Mc donalds part 1


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Mc donalds part 1

  1. 1. Brand Dossier McDonald’s Literature Review on McDonald’s Submitted to Prof.Srinivas Govind RajanSubmitted byKalyan Kumar DasJyotishree GuptaAmit KumarLiterature Review on McDonald’s Page 1
  2. 2. Brand Dossier McDonald’sIndexSerial no Topic Page no1 Early History of the Brand & its evolution over time 32 Initial Positioning & Subsequent repositioning,if any 63 Advertising,sales promotion and segmentation strategy 10 followed by the brand4 Analysis of the product & generic competition to the brand 135 Strategy adopted over time by the brand to tackle compe- 16 tition or prime market expansion6 Distribution Strategy followed by the brand 187 Summary regarding the future direction for the brand 21Literature Review on McDonald’s Page 2
  3. 3. Brand Dossier McDonald’sMcDonald’s History & Its Evolution: In 1937 Patrick McDonald opened the “Airdrome” restaurantin California. Here he sells hamburgers at 10cent & orange juice drink was 5 cent. In 1940 his twosons “Mac” and “Dick” modified the concept of “Airdrome” & renamed it McDonald’s.In 1948 Mac & Dick introduced the “Speedee service system” which helped them to change the con-cept of fast- food restaurant. After some time Mcdonald brothers realized that most of their profitcame from selling hamburger,they closed down their successful carhop drive in to establish astreamlined system with a simple menu of hamburgers,cheeseburgers,French fries,shakes,softdrinks and apple pie. The carhops was eliminated to make McDonald’s a self-serve Operation.In 1953, Mcdonald brothers began to franchise their successful Restaurant, starting in Arizona &California. In 1954, Ray Kroc , a seller of Multimixer milkshake machines learned that the Mcdonald’sformula was ticket for success. In 1961, Mcdonald brothers gave him rights to expand their fran-chise. In 1967 Mcdonald open their first restaurant outside the America. They open one in Rich-mond,British Colombia.By 1963 they had 102 restaurant at different Location.Phenomenal growth in the 1960s and 1970s In 1960, the McDonalds advertising campaign "Look for the Golden Arches" gave sales a bigboost. Kroc believed that advertising was an investment that would in the end come back manytimes over, and advertising has always played a key role in the development of the McDonalds Cor-poration. Indeed, McDonalds ads have been some of the most identifiable over the years. In 1962,McDonalds introduced its now world-famous Golden Arches logo. A year later, the company sold itsbillionth hamburger and introduced Ronald McDonald, a red-haired clown with particular appeal tochildren. In 1961 Kroc bought out the McDonald brothers for $2.7 million, aiming at making McDon-alds the number one fast-food chain in the country.In 1965, McDonalds Corporation went public. Common shares were offered at $22.50 per share. Bythe end of the first days trading, the price had shot up to $30. A block of 100 shares purchased for$2,250 in 1965 was worth, after 12 stock splits (increasing the number of shares to 74,360), about$1.8 million by the end of 2003. In 1985, McDonalds Corporation became one of the 30 companiesthat make up the Dow Jones Industrial Average.McDonalds success in the 1960s was in large part due to the companys skillful marketing and flexi-ble response to customer demand. In 1962, the Filet-O-Fish sandwich, billed as "the fish that catchespeople," was intro- duced in McDonalds restaurants.The Big Mac hamburger debut in 1968Literature Review on McDonald’s Page 3
  4. 4. Brand Dossier McDonald’sMcDonalds spectacular growth continued in the 1970s. Americans were more on-the-go than ever,and fast service was a priority. In 1972, the company passed $1 billion in annual sales. By 1976,McDonalds had served 20 billion hamburgers, and systemwide sales exceeded $3 billion.McDonalds pioneered breakfast fast food with the introduction of the Egg McMuffin in 1972 whenmarket research indicated that a quick breakfast would be welcomed by consumers. Five years laterthe company added a full breakfast line to the menu, and by 1987 one-fourth of all breakfasts eatenout in the United States came from McDonalds restaurants.M cDonal’s Egg McMuffinKroc was a firm believer in giving "something back into the community where you do business." In1974 McDonalds acted upon that philosophy in an original way by opening the first Ronald McDon-ald House, in Philadelphia, to provide a "home away from home" for the families of children innearby hospitals. Twelve years after this first house opened, 100 similar Ronald McDonald Houseswere in operation across the United States.In 1975, McDonalds opened its first drive-thru window in Sierra Vista, Arizona. This service gaveAmericans a fast, convenient way to procure a quick meal. The companys goal was to provide ser-vice in 50 seconds or less. Drive-thru