The restaurants operate under the franchise of McDonalds, an affiliate or as an independent cooperate. The company gets its revenue from rents, bills and fees paid from the franchisees they also get revenue from the sales they make in the restaurants under the management of the company. The company’s menus differ with the changing needs of the consumers and the cultural demands of its outlets.
The company had made successful sales by the year 1993 with 100 billion hamburgers and this figure grew with the sale of the enterprise and the ever-increasing franchises worldwide. They operate drive in and indoor and outdoor setting in most of its restaurants. In recent years, they have adopted to the rising demand for high quality coffee by introducing the McCafe. Business model of the McDonald chains differ from most of the other models applied by fast food industries. They get their revenues from rent, leases, fees and money from sales. It earns most of its revenues from investors who have properties and restaurants. The McDonalds have special days like the Happy Days where they donate the money from their sales to the charity organizations.
Market orientation is the focus on customers through coordination of marketing processes and making of profits. The business needs to put a lot of consideration in understanding unique needs of its customers, especially when it comes to ever-changing preferences for products. Understanding of the market means that the business is able to provide its customers with high-quality goods and services with a help of market intelligence and coordination of different departments. This process involves integration of culture in daily activities of the business in order to change the behaviours of business management. However, in order to prove that the business is in line with market orientation it has to manage its operations and culture in a way that produces maximum results.
Market Orientation in McDonald’s
Creation of reputation of McDonalds as one of world’s most recognisable brands has been a long and challenging task for its mangers. The enterprise managed to become so popular by paying close attention to the needs of customers and by responding to market demands even when the needs of customers were changing in a short period. By identifying the target market, McDonalds was able to create products that suited their consumers’ health wise. Company's target market consists of young people who are conscious of their health, young mothers, and children. This means that it has to come up with products that are safe to consume and serve the nutrition needs of these groups, (Oldroyd, 2004).
In order to keep their customers coming back and to keep up with competition, McDonalds had to analyse its strengths and weaknesses and look for ways to improve its service delivery. McDonalds adopted a 5P marketing mix strategy, which it uses to find its target segment and position itself in the market. The 5Ps used by McDonalds comprise of products that customers need, prices for these commodities, place, promotion needed to reach the target population, and people who need these commodities.
"Product" relates to the service or tangible commodity produced by McDonalds. Company gives these services to its customers. The product needs to have certain aspects that would make it unique to customers and would distinguish it from similar products of competing businesses. The uniqueness of products is expressed in different ways. These include packaging of the product, the guarantee of quality, and general appearance of the product to its customers.
McDonalds has been able to maintain the top position of its brand in the market by maintaining its product depth and width limited depending on the country where the product is served. Such market evaluation enables the company to maintain its customer base and at the same time preserve the culture of people of that particular country. The type of product made in different countries depends entirely on the taste and preferences of customers. This is referred to as an excelling customer feature, where product delivery depends entirely on the demands and needs of the customer.
"Place" factor relates to where the product needs to be at a certain time. The place factor in market orientation goes hand in hand with distribution of the product. The product needs to be at the right place when the customer needs it and it also has to be delivered at the right time. This is one of the things that makes McDonalds’ brand so popular in Australia because its outlets are only few minute drive from a customer. The place also needs to be environmentally friendly and hygienic. The services offered in such places are amble and they have a playing section for kids who can play while the adults have a good time (Malgee, Mayhew, Bounds, 2001). The latest service offered in company's restaurants is the Internet facility where they play music online to entertain customers. All these services offered in the restaurants make customers feel happy and satisfied when they have their meals in one of many centres located in different parts of the world.
This is one of the most important aspects of 5Ps in the mix. Prices and market penetration are indirectly proportional. This means that McDonalds has to evaluate its market keenly to be able to operate in all of them. The pricing aspect of market orientation ranges from discounts offered, options for making payments, and a list of products’ prices. The price part of the mix is the only one that brings revenue for McDonalds and, therefore, is the most important aspect. This means that the company must look at the supply and demand curve and equation before setting its prices. The value pricing technique and bundling strategies like the offers given to customers including terms like "happy meal", "combomeal", and "family meal" in an effort to increase its sales. The first serviced meals also help the enterprise increase its sales.
