McDonald’s is the leading global foodservice retailer and the world’s largest chain of hamburgers fast food restaurant. It is founded in year 1955 by Ray Kroc. McDonald’s serves more than 60 million people with more than 32,000 local restaurants in 117 countries each day. It employs more than 1.5 million people. More than 75% of McDonald’s restaurants worldwide are owned and operated by independent local men and women.
Source
From the table above, since year 2004 until year 2008, even until now, McDonalds is still the number choice of customers when come to fast food follow by Burger King and Wendy’s. In year 2008, Subway took over Wendy’s place and ranked at number three.
Besides that, The Star Online stated that McDonald’s is ranked in the top 10 most valuable brands in 2010 and it is placed at number six.
Top 10 most Valuable Brands in 2010
Rank
Brand
Value ($bn)
1
Coca-cola
70.45
2
IBM
64.73
3
Microsoft
60.90
4
43.56
5
GE
42.81
6
McDonald’s
33.58
7
Intel
32.02
8
Nokia
29.5
9
Disney
28.73
10
HP
26.87
Source:
Company Situation
Mission Statement:
McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
Values:
We place the customer experience at the core of all we do.
We are committed to our people.
We believe in the McDonald’s system.
We operate out business ethically.
We give back to our communities.
We grow our business profitably.
We strive continually to improve.
Management Overview
McDonald’s management is very successful as it exports its brands throughout the globe. The company operates McDonald’s restaurants as well as franchises. There are 32,478 restaurants in 117 countries at year-end 2009, and there are 26,216 were operated by franchisees and 6,262 were operated by the Company. Under franchise arrangement, a portion of the capital have to be provided by franchisees to invest in their restaurant businesses for the equipment, signs, seating and decorations, reinvesting in the business is needed from time to time.
Financial Situation
Revenues by geographic Segment:
McDonald’s largest geographical market is Europe, accounted for 41% of the total revenues in the year 2009 which is mainly driven by France, Germany and the United Kingdom. Revenues are generated through other geographic segments: United States (US), Asia Pacific, Middle East and Africa (APMEA) and other countries and corporate are 35%, 19% and 5% respectively.
From McDonald’s 2009 annual report, we can see that its total revenues from the US reached $7,944 millions in year 2009, a decrease of 1.7% over year 2008. Revenues from Europe were $9,274 million in year 2009, a decrease of 6.5% compared to year 2008. While revenues from APMEA reached $4,337 million in year 2008, an increase of 2.4% compared with year 2008. Revenues from other countries and corporate reached $1,190 millions in year 2009, a decrease of 7.8% over year 2008.
The total operating income and assets in US shows favourable results where the figures keep increasing since year 2007 to year 2009. Total capital expenses in US show improvement as well where the expenditure is lesser in year 2009 compared to year 2008.
Market Share:
According to Jim Muehlhausen, McDonald’s had occupied 19% of the total market share in the fast food industry. While its closest competitors: Burger King and Wendy’s accounted 2% individually. Pie Chart below shows the market share of the major players in the fast food industry.
Source:
Market Situation
Sector Trends
The land size of United States’s is at 3.79 million square miles, according to U.S. Bureau of Census, with the total population of 307,006,500 in July 2009, it is the third largest both by land area and population. The table on the left shows the population in United States in July 2009 according to states.
Segmentation
The market is segmented by demographic, geographic, psychographic and behavioural.
Targeting
McDonald’s target market is people who love fast food. The demand of fast food is increasing nowadays as everyone is practicing faster paced lifestyles. Macdonald’s target market is: children, students, working adults and families who are from five to seventy years old. Students tend to spend their time to socialize with their friends in fast food restaurants compare to other restaurants as it offers affordable prices and trendy ambiences. Besides that, due to the hectic schedule, fast food restaurant is always the number one choice for working adults to have their meals as it offers quick services. Kids simply love fast food, hence, the parents will bring their children to fast food restaurants to have family meals.
Positioning
McDonald’s outlets are located mostly in high population states such as: Florida, New York, Texas, Illinois and Ohio. They were built near office buildings, schools, in shopping malls, etc., which are high visibility, traffic volume and ease of access areas.