sales eventually accounted for more than half of McDonaldssystemwide sales. Meantime, the Happy Meal, a combo meal for children featuring a toy, was addedto the menu in 1979.Surviving the 1980s "Burger Wars"In the late 1970s, competition from other hamburger chains such as Burger King and Wendys beganto intensify. Experts believed that the fast-food industry had become as big as it ever would, so thecompanies began to battle fiercely for market share. A period of aggressive advertising campaignsand price slashing in the early 1980s became known as the "burger wars." Burger King suggested tocustomers: "have it your way"; Wendys offered itself as the "fresh alternative" and asked of otherrestaurants, "Wheres the beef?" But McDonalds sales and market share continued to grow.During the 1980s, McDonalds further diversified its menu to suit changing consumer tastes. Thecompany introduced the McChicken in 1980. It proved to be a sales disappointment and was re-placed with series of different chicken sandwiches a year later. Chicken McNuggets were invented byRene Arend in 1979. They were so good that every franchise wanted them. However, there wasnt asystem enough to supply chicken products. The supply problem was solved in 1983, when theMcNuggets were made available nationwide. By the end of 1983, McDonalds was the second largestretailer of chicken in the world. In 1985, ready-to-eat salads were introduced to lure more health-conscious consumers. The 1980s were the fastest-paced decade yet. Efficiency, combined with anLiterature Review on McDonald’s Page 4
  5. 5. Brand Dossier McDonald’sexpanded menu, continued to draw customers. McDonalds, already entrenched in the suburbs, be-gan to focus on urban centers and introduced new architectural styles. Although McDonalds restau-rants no longer looked identical, the company made sure food quality and service remained con-stant.Despite experts claims that the fast-food industry was saturated, McDonalds continued to expand.The first generation raised on restaurant food had grown up. Eating out had become a habit ratherthan a break in the routine, and McDonalds relentless marketing continued to improve sales.In 1982 Michael R. Quinlan became president of McDonalds Corporation, and Fred Turner becamechairman. Quinlan, who took over as CEO in 1987, had started at McDonalds in the mailroom in1963, and gradually worked his way up. The first McDonalds CEO to hold an M.B.A. degree, Quinlanwas regarded by his colleagues as a shrewd competitor. In his first year as CEO the company opened600 new restaurants.In the mid-1980s, McDonalds, like other traditional employers of teenagers, was faced with a short-age of labor in the United States. The company met this challenge by being the first to entice retireesback into the workforce. McDonalds placed great emphasis on effective training. It opened its Ham-burger University in 1961 to train franchisees and corporate decision-makers. By 1990, more than40,000 people had received "Bachelor of Hamburgerology" degrees from the 80-acre (320,000 m2)Oak Brook, Illinois, facility. The corporation opened a Hamburger University in Tokyo in 1971, in Mu-nich in 1975, and in London in 1982.Braille menus were first introduced in 1979, and picture menus in 1988. In March 1992, Braille andpicture menus were reintroduced to acknowledge the 37 million Americans with vision, speech, orhearing impairments.Reference:’s in IndiaMcDonald’s entered India in 1996. McDonald’s India has a joint venture with Connaught Plaza Res-taurants and Hard Castle Restaurants. Connaught Plaza Restaurants manages operations in NorthIndia whereas Hard Castle Restaurants operates restaurants in Western India. Apart from openingoutlets in the major metros, the company is now expanding to Tier 2 cities like Pune and Jaipur.McDonald Financial Profile:Literature Review on McDonald’s Page 5
  6. 6. Brand Dossier McDonald’sRevenue USD $ 24 billionOperating Income USD $ 7.5 billionNet Income USD $ 4.5 billionTotal Assets USD $ 32 billionTotal Equity USD $ 14.5 billionMcDonald Initial Market Positioning:McDonald’s is one of the most successful companies on the planet, but it started out as a small busi-ness. They ultimately achieved their growth and their success by focusing on who they wanted to be- a family friendly, kid-oriented fast food restaurant offering low cost meals that taste great.Only after they decided who they wanted to be did they get started on the “what” – they developedads that targeted kids, sold franchises in urban areas located close to schools and family neighbor-hoods, and so on. (They also included indoor playgrounds at many of their locations, a dead givea-way that they are catering to children as part of their marketing strategy.) All of these tactics helpedto communicate to the market who McDonald’s is and what they stand for in the market.To put it into “marketing speak”, when McDonald’s decided to be the family friendly low cost restau-rant in the fast food business, they were deciding on what market position they wanted to own with-in the fast food market.Perhaps the best way to describe McDonald’s market position is to illustrate all of the market posi-tions they could have gone after, but decided not to:Literature Review on McDonald’s Page 6
