International Fast Food Company-McDonalds - Case Study Example

?McDonald’s Fast Foods Company Words Count (2505 Introduction McDonald’s Fast Foods Company was founded in 1937 by Patrick McDonald when he launched the Airdrome Restaurant in California. At that point in time, McDonald was dealing with the production and sale of hamburgers and fruit juice (Mcelhaney, 2008). It acquired its new name in 1940 when two brothers, Mac and Dick, changed it to McDonald’s. It was not until 1948 when the two introduced the ‘Speeder service system’, a concept that aided in changing the whole concept of fast foods (Love, 2008). It was also during this time that they realised that a major part of their returns owed their origin from the sale of hamburgers where they decided to close down the carhop drive to come up with one production system that saw McDonald's produce along one production line; hamburgers, French fries, soft drinks and apple pie. In 1953, McDonald’s Fast Foods’ most successful restaurant in Arizona was franchised. Similarly, the restaurant located at California was franchised. The outright success of the McDonald’s was with the entry of Ray Kroc who entered into partnership with Mac and Dick (Love, 2008). He was given the right to expand the franchise. Owing to this new partnership, McDonald’s opened its new branch outside America specifically Richmond Colombia. This was the first ever branch outside America. It is amazingly interesting to note that by 1963 the McDonald’s had more than 100 fast food restaurants worldwide. It was between 1960 through 1970 when significant growth was marked. This may have been due to the massive advertising strategies that were adopted by McDonald’s ads team. Kroc played a major role in advertising McDonald’s products making them the most admirable ads in the world. He also developed the Golden arches logo in 1962. In 1963, McDonald’s introduced the red haired wit which attracted a massive appeal from children and the youth. Later on as the years progressed, Kroc opted to buy out McDonald’s brothers for a total cost of $2.7 million. 2. Rationale behind Internationalization McDonald’s international strategy is based on the recognition of the available opportunities in overseas market and not because their home market is already saturated. In fact, McDonalds established franchised markets internationally because it needed to capitalize on available opportunities particularly among the rapidly growing populations in Asia. It is worth noting that while choosing markets McDonalds preferred whose prospects for expansion were optimal. For this reason, McDonalds entered into international markets. When Kroc solely began owning the company, he knew well that the success of McDonald’s fast food company was dependent on its ability to grow rapidly amid an ever widening competitive environment. Therefore, he began to offer franchises. As a result, several franchised McDonald’s opened up in various parts of the world. For instance, one such franchised branch opened up in the U.K. in1986. To date, close to 70% of all McDonald’s outlets worldwide are franchised. Today, McDonald’s boasts of having more than 120 restaurants’ and a customer base of over 60,000 people there was a need to employ intensive franchising as a means of promoting products and building a brand name. 3. Market entry strategy McDonald’s Fast Foods Company envisions placing itself strategically with an aim of becoming a superior performer in the world market. McDonalds’ franchise market entry strategy has always been informed by the customer base and room for expansion. In fact, the company is guided by their interest on low production cost while at the same time guided by their choice to serve their customers at their convenience (Pride & Ferrell, 2012). It prefers the use of franchise because once the market is established, it will be easier to modify and adapt to customer’s local tastes and preferences. McDonalds has used this strategy in Saudi Arabia and Indonesia with success. As mentioned earlier in this discussion, McDonald’s Company is guided by the need to produce at low cost so as to fix prices of food at low affordable cost in the interest of all customers. In the recent years, the Company has approached their entry strategy by narrowing down on client base while adopting a low cost approach in order to reach financially weak consumers. This has helped secure international markets and has given McDonald’s a competitive advantage over other fast food competitors. In a bid to attract more appeal from its customers on health concerns, the McDonald’s has continually tried to make healthier menu options in order to serve the needs of the consumers. In order to ensure excellence in service, the company has not only tried to minimize waiting time but also cut down on prices of food. McDonalds’ use of franchising concepts makes it one of the companies that believe in the power of franchise. In fact, of all the opened stores worldwide, over 75% are franchised. Since its inception, McDonalds have always sought to expand into markets associated with positively high GDP, population and trade ratio. This has been made possible owing to the incorporation of advanced modern technology that minimises the number of employees needed to serve a vast number of customers within a short time. By using these systems, the company has been able to