The Ansoff’s matrix enables businesses to look at their products and markets and to think of appropriate strategies for their business. It offers strategic choices facing managers in order to achieve their objectives. McDonald’s Corp. , a leading global fast food chain, which offers sandwiches and sides (cookies/chips) and drinks (juice, water, soda) like its competitor Subway, is the company to be analyzed with the matrix in this paper. In each of the four situations there are strategic choices presented below as suggestions on which McDonald’s can take action.
Existing Product/Existing Market. In this situation McDonald’s can choose to consolidate its current market position by focusing attention and initiating marketing activities in the area where it has competitive advantage, which is its powerful formula of increasing efficiency and quality. Revenues could be increased by promoting the product or the brand. McDonald’s makes substantial investments in advertising and promotions to improve its brand image, and it is a strong recommendation that this be continued, judging from the revenue figures that are always on top of the industry.
This can benefit the corporation in that strong brand keeps loyal customers coming back to the restaurants of the company and provides it maintenance of leadership in penetrated markets. New Product/Existing Market. The emphasis on quality in terms of very detailed operations manuals and tight cultural rules made it very difficult for McDonald’s to develop flexibility in meeting customers’ changing needs.
This quality trap forced McDonald’s to stick narrowly to ‘hamburgers’ until growing complaints from McDonald’s franchisees about the limited product range forced it to develop new menu items such as the Egg McMuffin, Chicken McNuggets, the McBarbecue, and the salad bar. As can be derived from this experience, McDonald’s would do well to generate menus more apposite to local tastes. In this situation, the company has to invest in introducing new products to its existing markets, which will be well-suited for the taste of the local market, for instance, rice burger in Asia where rice is a diet staple. Existing Product/New Market.
Here the company has to market its existing product in a new market. This is the strategy of market development. Market development can be achieved through identifying potential user groups in the current market areas. McDonald’s, in this instance, has adopted a market development strategy through franchising in many parts of the world. The McDonald’s franchise is a classical contract of the most elaborate kind. Not only does it impose extensive requirements on the franchisee, it reads in the McDonald’s manual which defines how much beef is to be found in a bun and for how long french fries must be french fried.
The result is an extraordinary uniformity in the McDonald’s product around the world and from year to year. McDonald’s branches can be virtually seen in all parts of the world, save for a very few countries, which means that new market opportunities in these unexplored territories are not so many. Thus, it would be best if McDonald’s focus on seeking additional distribution channels in the present geographical locations. New Product/New Market. In this situation the company has to pursue diversification strategy.
Through a limited menu and a high set of standard operating procedures, it will be able to provide outstanding quality and superior price performance across its whole organization around the globe. The saturation of its existing market, fierce competition from chains offering wider variety with competitive prices like Subway, and changing customer tastes requires McDonald’s to increase its product offerings to more than just burgers, sandwiches and drinks and should have menus emphasizing chicken, salads, and other fresh foods.
Purchase of other restaurant or smaller fast-food chains would also help, not only in increasing their market base, but also the range of products that they have to offer. They can even expand to more daring ventures, like purchase of a toy manufacturer for its exclusive toy giveaways included in McDonald’s promotional products.