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The McDonalds Corporation

Caroline Darden
Unique Lawson
Megan Perry
Teri Wheaton
Bailey Whitaker-Lea



MK8600 Global Marketing
July 28, 2014






Table of Contents
Executive Summary ...........................................................................................................3
Introduction ........................................................................................................................4
Company Environment Macro Factors ........................................................................5
Company Environment Micro Factors .........................................................................8
Value Proposition ...............................................................................................................9
Segmenting........................................................................................................................10
Targeting ...........................................................................................................................11
Positioning ........................................................................................................................11
Products and Services ......................................................................................................12
Standardization ................................................................................................................13
Pricing ...............................................................................................................................13
Promotions and Advertising ...........................................................................................14
Distribution Strategy .......................................................................................................15
Supply Chain Issues .........................................................................................................16
Use of Technology ............................................................................................................18
Evaluation of Performance .............................................................................................19
Recommendations ............................................................................................................22
Appendix A .......................................................................................................................24
Appendix B .......................................................................................................................25
Appendix C .......................................................................................................................26
Appendix D .......................................................................................................................27
Appendix E .......................................................................................................................28
Works Cited ......................................................................................................................29

Executive Summary
McDonalds Corporation is consistently listed as one of the top global companies
in the world. In business since 1955, the company has bested competitors in the fast food
industry to become a household name. Founder, Ray Kroc, saw potential in a restaurant
that served a standard menu of quality food and sought to replicate that model
nationwide.
Today, McDonalds employs a variety of techniques to become the favorite place
to dine in the eyes of its customers. The utilization of technological advancements,
adaptation to cultural differences, affordable pricing and efficient customer service all
play a role in McDonalds commitment to the customer and their experience.
Like all companies, McDonalds is affected by numerous company and industry
environmental factors. The company has had to deal with declining demand and the
increased bargaining power of buyers. Each contributed to a less than desirable financial
performance in the 2013 fiscal year. McDonalds also had to take into account numerous
social and cultural differences for the thousands of markets it serves. It recognized that
each area and person is different and to perform at its best, these markets must be
properly understood. To stay relevant, McDonalds must also consider how it uses
technology and social media. It currently has many digital initiatives underway to enable
it to compete in the industry. The political climate of the fast food industry must also be
considered. Operating in numerous countries with varying food and safety regulations is
difficult and may put McDonalds in precarious situations.
Competition in the fast food industry is also increasing. Around the world,
competitors such as Taco Bell, Burger King, Wendys, and Chipotle Mexican Grill are
fighting to gain market share. Each has developed a global presence and is attempting to
create a competitive advantage. McDonalds, although the global leader, must take each
competitors presence seriously and strive to maintain its competitive advantage in the
industry.
To compete globally, McDonalds has developed a marketing strategy to provide
quality food and service through its global segmenting, targeting and positioning.
Throughout each step, McDonalds determines whether to global standardization or
whether to adapt its practices to satisfy a specific population. In many cases, both are
used to best provide value to the company and the customer. The effects of these methods
are seen in the companys global pricing, promotions and advertising and distribution
strategies.
As McDonalds uses glocalization to support its campaign for global growth, the
company must essentially go back to the basics. Differentiation and innovation are also
key aspects to sustaining the companys growth. A stronger emphasis on its core menu
items and a focus on the customer service for which it is known, will enable the company
to continue to grow and maintain its position as the global leader in the fast food industry.

