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Marketing strategy of McDonalds Essay Sample

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Marketing strategy of McDonalds Essay Sample

1. History

The story of McDonald’s was started in 1940, as a food restaurant by two brothers’ named Richard and Maurice McDonald in San Bemardino, California in the USA. The name of restaurant was McDonald’s Hamburgers, by mid-1950s their restaurant revenue had reached $350 000. Raymond Kroc, the distributor for milk shake machines expressed interest in their business and finalized the deal for franchising with both the brother’s. He established a franchising company called McDonald system incorporation. In 1955 he became the founder of McDonald’s and bought out the McDonald brothers’ share for $2,7m and changed the name of the company to McDonald’s corporation. Kroc proved himself as a pioneer who revolutionized the American restaurant industry. Today McDonald’s is the California world’s largest fast food chain serving more than 47m customers daily. McDonalds is now one of the most valuable brands globally, worth more than $25bl. McDonalds today has become an accepted citizen of the world. Mission statement

“McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile.” 2. Business strategy

a) Franchising model – as per franchise model of McDonald only 15% of the total number of restaurants are owned by the company. The remaining 85% is operated by franchises. The company follows all the framework of training and monitoring of its franchises to ensure that they achieve good quality service, cleanliness and value for the money offered by the company to its customers. b) Product consistency – by developing a sophisticated supplier networked operation and a distribution system, the company has been able to achieve consistent product taste and quality across the nations of the world. c) Act like retailer, think like a brand – McDonald’s focuses not only on delivering sales for the the immediate present, but also protecting its long term brand reputation.

3. Defining objectives and goals

a) Objectives
Profitability
McDonald’s is a large corporation, and, therefore, must remain profitable to stay in business. To remain profitable, McDonald’s offers quality products at a price that meets its consumers’ demands. Ironically, McDonald’s has remained profitable, even during global recessions, by offering a cheap alternative to sit-down meals. Quality Service

McDonald’s aims are to offer quick, efficient products at a reasonable price. McDonald’s strives to expand and increase awareness of nutritious menu items. For example, McDonald’s has expanded food and beverages containing fruit and vegetables across the menu, and has increased awareness of fruit, vegetable and dairy options available for children on the menu. Their fast, convenient meals won’t result in an unsatisfactory product. Customer loyalty is an important objective of McDonald’s. Without customer loyalty, there would be a decrease in customers meaning less positive word of mouth from customers to friends and family members. Customer satisfaction involves marketing, as McDonald’s identifies the needs and requirements of its consumers in a better way than its competitors. Many consumers choose McDonald’s because of its friendly, inviting atmosphere. Restaurants offer comfortable seating, televisions and playgrounds for children. Convenience is also important, as customers want their food produced in a fast, efficient manner. Reputable Image

McDonald’s opened its first restaurant in 1954. As of 2011, McDonald’s operates more than 32,000 restaurants serving more than 60 million people in more than 100 countries every day. McDonald’s strives for uniformity. If you are in Paris, you can find many similar products on the menu as you would in New York City. McDonald’s seeks to continually improve its image as a pathway to a career, rather than a provider of “minimum-wage, dead-end, burger flipping jobs.” Community Outreach

McDonald’s strives to increase its financial and volunteer support to Ronald McDonald House Charities through communication outreach. It is involved in many schools, community organizations and nonprofit organizations that benefit citizen in communities all over the world. b) Main aims1

McDonald’s main aims are to serve good food in a friendly and fun environment, to be a socially responsible company and provide good returns to our shareholders. The company aims to provide its customers with food of a high standard, quick service and value for money. They also wish to be more eco-friendly and to serve healthier food.

Profit maximization
Maximising sales revenue or profit is an aim McDonalds may have been using since the beginning as the success of the business has grown immensely. This is where the business will seek out to gain and increase in their income from the customers. For example, McDonalds have done this by selling two burgers for the price of one or even one pound per burger. This gains a lot of customers coming in and spending more as they assume they are getting value for their money plus more and no doubt that they actually like these offers McDonalds is so generously giving out. Survival

Survival is an aim for many businesses. For McDonalds, as they started out they would first try aiming to stay in the business by earning enough money from customers to meet all of the businesses expenses. McDonalds also has the majority of its businesses as franchise. This means that the person or manager opening a McDonald’s restaurant up would have to aim for making enough money to cover its costs during the first year or so. Market Share

McDonalds needs to research other business and find out how they make customers so they can promote their business and they can make their business better than their competitors.

