The objective of this report is to gain an understanding of the marketing environment for McDonald’s. McDonald’s is a global icon in the fast food marked that has expanded its operations throughout the world. It is fast becoming very popular in markets as far away as India and China and Brazil. However unlike in the past, to date McDonald’s is under severe pressure from the marketing environment and it is the objective of this essay to gain an understanding of the macro-environmental factors that affect the operation of McDonald’s worldwide and use that knowledge to analyse the impact and influence the macro environmental factors have on the marketing mix activities of the company. By analysing the macro environment for McDonald’s the I will then proceed to discuss the influence of the macro environmental factors on elements such as targeting, segmenting, positioning, the product, the price, the place and promotional activities of the company. In order to carry out this research I have used a number of textbooks, Journals and magazine articles.
Macro Environmental Analysis
I have used the PESTLE framework to analyse the macro environmental factors that affect McDonald’s and will pay special attention to demographic, social culture are and ethics related issues in this section.
As concerns of childhood obesity increase in the developed world, more and more governments and politicians are becoming involved in passing legislation to help reduce incidents of childhood obesity (Hughes, 2007). Michelle Obama (wife of US President Barack Obama) is currently spearheading a programme to decrease obesity in children and increase parental involvement in making healthy food choices for children. This has had an indirect effect on fast food retailers and especially on McDonald’s as more and more people see McDonald’s type food as an ‘unhealthy choice’. As a result the company has had to change some of it’s menu items and offer a healthier choice in certain countries. For example in the United Kingdom, the United States and Canada the company has introduced cheap desserts that are considered to be healthy choices such as the Apple pie (Hughes, 2007).
Even though the company has been faced with a lot of pressure due to it being seen as an unhealthy choice in terms of food, the recent economic downturn was advantageous to the company. As disposable incomes reduced due to increased unemployment and discretionary spending was reduced by consumers, many families and individuals opted to eat at McDonald’s instead of going to a more expensive restaurant. Therefore even though there were fears that the McDonald’s type food is unhealthy and causes obesity, in an economic downturn, people tend to choose the unhealthy choice due to price attractiveness. Further as emerging economies such as China, India and Brazil and many others continue to see their middle classes growing, McDonald’s found its business booming and continues to see potential in these markets as more and more people are able to afford eating at McDonald’s and because McDonald’s is seen more as a prestigious choice amongst these newly affluent groups of individuals (Beng-Huat, 2000).
As more and more individuals become health-conscious and make a determined effort to change their lifestyles and make healthy choices, McDonald’s has seen its brand being pointed to as an unhealthy choice (Gubman, & Russell, 2006). It is expected that increased awareness of the health risks caused by obesity will continue to increase and McDonald’s will be seen as a brand to be shunned. Therefore it has made changes to its menu items to help consumers make healthy meal choices while still continuing to offer its signature items like the Big Mac Burger (‘McDonald’s Celebrates 50’, 2005).
When compared to the competition McDonald’s has been very apt at keeping its pricing down while continuing to innovate its menu. One of the main reasons for the company to be able to keep its prices down when compared to the competition is because it has access to a very strong supply chain management system (Kramer, 2000). It is due to this excellent supply chain management system that the company is able to work very efficiently and effectively and thus reduce waste and pass on the benefits of the same to its consumers (Drummond and Ensor, 2005). McDonald’s continues to upgrade its information technology and supply management systems as it sees much return on investment from the same.
Unlike big retail operations in the USA like Wal-Mart, McDonald’s owns most it’s suppliers and producers and has been faced with many scandals as a result of that. There have been many occasions on which producers and suppliers have accused the company of discrimination and high-handed tactics (Alfino, Caputo & Wynyard, 1998). Even though the company tries its best to project a very friendly image, there have been allegations of employee exploitation etc which have caused many problems to McDonald’s. Also, the company has also faced many legal challenges brought from health as well as consumer groups and it is expected that the same trend will continue well into the future (Royle & Towers, 2002).
As environmental consciousness increases the company is trying to project an image of environmental friendliness. Unfortunately however since the model of McDonald’s is to make maximum use of comparative advantage, it’s entire supply management system is based on such a concept and it is difficult for the company to reduce its carbon footprint in the short run (Livesey, 1999). However as in the past McDonald’s has been very successful at manipulating and projecting a favourable public image without making many changes to the actual operations and thereby has been able to buy favour with its consumers and this trend is expected to continue even in the future (Kotler, Wong, Saunders and Armstrong, 2005).
Both in the East and the West the company appeals to children, teenagers, young adults and families with children under the age fifteen. Even though the biggest demographic group for McDonald’s is families with children and teenagers, the company has become aware of the huge potential that is available to it in the baby boom segment of the Western population and therefore has done much to appeal to them wherever possible (Baker, 2002).
