Appropriate Multinational Fast-food Restaurant Chain - Case Study Example

To identify an appropriate Multinational Fast-food Restaurant chain; and then analyze, evaluate and prepare an individual report Executive Summary The project report deals with one of the largest multinational chain of restaurants, Mc Donald’s. The report aims to explore the marketing strategies adopted by Mc Donald’s in its mode of operation both in the domestic market and international market. The research methodology used is both primary and secondary research. The current strategies adopted by Mc Donald are explained and the segmentation, the target customer and the positioning statement has been defined properly. Apart from the STP, the company’s USP, the SWOT and PESTEL analysis has been analyzed and stated in the report. Finally a set of recommendation based on the marketing strategies have been provided to Mc Donald’s so to attract even more customers and expand internationally. Contents Executive Summary 2 Introduction 4 Methodology 5 Situational Analysis 5 Current strategies 6 STP 7 Differential advantages/weaknesses 8 USP 8 SWOT 8 PESTLE 10 Recommended objectives and goals (SMART) 11 Recommended Marketing Strategies and Programs 12 Conclusion 12 Reference 14 Appendix 16 Introduction Industries and markets differ to a great extend in the process of globalization. The dynamics of business have gained momentum both in industries and market which have become global and the extent of their globalization (Stonehouse & Campbell, 2004, p.109). The hotel and restaurants industry along with the real estate industry had moved on pretty fast and enthusiastically accelerated the economic growth of the cities in the process of globalization (Bhattacharya, 2011, p.21). The process of globalization process is not new in the restaurant industry. It is just that more US brands are expanding in every nook and corner of the global landscape of the restaurant sector. A major portion of revenue for the largest restaurants chains is often derived from international expansion. Mc Donald’s one of the multinational chains of restaurants earns about 55% of the revenue from international countries like Europe, Asia, Middle East, Pacific and Africa. Another huge brand, Yum Brands Inc with consists of brands like Taco Bell, KFC and Pizza Hut had opened nearly about 850 restaurants internationally. Thus international expansions are great deals because the domestic restaurants business tends to get saturated in some years or so. The restaurants companies usually adopt the franchising method for international expansion and also for domestic expansion (Brodsky, 2008). The project would deal with one of the multinational restaurant business which has gained huge popularity over the years and has expanded globally in almost every part of the world. The multinational fast food restaurant chain is Mc Donald’s. Mc Donald’s is the largest and leading retailer of food service with more than 33000 local restaurants which serves about 68million people per day and is located in 119 countries. About 80% of the stores are franchised Mc Donald’s mission is to be the favorite place of the customers to eat. The company has won many awards and has been recognized as one of the great place to work for (Mc Donald’s, 2012). Methodology According to Clifford Woody research mainly means defining and also redefining the problems formulating the hypothesis and collecting, organizing and also evaluating the data and finally reaching to a conclusion (Kothari, 2008, p.3). Research is mainly two types’ primary research and secondary research. Primary research methods mainly comprises of questionnaires and surveys, through focus group discussion and through interviews. Whereas the secondary researches are mainly based on information’s which are already available in magazine or journals and reports from previously studies (Pakroo, 2012, p.222). The report on Mc Donald’s would deal both with primary and secondary research in order to understand the strategies and the ongoing market trend of the organization. Thus as part of the primary research, questionnaires would be used to enhance the strategies and what are the methods adopted by the company. Apart from the primary research, secondary research would be conducted to gain indebt knowledge. Secondary research is important because with the availability of data it is easier to get in all the required information which have already been researched and published. Thus the methodology used is primary research through questionnaire and also secondary research. Situational Analysis The situational analysis is one of the processes in analyzing the needs of the individuals and the communities. Some of the factors which are taken into consideration by companies while conducting a situational analysis include the county and the demographics, the economic structure of the country as well as the individuals, the characteristic