McDonalds Australia Holdings SWOT Analysis - Case Study Example

McDonald’s Australia Holdings Name Professor Institution Course Date McDonald’s Australia Holdings Executive Summary This report is prepared to analyze McDonald’s Australia Holdings SWOT and provide recommendations how the company can use its strengths to introduce a new product in a target market. McDonald’s Australia Holdings is a fast food company which has its roots in the US. The parent company McDonald’s Company was established in 1940 in California, US (IBISWorld 2014). Currently the company operates all across the globe and has turn out to be one of the most well known and admired brands internationally. McDonald’s Australia Holdings a franchise of McDonald’s Company, was founded in 1971 with its head office in Thornleigh, NSW, Australia (IBISWorld 2014). From then, McDonald's Australia Holdings has grown rapidly with regards to its outlets, revenue and employees. In 2012, this company made total profits of $1599990000 from sales and other profits (Euromonitor 2013). Currently the company has 7942 staff in Australia as well as staff from all subsidiaries controlled by the company. Table of Contents McDonald’s Australia Holdings 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 SWOT Table 4 3.0 Findings 6 3.1 Explanation of SWOT analysis table 6 4.0 Recommendation 9 4.1Target market 9 4.2 New Product description 9 4.3 Customer value 10 4.4 Justification of the new product using a strategy 11 5.0 Conclusion 11 6.0 References 12 7.0 Appendix 13 1.0 Introduction As the 21st century unfolds globalization and competition is changing the business environment (Pride & Ferrell 2011, p.301). Business mangers have to rethink their strategies and use their strengths to sustain competition. Pride & Ferrell (2011, p.30) argue that in the face of that globalization, numerous changes and developments are happening around with many organizations within every sector attempting to sustain pace with the adjustments and different needs of individuals. One of such industry is the Australian fast foods industry. With many competitors in the sector McDonald’s Australia Holdings is one of the market players that have been compelled to design new marketing to counter its major rivals (Monika, Schröder & Morven 2005, p.213). Based on the information, this report is prepared to analyze McDonald’s Australia Holdings SWOT and provide recommendations how the company can use its strengths to introduce a new product in a target market. 2.0 SWOT Table Experts believe that the with many companies getting into Australian Fast Food Services sector, competition is poised to go up (Euromonitor 2013). As such, companies must understand their strengths and weaknesses; maximize on the strengths and opportunities while minimizing on the weaknesses and threats so sustain the competition. With McDonald’s Australia Holdings intending to introduce new product in the market, the top management must understand its internal capability (SWOT) to know whether the company is able to well in the external environment (Monika, Schröder & Morven 2005, p.215). Strengths Weaknesses 1. McDonald’s Australia Holdings is a market leader 2. Strong brand because of global presence 3. Cultural differences adaptation 4. Large customer base 5. Solid financial base 6. Highly diversified products 7. Environment protection 8. Corporate social responsibility 1. Its menu mostly targets children 2. High employee turnover 3. Large company network which is difficult to control 4. Promoting junk food which is unhealthy 5. Rigid to economic changes 6. Child labor Opportunity Threats 1. Developing new brand 2. Adding new preference healthier foods 3. Expansion of its operations 4. Increasing home delivery and take away foods 5. Advancement of technology 1. Fictional stories concerning the quality of its foods 2. Fluctuation of foreign currencies 3. Competition from major players 4. Increased price of raw foods 5. Economic downtown 6. Consumer and health consciousness 3.0 Findings 3.1 Explanation of SWOT analysis table IBISworld report (2014) claims that McDonald’s Australia Holdings is a market leader in the Australian fast food industry, having the largest share of the market of 15.3% followed by Yum! Restaurants Australia with a market share of 9.3%, Subway Systems Australia with a market share of 8.8% and Competitive Foods Australia with 7.0% share of the market (appendix 1). This aspect points out that this company offers high quality foods with outstanding customer service. It is apparent that the major McDonald’s Australia Holdings strength is its strong brand recognized all over Australia and internationally (IBISWorld 2013). The firm is the leading in the industry with regards to its product portfolio and generating value in reference to fast foods. This factor has made the firm be way ahead of its close rivals. This aspect is also observed through its diversified products which have given it the market advantage based on the product branding and uniqueness. Monika, Schröder & Morven (2005, p.218) claim that during its earlier years the company suffered cultural differences problems since cultures of US and that of Australia to some extent are different. For that fact, some of its employees find it hard to cope, but with time the company has expatriates have adapted well. McDonald’s Australia Holdings has a