Executive Summary
Executive Summary
Executive Summary
The competition among the fast food restaurants has intensified over the last
decade and with them fighting for bigger market share. In lieu with the said
event, the world's biggest hamburger chain, McDonalds, is facing an
onslaught of competition from better-burger chains. On January 29, 2015,
McDonalds Corp. said that it was replacing CEO Don Thompson with its chief
brand officer, Steve Easterbrook after seeing their own customer visits
decline at established U.S. locations for two straight years. It was the latest
in a string of changes the company has announced in hopes of appeasing
investors and winning back customers.
INTRODUCTION
One of marketing problems affecting restaurant businesses is the tough
competition in the industry. Trying to get a business stand out in a crowded
marketplace is tough. Even large chain restaurants are facing tough
competition from their rivals. The answer to this problem doesnt start with
expensive advertising and more exposure but meeting the customer
demands and discovering its edge in making it different and more appealing
than its competitors.
McDonald
Yum!
Burger
Wendy
Brands
King
33.79%
14.7%
86%
19%
the franchisees
Source: Companies Financial Reports
The numbers indicate that Yum! Brands and Wendys has to rely on their
directly owned restaurants to generate most of the income, while Burger
King (and Subway) has to rely on the franchisees for its income. Both
Income
from
McDonald
Yum!
Burger
Wendy
Brands
King
58%
>98%
31.5%
U.S.
Income
22.3
%
from
40.4%
~20%
29.3%
0%
28.1%
57.7
12.7%
<2%
Europe
%
Source: Companies Financial Reports
We can see that Burger King and Wendys heavily rely on sales from U.S.,
while more than 52% of Yum! Brands revenue comes from China.
McDonalds diversified income is a strength that allows the company to grow
more steadily. The company isnt affected by major demand changes in one
or another region as much as the other fast food companies.
In relation to McDonalds, it faces competition from other fast-food chains
such as Burger King, which has been gaining market share with a simpler
and cheaper version of the McDonalds menu. And it is being squeezed by
more upmarket "fast-casual" restaurants such as Shake Shack and Chipotle
Mexican Grill, which are rapidly growing. They have been luring customers
particularly younger onesaway from McDonalds chicken nuggets and chips
by offering slightly better quality food, a high level of customization (such as
the option to choose the ingredients in a burrito or burger) and some table
service.
Some of McDonalds problems stem from operational mishaps across the
world. In particular, its business in Asiawhere it makes nearly a quarter of
its global revenueshas been hit by several health scares. Sales in China fell
sharply after one of its suppliers was discovered last July to be using expired
and contaminated chicken and beef. More recently, several Japanese
customers have reported finding bits of plastic and even a tooth in their
food. Geopolitics has not helped. Last year some Russian outlets were
temporarily closed by food inspectors, seemingly in retaliation for American
and European sanctions against Russia over its military intervention in
Ukraine. Some politicians in Russia have even called for the chain to be
thrown out the country completely.
PROBLEM STATEMENT
The world's biggest hamburger chain, McDonalds, is facing an onslaught of
competition from better-burger chains. tough competition in the industry.
OBJECTIVE OF THE MARKETING PLAN
SWOT ANALYSIS
Strengths
1. Diversified income. The fast food chains revenues come from various
countries, regions and products. It doesnt rely on one key source of income,
unlike some of its rivals.
Strong brand name, image and reputation
McDonalds has built up huge brand equity. It is the no 1 fast food company
by sales, with more than 31,000 restaurants serving burgers and fries in
almost 120 countries. The image of McDonalds is recognized everywhere.
This brand is in top ten of the most powerful brand names in the world with
Coca-Cola, Nokia or GM.
- Large market share
McDonalds is considered as the largest player in size and global reach. When
Wendys or Burgers King are losing market share in 2006, McDonalds still
increases its market share. Market share of McDonalds in the recent time is
about 19% while Yum!Brands is 9% and both Wendys and Burger King is
2%.
-Another strength they have is that they are able to us the idea of
economies of scale. This means the more they make of something, the less
it costs for each one. McDonalds mass produces French fries and burgers at
one time in batches so they always have products ready for the customer.
- Another strength they have is that their name is well- known throughout
the world. This comforts people because they know they can trust that the
food that McDonalds makes is safe, cheap, and good.
Weaknesses
High employee turnover in their restaurants leads to more money
McDonalds has to compete with many strong brand name in fast food
industry such as Wendys, Burger King or Yum!Brands. This fierce
competition makes McDonalds loose a large number of customers who
prefer favor of other brands.
