Mcdonald’s Market Structure
Introduction By the late- 1990s fast-food chain McDonalds had enjoyed 40 years of exceptional performance. McDonald’s brand mission is to be a customers’ favorite place and way to eat. McDonald’s worldwide operations are aligned around a global strategy called the Plan to Win, which center on an exceptional customer experience – People, Products, Place, Price and Promotion.
They are committed to continuously improving theirs operations and enhancing customers’ experience. McDonalds place the customer experience at the core of all they do. McDonald’s customers are the reason for their existence.
So, McDonalds’s demonstrate appreciation by providing them with high quality food and superior service in a clean, welcoming environment, at a great value. Their goal is quality, service, cleanliness and value for each and every customer, each and every time. McDonalds are committed to people. They provide opportunity, nurture talent, develop leaders and reward achievement. They believe that a team of well-trained individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to continued success.
McDonald’s business model, depicted by three-legged stool of owner or operators, suppliers, and company employees, is foundation, and balancing the interests of all three groups is a key. McDonalds operate their business ethically. Sound ethics is good business. At McDonald’s, they hold their selves and conduct the business to high standards of fairness, honesty, and integrity. McDonalds are individually accountable and collectively responsible. McDonalds give back to our communities.
They take seriously the responsibilities that come with being a leader. McDonald’s help their customers build better communities, support Ronald McDonald House Charities, and leverage their size, scope and resources to help make the world a better place. McDonalds grow their business profitably. McDonald’s is a publicly traded company. As such, they work to provide sustained profitable growth for their shareholders. This requires a continuous focus on McDonald’s customers and the health of our system. McDonalds strive continually to improve.
They are a learning organization that aims to anticipate and respond to changing customer, employee and system needs through constant evolution and innovation. Task 1 History of McDonalds The McDonald’s restaurant concept was introduced in San Bernardino, California by Dick and Mac McDonald of Manchester, New Hampshire. It was modified and expanded by their business partner, Ray Kroc, of Oak Park, Illinois, who later bought out the business interests of the McDonald brothers in the concept and went on to found McDonald’s Corporation.
In October 1948, after the McDonald brothers realized that most of their profits came from selling hamburgers, they closed down their successful carhop drive-in to establish a streamlined system with a simple menu of just hamburgers, cheeseburgers, french fries, shakes, soft drinks, and apple pie. The carhops were eliminated to make McDonald’s a self-serve operation. Mac and Dick McDonald had taken great care in setting up their kitchen like an assembly line to ensure maximum efficiency. The restaurant’s name was again changed, this time to simply “McDonald’s,” and reopened its doors on December 12, 1948.
In 1960, the McDonald’s advertising campaign “Look for the Golden Arches” gave sales a big boost. Kroc believed that advertising was an investment that would in the end come back many times over and advertising has always played a key role in the development of the McDonald’s Corporation. Indeed, McDonald’s ads have been some of the most identifiable over the years. In 1962, McDonald’s introduced its now world-famous Golden Arches logo. A year later, the company sold its billionth hamburger and introduced Ronald McDonald, a red-haired clown designed to appeal to children.
Arise of Burger King In the late 1970s, competition from other hamburger chains such as Burger King began to intensify. Experts believed that the fast-food industry had become as big as it ever would, so the companies began to battle fiercely for market share. A period of aggressive advertising campaigns and price slashing in the early 1980s became known as the “burger wars. ” Burger King suggested to customers: “have it your way” and had attracted many customer and affected McDonald’s sales and market share.
The predecessor to what is now the international fast food restaurant chain Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King. Inspired by the McDonald brothers’ original store location in San Bernardino, California, the founders and owners, Keith J. Kramer and his wife’s uncle Matthew Burns, began searching for a concept to open a new restaurant around. After purchasing the rights to two pieces of equipment called “Insta” machines, the two opened their first stores around a cooking device known as the Insta-Broiler.
The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device. After the original company began to falter in 1959, it was purchased by its Miami, Florida, franchisees James McLamore and David R. Edgerton. The two initiated a corporate restructuring of the chain; the first step was to rename the company Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967. |
McDonalds| Burger King| The first original McDonalds opened in 1948, a restaurant created by Mac & Dick McDonalds in St. Bernandino| Burger King was founded in 1953 in Jacksonville, Florida, as Insta-Burger King by , Keith J. Kramer and Matthew Burns| Establish a streamlined system with a simple menu of just hamburgers, cheeseburgers, french fries, shakes, soft drinks, and apple pie. | Equipment called “Insta” machines, the two opened their first stores around a cooking device known as the Insta-Broiler| In 1962, McDonald’s introduced its now world-famous Golden Arches logo. Expanding to over 250 locations in the United States| Delight each customer with unmatched quality, service, cleanliness and value every time| Dedicated to supporting and investing in our people – employees, franchisees, suppliers and restaurant guests | Place the customer experience at the core| “Customers always right” | Comparison of purposes of McDonalds & Burger King Task 2 McDonalds Internal Environment The most important factor comes from the internal company or precisely the management itself.
