic fast food outlets. However most of the aforesaid do not have
the same level of convenience that McDonald’s offers, in having a
number of outlets in big cities and through the use of multiple drive-
through outlets.

Bargaining power of suppliers

Fundamentals of Marketing | 20
- Strong bargaining power allows suppliers to sell higher priced or low quality raw
materials to their buyers. This directly affects the buying firms’ profits because it has
to pay more for materials. Suppliers have strong bargaining power when:
o There are few suppliers but many buyers
o Suppliers are large and threaten to forward integrate
o Few substitute raw materials exist
o Suppliers hold scarce resources
o Cost switching of raw materials is specially high

 This ranges from the threat of forward integration to the threat of

cutting off suppliers. As McDonald’s have a great deal of influence
over the suppliers, due to the fact that it aids them and trains them, the
threats from suppliers are low. Due to the scale of McDonald’s
operations, suppliers are keen to retain their contracts with the firm.
McDonald’s internationalism could also mean greater sales potential
for suppliers.

Fundamentals of Marketing | 21
Task 3 - STP
The selected product of the writer is the McDonald’s “Happy Meal”.

Segmentation
Market segmentation is grouping customers who are having homogeneous characteristics.
The main bases of segmentation are geographic, demographic, behavioral and psychographic.

- Geographic
o Region – the products of McDonald’s are served island wide and
internationally too
o Size of metropolitan area – the products of McDonald’s are served island wide
and internationally too

Figure 9 : Worldwide locations of McDonald’s

Fundamentals of Marketing | 22
 Source: Internet

o Population density – the products of McDonald’s are targeted mainly to

urbanized and sub-urbanized people

- Demographic
o Age – the main target segments are kids, teens and youth
o Gender – there is no gender separation for the food items provided but the toy
given by the Happy Meal asks preference whether it’s a girl or a boy
o Family size – when buying food people must consider whether they belong to
a nuclear family or an extended family in order to buy the enough amount
sufficient for everyone
o Family lifecycle – customers belonging to young singles, young married and
parenthood are mainly attracted by the products
o Education – customers with primary education are not profitable enough to
afford the products but customers with secondary or tertiary education know
what products are available and what is best for them
o Income – the products are targeted to middle- and high-level-income
customers
o Social class – with reference to Sri Lanka McDonald’s should not focus on
social class as a variable but when it comes to international level social class
matters
o Religion – with reference to Sri Lanka McDonald’s should not focus on social
class as a variable but when it comes to international level social class matters

- Behavior
o Benefits sought – customers expect high quality food for an affordable price,
and the services they offer (drive thru, take away, delivery services, free Wi-
Fi) to be efficient and speedy
o Product usage rate – the usage rate of McDonald’s products are high among
kids and teens
o Brand loyalty – the customers who regularly visit Mc Donald outlets and
purchase their products have a strong loyalty towards them
o Occasion – there’s no need of a special occasion for customers to purchase
from McDonald’s but if there is any function like a birthday party, they can
have that opportunity to invite people and make them taste their food
o User status – the customers are potential and regular fast food eaters

- Psychographic
o Personality – customers of McDonald’s are mainly extroverts
o Lifestyle – customers who are socialized and mainly into fantasy world who
seek easy going lives buy products from McDonald’s

Fundamentals of Marketing | 23
 o Attitudes – customers try to show off their levels of income and class once
they are in to purchase a product
o Class – customers tend to pretend their class, so the class cannot be considered
as a variable when it comes to a fast food product

Targeting
Targeting is the process of identifying the customers with similar characteristics in profitable
markets.
The main targeting strategies are full market coverage, single segment strategy and multi
segment strategy.

- According to the information collected along with the writers’ view, the targeting
strategy that McDonald’s has used is Multi Segment Strategy.
o McDonald’s has a vast variety of food and beverage categories namely
“breakfast”, “ala carte”, “meals”, “all-time favorites”, “sides and salads”,
“happy meals”, “deserts” and “drinks” from which customers can choose from
according to their taste and also according to their age groups (e.g.: happy
meal for kids, veggie burger for vegetarians, chicken wings for meat lovers
soft drinks for taste bud arousers and water for health concerns)

Figure 10 : Targeting Strategy of McDonald’s (Multi Segment Strategy)

kids

vegetarians

meat lovers

o Regarding the McDonald’s “Happy Meal”, it is mainly targeted only to kids

and teenagers. So, the targeting strategy for this product could be Single
Segment Strategy.

Figure 11 : Targeting Strategy of Happy Meal

Fundamentals of Marketing | 24

Happy Meal Kids/ Teenagers

Positioning
Positioning is establishing a good name (brand/ logo/ combination) in customers mind.

