A Global Brand Assessment of McDonalds - Case Study Example

A global brand assessment of McDonald’s Introduction As an international product that is the industry leader in the fast food segment, McDonald’s has been under pressure to get its global branding strategies correct from the start. The actions of the company back in 1940 when the McDonald’s Bar - B - Q opened in San Bernardino California (McDonald’s, 2013) did not matter to the public or corporate America. The company’s international strategies and branding approaches garnered only slight external notice in 1967 when it opened its first international operations in Canada and Puerto Rico (McDonald’s, 2013). However, around 1990 the domestic and international strategies of the chain represented highly important components of its growth plans and strategies to stave off competitive inroads. The purpose of the above brief historical time references was conducted to bring forth the fact that McDonald’s was once a small business that grew into the world’s largest fast-food chain. Every step in this growth path included decisions represented by the ongoing development and refinement of global strategy and branding components. This study will examine these two components (global strategy and branding) to uncover their business and societal implications. The above will also include the key characteristics, advantages, and disadvantages; along with the risks and benefits McDonald’s faces globally. In reviewing and assessing the above, the branding strategy of McDonald’s will be compared against literature information on global branding along with the societal impact of the company’s branding strategy. The above areas will provide information to analyze McDonald’s global branding strategy and its impact on revenues, brand equity as well as marketplace perceptions The Global McDonald’s As a fast food concept that spans 73 years, McDonald’s has managed to take a basic set of food staples (hamburgers, French fries and sodas) and turn it into a $27,567 billion operation serving 69 million customers daily in 119 countries through more than 33,000 outlets (McDonald’s, 2012). The revenues from foreign operations totaled $9,939 billion or 36 percent of overall revenues in 2012 (McDonald’s, 2012). The contribution of foreign sales to the company’s revenue stream is significant and represents the arena for the continued growth of the chain as the U.S. market is basally saturated in terms of locations and sales (Campos, 2013). As shown from the revenue figures McDonald’s derives 64 percent of its sales from the U.S. market of 317,212,000 people compared against a global population of 7,129,591,000 (United States Census, 2013). In terms of global business growth, it needs to be remembered 3 billion people or around 40 percent of the global population live on less than $2.50 per day (Shah, 2013). In an assessment of the upper limits of foreign McDonald’s restaurants, there are 14,000 out of the global total of 33,000 located in the U.S (Rosenberg, 2013). An article in Forbes (2012) stated the chain could add a total of 10,000 more restaurants to its foreign outlet base which would bring the total to 29,000 as a saturation point. This estimate took into account consumer affordability calculated at over $10,000 per annum or $25 per day as the affordability cutoff point representing 13 percent of the global population or 600 to 650 million people outside of the U.S. (Forbes, 2012). McDonald’s Business and Societal Implications McDonald’s has been the subject of dietary and societal debates over the nutrition content of its food (Arthur Page, 2007). The chain is facing stiff competition from competing fast food items such as fast food pizza and the need to continually recruit each new generation to buy into the McDonald’s menu (Henage, 2012). Concerning nutrition, McDonald’s has been under fire since 2005 over the trans fat oil used in the preparation of its food, its use of preservatives and the fact that nutritionally its menu is unhealthy for children and adults (Arthur Page, 2007). In a documentary titled “Super Size Me’ Morgan Spurlock spent a month eating just McDonald’s (Robbins, 2010) Examinations by physicians determined he gained 25 pounds and suffered severe increases in cholesterol levels, fatty liver accumulation, heart palpitations and other symptoms (Robbins, 2010). Another social concern regarding McDonald’s is the manner it saturates markets to the point where the community suffers from restaurant blight (Caraher et al, 2013). This is an aspect of McDonald’s branding strategy used in the United States that is not being received well in Europe and other foreign countries (Caraher et al, 2013). The location of McDonald’s restaurants in close proximity to each other is a part of the chain’s branding strategy that creates reinforcement on a daily basis regardless of whether an American sees a television or print ad on the company (Caraher et al, 2013). Europeans see this differently. London has legislated healthy eating choices where there must be at least two non-food stores between each new restaurant and food takeaway establishment (Caraher et al, 2013). The societal concerns over McDonald’s include the influence its ads have on the younger generation (Harris et al, 2009). The company has long pursued a policy of cultivating children and adolescents as it has a policy of bringing the McDonald’s experience, branding and products to successive generations (Koshuta, 2007). As part of its branding and marketing efforts the chain uses “….. cartoons, toys, schools, charities and even parents to reach its youngest customers” (Koshuta, 2007, p. 1). The above was part of a report "McDonald's and Children's Health: The Production of New Customers” that was