of the population such as the lifestyle, income level, the educational level, culture of the target market and other factors (Richardson, n.d). By analyzing the factors it becomes easier for a company to make an appropriate strategy for the target market. Current strategies According to Porter a firm can pursue differentiation strategy, overall cost leadership strategy and focus strategy. In overall leadership strategy the firm tends to keep the price of its product to a minimum and in a way becomes the price leaders. One such example is of Timex. The differentiation strategy aims to provide the customers with something different which is not before provided by its competitors. Companies which are able to implement the differentiation strategy successfully usually charge a higher price and the customers are willing to pay off the price in order to get hold of the product. In the focus strategy aims in creating a niche market for a certain range of customers (Griffin, 2010, p.244). Mc Donald’s has been regarded as one of the most popular brand both in its own country and also internationally. It succeeded as one of the finest fast food chain of restaurants globally. In order to compete, Mc Donald has adopted both the strategies simultaneously which is the differentiation strategy and the cost leadership strategy. Mc Donald’s have developed a well accepted and unique brand name reputation through its promotional strategies and also marketing strategies and in the same time has developed a low cost in its distribution and manufacturing process. In fact Mc Donald’s have used inter organizational strategies in order to pursue both the cost leadership and differentiation strategy. The company has formed strategic alliance with the suppliers and tends to obtain rolls, bread and other necessary things required by the restaurant. The main strategy used by the company and still uses is the franchising in order to maintain the efficiency and reliability for its retail outlets (Jones, 2008, p.222). Mc Donald’s have revised its corporate level strategy in order to take different actions and implement in on the business level strategy. Mc Donald’s focuses on innovations of its product and upgrading the existing properties of Mc Donald’s instead of rapidly expanding. The company relies on their core product which adds on to its sales revenue. From the perspective of corporate level, Mc Donald had decided to become less diversified. The firm disposed of some of its objective. The firm started to listen to its customers who demanded value for the price paid (Hitt, Ireland and Hoskisson, 2010, p.4). STP Segmentation targeting and positioning forms an integral part of the marketing and marketing strategies. Marketers should know about the needs wants of the customers in order to provide them with better products and services which would satisfy their needs. Thus market segmentation is defined as the process of dividing the market into segments with common needs or characteristics and selecting one or more targets with a proper marketing mix. Target market refers to a group of customers for whom the products have been manufactured. Positioning is creating an image in the minds of the customers about the specific product (Cant, Strydom & Jooste, 2009, p.104). Mc Donald’s have segmented its product for the consumer market. It has segmented to cater to the needs of the kids, the youths. As per geographic segmentation it is mostly available in urban town and cities. As per its strategy Mc Donald is opening now in tier 2 and tier 3 cities. The outlets are usually situated in malls having independent franchises. Demographically it has segmented its products for all age group including kids and also adults. Mc Donald’s have targeted all the people irrespective of age groups. The target customers range from kids to teenagers to adults to elderly people. It caters to the need of the people. The kids love Mc Donald’s and is a good place to hangs out with family and friends. It tends to provide a place that is loved by the people all over the world. Mc Donald’s have positioned itself as a family brand with low cost restaurant in the fast food chain of business. The company has positioned itself as the fore front of the fast food industry and has set the standard for the rest of the industry. It has created an image of being affordable and at the same time healthy. Fast food is often seen as unhealthy so Mc Donald’s have positioned itself on being a healthy fast food center. Differential advantages/weaknesses USP USP which means Unique Selling Proposition is a process which tends to differentiate a product from that of its competitors. Mc Donald’s carry a USP which consists of service, quality, cleanliness and of course value for money. This means the company focus on providing the customers with a high quality of products, the products are served quickly to the customers and with a smile in a clean and present