This case analysis assessed, The McDonald Corporation and its position in the fast food industry. The study reviews the industry, the corporation, its major competitors and its future in the industry. McDonald’s is a market leader in the fast food industry and continues to make strides in the ever-changing market. It is recommended that McDonald’s continuously develop new products to maintain its claim as an industry leader.
A Case Study Analysis: The McDonald’s Corporation
Serving an estimated sixty-eight (68) million customers daily in one hundred and nineteen (119) countries, stands the worlds’ largest chain of fast food restaurant, is the McDonald Corporation (Wikipedia, n.d.). McDonald’s is primarily known for selling hamburgers, French fries, breakfast items, soft drinks, milk shakes and desserts. Its brand mission is, to be our customers favorite place and way to eat and drink…we are committed to continuously improving our operations and enhancing our customer’s experience. (McDonald’s, 2014). Jack M Greenberg stood at the helm from the late 1990’s to the early 2000s, during this time period McDonald’s, his concern was focused on the once acclaimed, “Big Mack Attack” as it no longer referred to their advertised slogan for the Big Mac Burger but it now referred to the company’s decline in earnings. Despite the dynamic market expansion, new products and special promotional strategies that made them leaders in the fast food industry, their sales growth in the US had slowed. Greenberg was now faced with the challenge to decide on an appropriate set of strategies for the future, in order to reverse the declines and to stay ahead of the competition (Peter & Gokhale, n.d.).
The fast food industry has seen ‘profit drains’ and ‘flat sales’ and as a result had to find new marketing strategies to compete in the mature market (Peter & Gokhale, n.d.). The competition for McDonald’s has been segmented, mostly because of its menu offerings; its major competitors in the hamburger segment being Burger King, Wendy’s and Hardee’s. Where as in the non-hamburger segment its competitors are Pizza Hut, KFC and Taco Bell. Subway became a growing trend that began to dominate the market; as well as the addition of prepared meals and sandwiches that became easily accessible in supermarkets, convenience stores and gas stations Another concept that rocked the fast food industry was the introduction of the fast-casual segment that included restaurants such as Boston Market, Panera Bread Company and Atlanta Bread Company (Peter & Gokhale, n.d.). Fast casual restaurants, does not offer full table service but promises a higher quality of food and atmosphere (Wikipedia, n.d.). An analyst notes, that fast casual combines all the elements for what the on-the go consumer- which seem to be almost everyone these days – is looking for (Peter & Gokhale, n.d.).
The fast food industry has also been heavily impacted by the fact that, Americans are eating out less compared to previous years and their eating habits are changing (Peter & Gokhale, n.d.). Although consumers may be ‘turning away’ from fast food hamburgers, research shows clear indications that they are still ‘time conscious’ as drive-through sales account for 65% of sales with an expected growth which is at least three times faster than on-premise sales (Peter & Gokhale, n.d.). So how has the customers taste changed the fast food industry? As people have become more health conscious there has been a decrease in satisfaction with the quality of food. With their target markets: young adults and baby boomers turning away from fast food; fast food chains started to move toward discounts, new products and store designs to address customer concerns (Morrissey, 2011). With legal and health concerns looming and more attention being paid to the nutritional value of their menu offering, McDonald’s amongst other companies found ways to capitalize on this by adding wraps, fruits, water and low fat offering to their menus.
With the effect of these changes McDonald’s addressed the diversity of their menu items, restaurant design including location placement and accessibility as well as marketing strategies. Customers on the other hand, while being ‘time conscious’ placed a demonstrated premium on having comfortable environments and some increase in nutritional value along with accessibility and efficient service as evidence by the drive through numbers. People who frequently eat out are simply looking for a ‘better ‘ alternative and the industry must continuously strive to appease its consumers. McDonald’s U.S. market share remains above that of it competitors; with over $40 billion in sales and its increase in shares compares to its competitors Burger King Corp and Wendy’s International, McDonald’s look to reverse its decline in earnings (Peter & Gokhale, n.d.). With the changes in taste, McDonald’s competitive strategy was to roll out its ‘New Taste Menu’, this was products that were offered for a limited time: fried chicken sandwich, brownie, a pork tenderloin sandwich and Philly cheesesteak; in efforts to face its competitors such as Wendy’s and Burger King versions of chicken sandwiches McDonald’s put chicken menu items on the forefront of its offerings (Peter & Gokhale, n.d.).
