McDonald
by
Kashan Pirzada Page 1
1 CHAPTER INTRODUCTION y
Brief Profile About About McDonald McDonald
Page 2
Introduction With its head office in Oak Brook, Illinois, fast food giant McDonald¶s has ridden the wave of global trends towards eating out and fast food since it took its modern form in the early 1950¶s. 1950¶s. Outside the USA, USA, customers of the global chain were not, not, however, only only eating hamburgers- they were ³eating and drinking America´. In societies that never had enough meat, the rapid emergence of fast food chains was linked to the availability at reasonable prices of hot beef and chicken. By the 1970s and 1980s, McDonald¶s and its golden arches logo had become a global brand. By 1996 McDonald¶s operated in 100 countries and was finally earning more revenue than McDonald¶s International than McDonald¶s America. In deed the Big Mac had become so globally recognizable that it was adopted as a measure of purchasing power across different markets. Mc Donald¶s has packaged itself as a multi-local company, which has a high level of local ownership through a network of franchise outlets. The products offered are tailored to meet the needs of the local market, for example, beer is sold at McDonald¶s in the Czech Republic and different chicken sandwich are sold in England as compared to Germany. Sourcing of products is also global in some cases, sesame seeds come from Mexico but others are local.
Despite its global dominance McDonalds began to see a slowing of its growth in the late 1990s. By 1996, it reported a decline in sales in the USA. In part McDonald¶s become a victim of its own success in that instead of generating new customers it just spread its existing customer over more stor stores es so that they did not increase their market shares.
In
response to the lost of it market shares and decline in sales McDonalds lunched a fierce marketing strategy that included extensive promotion (³I¶M Loving¶ It´ campaign), the introduction of new healthier options and expansion into new markets such as Hong Kong, Singapore, the Philippines and Malaysia. Recently, McDonald¶s fortunes has changed yet again and in the last quarter of 2008 they announced an increase in sales and profit in the UK which they attribute in part to the credit crunch as people are now looking for cheaper eating out options . In January 2009, announced that it will be opening 1000 new stores across the UK in order to meet market demand for the brand. (Business: BBC, 2009). Page 3
Business Case for a healthier Menu
In recent years there have been numerous campaign and TV programs feature McDonalds as an unhealthy fast food option. The movie, Supersize Me, altered the public to the damagers of eating McDonalds and explained exactly how unhealthy the fast food is. Research has shown that a Big Meal contains approximately 2,400 calories, which equals the recommended calorie intake for a man and excess the recommended intake for a woman. woman. McDonalds on a regular basis. In fact, his research shows that on average children who ate junk food, such as McDonalds, where often lethargic and unable to concentrate and has poor academic performance as a result. Such programs have led consumers to think about what they eat and a nd they are seeking healthy options that are ar e affordable. New EU regulation regarding salt and fat content and the removal of the use of certain oils and fats from fast food, has reinforced the need for McDonalds to offer its customers healthier options. Additionally, the UK government, in its drive to reduce obesity and encourage Britons to be healthier has used companies such as McDonalds as examples of foods that should be avoid. In 2009, the UK government, in an attempt to regulate the fast food industry, has set out guidelines for including calorie and fat contents on the package of meals so that consumer can make an infor med choice. McDonalds has also seen a decline in its sales due to socio-cultural factors such as lifestyle changes. Growing health consciousness together with social and government pressure to eat healthy and reduce the levels of obesity in countries like the UK and USA has adversely affect the sales of McDonalds in these markets. Few years ago people start to change their eating habit, and start eating healthy and vegetarian food. As a result McDonalds saw a decline in sales in UK, Germany and Japan. McDonald¶s, since some of them were offering healthy and affordable meals. For example example , they has phased phased out the use of trans fats fats and now use a new cooking oil designed to make the food healthier without losing its taste. In light of the changing circumstance, McDonalds needs to focus on introducing a healthier menu by reducing the fat content of its existing meals and adding healthier options such as salad, low fat sandwiches and grilling rather than frying it nuggets, chicken and fish burgers.