environment and most importantly at an affordable price. The philosophy of Mc Donald’s USP is the guiding force of its service towards is customers. The menu of Mc Donald’s is priced at a value where a major segment of the customers can afford. Mc Donald’s is known for its quality and service and does not sacrifice any of these factors. The USP of Mc Donald has also helped the fast food chain of restaurant to fulfill its own set target of launching about 40 outlets globally every year (Cheema, 2012). SWOT SWOT analysis is one of the most important factors when it comes to analyzing the company’s internal and external factors. The SWOT analysis helps in overcoming the weakness by utilizing the strengths and overcoming treats related to the industry with the help of opportunities. An analysis into Mc Donald SWOT has revealed the following information. Strength: Mc Donald’s has a strong presence not only in the domestic market but also internal market. It is the market leader both in its country as well as internationally. The locations of Mc Donald outlet are a major strength for the company because the outlets are usually located in areas which are highly recommended, visible, attract more people and easy to access. Mc Donald brand name is also strength for the company and is able to generate more sales because of its brand recognition. Weaknesses: The food industry has reached a saturation point which has leaded the company to deal with the prospect of market saturation which can hamper its target of establishing new outlets. Also due to an increasing price competition driven by the competitors tends to reduce the ability of Mc Donald’s to increase revenue. Lack of product innovation can also be termed a one of the weakness of Mc Donald’s. Opportunities: One major opportunity for the company is its international expansion. Mc Donald’s has the opportunity to concentrate more on its innovation strategy; it can go for green packaging solutions and incorporate these strategies as part of its marketing strategies. It has the opportunity to create new offering of its product. Threat: Major threat comes from the global economy. In addition the fast food industry has become an increasing competitive sector. As a result the company needs to match up with the expectations and hence spend much more on its promotional campaigns. Mc Donald’s differentiating strategy is similar to those of the competitors. Competitors such as Yum Brands, Burger King tends to give a tough competition. PESTLE Political factors: Mc Donald’s business is highly affected by the political factors as government’s sets out the policies for fast food industry. The international operations are mostly affected due to the policies which are enforced by the government. Europe and USA are highly concentrated on health implication on consuming fast food. Another issue is the licensing factor for its restaurants. Economical Factors: Recession is one of the biggest economic factors that might affect Mc Donald’s business. Fluctuation in the rate of raw materials is also of concerned for the company as mostly the company imports raw materials which cannot be supplied in abundance in order to meet the demand of its product. Mc Donald’s may also face government regulation on taxes. Social Factors: With a change in the consumer taste and preference and with a high disposable level of income the people are willing to spend more and with the growing trend in the fast food industry, customers are demanding and preferring more of products which are easily available. Technological Factors: Mc Donald has a good inventory system and supply chain process. With a use of better technology, distribution chain Mc Donald’s delivers an appropriate result. Adaptation of technology would make the management cost saving and at the same time effective. Environmental Factors: Mc Donald’s have been adopting formulas with respect to the sustainability issues. Mc Donald’s is committed in doing the right thing. The sustainability efforts of the company ensures that the business practice and policies continuous to be the rich heritage in making a positive impact on the society (Mc Donald’s-a, 2012). Legal Factors: As McDonald is present global it need to meet up the legal requirement configuring different countries with respect to its product. Recommended objectives and goals (SMART) Specific SMART objectives include setting up Specific goals and objectives. The primary goal of Mc Donald would be satisfy the customers demand and wants and expand internationally. Measurable The objective should be Measurable both qualitatively and quantitatively. Mc Donald can measure its qualitative objectives by the number of customers coming to its restaurants and quantitative would be to achieve the targeted sales growth. Agreed Upon Mc Donald’s objectives would be based on a mutual understanding between the company and the franchisee. Realistic The result which the company has