Assessing the Various Marketing Strategies of Mcdonalds - Essay Example

A REPORT ON ASSESSING THE VARIOUS MARKETING STRATEGIES OF MCDONALDS EXECUTIVE SUMMARY: This dissertation comprehensively analyses the operations and activities of McDonald’s Corporation. It is considered as the largest and most successful corporation operating in the global market. In this dissertation, McDonald’s Corporation is studied extensively, its financial statements are analyzed and other tools of strategic managements were used to assess the corporation performance of the organization. The marketing strategies and marketing plans that McDonald’s Corporation uses is also looked upon at great details. The report also contains some of the new marketing techniques that McDonald’s Corporation has started using in order to further strengthen their position in the market. Many writers considered that there are four Ps of a successful marketing mix strategy. However, with the passage of time people also included another P in this and now as we see it we have five Ps that are related to the marketing mix. These include: Product, Packaging, Pricing, Placement, and last but not the least Promotion. There are a lot of factors involved, if an organization or a big corporation like McDonald’s wants to develop a successful marketing strategy. First of all, the marketers will have to investigate and research the market accordingly, in the context of McDonald’s Corporation products and service they offer. This research will provide an important vehicle to McDonald Corporation in developing appropriate products, good pricing decision, better distributional channel, and then will help them to reach to their target audience by the means of advertising and promotional activities. All the above decision will help McDonald’s in earning optimal return on investment. However, as we see it today, McDonald’s marketing policies have always been spot-on, ever since it was formed and serving a lone hamburger in 1955. After that, when Ray Kroc took a important decision to expand this restaurant and to make it a global entity through advertising, it was probably the wisest decision ever, that contributed in making McDonald Corporation the most valuable global brand. The greatness of McDonald’s Corporation lies in the fact that it not only produces standard products all over the world, but it also make slight alterations in line with the diverse cultures of the different countries in order to produce a product that is in concert with the religion, culture, values and trends of the home country in which the franchise is operating in. This respect given by McDonald’s to different culture has clearly played its part in making McDonald a big fish in the current global market. As we are told that big things just don’t happen, they have to be planned, let’s analyze a statement of Mr. Richard Kroc. He once said: “The basis of our entire business is that we are ethical, truthful and dependable”. In the current marketing plan of McDonald’s, we can clearly see that its marketing strategy incorporates the values that were given to the company by Mr. Richard Kroc. Product: The products offered by McDonald’s Corporation comply the principles of hygiene and healthy. According to their standards they do not serve their customers with food that is cooked five minutes earlier. It is also one of their important values that they always try to offer fresh food to their customers. This has clearly played its part in making McDonald a stand-out company in the fast food business. McDonald’s Corporation, in their global business makes variation in its products in line with the culture of a country in which they are operating in. (McDonald’s Official Website History Section, 2009) Packaging: The packaging policy of McDonald’s corporation serves a dual purpose of cost-effectiveness as well as keeping the product hygienic. However, the packaging material that is used varies from different products. Some burgers are packed in a box, whereas others are wrapped in a paper. Though, all the package material carries McDonald’s logo. McFries are also served in a red-colored box containing a McDonald logo. Pricing: The pricing policy of McDonald’s is very simple and they charge a very reasonable price to their customers. As a result of their reasonable price, McDonald’s Corporation target market is vast and people from all age-groups and income-groups enjoy the delicious food offered by McDonald’s. Promotion: A lot can be said about the different ways that McDonald’s Corporation uses to promote its products. Ronald McDonald is used a mascot to promote various different kind of products that are offered by McDonald’s. The corporation’s unique business strategies have revolutionized the conventional strategies used in promoting a fast food restaurant. One of its earliest innovations was introduction of a play place or fun place for children. This way McDonald not only provided people with excellent food but also attracted children by promising them good entertainment while their parents enjoy a great McDonald’s burger. This was one of the many firsts that this corporation aims to bring to the food industry. McDonald’s, at that time was particularly conscious in providing the comfort to their customer while they are eating their meal. It was the first fast food chain, which designed special comfortable chairs and tables for its customer. They also redesigned the conventional restaurant-model so that they provide warmth and excellent homely environment to their customers. McDonald Corporation usually advertises its new-menu-additions and products which are offered under Mc-Saver deal. Mc-Saver deals usually consist of low-priced meals, targeted toward customers of lower income group. These are the different strategies that are used by McDonald’s Corporation to market their products. (Kotler and Armstrong, 2001) Placement: McDonald’s Corporation offers it product to consumers through a very simple distribution channel. The products reach consumers either through company-operated outlets or through franchises. This