McDonald's Marketing - Essay Example

McDonald’s Marketing Profile McDonalds is the world’s leading global fast food service retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 119 countries each day. Its golden arches have become synonymous with hamburgers and are one of the worlds most recognised, well-known and valuable brands. It holds a leading share in the globally branded quick service restaurant segment of the casual informal eating-out market and garners about 43.6% of the market and had revenues in 2004 to the tune of $19.07 billion, with net income at $2.75 billion. It has currently served 100million customers and is 50 years young. It has become the epitome of globalization. Uniqueness The secret of McDonald’s success is its willingness to innovate, even while striving to achieve consistency in the operation of its many outlets. The company has also made convenience its watchword, not only through its fast service but also due to its omnipresent abilities. Freestanding restaurants are positioned so that you are never more than a few minutes away by foot in the city or by car in the suburbs. McDonald’s is consolidating its presence into schools, stores, bookshops and more. In addition, it operates by means of franchises, and they are all trained at the “Hamburger University” to run them on the same expected level of quality. Performance Despite these innovations, McDonald’s tremendous growth could only continue for so long. Its average annual return on equity was 25.2% between 1965 and 1991. However, the company found its sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the quick service market fell from 18.7% in 1985 to 16.6% in 1991. Growth in the quick service market was projected to keep pace with inflation in the 1990s. After a decade of struggle, by 2003 McDonald’s shares hit rock bottom. At this point a “plan to win”, marketing campaign was launched and the salad was added to the menu to combat the unhealthy image the food had attained. It backfired initially because of its high calorie content, but then McDonald became more aware of customer needs and revamped its offerings with low fat salad dressings etc. McDonald was back on its feet very soon and turned in a healthy profit in 2004. Service and products Most McDonalds restaurants offer both counter and drive-through service, with indoor and sometimes outdoor seating. The Drive-Thru, Auto-Mac, or McDrive as it is known in many countries, often has separate stations for placing orders, paying for them and picking up orders. In some countries "McDrive" locations near highways, offer no counter service or seating. In contrast, locations in high-density city neighbourhoods often omit drive-through service. Menu choice also involves variety. The emphasis is on standardized limited menu with high quality and low wait times. The menu serves typically serve different types of food products in a range of sizes. Its French fries, Big Mac and Happy meal have all become big hits. Customization McDonald sticks diligently to its core limited menu but has always risen to the occasion innovatively and catered to the local palate. The traditional hamburger made of ground beef served at most McDonalds is varied as per local requirements. In India, the Big Mac is called the Maharaja Mac, while in Australia, McDonalds menu features the McOz, which is similar to a Quarter Pounder and features beetroot, tomato and fried onions, popular additions to hamburgers in Australia. In some Canadian locations, McDonalds also sells poutine, a Canadian dish of French Fries, cheese curds, and gravy. In the Netherlands, French Fries are often served with mayonnaise, as it is popular there. McDonalds has also diversified into "McCafé" counters, which sell brewed, and specialty coffees and snacks and cakes in addition to the regular menu. In Portugal, "McCafés" serve coffee in china cups as per the country’s custom of after meal coffee in delicate china. Names of other international hamburgers include the Kiwi Burger (with egg), the McHuevo, the McNifica, the McAfrika, and the McLaks. Starting 2005, Singaporeans will also get to enjoy home delivery at a flat delivery fee of S$2.00 at any time of the day/night. Key Challenges facing McDonald’s within the next three years Within the highly competitive market, competing, winning and maintaining market share is challenging. The complexity is increased by the continually changing trends and ability to adapt and cater. Its competitors like Subway and Burger King are driving traffic to their arenas and have stepped up the heat in the fast food market. McDonald’s has never hesitated to be innovative but it is also constrained by the limitedness of its offerings when changes need to be implemented. Three of the key challenges it faces may be discussed as follows. More health conscious consumers McDonald’s due to its high visibility has often been the centre of high profile law suits related to its high fat content in the menu. Obesity has reached epidemic levels in the world, and almost two-thirds of Americans are overweight or obese. McDonalds has had the good fortune of the cases being dismissed but it has raised sufficiently strong concern amongst the public about the fat content in the fast food industry. This means that the company has to look for healthier alternatives for the conscious target segment without turning away its existing customer base. It has introduced more fruit and salad choices but it needs to keep moving forward to combat competition from Subway, whose main selling