- McDonald’s positions itself as the leader in quick service restaurants. In order to

maintain their standard, they have started marketing to a younger set of people, much
in the same way that their “I’m loving it” campaign does.
Figure 12 : McDonald’s Logo

Source: Internet

- Furthermore, the bases and strategies of positioning are as follows:

o Attributes of the product
 size
 color
 ingredients
 speed
 taste
 effectiveness
 level of nutrition
o Price and quality
o User or application
o Product class
o Location
o Competitors

Figure 13 : Competitors of McDonald’s

-

Fundamentals of Marketing | 25
Perceptual Map for “Happy Meal”

Figure 14 : Perceptual Map for Happy Meal

Wide range of choices

Limited locations Lots of locations

Limited Range of choices

Fundamentals of Marketing | 26
Task 4 – Buying Decision Behavior
The customer perception is a key factor affecting a products success; to improve overall
functionality McDonald’s has increased efforts to capture more and better data with regards
to customer feedback and satisfaction.

Furthermore, identifying customer behavior is easy as there are four main types of buying
decision behaviors which each and every customer fall into one category. The types are
namely:
1. Complex buying behavior
2. Variety seeking buying behavior
3. Dissonance seeking buying behavior
4. Habitual buying behavior

- The writer assumes that the customers of McDonald’s who buy “Happy Meal” belong
to the type “Habitual Buying Behavior” due to the following reasons:
o A consumer falls to this category due to the low involvement of products. The
writer says so because one particular customer doesn’t go to McDonald’s each
and every single day or doesn’t eat “Happy Meal” every day. Occasionally
may be twice or thrice a month maximum, a customer may visit McDonald’s
outlets. So, in that case the product involvement is low.
o The next case is about the few differences between brands. All fast food
outlets or in other words the competitors of McDonald’s, such as KFC,
Domino’s Pizza, Taco Bell, Pizza Hut, Burger King, etc. produce almost the
same products when it comes to kids meals, where only the outlet name
changes. Therefore customers of McDonald’s who buys Happy Meal have
Habitual Buying Behavior.

Fundamentals of Marketing | 27
Task 5 – Marketing Mix Strategy
Product
A product is anything that can be offered to the market that might satisfy a need or a want.
E.g.: Happy Meal offered by McDonald’s

Features of the Happy Meal

- The Happy meal comes in different types
o Hamburger Happy Meal
o 4/6-piece Chicken Nuggets Happy Meal
o Mc Rice Happy Meal
o Cheeseburger Happy Meal
o Chicken Wrap Happy Meal
- Happy Meal offers a soft drink/ water/ milk packet according to the choice of the
customer in addition to the main meal
- A toy is also included in the Happy Meal for kids to have an extra excitement

Product Life Cycle of Happy Meal

Figure 15 : Product Life Cycle of Happy Meal

Source: Case study of McDonald’s (Institute of Information Technology University of Dhaka)

Price
Price is the amount of money that the customers must pay in exchange of the product.
E.g.: the maximum Price of a Happy Meal in a McDonald’s outlet is Rs.500/=

Pricing Strategy Used

- The pricing strategy used by McDonald’s in order to sell the Happy Meal could be
Penetration Pricing.
o According to the experience of the writer, the Happy Meal was at a lower
price than Rs.500/= initially, but when customers, mainly kids and teenagers
gather to buy the Happy Meal over and over again and when the producers see

Fundamentals of Marketing | 28
 an increase in sales they gradually increase the price slightly where it is
unknown and unfelt to the customers.
- Apart from the above pricing strategy, McDonald’s uses Bundle pricing strategy as
well.
o The Happy Meal includes a burger/mc rice, french fries and a cola/pepsi
which the whole bundle costs only maximum Rs.500/=, but when customers
purchase all those items individually the cost is high compared to that of a
Happy Meal.

Factors that McDonald’s has considered when deciding the price of the Happy Meal
- Costs
o The costs include the expenses that come in daily/monthly rather than sales
and the expenses that are incurred by producing and delivering the Happy
Meal.
- Customers
o Above all, the organization must know what customers expect from them and
what their choice is. Secondly to check whether the customers are buying
high-end or low-end products.
- Competitors
o Checking out who are the competitors of the organization is done in order to
maintain the standards of that particular organization without letting it go
down. Comparison of product prices, levels of service, how the opponent
attracts customers and the position of the competitor in the marketplace are
few key items that come into consideration.
- Positioning
o This is done for the betterment of the organization in order to achieve a higher
position in the market.
- Profit
o Profit is one of the most important factors that the organization must
investigate before producing a new product or before selling their current
products because if there is no profit the business will bankrupt in no time.

