McDonald: A multinational company
McDonald is a multinational company because aside from its main parent headquarters in the United States of America in Oak Brook. It has set up regional headquarters in other countries, like Great Britain, Canada, Singapore, India and so on. Such a globalised company has profound effects on the company itself and the host countries. Ray Kroc was the founder of McDonald's. The firms major competitors are Wendy's, Burger King, Hardees, KFC, same's, and so on.
McDonald's size, share, growth
McDonald's first international expansion occurred in 1967 when the company opened in Canada. The company's international division was formed shortly after in 1969 and has continuously grown since. Over the years, the international section of the McDonald's Corporation has become increasingly more important to the company's overall success. As of this past year, non-US based restaurants account for over half of the company's $40 billion in revenues. Foreign restaurants now account for about 60% of McDonald's total profits. Currently, McDonald's is the market leader in 96% of the markets they do business in around the world and it is very common for McDonald's to hold over 50% of the fast food market in foreign markets. Unlike the U.S., competitors in the past have not cut into McDonald's market share as easily in foreign markets, although that is beginning to change. In the last ten years, almost 90% of McDonalds' expansion occurred in countries other than the United States. During that time, the 1990's saw an increase in international units from 3,600 in 1991 to more than 11,000 by 1998, largely in Japan, Canada, Germany, Great Britain, Australia, and France. Additionally, the number of international countries nearly doubled from 59 in 1991 to 114 in 1998. The rationale behind these important decisions stemmed foremost from the increasing amount of saturation that had evolved in the United States. This saturation was in the past, and is currently, forcing McDonald's to slash prices and as a result profits in its domestic market. To counter this trend, international restaurants were franchised and invested in. As was mentioned earlier, foreign markets are extremely more profitable for McDonald's than U.S. operations. McDonald's detected this trend early as an opportunity through marketing research and the idea of utilizing the heavily populated areas of focus to cut costs and increase profits. Second, expansion in the U.S. has been taking place for the last 45 years, where it has only been occurring heavily overseas for about 20 years, so there is more business opportunity (Gilligan, Wilson, 2009).
McDonald's is the ultimate suspicious stock. When the recession put a chill on spending, consumers decided to miss more expensive eateries in exchange for the practicality of the Golden Arches. Or so the reasoning went. In the past few months, McDonald's has struggled a bit in sales, earnings and share price, though it has avoided the tragedy that befell some consumer stocks. The stock is 15% off its 52-week high and has been trending sideways to slightly down for months. Its Relative Strength ranking has fallen to 23, meaning that it has been outperformed by 87% of stocks in the market. Sales have fallen for three straight quarters. The king of the fast-food restaurant industry managed to increase earnings in the low single digits the past two quarters exclusively by cutting costs, which is something a company can only do so much of. In the past year, the company has been expenses money sprucing up its restaurants to draw in more customers. It operates 6,502 of its own restaurants and franchises 25,465 more worldwide. It actually gets more sales from Europe (42%) than from the United States (34%).It still has an extraordinary history of growth, with six straight years of earnings growth. Skeptics have been saying since the 1960s that the market was saturated and there was no more growth in McDonald's. It has an EPS Stability Rating of 4.In the latest quarter, earnings were 97 cents a share, a 3% increase from the year-ago quarter. That matched estimates. Analysts expect 2009 earnings of $3.89, a 6% increase from 2008(McDonald, 1992-2008).
A total of 1,113,901,008 shares of McDonald's Common Stock were outstanding and entitled to vote at the Annual Shareholders' Meeting.
FUTURE CORPORATE STRATEGY
Increase its product line, to have more variety to choose from, to include more deserts and more items like Pizza McPuff. It should continue to provide better and quick service. By lower the supply chain cost so that it helps in cost reducing.
MCD is willing to expand their happy meal choices to attract and retain customers and can also introduction of McCafees serving premium and specially coffees and other beverages and other products such as cakes, pastries etc in the existing McDonald's. Focus on gifts for all generations i.e. youth, kids' especially senior citizen which is a completely new concept. MCD should provide special promotions during festivals. They should increase the space for provision of birthday party areas and try to sponsor college festivals. After analyzing the marketing of McDonald's, it is clear that the company can be said to be ‘global', i.e. combining elements of globalization and internationalization. McDonald's have achieved this through applying the maxim, think global, and act locals. In order for the international division of McDonald's to continue the inspiring success that it has achieved in the past, two major areas of concern must be addressed. The increasing level of saturation in most of the major markets around the world and the struggle over autonomy between corporate and the franchises must be addressed with extreme urgency and by allocating the resources necessary.
Although saturation is a growing issue overseas, it was noted earlier that foreign operations are now more than ever, a major element of the McDonald's Corporation business. As a result there is a constant fight over autonomy. The franchises, especially the experienced outlets with over a decade of success, want more autonomy to adapt to local tastes and preferences. The franchises feel that as the market becomes more aggressive, it will be vital for alterations and adaptations to occur faster and easier than they ever have in the past. However, McDonald's corporate is on the opposite side of the issue and is not budging.