set the target of achieving specific set goals should be attainable. McDonald’s has set a target for opening 40 outlets each year in the international market. Time Bound The objectives set by Mc Donald’s are of a specific time period. It desires to achieve near about a certain percentage of profit each year. Recommended Marketing Strategies and Programs The marketing strategies adopted by Mc Donald’s have helped it to gain the market share in the present scenario but with an increase competition it needs to keep on modifying the strategies so that it can offer new products to its customers. Mc Donald’s can review its marketing mix according to the needs and demand of its target audience. In terms of product, Mc Donald can add on more products to its product portfolio which would keep up its innovation level. It can introduce products which would attract the kids and also the youths. The price of the products is reasonable and Mc Donald’s have achieved a cost leadership in the fast food chain business. With an effective distribution channel Mc Donald’s can lower the inventory cost and implement supply chain in the process. Mc Donald’s operate globally thus with an effective supply chain it would be much easier for the company to operate at a low cost. The promotional techniques are the factor which attracts most of the customers. It can spend on advertisements such as billboards hoardings and others. It can initiate programs with respect to green marketing and adopt the concept of green marketing by introducing it into its packaging. It can provide service delivery to its client through which it would generate more people or introduce offers on introduction of some new products. Conclusion Mc Donald’s have been globally recognized as one of the most effective and low cost fast food chain of restaurant. It has established itself globally and in the near future it is expected to grow even more. The company has achieved success over the years and continues to achieve with its low cost and differentiation strategy. Mc Donald’s has received many awards for its performance and also been awarded as the most innovative food company in the year 2011. The company is trying to establish more outlets in different parts of the world through franchising and maintaining the company’s USP which is quality, cleanliness and products available at an affordable price. Mc Donald’s has acquired the top position over the years and as compared to its competitors, it has relatively performed better and has more exposure towards the global environment. Thus it can be said that Mc Donald’s has been able to prove itself in the competitive world and is one among the best fast food chain restaurants both domestically and on international grounds. Reference Bhattacharya, S., 2011. Globalization and a Shrunken World. USA: Author House. Brodsky, M., 2008. The taste of risk: the restaurant industry is expanding globally, and risk managers are front and center in the process of determining the new exposures on this expanded frontier of their brand empires. [Online]. Available at: http://findarticles.com/p/articles/mi_m0BJK/is_5_19/ai_n25364703/?tag=content;col1. [Accessed March 22, 2012]. Cant, M. C. Strydom, J. W. & Jooste. C. J., 2009. Marketing Management. Juta and Company Ltd. Cheema, P., 2012. The Big Idea: McDonald’s Unravels its Supply Chain. [Online]. Available at: http://logisticsweek.com/feature/2011/07/the-big-idea-mcdonalds-unravels-its-supply-chain/. [Accessed March 23, 2012]. Griffin, R. W., 2010. Management. Cengage Learning. Hitt, M. A. Ireland, D. And Hoskisson, R. E., 2010. Strategic Management: Competitiveness & Globalization, Concepts. Canada: Cengage Learning Jones, G. R., 2008. Organizational Theory, Design, And Change, 5/E. South Asia: Pearson Education India. Kothari, C. R., 2008. Research methodology: methods and techniques. New Age International. Mc Donald’s-a, 2012. Sustainability. [Online]. Available at: http://www.aboutmcdonalds.com/mcd/sustainability.html. [Accessed March 23, 2012]. Mc Donald’s, 2012. Our Company. [Online]. Available at: http://www.aboutmcdonalds.com/mcd/our_company.html. [Accessed March 22, 2012]. Pakroo, P. H., 2012. The Small Business Start-Up Kit: A Step-By-Step Legal Guide. Nolo. Richardson, J. G., No Date. Situational Analysis. [Online]. Available at: http://www.ces.ncsu.edu/resources/education/sd2/. [Accessed March 23, 2012]. Stonehouse, G. & Campbell, D., 2004. Global and transnational business: strategy and management. John Wiley & Sons. Appendix Questionnaire How often do you visit Mc Donald’s? Every day Once in a week Once in two weeks never Best selling items in Mc Donlds Burgers Hamburgers Others Which fast food joint do you prefer? Mc Donald’s KFC Pizza Hut Others Why do you prefer Mc Donald’s? Taste good cheap Convenient All of the above Does price affects what you buy? Yes No Rate the service of Mc Donald’s Bad Average Good Excellent Any suggestions? Read More