Global marketing mix of McDonalds - Essay Example

? Global marketing mix of McDonalds November 05, Step selection of Brand Interbrand, provides a list of the top 100 global brands, based on parameters such as performance, visibility and marketing reach. Among the 100 brands selected, the firm selected is McDonalds. The firm is ranked seventh among the global brands. Reason for selecting this brand is that it employs a unique marketing mix that is based on quality of its product, store ambience, service quality and other parameters. This report will focus on the marketing mix of McDonalds. Step 2. Analysis of the brand and IPT application In this step, the marketing mix of McDonalds is analysed. A brief overview of the firm is provided followed by an analysis to assess if the marketing mix is standardised or adapted across international markets. Also discussed is the Internationalisation Process Theory - Uppsala theory for its international operations. 2.1. About McDonalds McDonalds operates in the restaurant sector and its products are fast food items, soft drinks, milk shakes, salads, breakfast, meals and other food items. In 2012, the firm had revenues of 27.56 billion USD. It has more than 34,000 outlets in 118 countries. It employs more than 1.7 million people in its stores and offices. Outlets are operated using different models of as an affiliate, franchisee and directly by the firm. The firm earns its income from royalties, rent, fees from franchises and from sale of food products. Franchise operators are monitored strictly for the service levels and to ensure that the brand image is not spoilt. Outlets have different styles such as counter service and drive-through/ walk through service. It has also opened McCafe, a cafe style of outlet that competes with Starbucks (McDonalds, 2013). 2.2. Assessing the7Ps of marketing mix The marketing mix is a marketing practice and business tool that helps to assess the brand's offer to customers. It combines a set of activities that the organisation must take up so that the target customers are identified and their needs satisfied (Albaum and Duerr, 2011). The earlier marketing mix consisted of the 4Ps and these were called as product, price, place and promotion. For service firms, that offer specific products, another 3 Ps were added to form the 7Ps of marketing mix. These extra Ps are people, performance and processes. For this paper, the 7Ps of marketing for McDonalds is discussed (De Mooij, 2010). Since the global branding practices are under discussion, the efforts of McDonalds in overseas markets is also analysed to assess the consistency of its business practices. 2.2.1. Product Product is a tangible and main offering of a firm and it generates revenue through sale of its products. For a firm to succeed, the product must have a unique selling proposition and it must be difficult for others to copy. Product is made of the core product and augmented products and these are packed together to increase the portfolio range. International firms must ensure that there is consistency in product offerings in terms of quality, taste, appearance and delivery (Anderson and Buvik, 2002). McDonalds offers the same range of products across all its outlets. In almost every location, one would see burgers, fries and these are the core products, augmented by milkshakes, coffee and ice creams. Thus, there is sufficient breadth and depth as indicated in the following figure. However, some amount of localisation is done since pork is not served in Middle East and Muslim nations and beef is not served in India. In addition, products in Asia are spicier than similar products in western nations (Vignali, 2010). Thus, McDonalds has standard products that are adapted to suit local conditions. Figure 2.1 Product range of McDonalds (Vignali, 2010) 2.2.2. Price Price refers to the money a customer's pays to procure the product. While lower prices could increase sales, it lowers public perception of the product quality besides reducing earnings. Higher price would keep people away (Andrews and Kim, 2007). Since McDonalds is an international brand, incomes vary widely across nations. A medium sized burger meal in UK starts at four GBP and in Indian currency, it is about 400 INR and a family can have full meals at this price. Given below is a perceptual map that shows that McDonalds products are perceived by customers as being of high quality and low price (McDonalds Marketing, 2003). Hence, price parity is not practiced and discrepancies are maintained for prices. Figure 2.2 Perceptual map for McDonalds pricing (McDonalds Marketing, 2003) 2.2.3. Promotion One of the most important is promotion or publicising the product. This is done through PR, advertising, sales promotion along with personal selling. Multiple media such as shop displays, hoardings, handouts, TV programs, print media, event sponsorships and others are often used (Ozsomer and Altaras, 2008). McDonalds has a unique logo with its double yellow arches and the mascot, Ronald the clown and these are easily recognised by millions of customers and this is consistent across all nations. It has launched the 'I'm Loving it' campaign and the Ads have a similar look and feel in different nations. As seen in the following figure, only the translation is done for the slogan, as per the local language. Some differences are observed in the Ad campaigns and local models are used to make the Ads relevant (Lafontaine and Leibsohn, 2004). Hence, there is consistency in global promotion with some amount of localisation. Figure 2.3. Consistency in promotion and Ads () 2.2.4. Place Place is the outlet design and location where the products are sold. Global brands need to have a consistent look and feel and they must be located at convenient places so that people do not have to travel far to buy the product (Whitelock and Fastosa, 2007). In the case of McDonalds, depending on the size and space availability, there is a consistent design of the restaurants. Modern lightweight furniture with a counter to buy food and with overhead displays of different menus is available (Lafontaine and Leibsohn, 2004). Please refer to the following figure. Figure 2.4. Typical interior of a McDonalds restaurant (Lafontaine and Leibsohn, 2004) 2.2.5. Personnel This element refers to employees, either direct of franchise operators that form the front line and the support staff of a firm. Service and product offerings are delivered through these personnel and the brand image is strengthened or weakened by the personnel (Carrigan, et al, 2005). In the case of McDonalds, all personnel are given training, based on their expected function and roles. Therefore, kitchen staff is trained to use consistent and the same cooking techniques and provide the same service delivery. Some amount of localisation is done and local people are recruited, trained and placed at different locations (Vignali, 2010). Therefore, McDonalds has standard training practices but these are adapted to suit local conditions. 