The ellipsis SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threat, that can provide an thrust to analyze a situation and develop suitable strategies and diplomacy, a basis for assessing nucleus capabilities and competences. Moreover, this can provide the evidence for, and cultural key to change and a stimulus to participation in a group experience. The strengths of the company such as the brand name value of McDonalds that is already world - celebrated is too difficult to beat with the upcoming entrants that is still new in the fast food industry. They maintain the proficiency of their skilled workers; chances are better workforce that allows them to connect business globally. However, one must also keep in mind that customer's preference change from time to time those buyers usually have no encouragement to be loyal. So what if they choose another fast food? Furthermore, switching cost to another fast food or eating out in a local restaurant, pizza parlours, coffee shop etc., is moderately low. The tactic to meet the changing lifestyle of the health conscious consumers is to offer them vegetarian dishes that will satisfy their needs by adding more colourful variants in their menus such as more vegetables, tofu food or yogurts. The World's seventh McDonald Hamburger University, Hamburger University Hong Kong, was opened in 2002. These are only a few examples of strategies that have captivated people to continually praise their product even with the presence of strict competition. McDonalds Company must bear in mind that to be aggressive in the competitive fast food industry, it is required that they maintain quality products at a minimum price.
Strategic plans must be implemented where in strategic control gives a new variation for such. Strategic control evolved as another reaction to the changed perception of the socioeconomic environment in the 1970s and onwards, that is, more and more surprising and discontinuous changes.
To cope with issues such as less predictable changes, for example, consumer protests or environmental legislation, the notation of strategic issue management was developed. Strategic issue management is mainly recognition of the fact that as predictability becomes poorer, it becomes necessary to make multiple plans: a basic plan preparing the firm for the most probable future plus contingency plans for less probable events and futures in which the basic plan would become invalid. This in return would make the implementation of the fixed plans easier and flexibility of these plans is measured by the back - plans. Meaning in this category, it is a win - win situation.
Environment and Drivers of Change:
Ritzer suggests that McDonald's epitomises the relentless drive towards a less human society, one centred on ‘efficiency', ‘calculability', ‘predictability' and ‘control'. I seek to propose the following:
People: Improve the morale of the employees. I propose to change the working conditions of the company's employee and make some changes in the system in order to ensure productivity and contentment among the employees.
Management-Employee Relations: Create an environment that allows exchange of ideas and participation between the management and the workforce to implement co-determination and participation of employees in decision making on issues regarding the restaurant. If the company focuses more on the employees' condition, listen to their complaints and suggestions, and try to improve; there will be an increase in productivity and quality.
The leadership style in Mc Donald's is more beneficial to the people who hold power. The workers, mostly part-timers, are not given the same benefits as the regular employees. Many issues need to be addressed but the focus of this report is to improve the employment condition of the workers in Mc Donald's. I think the company needs to change the style of leadership and allow the employees to voice out their feelings about the company.
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.
This includes all factors that can manipulate and organization, but that are out of their direct control. A company does not generally manipulate any laws. It is continuously changing, and the company needs to be stretchy to acclimatize. There may be aggressive competition and challenge in a market. Globalization means that there is always the threat of substitute product and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.
McDonald's Marketing Strategy
McDonald's is the world's largest fast-food restaurant chain. It has more than 30,000 restaurants in over 100 countries. Over one billion more customers were served in 2007 than in 2006. Although net income was down by $1.1 billion in 2007, McDonald's sales were up 6.8%, and revenue was a record high of $23 billion. “The unique business relationship among the company, its franchisees and suppliers has been key to McDonald's success over the years. The business model enables McDonald's to play an integral role in the communities we serve and consistently deliver pertinent restaurant experiences to customers (McDonald's, 1992-2008, 25).
McDonald's overall strategic plan is called Plan to Win. Their focus is not so much on being the biggest fast-food restaurant series; rather it is more decisive on being the best fast-food restaurant series. McDonald's “strategic configuration behind this plan has created better McDonald's experiences through the implementation of multiple initiatives surrounding the five factors of exceptional customer experiences - people, products, place, price and promotion” (McDonald's, 1992-2008, 25). McDonald's also incorporates geographical strategic plans. In the U.S., McDonald's strategic plan continues to focus on breakfast, chicken, beverages and convenience. These are the core areas in the United States. McDonald's has launched the Southern Style Chicken Biscuit for breakfast and the Southern Style Chicken Sandwich for lunch and dinner. In the beverage business, McDonald's starting introducing new hot specialty coffee offerings on a market-by-market basis. In Europe, McDonald's uses a tiered menu approach. This menu features premium selections, classic menu, and everyday reasonable offerings. They also “complement these with new products and limited-time food promotions” (McDonald's, 1992-2008, 26). In the Asia-Pacific, Middle East, and Africa markets, McDonald's strategic plan is focused around convenience, breakfast, core menu extensions and value. With McDonald's overall strategic plan and its geographical strategic plan, the company should start to see more positive financial results.