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2
CHAPTER Literature Literature review
y
Literature review ¼ work done already by other peop eople
Page 5
New product launch/development is a company's future. Company¶s profit and growth suffers without aggressive development launching new products in the market All companies need a full research about their customers. However, asking your customers to take the role of R&D personnel to find out what they want will not always lead to success. The key to successful market research for new product development comes from an understanding of what customer¶s value and not simply from asking them to submit their own solutions. Competitive Advantage
Jones and George suggest that competitive advantage can be created by one or more of the four factors: - (Jones & George, 2007) y
Efficiency: fficiency: this refers to the overall efficiency of the organisation by comparing total
income against total costs. They further stated that the organisation must consider labor costs, the long term benefits that may result from introducing new technology; possible increase in income and reduction in cost by improving quality and long-term benefits such as employee training. McDonalds have been able to improve efficiency by providing high quality choices that offer customers a variety of choices to meet a balance as well as a s specialist dietary need. For example, McDonalds offer salads, fruits and fruit juice among its healthy option range to meet customer needs. Also they are providing transparency on their products by make customers aware of the nutritional content of all it products. In addition, McDonalds is investing in its workforce through numerous training programs to enable ena ble employees employees to better serve their t heir customers.. customers.. y
Qualityuality-this refers to the quality of output in terms of does the product meet the
customer requirements. This aspect emphasis quality of design, conformance to quality and reliability. relia bility. McDonalds has continued to product high quality products that meet customer needs. y
Innovation:
this refers to innovation of product, production or service provision.
McDonalds has continued to offer completely new ranges of products as well as improving or varying existing ones. For example, McDonalds has focus on reducing the Trans fat and salt content of its products without changing taste and have been successful in their use of new healthier cooking oils. y
Customer responsiveness: responsiveness: this refers to the organisation establishing the needs and
wants of the customers, developing products that satisfy those needs and wants, Page 6
measure the products in terms of value, quality and customer satisfaction and exchange of transactions between the organisation and its customers. McDonalds has mainly focused on this strategy in order to reposition itself and has done so in the following ways:o
McDonald¶s have carried out extensive market research to establish what products their customers want and has revised its menu to meet customer demands. For example, McDonald¶s experimented with a range of vegetarian meals and where able to provide a vegetarian menu within 18 months. Also providing lamb burgers in India in responsive to their religious needs
o
A change in lifestyle for instance healthier eating habits has seen the biggest change in McDonalds. McDonalds now offer health options such as salads, grilled chicken, flatbreads, breakfast porridges fruits and fruit juices. They even offer concern parents the opportunity to replace fries with carrot stick. The firm also dropped its supersize portions.
o
McDonalds also launched a campaign emphasizing the firm¶s fresh and healthier menu with a slogan ³McDonald¶s but not as you know it´ splashed across close up pictures of fruit and salad. (Crane & Matten, 2007)
o
Finally, McDonalds¶ launched an exercise imitative aimed at young people. The µwhat I eat and what I do¶ campaign intends to show that there are two sides to a healthy lifestyle- diet and exercise. (Crane & Matten, Matte n, 2007) 2007)
Michael Porter (1998) argues that there are five forces that affect competition. He states that ³the five-force framework provides the structure for analyzing effect, while activities and the value chain provide the structure for examining the competitive advantage effect.´
Porter¶s five forces are useful, because it helps to understand both the strength of your current competitive position, and the strength of a position you're looking to move into. 1) Bargaining power of suppliers: in this case it is for suppliers to drive up prices. It is
driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control. Not to be under suppliers control McDonalds are producing their own products for example potato and might think of sourcing different suppliers because of the increasing prices of food and petrol.
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2)
Bargaining power of customers: in this case prices are driven by the number of
buyers, the importance of each individual buyer to McDonalds. Due to the credit crunch buyers are choosing McDonalds as an eating out option since it will cost them more switching from McDonald¶s products to those of someone else. McDonalds is attracting buyers through quantity, pricing and promotions. 3) Threat from substitute products: this is affected by the ability of your customers to
find a different way of doing what McDonalds does ± it¶s true that McDonalds prices are affordable but there is a large number of competitors for example ready meals, sandwiches , Burger king this means they are not supplying a unique product so buyers have the choice to choose other places, and due to the credit crunch people may substitute by eating at home and not paying extra money on their meal which might weakens McDonalds power. 4) Threat of New Entry: Power is also affected by the ability of others to enter
McDonald¶s market; it will cost them time and money to compete effectively. Although fast food industry is growing and showing an increase in sales at the mean time because of their affordable prices with the credit crunch, it makes it attractive to new business, but McDonalds have a strong and durable barrier to entry by dominating the market with established products and brand equity, so they can make it unattractive to new comers and preserve a favorable position and take fair advantage of it.