Managers must work closely with other department to come out with a strong marketing plan to boost McDonalds sales and efficiency of the operation. For example, the company management has a clear goals regarding importance of retaining customers by offering satisfaction to all its customers. Supplier Supplier is an important factor in the relation with McDonalds and its consumer. To have a good, continuous and no disruption supply, McDonalds must build a strong relationship with the suppliers. McDonalds must also consider that in the business market environment, it is competing with other fast food operators.
Any strike, supply shortages and increasing of prices in market must be monitored closely by McDonalds to ensure it will not affect its bottom line performance. Simple economic rules, the more the input cost, the more the company’s overall cost and pricing will be and thus it affect the volume of sales to customers. However, pricing is not as important as close relationship and integration that McDonalds must achieve with vendors to ensure sustainability of supplier. Distributers Marketing intermediaries are company that helps other company to promote, sell and distribute the goods to final buyers.
McDonalds is a franchise-based business, which headquartered in United States and with franchisee around the world. Franchise system is part of marketing intermediaries to actual corporate McDonalds in United States, which helps to popularize, distribute and expand McDonald’s business concept around the globe. However, in the midst to expand the marketing of its brand around the world it must choose a strong creditable franchisee to ensure their business performance is in line with standards set by corporate. McDonalds also need logistic or physical distribution firm especially to help in distribution nd transportation of goods and materials around the country to its restaurant. Customers Customers whether it is business or household buyer are important factor in microenvironment where McDonalds operates. For McDonalds it is more on household consumers, which is changing fast in the market trend. McDonalds must have a clear market segmentation to differentiate the consumers group and has a special marketing attention to each of them such as kiddies, adult, working professional and teenagers with different taste of its food.
Every consumer’s trend will affect the company bottom-line performance and if McDonalds cannot change or adapt to the changes of consumer behavior it might risk losing the market. Competitors Fast food industry has a wide range of competitors from small to big size in term of financial capabilities. For example in Malaysia, we have Kenny Roger’s, KFC, Pizza Hut, A&W and Marry Brown and to smaller scale, we have Ramli burger stall around the street corner serving the niche market. These are competitors of McDonalds, which McDonalds must compete by offering a differentiation in term of value and satisfaction to its customers.
Any values and benefits that McDonalds can utilize to differentiate it apart from all can be a strong marketing point to reach and conquer the market. Marketer must constantly understand ever-changing customer’s needs, needs by special group and develop strategies to strengthen the company positioning in domestic market. Employers The good things for this company is it provide a good training to all staff and especially to those involve in management level. Even in Malaysia, many management staff sent to Chicago to training on managing the operation of McDonald’s outlet.
Hamburger University in Illinois Chicago has graduated more than 70,000 managers who leads and manage the operation of McDonald’s outlet in the standard push upon them. Culture of training also prevails at McDonalds with over 32 hours of training for all new employees to ensure they understand the requirement and aspiration of McDonalds for continuation of best fast food restaurant service provider to the customers. McDonalds keen to train its own people and mission to be the best talent developer of people with the most committed individuals to Quality Service, Cleanliness and Value (QSC&V) in the world.
Task 3 McDonald’s Pestle Analysis McDonald’s is comprised of more than 30,000 local restaurants and serves 52 million people in more than 100 countries each day. The company is the largest food retailer in the world and is part of the current way of life. In order to remain competitive and an iconic, McDonald’s has developed programs and strategies for organizational behavior in its market environment. As a result, McDonald’s presented an excellent opportunity to observe external macro environment which called Pestle. Pestle stands for political, economic, social, technological, environmental and legal factors.
POLITICAL FACTOR The international operations of McDonald’s are highly influenced by the individual country’s policies enforced by each government. For instance, there are certain groups in Malaysia, Europe and the United States that take actions pertaining to the health implications of eating fast food. They have indicated that harmful elements like cholesterol and adverse effects like obesity are attributable to consuming fast food products. On the other hand, the company is controlled by the individual policies and regulations of operations.