McDonald's incorporates several organizational strategies. Some of the organizational strategies consist of better restaurant operations, placing the customer first, menu variety and beverage choice, convenience and day part development, and fragmentary restaurant reinvestment. McDonald's plans to “continue to drive success in 2008 and beyond by leveraging key consumer insights and our global experience, while relying on our strengths in developing, testing and implementing initiatives surrounding our global business drivers of convenience, branded affordability, day part development and menu variety” (McDonald's, 1992-2008, 25). One of the ways McDonald's can obtain a positive net income is to maximize efficiency in its restaurant operations while at the same time placing the customer first. With strategic focus on menu variety and beverage choice, McDonald's is hoping for increased sales and guest counts. With their convenience and day part expansion initiative, McDonald's is hoping to increase efficiency in its drive-thru pick up window, and the company is staying open later for those late-nighters who want a quick nibble to eat. McDonald's also has locally owned and operated restaurants which “are at the heart of their competitive advantage and makes them not just a global brand but a locally germane one” (McDonald's, 1992-2008, 27). They are in the process of remodelling and promotion its franchises. The company is also opening up McCafe's “with the anticipation that the connoisseur coffee shop would move it closer to its goal of doubling sales at existing U.S. restaurants over the next decade” (Peter & Donnelly, Jr., 2007, 253). A couple other organizational strategies are branded affordability, and the development of their employees starting with enrolment and training and leading all the up to leadership and management.
McDonald's strategic plan is influencing their marketing labours by building better brand intelligibility. They want their image to be predictable globally. They are pretty the customer's experience. “Across their markets, they are making is easier for customers to enjoy a great McDonald's experience. They are introducing drive-thrus to the gradually more mobile populations in China and Russia, while in the U.S. and Canada, greater drive-thru efficiency and double drive-thru lanes enable them to serve even more customers quickly” (McDonald's, 2008, 13). In Germany, McDonald's has a reimaging program that includes adding about 100 McCafes. They are also installing new kitchen operating systems so that they can continue to deliver high food quality. McDonald's has already renovated about 10,000 restaurants worldwide. They want their restaurants to be an expression of their brand. The company is also delivering greater value to the customer with new menu selections. “By helping a locally relevant balance of new products, premium salads and sandwiches, classic menu favourites and everyday affordable offerings around the world, they create value for customers and satisfy their demand for choice and variety” (McDonald's, 1992-2008, 15).
Types of marketing mix that McDonald's use to achieve their marketing goals are longer operating hours, everyday value meals, and optimizing efficiency in the drive-thru. McDonald's also uses marketing campaigns. In 2007, McDonald's used the Shrek movie to give children a choice between milk, fruit, or vegetables as part of their Happy Meal. In addition to their commitment with children, McDonald's is building their brand image “with innovated marketing transporting ideas across borders and using I'm lovin' it to enlarge their connection with customers who love their food and the unique McDonald's experience” (McDonald's, 2008, 17). In the 2008 Olympics held in Beijing, McDonalds offered the Beijing Burger, Carmel and Banana Sundae, and Rice Sticks. They featured nine Olympic and Paralympics athletes on their packaging. In Australia, McDonald's held a marketing campaign where the people could decide what name to give its new hamburger.The name that won was Backyard Burger.
With marketing campaigns like these, McDonald's is trying to create a better brand image.
Other organizational and marketing strategies are “creating stronger bonds of trust by being accessible and maintaining an open dialogue with customers and key stakeholders” (McDonald's, 1992-2008, 27). The company is reinvesting approximately $1.9 billion into their restaurants primarily to reimage existing restaurants and build new ones. McDonald's is also moving towards a more heavily franchised, less capital-intensive business model. Although in some countries, such as China, this is not permissible due to governmental laws.
With McDonald's rising global brand image and its emphasis on the five factors of exceptional customer service, this should help them increase sales and lattice income.
In summary, the fast food industry has already dominated the market here and aboard. Now, that globalization is at hand, they still continue to grow and extended throughout the world. Firms that operate within the fast food industry are categorized as a market structure that is highly aggressive. McDonald's Corporation and its strategic marketing through planning and control has been the focus of this research as McDonald's is market leader in the fast food industry. It is also a known fact that the brand value of the said company is difficult to depose down but with the changing trends in the economy, it is always appropriate not to over - estimate resources without studying the proper numbers that tells the exact sales or profit.
From the research it is important to integrate competitor analysis in strategic marketing management. In order to assess thoroughly the possibilities that may encounter along the way; this is also vital in strategic planning in attaining the specific goals that has been set and more over, strategic control brings convenience in adapting to the changing times of the market industry.