5) Industry for rivalry among existing competitors: the number and capability of
McDonalds competitors are very important± for exa mple Burger King and KFC, and they offer equally attractive products and services, If buyers don¶t get a good deal from McDonalds, they¶ll go elsewhere so they need to be continually innovative new products at regular intervals to attract and retain customers, focus on below the line promotion strategies for example buy one get one free. New Product Development
According to Johnson and Scholes, strategy development is a dynamic process which should be carried out on a regular basis, in order that strategies and plans can be adjusted can be adapted to changes within the organization itself and within the wider business environment. (Johnson & Scholes, 2002). Page 8
Strategy development is important in that is will help McDonalds to identify their:t heir:y
Strengths and weaknesses as well as the opportunities and threats facing the organizations. These give McDonald¶s an idea of where potential opportunities for expansion existing as well as it the company have the necessary resources in place to meet the changing organizations needs
y
Organizational capabilities- McDonalds will be able to address issues as the availability of resources needed for a ny new product development.
y
Environmental forces- by conducting a PESTLE analysis McDonalds will be able to identify the environmental forces influencing the company and they can therefore develop and implement strategies to meet these t hese needs.
Lancaster and Massingham (1988) identified the stages of New Product Development as follows: y
Idea generation- develop new idea for product through customer survey and
brainstorming sessions y
Screening
new ideas- this stage allows further analysis of the ideas addressing areas
such as target market, size of growth forecasts, competitive pressure and feasibility of developing the product. y
Business analysis - concerns the financial viability of the product. Forecasting
techniques are used to determine the selling prices as well profitability and breakeven point based competition and customer feedback. y
Product development ± this stage is concerned with the actual development of the
product and includes prototype prot otype development. y
Test Marketing- involves testing the product using focus groups. Any necessary
changes are made at this stage. y
Commercialization- this is the final stage of the development cycle. At this stage the
product is launched, the full marketing mix is engaged e.g. promotion and distribution
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3
CHAPTER Aims Aims Of The Study
ustification Of The Ai ms y Justific
Aim of the study: Fast Food Leader Page 10
McDonald Company has an intention to provide the best service in the fast food restaurant because service is one of the tools to incompetent the rivals and there is nothing which is comparable with outstanding service.
Justification of Aim: 24 Hours Takeaway McDonald company offering 24 hours takeaway offer at their all outlets especially in united kingdom and offer tremendous deals in day, at night and mid night which will attract the customer and buck the customer in all over the world and McDonald market share is rapidly increasing and sooner sooner it will be a number 1 fast food provider. Additionally the all sources of ordering are open 24 hours telephone, email, and directly order to the outlets at any time.
McDonald fast food restaurant has wide variety of foods in their all outlets and their style of outlets is amazing separate area for kids, adults and family and quality of food is same in all over the world these are the key area of the success of any business which are all in McDonald. McDonald outlets are very clean and staff are very helpful and without wasting the time they pass the order quickly around in five to ten minutes order is on the table.
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4 CHAPTER METHODOLOGY y
Qualitative & Quantitative
y
Researc esearch design
sourc sources of data.
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METHODOLOGY This research will be conducted using both primary and secondary data. Primary Data collection Primary Research: ³It is information that does not exist until you carry out your own
investigation´. The mixed methods approach will be used combining primary and secondary data. ³One of the benefits of this is that it can overcome one of the main drawbacks of secondary data, which is that it is often not of direct relevance to your research objective. By using appropriate primary data to µplug the gaps¶ you should be able to obtain the complete picture. This might be the case where you are researching an issue within an organisation´ Advantages of primary data y
Allows the researcher to carry out research on a specific topic
y
Greater control over the type of data collected and the sample size
y
Efficient way of spending time as the t he data being research is topic specific
Disadvantages
y
Time consuming as questionnaires, interview and surveys have to designed, samples have to chosen, target audience need to be identified. Collection and analysis of data can take a very long time
y
Costly- this include costs such as postage, printing material, and cost of time to conduct the research.
y
Research Resear ch bias- the researcher researc her can impose impose his or or her view on the research res earch subjects
Questionnaires
These are seen as a logical and easy easy way of collecting information from people. The research will design a series of questions related to the research topic and using a survey hand out the questionnaires questionnaires to the potential subjects.
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T ypes of questionnaires q uestionnaires
C losed losed
y
questionnairesquestionnaires- this type of questionnaire gives the subject a list of possible
answers to the questions and which they can make their choice. Close questionnaires are often bias as they have predetermined answers and often reflect the researcher¶s view point. However, close questionnaires are easy to interpret as data can be easily quantified as a percentage. O pen questionnaires-
y
this is where the answers are not provide and the subjects need
to offer their opinion. This type of questionnaire provides more information but can be difficult to interpret and may lead to inaccurate and incomplete assumptions by the researcher. ixed-questionnaires M ixed-questionnaires-
y
this type of questionnaire allows for the use of both closed
and open question therefore providing the researcher with a more rounded view of the subjects opinions . Justification for using questionnaires y
Inexpensive to use
y
Can be used in either small or large surveys.
