Marketing Principles of McDonalds - Essay Example

Marketing Principles Verene Thomas ID number: P1021027 Group 32B July Lecturer: Murad MCDONALD’S Introduction Marketing principles involve the most effective product promotion ideas and strategies that businesses adopt during marketing. When undertaking marketing, businesses ensure that they practice high levels of creativity as they intend to prove to the customers that they are the best in the market. As such, most companies ensure that they focus on the market and specifically their customer. This is because the customer provides the market for the products made. In a highly competitive world such as todays, it is important to create a competitive advantage or an edge that a company uses to beat the competition. Marketing strategies are especially important because they help businesses in maximizing performance of existing products as well as launching new products into new markets. McDonald’s has managed to establish and maintain a variety of marketing principles and strategies that comprises of four main elements, which are balanced to the benefit of the company. The first section of the essay addresses the elements of marketing and the benefits of the mode of orientation that McDonald’s adopted. The third part expounds on the business environment while the fourth section discusses the differences between international and domestic marketing in close relation to McDonald’s. Lastly, a concluding statement wraps the essay with a summary of all issues covered regarding McDonald’s. Question 1 Elements of Marketing process by McDonald’s The marketing process can be defined as the procedure of assessing marketing opportunities, selecting markets to target, formulating the marketing mix, and management of the marketing effort (Marketing & Supply Chain Management, n.d). this process incorporates situation analysis, marketing strategy, marketing mix decisions, and implementation and control. Situation analysis includes a comprehensive analysis of a situation allows a business to identify the opportunities that could be exploited to satisfy unattended customer needs and wants. Marketing strategy involves developing a plan that can be used in fulfilling the identified opportunity. Marketing mix decisions incorporate detailed decisions that are made for controllable parameters in the marketing mix and include product development, pricing decisions, distribution contracts, and formulation of promotional campaigns. Lastly, the implementation and control step involves launching of the product or the service and close monitoring. As the market continues to change, the marketing mix valuables can also be adjusted to accommodate any identified changes in the market. The place element, in the marketing mix decisions, is one of McDonald’s best growth strategies where the company ensures that it delivers according to the customers’ preferences. In China, McDonald’s has established motorbike delivery to its customers as orders are increasing in this country. Therefore, “it is also advisable to check up different components of the marketing mix to be employed in the market and their probable future relationships.” (Chitale & Gupta, 2006, p. 401). In the place element, McDonald’s has managed to expand its operations overseas and has continued to ensure that its outlets are located in easily accessible but populated areas. This makes it easier to increase its market share by capturing more customers. To improve its appeal in the eyes of the customers McDonald’s has added the promotion element in its marketing strategy. This is mostly seen in the menus that the organization offers its customers. The menus have been customized to the point that they adapt to the local preferences so as to improve reliability (Chitale & Gupta, 2006, p. 399). Some of the food offered in China include sweet taro stuffed pies and a range of chicken flavors. In addition, McDonald’s has included the pricing element in its marketing strategy so as to increase the number of return customers. The menu has been strategically priced in a way that it allows virtually anybody to enjoy a good meal without having to pay a lot of money. For instance there has been constant price wars between McDonald’s and Yum Yum prompting McDonald’s to reduce its prices so as to remain attractive in the market (Ausick, 2014). Furthermore, the product element in McDonald’s marketing strategy is also effective. The main reason behind an increase in the company’s market share is the product element. The company offers quality food that is served in a clean, fast, and courteous manner aimed at impressing the customers. “Information on customer awareness, trail and repeat purchases are used to predict adoption of the new product” Chitale & Gupta, 2006, p. 400). McDonald’s has also established additional marketing communication strategies so as to improve its efficiency and management of the various restaurants that it operates (Deng, 2009, p. 40-41). The company also undertakes targeting which determines the success of the organization if it ventures in a certain unexploited market. In addition, positioning is another of McDonald’s marketing elements that it uses to determine how it should establish itself in an identified market. Monitoring of the market is also important to McDonald’s. This is because it helps the company in acquiring first-hand information concerning market related changes so as to determine counter measures. Question 2 Benefits and Costs of McDonald’s Orientation McDonald’s has adopted the customer orientation and focuses on this while serving its products. Customer orientation involves the “capability to continuously probe customers’ latent needs and uncover future needs.” (Herhausen, 2011, p. 16). To serve the market, the company has ensured that it provides the