  7. 7. Brand Dossier McDonald’sa) McDonald’s could have been a fast food restaurant with better quality food than all of their com-petitors, but at slightly higher prices and that would take slightly longer to prepareb) They also could have been the fast food restaurant with the widest menu offering the mostchoice to their customers Or c) They could have targeted the adult market instead of focusing their marketing efforts onchildren and families But they did none of those things. They looked at the market and decided thatthe best opportunity for their business was in attracting the business of families with children – andso they took up that “position” in the market.Now bear in mind, McDonald’s didn’t just wake up one day and “decide” on their market position.They did plenty of research on the market and identified the most profitable market for their prod-ucts, then refined their marketing and operations to deliver on what their chosen market wouldwant.Clearly, their decision was a success for them. However, even though McDonald’s dominates the fastfood category, there are plenty of alternative market positions available to other businesses in thatmarket.While you might think that all burger places are the same, from a marketing standpoint, theycouldn’t be more different.Burger King has started to establish themselves as the choice of the young adult market, notablyamong young males. Watch their advertising – you don’t see nearly as many ads featuring kids orfamilies. Instead, their focus is on the teenage crowd and up.Burger King is simply playing the market position game. Since McDonald’s has the kids and familiesmarket wrapped up, Burger King took aim at a different part of the market, and has found success bytailoring their menu and marketing to a different market segment. They are attempting to securethe position of “choice of teens and young men”.Wendy’s has taken up a position in another part of the market, targeting adults. Notice their menu isquite different than that of Burger King or McDonald’s. Wendy’s offers substitutions on their menuto accommodate health conscious eaters. You can have a baked potato instead of fries, for example.And you can purchase a lunch sized salad if you want to skip the burger altogether. (Unlike McDo-nald’s where they might grudgingly give you a salad instead of fries, Wendy’s actively promotes theirhealthy choices.) Their market position is clear: healthier fast food.COMMON POSITIONING FACTORSSo how could such a business be positioned to actually mean something in a crowded marketplace?Well, you could start by leveraging some of the market positioning factors outlined previously:Price – You could scan the market to determine what your competitors charge and simply chargeless, giving you ownership of the “low-price” positionLiterature Review on McDonald’s Page 7
  8. 8. Brand Dossier McDonald’sLevel of Service – You could offer more services than the competition, or you could do the oppositeand offer fewer services allowing you to specialize in certain types of consulting.Geography – Thanks to the Internet, you could be a consultant to anyone in the world, or you couldchoose to offer your services on an in-person basis within a defined geographic area.Quality of your Service – What credentials and experience do you bring to the table that would allowa customer to judge the quality of your consulting services? Are you better equipped or lessequipped than your competition in this area?Target Market – Do you have a defined target market for your product or service? McDonalds wasclearly targeting families and the youth market. targets cost conscious consumers whoare willing to accept over the phone service instead of in person service from their insurance com-pany in exchange for a discount on their premiums.While being a marketing consultant is hardly unique, you could manipulate the factors listed aboveto create a compelling offer for clients.EXAMPLE – DEFINING YOUR MARKET POSITIONFor example, you could determine that a market opportunity exists in providing marketing consult-ing services in your local market, aimed specifically at small retail stores. This would effectively shutout your online competition, since it is much more likely that a local small business owner would dobusiness with a consultant who was an expert in the local market before hiring someone found viathe Internet.In doing this, you would take up the market position as “the marketing consulting choice for localretailers”. (To focus on this market, you