y
Close questionnaires are easily quantifiable
y
Provide large amounts of data
Secondary
data
Is the data have already been collected by elsewhere for someone else for some other purpose, but which can be used or adapted for the survey being conducted´ Information will be collected from websites, journal, newspapers etc in relation to McDonalds. Advantages of secondary data y
Ease to access and less time consuming than primary research as the data already exist.
y
Low cost- secondary data collection is much cheaper that primary pri mary research research collection
y
May help to clarify the research question for example by conducting a literature review this might help the research obtain a clearer understand of the topic to be researched. Page 14
Disadvantages y
of secondary data
Inconsistency and inaccuracy of data may hinder the research from getting a clear understand understand of the research topic and may lead lea d to incorrect assumptions.
y
Information is not specific to the researchers need and means that the research may need to spend a large a mount of time sorting through irrelevant information.
y
Secondary data may not be timely, t imely, that is information could be out-of-date. out-of-date.
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5
CHAPTER Results Results
Page 16
R ESULTS Analysis and Finding In March 2003, McDonald¶s added several healthier items to its menu. These items include a line of premium salads for adults, and 1% fat milk and fresh apple slices as Happy Meal options for children. McDonald¶s has also eliminated its supersize drink and French fries options. As of November 1, 2004, McDonald¶s had sold 200 million salads, and anticipated selling 35 million pounds of apples during 2004. Sales of 1% fat milk sold in Milk Jugs bottles have more than doubled since their introduction in 2003. McDonald¶s efforts to increase healthy menu options have also increased sales. The company reports new, healthier products have been profitable for their bottom line. The company reported a fall in profits - to $471m (£290m) in the three months to end-June, from $498m a year earlier - but was encouraged by an 11% jump in sales. It attributed falling profits to the high costs of restructuring its business, including the closure of hundreds of restaurants a nd investment in new products. These new products, which are deliberately slanted towards healthy eating, have sold well, the company insisted. McDonald's financial performance in recent years has suffered from the perceived dreariness of its traditional menu. And investors have become afraid of lawsuits from obese customers, some of whom blame the chain for their expanding waistlines. '
Only the beginning
'
"I'm pleased with the strong customer response to our innovative new products," said chairman and chief executive Jim Cantalupo. Cantalupo. ³But I'm far from satisfied. This upturn reflects only the beginning of our worldwide revitalisation plan." Page 17
Part of this plan is a drive to invest in new products, and to market them aggressively. a ggressively. Mr Cantalupo heaped praise on launches such as the "McGriddle" breakfast concept, and the roll-out of Wi-Fi internet access in some US restaurants, both of which, he said, chime with changing lifestyles. The other part of the recovery plan involves far tighter control of spending. The pace of restaurant openings is being reined in: last year, the firm opened 1,000 more outlets than it closed; in 2003, the net increase will be just 360. (www.mcdonalds.com, 2009) Research indicated that 35% of people who currently do not purchase McDonalds would do so if they had healthier healthi er options as they were cheaper than many other restaurants. restaura nts. Additional, Additional, 67% of existing Customers indicated that they were concerned about their health and would purchase healthier options if they were available and attractive. Customers still want to enjoy the eating out experience during the economic recession and see McDonalds as a viable via ble option. However, concern over the high fat and calorie content of McDonald¶s food have deterred individual who are health conscious and want to eat health. Introducing more healthy options such as a variety of salads and healthy kid¶s meal can see a potential increase in McDonald¶s sales. Introducing healthier options will allow McDonalds to increase their customer base and attract new customers so that they can expand through product development.
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6
CHAPTER Dis Disccussions onclusions y conc y Recommendations
CONCL
US
ION Page 19
McDonalds will review its sales at the end of 6months to see if there have been increases in the number of healthy foods sold as well as overall sales. Volume of new menu sales will indicate that the new products have been successful and management can then decide if to continue with the products.
Customer feedback: McDonalds will conduct a post-implementation questionnaire and focus group to determine what customers think about the healthier menu. This will give the company and indicate as to whether people like the healthier option. Also it will tell them if they have attracted new customers and have therefore grown as a result of the new products. The development and introduction of a new menu will require financial investments. McDonalds will either have to source money from existing funds or from external investors.