As stated in the previous section McDonald’s is faced with immense pressure due to increasing cases of obesity and also as environmental consciousness increases in the population (Mccoppin, 2005). However the company continues to portray itself as a family friendly restaurant that helps families have fun and enjoy themselves at a very reasonable price. It is also seen as an employer in the community and therefore has continued to grow from strength to strength in the face of many challenges (Groucutt, 2005).
Business and Personal Ethics
McDonald’s uses its financial strength to often strong arm different stakeholders and ensure that its business model is not severely affected at any time. Even though the company has come under immense pressure from health and consumer groups and today is under pressure from political groups as well, it continues to exert strong pressure and avoids or delays the passing of legislation that would affect it to a great extent. In terms of ethics the company does not have a very good record even though it has tried to project a very favourable image (Brassington and Pettitt, 2006). Based on past events and its actions it can be safely said that the company is not going to change its ways and most probably will continue to use its financial strength to achieve profitability goals without becoming more ethical or socially responsible.
Influence on Marketing Mix activities
I will now use the knowledge gained from the above analysis to explain and discuss the influence the macro environmental factors have on McDonald’s activities in terms of targeting, segmenting, positioning and the marketing mix.
In the past the company was able to target consumers who were looking for a ‘quick fix’ meal, a cheap meal or reasonable family outing (Jobber, 2003). However, today this process has become much more complex due to the changing socio-cultural trends and health concerns. As concerns for health issues and the risk of obesity continues to increase the company cannot simply target individuals from the point of view of offering them a cheap meal, but has to ensure that it is able to provide value for money both in terms of quantity as well as quality (Watson, 2006). As a result the company has been targeting individuals while looking for a ‘quick fix’ by providing them with its traditional items and also targeting individuals who are more health-conscious by providing them with new menu items that offer choices that are considered to be healthy and not ‘junk food’ (Buss, 2005).
While McDonald’s continues to have the same philosophy and offer the same range of items throughout all its fast food outlets across the world, it has had to customise some of the menu items to meet Local tastes (Salva-Ramirez, 1995). In countries like India and the Philippines McDonald’s has introduced rice to its menu as a side dish because rice is the staple diet in these countries. While the company segmented its customers in terms of pricing in the developed world and offers cheaper food choices, in the developing world McDonald’s is seen as a prestigious option and therefore prices its products at the level where are the middle class and upper middle classes can afford it and enjoy it (Debres, 2005).
The manner in which the company positions itself is different from one market to the next (Watson, 2006). As stated in the previous section, while been seen as a cheaper choice in the developed world, in the developing word it is seen more as an expensive and prestigious choice (Olsen, 2007). Therefore since obesity is still not an issue in countries like India, it positions itself as a middle of the range of brand and appeals to the middle-class or upper middle class segments of society. However in the developed world it positions itself as a cheap alternative that offers value for money and is a quick fix and a tasty choice (Watson, 2006).
While the company continues to have its flagship menu items such as the Big Mac Burger etc it has continued to be innovative has added healthy choices such as salads, Apple pies etc to its menu (Buss, 2005). Further the company has also customised its menu in a manner that appeals to local taste buds in different countries by adding menu items such as rice and other side dishes, which appeal to the local population and is a part of their daily diet (Traphagan & Brown, 2002).
McDonald’s pricing strategy differs from one part of the world to the other, this is because the company has a different image in different parts of the world. While it is seen as a cheaper alternative in the developed world, in the developing world it is seen as a sign of affluence to be able to eat out at McDonald’s (Watson, 2006). Therefore the company has had to take these factors into consideration and price its production accordingly and has done a very good job of it as it continues to succeed in this area (‘Huge Profits, 2004).
McDonald’s is seen almost in every street corner in North America and has done a very good job of placing its product to be easily accessible. In the recent past the company has also started to buy up real estate and place itself very close to schools, which makes up one of its biggest customer groups (Royle, 2000). It is the long-term philosophy of the company that when children identify its brand from a very young age they become lifelong customers and therefore provide the company with a huge potential. Further the company has also ensured that it if strategically placed in towns and cities in almost all emerging economies as it sees much potential in countries like India, China, Brazil, Argentina etc in the coming years (Watson, 2006).
In terms of promotion it can be stated that the company continues to project an image of being a cheap alternative and a family’s number one choice for eating out (Talwar, 2002). The company has done a very good job of promoting itself and has been able to change its image frequently through excellent promotion (Hudson, & Lusk, 2004). As stated in the section above the company has done very little to change its operations but due to clever promotion it has been able the change its image appropriately to reflect the changing trends and fads in society (Hughes, 2007).
Based on information that has been stated above it is apparent that Macdonald’s is currently under much pressure from the political and social spheres. The reason for this is because there increased awareness of the risks of obesity and also increased environmental consciousness. However as the potential in emerging economies and the developing world increases the company is able to go from strength to strength by promoting itself in those economies while continuing to change its promotional strategies in North America and Europe without much change to its traditional philosophies and operating model. Therefore in conclusion it can be stated that while the company is faced with much challenges from the external environment it has been very good at manipulating it’s marketing mix activities based on the influence of the external factors.
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