McDonalds use Trans - fat and beef oil in their food. Although it is not
illegal, it affects badly on customers health because Trans fat is
causes of some kind of cancer. Consequently, a number of customers
who care about their health stop eating at McDonalds restaurants. It
makes revenue of company decrease.
Opportunities
In todays health conscious societies the introduction of a healthy
more upscale restaurant settings, like the one they have in New York
City on Broadway, to appeal to a more upscale target market.
Provide optional allergen free food items, such as gluten free and
peanut free.
In 2008 the business directed efforts at the breakfast, chicken,
With low cost menu, McDonalds can attract customers who just have
low income. This segment makes up a fairly remarkable part,
especially in the recent time, when global economic is struggling. It is
not difficult for McDonalds to apply low cost menu on all restaurants.
Discounts given on every food item may help them gain more
customers. Moreover, a new trend is rising among customers that they
like freebies and discounts, even when they dont need it or dont use
these freebies after.
good such as
This
is
an
would pick the cheaper one over the more expensive one.
-McDonalds have an opportunity to expand its business internationally
Threats
They have been sued multiple times for having "unhealthy" food,
allegedly with addictive additives, contributing to the obesity epidemic
in America. In 2004, Michael Spulock filmed the documentary Super
Size Me, where he went on an all McDonalds diet for 30 days and
wound up getting cirrhosis of the liver. This documentary was a direct
attack on the QSR industry as a whole and blamed them for Americas
obesity epidemic. Due in part to the documentary, McDonalds no longer
pushes the super size option at the dive thru window.
- Intensity competitors
Along with the development of fast food industry, there are many new fast
food brand enter to the market. It is nothing to say if there is no strong
brand which can compete with McDonalds. However, in fact, there are some
and they are stronger gradually, for example Yum!Brands, Wendys or Burger
King. Although market share of these brand are lower than McDonalds, they
try to gain more customers from McDonalds. Moreover, more casual dining
restaurants increase their burger offering and decrease the price. If we are
not really hurry, we may choose this kind of restaurant instead of fast food
restaurants. They also become the competitors of McDonalds.
- Economic recession
The company's revenue streams are diversified, but depending on the length
of this "recession", they will inevitably be negatively impacted by the
trickledown effect. Recession or down turn in economy may affect the
retailer sales, as household budgets tighten reducing spend and number of
visitors.
-The largest threat for McDonalds would be the presence of competition.
They face many competitors in their same industry such as Burger King,
Wendys, KFC, Taco Bell, and many others. Out of all of them Burger King
would be their biggest competitor because Burger Kings real estate strategy
is to find where McDonalds opens a store and open one a block over.
-Being a food based business; they have a constant potential threat of the
FDA. McDonalds have to worry about the FDA establishing new federal
regulations on the food and it could affect the way McDonalds makes its
food.
- Another threat is the changing society and the different eating patterns
consumers have. As time goes on people are starting to eat healthier and
this is a threat to McDonalds because most wouldnt consider their food to
be the healthiest.
Alternatively, re-arrange
trends
like
Chipotle
Mexican
Grill,
Potbelly
leverage
the
companys
core
capabilities
in
in
ninth
position
among
the
countries
which
have
McDonalds
would
give
customers
an
alternative
while
allowing
This
allows time for the advertisements to sink into the childrens minds and
convince them that they want a happy meal from McDonalds.
The ad
should show Sponge Bob and Dora the Explorer eating a happy meal
because they are famous characters in the shows that children watch. Those
characters would be like celebrities to children so they would serve as
celebrity testimonials saying to get a happy meal at McDonalds. The ads
should be placed during specific tv shows such as morning cartoons. For
example a good show to run the ad is during Sponge Bob, the Rug Rats, and
Dora the Explorer. Another spot to place an ad is on the bench at bus stops
for the school bus which should cost roughly two million dollars to print the
ad and have them placed on the benches.
McDonalds should also use product placement to promote the happy meal.
They should spend about two million dollars to have sponge bob eating a
happy meal during one of the episodes and have him say that McNuggets
are great.
Another strategy that should be used is sales promotion.
One great
promotional idea McDonalds had in the past was the monopoly game. They
give out properties on their products that you have to purchase and it allows
the consumer a chance to collect enough to make a monopoly and win a
price. McDonalds should advertise this game to children because children
love to play games.
can afford to do it and it would make up for it with the increased purchases
of happy meals within the two months.