Place
It is the process of moving the product from producer to the user or in other words called
distribution as well.
E.g.: distribution of Happy Meal can be done by delivery services offered by Mc
Donald’s, dine in facility, take away facility or even via the drive thru facility

Method of Distribution
- Distribution of the happy meal can be done in both ways directly and indirectly.
o Directly – the customer comes straight away to the outlet to buy the Happy
Meal
e.g.: dine in, take away, drive thru

Figure 16 : Direct Method of Distribution

Fundamentals of Marketing | 29
producer customer
dine in/ take away/ drive through
 o Indirectly – the customer might prefer to stay at home and order online
e.g.: delivery services provided by McDonald’s, through delivery
agents like Uber Eats

Figure 17 : Indirect Method of Distribution

delivery agent
producer customer
(uber eats )

Level of Intensity
- McDonald’s has a “Selective” intensity level when it comes into action in the market
as McDonald’s outlets are not built up everywhere but only in selected places island
wide.
Promotion
It is the only element that serves to inform, persuade and remind the market about the
particular product.
E.g.: when the toy given by Happy Meal changes from time to time, very creative and
colorful advertisements are shown on television to promote the Happy Meal where all the
kids are attracted by it

McDonald’s uses the following tactics to promote its products:

- Advertising
o “Advertising is any paid form of non-personal presentation and promotion of
ideas, goods or services by an identified sponsor.” – Philip Kotler
o The following are a few ways used by McDonald’s to promote their products
through advertising:
 Print and broadcast ads via TV, radio and online media
 Packaging outer and inserts
 Brochures and booklets
 Posters and leaflets
 Billboards
- Sales promotions

Fundamentals of Marketing | 30
 o “Sales promotions consist of a diverse collection of incentive tools, mostly
short term, designed to stimulate quicker and/or greater purchase of a
particular product by consumers.” – Philip Kotler
o The following are a few ways used by McDonald’s to promote their products
through sales promotions:
 Coupons
 Freebies
Figure 18 : Freebies of McDonald's

Source: Internet

- Public relations
o Activities that promote a positive image, generate publicity and foster
goodwill with the intention of increasing sales are called public relations.
o The following are a few ways used by McDonald’s to promote their products
through public relations:
 Charitable donations
 Roland Mc Donald House Charities
 Events
 McDonald’s Global Best of Green Environment
 Sponsorships

- Direct marketing
o “Undertaking marketing activity through various advertising media that
interact directly with consumers, generally calling for a customer to make a
direct response is known as direct marketing.” – Kotler and Armstrong, 2009
o The following are a few ways used by McDonald’s to promote their products
through direct marketing:
 Telemarketing
 E - marketing
 SMS

Fundamentals of Marketing | 31
Conclusion
“If you work just for money, you’ll never make it, but if you love what you’re doing and you
always put the customer first, success will be yours.” – Raymond Kroc

The marketing strategies implied by McDonald’s clearly give the entire comprehensive
information that is necessary for the growth and development of the corporation. McDonald’s
effectiveness and profitability is well supported by their strong competitive position. Its
international success is achieved by the marketing strategies and the tactics used which
complement each other and work on harmony.

McDonald’s portfolio of products is well managed and ensures the best fit between the
company’s strengths and weaknesses and for offsetting the threats found in its competitive
environment.

On the basis of discussions and analysis above, the following recommendations can be
formulated to McDonald’s in order to address the current challenges faced by the business
and increase its long-term growth prospects.

- Increasing the nutritional value of food

- Increasing the effectiveness of CSR aspect of the business
- Entering into strategic collaborations

Fundamentals of Marketing | 32
References
 (PDF) McDonald’s Corporation | Dolorita Corazana - Academia.edu. 2020. (PDF)
McDonald’s Corporation | Dolorita Corazana - Academia.edu. [ONLINE] Available
at: https://www.academia.edu/37089821/McDonalds_Corporation. [Accessed 19
February 2020].
 4 types of consumer buying behavior | Management Education. 2020. 4 types of
consumer buying behavior | Management Education. [ONLINE] Available
at: https://managementation.com/4-types-of-consumer-buying-behavior/. [Accessed
06 February 2020].
 McDonalds Corporation Strategic Management Analysis. 2020. McDonalds
Corporation Strategic Management Analysis. [ONLINE] Available
at: https://www.slideshare.net/TahminaSharmin/mc-donalds-strategic-management-
analysis. [Accessed 17 February 2020].
 MyFeelBack: Turn customer feedback into business opportunities. 2020. Why
Customer Centricity is at the Heart of McDonald’s. [ONLINE] Available
at: https://www.myfeelback.com/en/blog/customer-centricity-heart-mc-donalds.
[Accessed 06 February 2020].
 Ovidijus Jurevicius. 2020. Porter's Five Forces | SMI. [ONLINE] Available
at: https://strategicmanagementinsight.com/tools/porters-five-forces.html. [Accessed
13 February 2020].
 Panmore Institute. 2020. McDonald’s Marketing Mix (4Ps) Analysis - Panmore
Institute. [ONLINE] Available at: http://panmore.com/mcdonalds-marketing-mix-4ps-
analysis. [Accessed 08 February 2020].
 SmartCompany. 2020. Five factors to consider when pricing products or services -
SmartCompany. [ONLINE] Available
at: https://www.smartcompany.com.au/business-advice/five-factors-to-consider-
when-pricing-products-or-services/. [Accessed 10 February 2020].
 Your Article Library. 2020. Marketing Concepts: 8 Core Marketing Concepts (With
Diagram). [ONLINE] Available
at: http://www.yourarticlelibrary.com/marketing/marketing-concepts-8-core-
marketing-concepts-with-diagram/48558. [Accessed 04 February 2020].

Fundamentals of Marketing | 33