solid financial base for its sale both US and in Australia making it conducts is operation smoothly (IBISWorld 2013). Some of its activities that have improved as a result of its solid financial base are its promotion, corporate social responsibility and payment of employees. In turn, the company has benefited from such activities by increasing its customers and enhancing its reputation. Monika, Schröder & Morven (2005, p.216) contend that McDonald’s has also improved their reputation as company that mind the welfare of the public through their environmental initiative from 1990s. McDonald’s Australia Holdings has been feted by the U.S. Environmental Protection Agency for their consistent effort to decrease solid waste by developing more resourceful packaging and by encouraging the utilization of recycled-content stuffs (Monika, Schröder & Morven 2005, p.217). McDonald’s Australia Holdings itself claim that they are dedicated towards ecological leadership by efficiently managing the electric energy, by protecting natural resources by means of recycling materials and addressing management of water concerns in the environment (Monika, Schröder & Morven 2005, p.218). On the other hand, the company faces some weaknesses which affect its operation even as it moves on. It menu mostly targets mainly children. Children normally depend on their parents income, meaning they do not have economic freedom to shop own their own. In most cases, it’s the parents of the well-off that are given extra pocket money or wait for weekends for family outing to be bought fast food for at McDonald’s Australia Holdings (Yankelovich & Meer 2006, p.5). This implies that if there are no disposable incomes, then their sales will remain low. According to Euromonitor (2013) the company does not have proper mechanisms for motivating their employees. Hence the company faces high employee turn over every year. Because of that the company has been changed and at some point has been forced to employ children. The issue of child labor has tarnished its name and even has even led the company being sued. In 2007, McDonald's was charged with five counts of charges associated with the hiring of children in the age of 15 and fined A$8,000 in Perth, Australia (Neville 2008). Within Australia alone McDonald’s Australia Holdings has a wide of outlets which is proving difficult to manage. Due to that reality, it is hard to know the net equity of the company. According to Kotler, P. & Armstrong (2010) if one outlet is not doing well or one product is not performing well; it is pulling down the profit of the entire country franchise. The company has established itself as junk food Company, a fact which is hard to change. However, health experts have created perception that McDonald’s Australia Holdings is promoting unhealthy foods, an issue that has portrayed negative publicity about the organization (Euromonitor 2013). Australia has in the past particularly in 2008 faced economic downtown a situation that forced companies to change their methods of doing business to survive. Euromonitor (2013) asserts that McDonald’s Australia Holdings was one of the companies that were affected due to its inflexibility to economic changes. As an established company and a market leader, these weaknesses should not deter the company from moving ahead. There are several opportunities which McDonald’s Australia Holdings requires to exploit so as to uphold the market dominance. The company can develop new unique brands and add to portfolio to improve its market advantage (Euromonitor 2013). The company is predominantly known for products such as hamburgers, French fries, breakfast items, desserts and soft drinks (IBISWorld 2014). Adding white meat pies in its existing is likely to increase its profits. Activities like social networking have increased among the youth a great deal. Technology offers opportunities to increase their customer base. Therefore, McDonald’s can provide free Wi-Fi to attract the consumers, mainly students. The company has certain things within their derails their operations that are threats. One of the major threats is the stiff competition from major players in the market (Euromonitor 2013). Evans (2004) affirms that the company also suffers from a bad perception about promoting unhealthy foods. Lastly, the company has to undergo fluctuating foreign currencies. If these situations are not controlled, McDonald’s Australia Holdings may find itself toppled as the market leader. 4.0 Recommendation 4.1Target market Target market since the company has been targeting the kids for most part of its existence, its time they can start targeting the old between the ages of 20-50. This target market comprises of people with income from their occupation as opposed to children who depends on their parents. The consumers in the age of early 20s (experiencers) are known to like social activities and even spending heavily on fast food during such activities (Yankelovich & Meer 2006, p.4). For that reason, if McDonald’s Australia Holdings use effective marketing activities such as free provision of Wi-Fi, they are bound to win these target groups. On the other end, people who are people who have a stable occupation at the age of late 30s to early 50s are known to have high incomes (Innovator), like leisure activities and great taste for “superior things in life (Yankelovich & Meer 2006, p.6). McDonald’s Australia Holdings is a strong brand and a market leader, which provides which suit the innovator consumers. The company stands a chance to win this group and consumers, which as a result, will help the organization boosts its market share. 