released by the Corporations and Health Watch (Koshuta, 2007, p. 1). In order to understand the depth of McDonald’s children and adolescents branding and marketing strategies, the report provided the following evidence (Koshuta, 2007, p. 1): Table 1 - McDonald’s Children and Adolescent Branding and Marketing Programmes (Koshuta, 2007, p. 1) In order to assist with the above, Kornberger (2010, p. 2002) states that “… corporate branding is understood as one of the few concepts that allow the integration of strategy, organization and marketing”. He adds that is purpose and focus is concerned with “… the core identity of an organization that brings these different functions together” (Kornberger, 2010, p 2002). Avidsson (2006) adds to the above by stating the purpose of branding is to create a connection with consumers concerning the features, benefits, and attributes to aid in distinguishing it from other products or services. Capitalising on the attributes of a brand entails the delivery of a consistent message in all customer contacts and then delivering on the benefits or promises made (Avidsson, 2006). McDonald’s Global Branding The above aspects have been covered to provide insight concerning the depth of McDonald’s branding and marketing strategies which are intertwined. In order to appreciate the approach to branding by the company Danesi (2006) states that in one form or another everyone is familiar with an aspect of branding. Danesi (2006, p. 3) refers to the definition of branding used by the American Marketing Association where a brand is termed as “… as a name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers …”. As the understanding of branding is critical to this examination, Landa (2006) adds to the Danesi (2006) definition by stating a brand represents the sum of all the characteristics of the product or service. He continues that this also includes physical features, cultural connections, and associations as well as emotional factors (Landa, 2006). McDonald’s Core Branding Strategies To understand the chain’s global branding strategy it is necessary to understand McDonald’s core branding strategies as the global segment emanates from that core. The facts are, regardless of what market McDonald’s is in it faces competition (McDonalds, 2008). The chain has adopted a familiar phrase to guide its global brand “think globally, act locally” (Vignali, 2001, p. 98). Although Vignali’s (2001) article is over a decade old, it contains branding factors that are still true today concerning McDonald’s. The chain adapts to foreign environments as a means to become immersed in the culture and thus achieve heightened acceptance. This means serving beer at German McDonald’s “… espresso and cold pasta in Italy, Teriyaki burgers in Japan, and vegetarian burgers in the Netherlands. McSpaghetti has become increasingly popular in the Philippines …” Vignali’s (2001, p. 99). The above provides insights concerning how McDonald’s stretches the realms of its brand beyond Egg McMuffins, Big Macs, and other areas yet stays within the larger picture of the Golden Arches. These are brand identities that aid in building brand equity. MacDonald’s is a classic example of brand equity. Keller et al (2008) explain this by referring to brand identities. This is also discussed by Klein (2001) who uses Marlboro for his analysis, but with the same end results in terms of instantly recognisable aspects. By this Keller et al (2008) are discussing trademark aspects associated with the product that is instantly recognised as being associated with the brand. The significance is that any of these brand elements recall the McDonald’s name, image, and overall identity. Keller et al (2008) state these are highly persuasive elements that translate into any culture or language (Clackson, 2007). The above is what Moor (2007, p. 66) states are known “… historical links between branding and design …” The Keys and Principles of Branding In a report by Interbrand (2012, p. 1) titled “Best Global Brands, 2012” it ranked McDonald’s number one citing “… its exceptional brand management, significant global presence, leadership in sustainable practices and admirable approach to consumer engagement”. In order to understand the global branding strategies of the company Kapferer (2008) states there are ten strategic brand management principles: Table 2 - Ten Strategic Brand Management Principles (Kapferer, 2008) The above are key components to aid in assessing McDonald’s global branding strategies which includes marketing elements. In order to understand these two terms, Balmer (2001) explains that branding is what a company is and that marketing is what a company does. Douglas et al (2001) help to clarify this further by telling us branding precedes and underpins marketing efforts. Branding is a pull effect, whilst marketing is a push as a brand encourages people to buy and supports marketing activities being used (Douglas et al, 2001). Yoo et al (2000) tell us brand equity describes the value generated or inherent in a brand that is well known. McDonald’s International Branding is Being Watered Down The preceding aspects have been brought forth to explain that McDonald’s global branding strategy is not an entity onto itself, but rather an extension or modification of its overall brand strategies. The indicated beer in Germany, teriyaki burgers in Japan and other aspects mentioned are adaptations of what the company is (branding). In an illuminating article by Ganapathy (2009) he reveals the disadvantages of the company’s position in terms of global markets as uncovered in discussions of nutrition, store saturation, and blight. The above includes ethical facets as described by advertising and marketing to children and adolescents, social