Marketing: McDonald's in North America - Research Paper Example

?SWOT Analysis McDonalds has many strength and virtues that have helped the company become an extremely successful fast food restaurant chain. McDonald’s is the industry leader in the fast food industry both in terms of size and revenues. The company generated global revenues of $24,075 million in 2010 (Yahoo, 2011). The organization has 32,737 stores worldwide. McDonald’s has been able to capitalize on the international market better than any other competitor in the industry. McDonalds has 17,236 international stores in 118 countries (Worldfranchising, 2011). McDonald’s has tremendous brand value. The mascot of the store Ronald McDonalds is a global icon. He has been instrumental in the firm’s ability to achieve the highest market share among kids in the industry. The organization has a huge customer base that allowed the store to serve 64 million customers on a daily basis (Aboutmcdonalds, 2011). The financial performance of the company in 2010 was outstanding. The net income and net margin of the firm in 2010 were $4,946 million and 20.54% respectively. The product variety of the company is excellent. This provides the customers with many eating alternatives to choose from. The company just like any other business has weaknesses. One of the weaknesses of McDonalds is that it competes in an extremely saturated industry. There are approximately 160,000 fast food restaurants in the United States. A second weakness of the firm is that a lot of its food products are not nutritional since they have high contents of fat. As the industry leader the company is a target of its followers who often include anti-McDonald’s campaigns in their advertisements. The high cost of acquiring a McDonald’s franchise has become a weakness that will make it harder for the company in the future to find a large pool of franchisee applicants. The organization also charges extremely high royalties. Franchisees have to pay a 12% royalty on sales and a 4% advertising fee. This means that the franchisee gets to keep only 84% of the revenues generated by the store. There are opportunities that McDonald’s can capitalize on to continue to achieve growth and prosperity and to improve the brand value of the company. The firm can increase its product offering to include more products that have lower fat content. The use of wheat flatbread and tortillas can be used to add several healthy products that can attract dieters, diabetics, and healthy eaters. Another opportunity for McDonalds is to create a new customer reward program. The new customer reward program would give its customers a 6% food credit for future purchases. The creation of this program would beat the best program in the industry which is the Burger King’s BK reward which gives customers in certain states and US territories a 5% credit towards future purchases (Mybkrewardscard, 2011). A growth opportunity for the company is mobile food trucks. McDonalds should design and aggressively market mobile McDonald’s food vending trucks. These food trucks would offer a limited McDonalds menu. Two advantages of offering these trucks are lower franchisee entry cost and lower operating costs. Distress in the US and global economy is a threat to McDonalds. The rising unemployment in the United States is decreasing the disposable income of its citizens. The unemployment rate in the United States in August of 2011 was 9.1% (Tradingeconomics, 2011). When the population has lower income people spend less money eating outside of home. The trend towards healthier eating is another threat to McDonalds. Fast foods are by nature an unhealthy meal. Another threat to McDonalds is increased education among the population about the health dangers of high consumption of red meats. High consumption of red meat increases risk of cancer, heart disease and it lower life expectancy (Brody, 2009). Competition McDonalds faces direct and indirect competition from many sectors. There are thousands of fast food restaurant competing in the fast food industry. Many cafes, bakeries, mobile food trucks, and convenient stores sell cooked hamburgers as part of their menu. People can replace the burger eating experience by cooking hamburgers at home. There are some major players that directly compete with McDonalds. The two biggest competitors to McDonalds are the hamburger chains Burger King and Wendy’s. Burger King is the second largest fast food franchise in the world. In 2010 Burger King generated total revenues of $1,839 million. Burger King serves 11 million customers on a daily basis across its network of 12,078 stores (Bk, 2011). Burger King and Wendy’s have a reputation for using better quality meats than McDonalds. Wendy’s is the third largest hamburger chain with over 6,650 franchises. In fiscal year 2010 Wendy’s generated sales of $3.41 billion (Yahoo, 2011). Product Offering McDonalds offers a variety of products in its menu. The traditional McDonalds customer order includes a hamburger, fries, and soft drink. The restaurant sells individual items and food combinations. The restaurant has both a breakfast and lunch/dinner menu. There are special kids’ meals available in the menu. The McDonalds food menu is divided into eight food product categories. The eight food product categories are burger & sandwiches, chicken, breakfast, salads, snacks & sides, beverages, McCafe, dessert & shakes (Mcdonalds, 2011). The company