Mcdonalds Restaurant Chains in New Zealand - Situational Analysis - Case Study Example

Situational Analysis Report Introduction This report presents a market situation analysis for McDonald’s restaurant chains in New Zealand particularly in relation to their lamb burger product. Foremost, it provides an overview of the McDonalds Company. Secondly, this report provides an overview of McDonald’s lamb burger product line. Thirdly, it presents a market analysis of this product line. In this case it examines, the target market and market share of the product. Subsequently, this report explores McDonald’s lamb burger product line particularly in relations to its attributes, pricing, promotion, market share and marketing channels. It also identifies and describes the major competitors of the lamb burger product line with regards to their size, product quality, goals, market share and promotion strategies. Moreover, it presents a macro environment and SWOT analysis of this product line. Lastly, this report identifies three emerging issues revolving around McDonald’s lamb burger product line. Overview McDonald’s, the world’s largest fast food chain, was founded in 1940 when brothers Richard and Mac McDonald opened their first McDonald’s restaurant in San Bernadino, California. The McDonald’s business model focused on providing high quality fast food at a significantly lower cost as compared to its competitors. Ray Kroc, a milkshake mixer salesman from Chicago, would express interest McDonald’s in 1954 and subsequently negotiate a franchise deal to allow him franchise McDonalds. With its distinctive golden arches, McDonald’s has subsequently grown to become one of the world’s most valuable and recognisable brands. It operates 120 countries with more than 34,000 restaurants and employing over 1.8 million people who serve more than 52 million customers daily (McDonalds 2013). McDonald’s product offering includes selling hamburgers, French fries, chicken products, sandwiches, breakfast items such as the Egg McMuffin, soft drinks, shakes, desserts, salads and other localized offerings such as fish and lamb. Currently, over 80% of McDonald’s restaurants are franchised (McDonalds 2013). McDonald’s global success can be attributed to its business model and marketing strategy- “think global, act local”- which represents a convergence of globalisation and local culture. Through franchising, McDonald’s has been able to achieve rapid global expansion. Its franchising business model has also been augmented by a marketing strategy which focuses on offering both standardised products in its menus as well as adapting its product offerings to meet the unique tastes and preferences of customers and to comply with the customs and laws of the host market (Vignali 2001). For example, while the beef burger (Big Mac) is offered in markets such as the United States, the Chicken Maharaja Mac is the variant offered in India where the predominant Hindu population does not eat beef due to religious considerations while the Tuna Mac is offered in markets such as Japan and China where fish is popular. In predominantly Muslim markets such as Singapore and Malaysia, McDonald’s has had to obtain halal certification and cannot offer pork products such as bacon while in Israel it has to conform to the separation of meat and dairy products consistent with kosher guidelines and does not serve cheese with Big Macs (Vignali 2001). McDonald’s opened its first restaurant in New Zealand in June 1976 at Porirua, near Wellington. McDonald’s New Zealand (also popularly referred to as Macca’s) has 161 restaurants across the country, 80 percent of which are franchises which employ more than 10,000 people (McDonalds 2013). Some of the localised offerings in McDonald’s restaurants in New Zealand include the Kiwiburger (with beetroot and egg), Prime Angus beef burgers and lamb burgers. McDonald’s New Zealand currently commands an estimated 40 percent share of the New Zealand fast food (quick service) market which is estimated at $ 1.7 billion. Its revenue is generated by 30 locally owned restaurants which are supplemented by franchises and royalties from the other 131 restaurants (Adams 2012). In 2012, McDonalds New Zealand generated more than $ 600 million in sales. Between 2006 and 2010, locally owned restaurants reported a 40 percent increase in sales from $140.9 million to $197.6 million with profits for the same period increasing from $10.8 million to $35.9 million (Adams 2012). McDonald’s New Zealand’s short to medium term plan is to open 5 to 10 restaurants and to hit the 200 restaurant mark. Product Line Overview McDonald’s New Zealand’s menu consists of products offered both internationally and items unique to the New Zealand market. This is consistent with McDonald’s marketing strategy of adapting its menu to meet customer preferences in particular local markets (Doole and Lowe 2008). Its menu includes breakfast items such as Egg McMuffin, shakes, French fries, Big Macs, wraps and other items such as salads which are offered across McDonald’s franchises globally (Barnes 2008, Cohen 2005). It also includes localised products unique to the New Zealand market. A good example is the Kiwiburger which includes beetroot and egg as ingredients that is unique to the McDonalds New Zealand menu after several consumer surveys which have shown that New Zealanders prefer beetroot and egg on their burgers (Barnes 2008). Others include the Prime Angus beef burger made from local Angus bulls and lamb products such as the Serious Lamb Burger and the