McDonald’s differentiated its products through improving its store quality, offering an expanded range of product increased perceived value and its marketing (Morrissey, 2011). Customer preferences have been addresses through increased salad and reduced fat offerings and expansion of wireless Internet access. McDonald’s advertises messages that are centered on offering tasty and nutritious food, friendly folks and fun. So, to further appeal to consumers McDonald’s opened McCafe, anticipating that the gourmet coffee-shop would improve their chance of obtaining their goal of doubling sales at U.S. restaurants over the next decade (Peter & Gokhale, n.d.); in mature markets where expansion is limited, the industry has to focus on customer preferences and marketing. As the fast food industry changes and the influx of new competitors to the market, McDonald’s continue to capitalize on its strengths: its brand loyalty, its positive social image – Ronald McDonald House Charity, accessible locations, marketing alliances and being a market leader (Peter & Gokhale, n.d.). Whilst continuing to improve on the weaknesses such as the dissatisfaction with food quality, susceptibility to negative publicity (Morrissey, 2011), income shrinkage of 17% and the slow growth of its market share (Peter & Gokhale, n.d.). So what does the future hold for McDonald’s?
According to Greenberg, he recognizes that the company faces a difficult task to grow sales, market shares and profits in a fiercely competitive industry (Peter & Gokhale, n.d.). So being who they are, McDonald’s had to capitalize on opportunities to keep their lead in the market such as: drive through sales and efficiencies, grow trends toward non-hamburger sandwiches, heavy users and entry to the fast casual segment: McCafe. Whilst paying close attention to the possible threats: consumers seeking better alternatives, strong and growing competitors in all segments, food cost increases and price pressure at the retail level (Morrissey, 2011). To stay ahead of the competition McDonald’s must position itself as a leader in healthier options. Another trend of importance to McDonald is ‘heavy users’; they comprise of about 20% percent of customers but they account for 60% of all visits. Heavy users are described as single males under 30, with working class jobs (Peter & Gokhale, n.d.). So should they have their own segment in the industry, in my personal opinion I would say no, as ‘heavy users’ can change over time and all invested would be at a lost.
McDonald’s has always been the target for the negative effects of consuming its food over a substantiated period of time: significant weight gain, increase in emotional disturbance, a decrease in physical activity and physical fitness. They have also been in legal battles as it relates unhealthy food options, so to do so, the public could view it as socioeconomic discrimination. Having a segment specifically for ‘heavy users’ could potentially harm the company (Morrissey, 2011). As recognized by Greenberg, McDonald must grow its sales, market shares and profits to continue to compete in the fast food industry.
By continually introducing new products as was evident, when the line of Premium salads was introduced. As consumer trends and taste continue to change new product development is a potential way to generate higher sales. Another note worthy mention, is that McDonald’s should reconsider, who is their target market and gear their adverts and marketing strategies towards the targeted market (Morrissey, 2011). Having a good marketing strategy will greatly assist with the new product launches. As it stands in todays’ market, McDonalds is holding its own and can continue to be an industry leader with continued market research and strategies and most importantly new products that will not only be nutritious and tasteful but will also appeal to the ever changing taste of its’ consumers.
Fast Casual Restaurant. (n.d.). In Wikipedia Online Encyclopedia. Retrieved from http://en.wikipedia.org/wiki/fast_casual_restaurant
Morrissey, James. (2011, May 10). Business & Human Capital: McDonald’s. Retrieved from http://morrisseyhr.wordpress.com/2011/05/10/McDonald’s McDonalds. (n.d.). In Wikipedia Online Encyclopedia. Retrieved from http://en.wikipedia.org/wiki/McDonald’s
McDonald’s. 2010-2014. McDonald Corporation Website. Retrieved from http://www.mcdonalds.com
Peter, Paul J., & Gokhale, Ashish. (n.d.). McDonalds Corporation. University of Wisconsin-Madison