sells 23 different burgers and sandwiches and 11 different types of wraps. Some of the most popular items include the Big Mac, McDouble, Fillet-O-Fish, and the McChicken. McDonald’s sells 22 different products made with chicken. The breakfast menu has 21 items. Some popular breakfast products sold by McDonalds include McMuffin, McGriddles, Hash Brown, Hotcakes, and the Southern Style Chicken Biscuits. There are 14 different salads to choose from. Four of those salad products are Premium Ceasar Salad, Premium Asian Salad with Grilled Chicken, and Side Salad. One of the newest additions to the McDonalds Menu is McCafe. McCafe was created to compete directly with Starbucks Cafe products. The McCafe menu includes 14 different beverages. A special menu that has been extremely popular among McDonald’s customers is the dollar menu. The dollar menu includes 13 items five of which are sold during breakfast and the other eight during the rest of the day. The eight dollar menu items that are sold during the day are small fries, McChicken, McDouble, Hot Fudge Sunday, Apple Pies, small beverage, Fruit’ N Yogurt Parfait, and Side Salad. Keys to Success McDonald’s has the highest market share in the industry. In the United States the fast food industry is saturated and room for growth is limited. The organization depends on the continued success of its international operations. McDonalds is a multinational corporation. The firm has more international stores than US locations. Approximately 52.46% of McDonald’s stores are international businesses. The firm must identify the fastest growing emerging economies. The top four emerging economies of the world are Brazil, Russia, India, and China (Businessweek, 2005). These four emerging economies were referred too as the BRIC. This term is no longer used as South Africa, one of the hottest emerging economies in the world, was added to the BRIC to create the BRICS. The company must continue to implement training and development initiatives to optimize the productivity of its labor force. The executive management team must purchase the latest kitchen innovations to maximize the use of the assets of the company. McDonalds has to be able to differentiate the brand. The firm has been effective in the past at adding new products and using innovative pricing strategies to attract and retain many customers. The firm must use innovation in its services to add value to the McDonalds experience. The redesigning of stores to include areas with television programming can help the company differentiate itself. This concept can be tested at stores with McCafe facilities layouts. Food safety and quality assurance are important factors to prevent the company from incurring in any civil liability. Critical Issues McDonald’s has a large international operation. The firm has to monitor closely various monetary risk factors associated with globalization. Two of those factors are inflation and foreign exchange. The price structure of the franchise in countries with high inflation must be updated on a recurrent basis. This must be done to ensure that the profitability of the business is not affected negatively due to changes in the buying power of money in a specific country. The foreign exchange rate must be tracked by the managers of the company due to the fact that some countries have very volatile currencies. A country that has historically had large fluctuations in the value of its currency is the Dominican Republic. McDonalds has to monitor the availability of quality labor in the emerging economies it penetrates. Regions with high illiteracy rates are the types of undesirable labor markets McDonalds should stay away from. The general state of the global economy will affect the performance of the enterprise. A recession might force the company to lower its prices to increase the demand for the firm’s product. Such a strategy would lower the profitability of the company. Inflation in the price of food can alter the pricing structure of the company. Five critical raw materials used by the company are potatoes, shredded meat, cooking oil, chicken, and bread. References Aboutmcdonalds.com (2011). Our Company. Retrieved September 11, 2011 from http://www.aboutmcdonalds.com/mcd/our_company.html Bk.com (2011). Company INFO. Retrieved September 11, 2011 from http://www.bk.com/en/us/company-info/index.html Bkrewardcard.com (2011). BK Rewards. Retrieved September 11, 2011 from http://mybkrewardscard.com/register.php Brody, J. (2009). Paying a Price of Loving Red Meat. NY Times. Retrieved September 11, 2011 from http://www.nytimes.com/2009/04/28/health/28brod.html Businessweek.com (2005). Emerging Markets: Beyond the Big Four. Retrieved September 11, 2011 from http://www.businessweek.com/magazine/content/05_52/b3965450.htm McDonalds.com (2011). Food. Retrieved September 11, 2011 from http://www.mcdonalds.com/us/en/food.html Tradingeconomics.com (2011). United States Unemployment Rate. Retrieved September 11, 2011 from http://www.tradingeconomics.com/united-states/unemployment-rate Worldfranchising.com (2011). Mcdonald’s. Retrieved September 11, 2011 from http://www.worldfranchising.com/franchises/mcdonalds.html Yahoo.com (2011). McDonalds Corporation (MCD). Retrieved September 11, 2011 from http://finance.yahoo.com/q?s=MCd&ql=1 Yahoo.com (2011). The Wendy’s Company (WEN). Retrieved September 11, 2011 from http://finance.yahoo.com/q/is?s=WEN+Income+Statement&annual Read More