4.2 New Product description Meat pie is one of the products which currently, have a large market in Australia and New Zealand. Because of its preference in outdoor activities and general consumption among Australians, McDonald’s Australia Holdings should consider having this product amongst its portfolio. According to Wilkinson (2012) meat pie is described as hand-sized meat pie consisting of mainly minced or diced meat, sometimes mixed with cheese, mushrooms, onions, and frequently eaten as a takeaway snack. The meat pie is the same as steak pie of the UK. The product is greatly related to Rugby League and Australian football as one of the recognized, utilized food item while watching a match (Wilkinson 2012). It would be best for McDonald’s Australia Holdings to introduce this product Melbourne owing to its high population and city life. Since the company intends to introduce this product for the first time, it can use penetration pricing to create a notion that this company offers cheap prices but high quality products (Kotler & Armstrong 2010). As mentioned above targeting new market, i.e. ages of 20-50 would work well for the company bearing in mind their high income and liking for leisure. 4.3 Customer value Majority of marketing strategists concurs that creating consumer value is essential to the organizations (Kotler & Armstrong 2010). Pride & Ferrell (2011) agues that creating greater customer value is a critical factor for a firm in safeguarding a niche in a competitive setting, not to talk about a leadership status in a market. Through venturing in meat pies, the company will realize it was missing a key growth opportunity. In fact, introducing what the consumer has been missing like meat pies is itself value creation. Even though, negative perception have been created about the company promoting unhealthy foods, the meat pies processed by McDonald’s Australia Holdings should have low meat content with more vegetable content to help reduce health risks. Effective promotion, information, customer service should be in the forefront of the company agendas in regards to new product so as to create customer value proposition (Pride & Ferrell 2011). McDonald’s Australia Holdings can create a strong customer value proposition by recognizing customer needs by means of a market research and assessment. 4.4 Justification of the new product using a strategy It can be argued that McDonald’s Australia Holdings creation of new product, meat pies, means it has used S-O strategies to enhance its strength as a highly diversified company. Kotler & Armstrong (2010) posit that diversification strategy helps the company not only to spread the risks but also to offer additional strength for growth. By introducing meat pies into its portfolio, the company is using S-T strategies to reduce its exposure to external attacks. Evans (2004) holds that McDonald’s Australia Holdings has always been attacked as a company which promotes unhealthy living because of selling junk foods. However, the new meat pies will be a mixture of few meat pieces and a large percentage of vegetables, which is in fact healthy for health conscious consumers. 5.0 Conclusion McDonald’s Australia Holdings enjoys market share and dominance in both the Australia and globally in fast food segments. The firm takes the lead in diversification of platforms such as Hamburger, cheeseburger, French fries and desserts of its strong brands. However, McDonald’s Australia Holdings experience bad perception and competition in its operations. There are several opportunities which can exploit so as uphold its dominance of the market – the introduction of meat pies will most probably improve its perception and revenue. However, to attain this, the firm will have to reduce competition created by Subway Systems Australia including other upcoming fast food joints. 6.0 References Euromonitor 2013, Fast Food in Australia, viewed on 3rdApril 2014 http://www.euromonitor.com/fast-food-in-australia/report Evans, S 2004, McDonald's: The journey to health. BBC News. IBISWorld 2014, IBISWorld Industry Report H4512: Fast Food Services in Australia, viewed on 3rdApril 2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?e ntid=2005 IBISWorld 2013, IBISWorld Company Premium Report: McDonald's Australia Holdings Limited, viewed on 3rdApril 2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/enterprisepremium/defa ult.aspx?entid=202 Kotler, P. & Armstrong, G 2010, Principles of Marketing, 13th (Global) ed. Boston, Pearson Education, Inc. Pride, W. M. & Ferrell, O. C 2011, Foundations of Marketing, Mason, South Western, Cengage Learning, p.301 Monika J.A, Schröder & Morven G.M 2005, Fast foods and ethical consumer value: a focus on McDonald's and KFC, British Food Journal, pp 107, 212 – 224. Neville, S 2008, McDonald's ties nine out of 10 workers to zero-hours contracts, The Guardian Wilkinson, S 2012, Competition's hot for lunchtime legend, The Advertiser. Yankelovich, D & Meer, D 2006, Rediscovering Market Segmentation, Harvard Business Review: 1–11. 7.0 Appendix Appendix 1: Australian fast food industry’s market share Read More