Strengths
McDonald’s is considered as a global brand that is available in most countries in the world and shares the same strategic principles, positioning and marketing in every market throughout the world, but the marketing mix can vary that helped the company to have a vital market share in all countries as well as comparable brand loyalty (de Mooji, 2005 p. 14). That is the reason why, McDonald’s is considered as one of the main brands in the world in all industry. Thus, it has a strong brand image and reputation that lead the company to become the most powerful brand in the category of fast food according to BrandZ in 2008 (BrandZ, 2008).
The company also has a strong global presence with its nearest domestic competitor being only half its size, thus helped McDonald’s to become the leader in local and international markets. In addition, the company benefited from the cost reduction through the economies of scale due to its huge size and big global presence that enables it to expand risk that are involved with the economic performance of a given country. Thus, the company is well placed in order to expand and take advantage of the long-term growth in economy (Orji & Bao, 2005 p. 7).
In addition, the company also has a strong real estate portfolio. It can be observed on the position of the stores of the company, where in it is located in different areas that are highly known for visibility, traffic volume and most importantly, ease of access (Orji & Bao, 2005 p. 7).
Above all, the company’s Hamburger University is also considered as one of its advantages. It is the Center of Training Excellence of the company. It has emphasized consistency in terms of restaurants operations procedures, service, quality as well as cleanliness. The University was founded by Fred Turner, the former senior chairman and Kroc in 1961 in the basement of the store in Elk Grove Village, Illinois. In February 24, 1961 the initial class that is composed of 14 apprentices graduated in the University and as of now there are over 5,000 students that are attending the University each year. Since its first operation there are about 80,000 managers of restaurants, mid-managers and even proprietors and operators that have finished course from the said university (McDonald’s Corporation, 2008).
Weaknesses
Food industry is considered as saturated, thus different restaurants must focus on discovering balance between the increasing prices of raw ingredients and price sensitive consumer in the world (Jagger, 2007). Consequently, the company has to deal with the point of view of the alarming market saturation that will make it hard for the company to add new stores and outlets (Orji & Bao, 2005 p. 7).
In addition, the company is experiencing reduces in ability to increase revenue. However, the swift of the focus of the company from a value meal menu to a more diverse one has limited the negative impact of the intense price competition that was traditionally taking place among the leader of the industry (Orji & Bao, 2005 p. 8).
Another weakness is the weak development of product, which is considered as one of the main vital and crucial activities in any firm or organization. It is important to take note that the last product breakthrough of McDonald’s was Chicken McNuggets in 1983 (Orji & Bao, 2005 p. 8). As a result, the company is having difficulty in meeting the changing demands and preferences of the customers towards their products and services.
The company also shows poor marketing effort and connection with its local customers. There are different advertisement and promotion of the company that insults and caused negative image for the company. In China, the company launched a television commercial that some of the Chinese viewers considered as offensive that shows Chinese man kneeling and begging for a discount from an electronics salesman who refuses due to the fact that his coupon has expired, then the ad said that people don’t have to beg in order to take advantage of the company’s promotion. Thus, the advertisement portrays that Chinese people are poor and lacking in dignity (China Economic Review, 2005). In addition, in Hong Kong, too many promotions become extremely excessive (Epinions.com, 2001).
Furthermore, the company is also facing problem regarding poor management. There have been different issues that are related to the poor customer service of the company. According to the customer service index that was conducted in 2003, McDonald’s has the lowest customer service ranking in the entire fast food industry; it has even ranked lower in the customer service compare to IRS (Pae & Nguyen, 2005). The survey of the University Of Michigan Business School National Quality Research Center to 200 firms and 30 government groups, shows that McDonald’s garnered an average score of 64 that enables the company to be the lowest in the category of fast food and quick service restaurants (The University of Michigan Business School, 2003). The said rate of the consumers is somewhat ironic to the position of the company as a well-accepted and famous brand in the world as well as in the history of the industry.