Specific markets focus on different areas of concern such as that of health, worker protection, and environment. All these elements are seen in the government control of the licensing of the restaurants in the respective states of the country. For instance, there is an impending legal dispute in the McDonald’s franchise in Malaysia where certain infringement of rights and violation of religious laws pertaining to the contents of the food. There are also other studies those points to the infringement of McDonald’s Stores with reference to the existing employment laws in the target market.
Like any business venture, these McDonald’s stores have to contend with the issues of employment procedures as well as their tax obligations so as to succeed in the foreign market like Malaysia. Since it is apparent that the company is expanding continuously, it is wise to deal directly with the proper authorities in the respective markets that they intend to operate in. This way, the company can adopt a good way of establishing good relationship with the government. It is advisable that the company rests on the good graces of the government on which they will be penetrating.
To do this, all they have to do is accomplish all the prescribed acts and satisfy all the prerequisites for doing business. The company must also be acquainted with the law in order to know what their responsibilities and their possible liabilities. Also McDonalds should protect its workers by ensuring all the hiring, compensation, training or repatriation in accordance to the labour laws. ECONOMICAL FACTOR Organizations in the fast food industry are not excused from any disputes and troubles. Specifically, they do have their individual concerns involving economic factors.
Branches and franchises of McDonald’s have the tendency to experience hardship in instances where the economies of the respective countries are hit by inflation and changes in the exchange rates. The customers consequently are faced with a stalemate of going over their individual budgets whether or not they should use up more on these foreign fast food chains like McDonalds. Hence, these chains may have to put up with the issues of the effects of the economic environment. Particularly, their problem depends on the response of the consumers on these fundamentals and how it could influence their general sales.
In regarding the operations of the company, McDonald’s tend to import much of their raw materials into a specific country’s territories if there is a dearth of supply. Exchange rate fluctuations will also play a significant role in the operations of the company. The company’s international supply as well as the existing exchange rates is merely a part of the overall components needed to guarantee success for the foreign operations of McDonald’s. Moreover, it is imperative that the company be cognizant of the existing tax requirements needed by the individual governments on which they operate.
This basically ensures the smooth operations of the McDonald’s franchises. In the same regard, the company will also have to consider the economic standing of the country on which they operate on. The rate at which the economy of that particular country grows determines the purchasing power of the consumers in that country. Hence, if a franchise operates in a particularly economically weak country, their products shall cost higher than the other existing products in the market, then these franchises must take on certain adjustments to maintain the economies of scale.
Ideally before penetrating the market, the company must carry out a well conducted market research, especially in the movements in the economic environment which McDonalds had done before entering the global market due to which the company has been able to bear the frequency of the shifts in the inflation rate as well as the fluctuations in the exchange rates which affects the operations of any company. SOCIO-CULTURAL FACTORS Articles on the international strategies of McDonald’s seem to function on several fields to guarantee lucrative returns for the organization.
To illustrate, the organization improves on establishing a positive mind-set from their core consumers. McDonald’s indulge a particular variety of consumers with definite types of personalities. It has also been noted that the company have given the markets such as the United Kingdom and Malaysia, an option with regards to their dining needs. McDonald’s has launched a sensibly valued set of food that tenders a reliable level of quality for the respective market where it operates.
Additionally, those who are aged just below the bracket of thirty-five are said to be the most frequent consumers of McDonald’s franchises. The multifaceted character of business nowadays is reflected in the harsh significance of the information on the subject of the existing market. This procedure is essentially identified in the field as market research. Information with regards to the appeal and potential fields of the market would double as obstructions to the success of the company if this area of the operations is neglected.
In the case of McDonald’s they establish a good system in determining the needs of the market. The company uses concepts of consumer behavior product personality and purchasing decisions to its advantage which is clearly evident in case of Malaysia as the company was quick in removing their Pork products from Malaysia’s menu. It is said to have a major influence on the understanding of the prospective performance of the organization in a particular market. McDonalds should obtain the relevant information from the target market in addition to the individual customers of the organization.
It is imperative that before a franchise is granted to a particular market, a well drafted and comprehensive market research should be conducted initially so as to establish the acts that would conform to good customs, public policies, and morals of the said Country’s society. Similarly, the company should find out the shifts in areas like the consumer behavior and purchasing patterns of the market. Fundamentally, this is the key condition for executing a suitable customer relationship management system.
Also the company should constantly survey and learn about local culture to better understand and design the best product for them. TECHNOLOGICAL FACTORS McDonald’s generates a demand for its own products. The company’s key tool for marketing is by means of Online Facebook and Google ads, Collaboration with these websites to promote sales in India, television advertisements, banners and hoardings. There are similarly some claims that McDonald’s are inclined to interest the younger populations more. Other demonstration of such a marketing strategy is apparent in the commercials they use.
