This document discusses McDonald's brand extension strategy and response to challenges in maintaining growth. It faced market saturation, health concerns, and increased competition in the 2000s. McDonald's adopted a four-pronged growth strategy of using new products, current products, geographic diversification, and improving its brand image. Examples given are opening McCafe and McTreat lines and localizing offerings. The document examines factors important for successful brand extensions like consistency with the parent brand. McDonald's brand power remains high globally but sales have fallen, demonstrating the challenges of sustaining growth for a 70-year old brand.

1. GROWING THE
McDONALD’S BRAND
- Harsh Daga, PGP31149, IIM Lucknow

2. Key Questions Answered
1. What options does a brand have to grow when existing markets reach
saturation level?
2. How can a brand tackle changes in customer lifestyles that are adverse to its
growth?
3. How can the chances of success for an extension be improved through
promotion?
4. How important is the consistency of brand associations between a parent
brand and its extension?
5. How can a 70-year old brand successfully reposition itself in the mind of it’s
target group?
McDonald’s brand extension strategy is unique and a source of
insights for the following critical brand management questions.

3. McDonald’s Customer-based Brand Equity
Diversification
• Opened McCafe in Portugal &
Austria & McTreat for desserts
• New products for new markets
PERFORMANCE IMAGERY
JUDGEMENTS FEELINGS
RESONANCE
SALIENCE
Famous multinational fast food chain Presence in 120 countries
Sell tasty and cheap
Multiple secondary services
Historically targets children
Convenient, Fun and Efficient
Good Quality
Value for Money
Possibly unhealthy
Warmth, Fun
Excitement – Happy Meal
Cheap
Attachment
Loyalty - Repeat sales

4. Changes in Environment
McDonald’s faced an adversarial environment from mid 2000s :
Market Saturation Health Concerns Economic Slump

5. Decline in Fast Food Acceptance
• Globally fast food market was witnessing saturation across all
geographies, with the exception of Asia-Pacific
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015
Fast Food Market (in $ Billion)
World Asia Pacific Australia Eastern Europe Latin America Middle East and Africa North America Western Europe

6. Stiffening Competition
Its competitive frame of reference also kept increasing

7. Stiffening Competition
• As can be seen from the graph below, Subway aggressively
increased its no. of outlets worldwide
Leading Fast food (in terms of outlet numbers
• In North America, Burger King provided a cheaper alternative to
McDonald’s

9. “For 59 years we asked customers to fit around our business model:
Here's our menu and here's the way you can interact with us... But
peoples' desires are changing ” - Steve Easterbrook, CEO

10. McDonald’s Response
Using New Products
Product Development Diversification
• Conscious focus on creating
healthy options like salads
• Launched a premium coffee line
• Opened McCafe in Portugal &
Austria & McTreat for desserts
• New products for new markets

11. McDonald’s Response
The company responded with a 4-prone growth strategy
Using Current Products
Market Penetration Market Development
• Adopted motto of “Better, not
bigger”
• Upgraded facilities and
operations of existing stores
• 24-hour service at select outlets
• Expanded to new countries in
Asia & Africa
• Localized offerings based on
taste preferences
• Targeted new customer
segments

14. Geographic Diversification

15. Improving brand image

16. Brand Power
• McDonalds continues to have the highest brand power among
fast food chains Globally
Ranks as the 9th strongest brand overall
but has been witnessing a fall off-late
A 70-year old brand legacy

17. Extensions – Accepted or Rejected?

18. Impact - Global Sales of McDonald’s
Diversification
• Opened McCafe in Portugal &
Austria & McTreat for desserts
• New products for new markets
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Global Sales of McDonald's ( in $ Billion)
Company-Operated Franchised
• A situation of depleting sales persisted, especially in its company
owned outlets
Source : Bloomberg
• 2015 sales declined by $3 Billion from 2013

20. Successful brand extension
requires a perception of fit
between the parent and
extension

21. Disclaimer
These slides have been prepared under the guidance of Professor
Sameer Mathur for the Brand Management course at IIM Lucknow
Indian Institute of Management,
Lucknow
Harsh Daga
PGP31149