cut down on recurrent expenditures on wages for their employees. This has consequently enabled McDonald’s to cut down on the costs of their food products attracting more customers. This approach is incorporated in the entire business processes. It is important to note that in their efforts to minimise waiting times, all McDonald’s are constructed with a double drive-through. The drive-through carriage has been instrumental in increasing the volume of customers served at a time. The McDonald’s have always remained in their markets even in times of major financial crises maintaining their marketing schemes identities by being friendly to families through adverts and slogans. Whenever they enter into a new market, the McDonald’s always have a way of appealing to the customers (Boyle & Roth, 2013). By using slogans such as Happy Meal or Burger King, the company has been able to arouse the interest of the young adults and children all over the world. Through their creative and fast food technological innovations, McDonald’s have always set out impeccable standards upon which other industry players refer (Schlosser, 2012). In industry strategy, McDonald’s Company has always invested in research on basic forces of competition. In this regard, a thorough research on competitor’s rivalry, barriers to new markets, threats, buyer’s bargaining power and supplier’s bargaining power has to be taken into consideration before entry into a new market. This has always saved the McDonald’s financial humiliations as witnessed among other industry players. Consumers purchasing decisions in the entire Fast Foods industry are always informed by convenience and cost. Although, other factors such as loyalty may come into play, their impact is in most cases insignificant compared to the former. Therefore, the power of purchasing is centred on the customer as the bargaining power is by suppliers. There has to be a balance between the price of energy and oil since an increase in either of them will impact on the prices of commodities. This means a massive reduction in profit margins which has to be sheltered by either the company or the consumer. McDonald’s has always approached such situations differently since inception. Instead of pushing margin loses to the customers through increased cost of food products as other industry players do, they have always endeavoured to use available substitutes. Such strategies have enabled McDonald’s Fast Food industry a growth beyond the obvious reigning supreme within the entire service industry. It is important to note that prestige and history play a key role in competitive success of the McDonald’s Fast Food Company. This is because of the large wealth acquired over years of its existence enabling it to adjust on price margins and international growth even during times of declining sales (Mcelhaney, 2008). Since the McDonald’s has several chains worldwide, customers get satisfied at their convenience. In order to achieve and sustain its competitive advantage, the McDonald’s have always relied on three different approaches; lower cost of management, differentiation and focus. On cost of management, the McDonald’s have always tried to provide cheap services and products at lower costs as compared to those of competitors in the market. However much cheap their services and products may be, the company never compromises on quality. On differentiation, the McDonald’s has always offered loftier products costing equal to their competitor’s inferior products. Lastly, McDonald’s always focuses on the satisfaction of a narrow market segment. It is worth noting that McDonald’s always strive in meeting specific set of competitive advantage. For instance, as cost leaders in the service industry, their prices are far much superior to those of their competitors. 4. Marketing mix strategies McDonald’s marketing mix strategy aims at reaching children between the ages of 3 and10 years. This is a young age bracket implying that their parents would play a key role in making buying decisions. The McDonald’s understands that such decisions will be informed by cost. One most interesting observation that was once noted was when the sales executives would place toys with a hamburger or a soft drink branding it Happy Meal. This worked pretty well for them because would prefer buying the Happy Meal from McDonald’s chains than just a meal from elsewhere. Their mode of advertisements is unique and attractive. “The Restaurants have a variety of advertising strategies which apply to the product, placement, promotion and price” (Leidner, 1993). Product McDonalds Company aims at creating standardized brands with similarity in taste in various parts of the world. Key within this concept is the company’s capability to adapt to the new environment. The company adopted the concept of global thinking while acting locally. The company maintains the concept of adaptation on matters like consumer tastes and preferences. The company has in many instances modified their meals in order to adapt to norms and customs existing within the target market. For instance, McDonalds modified brand which they had earlier served in Israel after some protests that claimed that the initial brand was contradicting religious and customary laws. Price In spite of the need to recover costs incurred in standardization and quality checks, McDonalds believes in adapting prices