McDonalds Restaurants & Management
Strategies are important for all businesses, irregardless of the products or services that they offer. Through strategic management and operations, companies are able to integrate new and effective means of running their respective businesses. In turn, these strategies results to increased profit or sales, stable market position and greater levels of customer loyalty. In the fast food industry, certain business strategies are also being developed and applied so as to achieve similar effects. In this report, the impact of some business strategies in actual businesses will be analyzed.
The case study provided was about McDonalds and how the company has evolved to be successful in the British market. In addition, the case discussed the problems that McDonalds have been encountered throughout the years, specifically in terms of being considered as a company which offers unhealthy foods. Primarily, the main goal of this paper is to determine the business strategy of McDonald to sustain their competitive advantage in the global market.
Overview of the Company
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McDonald’s has a rich history that started out in 1954. The company was put to the spotlight by Ray Kroc. Throughout the years, marketing ideas have poured through and helped the company become one of the most renowned fast food brands globally. The trademark design for the fast food was carefully studied and it came with a happy clown character known as Ronald MacDonald (McDonald, 2008).
The Big Mac and the Egg Muffin have been some of McDonald’s most innovative products. In terms of marketing, the happy meal approach was also a creative as it entices children to eat at MacDonald’s because of the toys they can get. Today, McDonald’s is also on the Internet bandwagon, providing information to people all over the world with a click of a mouse (McDonald’s Corporation, 2008).
McDonald's restaurants offer a substantially uniform menu, common in the usual fast foods. This includes hamburgers, cheeseburgers, chicken sandwiches, French fries, salads, milk shakes, desserts, and ice cream sundaes. The company’s top sellers, and can also be considered as innovative ones, include the Big Mac, Quarter Pounder with Cheese, the Filet-O-Fish and Chicken McNuggets.
Recently, the company has added a number of new nutritional products. This includes the Salads Plus products i.e. Garden Side Salad and the Grilled Chicken Flatbreads (McDonald’s Corp. UK, 2008). Uniformity continues in McDonald's restaurants operating in the US, UK and certain international markets that are open during breakfast hours and offer a full or limited breakfast menu. Breakfast offerings include the Egg McMuffin and Sausage McMuffin with Egg sandwiches, hotcakes, biscuit and bagel sandwiches and muffins. Also, McDonald's tests new products on an ongoing basis and sell a variety of other products during limited-time promotions.
In the fiscal 2003, McDonald's generated revenues of $17.1 billion, an increase of 11% on the previous year. Operated Restaurant business unit posted revenues of $12.8 billion in fiscal 2003, compared with $11.5 billion in 2002 and $11 billion in 2000 and represents approximately 75% of the company's net sales. On the other hand, the Franchised and Affiliated Restaurants business unit posted revenues of $4.3 billion in fiscal 2003, compared with $3.9 billion in 2002 and represents approximately 25% of the company's net sales. The geographic are of Europe accounts for 37%, second to the 39% total revenue in the US.
The customer target of McDonald’s is usually children or young people. In fact, McDonald’s already entered the children’s wear market. The new McKids products include footwear, videos, toys and casual clothes. Soon to be released worldwide, it is an attempt to redefine McDonald’s image partly due to heightened concerns about the rising levels of obesity amongst consumers, particularly in the US and the UK.
Strategies of McDonald
McDonalds is one of the famous food chain all throughout the world known by both the child and adult alike. It has increased it sales despite some issues being raised against the company. To further increase sales on the business and improve its performance, business strategies are done by person in-charge. It is in this stage wherein the company would improve what they lack thus making prospective customers to keep on coming back and ask for more. It is said that McDonald has been able to use various strategies to uplift and sustain their competitive advantage in the market.