Growth

Growth is an aim McDonalds have succeeded in however are still always aiming to grow in order to fulfil new targets or objectives. The objectives are more detailed aims, which set out more specific targets. It helps increase the size of the business year by year. Aims help McDonalds to measure their success. McDonalds needs to make profit to grow and continue the business and they also need to survive. McDonalds has to be ahead of its market share in order to survive as well. To achieve their aims, business managers and owners set themselves objectives. Objectives are the steps that a business needs to take in order to achieve its overall aim. Objectives are short term and aims are long term.

4. McDonald’s marketing mix (5P’s) strategy
After analyzing the market, finding the key factor, target segment and understanding the market demand every company needs to come up with an offers or such type of plan, that speed up the growth of the company. For which McDonald’s uses 5P’s of marketing mix which are as follows:

a) Product
Product is the physical product or services offered by the company to its customers. McDonalds includes certain aspects of its product such as packaging, desirability, looks etc. This consists of both tangible and non-tangible aspects of the product and services. McDonalds has purposely kept its product depth and product width limited. McDonalds had first studied the behavior of the Indian customer and provided a totally different menu as compared to its menu offered in International market. It removed pork, beef and mutton burgers from the menu. India is the only country where McDonalds serve vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian. McDonalds continuously innovates its products according to the changing preferences and tastes of its customers. The recent example is the introduction of the Chicken Maharaja Mac and latest introduction of chicken style is Chicken Mcnuggets. b) Place

The place mainly consists of distribution channels and outlets of the company. It is considered as very important because the product must be available to the customer at the right place, at the right time and in the right quantity. In U.S.A nearly 50% of outlets are situated within the distance of 3 minutes. There are certain degree of fun and happiness that McDonalds provides to its customers. It provides value position based on the needs of the customer. McDonalds offers proper hygienic atmosphere, good abidance and better services. Now McDonalds have also started offering internet facilities at their outlets, along with music system through radio, not the normal music but the music which is preferred by young generation in order to attract them.There are also games for children the one example is air hockey.Children play games till the time there parents spend quality time in McDonalds. c) Price

Pricing strategy is most important aspect of Marketing Mix. It includes price list, if any discount facility available or payment facility available. It should also take into consideration the possible reaction from its competitors regarding the pricing. Pricing is very much necessary because it is this part, which decides revenue for the business unit. All the other three are the expenses incurred in the business. The price needs to take demand and supply equation into consideration by analyzing the pricing demand as per Indian market. McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal, happy price menu etc to increase overall sales of the product. d) Promotion

The promotional activities adopted by the McDonald help to communicate efficiently with the target customers. The diagram gives idea about the promotion strategy of McDonalds. Application of above mentioned Communication Mix describes the cost that is feasible as per the consumers. McDonald’s corporate used advertising, personal selling, sales promotion, public relations, and direct marketing and became worlds largest leading Burger Empire. These five promotion tools are used by McDonalds to integrate marketing communication program which allows McDonalds to access the communication channels clearly, consistently and easily transfers messages and product to the target audiences.

Advertising2
Due to distinct features of advertisement McDonalds also hold the hand of Advertising. There are three main objectives of advertising for McDonald’s are to make people aware of an item, feel positive about it and remember it. The right message has to be communicated to the right people through the right media. McDonald’s does its promotion through television, hoardings and bus shelters. They use print ads and the television programmes are also an important marketing medium for promotion. Personal selling

In personal selling McDonalds employees working in different outlets are the best example of personal interaction, the employees are directly serving the customers so, and the face to face communication is easily possible. In the McDonalds outlet there are such staff which are appointed for personal selling they are the one who perform the activities regarding selling up of goods to customers. Sales promotion

McDonalds organizes several sales promoting contest and programmes in different retail markets and outlets in which they distribute free discounts coupons. The statue of Mascot McDonalds is always there for any occasions that are also one of the logo of McDonalds. Public relations5

Public Relations are also an important part of the McDonald’s marketing strategy. The restaurant employees play a huge role in interacting with the public. On a day-to-day basis the employees commit themselves to customers and the customers’ feelings toward the brand. McDonald’s feels that before they communicate with their customers they need to be aware of what their competitors are communicating, so they can create a beneficial difference between themselves and the competitors. Direct marketing

