Company Background And Market Analysis Of Mcdonalds

Company Background And Market Analysis Of Mcdonalds McDonalds is the leading global foodservice retailer and the worlds largest chain of hamburgers fast food restaurant. It is founded in year 1955 by Ray Kroc. McDonalds 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 McDonalds 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 Wendys. In year 2008, Subway took over Wendys place and ranked at number three. Besides that, The Star Online stated that McDonalds 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 Google 43.56 5 GE 42.81 6 McDonalds 33.58 7 Intel 32.02 8 Nokia 29.5 9 Disney 28.73 10 HP 26.87 Source: Company Situation Mission Statement: McDonalds vision is to be the worlds 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 McDonalds system. We operate out business ethically. We give back to our communities. We grow our business profitably. We strive continually to improve. Management Overview McDonalds management is very successful as it exports its brands throughout the globe. The company operates McDonalds 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: McDonalds 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 McDonalds 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, McDonalds had occupied 19% of the total market share in the fast food industry. While its closest competitors: Burger King and Wendys 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 Statess 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 McDonalds target market is people who love fast food. The demand of fast food is increasing nowadays as everyone is practicing faster paced lifestyles. Macdonalds 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 McDonalds 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 McDonalds 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 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 McDonalds 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 Magazines 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 McDonalds 2009 annual report, foreign currency translation had a negative impact on McDonalds 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 McDonalds consolidated operating results. Economical With its franchises in US, McDonalds provide a lot of job opportunities to the US people to reduce the unemployment level in that country. McDonalds 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, McDonalds 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, McDonalds serves burgers and fries to the customers in minutes time, McDonalds 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, McDonalds uses Wayport for high speed connectivity to the internet. Legal McDonalds has been involved in legal cases which most of them are trademark disputes where many food businesses are using Mc or Mac because of McDonalds strong brand recognition. Environmental To reduce the impacts on environment, McDonalds 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 McDonalds closest competitors are Burger King Corporation and Wendys 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 Wendys Wendys is founded in year 1969 by Dave Thomas. It is an international fast food chain restaurant which ranked as the worlds 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. Wendys 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 McDonalds business into consideration during the preparation of a marketing plan. Objectives These marketing objectives are what McDonalds 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 customers 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 McDonalds 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 RD 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 McDonalds primarily sells hamburgers, chicken products, cheeseburgers, breakfast items, lunch items, french fries, soft drinks, shakes and also desserts. McDonalds 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, McDonalds 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. McDonalds 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 McDonalds have an idea to improve on its products and environments by following customers preferences. As people starts to practice healthy lifestyles, McDonalds 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 McDonalds 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 McDonalds 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 McDonalds outlets can be reached by driving within three minutes. McDonalds gives certain level of satisfaction, fun as well as happiness each time they dine at McDonalds 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 McDonalds outlets have Drive-Thru to make customers who want to take away more convenient and fast. Besides that, quick del ivery to households is provided with a little charge. Promotion McDonalds 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. McDonalds 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. Besides that, McDonalds is doing sales promotion too. Customers can enjoy McDonalds 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 McDonalds foods in cheaper prices. Kids simply love to celebrate their birthday parties in McDonalds. Hence, McDonalds 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 McDonalds 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 McDonalds 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 McDonalds 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 McDonalds 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. McDonalds can get feedback from the customers to know what they prefer, how they want McDonalds to change so that McDonalds know what action it should takes to improve itself. With new product innovations and healthier fast food, McDonalds will be more successful. Word Count: 2275 words