aspects, risks represented by competing products such as pizza, and limited upside growth ceilings represented by the fact its American menu has limited appeal in overseas markets. This last facet is perhaps the most important in terms of this discussion of McDonald’s global branding strategy as it provides the basis to illustrate how powerful branding can be as a tool. The saturated U.S. market offers limited growth potentials for the chain as McDonald’s has restaurants in every market in the country. Global markets that comprise 36 percent of sales is the arena for growth, yet the chain has found the foreign appetite for Big Macs, Chicken McNuggets, and other traditional McDonald’s menu items is mild (Ganapathy, 2009). In order to appeal to differing foreign tastes McDonald’s global branding strategy has been to adapt its brand to use its name, fast food reputation, and size to cater to locale tastes (Ganapathy, 2009). In fact, McDonald’s has gone as far as to modify restaurant design in an effort to appeal to differing markets. Ganapathy (2009) describes this as having the potential for disastrous consequences in the near future as the brand will dilute its identity to one of a chain that serves differing menus in different markets but has no real global identity of its own. This same analysis was arrived at in an article by Burger Business (2013, p. 1) that stated: “French architect Philippe Avanzi’s interior is nice but it’s most important as a tangible indication of a significant shift in thinking ongoing at the world’s largest restaurant company”. The process of McDonald’s modifying segments of its brand to suit European tastes is described as “Europeanisation” that represents the chain transitioning to a brand identity that is more sophisticated than its American model (Burger Business, 2013). More telling is that this transition is not confined to just Europe as the chain is modifying its menus and restaurant designs in all its global markets (Burger Business, 2013). In fact, the “Europeanisation” of McDonald’s is making its way back to the United States as upscale menu items will be offered in the U.S. Ganapathy (2009) saw this coming in 2009 and warns that the chain is straying from its core competency and recognisable brand identity. The change from the traditional red arch background to green in Germany and France that will be rolled out in Europe is a telling example of the dilution of its brand identity (Burger Business, 2013). Conclusion The 73 years of success McDonald’s has experienced in its rise to the top of the global fast food segment has seen it become a brand located in 119 countries. This means that when travelling abroad one would have the opportunity to see the Golden Arches in almost every country one visited. Different customs, culinary tastes, and traditions have seen McDonald’s take the position of recently undergoing adaptations to its menu and store design that the chain describes as localisation. The paths to success the chain took in the United States included some potentially questionable strategies that actively promoted and advertised its products to children and adolescents, along with menus that have been shown to lack nutritional content. The McDonald’s on almost every street corner, the lure of $1.00 menu items, and a list of products that almost everyone in the United States can recall have built a brand that is extremely well known. The company’s branding strategy has always consisted of putting the McDonald’s name, image and product in front of the U.S. population as many times a day as possible. Its recognisable red background and gold lettering are highly familiar and constitute another aspect of the company’s brand strategy. As revealed in this study, these foundations are not translating well in foreign markets. The American obsession with hamburgers, french fries, pocket apple pies, and coke have not been hammered into the minds of foreign children and adults since they were old enough to walk. This means the branding strategy that has and does work so well in the United States is not the cultural phenomenon in Turkey, Italy, France, Germany, and other countries it is in the U.S. McDonald’s is not like Pizza Hut or Starbucks, its menu is distinctly American and this represents a taste problem. As uncovered in this examination the chain has begun wholesale customisation of its menu to cater to the tastes of the different countries it is located in. So much so that there is a trend in Europe that is seeing the traditional red background being changed to green. The chain serves beer in Germany and special foods in each market, with its American fare representing a reminder it is, in fact, McDonald’s, even though these American iconic products do not sell that well. Foreign sales for the chain represented just 36 percent of revenues despite the fact that out of the chain’s 33,000 outlets, 14,000 are located in the U.S. The truth is, McDonald’s global branding is being impacted by its foreign operations more than McDonald’s is impacting them. This potentially indicates a concern as the company is losing parts of its branding identity. References Arthur Page (2007) McDonald’s Corporation and the Issue of Health and Nutrition. (online) Available at (Accessed on 8 December 2013) Avidsson, A. (2006) Brands. Meaning and value in media culture. London: Routledge Balmer, J. (2001) Corporate identity, corporate branding and corporate marketing - Seeing through the fog. European Journal of Marketing. 35(4). pp. 248 - 291 Burger Business (2013) New Menus Symbolize the Europeanization of McDonald’s. (online) Available at (Accessed on 8 December 2013) Campos, A. (2013) Why This Fast Food Chain Is in Danger. 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