Market orientation in regards to mix technique refers to using appropriate channels to help marketers promote their goods and services. The first strategy applied by McDonalds is effective communication with its stakeholders and customers. The company ensures that proper information about the product or service is delivered to the interested parties. Studying customers’ values will help the company decide whether promotion is worth investing in and whether the costs incurred will be paid off in the long-run (Johnson, 1998). The objectives considered before making any advertisements in McDonalds enterprise are aimed to make people aware of the presence of an item in the market, make people have a positive perception of the product, and make them remember the product. The message has to reach the audience through the right media with the right message directed to the right people. Most of the promotions done by McDonalds are through the media, especially on TV stations, hoardings, and bus shelters. The company uses differentiation strategy focused on market segmentation where they target family units, especially children, by using phrases like "Happy Meal" and these meals have prices that are subsidised.
The value of employees and customers in any business is of utmost importance, and McDonalds pays attention to the needs of customers and their employees in order to provide the best services. Services that an employee offers to customers depend on how the employee is treated by the management. The company constantly performs internal marketing, which involves hiring, training, and looking for ways to motivate their employees. This makes external marketing strategies succeed because internal marketing affects the outcome of external auditing.
Value chain concept
Value chain analysis helps the McDonalds to break down their strategies and know how cost behaviour and differentiation sources affect its strategic decisions. By identifying, the strategies that can help them differentiate their strategies McDonalds can then look for ways of performing these activities at a lower and better way than its competitors. McDonalds have been able to find reliable and high quality supplies with the distributors placed in strategic locations to reach the outlets easily. McDonald is taking advantage of its influence to profit from global purchasing activities. The franchises are investing in new equipments like the quality doors in Australia at low prices from quality suppliers. The increasing number of customers has led to the addition of new items to the menus. The test kitchens are located in selected markets to identify new menus that will add variety to the existing menu. McDonalds focus on training its employees to be polite, fast, precise, efficient and effective when serving in the University of Hamburger. Students stay in the universities lodge rooms during training, which creates uniformity in its operations. Franchises have a right and freedom to explore new menus and ideas.
Macro Environment Analysis of McDonald's
The macro environment analysis in McDonalds' case is from the top to the bottom. Internal analysis of the enterprise needs to use a value chain, which is a disaggregation tool used to create strategies in any business. McDonalds performs many activities to help its franchise, and these activities range from logistics to marketing and sales. Logistics activities include purchasing raw materials on behalf of franchises and shipping them to their destination as well as shipping finished products to distribution places. The food towns located in most distribution centres help McDonalds deal with competitors in areas, where the company does not have many restaurants. Some activities done to support internal analysis are use of technology, procurements, and development of human resource department, (Deshpande, 1999). The use of electronic tools for ordering services online has set a trend of logistics where restaurants operate smoothly. Training of employees to serve in a quick service culture in one of the most important factors. National centres or university helps McDonalds develop high quality services that attract many customers and make them return.
External analysis used by McDonalds focuses mainly on PEST analysis, which helps them understand fast-food market and understand how the company has to operate in the ever-dynamic environment. The first factor of the PEST analysis is the political factor. Politics affect operation of the business because of the influence of the government policies, especially regulations related to food industry. Health of people is a priority to many governments. This is why most of fast food industries are always under control of the government. The issuing of license is under control of the government meaning that McDonalds has to maintain good relationship with the government by following the regulations. Another factor affecting the fast food industry are labour laws regulations, which protect workers. McDonalds is maintaining a good relationship with labour unions by following correct procedures of hiring, recruiting, promoting, and compensating their employees.
Economics is the second aspect of PEST analysis. McDonalds has to consider the variables that play a role in operations of their business. External currencies, global supply, and international sourcing are some of the factors of the external environment that affect the business. Exchange rates affect operations of the business because it gets its supplies from other countries. This means that the rates of exchanges, especially that of the dollar, affect its profits. Regulations of governments on taxes and revenues affect how different franchises operate in different countries, depending on the type of regulations put forth by the government. Another economic factor is economic position of a country in which the franchise operates. The economy of the country determines the ability of people to consume fast foods, and if per capita income is low then profits of the franchise will be low, (Day, 1999).
Socio-cultural lifestyles of people also play a vital role in determining whether they will eat at McDonalds or not. Some people in other countries may be capable of eating in expensive restaurants, but often they hesitate to go there because they feel that they are not getting sufficient services for their money. This means that demands of customers and their social or cultural values determine how they should be served. Some people, for example, value services they get for their money. Some of them want to use technology to get these services. McDonalds has to consider this in such a market. McDonalds has been able to adapt to the unique needs of their customers depending on their tastes and cultural practices.