This following marketing mix will be used for McDonalds new Healthier Menu. y
Product: McDonalds, will be offering a wider variety of salads and fruit options. This
will be offered on two scales Salads for adult and fruits and fruit juice in kid¶s meals instead of chips and sodas. y
t hese products throughout throughout it franchised franc hised stores. Distribution : McDonald¶s will sell these
y
quality of unique of of the products products McDonalds will use use a Price: due to the unique quality premium pricing strategy with salads and healthy sandwiches. However, they will maintain their value pricing strategy with regards to the kids meals as fruits and fruits will be replaces existing foods in the meal package and a nd are not additionally options.
y
Promotion : McDonalds will market its Healthier menu using a range of techniques
for including advertising, publicity, partnership and sale promotion. TV, Newspaper and posters will be used to promote the product. They will also attempt to reform its strategic alliance with Disney to help promote the new kids meal by offering Disney character as part of the meal package.
Recommendations
Page 20
y
Market penetration strategies
This is the most frequently used strategy and focuses on increase market shares. This can be done by attracting new customers or increasing sales to existing customers. For example, the introduction of the adult burger and redecorating the restaurant to make it more attractive to a dults. y
Market development strategies
This entails marketing existing existing products to new customer groups and regions. This strategy requires the full implementation of the t he marketing and focuses on finding new markets, distribution channel and promotion strategies as well as products specialisation. For example, open in new market example Singapore and Hong Kong and adapting products to suit culture needs. y
Diversification Strategies.
This concerns the development of new products for new markets. This is the most risky options, especially when the entry strategy is not based on core competences of the business. McDonalds has used vertical integration by purchasing the own potato farm as well well as the factory for for production of of the own chips.
rather than mass
production. y
Raw Material and supplier :
The new menu will require different raw material than those already used so McDonalds will need to source more vegetables, salads and lower fat oils. They may need to look for new supplier or work together with existing supplier to ensure that the product required are available. a vailable. y
Product Development
McDonalds innovate its products offer some deals that will attract more customers and make new product for boosting their sales and enhancing the level of profit and use the latest technology.
R EFER ENCES Page 21
1.
^
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P roduct roduct
Design and Development ,
3rd Edition, McGraw-Hill, New York, 2004 2.
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edition 3.
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Kim, J. and Wilemon, D. (2002), Sources and assessment of complexity in NPD
projects. R&D Management, 33 (1), pp. 16-30. 4.
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Koen et al. (2001), Providing clarity and a common language to the µfuzzy front
end¶. Research Technology Management, 44 (2), pp.46-55 5.
^
Smith, Preston G. and Reinertsen, Donald G. (1998) Developing P roducts roducts in Half
the Time, 2nd Edition, John Wiley and Sons, New York, 1998.
6.
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Process: A comprehensive Review of Selected Sel ected empirical NPD and explorative explorative FFE Studies, Brusell, Juni 2003, p.14. 7.
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time, Van Nostrand Reinhold, New York 8.
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Industrial Marketing Management,Vol.17 (1988), (1988), No 2,pp. 237-248 9.
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early Phases of the Innovation Process, 12th Int. Prod. Development Conf.,Copenhagen,2005 12.
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Breakthrough Products. In: PDMA Handbook of New Product Development, 2nd Ed., N.Y., 2004, pp.81-91 14. http://en.wikipedia.org/wiki/New_p http://en.wikipedia.org/wiki/New_product_developm roduct_development ent [Accessed 30 November November 2009] 15. http://www.answers.com http://www.answers.com/topic/new-product-development /topic/new-product-development [Accessed 1 January 2010]
Survey
on Fast-food Page 22
This
information will be kept confidential and would not be misused anyway. We would
be very t hankful for your participation.
Q1 Gender:
Name: Age:
(16-20) (20-24)
(24-28) (28 above)
Male
Female
E-mail:
Q2Do you live in London? Yes
No
Q3 How often you eat fast food?
Every day
Weekend¶s
Once in a month
Never
Q4 what would you like to see a fast food restaurant offer?
________________________________________ ______________________ _____________________________________ ___________________________________ ________________
Q5 What other than food do you purchase when buying fast food?
________________________________________ ______________________ _______________________ _____ _____________________________ _____________________________ Q6 On Average how much would you expect to pay for a fast food meal? Page 23
1. £1
4. £4
2. £2
5. £5+
3. £3 Q7 Would you be prepared to pay more for fair trade food?
Yes
No
Q8 Why do you buy fast food?
Quicker
Hot
Healthy
No Option
Girl/Boy Friend Frie nd likes
Q9 What time would you normally buy fast food?
1. Before 12 pm 2. Between 12-3 pm 3. Between 3-6 pm 4. Between 6-9 pm 5. 10pm or later
Q10 Which fast food restaurant would you rather work for?
McDonalds
KFC
Pizza Hut
Other please specify ____________________
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