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Part of its business strategy is its plan to phase out its Super Size French fries and soft drinks as it tries to create a healthier image for itself. The Super Size option is to be phased out in an attempt to slim down its menu amid increasing concerns and issues being raised about obesity (Crouch, 2004). The company is also planning other menu changes, such as switching to a cinnamon roll and a sausage burrito as its core breakfast offering, while bagels would become an optional item. The company also has to stop selling its 14 ounce McDonald’s Fruit n Yogurt Parfait and replaced it with a smaller-sized version of the product (Crouch, 2004). All these changes in the menu are part of its strategy to provide a range of choices that support a balanced lifestyle. The company has also added that the simplified core menu would be rolled out to its entire restaurant.
Furthermore, using the national rollout of its “made for you” platform as the opportunity to re-evaluate its core brand attributes, the company has quietly formed a global brand strategy task force that is looking for “long and hard” at the essence of the Golden Arches (Howard, 1999). The group which will be led by new vp-brand strategy has been meeting for several months and is anticipated to put forward its findings in fresh consumer messages by mid-2000.
The slow-build will allow stores to work through an expected learning curve for the new cooking system and avert major miscues as it attempts to deliver on the promise of hotter, fresher foods made to order (Howard, 1999). The group also is evaluating all elements of the brand from menu, service, and restaurant décor to brand icons Ronald McDonald.
Even though domestic sales have turned to healthy 5% level, the said company is rethinking how to sustain growth in the face of both national and regional rivals.In the past, the company’s marketing strategy has been criticized for being short-term focused and there has been no over-arching umbrella strategy. With that, the charge is to bring continuity and consistency to the brand strategy piece.
Strategies in other areas of the organization is also made like the three-wheeled vehicle that is used to collect discarded cups and burger wrappings from the neighbourhood around the restaurant and the provision of good services to customer which naturally begins and commences with hiring the right kind of people (Livesey, 1999).
Staffs are encouraged to smile, be optimistic and treat customers particularly with respect, tell them what a person wants and follow up on the performance and reward their behavior. The restaurant’s bathroom is not spared. Issues are raised on the concerns about the said restaurant to be dirty and unhygienic. Customers want a clean area especially the bathroom to make they feel comfortable. Strategies like this should also be applied (Livesey, 1999).
McDonald’s has developed three strategies for sustaining the competitive advantage. These are customer convenience, customer value, and optimal operations. Together with the digital strategies, it will help create new and bold ideas for the company. The stores are characterized by the operations team as miniature manufacturing facilities.
With its goal in improving the suite of its manufacturing systems (inventory control, production planning, financial control, and point-of-sale order entry) that supports the store, the team has developed ways of improving its overall operations.
Aside from offering hamburgers and French fries, the current trend in McDonald’s extends in serving as a family retreat, and as a community center for senior citizens. The means for the former one are its extensive indoor playgrounds and promotional toys, while the invitational plays of bingo are for the latter one. As this trend continues, an extension of more service-oriented technologies is needed. They can conduct studies and surveys to better know which among the different alternatives serves the company’s objectives the best. These might include robots taking orders instead of humans, automated processes of food production, and the like.
To achieve customer convenience, one of their key initiatives is on the improvement in the speed of new stores’ opening. To answer this, the “day in the life” scenario was developed for site developers that described the optimal toolset and the collaborative environment they would have with them as they scouted for locations.
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Rather than choosing individual tools, they should think about the tools on the horizon-geographical information systems, global positioning satellites, new media such as teleconferencing, and the expanding flow of information through public networks like the Internet. The adherence of the company to put WIFI technology in their stores for instance has also become one of the attractive forces for customers.
For the achievement of customer value, focus should remain on real-time information flow that allows instant corrections of the menu and prices in response to customers’ preferences, competitive environment, and even the ingredients’ global commodities market.
Specific Situation Strategy
McDonald’s has been recognized as a highly flexible corporation. This company feature has been evidenced by its vast product differentiation. This is one of the company’s major strategies in entering foreign markets. Teriyaki burgers in Japan, McPork Burgers and McTempeh in Indonesia, McSpaghetti in the Philippines and McLox Salmon sandwiches in Norway are some of the concrete examples of McDonald’s ability to modify its products based on international tastes and preferences which they also done with their British market. While minor product changes are required for these countries, vast changes would have to be done for Britain’s case.