Direct marketing is also one of the efficient tools for promotion. The McDonalds uses tool in the home delivery services in which they directly serve the order to their home. Also they have a websites which are more in preference for direct marketing in that they usually mentioned all the new offers along with the contact number of your nearby outlets. e) People

McDonald’s understands the importance of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald continuously does Internal Marketing because if the internal marketing is effective it will automatically lead to in the success of external marketing. Internal marketing includes hiring, training and motivating employees. In this way they can easily serve customers and the result will be the smiling faces of the customers. The level of importance has to be placed in the following order (the more important people are at the top): Customers

Front line employees
Middle level managers
Front line managers

The punch line ³I’m loving it´ is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers. 5. Segmentation, targeting, positioning and diversification

Market segmentation is defined as dividing a single market into smaller segments. The basic reason for dividing the market into small segments is to make it simple to address the needs of smaller groups of customers and try to manufacture different products according to their consuming habits. Particularly it is done according to the people who have similar characteristics. It can be done on the basis of age, gender, lifestyle, region etc. McDonald’s uses demographic segmentation strategy with age as the parameter. The main target segments are the children, youth and the young urban family. If they take children into consideration, children are more attracted towards toys and delicious meals including today’s youth prefer such places for their entertainment and the urban families select McDonald’s on various occasion like birthday party, treat to their children etc. McDonald’s offers different products like Happy Meal which includes a free toy for kids.

For families it has made different outlets and meals which are suitable for takeaways and drive-thru. McDonald’s has made its environment which is suitable for students of school to hang out with their friends and can get their lunch at McDonald’s. This strategy is targeting in making McDonald’s a fun place where you can enjoy both playing and eating. This also helps McDonald’s to attract the young urban families who wanted to spend some quality time, while their children can enjoy every movement of McDonald’s. To target the teenagers and young youth, McDonald’s has priced several products aggressively, keeping in mind the price sensitivity of this target customer. In addition, facilities like Wi-Fi are also provided to attract students to the outlets, example of such outlet is of a Vile Parle situated in Mumbai. 6. Ways of analyzing the environment

a) PEST analysis
Political environment
In general terms the government policies do not affect the company much nor do the changes in the government influence the organization of the company. Mostly what company obligation to the government is the paying of different taxes which include payroll and business taxes. McDonald’s enjoys an added advantage in countries where consumer protection laws are not very strong. In countries like US where the consumer protection laws are very strong, there are great costs associated with a breach in quality or service in the form of litigation and lawsuits. Economic environment

There are many factors which can affect the operation of a company. For instance the economic situation in the country strongly corresponds to the prices thus in Bulgaria for example McDonald’s is said to be one of the cheapest fast food restaurants. McDonald’s offers the food at higher rates in comparison to many local food restaurants. For example most of the people in Pakistan fall in the category of middle class and it is not affordable for them to have McDonald’s at regular basis. Social environment

Before McDonald’s entered a lot of different markets all around the world people were not very much into fast food style but now the business has been influenced by the changes made in the society especially changes in the eating habits among young people who helped the acceptance of the fast food idea but also the rapid change of way of life which is very quick now as everyday people are running out of time. This in turn has helped the company to grow and increase its profits. Technical environment

Food made with the help of machines is considered more hygienic and of course it helps McDonald’s to be more productive and deliver greater customer value and satisfaction because of its ability to deliver its service quicker. b) BCG matrix

‘Bruce Henderson, founder of the Boston Consulting Group, developed this portfolio matrix. The underlying idea of the BCG matrix is that the best strategy is to dominate market share when the market is mature. The BCG matrix proved a great success and most of the big U.S. companies used it to review their business units. ‘

According to BCG matrix McDonald’s is a star. The reason for this is its high market growth and high market share almost all over the world. On the other hand KFC and Pizza Hunt are the cash cows because of their low growth rate and high market share. During past some years KFC and Pizza Hut have lost their market growth of the fact that they lost their standard war to their competitor McDonald’s. Another direct competitor of McDonald’s is Subway. According to BCG matrix it’s a dog. Some of the reasons that are responsible for its low market share and low market growth are the less expansion strategies being followed by the company. c) SWOT analysis

McDonald’s is the world’s leading fast food restaurant chain with more than 34,000 local restaurants serving approximately 69 million people in 119 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local franchisees.