Technology is the fourth aspect of PEST and this is not a challenge to McDonalds because the company has so far adapted well to the use of technology in different fields. However, the ongoing innovation and development of new services by their competitors demand that McDonalds puts more effort in creating ways of serving their customers by using technology to help them keep up with the rising competition. The use of technology makes the management of franchises more effective and efficient, which leads to high quality service provision. Technology application in advertisements and promotions also helps the business get more customers by creating awareness.
Legal and environmental factors also affect operations of the business. The certification used in different countries may hinder the smooth operation of the business. This means that businesses have to maintain high level of integrity by ensuring that they operate within certified processes in order to maintain loyalty of their customers. High integrity in operations protects the business from legal suctions or termination (Campbell, Edgar, & Stonehouse, 2011). Environmental factors are the green house effect caused by large consumption of beef products and large plantations used to supply McDonalds chains. Environmentalists claim that people are clearing forests to create land for plantations. They also claim that paper packing is causing pollutions. Vegetarians also claim that fast foods are causing a lot of harm to animals. The whale burgher issue caused a worldwide uproar because of the small population of whales in the world currently.
Market position of the business is of utmost importance and the company has to consider things like supplier power, buyers, threat of entry, and substitution and competition. The power it has over its suppliers stems from the partnership that helps it maintain the quality of supply goods and ensure that there is minimum bargaining. Consumers have a lot of power in the business because their tastes and preferences affect how the business operates. High competition in the market determines whether the business can retain its customers and suppliers. This means that McDonalds has to operate under suitable environment to keep its prices low and maintain their profits (Cox, 1998).
A youngster or teen is a person who will spend most of his or her time watching television, browsing the Internet, and idling around. He or she has limited time to prepare a healthy home-cooked meal for him or herself. The lifestyle of a teenager revolves around fast things. He or she has a busy schedule’ that does not give him or her enough time to eat healthy food. Their menu comprises of fat foods that they get from the nearest outlet. Youngsters also spend most of their time hanging out with their mates. Snack items on the menu in McDonalds are in most of its outlets and target youngsters and teenagers. The youths are the people who watch more advertisements than most of the people. The major target group in the United States of America are youths. Advertisements used to reach this group of people rely on humour and use celebrities to appeal to the youth. Teens tend to love fast foods, especially snacks, as compared to other adults, and McDonalds capitalizes on this by making ads that appeal to the youths like the Dairy Queen, Sonic, and Domino to convince the youth to have a taste of these delicacies. Young people also use the Internet more frequently as compared to adults, and they get to see more ads on the Internet making them a target of the fast food industry. The fast food industry targets the youths by placing many ads on websites they know youths visit frequently, thus making them aware of their presence in the region. Teens also consume more calories than other target groups and their diet is poor in nutritional value. Young people who visit most outlets rarely ask for a healthy meal, which makes them a target of the unhealthy snacks. The snacks that are commonly bought are french-fries and soft drinks.
The life cycle of snacks in the menus is still at the growth stage since the company is trying to increase the number of youth consuming these products. This means that a lot of work is to be done in terms of ads and convincing the youth to purchase fast foods in McDonald’s restaurants. McDonalds uses different differentiation tactics to make their snacks different from those of their competitors. They have a unique packaging and offer snacks at a lower price. Their famous brand also ensures that their products are unique. These snacks come in packages that have golden arches sign of McDonalds’ products. Branding of products help customers differentiate between products of different fast food outlets and this is majorly through packaging and branding of the product. The use of differentiation helps customers choose the product they want from a wide range of similar products because of the confidence they have in the company.
The position of the business in the fast food industry is of utmost importance and they have to regard things like their supplier power, buyers, threat of entry and substitution and competition. The power they have over their suppliers stems from the partnership that helps them maintain the quality of the supply goods and ensure that there is minimum bargaining. The consumers have a high power in the business because they affect how they business operates depending on their tastes and preferences. The high competition in the market determines whether the business can retain its customers and suppliers. The McDonalds in Australia have to make sure that they keep up with the technological advancements and take into consideration the changes in tastes ad preference of its customers through market orientations.