Lamb Snack Wrap (McDonalds 2013). The Serious Lamb Burger Product A product is the most important aspect of an integrated marketing mix since it is what satisfies or meets the wants and needs of consumers. (Cohen 2005). In the fast food market, it is what is offered to a customer as they approach the point of sale. Some of the key aspects of a product that play a critical role in determining customer satisfaction include; quality, varieties and features (Kotler 1993). For a product to be marketed successfully, it must fulfill the customer’s specific needs as well as provide value for their money. McDonald’s New Zealand introduced the 100% Kiwi lamb burger to its menu in August 2012. The Serious Lamb Burger was introduced after research which confirmed the iconic status and popularity of lamb among New Zealanders despite its cost. The introduction of the lamb burger was seen as an opportunity to consolidate its market share as the research had indicated that high cost was the main deterrent to the consumption of lamb in New Zealand as consumers could not afford export quality prime cuts (McDonalds New Zealand 2012). The Serious Lamb Burger is a localized product offering unique to McDonalds New Zealand. It was first introduced to the New Zealand menu which would serve as a pilot for eventual roll out in other markets such as Australia and in the Middle East and Asia as an alternative to beef burgers. The lamb burger was introduced following independent market research which concluded that 82 percent of the respondents preferred lamb despite 65 percent not being able to afford it (McDonalds New Zealand 2012, Maxwell 2012). The serious lamb burger is made of 100% New Zealand lamb patties seasoned with lettuce, oregano, garlic, egg, beetroot and creamy aioli served between two wheatgerm buns and is the biggest burger offered by McDonalds. The inclusion of beetroot and egg as ingredients follows McDonald’s previous success with the Kiwiburger in New Zealand (Maxwell 2012). Several consumer surveys had shown that New Zealand customers preferred the two ingredients on their burgers. Therefore, the product builds on McDonald’s strategy of offering high quality products consistent with consumer preferences in particular markets which are established by conducting market research (Vignali 2001, Barnes 2008). The Serious Lam Burger is offered by itself or as a combo with other products such as soft drinks and French fries. This enables McDonalds to market both its international standardized offerings such as French fries and soft drinks with a product adapted to suit local tastes and preferences- the lamb burger (Vignali 2001). The Serious Lamb burger is also McDonald’s largest burger on offer (Maxwell 2012). Place Place refers to the distribution channel used when delivering products to consumers (Cohen 2005). Distribution channels help companies to deliver their products more efficiently to consumers. All the ingredients that go into the production of the Serious Lamb Burger are sourced domestically and subjected to McDonalds global quality assurance tests to ensure consistency and maintenance of the high quality expected of McDonalds branches. The main ingredient-lamb- is readily available in a country renowned for its beef and lamb exports. The Serious Lamb Burger patties are made using export-quality shoulder cuts (no mutton used) from 100% New Zealand lamb (Maxwell 2012). McDonald’s New Zealand uses local suppliers from both North and South Island such as AFFCO, ANZCO and Silver Fern farms and processed at the ANZCO plant in Waitara (Rae 2012). Other ingredients such as beetroot, egg and lettuce are also sourced domestically from a variety of suppliers and regularly subjected to McDonald’s quality assurance checks (Vignali 2001). Once the ingredients are subjected to quality assurance checks, they are distributed to McDonald’s locally owned restaurants as well as franchises based on the stock requirements of each store which are determined by past sales. The burger is prepared and served to the end consumer at the more than 160 restaurants across New Zealand. Price Price is a key variable in the marketing mix that must be set based on the other three P’s of marketing as it is what ultimately determines the revenue that a business will generate (Cohen 2005). The lamb burger is priced at $8.90 for the burger and $ 11.90 for the medium combo (Maxwell 2012). The pricing strategy is also consistent with McDonalds pricing strategy which takes into account multiple factors in the host market while setting the price for its products. As indicated by the two year research and development process which preceded the introduction of the burger, the affordability prime export quality lamb was the major obstacle to domestic lamb consumption in New Zealand despite its immense popularity. Therefore, the lamb burger was introduced to occupy a niche in the market as it would make lamb affordable to most of McDonald’s customers in New Zealand who could not afford export quality prime lamb cuts (McDonalds 2012). The burger provides an opportunity for McDonald’s customers to consume high quality and affordable lamb. While the price is considerably high as compared to other burgers in the McDonald’s menu, it takes advantage of the fact that lamb is considered a high end product in New Zealand. The pricing strategy is also pegged against its main competitors (Vignali 2001). McDonalds was the first among its major competitors such as fast food outlets Carls, Burger King, Wendy’s and KFC to introduce the lamb burger as