point is its healthy menu items. Atkins’ diet Suddenly low carb diet is the way to go all over the world. The low carbohydrate and high protein diet has caught on. This has become especially prevalent in the USA, where the fast food industry is reeling under its onslaught and trying to find solutions in a hurry. McDonald being a prime player needs to try finding low carbohydrate options to replace bun and bread is a daunting task. The pressure is on, since, its competitor, Burger king that closely follows McDonalds on its heels has introduced a bunless burger on its menu. Clearly, turning away those customers is not an option. Competitors Brands like Subway, Krispy Kreme, Whataburger, Papa Murphys, Moes Southwest Grills and Olive Garden have all jumped into the fray and are complicating an already saturated fast food market. Surviving in such a scenario is tough and maintaining the market share even tougher. While each of them offers the customer a differentiation, McDonald’s will need a lot of resilience to keep its customer loyalty intact. It may be well advised to continue its tradition of innovation. At the same time, it needs to revamp its image to cater to a higher level of dining, trying to scale from its casual dining image to counter the likes of Olive garden etc. Analysis and Recommendations McDonald’s has built itself awesome brand equity and needs to capitalise on it. It needs to respond to the current trends and highly challenging environment by injecting a differentiation but at the same time, marketing themselves to be attractive to existing and new customers. It has a good marketing mix and a diversified consumer segment. McDonalds has definitely tried to go the healthy route by offering new menu choices and, new low-fat dressing, more salads, and more nutritional information. So far the healthy initiatives have stood have stood the company in good stead. It can try to enhance its interiors for a fresh new look, add some sophistication to the interiors, to project a slightly upscale image for the crowd that looks for something a little more than a “quick bite.” It can offer home delivery on large volume orders that may appeal to the youthful party crowd. It has a great rapport with the kids and play areas are seen in many of its franchises. It can enhance the experience along the lines of “Chuckee-cheese” so that it draws in more children. It needs to have a better relationship with its franchises, foster team spirit and motivate them so that its ideas transition into execution smoothly. They need to be convinced that the benefits far outweigh the risks. It can buy out competitors catering to differing target segments to have a wider market penetration. Its recent marketing strategy to sell yuletide prepaid gift cards or “Arch Cards” is bound to be beneficial. Implementation Challenges The implementation challenge would be that with its global presence what works for one market may not work for another so it would involve a considerable amount of risk. It is always vulnerable to sudden capture of market share by its existing and new entrants who compete. It has kept its image fresh and vivid to combat its ubiquity. It has the added challenge of convincing its franchises on whatever the changes are, in order to achieve a consolidated growth. McDonald’s SWOT Analysis Strengths: McDonalds has amazing brand equity worldwide and has a 42% of US fast-food hamburger business. It has standardized its menu and maintains unerring consistency in the quality of its food. It has a successful marketing mix under its belt, Fries, Happy Meal, Big Mac, Egg McMuffin, and caters to a wide market segment. It has a sustained presence in the overseas market and a strong healthy balance sheet position. Weaknesses: It has been plagued by the declining market share and weak product expansion. Its franchises have been having problems and its ubiquitous presence has reduced its value as a prime dining option. Its lack of innovative edge in the quality and taste of the products has been a deterrent to moving a level up in the dining market. Opportunities: It has a solid international base, has geographically segmented its marketing strategies, is well versed catering to global markets and hence is well educated and informed to expand explosively worldwide. It has only served about a fraction of the world’s population and is poised to serve an ever-increasing target segment “on the run” that look at dining-out as a convenience and a norm. With the globalization of the markets, it has a wider reach for its advertising and marketing strategies and will be able to draw a wider audience. Threats: It operates in a very mature market saturated with strong competitors. The more health conscious customer threatens its existing product line. Changing demographics need to be catered to and the world economies determine the purchasing power of its citizens. Currency fluctuations and foreign exchanges may affect its bottom line due to its worldwide presence. Sources McDonald’s From Wikipedia, the Free Encyclopaedia Wikipedia.org 24th November 2005 About McDonald’s Corporation McDonald’s.com 24th November 2005 Pain, John AP Business writer Burger King taps Ex-Continental president 13July 2004 Losangelestimes.com 24th November 2005 McDonald’s Case Study Comcast.net 24th November 2005 McDonald’s rejects claims for growing obesity levels 15th Nov 2005 Ireland Online 24th November 2005 Olson, Parmy Skinnier McDonald Plugs New Yuletide Gift Idea 23rd Nov 2005 Forbes.com 24th November 2005 Read More