would need to establish the size of the market and deter-mine whether there was enough business potential to keep you going. Or you could plan to servicethis market for the first year of your business, then expand to focus on non-retail businesses, or tofocus on neighboring communities.)A MARKET POSITION DEFINES WHO YOU ARE – AND WHO YOU AREN’T1) lesson from McDonald’s – you can’t please everybody so don’t bother trying.Despite their incredible growth over the years, McDonald’s has pretty much stuck to their originalgame plan. Get families and children into the store, keep the menu short in order to prepare mealsquickly, offer food at the lowest possible price, and so on.Sure they have made attempts to go after health conscious customers by offering more low-fatmenu items as the market for healthier food has grown, and they’ve had some success doing so. Butin the immediate future, these tactics can’t replace the dollars they earn from their core customers –families and the youth market.Literature Review on McDonald’s Page 8
  9. 9. Brand Dossier McDonald’sEven the mighty McDonald’s realizes that you need to take up a market position to have any chanceof succeeding in business today. You must stand for something and make it known to the marketwhat you stand for, or else you will easily be forgotten.2) lesson from Wendy’s and Burger King – find market positions that aren’t taken…and take them!Just because some other company is dominant in your market doesn’t mean that there aren’t somegreat marketing opportunities for your business. BK is using their marketing and advertising to winback young males and teens from McDonald’s. Wendy’s is using a healthier more flexible menu totarget health conscious adults who want the convenience of fast food.In both cases, they are still in the fast food business, but they are focused on a particular part of themarket. Their “market position” is designed to establish them as an alternative to the leader, McDo-nald’s.Think of the marketing process like this:What market position do you want to establish?▼Who are your customers in this market position?▼How do you reach them to tell them about your market position?▼What do you tell them when you do reach them? Your market position is the foundation for everything else you do. All of the ads you run will serveto promote your position to the right audience, and will help to establish your business in the mindsof customers because you stand for something.Reference: Advertising:McDonalds has for decades maintained an extensive advertising campaign. In addition to the usualmedia (television, radio, and newspaper), the company makes significant use of billboards and sign-age, sponsors sporting events ranging from Little League to the Olympic Games, and makes coolersof orange drink with their logo available for local events of all kinds. Nonetheless, television has al-ways played a central role in the companys advertising strategy.To date, McDonalds has used 23 different slogans in United States advertising, as well as a fewother slogans for select countries and regions. At times, it has run into trouble with its campaigns.Literature Review on McDonald’s Page 9
  10. 10. Brand Dossier McDonald’sMcDonald Global slogan: “Things that make you go mmmm” “ I m lovin it”(2003-present)Creative Ads from McDonald’s:Literature Review on McDonald’s Page 10
  11. 11. Brand Dossier McDonald’sSegmentation Strategy:McDonald’s uses demographic segmentation strategy with age as the parameter. The main targetsegments are children, youth and the young urban family.As shown above, kids reign supreme in FMCG purchase related to food products. So to attract chil-dren McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disneycharacters are given (the latest in this range is the toys of the movie Madagascar). For this, they havea tie-up with Walt Disney. At several outlets, it also provides special facilities like ‘Play Place’ wherechildren can play arcade games, air hockey, etc. This strategy is aimed at making McDonald’s a funplace to eat. This also helps McDonald’s to attract the young urban families wanting to spend somequality time while their children have fun at the outlet. To target the teenagers, McDonald’s hasLiterature Review on McDonald’s Page 11
  12. 12. Brand Dossier McDonald’spriced several products aggressively, keeping in mind the price sensitivity of this target customer. Inaddition, facilities like Wi-Fi are also provided to attract students to the outlets like the one at VileParle in Mumbai.Reference: Of the product & Generic Competition to the brand:McDonald’s Indian Menu: Vegetarian Non Vegetarian Mc Veggie Chicken Maharaja Mac McAllo Tikki Mc Chicken Burger Paneer Salsa wrap SahiChcken McCurry Chripsy Chinese Wrap chicken Mexian McCurry Pan Fillet-O-Fish Pizza McpuffLiterature Review on McDonald’s Page 12