products as the customers want and at the most customer friendly prices. Additionally, it has expanded its operations to other highly populated areas including China so as to serve their Chinese customers in a better way. The benefits associated with this orientation include an increase in the market share due to higher sales volume and a bigger area of the company’s presence. Additionally, it has improved the organization’s efficiency and effectiveness while doing its business. The costs associated with this orientation include the need to adapt to better management practices that would work on the international arena and an increased urge to offset the threats that may be present in its environment. While it has a good appeal on the customers, maintaining customer orientation “is extremely difficult and cost intensive.” (Herhausen, 2011, pp.18). Question 3 Macro and Micro Environments in Relation to McDonald’s Both macro and micro environmental factors have affected the marketing decisions undertaken by McDonald’s. By definition, the microenvironment can be described as the immediate factors that exist within the control of a business and can affect its performance (Banhegyi, 2007, p. 51). Under the microenvironment, the customers and the competitors have been the main determinants of the marketing strategy. International customers have affected the marketing decisions in the perspective that the company has decided to expand into foreign counties and established market specific services (Blythe, 2005, p. 2-3). This is why the company has introduced menus that have been adapted to the local preferences. In addition, McDonald’s has introduced motorbike deliveries due to customer demands. This implies that the customers have affected the marketing strategies towards the point that McDonald’s has become one of the high quality but affordable companies that offer fast foods. With regard to strengths, McDonald’s has a high brand recognition and has a large fast food market share in China. In the quest to acquire a large market share, McDonald’s has employed many tactics such as home delivery making it more attractive as compared to other companies. In addition, the company established locally adopted menus. This is one of the strengths that make McDonald’s very attractive since the customers have the opportunity to get the products according to their liking. Such strengths have enabled the company to target the Asian markets easily. According to the weaknesses, the company has, at several times, had negative publicity. This is one of the factors that affect the customers and the overall market share as they opt to try the competitors. The competitors also take advantage of this. This affects McDonald’s profitability and public image. In addition, the idea that fast foods are unhealthy is becoming much of a weakness since the company deals with such foods. As other companies begin advocating for healthier foods, McDonald’s may lose its market base to the healthy food companies. However, there are opportunities that include the increasing demand for healthier foods. If McDonald’s adopt this, the their survival in the food business may be guaranteed. In addition, there are constantly changing customer habits that include preferences. McDonald’s can capitalize on this through flexibility as the new practices occur. There are also threats that include the increasing trend towards the healthy foods, currency fluctuations, and competition from local fast food companies. The macro environment can be described as the external factors that cannot be controlled by a business but can affect its performance. With respect to macro environment, demographic forces and economic forces have exhibited influence on the functioning and the strategies adopted by McDonald’s. The demographic forces affecting McDonald’s include size and growth of populations (Banhegyi, 2007, p. 51-52). For instance, although McDonald’s ventured into China because of the changing trends, it also considered the vast Chinese market which is above 1 billion people as compared to U.S, which has approximately 320 million people (Lee, 2003, p. 951). The marketing strategies adopted by McDonald’s in the global market have been influenced by the increase in population in countries such as China. Such countries provide a good market for the products being offered since the market is in constant expansion. This is why the organization has decided to establish its largest number of new restaurants in such highly populated areas as China. The strategy of establishing motorbikes to distribute the products represents an effect that the economic forces have had on McDonald’s marketing strategies. Here, the company acknowledges the existence of intense competition between the main competitors including Yum Yum, which is the main reason behind the adoption of the motorbike strategy so as to gain a competitive advantage. Such ideas take place because “the macro environment affects both the market environment and the micro-environment.” (Banhegyi, 2007, p. 52). Although McDonald’s can affect the microenvironment, its marketing strategies can also be influenced by it. This can be explained through the customers who can affect the company’s marketing strategies if they shift their preference towards the existing product. According to porter’s five Forces, McDonald’s faces constant threats from new entrants. The company cannot control this and its market share may be taken away by new entrants if they introduce superior products as compared to McDonald’s products. This implies that rivalry continues to build up among the main competitors, which calls for companies such as McDonald’s to develop new strategies. Supplier power also affects the functioning of McDonald’s. This is because if they concentrate too much, supplies become