simplified distribution network results in high-quality fresh product being served to the customer. McDonald’s does not believe in a policy of cooking product at their head-office and from there on they supply it to various franchises. McDonald’s believe that this will result in low-quality products and they do not want to risk their excellent reputation in the market by changing their policy, despite the fact that this policy will be more cost effective. This type of policy is followed by Dunkin Donuts, but McDonald’s wants to keep itself away from any policy that may result in angry and dissatisfied customer. (Keller, 2006) New Marketing Techniques for McDonald’s to further differentiate their products: 1. McDonald’s Corporation is planning to increase the timings of their working hours to 24/7. McDonald’s Corporation plans to implement this strategy in McDonald’s Asia. This marketing promotion goes by the name of “We own the night”. Recently, In Honk Kong, 40% of McDonald’s outlets have become 24/7 in compliance with the strategy. 2. Free Home Delivery: McDonald’s also delivers its products to busy customers who cannot leave their home or office. This strategy is particularly target toward McDonald’s Latin America market, in order to improve the business position there. 3. Early Risers Plan: McDonald’s Corporation opens its restaurant earlier than their competitor in order to serve the UK and USA market for breakfasts.. They offer premium coffees and a special breakfast menu for the customers who want to eat McDonald’s in the morning. A good brand name: McDonald’s is a very well developed brand name through efficient management and marketing policies. Similarly, McDonald’s is operating in the market for more than 50 years now, this long presence of McDonald’s in the market has made it a very trusted and successful and trusted brand. Largest fast food Company: McDonald’s is the largest fast food retailing chain. According to factual information, the company operates in approximately 120 countries, having more than 30,000 retail outlets at its disposal. This extensive size of the organization enable McDonald’s Corporation to reap various benefits associated with size such as economies of scales and marketing cost reductions. McDonald is known as to be a socially responsible brand that elevates its prestige: McDonald’s charity programme, which is commonly known as “The Ronald McDonald House”, targeted towards helping children of all ages, has created awareness among people about the social responsibility, and the fact that such a big organization is rendering services to society, encourage more people to come and do something good for the society. This increases the goodwill for the company and McDonald’s reap advantage of this in the form of increased sales. McDonald’s is a diversified organization: The fact that all McDonald’s eggs are not in one basket saves the business from volatile economic conditions in the market. Other sources of revenue for McDonald’s include property investment and their huge business of franchising their prestigious brand name. A branded business: Most of the products produced by McDonald’s are branded, such as Big Mac, Happy meal, Fillet-O-Fish etc. This allows McDonald’s to create a unique personality for their products and in turn allows them to charge higher prices. This results in increased profits for the firms. Customer-Oriented Approach has increased the brand-loyalty: McDonald’s approach of focusing on one customer at a time has resulted in increased brand-loyalty and sales as customers feel important when they dine at McDonald’s. Controlling/Planning such a humongous organization is a problem: The facts that McDonald’s has grown four fold during the past few years create problems for the management and planning department of the company. It has become increasing difficult to difficult to create a one unified policy to all the retail outlets/franchises operating in the different parts of the world. For example, Cultural and Demographics of India will be completely different from that of the USA. Therefore, the policies that McDonald’s must choose have to be flexible and changeable according to the differences in the culture of different countries. It has, therefore, become very difficult to control such a large organization centrally. McDonald’s prices are higher than its competitors: McDonald’s prices are usually higher than its competitor’s prices. According to the conventional demand theory, high prices usually result in low demand as people look for alternative or substitute products. Similarly, demand for McDonald’s products is on a decline, due to the pricing policies of McDonald’s. Advertisement policies are not coherent: Most of the promotion and advertisement techniques target children and people from lower income group. This is not appropriate because the actual target market of McDonald’s is adults and people from higher income groups or these groups also make a major chunk of McDonald’s sales. Advances in modern technology have reduced the marketing costs for various firms including McDonald’s: Technology has revolutionized the way firms promote their products. The costs of advertising is much lower for companies when they advertise through SMS on cell-phones or use direct mail as a medium of advertising, rather than advertising on TVs and Newspapers. This has resulted in reduction in the marketing costs for the firm’s which are in turn passed on to the consumers in the form of lower selling price of products. Environmental friendly material used by various fast food businesses: With the passage of time, the introduction of environmental equipment, packaging material and cooking ingredients has resulted in increased environmental-issues awareness among the various businesses in the food industry. Current Economic global downturn: Although McDonald’s Corporation is protected against recession; however, the longer this recession goes on, the more negatively it is going to affect the business as it decreases the purchasing power of people. Increased health awareness and possible