Evaluation of Performance
McDonalds continues to implement strategies that will sustain its competitive
advantage in the fast food industry. In May 2014, the company released its strategic
framework for global growth. Its four priorities include its menu, customer service
within the restaurants, convenience of restaurants and establishing trust and brand
loyalty (Watrous).
McDonalds seeks to put more emphasis on its global core menu items such as the
Big Mac, Egg McMuffin, french fries and breakfast items. These items make up 40% of
total sales (Team, McDonald's Sales and Margins Continue On A Declining Trajectory).
Don Thompson, McDonalds president and CEO stated:
[to] complement our emphasis on our core menu, we are sequencing new menu
items and also our limited-time offers in the four categories where we believe
growth will outpace the overall industry . . . premium beef, chicken, breakfast, a
category where were the industry leader, and beverages . . . our menu teams are
creating and testing new product ideas and sharing local innovations with each
other around the world to build even stronger menu pipelines for every market
(Watrous).
While sales were down in the U.S., sales have slightly increased around the world
for the first quarter of the 2014 fiscal year. Increased sales in Europe were attributed to
premium menu choices and beverage sales in the U.K. and France. These increased sales
offset poor sales in Germany where McDonalds believes there is a contrast between the
menu items and the tastes of consumers in that market. Sales in Asia and the Pacific, the
Middle East and Africa (APMEA) also slightly increased while sales in Japan alone
decreased, mainly due to the weakening value of the Yen (McDonalds). McDonalds
plan for the overall region in regards to menu offerings is to focus on breakfast items
(McDonald's Corporation) and to optimize its offerings in Japan (Team). It plans to
focus more enhancing local relevance offering menu items with flavors that will satisfy
the tastes of consumers in that region (McDonalds).
The breakfast business is becoming more popular globally, adding many
competitors for McDonalds (see Appendix E). Taco Bell, Starbucks and Burger King are
all major competitors when it comes to breakfast. These rivals are determining how to
gain market share in this business. To combat these competitive forces, McDonalds must
consider methods of differentiation. One method of attempted differentiation is the
introduction of McCafe in several countries. With McDonalds putting an emphasis on its
coffee and beverage options, Starbucks has become an even stronger competitor,
although coffee is clearly the competitive advantage of the latter. It has also been
speculated that McDonalds may begin to serve breakfast all day or at least extend the
current breakfast service hours. The company has not yet confirmed what direction, if
any, it will take (Wong). Breakfast sales for McDonalds have easily outperformed Taco
Bells overall sales (Griswold), but the competition is significant and many other
restaurants may begin to emerge with their own offerings. Ingredients for breakfast are
considered less expensive than those for lunch and dinner, making the meal more
profitable (Jargon). This is reason enough for rivals to attempt to compete in this market.
In response to McDonalds second priority of increased customer service,
Thompson states that, [around] the world, our restaurants are increasing their emphasis
on properly staffing, scheduling, and positioning restaurant employees. In addition,
were more fully leveraging the investments that weve already made in technology . . .
[creating] an even easier customer experience today (Watrous). The restaurant has
realized that by focusing on new menu items and creative launches, quality customer
service was being neglected. The expanded menu and the time and effort it took to make
some of the newer items slowed down service. Howard Penney, managing director at
Hedgeye Risk Management said, adding more processes that come with a bigger menu,
specifically the smoothie and espresso machines, has disrupted McDonalds restaurants
time and motion . . . It takes a lot longer to make a smoothie than it does to pour a
fountain Coke(Zillman). Therefore, McDonalds has committed the first half of 2014 to
rectifying this problem (Jargon, McDonalds in 2014: First, Get the Mundane Things
Right). Improving customer service will lead to the trust and brand loyalty the restaurant
seeks. Thompson said, the key is going to really be to re-establish the trust of customers
. . . That means basic execution at a restaurant level, marketing engagement at a much
stronger level, and also to make sure that our menu is relevant (Coyle).
To aid in its accessibility to consumers, McDonalds plans to open between 1,500
and 1,600 new restaurants in markets across the world. Three hundred restaurants will
open in China to take advantage of the countrys growth potential and to offset the poor
sales performance in Japan and Australia (Team, McDonald's Sales and Margins
Continue On A Declining Trajectory). According to McDonalds U.K. Development
website, the company would like to have 40 new openings per year beginning in 2014. In
65 markets in the the APMEA region, McDonalds utilizes a developmental licensee
model where the franchisee owns and operates 100% of their restaurant. After the signing
of such an agreement in 2013, the first McDonalds restaurant in Vietnam opened in
February 2014, its 10,000th in the entire APMEA region (McDonalds). McDonalds
Saudi Arabia also signed such an agreement with the McDonalds Middle East and
Africa Development Company in 2013 to extend their partnership and grow that region.
Yousif Abdulghani, the managing director of McDonalds Middle East and Africa said, .
. . we will be opening our 1,000th restaurant in the Middle East and Africa, and we are
aiming to grow that figure to 1,400 restaurants by the end of 2015 (Arab News).
Recommendations
In order to sustain growth, McDonalds should continue to emphasize its global
core menu items, which are responsible for a large portion of sales. Thompson,
McDonalds CEO says that these truly represent McDonald's to all of our customers
(Nichols). Declining sales from 2013 have been attributed to menu offerings in the U.S.
and poor customer service and lack of access in locations around the world. Back to
basics menu items will allow each franchise to focus on providing quality and friendly
customer service, for which the brand is known.
With nearly 19,000 restaurants outside the U.S., this global giant will only benefit
from the addition of restaurants. More franchises will allow the company to grow in
earnings due to higher profit margins from franchise fees, as well as growth in global
presence. However, regardless of the desire to further expand globally, McDonalds
should approach the idea of growth in developing markets cautiously. Because of
potential political instability, crime, corruption or social unrest, there is a risk to the
company entering certain markets and growth in those areas of the world may not
happen.
McDonalds should also remain consistent in its offerings but also innovate and
adapt menu items to satisfy local tastes. If McDonalds remains steadfast in its global
standardization or glocalization, there will be cost benefits for the company and overall
consumer satisfaction. With a clearer focus on core competencies, McDonalds will
rebound, successfully.
McDonalds has demonstrated its staying power as a multinational and global
company with a polycentric management style. It is a trendsetter in the fast-food industry
whose global successes have been modeled by competitors. Its product, positioning,
promotions and pricing, combined with the macro factors effecting the company
environment, have influenced its place in the global marketplace with no signs of slowing
down.









Appendix A
McDonalds PEST Analysis