McDonalds - Situation Analysis, Social-cultural, Legal, Technological and Economic Factors - Case Study Example

Introduction The drive towards the increased growth of firms towards being multinationals is the benefits that accrue such ventures both in the short and long term basis. In the food industry many firms have spread their wings from their mother countries in search of market for their products. In this case the role of international marketing strategy as well as that of integrated marketing mix in an international context is examined in this paper (Czinkota & Ronkainen 1995). In order to elaborate the above concepts with the aid of a number of theoretical perspectives and in regards to environmental analysis, McDonald's South Africa s will be taken as an example of a food retailer operating in the South African market. Situation Analysis South African food market has been a market on the rise especially after the apartheid times dating back to 1994. McDonald's has had to adapt to the South African market in respect to its political, legal, and economic as well as the social environment. A firm wishing to operate in an international market must have the understanding that different nations exhibit different systems of operation (Kotler 1997). These systems include taxation laws, government policy, a country's inflation, interest and exchange rates, culture of the people, level of technology among others. SLEPT The first consideration in this paper is the SLEPT analysis of McDonald's in South Africa. As earlier highlighted the end of apartheid in South Africa brought forth a great deal of developments in South Africa and in particular increased interest by foreign investors (Kotler 1997). In the lead was McDonald's which set its first restaurant in November 1995. The factors that have come to affect McDonald's under SLEPT analysis are legal, political, economic, technological as well as social ones. Social-cultural factors There are those factors related to language, ethnic background(s), religion of a people and values that they hold as well as perceptions. These factors are known to force firms to adopt completely different approaches to the market especially in the way the firm advertises its products. There are certain values and beliefs, societal norms and cultural orientations that the firm must put into consideration in conducting its day to day business. In the South African context, McDonald's faces a culture that is not too liberal like that of its mother country, USA. For this reason its products and their adverts must conform to the accepted norms under the African culture. There was also the perception that firms like McDonald's were established in South Africa to serve the white population (Kotler 1997). Due to the just ended apartheid regime, the black population had resented white affiliated facilities, goods and amenities. For this reason McDonald's had to take this market from a totally different perspective from that of maybe, China. The names and symbols of the products have to conform to the linguistic connotations or manifestations of South Africa. The firm in its adverts includes South African language so as to attract and make customers feel that McDonald's is part of them. Legal/political factors In all countries of the world, businesses are operated within the legislation frameworks set. In South Africa the adverts must conform to moral standards upheld in the law. Scenes that appear provocative for example nudity are outlawed as well as language use in adverts which should fall within the realms of social conformity. Failure to uphold these standards results in legal suits against a firm and as well as other harsh measures like license cancellation in more deviant cases. As highlighted earlier, the political changes that occurred in the early 1990s made McDonald's to view South Africa as a viable market (Kotler 1997). The political atmosphere has been quite stable as compared to many of its neighbours and this has enabled the firm to thrive. Corruption on the other hand has been relatively put to check which has made McDonald's and many other multinationals to have a better outlook in conducting their business. Technological factors These are the factors that relate to the state of technology in the country of operation. For efficient international operations of a multinational entity, high technological levels are required. The higher the technological levels, the lower the cost of communication. The level of technology particularly in IT has leaped huge steps; a phenomenon that has seen better management of operations within the South African McDonald's. Television and radio as media channels are more popular for advertising than newspapers and websites in South Africa (Czinkota & Ronkainen 1995). This therefore calls for McDonald's to use these channels more that would be the case in developed countries. Economic factors These factors quite hugely affect the way companies operate as well as their decision making process as well as strategies adopted (Roger & Jim 2002). They include the process of globalisation, economic changes, and rates of unemployment, inflation rates, exchange rates, and interest rates among others all of which are used to assess the economic stability of a country. In respect to the South African market, the economy on general terms has been improving and major falls have not been witnessed. SWOT McDonald's being one of the largest firms dealing in food