Modifying the product or service is one example on how foreign firms are able to distribute their goods effectively in diverse markets. Another is by modifying the businesses’ marketing mix in order to fit global resources to local market conditions. In order to do this, multinational companies can transfer their developed global brands into a new market by means of changing their products’ formulation, prices or packaging. This in turn will increase the products’ appeal to both consumers and retailers.
Doing this globalization strategy however, naturally requires considerable investment. Still, this will make multinational companies at par with the local companies. Another possible localization strategy is by developing new resources that are market-specific. This strategy is done when the multinational company acquired some local brands, marketing them along with their global product brands (Arnold, 2003).
As McDonald’s typically serve beef burgers and non-spicy food items, the company would have to drastically change its menu for the Britain market to provide healthier menus for British people. For instance vegetable salads and chicken kebabs were also served to cater to the health conscious population. These are some of the many changes that McDonald’s did in order to gain entry to the Britain market. In addition to product differentiation, regulation of the products’ prices is also a top priority.
Effective promotions and advertising were also integrated into the company’s international strategy. One of these tactics include the company’s promotional offers of various items like Internet cards, concert tickets, CDs, T-shirts, caps and international trips . This promo had been done as the company collaborated with other organizations including Coca-cola, Sony, MTV, and General Motors. Painting contests for children were also conducted by McDonald’s.
Furthermore, the advertising strategies of McDonald’s had been focused on building an image of family comfort. Rather than just being an ordinary fast food that serves quality meals, McDonald’s intends to appeal to the market by building a fast food image where families can get together, enjoy and relax.
Overall, the international strategy of McDonald’s for Britain has been effective. In general, the focus of these strategies was the customers. Customers play a significant role to a business’ success or failure. Being an important business element, meeting the needs and preferences of the consumers is the utmost priority of almost all businesses. McDonald’s has clearly shown the importance of this concept by adapting to the Britain culture, its people and their tastes. By reaching out to the British market, McDonald’s was able to successfully establish itself in Britain.
Despite the success of McDonald’s in Britain, it is important to consider that the cultural background and preferences of its market continues to change. New markets in the country will eventually emerge. Considering the strict competition within the food service industry, McDonald’s should then implement new strategies so as to reach out to the new markets. Perhaps, one of the most significant initial steps for the company is constant conduction of consumer studies.Strategic recommendation
Through this strategy, McDonald’s can be updated with the latest market trends and identify new market segments. Changes in food preferences can be obtained through consumer research. Furthermore, this strategy can significantly help in increasing the company’s market scope in the country.
Another important strategy that McDonald’s should do so as to address emerging markets in Britain is through enhanced advertising and promotions. This can be done through the implementation of the integrated marketing (IMC) approach. McDonald’s employs a number of ways on how to promote its products in Britain.
Aside from television commercials and printed advertisements, the company also uses the Internet and various promotional offers for advertising purposes. In order to optimize the functions of each promotional media, McDonald’s can use the IMC Strategy.
IMC enables interactivity, which in turn allows the counter flow of information. Through IMC, companies in the food service industry, such as McDonald’s, will be able to combine core strategies with other forms of communication to gain more marketing advantages and generate better business effects.
IMC is the strategic coordination of multiple communication voices. Its aim is to optimize the impact of persuasive communication on both consumer and non-consumer such as trade and professional audiences by coordinating such elements of the marketing mix as advertising, public relations, promotions, direct marketing, and package design (Moore and Thorson, 1996).
While traditional means of marketing like advertising is one way in nature, the integrated marketing communication approach permits users to do several functions, including receiving and altering information or images, forward inquiries, respond to these questions, and the most important of all, make purchases (Moore and Thorson, 1996; Moore, 1993).
One important aspect of this integrated approach is the resulting effect of a more enhanced means of brand building. In the case of internet marketing, integrated marketing communication will allow food service companies to maximize the use of the internet in building bands by incorporating other marketing means. The effect of which will lead to enhance product promotions and better net sales.