State
July 2009 population
Alabama
4,708,708
Alaska
698,473
Arizona
6,595,778
Arkansas
2,889,450
California
36,961,664
Colorado
5,024,748
Connecticut
3,518,288
Delaware
885,122
DC
599,657
Florida
18,537,969
Georgia
9,829,211
Hawaii
1,295,178
Idaho
1,545,801
Illinois
12,910,409
Indiana
6,423,113
Iowa
3,007,856
Kansas
2,818,747
Kentucky
4,314,113
Louisiana
4,492,076
Maine
1,318,301
Maryland
5,699,478
Massachusetts
6,593,587
Michigan
9,969,727
Minnesota
5,266,214
Mississippi
2,951,996
Missouri
5,987,580
Montana
974,989
Nebraska
1,796,619
Nevada
2,643,085
New Hampshire
1,324,575
New Jersey
8,707,739
New Mexico
2,009,671
New York
19,541,453
North Carolina
9,380,884
North Dakota
646,844
Ohio
11,542,645
Oklahoma
3,687,050
Oregon
3,825,657
Pennsylvania
12,604,767
Rhode Island
1,053,209
South Carolina
4,561,242
South Dakota
812,383
Tennessee
6,296,254
Texas
24,782,302
Utah
2,784,572
Vermont
621,760
Virginia
7,882,590
Washington
6,664,195
West Virginia
1,819,777
Wisconsin
5,654,774
Wyoming
544,270
Total
307,006,550
McDonald’s target market and its market segmentation:
Children
Youth
Adults
Elderly
Demographic
Age
5 to 12
13 to 25
26-54
55-70
Occupation
Students
Students/Part-timers
Part-timer/Full-timer/Self-employed
Retired
Income
<1000
1000 to 2500
>2500
Pensions and savings
Geographic
Within United States
Psychographic
Interests
Entertainment
Entertainment, leisure
Entertainment, leisure
Enjoyment
Lifestyle
Dependent
Aggressive
Aggressive
Slow and steady
Behavioural
Occasions
Birthday party
Birthday party, gathering
Gathering, anniversary
Anniversary
McDonald’s SWOT analysis
Strengths
Strong global presence with its nearest domestic competitor being only half of its size.
The market leader in both domestic and international markets.
Strong brand recognition
Ranked number one in Fortune Magazine’s 2008 list of most admired food service companies
Having more than 32,000 local restaurants in 117 countries.
First to come out with nutrition facts information on its products.
Weaknesses
Lack of product innovation.
High cost for employee training due to high employee turnover.
Opportunities
Its outlets are located in high visibility, traffic volume and ease of access areas.
International market
Advances in technology
Threats
Saturated food industries.
Price competition between competitors.
More health conscious customers and fast food is categorized as unhealthy food.
PESTLE implications
Political
According McDonald’s 2009 annual report, foreign currency translation had a negative impact on McDonald’s consolidated operating results in year 2009 which is driven by the Euro, Russian Ruble, British Pound, Canadian Dollar and Australian Dollar. While in year 2008 and 2007, the foreign translation had positive impact on its consolidated operating results. The table below shows how the foreign currency translation affect McDonald’s consolidated operating results.
Economical
With its franchises in US, McDonald’s provide a lot of job opportunities to the US people to reduce the unemployment level in that country. McDonald’s is hiring up to 600 part-timers to work in its outlets throughout the Las Vegas area which is with 14.2% of unemployment level.
Social
Fast foods lead to obesity problems in America as they are high in fats, calories, sugar and salt. Rates of obesity in America are keep increasing obesity will leads to other diseases like heart diseases, diabetes, etc. The Coronary Artery Risk Development in Young Adults (CARDIA) said that a person will gain an average weight of 10 pounds if he or she ate fast food two or more times in a week. Pew Research Centre reported that almost 20% of Americans eat fast food at least twice a week after the survey is conducted. As the health concern is increased among the Americans, they tend not take less fast food as it have been seen as unhealthy food.
To conquer the problems, McDonald’s comes out with nutrition facts charts on selected packaging and menu information for customers to have guidelines for the food intake and meet their nutrition desires. Sample nutrition facts are shown in the pictures below.
Technology
With the technology, McDonald’s serves burgers and fries to the customers in minutes time, McDonald’s was the first to have touch-screen computers at the front counter and drive-thru to serve customers faster and easier when they ordering food. There are also touch screen self-ordering kiosks for customers to order food by themselves. Besides that, McDonald’s uses Wayport for high speed connectivity to the internet.
Legal
McDonald’s has been involved in legal cases which most of them are trademark disputes where many food businesses are using “Mc” or “Mac” because of McDonald’s strong brand recognition.