Strengths
Largest fast food market share in the world. McDonald’s is the largest fast food restaurant chain in terms of total world sales (8%). It is the second largest outlet operator with more than 34,000 outlets, serving 69 million consumers every day in 119 countries. Brand recognition valued at $40 million. Company’s brand is the most recognized brand in fast food industry and is valued at $40 billion. McDonald’s is also famous by the Ronald McDonald clown.a $2 billion advertising budget. McDonald’s spends on advertising more than the next 4 fast food restaurant chains combined. Locally adapted food menus. The fast food chain is operating in many diverse cultures where tastes in food are extremely different than those of US or European consumers. Thus ability to adapt to local tastes is one of McDonald’s strengths.

Partnership with best brands. McDonald’s offers only most popular brands in its restaurants, such as: Coca Cola, Dannon Yogurt, Heinz ketchup and others. More than 80% of restaurants are owned by independent franchisees. Therefore, McDonald’s can focus more on perfecting its serving system and marketing campaigns. Children targeting. The business successfully targets very young children through offering playgrounds, toys with its meals and advertisements. Weaknesses

Negative publicity. McDonald’s is heavily criticized for offering unhealthy food to its customers, stimulating obesity and strong marketing focus on very young children. Unhealthy food menu. Although McDonald’s tries to introduce healthier choices in its menu, the menu is largely formed of unhealthy meals and drinks. Such menu offering prompts protests by organizations that fight obesity and hence, decreases McDonald’s popularity. Mac Job and high employee turnover. Mac Job is a low paid and a low skilled job, which is often seen negatively by its employees. This results in lower performance and high employee turnover, which increases training costs and add to overall costs of McDonald’s. Low differentiation. McDonald’s is no longer able to substantially differentiate itself from other fast food chains (at least not enough to gain some market share) and opts to compete by price rather than by additional features. Opportunities

Increasing demand for healthier food. While demand for healthier food increases, McDonald’s could introduce more healthy food choices in its menu and reverse its weakness into strength. McDonald’s is trying to seize such an opportunity and soon plans to open only vegetarian restaurant in India. Home meal delivery. McDonald’s could exploit an opportunity of delivering food to home and increase its reach to customers. Full adaptation of its new practices. McDonald’s has redesigned its logo and restaurant design in 2006. In addition, it has introduced some new practices. In a result, remodeled restaurants have seen 8-9% higher than average market growth. McDonald’s should finish remodeling all of the restaurants and adapt the best practices in them as soon as possible. Changing customer habits and new customer groups. Changing customer habits represent new needs that must be met by businesses. So far, the company has been successful in introducing its McCafé, McExpress and McStop restaurants to meet the changing customer habits and the needs of previously untapped customer groups. Threats

Saturated fast food markets in the developed economies. The fast food market in the developed countries is already overcrowded by so many fast food restaurant chains and this already proves to be a threat to McDonald’s as it barely grew through 2012. Trend towards healthy eating. Due to government and various organizations attempts to fight obesity, people are becoming more conscious of eating healthy food rather than what McDonald’s has to offer in its menu. Local fast food restaurant chains. Local fast food restaurants can often offer a more local approach to serving food and menu that exactly represents local tastes. Although McDonald’s does a great job in adapting its own menu to local tastes, the rising number of local fast food chains and their lower meal prices is a threat to McDonald’s.

Currency fluctuations. The business receives a part of its income from foreign operations. The profits that are sent back to US have to be converted into dollars and may be affected by the exchange rates, especially when the dollar is appreciating against other currencies. In 2012, McDonald’s profit was largely affected by appreciating dollar. Lawsuits against McDonald’s. McDonald’s has already been sued for many times and lost quite a few lawsuits. Lawsuits are expensive as they require time and money. And as McDonald’s continues to operate more or less the same way, there is high probability for more expensive lawsuits to come. d) Strategic planning market tool (Ansoff matrix)