They employ animated depictions of their characters like Grimace, Ronald and Ham burglar. Other advertising operations employ popular celebrities to promote their products. The ‘like’ has become endorsers for McDonald’s worldwide “I’m loving it” campaign. Moreover, the operations of McDonald’s have significantly been infused with new technology. Elements like the inventory system and the management of the value chain of the company allows for easy payments for their suppliers and other vendors which the individual stores in respective markets deal with.
The integration of technology in the operations of McDonalds tends to add value to their products. Basically, this is manifested in the improvements on its value chain. The improvement of the inventory system as well as its supply chain allows the company to operate in an international context McDonalds use the internet to their advantage. The cost-effectiveness, interactivity and real- time effects of the communications are a good way to find suppliers. It is also a good way to correspond with the respective McDonald’s headquarters in every Country.
The company must also look into the use of IT to enhance their inventory operations. As the operations in its inbound and outbound logistics improve, the company will expect significant savings and reduction of costs in the operations. ENVIRONMENTAL FACTORS The social responsibilities of McDonald’s on the country are influential to the operations of the company. These involve accusations of environmental damage. Among the reasons why they are charged with such claims is the employ of non-biodegradable substances for their drinks glasses and Styrofoam coffers for the meals.
Several civic groups in Malaysia have made actions to make the McDonald’s franchises in Malaysia aware of the rather abundant use of Styrofoam containers and the resultant abuse of the environment. The company should find out the environmental regime that governs the operations in every market. It should also monitor the waste disposal of the company. McDonald’s should minimize the use of Styrofoam materials and plastic cups. Constant updating of the social corporate responsibility is imperative and implements “Go Green”.
This should also entail that the headquarters should take in hand, a manner of internal control of those that would infringe upon this company objective. LEGAL FACTORS There has been the recurrent bellowing in opposition to the fast food industry. This has similarly made McDonald’s apply a more careful consideration on their corporate social responsibilities. On the whole, this addressed the need of the company to form its corporate reputation to a more positive one and a more socially responsible company. The reputation of McDonald’s is apparently a huge matter.
Seen on the website of the company, it seems that they have acquired strides to take in hand the key social censures that they have been berating them in the past decades. The company has provided their customers the relevant data that they need with reference to the nutritional substances of their products. This is to attend to the arguments of obesity charged against the products of the company. In the same way, the consumers provided freedom in choosing whether or not they want to purchase their meals. This is tied up with the socio-cultural attributes of the market on which they operate.
For instance, operations in predominantly Muslim countries require their meat to conform to the Halal requirements of the law. In the same regard, those that operate in countries in the European Union should conform to the existing laws banning the use of genetically modified meat products in their food. This was prime reason which forced McDonalds to eliminate beef, pork and Mutton out of India’s product menu. Other legal concepts like tax obligations, employment standards, and quality requirements are only a few of important elements on which the company has to take into consideration.
Otherwise, smooth operations shall be hard to achieve. As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. McDonalds should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labour and employment laws and quality & environment certification (such as ISO) in which the outlet has been certified.
The legal requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous. The company should hire local counsels to deal with the legal conflicts in individual markets on which the company may encounter. This shall ensure the company that the lawyers that will handle their legal affairs are more versed with the legal regime that would ease out certain problems on their operations. Task 4 Impact of European Union’s Policies on McDonald The European Union (EU) is a unification of 27 member states united to create a political and economic community throughout Europe.
Though the idea of the EU might sound simple at the outset, the European Union has a rich history and a unique organization, both of which aid in its current success and its ability to fulfill its mission for the 21st Century. The European Union Policies have an impact on McDonald’s market environment. Economic and Financial Affairs (ECOFIN) Cooperation on economic and political matters is based on several forms of cooperation procedures. A fundamental principle when coordinating their economic policies is that Member States are responsible for their national economic policy.
As a result of the crisis, Member States have strengthened the coordination of economic policy. However, Member States continue to place strong emphasis on national sovereignty in economic matters while adhering to common rules. McDonalds Cooperation is registered under (ECOFIN) and has to seek for consultation or in co-decision with the European Council every year. Although each EU Member State is responsible for determining its own tax policy, the EU still cooperates on relevant aspects of taxation. This applies especially to policies which affect international trade and trade among the Member States.