2.2.6. Performance Performance refers to the financial and strategic results of a firm. Having strong financial results with growth in turnover, profits and share price along with expansion, indicates that the firm has a good record of accomplishment. This will encourage investors to buy shares and invest in the company (Shi, et al, 2004). Each outlet of McDonalds is an independent venture and it is responsible for its budget and control over expenses and it must show growth. In 2012, the firm had revenues of 27.56 billion USD and this is a growth of 8% over 2011. As seen in the following figure, the share price over a five-year period has shown a growth of 12.03%. Share price in 2009 was at 50 USD each and as of 5 November 2013, the price is 97.31 %, a growth of almost 98%. Hence, McDonalds has shown a robust performance over its global operations (FT, 2013). Figure 2.5. Five year Market performance of McDonalds (FT, 2013) 2.2.7. Processes Processes refer to the methods and systems used in preparing the item and in delivery of service. A global brand must have the same quality, performance, look and feel, must taste and smell the same, irrespective of the locations. When this state is achieved, there is a standardisation of processes (Andrews and Kim, 2007). The firm uses highly standardised processes in the manufacture and this includes equipment, temperature at which food is cooked, ingredient control and time for preparation. A highly selective method is used to select, organise and monitor vendor performance for ethics, economic and environmental parameters (Suppliers, 2013). Hence, processes are consistent and standardised across its global operations. 2.2.8. Summary The above sections have analysed the 7Ps marketing mix of McDonalds. It is clear that across all the seven elements, McDonalds has used highly efficient methods and process that are standardised and consistent. However, some amount of localisation and adaption to local requirements is done while maintaining the high level of quality and service. This is seen in products, promotion, pricing, processes, place and other elements. Thus, the McDonalds strategy is "to think global, act local". 2.3. Internationalisation Process Theory - Uppsala Model Internationalisation Process Theory explains the process and methods that firms use to expand into international markets. Leading firms such as Microsoft, GE, McDonalds, etc, started their initial operations in a small way in the country. After consolidating their position and developing sufficient experience, they ventured into overseas markets. Many theories are available to explain this internationalisation effort (Maruca, 1994). Among these, the Uppsala model is examined and applied to the McDonalds case to explain the international expansion. The Uppsala model, suggests that firms first take root in a region, gain experience in the domestic market and gradually intensify their strength. They then move to foreign markets that are culturally similar or geographically near before moving to new markets (Cavusgil, et al, 2005). In the initial stages, a firm will not commit more resources to a foreign location and only after gaining confidence will it dedicate more resources. In cases, where the performance in a foreign country is not as expected, then the firm may gradually withdraw (Keegan and Schlegelmilch, 2001). The history of McDonalds is seen to follow the practices and principles of the Uppsala model. The firm was started in 1940 and after changing hand, the business took shape and local expansion in USA started from 1959 onwards (Ghauri and Cateora, 2010). Until 1967, international markets were largely untapped save for one or two stores in Canada that is aligned to USA in terms of geographic location, language, religion and culture. Entry into Japan started from 1970 onwards mainly due to the large number of US personnel stationed there. UK, France and Germany entry started from 1973. Initially, only a few outlets were opened in these nations to judge the reception towards the new product and services. After about 5-6 years of market study and growth, expansion and growth in these nations took off at a rapid rate (Lafontaine and Leibsohn, 2004). This growth pattern is seen in the following figure. Figure 2.6. International expansion of McDonalds as per Uppsala model (Lafontaine and Leibsohn, 2004) 3. Conclusions The paper has examined the 7Ps marketing mix of McDonalds and assessed internationalisation efforts of the firm. The study indicates that while McDonalds has adopted highly visible efforts for marketing, some amount of localisation is also done so that local requirements and cultures are respected and adhered to. In its internationalisation efforts, the firm has followed the trajectory indicated by the Uppsala model. References Albaum, G. and Duerr, E., 2011. International Marketing and Export Management, 6thEdition. London: Prentice Hall Anderson, O. and Buvik, A., 2002. Firms’ Internationalisation and Alternative Approaches to the International customer/Market Selection. International Business Review, 11(3), pp. 347-363 Andrews, M. and Kim, D., 2007. Revitalising Suffering Multinational Brands: An Empirical Study. 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