Business Strategy Anaylysis McDonalds

Introduction

This paper is based on the US fast food sector and aims to analyze McDonalds in terms of its business and marketing strategy as well as depict the position of the company in the market.

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Background

The McDonalds Corporation is a fast food retail chain which has been operating in diverse market around the world. The company has been very successful in establishing its global operations in the international market. While most of the restaurants that come under the McDonalds umbrella are franchises of its burger and fast food chain, the company also owns a separate brand name called ‘The Boston Market’ which heads a different line of restaurants. Aside from this the company also has major shareholding in Pret a Manger, Piles Café as well as Chipotle Mexican Grill. The company is now also entering into the DVD rental market. The headquarters for the McDonalds Corporation are located at Oak Brook, Illinois in the Unites States.

McDonalds was launched initially in 1940 by Dick and Mac McDonald. The fast food chain offers counter, and drive through service. In the crowded downtowns of the major countries the company also operates as a walkthrough. The general product offering of the company includes burgers, milkshakes, French fires, soft drinks and deserts. The company however has now started offering meal deals, salads and fruits as well.

Strategy

The specific marketing strategy that is employed by McDonalds is discussed in terms of the brand marketing employed by it, the layout of its retail outlets, the community projects that have taken up and the formal growth strategies.

Marketing their Brand

McDonalds has been quite a success story in terms of brand building and marketing. The company employed its mascot Ronald McDonald as an icon figure and developed the brand of McDonalds around him. The happy and easy going personality of the character was established in order to relate the atmosphere in McDonalds. However in the 1990s, this theme of McDonalds started suffering due to market and environmental changes and as a result McDonalds started to employ aggressive marketing strategies. The company started collaborations with motion pictures as well as toy manufacturers to establish co-branding. The company also made use of this branding technique in order to brand its products (burgers) as well as its happy meal offerings. Currently the company is employing co-branding with Hot Wheels, Apple and Sony.

McDonald’s service level agreement states that it provides the same level of quality, taste and wholesomeness of food in all its operation. However in order to target the diverse market of its different target markets in international location, the company has developed specific marketing campaigns as well as specific product offering which are modified to the culture and the preferences of the local communities.

Store Formats

McDonalds has been promoting a very community centre ambiance in its stores and retail outlets. The ambiance in the McDonald store is usually friendly, and approachable. The colors are kept clean, signifying quality and hygiene. The food dispensing and cashing area are usually in the front of the store which allows people convenience in terms of coming and, placing their order and taking their food for on the go or to enjoy at the cheerful chairs present at the retail outlets. The theme of red and yellow is carried out through out the retail outlet in order to further extend the brand colors in the premises. In outlets with seating space, the store usually houses a life-size figure of its mascot Ronald McDonald.

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The seating area in the outlets is usually present at the left or the right location of the cash register. In locations where the outlets are constraint for space and is multistoried available, in such case the top floor of the restaurant usually has the seating area with the ground floor being the cash counter and the kitchen. The area at the back of the cash register houses a kitchen and hot shelves on which the available orders are placed. Aside form this almost all franchises and branches of the company also house a Kids playing area, and a room reserved form children parties.

Community Involvement

The McDonalds chain of fast food restaurants has been promoting diversity in its franchise outlets all over the world. This combined with the superior quality of food provided have enabled the company to establish a strong position in the international market, amongst its competitors. The company initiated a department for Affirmative Action programs in the 1970s and has been reaping the benefits of investment in the community. Aside from this the company has also been providing for and supporting sociable causes in its regions of operations in order to promote development in the community. “Fast-food giant McDonald’s has long had a reputation for their CSR initiatives. The company is planning to launch an energy and waste recycling initiative called Green City.” (Paton, 2007)

Moreover McDonalds has also been trying to improve the crime and justice issues in its areas of operation. The Illinois based fast food giant has been providing pro bono legal advice and support to its community in Illinois, however as of 1999, the company has taken a systematic approach to providing this public service.

Growth Strategy

The popular growth strategy that was employed by McDonalds until recently pertained to opening new stores for operation over a large span of geographic area. “Replication, a familiar phenomenon sometimes referred to as the ‘McDonalds approach,’ entails the creation and operation of a large number of similar outlets that deliver a product or perform a service.” (Winter & Szulanski, 2001) However now the company has changes its strategy and is investing in boosting sales in its existing stores operations.

The financial impact of this strategy has been tremendous resulting in financial growth for the company. In the recent years the demand for fast food products has been decreasing as the consumers have become increasingly aware of health risks and are focusing on eating healthy foods. McDonalds has taken up this opportunity and has started to provide a whole range of salads catering to such customers. As a result in 2003 “sales were up 13% to $9.1 billion, and net profits rose 38% to $1.1 billion, compared with the same period a year earlier.” (Economist, 2004)

SWOT Analysis

Strengths

As a result of the SWOT analysis of McDonalds we were able to identify that the strengths of McDonalds Corporation pertain to the establishment of the McDonalds as a global brand. The company has been successful in building a brand name world wide in terms of quality food and good/ happy times. Moreover the company has been able to attain a diversified presence in the varying geographic markets in the world. The strong supply chain of the company also supports its operations and enables it to maintain its quality and standard in its franchise operations around the world.

Weaknesses

The weaknesses of the company however pertain to the weak revenue growth, as well as the low revenue per employee that is inherent in the company. Aside from this the company has also been facing problems in terms of customer complaints and law suits. One of the major legal case that was processed against the company involved its use of a child in its London branch and over working him in terms of child labor.

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Opportunities

The opportunities that exist for the McDonalds Corporation pertain to launching new product lines in addition to the product that exist in the market. Aside from this the growing economies of China and India also represent a huge growth potential for McDonalds in the Asian region. The reason for this is the American fast food culture which is developing in these countries, and the large population of the region that can be targeted by the McDonalds.

Threats

The threats that are being faced by the company pertain to intense competition in the market as well as the growing number in its target market that are becoming health conscious. This trend is bound to take the current market of customers away form McDonalds as the main product offering of the brand is fast food pertaining to burgers and fries. Moreover the attacks of bird flu are also threatening to decrease the number of chicken consumers in its target market.

References

  1. (2004), Big Mac’s makeover, Economist, Vol. 373 Issue 8397, p. 63-65, 3p, 2 graphs, 2c.
  2. Brønn, P.S., (2006), Building Corporate Brands through Community Involvement: Is it Exportable? The Case of the Ronald McDonald House in Norway, Journal of Marketing Communications, Vol. 12 Issue 4, p. 309-320, 12p, 1 chart, 1 diagram.
  3. Paton, N., (2007), Giving Something Back, Caterer & Hotelkeeper, Vol. 197 Issue 4496, p. 46-49, 4p, 3c.
  4. Solomon, C.M., (1993), McDonald’s links franchisees to the community, Personnel Journal, Vol. 72 Issue 3, p. 61, 3p, 2c.
  5. Tatge, M., (2001), Burgertory, Forbes, Vol. 167 Issue 14, p. 76-76, 1p, 1c.
  6. Young, A., (2005), McDonald’s: ‘Balanced lifestyle, Marketing, p. 29-29, 1/3p, 2c.
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