The Member States therefore cooperate on certain aspects of taxation with cross-border effects. For instance, McDonalds have differentiated taxation rate in various country based on the country exchange rate. Employment, Social Policy, Health and Consumer Affairs (EPSCO) From the very beginning, the free movement for workers has been one of the basic rights within the European Community and this was the focal point of the first social and employment policy of the EU. The McDonald normally makes decisions in co-decision with the European Council.
This procedure applies for instance when the Council passes legislation about the working environment, conditions at work, and the free movement of workers of McDonalds. The EU has the mandate to compliment McDonald’s initiatives in the area of health for the purpose of protecting people from health threats and diseases, promoting healthy lifestyles and helping national authorities in the EU to cooperate on health issues. This is especially relevant when it comes to burgers of McDonalds which is high in cholesterol and may lead to heart disease.
Therefore, McDonalds have to modify the ingredient of the burgers. Competitiveness (COMPET) The McDonalds has to follow with industrial policy since the establishment of the EU. A milestone in the EU industrial policy is the establishment of the Single Market, which created a large home market for industry providing businesses with the opportunity to mass produce and profit from large-scale operation like McDonalds. Today, industrial policy is subject to the co-decision procedure, meaning that Competitiveness in business is legalistic. For an example, Burger King is legal competitor for McDonalds.
The European research and innovation cooperation and the close connection between research, innovation and education play a decisive role in securing future growth. Therefore, the EU gives high priority to this area and allocates considerable funds annually to finance the McDonalds research programmer. Agriculture and Fisheries (AGRI) Through the Common Agricultural Policy (CAP) the EU wants to ensure an economically viable agricultural sector that produces safe, high-quality food based on environmentally sustainable production. Moreover, the CAP contributes to ensuring good business and living conditions in rural areas.
By requiring farmers to deliver public goods in return for the financial support, the Common Agricultural Policy is to ensure that beneficiaries deliver public goods on a range of relevant aspects, such as an improved environment and climate, innovation, technology and food quality of McDonalds. EU consumers should be confident that the foods on the market are healthy, safe, of high quality and produced with respect for animal welfare. Improvements of food safety levels in the EU through the harmonization of standards will be of high importance of McDonalds.
EU countries have adopted common rules for McDonald’s hygiene and self-monitoring and common rules for authorities’ monitoring of the food industry. An EU inspectorate also monitors whether the McDonalds implement food legislation correctly. Task 5 Global Factors That Affect McDonalds Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy. Social factors
These factors are related to changes in social structures. These factors provide insights into behavior, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc. all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that McDonald’s business strategies are designed keeping in mind the social and cultural differences that vary from country to country.
Consumer religion, language, lifestyle patterns are all important information for successful business management. Legal factors These factors that influence McDonalds business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time.
From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc. Economic factors These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for McDonald to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase.
In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand McDonald will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations. Political factors This refers to the changes in government and government policies. Political factors greatly influence the operation of McDonald. This has gained significant importance off late.
For example: McDonalds is operated in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government’s policy on the economy. Technological factors These factors greatly influence McDonald’s strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the McDonalds to reduce costs and develop new products.
With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organizations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost.
Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world. Conclusion From the beginning in 1948 as a fast food restaurant in Southern California, McDonalds grew by the end of the twentieth century into the world’s largest food service organization, having served up more than 100 billion hamburgers in half a century of operation. In conclusion, McDonalds are executing all these customers’ service improvement programs to constantly portraying itself as a friendly, healthy and quality food provider to customers.
McDonalds is trying to build long-term relationship with customers to ensure the retention rate in the market where competition is tough between all the fast food restaurant operators. The purpose of this paper work is to analyze McDonald’s with its competitor; Burger King, internal microenvironment, Pestle analyze, impact of EU Policies and global factors on McDonalds. Hereby, I strongly believe that I have reached your expectation on this case study. References McDonald (2012). A short history of McDonald. Available from: http://www. articlesbase. com/a-short-histoty-of-mcdonalds03920. tml [Accessed on 20/2/13] Frank Newman (2009). Burger King: A short Story. Available from: http://www. 21e5-11e4-dsas3-00134fascesds04. html. [Accessed on 20/2/13] Edita Novana (2003). McDonald’s Cooperation Analyze. Available from: http://www. mcdonalds. com-analyze-cooperate-profile-corp. [Accessed on 22/03/12] Edward Dean (2009). European Union Policies. Available from: http://www. ec. europa. eu/policies/index-en. html. [Accessed on 26/2/13] Anita Cameron (2011). Global Issues that affect Business. Available from: http://www. enziarticales. com/? Global-Issues-That-Affect-Business. html. [Accessed on 28/2/13]