adverse effects of eating fast food: Increased cases of obesity in various countries and negative press by documentaries such as “SuperSize Me” by Morgan Spurlock, has resulted in people demand more healthy food such as salads and fruits. This has resulted in plummeting demand for various fast food companies including McDonald’s. Increased competition in the industry: This industry was known for its high profit margins in the past, but this has resulted in influx of more and more firm in the industry, leading to increased competition. This increased competition and fight for more and more market share has resulted in price wars. As a result of this, Profit Margins in the industry have been considerably reduced. All of this shows that McDonalds maintain a very distinctive position in the minds of consumers. This has several advantages for McDonalds as discussed above it helps McDonalds in making the marketing and advertising decision. It also hedges McDonald’s against stiff competition and it is protected from competitors and maintains a position where it enjoys great market share. McDonald is perhaps the most successful corporation of the world. There’s no magic formula to it, but the company believes that its success has come due to their insistence on their values and because of their belief in truthfulness and honesty. “At McDonald’s, success has always involved a not-so-profound formula involving one-part inspiration and four-parts perspiration. Our founder, Ray Kroc, coined the phrase “grinding it out” to characterize the determination and attention to detail that is required to be successful in our industry. “Grinding it out” was his way of saying the restaurant business is, and always will be, a labor intensive operation. It was hard work and determination that built McDonald’s — and today, those same qualities drive our success.” (McDonald’s Corporation Annual Report, 2008). McDonald’s Corporation had another very good year in 2008, during this period the total revenue that were earned by the corporation amounted to $23.5 billion (McDonald’s Corporation Annual Report, 2008). The company was also able to increase its market by an impressive 7% during the same period. These good results were reflected in a very generous dividend policy by the company, giving out around $6 billion, which is around 24% of what the company has earned during the fiscal year ending 2008. Comparing the current year’s results with past performance of the company, one can clearly see that the company is moving in the right direction- forward. In the financial analyses that are incorporated in the earlier part of this report it can be seen that all the ratios and financial figures have showed improved. It was only that the gross profit ratio has come down by 10%. This may be due to the fact that McDonald’s Corporation has lowered its product prices, faced by intense competition in the market. Price to Earning ratio is now 14% better off as less investment is needed to earn substantial amount of dividend. This may be due to the fact that the Board of Directors has announced a very generous dividend policy of around 22%. Similarly, the company has also started utilizing there equity properly, as the return on equity has seen an increased. VISION AND MISSION OF MCDONALD: MISSION STATEMENT: “McDonalds vision is to be the worlds best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile." This is a very well constructed mission statement. Here they do not talk about how they are going to achieve their plans but instead they talk about what McDonald’s wants to achieve. This is an example of a good vision and mission statement as it would help the company to innovate and think about new ways to achieve their vision. Similarly, by becoming the quick service restaurant, it will serve and save the time of busy people of USA and around the world. This will help them to have a good breakfast or lunch without getting late for their jobs or wherever they are needed. In doing so McDonald’s also plan not make any compromises on hygiene and quality. This would make sure that they keep their market share and attract consumers from competing markets as week. Similarly, McDonald’s being a consumer oriented organization it wants to make people smile and appreciate their services. For this, they have established certain guiding principle and are also coming up with new ideas that will make customers happy and will build goodwill for the company on its way. VISION STATEMENT: McDonald’s vision statement is divided into three core objectives, where they will try to achieve these SMART goals. Be the best employer for our people in each community around the world, Deliver operational excellence to our customers in each of our restaurants, and Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonalds system through innovation and technology." This vision statement clearly shows the worth of how the company is going to go about achieving its objectives. It will try to make use of cultural diversity management, consumer oriented approach and the use of new technology to achieve its mission. This again is a well written vision statement as it talks about the ways the company considers to achieve its final mission. References About McDonald’s. (2009). Cause that counts. Retrieved June 30, 2009, from http://www.aboutmcdonalds.com/mcd/students/mcdonalds_does_good/cause_that_counts.html. Kotler, P. & Keller, K.L. (2006). Marketing management (12th Edition). Pearson: Prentice-Hall. McDonald’s.com. (2009). Retrieved June 29, 2009, from http://www.aboutmcdonalds.com/mcd/investors/corporate_governance.html. McDonald’s.com history. (2009). Retrieved June 29, 2009, from http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html. Rowley, J. (2004). Online branding: The case of McDonald’s, British Food Journal, Vol. 106, No. 3, (228 – 237). Retrieved June 30, 2009, from Emerald Full Text Article database. Vignali, C. (2001). McDonald’s: “think global, act local”—the marketing mix, British Food Journal, Vol. 103, No. 2,(97 – 111). 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