a permanent offer on its menu. The Serious Lamb Burger is also McDonald’s largest ever burger which gives it leverage in pricing due to quantity (Cohen 2005, McDonalds New Zealand 2012). Promotion Promotion refers to the process of persuading, informing or reminding potential and regular customers about the qualities, price or location of a particular product (Cohen 2005). It includes activities such as advertising, personal selling, and sales promotion to communicate to the target customers the benefits of purchasing the product and to persuading them to buy it (Kotler and Armstrong 1993) McDonald’s utilizes several types of marketing communications to advertise the Serious Lamb Burger. The burger has been advertised through in-store promotions at McDonald’s restaurants through media such as fliers and posters on trays to inform customers that the burger is now offered as a permanent item on the menu. The burger has also been promoted through t-shirts worn by staff with the slogan “Seriously Choice Lamb” as well as a customized box for the burger with information on the burger. Other forms of print advertising include posters and artwork on public transport (buses) with slogans such as “Export some New Zealand lamb to your New Zealand stomach” (Huffington Post 2012). The burger has also been advertised through audiovisual media such as short television advertisements with images of the burger and voice-overs informing customers of its availability on the menu. Billboards have also been used with catchphrases such as “Mary had a little lamb, fries and coke” which draws on a popular nursery rhyme (Huffington Post 2012). On social media, the lamb burger is featured on McDonald New Zealand’s Facebook and Twitter pages (McDonalds 2013). The underlying message in all the advertisements is that the McDonalds offers prime export quality New Zealand Lamb at an affordable price through the burger. It has also received the endorsement of Beef and Lamb New Zealand and the Federated Framers of New Zealand on the basis of using 100% New Zealand Lamb and boosting sheep farming as well as lamb consumption in New Zealand (Maxwell 2012, Rae 2012). Identified Issues When it comes to marketing or promoting McDonald’s lamb burger product line there are several issues that emerge. The first issue relates to the nutritional value of this product. Over the years, McDonalds has been subjected to criticism and protest over its product offering. The consumption of McDonald’s product has often been termed as “unhealthy” and associated with health conditions such as obesity and overweight (Stern &Kazaks 2009). In order to salvage this product from being perceived as unhealthy, it is crucial for the company to position its lamb burger product line as a product with nutritional value. Positioning basically entails creating an image or identify of a product in the mind of the target market (Cant, Strydom & Jooste, 2009). Given that the lamb burger is seasoned with healthy additions such as lettuce, oregano, garlic, egg, beetroot and aioli its is crucial for the company to highlight these features when marketing this product line so as to create perception to the target market that the product has some nutritional values. Another issue that is bound to emerge revolves around the pricing of the lamb burger. The price range of this burger ranges betweent $8.90 to $ 11.90 (Maxwell 2012). Evidently, this pricing is higher than usual and may dissuade consumers especially from low-income market segments from purchasing the product. In order to address this issue, the company should segment its market based on income levels and employ a flexible pricing strategy in order to meet the needs of all its consumers. References Adams, C. (2013). Macca's main man predicts price war. The New Zealand Herald, 3 March. Retrieved on March 5, 2013 from < http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10789396 > Barnes, D. (2008). Operations Management: An International Perspective. London: Cengage Learning. Cant, M. Strydom, J. & Jooste, C. (2009). Marketing Management, Juta and Company, Cape Town. Cohen, W. (2005). The Marketing Plan. New York: John Wiley & Sons Inc Doole, I. & Lowe R. (2008). International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning. Huffington Post (2012). McDonald's 'Serious Lamb Burger' Invokes 'Mary Had A Little Lamb'. Retrieved on March 6, 2013 from < http://www.huffingtonpost.com/2012/08/27/mcdonalds-serious-lamb-burger- ad_n_1833391.html > Kotler, P. & Armstrong, G. (1993). Marketing and Introduction .3rd Ed, New Jersey: Prentice Hall. Maxwell, J. (2012). Lamb burgers mean more than just a quick snack for farmers. Waikato Times, 21 August. Retrieved on March 6, 2013 from < http://www.stuff.co.nz/waikato- times/farming/7515304/Lamb-burgers-mean-more-than-just-a-quick-snack-for-farmers > McDonald’s New Zealand (2012). Media Release: McDonald’s Expands Menu with 100% NZ Lamb Products. Scoop Business. Retrieved on March 5, 2013 from < http://www.scoop.co.nz/stories/BU1208/S00433/mcdonalds-expands-menu-with-100- nz-lamb-products.htm > McDonalds (2013). Retrieved on March 6, 2013 from < http://mcdonalds.co.nz/> Rae, S. (2012). Lamb burgers excite farmers. Otago Daily Times, August 20. Retrieved on March 5, 2013 from < http://www.odt.co.nz/news/farming/222279/lamb-burgers-excite- farmers > Stern, J. &Kazaks, A. (2009). Obesity: A reference handbook. Santa Barbra, CA: ABC-CLIO. Vignali, C. (2001). McDonalds: “Think global, act local”- the marketing mix. British Food Journal 103(2): 97-111. Read More