fit specific environments. This is a guiding principle in their local pricing strategy. In the past decades McDonalds have adopted different pricing strategies informed by the nature of the market segment. Pricing decisions are made based on a number of factors which include among others price objectives, demand, costs, competitors’ prices and offers. Place Through proper management of capital expenditures McDonalds has continued to expand to international markets. Through its expansion strategy the company adds on average between 400 and 500 restaurants annually in capital markets like China and Mexico. In the recent years McDonalds’ market expansion has been concentrated in countries whose brands have gained anonymous acceptance. Promotion Promotion is made up of five elements which include advertising, direct marketing, sales promotions, public relations and personal selling. McDonalds opts franchise as a way of doing business because it enables localized promotions in order to reach diverse population that has unique cultures and religious differences. McDonalds has diverse ways of advertising in diverse international markets. In advertisements the company reaches potential buyers through prominent personalities such as footballers. It is important to note that though the company concentrates on standardizing product name; their campaigns are in most cases localized to take the point home. 5. Brand positioning and advertising strategies McDonald’s capitalises on demographic segmentation using age as a key determinant. The market segments aimed at are youth and children. Since children are always attracted to toys and delicious meals. Similarly, youth opt spending in such places as they double as entertainment places. To attract children the restaurant initiated the Happy Meal gift concept where for every meal purchased a toy is awarded to a child. This makes McDonalds a place to eat and play attracting youth and children. In summary, McDonalds always aims at adding value to their brands across all chains in the world. In order to achieve this endeavour, the company has made it easier for products to get to the customers in a more fast way while fresh as much as possible. It is important to note that branding is a long term process which builds up progressively over time. Over years, McDonald’s Fast Foods Company has revolutionized the food service industry positioning them as the market leader in the world through their low priced quality foods (Aswathappa, 2010). It is worth noting that the company has been able to achieve the desired brand name and image through their willingness to innovate and adjust based on the demands of the consumers. They do this by maintaining consistency running the activities of its chains. In response to the consumers’ demands, McDonald’s were at some point able to change breakfast menu by introducing salads and Chicken Nuggets in respect to the demands of consumers (Smith, 2007). The adjustment worked so well for the company since they were able to arouse appeal from a wide range of consumers. Throughout history, McDonald’s have utilized novelty and investigation in coming up with new products that have continued to fetch high returns. The use of innovations across its outlets has been key secret in retaining McDonald’s strength of quality and consistency. Through their franchise approach the firm has been able to achieve results as a result diversity of innovation in products or solutions. In fact, a wide variety of menu items stem from franchisees in response to unique customer needs. 6. Marketing strategies and plan McDonald’s marketing strategies has continued to rely heavily on adverts. The ads have over years made considerable progress in attracting new consumers towards buying their products. “The adverts are conducted on variety of available media which include; Television, radio, cinema, online posters, press and social media” (Schlosser, 2012). They have also utilized other advertising methods such as sales ads, public displays, retail, straight mail, expositions, telephone selling, conferences and loyalty structures among others. McDonald’s Fast Foods Company has over several decades since its inception used a variety of these advertising methods to reach a vast population of potential consumers worldwide. McDonald’s firm has been looking forward towards moving the audience towards making purchasing decisions, visiting the restaurant or acclaiming a choice to an associate. Therefore, whenever McDonald’s enter into a new market, the first assignment is to understand the type of customers they are dealing with so as to make wise advertising decisions. The media chosen for advertisement would depend on who the audience. 