In addition, the company also has the highest employee turnover rate compare to its competitors (Pae & Nguyen, 2005). The current annualized turnover number of the company is 44% per article or annual turnover at 700,000. In details, globally, managerial turnover is about 20%, at the same time the crew members averages to 80% – 90% (Fistful of Talent, 2008). The said events cause the company to spend more costs in their human resource management. While the organization continues to spend long time in the entire process of recruitment and hiring new employees and staff, it does not pay true attention to the cost of the turnover among its staffs. The cost of the employee turnover can be divided into two important categories which are: the direct cost that include the actual out-of-pocket expenses, together with the time that is expended by the staff as well as the management; and the opportunity costs, that include the number of the hours that have been taken for a new employee to acquire the skills and knowledge of the previous employee fully, together with the cost of the damage in the process of terminating employee did to he organization by the process of alienating the customers, wasting time, sloppy work as well as carelessness. Thus, it shows that the cost of the employee turnover has a direct influence over the bottom line of the organization (Wendover, 2006 pp. 3 – 4).
Opportunities
Globalization, expansion in other countries is considered as one of the most important opportunities for McDonald’s. The company still needs furthermore penetration in different countries, specifically Europe, Asia as well as Latin America (Orji & Bao, 2005 p. 8). The said opportunity will help the company to gain more market that can help to increase the entire revenue. In addition, Asia is considered as one of the most feasible market due to the fact that there are different newly developed countries that can be considered as possible market such as China and Korea. China is important due to its huge population as well as the growing condition of the country.
In addition, diversification and acquisition of other quick-service restaurants will also be as an opportunity for the company. It is important for the company to focus on its different branded chain restaurants such as the Chipotle
Grill. This is Chipotle is considered as the most successful McDonald’s branded chain of restaurants (Orji & Bao, 2005 p. 8).
The development of the industry of fast-food in the world is also an opportunity for the company. In the US alone, the fast food industry is showing a healthy growth and development in the past years where in the forecast can be maintained. Thus, the fast food industry is anticipated to sustain or retain its existing outlooks for growth that has an expected Compound Annual Growth Rate or CAGR of 2.3% for period between 2005 and 2010. As a result, it will push the industry to a sum value of .6 billion at the end of 2010, a total increase of 12.1% since 2005. Furthermore, the fast food market is forecast to have a total huge volume of 37 billion transactions, representing a total increase of 5.3% since 2005 and the CAGR of the volume of the market during 2005 – 2010 periods is predicted to be 1% (Datamonitor Industry Market Research 2006). Aside from that, the Chinese’s fast food industry is showing extraordinary development, and it is considered as one of the fast developing industries in the said state that has a CAGR that crosses 25% (RNCOS, 2008). It is the effect of lack of time of the Americans and Chinese to prepare food due to the amount of the time that they spend in their works.
The changing eating habits of the customers can serve as opportunities and threats for the company. In terms of opportunity, as have mentioned, people tend to buy fast food because they no longer have much time to cook and prepare meal due to their works and schedules. In addition, the increasing participation of women in the labor force affected their time that spent managing their homes, particularly cooking. In the US alone, during 2004, about 59% of women are involved or had entered the labor force. From 2000 to 2004, 71% of the entire labor force participation rates of women are those mothers with children that are under age 18. During 2004, half of the entire management, certified and associated careers were handle by women. In addition women have the 14% of architects and engineers; and 29% of physicians and surgeons. Furthermore, women have 86% of the entire paralegals and legal assistance; and 89% of dieticians and nutritionists (Bureau of Labor Statistics, n.d. p. 2).
Above all, the low cost menu of the company will gain the attention of price sensitive customers.
Threats
Like any other global or multinational companies, the company is exposed to any changes in the global economy and its aggressive international expansion has left it as very sensitive to other economic slowdown of other countries (Orji & Bao, 2005 p. 10). One of example is the fluctuation of the foreign currency. In addition, due to the economic slowdown in some countries, particularly in most of developing countries, customers tend to become price sensitive, and it has a great impact over the buying behavior of the customers.
In addition, competition is also one of the major threats for the company. Currently, there are huge numbers of players in the industry, and most of them are offering the same or similar products and services. The reason behind the said growth is due to the improvement of the entire fast food industry in the world. That is the reason why there is intensive price war, extreme battle of innovations and breakthrough and serious promotions and advertisements are being implemented by each and every players in the said industry. Increasing competition has led to aggressive pricing policies amongst the large brands as well as pushed them to increase their menu diversification as well as product developments in order to increase sales and market share, thus maintain current position in the entire market (Royle & Towers, 2002 p. 52).