  13. 13. Brand Dossier McDonald’s of McDonald’s:McDonald’s competes with fast food chains like Pizza Hut, Domino’s Pizza, Papa John’s,Jumbo King,Nirula’s and KFC in India.Strategy adopted over time by the brand to tackle the Competition:McDonald’s introduced their newest strategic plan in 2008, which they called “Plan to Win.” The ob-jective of this plan was not to be the biggest fast-food chain but to be the best fast-food chain in theworld. To do this, McDonald’s implemented what would be known as the 5 P’s. They are Price, Pro-motion, Place, Products, and People.The main objective of the “Price” strategy was to make it very affordable for a family to go out forbreakfast, lunch or dinner and not break the bank in doing so. McDonald’s achieved this by makinghappy meals for children that were of right portion, right price, along with the everyday value mealsand dollar menu items. There are over 10 items on the dollar menu all day which makes it very easyfor customers to swing by for a quick bite to eat. McDonald’s also runs many different specials forbreakfast where they will make different breakfast sandwiches 2 for $3. By doing this it allows forparents to feed two children for the piece of one. It also allow for more hungry people to make surethey will be full after they have eaten two sandwiches.Literature Review on McDonald’s Page 13
  14. 14. Brand Dossier McDonald’sThe second Strategy is Promotion. Advertising through television, radio, and billboards are greatways that McDonald’s promotes their products and service. Over the years McDonald’s has usedseveral slogans to leave an impression in people’s heads. Some of these include “It’s a good time forthe Great Taste of McDonald’s,” “Food, Folks, and Fun,” “We love to see you smile,” and the mostrecent slogan, “I’m Lovin’ it.” All of these slogans have been used over the years to promote McDon-ald’s and by doing so people remember the name and have become accustomed to visiting nearbylocations.Another strategy that McDonald’s used over the years was to promote their figure head, RonaldMcDonald. Ronald is the made up character behind McDonald’s corporation for the past 50 years.He was originally introduced in 1963 and resembles a clown character that is considered #2 only toSanta Claus for the most recognized name in children’s eyes. There has also been a television showcalled, The Wacky Adventures of Ronald McDonald,” which have variously been released between1998 and 2003. This show was great promotion for children and McDonald’s because it only hap-pened a very limited amount of times so kids were so excited when they actually got to experience itand it allowed for McDonald’s to expand revenues.McDonald’s continues to promote by using several athletes and celebrities to endorse their prod-ucts. During the 2008 Olympics in Beijing, McDonald’s featured nine Olympic and Paralympic Ath-letes on their cups and packages. McDonald’s also held a Marketing Campaign in Australia wherethere people could decide the name of a new burger about to be introduced. By doing such thingsMcDonald’s is creating a better brand image and thus making greater profits.The third Strategy is Place. Place has been considered the most important “P” of the 5 P’s over theyears because without numerous locations throughout the world it would be impossible to reach the52 million customers a day and would make it hard for McDonald’s to be the world leader in thefast-food industry. Nearly 50% of the U.S. is less than three minutes away from their nearestMcDonald’s. This is a perfect example of why McDonald’s is the leader in customer satisfaction.What kinds of people want to drive long distances just to get some quality food at a great price? Notonly is McDonald’s a great place to take yourself or your kids for a deal, but it also allows for kids toenjoy a playground area at several locations around the world. By offering the attractions of swings,slides and ball-pits McDonald’s is helping to promote exercise and nutrition in children’s diets.Literature Review on McDonald’s Page 14
  15. 15. Brand Dossier McDonald’sThe forth strategy is Products range. McDonald’s offers such a large variety of products that it al-lows for almost all people to be satisfied. Products range in the food department from burgers tochicken sandwiches to chicken nuggets to apple pies to soft serve ice cream to apple slices. Alongwith the beverages, which range from soda to milk to apple juice to water to coffee. It is also impor-tant to point out that McDonald’s now is introducing a Vegan Menu as well as a vegetarian Menu inparts of the world. Another point of interest is that in places such as Europe you can also sit downwith your food and enjoy a beer. This is something that hasn’t been implemented in the U.S. but itcould be a potential possibility in the future. By having such a wide variety of product choicesMcDonald’s has made it hard for people to not dine-in or eat-out at one