Market penetration occurs when KFC’s clients decide to go and eat in McDonald’s. Thus company grows by increasing sales of its current products to current market segments without changing the product. Market development appears when for example McDonald’s has intention to expand internationally by opening new outlets in other countries. Product development is said to exist when McDonald’s starts to offer new products to its loyal customers. Diversification happens when company grows through starting up or acquiring businesses outside the company’s current products and markets. At the moment McDonald’s is trying to implement new products at an already existing market. Steve Russell, vice president for Human Resources for McDonald’s North America, notes, ‘McDonald’s, as a constantly growing company, is devoted to innovation as its main means of driving growth. The company’s main methods of innovation have been the development of food products that appeal to customers that traditionally would avoid McDonald’s, as well as the involvement of franchise owners and operators in every aspect of management.‘

7. Co-branding strategy
An article cites, ‘Branding is the valuable quality of a firm that identifies one seller’s product distinct from those of others. It notes that co-branding is a combination of two brands used to capitalize the equity of each and enhance the success of a product…‘11 Co-branding strategy is also one of the beneficial instrument for boosting the business and providing different the same things in different manner. It helps in making profit for both the business enterprise as well as to increase their sales and growth of organization.The two different brands enter into co-brand through certain contracts or agreement and as per the agreement they bifurcates their earnings from their brands. There are different examples of co-branding strategy of McDonalds which are as follows. a) Coca-Cola

Coke is one soft drink brand that had tie up with McDonalds since past many years. In McDonalds the coke is the best beverage in cold drinks which are served to the customers along with different menus of the McDonalds for example happy meal, happy price menu etc. As coke is preferred by children’s even their parents as well as the young youths. Therefore by keeping in mind the consumer wants they came up with Coca-cola. In fact this co-brand of McDonalds is initiated to increase the volume of sales of the both the business enterprise. And of course this co-branding strategy has encouraged both the business in achieving the successful returns of customers satisfaction. b) Walt Disney

McDonald’s will introduce a collection of 100 exclusive Happy Meal toys as they are inspired by Disney’s admired collection of dramatic, vide and television characters. Representing more than 40 Disney films, the McDonald’s premiums include a mix of new and classic Disney characters, allowing kids and parents of all ages to recall their favorite Disney memories. 8. Advertising strategy

There have been many McDonald’s advertising strategy and slogans over the years. McDonald’s is one of the most widespread fast food advertisers. McDonald’s Canada’s corporate website says that the business campaigns have always focused on the “overall McDonald’s experience”, rather than just product. The purpose of the image has always been “portraying warmth and a real slice of everyday life.” Its TV ads, showing various people engaging in popular activities, usuaally reflect the season and time period. Finally, they have never in their advertising history used negative or comparison ads pertaining to any of their competitors; the ads have always focused only on McDonalds alone. McDonalds has for decades maintained an extensive advertising campaign. In addition to the usual media television, radio, and newspaper, the company makes significant use of billboards and signage, sponsors sporting events ranging from Little League to the Olympic Games.

9. Worldwide growth strategy
McDonald’s growth strategy is based on three elements.
a) Adding restaurants
b) Maximizing sales and profits at existing restaurants
c) Improving international profitability

10. McDonald‘s slogans through the years

Let‘s eat out! (1960-1965)
The closest thing to home (1966-1969)
McDonald’s is your kind of place (1967-1971)
You deserve a break today (1971-1975)
Nobody can do it like McDonald’s can (1979-1980)
Nobody makes your day like McDonald’s can (1980-1983)
McDonald’s and you (1983-1984)
It’s a good time for the great taste of McDonald’s (1984-1988) McDonald’s is your place to be (1986)
Good time, great taste (1988-1990)
There’s nothing quite like a McDonald’s (1988-1990)
Food, folks and fun (1990-1991)
McDonald’s Today (1991-1992)
What you want is what you get (1992-1995)
Have you had your break today? (1995-1997)
My McDonald’s (1997)
Did somebody say McDonald’s? (1997-2000)
We love to see you smile (2000-2003)
Put A Smile On (2000-2003)
Smile (2002-2003)
I’m loving’ it (2003)

S O U R C E S

1. http://www.slideshare.net/pridhavale/mcdonalds-marketing-strategies 2. http://www.businessdictionary.com/definition/Ansoff-matrix.html 3. http://www.strategicmanagementinsight.com/swot-analyses/mcdonalds-swot-analysis.html 4. http://en.wikipedia.org/wiki/SWOT_analysis

5. http://www.scribd.com/doc/16448162/8/BCG-Matr
6. http://search.ebscohost.com/

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