RECOMMENDATION
McDonalds has undergone several changes since its inception in San
Bernardino, California. The fast food chain has conquered the US and it now
focusing on the rest of the world. McDonalds, along with this trend,
continues to strive toward customer satisfaction while still enhancing its
international market position. The company is doing very well and keeps
trying in Africa, China, and the Middle East, which will be continued source of
revenue for many coming years. If McDonalds can overcome all of its
challenges, makes use of advantages and has right strategies, it will win the
market again and hold fast to first position in fast food industry.
MARKETING STRATEGY
Target Market:
There are multiple market segments that McDonalds must market too. They
must market to young children, teenagers, seniors, families, and people who
The
geographic would be any kids that live in the united states or within a few
miles from a McDonalds.
market to all different social class structures but focus more on the middle to
lower classes because the upper class would tend not to eat fast food as
often. Another reason they shouldnt focus as much on the upperclass is
because in order for them to be considered upperclass the parents would
have to work more to make more money leaving little time to listen to the
children wine about wanting McDonalds. When it comes down to it, the
reason we market to children is to get them to have their parents buy it for
them but if the parents dont have time to listen to their children then it
could be a waste of money to market to them.
Product
The important thing to remember when offering menu items to potential
customers is that there is a huge amount of choice available to those
potential customers with regard to how and where they spend their money.
Therefore McDonalds should place considerable emphasis on developing a
menu which customers want. Market research establishes exactly what this
is. However, customers requirements change over time. What is fashionable
and attractive today may be discarded tomorrow. Furthermore, since its
competitors are also updating their products, McDonalds should consider the
present trend and the customers wants if they really want to get ahead in
the competition.
Price
Place
Place, as an element of the marketing mix, is not just about the physical
location or distribution points for products. It encompasses the management
of a range of processes involved in bringing products to the end consumer.
Control and Evaluation:
Inorder to find out how well my marketing plan is doing, I am going to track
my sales through my marketing information system. If sales seem to be up
and increasing, I will continue with the plan and enjoy the increased
revenue. However if the sales seem to be decreasing, I must find out why.
I will research which part of the plan is most effective. First I will send out a
business memo to all the McDonalds stores that tells them that they must
ask every child that walks in the store where they heard about McDonalds
and what is the reason for wanting to buy the happy meal. Each month I
will have the employees send the marketing department the childrens
answers and we will have a better understanding of which ads are most
effective and what promotional ideas led the children to want to buy a happy
meal. I will also create a focus group filled with children who half of them
have eaten at McDonalds and half of them who have never eaten at
McDonalds. The ones who have eaten there before will be asked what made
them want to eat there in the first place. They will also be asked what they
like about the happy meal and what they think needs to be improved in the
happy meal. The answers to these questions will inform us what marketing
strategy was most effective and what changes should be done to the happy
meal.
We will ask the children who never ate at McDonalds why they
havent ate there and what could we do differently to make them want to eat
there. As an incentive to join the focus group we will be giving all the
children free happy meals. I will need to form 500 focus groups nation wide
to get a good sense of what the children are thinking and this would cost us
about 500 thousand dollars to cover the happy meals, the salaries of the
people conducting the focus group and the researchers who watch the focus
group.
McDonalds has pursued two strategies since 2003. To keep up with rapidly
changing consumer preferences, demographics, and spending patterns,
McDonald's has introduced new items (Premium Chicken sandwiches and the
Angus Beef Burger) and campaigns to create more healthy foods (Premium
Salads). The strategy reflects the philosophy that novelty, as opposed to
loyalty to traditional products, is the key determinant of sales in the fast
food industry.
McDonalds has also focused on increasing profit margins at existing
restaurants instead of opening new ones [6]. To do so, McDonald's has
remodeled many restaurants, kept stores open longer, and increased menu
options. Nevertheless, new McDonald's restaurants are still opening around
the world at a rapid rate - the company plans to open about 1,000 units in
2008, and continues to grow its restaurant base by 1-2% each year.
That ride wasnt always smooth. In the late 1990s and early
2000s, the company faced all sorts of challenges to its
business model among different consumer groups, and it
took its toll on sales growth and equity performance.
Nonetheless, McDonalds leadership managed to re-ignite
sales growth by launching the Fast and Convenient
campaign, a radical adjustment of the companys product
portfolio to meet emerging food industry trends; and
refurbishing
of
McDonalds
restaurants
to
achieve
they
count
once
were.
ahead
of
They
place
affordability,
calories
and
speed,
and
McDonalds name, which once was an asset for the babyboomer market, turned into a liability.
REFERENCES