All fast-food hamburger chains, including McDonald’s are forced to respond to the changes in the preferences of customer from high-calorie foods such as burger and fries to healthier one such as deli sandwiches and baked potatoes (Pae & Nguyen, 2005). The fast food industry holds negative image as the vital factor in a myriad of health problems. There are different notions that shows that the combination of desire for convenience from society and the greed that is driven market has helped to produced a culvert of repulsive eating habits (Murphy, 2008). As of now, more and more customers are becoming aware of nutritional values and health benefits of products and services that they are availing. In addition, they people are more figure and body conscious than before. In addition, childhood obesity was also connected and blamed for the growing incidents and cases of childhood obesity that can cause hazardous health problems in adulthood. The said situation has a great impact over the brand, due to the fact that children have the big share on the revenue of the brand (Palmer, 2004). The said trends reduced the revenues, staff motivation , together with the interests of the shareholders of McDonald’s, and it can be showed in the strong protest by different nutritional campaigners against the food that are being promoted by the company that have affected many lives, not only in the US but in other part of the world. The said events caused negative impact on the image of the brand that pushes Disney to decide not to renew its contract with the company (Glaister, 2006).
McDonald’s Revitalization Plan Under New Leadership 2003
Year 2003 is considered is a feasible year for the company. Under the new management of Jim Cantalupo, a major restructuring was announced that focuses on closure of more than 700 restaurants that mostly in the US and Japan; elimination of 600 jobs and charges of 3 million. Cantalupo also shifted away from the traditional reliance on growth of the company via the process of opening new units to a focus on gaining more sales and financial growth from the existing units (Funding Universe, 2004).
Furthermore, Cantalupo and his team had chosen to go big and bold with its three main initiatives such as flawless experience; customer choice; and ubiquity that were called as the McDonald’s Plan to Win that focuses on improving the customer expertise (Silverstein & Butman, 2006 p. 177).
The McDonald’s Plan to Win is also known as the “5 P’s or People, Products, Place, Price & Promotion”. The said strategy focused on what he company had identified as the five most important or vital drivers of success or 5 P’s.
Figure 2 Plan to Win McDonald’s Strategy 2003
People
People are considered as one of the most important driver of customer satisfaction fro exceptional experience of the customers. People or the employee was considered as the instrument in delivering exceptional customer service. Furthermore, the human resource or labor force is considered as the most vital resource in any organization due to the fact that it transforms different raw materials or product into salable products and services. The performance of each and every employee will reflect on the overall performance of the company.
The company focuses on staffing their restaurants during the busy periods and focuses on training their employees in order to deliver outstanding services. The company also applied new technology such as more visual menu that offers the employee more user-friendly system that will speed up their service towards the customers (Thompson & Strickland, 2005 p. C-228).
The Flawless Experience
The Plan to Win required rethinking the entire experience chain, from arrival to exit. The goals were to make the experience more personal and engaging, thus can help to increase the speed and convenience both at the counter and in the drive-through. The plan focuses on restaurant manager in order to implement flawless experience. Even though the company was originally popular for consistent quality and cleanliness via the establishment of corporate standards as well as rigorous systemwide oversight, the said new approach was considered as less suited to the process of providing the more personal experience that each and every consumer expects today. Thus, only well-trained and committed on-site manager can provide the said services (Silverstein & Butman, 2006 p. 177).
The said aspect of the strategy will help to maintain the advantage or strengths of the company regarding its strong brand image and reputation around the globe, and the Hamburger University can be used to the fullest. On the other hand, the strategy can help to focuses on the weaknesses of the company regarding the poor management that causes weak product development and innovation. The said strategy will help to motivate the employee more that will result to high employee satisfaction, thus help to improve the standard of service in each and every store of the company in different parts of the globe. In addition, the company will have the opportunity to apply the different abilities as well as skills of the employee in order to meet the changing demands of the customers.
It will also help the company to take advantage of the different opportunities such as the growth of the fast-food industry. More and more people from around the world are becoming more dependent in different fast food chains due to the changing social factors such as work and other schedules, however, due to economic changes, the demand for low cost menu and great service is also increasing. That’s why great and fast service of the employees will help increase customer satisfaction.
Product
The company also focused on their products by becoming responsive on the changing tastes, demands and preferences of the customers. The primary objective of the company is to focus on the growing interests of the public towards wholesome food choices and other premium products in different part of the globe (Thompson & Strickland, 2005 p. C-228).