Environmental
To reduce the impacts on environment, McDonald’s uses 3Rs approaches: reduce, reuse and recycle. There is 82% of McDonald packaging are made from renewable materials at the moment. Besides that, cooking oil is recycled to be reused in variety products such as environmentally friendly biodiesel.
Competitors situation and SWOT
McDonald’s closest competitors are Burger King Corporation and Wendy’s International Incorporation.
Burger King
Burger King is founded in year 1954 by McLamore and Edgerton. It has more than 12,200 outlets in 73 countries, however, 66% of its outlets are located in United States and 90% of them are privately owned and operated. It is having more than 38,800 employees serving about 11.4 million customers in daily basis.
Strengths
Second largest fast food hamburger restaurant
Strong brand equity
Weaknesses
Heavily concentrated in US market
Relies heavily on its franchises
Opportunities
International market
Advances in technology
Threats
Changing consumer habits towards healthier food choices
Intense competition with the competitors
Increasing labour costs
Wendy’s
Wendy’s is founded in year 1969 by Dave Thomas. It is an international fast food chain restaurant which ranked as the world’s third largest hamburger fast food chain. In year 2009, there are 6,541 restaurants worldwide where 1,391 are company restaurant and 5,150 are franchise restaurants, majority of them 77 are located at North America. Wendy’s employs 46,000 people worldwide.
Strengths
Third largest hamburger fast food chain restaurant
Global brand
Strong supply chain
Weaknesses
Concentrated in North America market
Having management problems
Relies on franchises
Opportunities
International market
Advances in technology
Threats
Strong competitors
Increase in beef prices
Fast food have been seen as unhealthy food
Objectives and Assumptions
Assumptions
During the preparation of a marketing plan, there are few assumptions being made upon it where there will be no large fluctuation particularly on Foreign Exchange variance. Besides that, it is crucial to take variances such as economy crisis, natural disasters that will have impacts on McDonald’s business into consideration during the preparation of a marketing plan.
Objectives
These marketing objectives are what McDonald’s is trying to achieve on the three following years of its operations by using SMART criteria which are specific, measurable, achievable, realistic and timely:
Marketing:
Specific
To increase market share.
To increase new product awareness.
Measurable
To increase the market share by 5%.
To have an increase of 18% on new product awareness.
Achievable
Advertisements on the new product to grab customer’s attention.
More franchisees to open new franchises.
Realistic
Fast-paced lifestyle leads to higher demand as more customers prefer fast food nowadays.
Timely
To increase market share by 5% yearly start from 2010.
To have an increase in product awareness by 18% start from 2010.
Financial:
Specific
To increase overall sales revenue.
To reduce cost of sales.
Measurable
Increase sales revenue by 8%.
Reduce the cost of sales by 5%.
Achievable
Higher demand for fast food.
Realistic
McDonald’s order raw materials in bulk to get cheaper prices and reduce cost.
Advertising stimulate customers’ appetite and increase sales.
Timely
Sales revenue increases by 8% annually start from year 2010.
Cost of sales reduces by 5% yearly start from 2010.
Societal:
Specific
Provide healthier fast food.
To make product more environmental friendly.
Reduce electric and water consumption and wastage.
Measurable
R&D at 8% of sales on healthier food recipe in year 2010.
Reduce energy consumption and wastage by 3%.
Achievable
Reduce in fats, calories, sugar and salt in the products.
Electric and water consumption is reduced by using them wisely
Realistic
82% of McDonald packaging are made from renewable materials
Timely
Electric and water consumption and wastage is to be reduced by 3% monthly start from January 2010.
Strategy
Marketing Mix
Marketing mix is all about putting the right product in the right place, at the right price and at the right time to boost sales and hence generate higher profit.
Product
McDonald’s primarily sells hamburgers, chicken products, cheeseburgers, breakfast items, lunch items, french fries, soft drinks, shakes and also desserts. McDonald’s should innovates its products continuously as people tend to change their preference and tastes from time to time. Without product innovations, customer will get bored to eat the same food over and over again. With its strong brand recognition, McDonald’s serves its customers within minutes from ordering until they get their food with world class food quality by using fresh ingredients and excellent product features. Its staffs are trained to provide fast and excellent services to the customers. McDonald’s product packaging is environmental friendly and 100% recyclable to reduce the negative impacts on the environment. Questionnaires have to be prepared from time to time to get feedbacks from the customers so that McDonald’s have an idea to improve on its products and environments by following customers’ preferences.