The IMC approach has been beneficial to several companies as it helps in identifying the most useful and appropriate methods in communicating and establishing good customer relations, including good relationships with stakeholders like the employees, investors, suppliers interest groups and the public in general.
During the 1990s, the introduction of the integrated marketing communications has been one of the most important developments in marketing, which continued on up to the present. From here on, the IMC approach is being applied by large and small companies alike, and has been well-known among companies marketing consumer goods and services, including business to business marketers. Using this strategy, McDonald’s may maximize the use of mass media, direct and online marketing.
In order to maximize the purpose of the IMC strategy, the official website of McDonald’s may be enhanced and integrated as well. The internet have changed the ways companies create, design and implement their whole business and marketing plans as well as their programs for marketing communications.
In order to promote their product lines, companies, from large multinational enterprises to small local companies, are developing certain web sites, complete with vital information that will help enhance customer relations or attract potential consumers.
In terms of the promotional mix, the internet is a capable medium of doing more than just advertise. Through this medium, McDonald’s may offer other means of sales promotion through coupon, sweepstakes or contests online. Moreover, the internet may be used to perform, personal selling, public relations as direct marketing more efficiently and effectively.
The official website of McDonald’s Britain is actually well-made and attractive. It offers complete product details along with product pictures, which serves as an effective marketing tool. As Britain’s are very particular about the ingredients used for their food, the website also discusses the different ingredients included for the products it produces.
Other services offered by the food company like parties are also included. In this website, the food items offered by the company are described as delicious, healthy, hygienic and refreshing. In addition, these food items are always served with a “smile”, implying the company’s quality service (McDonald's Britain Official Website, 2005).
With these major advertising elements, McDonald’s could use the same elements for its commercials, print ads and other promotion channels. By doing so, the company can create a more distinct and definite brand that the Britain market can easily remember. In this case, this is where the IMC approach comes in. The coordination of different media channels can then help in making a more established McDonald brand in Britain, resulting to higher market support, market growth and sales.
In addition, McDonald also considered the use of cost leadership and product differentiation strategy which also allows the companies to enhance their products as well as develop new ones based on market demands and needs. By means of new product development, generation of ideas that are different and unique among competitors becomes possible.
Thus, by means of new product development, industries are able to overcome cutthroat competition. Increasing the companies’ market coverage is yet another effect of developing new products for the customers like what McDonald’s have done with their British branches.
Creating something that is unique to the market place increases the possibility of catching the interest of other potential consumers. This in turn increases the market coverage or diversifies the target market of the company.
For McDonald's, people are its most important asset (McDonald, 2008). This is because customer satisfaction begins with the attitudes and abilities of employees and committed, effective workers are the best route to success.
For these reasons, McDonald's strives to attract and hire the best, and to provide the best place to work. In fact, McDonald's is so active and successful in newly emerging markets that other companies will sometimes use the golden arches as a valuable indicator of future growth markets.
McDonald’s has been successful in operating within the food service industry through efficient strategies and quality standards which enables them to gain competitive advantage. As evidenced by its international market growth, McDonald’s has already been efficient in gaining entry even in the most challenging markets like Britain. Through its strong sense of quality service and customer satisfaction, McDonald’s was able to offer its products to the Britain market. Products were modified to suit the British taste and preferences; affordable prices were implemented; effective promotions and offers were done.
These are some of the strategies involved in the company’s business strategy which allowed McDonald’s to gain the Britain support. Despite these successes, the company should take into consideration the growing level of competitiveness in the food service industry.
In Britain, several foreign fast food chains offering similar products are also being supported by the Britain consumers. Constant strategic change is then necessary to ensure that the company would sustain their competitive advantage.
In conclusion, McDonald’s has been successful because of the value the company gives for its customers. Hence, despite the controversial beginning of McDonald’s in Britain, the company managed to adapt to its people’s cultural needs. Indeed, McDonald’s is a learning organization, one that is willing to learn and open to change.
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