Customer Choice
Due to the different advocacy of different organizations towards the health problems that can be obtained in eating or depending on fast foods, McDonald’s and other players in the industry are facing veto vote from moms, tweens or kids between childhood and adolescence as well as serious that would require a broader menu choice. As part of the strategy, in order to connect the brand image of the company to healthy lifestyle and living, McDonald’s committed itself to food and menu innovation. The Chicken McNugget, despite its popularity and success, was not all that a chicken nugget could be due to the fact that standard version of McNugget was made from pressed chicken that is equivalent of hamburger or a different miscellaneous parts that were combined and pressed into an easily workable whole. That’s why the company introduced the premium chicken nugget that was made with the breast meat only. In addition, the company also offers salad and replaces the shaken salad which was composed primarily of shredded iceberg lettuce with a mixed salad that contains sixteen different lettuces. Furthermore, the company also offers new items in their menu that includes varieties of fruit and yogurt parfaits, new soup selections, McGriddles and other crispy-spicy options for their customers (Silverstein & Butman, 2006 p. 177).
Due to the fact that the company holds a strong brand image and reputation and holds a strong global presence, the said action will help the company to become more connected with the changing health needs of their customers. In addition, it can help the innovation and development process of the company by focusing on the healthy items in the menu that will help to improve the quality and taste of their products.
On the other hand, the said plan can also serve as a competitive advantage of the company in handling the intensive competition in the global fast food chain industry. It will help the company to have different products in some ways.
Place
Place is also another important aspect. The company focuses in making its restaurants cleaner, more relevant as well as more modern. Thus the company focuses on making the company as a place that customer seek out due to the fact that it offers the food that they want in a modern, fashionable, and at home environment that they want to be in whether eating alone or with friends or with family (Thompson & Strickland, 2005 p. C-228).
Ubiquity
The company launched and implemented different initiatives that will help to improve each and every store ambience and environment. In addition, due to the growing demand for technology and some of the customers of the company are working in their offices; the company install wireless technology that helped them to create wireless hot spots in different restaurants in 28 countries. This helps the company to cater on the demand of working customers to check their mail and works during their stay in the restaurant. Furthermore, in some countries, McDonald’s add up coffee houses that offer premium coffee, muffins ad even pastries at low costs in order to enhance the company’s appeal to the adults (Thompson & Strickland, 2005 p. C-228).
Furthermore, in order to make the stores of the company cleaner and more fashionable, the company implemented several renovations, rebuilding as well as relocation of some buildings in order to follow the goal of the company to offer fresh and sophisticated at the same time friendly environment (Thompson & Strickland, 2005 p. C-299).
When and where you want it had become the mantra at the company. The main goal of the company is to offer a McDonald’s options for the customers, regardless of his or her location, meaning the company strived to continue its creation and establishments of traditional store in order to increase its density in different locations where customers expected to find the restaurant. The company required the development of new footprints that helps to bring the company to different small towns, food court, resort destinations and other important and special venues and places (Silverstein & Butman, 2006 p. 178).
The said plan will help the company to maintain its image and reputation as well as its strong real estate portfolio. In addition it will help the company to focus and handle its problem regarding its outdated stores in different places that can affect the image of the company. Aside from that, it also enables the company to focus on the changing preferences of the customers towards technology due to the installation of wireless Internet. Thus, the said situation will help McDonald’s to maintain its position in the global market despite of extensive competition.
Price
Price is an important factor due to the fact that it has a huge effect on the buying behavior of the customers. It is important to consider the pricing is considered as one of the most important aspects of market. Thus, because McDonald’s is a multinational or global company it has to consider different behavior and culture of the customers in the decision-making regarding the price.
Productivity and Value
McDonald’s concentrated on offering a broad selection of products at a range of price points that will appeal to the price sensitive customers. Aside from that, the company is also offering premium product for those customers who are willing to pay well. The company also focuses on process of measuring the price driver that involves activities that will help to improve the value-for-money scores and restaurant margins (Thompson & Strickland, 2005 p. C-299).
The said strategy will help the company to take advantage of the opportunity regarding the popularity of low-cost menu items in different parts of the globe, primarily in the developing countries, especially during financial and economic crisis.
Promotion
Promotion is the final element of the strategy of the company. The company focuses on building trust and brand loyalty. This is vital because promotion is the primary connector between the brand and product towards the target customers.