retailing has had a big competitive advantage over its rivals in the countries of operation. The company has quite a huge financial base that has enabled it utilise the economies of scale to its advantage. The firm also boasts of having an image that is worldwide known thereby attaining a market leadership position from this aspect (Lehone 1995). The company has also embarked on enhancing relations between the buyers and the suppliers. These factors have come to manifest themselves in the South African market and the company has seen tremendous growth over the years. In fact the South African market has been taken to be historically successful in that it is the one that the company opened thirty restaurants in twenty three months only. The company has also ensured customer satisfaction by endeavouring to meet their expectations. However, the company also exhibits some weaknesses some of which are inherent (Roger & Jim 2002). An example of this is the brand itself whereby with the changing of time and new trends coming up, customers feel they need to move with the times thereby going to newer brands. The company has also felt that it needed to change the advertising approach to be more inclusive. Before the company's target market was that of the kids but of late, more and more teenagers and older generation are streaming in their restaurants in all states in South Africa (Lehone 1995). The company has taken a huge amount to undertake research in the South African market in order to come up with better products and services in the context of this market. Competitive environmental analysis It is the tradition that companies operate in a competitive environment which requires them to strive in emerging the best and being the market leaders. McDonald's main rival is the Quick Restaurants S.A. that has vested huge interests in the South African market (Lehone 1995). McDonald's also has to take its SWOT analysis quite seriously in for it to emerge at the top. When talking of the marketing mix, the paper takes the consideration of the pricing of their products, the supply chains that ensure that products are available at convenient locations for the customers, the promotion activities carried out by the company and finally the nature of the product made and taken to the market and whether such a product meets customers expectations. The pricing has also been within the affordable range of many and this has been in tandem with the type of product one is buying (Kotler 1997). The company has also ensured that it has the most number of stores in SA and this in turn ensures that the market is well covered. The pricing is an aspect that is quite sensitive in the internationals marketing strategy context. The prices of substitute items also need to be considered. Aims objectives/mission statement McDonald's mission statement is that it aims at being the best service restaurant experience and this is what it has turned to be in SA. This has been as a result of its intense promotional campaigns as well as consistency in providing good quality services to the customers. The company tries to achieve this objective by trying to be the best employer in communities around the world, ensure delivery of operational excellence and expansion through innovation and adoption of better technology in its operations. STRATEGY Porter's competitive strategy Companies have for a long time devised ways in which they will be able to achieve and more so maintain competitive advantage (Jeannet & Hennesey 1998). The Porters competitive strategy comes in handy as it involves both the cost leadership strategy and the differentiation strategy. In the former, McDonald's has endeavoured to use pricing a big attraction of customers. Many of its products take the lowest prices in the market and this is in relation to the quality or value of the particular item. The huge advantage that McDonald's has had in the SA market is the economies of scale, large scale production and the experience it has from other nations around the world. The company has also made strides in ensuring product differentiation such that the products suit the SA market and are in a huge way unique to it. Ansoffs matric and growth strategy The company at this point makes approaches to the market have made certain decisions regarding the product to introduce. In the case of McDonald's market penetration in SA, it uses the existing products with the existing populace. Mostly the advertisements have taken away customer from other firms like Quick Restaurants SA, Groupe Auchan SA and Elior SA. It hereby proves to be the least risky for the company in achieving growth (Czinkota & Ronkainen 1995). The other one is product development where the company develops new products targeting the same market segment. In this sense McDonald's always come up with new buggers but for the same market. Market development is the third in this line which involves McDonald's establishing new branches or restaurants for its existing products in more and more areas in SA so as to attract new customers. Finally, there is diversification which involves coming up with new products and taking this to a new market (Roger & Jim 2002). IMPLEMENTATION Strategy formulation is less a task as compared to strategy implementation. Successful organisations are successful in implementation of the strategies set. Many a time managements of firms formulate superb policies and develop corresponding strategies only to fail in their