available at affordable cost. Moreover, there is a constant threat of substitutes. These are usually offered at low prices affecting McDonald’s prices and may prompt the company to adjust its prices downwards so that it can remain in the business. The power of the buyer is determined by factors that include brand identity, buyer information, price sensitivity, and buyer volume. In addition, the available substitutes may also affect buyer power since the customers compare the products mostly through pricing. The degree of rivalry is also a main issue in marketing and businesses cannot control it. This is determined through industry growth, industry concentration, and exit barriers. This affects the size of McDonald’s market share and may also reduce the company’s profitability. Question 4 International Marketing vs. Domestic Marketing in Relation to McDonald’s International marketing differs from domestic marketing in several ways. First, the two are different in scope. Domestic marketing is limited to the local boundaries of a country although a company could be competing with international businesses and still be in this scope. As such, “international marketing is much more complex because the marketer faces several uncontrollable forces originating from different countries.” (Aswathappa, 2008, p. 444). For instance, when McDonald’s ventured into China, it had to adapt to the environment by implementing strategies that are related to children such as having special parties meant for the children to improve its marketability (Ahlstrom & Bruton, 2010, p. 45). International marketing can be said to be targeting customers overseas therefore eliminating any limitations brought by scope. From the scope perspective, McDonald’s undertakes international marketing. Second, the two differ from the perspective of benefits. International marketing has more benefits because there are fewer limitations as compared to domestic marketing, which is limited to the local market only (Aswathappa, 2008, p. 444). As for McDonald’s, practicing international marketing has brought more benefits with regard to more customers and serving a bigger market share. For instance, when McDonald’s ventured into China it acquired the advantage of serving a market with more customers than the U.S and still maintained its U.S market to ensure optimal performance. Third, international marketing allows sharing of technologies that improve a business’s efficiency while domestic marketing is limited in the use of technology. For instance, McDonald’s adopted technologies that include biodiesel technology to reduce emissions of greenhouse gases when it ventured into China. Sharing of technology has enabled McDonald’s to improve its efficiency and its profitability at the same time (Ahlstrom & Bruton, 2010, p. 45-47). This is accomplished through adoption of the technologies being used in the host countries such as China. Here, “Throughout history, firms have achieved worldwide dominance mainly through forays into overseas markets, notwithstanding their home country markets being small in size.” (Aswathappa, 2008, p. 445). Fourth, international marketing improves political relations between countries through the organizations doing business in both countries while domestic marketing has no influence in political relations between host countries (Paul & Kapoor, 2008, p. 7). The idea that McDonald’s has expanded its operations to China and other Middle East countries has a positive effect on these countries’ political relations as both work together towards a common goal, which is provision of high quality products. Lastly, while international marketing has many benefits, it has the setback of barriers. While domestic marketing has no barriers, international marketing has many barriers that include customs, currency, and cultural differences. For McDonald’s to undertake its business activities in the international marketing perspective, it has to learn to embrace and to deal with these barriers. Conclusion In conclusion, marketing requires an organization to establish new ways of doing business with respect to the characteristics of the specific market. For a company like McDonald’s serving in the international arena, there are many challenges as there are opportunities. Adapting in the international market is not easy but has huge benefits if an organization is able to embrace the differences existing in social structures. References Ahlstrom, D., & Bruton, G. D. 2010, International management: strategy and culture in the emerging world. Australia, South-Western Cengage Learning. Aswathappa, K. 2008, International business. New Delhi, Tata McGraw Hill Education. Ausick, P. 2014, Fast-Food Wars: McDonald’s vs. Yum! Brands in China. [online] Available at: http://247wallst.com/services/2014/02/10/fast-food-wars-mcdonalds-vs-yum-brands-in-china/. [Accessed 10 May 2014]. Banhegyi, S. 2007, Management: fresh perspectives. Cape Town, Pearson/Prentice Hall South Africa. Blythe, J. 2005, Principles and practice of marketing. London, Thomson Learning. Chitale, A., & Gupta, R. 2006, Product design and manufacturing. New Delhi, Prentice-Hall of India Private Limited. Deng, T. 2009, McDonald’s New Communication Strategy on Changing Attitudes and Lifestyle. International Journal of Marketing Studies. Vol. 1 no. 1, pp. 37-42. Herhausen, D. 2011, Understanding proactive customer orientation construct development and managerial implications. Wiesbaden, Gabler Verlag. Lee, M. 2003, Franchising in China: legal Challenges when First Entering the Chinese Market. American University International Law Review. Vol. 19, no. 4. Pp. 949-1007. Marketing & Supply Chain Management. N.d. [online] Available at [Accessed 13 Jun 2014]. Paul, J., & Kapoor, R. 2008, International marketing: text and cases. New Delhi, Tata McGraw-Hill. Read More