Brand Awareness
The company creates different messages that strengthen and support brand and then connect and relate it with the vital segment of customers which are the families and young adults. At the same time, the company also plan to continue to build bonds of trust with the customer as well as the entire community where in the company perform its business. The company implements different programs during the said strategy such as the I’m Lovin’ it campaign that was launched in the world during 2003. Aside from that, different general efforts were don in order to make the restaurant an easy choice for the families by offering both premium salad and improving their Happy Meal. Furthermore, the company also put Ronald McDonald in a prominent position in their marketing efforts towards the customers. Furthermore, the company also uses the benefits of the Corporate Social Responsibility or CSR in order to intensify their popularity in the market. Aside from that, the company also focuses their campaign towards the young adults by featuring different music from prominent and famous recording artists (Thompson & Strickland, 2005 p. C-299).
The said promotion efforts and activities of the company enable to improve its strong brand image and reputation. Ronald McDonald’s prominent position in promotion enables the company to gain more support from children, thus offering variety of products helps the company to focus, not just on the demand and preferences of the children but also to the demands of the adults. Thus it will create an impression that McDonald’s is a place where in family and friends can gather together and spend quality time. The CSR also help to maintain the image and reputation of the business due to the fact that the increasing importance on the CSR has a great influence on the relationship between the company and its respective stakeholders such as investors, clients, vendors, dealers, workers, communities and even the government (Economist Intelligence Unit, 2005 p. 3). Thus it helps to create impressive impact to the customers, especially now that more and more people are becoming aware of the current social and environmental issues in different part of the globe.
McDonald’s Current Performance
Plan to Win Leadership
The “Plan to Win” program enables the company to turn around and focus on its operation in US on different services and varieties at the accessible and present sites and positions rather than development of new locations. As have mentioned, the approaches regarding the menu focuses on breakfast, chicken as well as beverages, together with the convenience that the company will going to offer. In addition, the company also focuses on different healthier options that helped to meet the demand and preferences of the customers towards health. Just as the company was in the beginning of its plan, Cantalupo undergo from a deadly heart attack during the convention of the company in Orlando. The president and chief operating officer Charlie Bell succeeded him. Unfortunately, Bell passed away due to colon cancer within the year. As a result, Jim Skinner was positioned as CEO, Roberts was positioned as CFO of the global company and Thompson was positioned as the executive vice president as well as the chief operating officer of the US business in order to supervise the business environment and the whole thing that is going on within each and every restaurant on a daily basis (Hughes, 2007 p. 100).
During August of 2006, Roberts resigned and put Ralph Alvarez as the COO of the global company, and he handled presidency of the company’s USA operation. Currently he is guiding the company into its fifth year of successive expansion and development and serving to shift the company into another area like coffees (Hughes, 2007 p. 100).
Current Strategy and Level of Performance
The Plan to Win strategy of the company had helped McDonald’s to improve their position in the global market. In 2004, the cash that was provided by operations had increased from 0 million to .9 billion due to the increased margin that was influenced by higher sales at the existing restaurants. In the US, the company obtained an increase of 9.6%, considered as the highest increase in 30 years. Furthermore, the company had been able to increase the number of restaurant from 26,093 of 1999 to 30,496 in 2004 that helped the company to served an additional 1.6 million customers a day, compare with 2003. The stock of McDonald’s was also appreciated 29% that had helped to increase the annual cash dividend of the company to more than double compare to 2002. In addition, the company was named as the Marketer of the Year by the Advertising Age. The company was also ranked as number 1 in the list of Fortune of Top 50 Places for Minorities to Work. It was the second consecutive year for the company to receive the said recognition. Above all, according to another survey of Fortune, McDonalds was ranked as the top 5 Most Admired Company in terms of social responsibility (McDonald’s Corporation, 2004).The said improvement shows that the strategy of the company had worked fine in a year.
Currently, the company is still implementing the said strategy, where in the company focuses on being “one brand”, “one system” and “one plan”. The system alignment around the said strategy pushes the company in what is the most vital to the customers, thus help to provide a dynamic framework on the approach that is used in the global business.
