Understanding Market Opportunities: Environment & Industrial Analysis

Fakultas Ekonomi Universitas Indonesia

MMUI F121 Group 2

Adhi Mugiardi Aditya Rakhman Alam

Aditya Syamsu
Eva Dormauli Seskia

1990 McDonald (McD) first to enter the mainland China. Before Chinas franchise law was introduced. Direct investment model Developed internal supply network, including farms in China (early 1990s). It has also developed a network of local farmers, food processing manufactures and other suppliers.
1997 China enacted its first franchise regulations, applied only to domestic franchisors.

2004 December, preliminary legal structure introduced for foreign franchisors. As a commitment to the World Trade Organization
2005 McD partnered with Sinopec, Chinas largest petrol retailer, to build McDs drive thru restaurants at some of Sinopecs 30,000 petrol stations in China..

2006 95% of materials used by McD in its supply chain for the Chinese market were sourced from the country. Launched the rice burger as a promotional item in mainland China. Started to implement the business hours to 24 hours per day. Localized its menu to for the Chinese market by offering a selection of chicken products besides the traditional beef burger in 2006. McD campaign through the advertising is to be reconsidered since the advertising was pushing its beef products with sexually suggestive ads. Late 2006, McD introduced its American style breakfast (eg. sausage McMuffins, McEggs and Hashbrowns) to all its branches in China.

2007 February, Only one of 879 McDs restaurant in China was franchised. Mid-2007, nearly half of McDs restaurants in China operated 24 hours per day; 60% and 45% of its restaurants in southern and north China respectively were open 24 hours. Partnered with a popular Chinese online shopping site ie. Taobao.com Explored the use of tier pricing since 2007 to sell the products at a range of prices for consumers with different purchasing power. Chinese state owned newspaper revealed that McD has underpaid their part-time employees in Guangzhou

2008 Second largest fast-food restaurant after KFC. Launched home delivery service from its 42 outlets in Shanghai in early 2008. Supporting the Olympic 2008 with the slogan translated as Im Lovin it when China wins. Increased the price for almost all its products by 510% on 23 February 2008.

Market and Industrial Analysis

Market Domain

Industry Domain Industry Attractiveness

Market Attractiveness

Macro Level

Mission, Aspirations, Propensity for Risk

Ability to execute on CFSs

Team Domain

Micro Level
Target Segment Benefits and attractiveness

Connectedness up, down and across Value Chain

Sustainable Advantage

Demographic Environment
Aging, AIDS, Imbalance Population Growth, Increased Immigration,

Declining Marriage Rates, Ethnic, Education, Household patterns,

Sociocultural Environment:
Values, Attitudes, Behavior Business Ethics, Fitness and Nutrition View of ourselves, View of others, View of Organizations, Views of

Society, Views of Nature, Views of the Universe

Economic Environment
Consumer psychology, Income distribution, income savings debt and

credit

Regulatory Environment Technological Environment Natural Environment

Opportunities are attractive at the micro level on the market side when the market offering meets most or all of the following test:
Generic category benefits (based on Patrick Brwise and Sean

Meehan:
Theres a clearly identified source of customer pain, for some clearly identifiable set of target customers, which the offering resolves The offering provides customer benefits that other solutions do not

The target segment is likely to grow

There are other segments for which the currently targeted

segment may provide a springboard for subsequent entry

Threat of new entrants

Bargaining power of suppliers

Rivalry among existing competitors

Bargaining power of buyers

Threat of substitute products

Opportunities are attractive at the micro level on the industry side when the company itself meets most or all of the following test:
It possess something proprietary that other companies

cannot easily duplicate or imitate The business has or can develop superior organizational processes, capabilities, or resources that others would find it difficult to imitate or duplicate The companys business model is economically viable

Market and Industrial Analysis

Demographic

Chinas population has grown Growing middle class of China Young and youth 24 hrs service to entertain youth appetite

Economic

Focus in Urban area with higher GDP Differentiation of price based on purchasing power Tier Pricing An increase car ownership , expanding middle class Drive thru : Partnering with Sinopec with 30,000 petro station Tapping the youth internet users alliance with Taobao.com by providing coupons

Technology Natural

95% materials already from Internal Supply network

Sociocultural

Respecting the local culture by: Unique store design during Chinese New Year Localized menu i.e. chicken burger and Spicy Wings Local diet food by having i.e. red bean, seafood soup Introducing new way in having meals together. Chinese traditional is to serve dishes on communal plates McD serve individual menu. Catering the young and youth of China: Shift of demands higher standard, need a trendy place to socialized Fast passed lifestyle introducing home delivery to 42 outlets in Shanghai 80% eat breakfast in which 68% eat outside Introducing American Style breakfast Window to the West Business ethics : underpaid paid part time in Guangzhou increase by 12-56%

Target Segment

Focusing on the Youth Urban market

Benefit

Infusion of western tradition : A window to the West 24 hrs service outlets Home delivery Localized menu red bean pudding

Bargaining Power of Suppliers

Substitute Product Threat of New Entrance Competitors

Develop Internal Supply Network, including farms in China. It has also developed a network of local farmers, food processing manufactures and other suppliers Other fast food products i.e. Pizza , Noodles

Western fast-food entrance i.e. Pizza Hut, Burger King Asian fast food entrance i.e. MOS (Japan), Hongkong Caf de Coral (Hong Kong), Dicos (Taiwan), Ajisen Ramen (Japan) Local fast food growth KFC number 1 in the market

Specific Characteristic

International strong branding perceived as a symbol of Western Specific recipe and taste

Internal Process Business Model

Supply Chain Model 95% locally

Direct Investment / JV not Franchise Continuous expansion

What would be the opportunities and treats against McD?

Strong Branch Image Supply Chain model Variation of the localized products Added value services

High price compared to others Direct Investment model Miss- Management

New Competitors Negative press Nutritional causing obesity

Franchise Expansion in un-tapped rural area

Expanding business through franchising business model at the rural area considering that more than 60% of the population lives in Rural Area. Prioritize the second tier cities
Strategy : tier pricing business model

Re-branding due to the bad press to change the mindset positive campaign Nutrition fact to encounter the impact on obesity perception.

Inducing the American culture using the Chinese values decent advertising

Thank You