As people starts to practice healthy lifestyles, McDonald’s includes salads, wraps and fruit into its menu. Besides that, McDonalds comes out with nutrition facts table and charts for people to have guidelines for their food intake and to meet their nutrition desires. The sample nutrition facts table for McDonald’s USA is shown below.
Source:
Price
McDonalds uses value-based pricing and psychological pricing on its products. One example for psychological pricing is $3.59 instead of $3.60 and $4.99 instead of $5. In customers’ perception of saving, they look at the items with prices ending with £0.95 or £0.99 more favourable as compare to £1.00 as example although there are only £0.05 and £0.01 difference. The prices are set where they are reasonable and affordable by the customers. It uses value pricing strategies on some of its products where they are cheaper to buy in a set compared to ala carte such as: happy meal, combo meal, family meal, breakfast and lunch sets to increase overall sales volumes. Discounts coupons should be given out from time to time to attract new customers and to boost sales in those particular periods.
Place
McDonald’s outlets are located in high visibility, traffic volume and ease of access areas. Most of its outlets consist of the distribution channels. It is important so that the product is available to the customer all the time. In United States, there are nearly 50% of McDonald’s outlets can be reached by driving within three minutes. McDonald’s gives certain level of satisfaction, fun as well as happiness each time they dine at McDonald’s as it offers better ambience, hygienic environment and also great services. Free Wi-Fi with high speed connectivity to internet is provided to customers for them to access to internet to do business and entertainment when they are dining. Besides that, children will not easily get bored when they just sit and eat as they can have fun at the playgrounds in the restaurants while their parents have some time to spend together. Every McDonald’s outlets have Drive-Thru to make customers who want to take away more convenient and fast. Besides that, quick delivery to households is provided with a little charge.
Promotion
McDonald’s uses various promotion channels to effectively communicate the product information to the customers as it has clear understanding of the customer value that helps to decide whether the promotion cost is worth spending or not. McDonald’s three main advertising objectives are to make people aware of its product, having position perception about it and remember it. It does its advertising promotions through televisions, radios, hoardings and also bus shelters. Printed ads in newspapers and magazines and television programmes are one of its important marketing medium too to stimulate customers’ appetite.
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Besides that, McDonald’s is doing sales promotion too. Customers can enjoy McDonald’s breakfast and lunch sets in cheaper price in a certain period of the day. Besides that, discount coupons will be given to customers from time to time for them to enjoy McDonald’s foods in cheaper prices. Kids simply love to celebrate their birthday parties in McDonald’s. Hence, McDonald’s can give special discounts and gifts to the birthday kids so that they will come back next year and tell it to their friends.
Forecast and implications
McDonald’s three years forecasts and budgets (Dollars in millions)
2009
2010
2011
2012
Objective comment
Sales
7944
8580
9266
10007
Improve by 8% yearly
Cost
659
626
595
565
Reduce by 5% annually
Profit
7285
7954
8671
9442
Increases by around 8% yearly
It is forecasted that McDonald’s in United States will meet its financial objective where its sales increase steadily by 8% yearly start from year 2010 while its cost reduces by 5% annually. Hence, the profit will be increasing by around 8% yearly start from 2010.
Metrics
McDonald’s is using metric strategy in order to measure whether it can achieve its objectives or not.
Marketing metric:
Objectives
Metrics
To increase market share
Measure by number of new franchises opening yearly
Increase product awareness among target audiences
Calculated by the sales of the particular product after advertising promotion is done
Financial metric:
Objectives
Metrics
Increase sales revenue
Product sales is measured by dollars annually
Reduce cost of sales
Cost of sales is measured by dollars yearly
Societal metric:
Objectives
Metrics
Provide healthier fast food
Measure by the percentage of fats, calories, sugar and salt in the products
Reduce electrical and water consumption and wastage
Calculate by the electric and water bills monthly
More environmental friendly
Measure by the percentage of its packaging that using recyclable materials
Conclusion
As the conclusion, although McDonald’s is number one in fast food industry, it should keep improving its business in term of marketing, financial and social to be better in the future. McDonald’s can get feedback from the customers to know what they prefer, how they want McDonald’s to change so that McDonald’s know what action it should takes to improve itself. With new product innovations and healthier fast food, McDonald’s will be more successful.
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