The company is focusing more on the areas of human resource where in it established priorities in different areas of hiring, training as well as reward in order to maintain workplace flexibility in their restaurant. The company is also measuring the effectiveness of the practices of the people by regular employee survey that help to increase the commitment level of crew and manager of the company. In addition McDonald’s also offer progress from the “crew room to the board room”, that starts with the on-the-job training or OJT in the company’s restaurants and then moving ahead to the college-level management courses that are accessible at the Hamburger University. The Leadership Institute of McDonald’s also proposes and suggests different accelerated plans and process to about 200 prospects employees from the entire system of the company. As a result, in 2007, the company was ranked as one of the “Top 20 Global Companies for Leaders” (McDonald’s Corporation, 2007).
In addition, the company is also focusing on product development and innovation. As of now, the McDonald’s is offering Snack Wrap that offer flexibility to adapt to the local tastes. Furthermore, the company also set an alliance with the Kenco Rainforest in order to offer coffee to their customers (McDonald’s Corporation, 2007).
In terms of place, there are about 24,500 restaurants in different parts of the globe that is already offering 24-hour service helping their customers who are working in night or graveyard shift to avail of their products and services. The company is also taking advantage of the growing mobile population in China and Russia by offering drive-thrus, at the same time in the US and Canada, greater effectiveness and double drive-thru lanes enables the company to provide service to more consumers in quick manner. Aside from that, the company is also offering delivery services in Singapore, Egypt and other countries in Asia in order to make the life of their customers easier (McDonald’s Corporation, 2007).
To meet the different demands and behavior of customers in different places in the world, the pricing decision-making varies from one place to another. This is due to the fact that there are markets that considered as price sensitive. That’s why the company is collaborating with its suppliers and leverage different economies of scale in order to make sure that they have a consistent and competent supply of first-class elements or components at competitive and expected prices (McDonald’s Corporation, 2007).
In 2007, there are about 115 countries who have participated in one of the most successful promotions of McDonald’s, its partnership with DreamWorks’ Shrek the Third. The said promotion, with the help of the Shrek licensed characters made the process of preferring and selecting fruit, milk or vegetables as a piece of Happy Meal more pleasurable for kids than ever. In 2008, the company helps the Olympic dream come true for 200 kids with the McDonald’s Champion Kids, which enables them to experience the Olympic in Beijing. Above all, the company also uses the global appeal of games by bringing the fun of popular games, particularly the Monopoly to the customers around the world (McDonald’s Corporation, 2007).
As a result, the global comparable sales had increased by 6.8%, from .3 billion during 2006 to .8 billion in 2007. the company also showed billion in total revenue and a 25% three-year compounded annual return to the shareholders, considered as above double compare to the three-year returns of S&P 500 and the Dow Jones Industrial Average. As a result, for three consecutive years, the company has been included in the Sustainability Index of Dow Jones that reflects in the company’s ongoing effort towards CSR (McDonald’s Corporation, 2007).
Figure 3 SWOT Analysis McDonald’s 2009
Figure 3 shows the SWOT analysis of the company in 2009. The company had been able to show a great improvement in performance from 2003. Compare to the SWOT analysis in 2003, it can be observed that the company holds the same strengths that focuses on the strong brand image and reputation, strong global presence, real estate portfolio as well as its strong position in the overall market. However, due to the Plan to Win strategy that was implemented in 2003,some of the weaknesses have became strengths for McDonald’s such as the product development and innovation, quality and taste of products, marketing, management, appearance of stores as well as the response towards the changing demands and needs of the customers. While all the weaknesses were the same, aside from it was reduced to the problem regarding connection with the franchise network that will reflect on the issues regarding quality; and the fact that, most of the player in fast-food industry, that the core product of the company is out of the line with the current trends and interests of the people towards healthier lifestyle, both for children and adults.
The opportunities are the same, but there are some added factors such as expansion in improving economies such as China and India; application of IT that will help to enhance the quality and speed of service. Furthermore, focusing on the McCafe will help the company to gain more customers in other segments, particularly adults. Furthermore, the company must also focus on the needs of the children regarding Play Park and offer adults regarding information and facts about health and fitness.
Just like opportunities, the threats in the entire fast-food chain industry are the same compare to 2003 analysis, aside from the growing concern of the people and other pressure groups towards the environmental impact of different processes and procedures of the company in preparing and delivering food for the customers.