of their locations.The final strategy is targeting People. This is unlike most ordinary Marketing Mix’s. The main objec-tive when talking about the People aspect is to discuss both customers and employees, because ifthe employees aren’t happy, they will be more likely to take out their anger on the customer. Thiswould result in bad service and publicity. McDonald’s does a lot of internal as well as External Mar-keting. They have found that it is extremely important to show employees the proper respect andcourtesy that they deserve and by allowing for them to give input about things they think should beimproved or worked on is a great way of keeping everyone happy. If customers didn’t feel a greatsense of appreciation when they walk into a location they are much less likely to come back and berepeat customers. By doing research and taking surveys, McDonald’s executives are finding out whatpeople want and making sure that customers and employees are completely satisfied.We also created a SWOT analysis for McDonalds: Such strengths include: Strong Brand name, Cus-tomer Intimacy, Product Innovation and Supplier Integration. We believe these are the mainstrengths of McDonalds. However, weaknesses include Low depth of food because though there is avariety it still isn’t extremely large at every location and it is mostly fast food which doesn’t bring thebest quality. We also decided that healthiness of the food was a weakness. This is because though itis quick and convenient we all know it isn’t the best choice to eat. For opportunities we focused onthe prospect of the McCafe branching out to its own section with fancier snacks and drinks. Thiswould also bring McDonald’s a new product line. McDonalds also has a few threats, such as its com-Literature Review on McDonald’s Page 15
  16. 16. Brand Dossier McDonald’spetitors, like Burger King. Also, the threat of customer wants changing and trying to adapt to thenew customers would be seen as a threat.Reference: Strategy of McDonald’s –McDonalds Corporation is the worlds largest chain of hamburger fast food restaurants, servingmore than 58 million customers daily. In addition to its signature restaurant chain, McDonald’s Cor-poration held a minority interest in Pret A Manger until 2008, was a major investor in the ChipotleMexican Grill until 2006, and owned the restaurant chain Boston Market until 2007.A McDonalds restaurant is operated by either a franchisee, an affiliate, or the corporation itself. Thecorporations revenues come from the rent, royalties and fees paid by the franchisees, as well assales in company-operated restaurants. McDonalds revenues grew 27% over the three years endingin 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.McDonalds primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfastitems, soft drinks, shakes, and desserts. In response to obesity trends in Western nations and in theface of criticism over the healthiness of its products, the company has modified its menu to includealternatives considered healthier such as salads, wraps and fruit.McDonalds distribution channel and the way in which this fast-food restaurant chain gets its prod-ucts to the market. In the theory of the Marketing Mix, place (distribution) determines where theproduct will be sold and how it will get there. In fact, as noted on, McDonaldsis the leading global foodservice retailer, with more than 30,000 local restaurants serving nearly 46million people each day in 121 different countries. Approximately 80 percent of all McDonalds res-taurants company wants to be the first in the market and establish the brand as rapidly as possibleby advertising very heavily. This effective distribution strategy (place) has helped McDonalds de-velop a strong market share in the fast-food market around the world. McDonalds has pre-determined the locations for many of its stores to help reach a variety and diverse population. Con-clusion. In conclusion, McDonalds has an intensive distribution process which is a credit to theirMarketing department. As businesses and other organizations move forward, the challenge of mak-ingtheirproducts.Literature Review on McDonald’s Page 16
  17. 17. Brand Dossier McDonald’s Summary : McDonald’s is the world leading food service organization.With the expension ofMcDonald’s into many international market, the company has become a symbol of Gloablization &the spread of the American way of Life.In light of Evidence we as a team has gathered that McDonald’s will continue to grow well in the Fu-ture Because:McDonald’s provides value to the customerMcDonald’s will push the key area to the next level,Quality,Service ,Cleanliness and ValueMcDonald’s Listen their customer thoughts & suggestion.McDonald’s open for almost 18hours a day and Saturday & Sunday open for 24hours a day.McDonald’s will enter in theme park concept with Disney.Bibliography: Review on McDonald’s Page 17