implementation. In the case of McDonald's the following issues will be looked at. Market entry strategy McDonald's looked keenly into the SA market and did its preliminary screening quite well. Here it went ahead to study the country's stability in respect to the political as well as economic environments. The other aspects are in relation to demographics and the country's level of consumption, which was high and had good prospects too. It found SA to be a good market niche to adopt and it went for it after doing an in-depth screening. Within 23 months 30 new restaurants had been opened (Jeannet & Hennesey 1998). The company adopted an expansionist approach to this market and within no time branches had been distributed evenly all over the country. This move established a strong customer base countywide that stands to date. Marketing mix standardisation vs. adaptation The major challenge that McDonald's has had is in regards to adopting a standardisation approach to provision of services in SA and in other countries of operation or to come up with unique products that suit this particular market. McDonald's has made huge efforts in coming up with differentiated products that suit the demands and interests of the customers in SA (Roger & Jim 2002). Many products have been developed that are sold in all McDonald's restaurants worldwide but the major differences noticed are the way the products are advertised and even sold. For example in SA there is a lunch worth R19.95 as per 27th April 2010 that is being provided with a small soft drink and small fries between 12pm to 2pm (Hans et al 2006). This is a different pricing strategy unique to the SA market. At some points standardisation has been of importance in maintaining a common ground and affiliation to the mother company as well as taking advantage of economies of scale. However, each market or country has its own unique characteristics and as mentioned earlier, this uniqueness needs to be responded to with provision of services unique to it (Sak & John 2004). It has been seen with examples that McDonald's has achieved this thereby attaining the status as a market leader in SA. Time scale Time in each and every operation is crucial as it is regarded to be the most valuable resource available. The timing of various strategies is of essence since its miscalculation leads to loss o resources and poor market feedback or response. A good example of McDonald's good timing is witnessed at the time of its establishment in SA. The establishment was later followed by a boom in expansion that saw SA being considered as the most successful internationals market McDonald's has ever ventured into (Lehone 1995). The introduction on new products since then as well as market penetration moves have at many times been well thought out and calculated resulting to huge customer turn out and acceptance of the products. Evaluation and control Every marketing strategy implemented requires careful evaluation as well as control. These are two aspects that an organisation needs to keep in check to ensure sustained growth (Hans et al 2006). As time moves on so are the changes in the needs and preferences of the customers and the market in general. Evaluation aims at ensuring that the company is achieving the set targets and objectives. Control in this respect emphasises on taking corrective measures in case of deviation from the set goals or ensuring that the set goals are being achieved as planned. In the case of McDonald's in SA the strategies it has implemented have been taking root well over the years and well illustrated in this paper, its market leadership has come from the successes emanating from good evaluation and control measures (Hans et al 2006). This has been through routine checks and the follow-up that the McDonald's headquarters has on all its branches (Hans et al 2006). This ensures that prompt feedback on the effectiveness or otherwise of the policies being implemented is relayed to the right authority for corrective measures to be adopted within the shortest time possible. Conclusion It is clear that international marketing strategies are universally applied by firms that operate internationally and that these firms have a huge task of ensuring market leadership in the countries they establish branches. A good example take is McDonald's in the South African market and this has led to the company investing heavily to work towards attaining a market leader position despite the ever growing competition. All these require the management of the multinational to have a well laid out evaluation and control plan to make sure that checks and balances are in place in regards to achieving the objectives set as well as being in line with the mission and vision of the company. References Czinkota, MR & Ronkainen, IA 1995, International marketing, 4th ed., Hinsdale, IL, The Dryden Press. Hans, M, Helmuth, L & Lee, D 2006, International marketing: A global perspective, Cengage Learning EMEA. Jeannet, J & Hennesey, H 1998, Global marketing strategies, 3rd ed., Boston, MA, Houghton Mifflin Company. Kotler, P 1997, Marketing management - analysis, planning, implementation and control, 8th ed., NJ, Prentice Hall, Englewood Cliffs. Lehone, K 1995, Business Review, Vol. 2 No. 2. Roger, B & Jim, B 2002, International marketing: Strategy planning, market entry & implementation, Kogan Page Publishers. Sak, O & John, JS 2004, International marketing: Analysis and strategy, Routledge. Read More