Competitor Analysis
The following are the primary competitors of McDonald’s in fast food industry, primarily in the US:
Wendy’s
Wendy’s Old-Fashioned Hamburger was founded by David Thomas in Ohio and was incorporated in 1976 (Wendy’s 2008). The company is considered as the third largest fast-food hamburger business in the world that is operating 9,000 stores in about 33 countries in the world. During 2002, the company recorded total revenue of 2.73 billion that shows 14.2% increase compare to 2001. The strategy of the company focuses on offering different products and services compare to its competitor (Thompson & Strickland, 2005 p. C-223).
During 2002 – 2003, most of the food chain company is focusing on lowering the prices of their products in order to gain competitive advantage, but the company refused to follow the said trend and continue to focus on the quality of their products than price. As a result, Wendy’s had been able to offer unique items such as Garden Sensation, that enables the company to become prominent as a company that offer healthy items in their menu (Thompson & Strickland, 2005 p. C-223).
In terms of expansion, Wendy’s focuses on international expansion in Latin America, and uses acquisitions of smaller brands and joint ventures as the primary approach in expansion (Thompson & Strickland, 2005 p. C-224).
For the duration of the second quarter of 2007, McDonald’s reached a total of 8.3 million of sales, showing an increase, compare to 7.7 million in the same quarter of the previous year. The company recorded a decline in their franchise revenue, from .3 million during the second quarter of the prior year to .6 million of 2007 second quarter, this is because there is fewer open franchise restaurants compare to 2006 (FindArticles.com, n.d.).
Based on the said facts, it can be seen that Wendy’s maintains its core strategy, which is to focus on the quality of their product and not on global expansion. In addition, Wendy’s is also offering different healthy products that are not available in the menu of its competitors. Wendy’s also implements acquisition of smaller brand as their primary expansion approach, one of this is their acquisition of Baja Mexican Grill, however, under the management of Wendy’s Baja had started to lose money, that’s why the company decided to sell Baja in 2006. Aside from that, the company also acquires the Tim Hortons, but the company started some of its share in 2005.
The main disadvantages of the company is that it does not have an easily recognizable product that can be connected by the customers to the brand like Big Mac of McDonald’s and Whopper of Burger King (Orji & Bao, 2005 p. 10).
Jack in the Box
Jack in the Box is one of the most important competitors of McDonald’s in the industry and it was founded in 1951. During 2002, the company has a total of 1,850 restaurants in about 17 states. During the same year, the company recorded total revenue of .2 billion dollars that was up to 4.7% from 2001 (Thompson & Strickland, 2005 p. C-223).
The main strategy of the company during the said time is that it focuses its services and products towards the demands, needs and preferences of adult customers only, this is different from McDonald’s, Wendy’s and Burger King that focuses on the demands of the whole family. The company had been able to produce their innovative items like teriyaki chicken bowl and chicken fajita pita. Just like Wendy’s, Jack in the Box did not involved itself in the price war, instead it focuses its efforts towards the improvement of the quality of their product, together with the effort to attract women, that helped the company to reduce their dependency over the young males which is considered as a crowded market (Thompson & Strickland, 2005 p. C-224).
At the end of fourth quarter, September 28, 2008, the company recorded net earnings of .9 million or a total of 47% of diluted share, compare to the .8 million or 43% diluted share during the fourth quarter of 2007. It shows that the net earnings are 9.3 million or .01 per diluted share in 2008. It show that both the fourth quarter and fiscal year 2008 showed a negative impact of about 4 to 5 % diluted share due to the losses and costs that are related to the Hurricane Ike (Chain Leader, 2008).
The company sticks to its strategy to focus on a particular age segment of the customers, and that is to offer products and services that are suitable to the preferences, demands and needs of adults. That is the reason why the company focuses on different innovations and developments that will offer the customers the on-the-go convenience. As matter of fact, the company is the first main hamburger chain to develop and increase its own idea of drive-thru dining and most of its branches have its internal eating areas that are open for public for 18 – 24 hours every day (Jack in the Box, 2006).
Due to the growing demand for personalized products as well as healthy preferences of the customers, the company offers their Build Your Meal calculator, where in the visitor can go the website of the company and then their preferred burger or sandwich based on their tastes, online that will help them to analyze the nutritional information. Aside from that, the company also offers fresh and hot product due to the assembly-to-order program. The company also uses acquisition as their approach in expansion; the Qdoba Mexican Grill was acquired by the company in January of 2003 (Jack in the Box, 2006).