7. Impact of environmental, social and cultural factors The impact of environmental, social and cultural factors on consumer behaviour is of utmost importance to McDonald’s progress to success. On environmental factors, the firm experienced the most frustrating experience in 1980 when they introduced the Golden Arches to their menu. According to environmentalists, the product was associated with production of large amount of litter and wastes. This nearly halted expansion to newer international markets. With this in mind, the restaurant opted to maintain the favour of the public on the need for sound environmental concerns. To overcome this problem, the company embarked in finding a lasting solution through a research that sought to investigate on whether the criticism shouldered on McDonald’s had an impact on the purchasing decisions of the consumers or whether the consumers would not buy their products because of the effects it posed on environmental safety. “The research found their contribution to environmental damage through wastes was immense and as a result collaborated with Environmental Defence Fund (EDF) with an aim of exploring other environmentally friendly ways of production” (Johansen, 2012). Consequently, McDonald’s worked towards improvement by bringing back positive public view regarding environmental conservation. They were able to achieve this by reducing the amount of solid waste deposits on the environment. McDonald’s in collaboration with EDF worked together towards finding a lasting solution to the raised environmental concerns. As a result, they opted to use brown paper bags which were more recyclable compared to polystyrene clamshells which were initially used for packaging. Their collaboration has not only helped shape McDonald’s corporate appearance by the public but has also helped minimise shipping expenses for supplies and garbage removal. Culturally, McDonald’s decorations designs of restaurants targets young people based on psychological approach using the concepts of sports or romance. Through varied decorations the company intends to stimulate consumption through identification. The use of sport and music superstars to advertise the brands is the most prominent style used by McDonalds. Through social corporate responsibilities, the company has reached numerous customers. For instance, the company’s participation in sponsoring sport events helps sell their brand name. 8. Factors influencing decisions Over years, numerous product plans have been developed and adopted in coming up with new international distribution channels. The adoption of any particular plan has always been based on the type of culture which is unique to various geographical locations. Elements of culture such as religion, norms, taboos and traditions influence decision making especially on which type of products should be adopted. For instance, McDonalds have in the last decades come up with ‘Halal’ food which specifically targets Muslim consumers in Saudi Arabia, United Arab Emirates (UAE), Pakistan and Kuwait. 9. Conclusions Since McDonald’s is an international company it has to adopt various marketing mix strategies to reach a wider audience. In this regard, their decisions are chosen based on how such decisions affect the relationship between the firm and the area (Smith, 2007). In addition to ensuring that the company fulfils the needs of its customers, it is also keen on maintaining sound relationship among its shareholders. This is evidenced by the firm’s willingness to add healthful foods to their menus. This has been made possible through proper food preparation and packaging. Amidst these concerns, numerous challenges continue to face McDonald’s potential move away from ancient fast foods towards healthier brands as per the interest of those customers who care much about the quality of whatever they eat. McDonald’s has continued to uphold the need for maintaining positive strengths in spite of increasing concerns on quality and safety (Pride & Ferrell, 2012). Lastly, McDonald’s eco-friendly struggles though important should not override the company’s marketing creativities. Many opportunities are available for this company and as such, it must endeavour to strategize its marketing so as to remain relevant and consistent to the needs of the consumers. 10. Findings McDonald’s globalization has continued to develop for the last decades since its inception. It is quite notable that its performance as a global fast food company is a predominant leader in swiftness, performance, excellence and reputation. This research has found that McDonalds Company: i. Have numerous gaps in market positioning ii. Emphasizes much on building brand names at the expense of performance. iii. Integrates its culture into different cultures through love and loyalty. iv. Concentrates much in developing localized executive that is capable of bettering company’s tactical modifications. 11. References: ASWATHAPPA, K. (2010). International business: New Delhi, Tata McGraw Hill Education. JOHANSEN, L. T., MS, RD. (2012). Fast food vindication: the story you haven't been told. Los Angeles, CA, J. Murray Press LEIDNER, R. (1993). Fast food, fast talk: service work and the routinization of everyday Life: Berkeley, Univ. of California Press LOVE, JOHN F. (2008): McDonald’s Behind the Arches. Paw Prints. MCELHANEY, K. A. (2008). Just good business the strategic guide to aligning corporate Responsibility and brand; San Francisco, Barrett-Koehler Publishers http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=260725 MIETH, H. (2007). The history of McDonald's; Munched, GRIN Verlag PRIDE, W. M., & FERRELL, O. C. (2012): Marketing. Mason, Ohio, South-Western Cengage Learning SCHLOSSER, E. (2012). Fast food nation: the dark side of the all-American meal. Boston, Mariner Books/Houghton Mifflin Harcourt SMITH, A. F. (2007). The Oxford companion to American food and drink: New York, Oxford University Press BOYLE, M. A., & ROTH, S. L. (2013): Personal nutrition. Belmont, CA, Wadsworth, Cengage Learning Read More