Sonic
Sonic was founded by Troy Smith in 1953 in Shawnee, Oklahoma as Top Hat. By 2003, the company recorded a growth of 2.4 billion in revenue that is considered as 6.2% increase, and it had grown to more than 2,700 locations, where in more or less 80% were franchise. Sonic is smaller compare to other competitors in the industry, but it had been able to be listed as one of the Top 200 Best Small Companies by Forbes for the last 10 years; one of the Hot Growth Companies of Business Week during 2002 and 2003; and one of the top franchise opportunities by the Entrepreneur Magazine (Thompson & Strickland, 2005 p. C-224).
Sonic focuses on its unique drive-in restaurant business, which is considered as the largest in America is one of the strategies of the company in order to meet the demands of the customers. Aside from that, the company also offer broad selection of items in their menu and offer a different restaurant atmosphere which bring back the old times. The Sonic tried to focus on its item that will offer fun and novelty. Aside from that, the company has a strong and very good relationship with its franchisees that helped them to add new products in their menu. As a result, in 2004, the company shows increase of 16 – 17% in their earnings per share (Thompson & Strickland, 2005 p. C-224).
As of now, the company still implements and maintain the said strategy in order to come up with the expectations of the customers. However, just like the other major competitors, Sonic had started to deal on the nutritional values of its products in order to respond on the growing demand of the customers for healthier food. The official website of Sonic offers and shows page that will show the company’s menu and the respective nutritional values that shows the calories, fat, sugar and other aspects that are related to nutritional contents of their products.
Conclusion
Base on the performance of McDonald’s from 2003 up to the present, it can be said that the Plan to Win strategy was successful because the company had been able to maintain its position as the most important player in the fast food industry. However, there are different threats and opportunities that must be focused by the company in order to maintain the said position. Primarily, the growing consciousness of the world regarding the negative impact of fast foods, not only for health but to the physical aspects is affecting its overall demand. That’s why the company must focus on giving their customers varieties of items in their menu that will cater to their healthy preferences.
In addition, it is also important to consider the growing competition in the industry because most of the players are offering almost-the-same products and most of them is involved in the price war.
Globalization offer a great opportunity for expansion, however, it is important to consider that it also offers difficulties in terms of management and marketing due to the fact that each and every nations inhibits differences in terms of cultures and traditions that will influence the customers’ preferences, demands and the entire buying behavior and patterns.
Above all, McDonald’s must focus on giving CSR that is considered as a powerful marketing tool. This will help to boost the current strength of the company, which is the brand image and reputation.
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[*1]
Appendices
Appendix A – SWOT Analysis and Plan to Win Strategy 2003
People
Place
Product
Price
Promotion
S
T
R
E
N
G
T
H
S
§Strong brand image and reputation
§ Strong brand image and reputation
§ Strong brand image and reputation
§ Strong brand image and reputation
§Strong brand image and reputation
§ Strong global presence
§ Strong global presence
§ Strong global presence
§ Strong global presence
§Strong global presence
§ Specialized training for managers known as the Hamburger University
§ Strong real estate portfolio
§ Holds majority of the market share in the world’s fast-food hamburger industry
§ Holds majority of the market share in the world’s fast-food hamburger industry
§ Holds majority of the market share in the world’s fast-food hamburger industry
W
E
A
K
N
E
S
S
E
S
§ Weak product development and innovation
§ Many stores started to look out-dated
§ Declining share in the market
§ Failure to respond to the changing needs and demands of the customers
§Declining share in the market
§ Quality and taste of products
§ Weak product development and innovation
§ Weak product development and innovation
§ Poor management
§ Quality and taste of products
§Quality and taste of products
§ Failure to respond to the changing needs and demands of the customers
§ Failure to respond to the changing needs and demands of the customers
§Poor marketing
§Failure to respond to the changing needs and demands of the customers
O
P
P
O
R
T
U
N
I
T
I
E
S
§ Growth of the fast-food industry
§ Globalization, expansion in other countries
§ Globalization, expansion in other countries
§ Globalization, expansion in other countries
§Globalization, expansion in other countries
§ Growth of the fast-food industry
§ Growth of the fast-food industry
§ Growth of the fast-food industry
§ Growth of the fast-food industry
§ Changing trends in eating habit
§ Changing trends in eating habit
§ Low cost menu that will attract the customers
§ Low cost menu that will attract the customers
T
H
R
E
A
T
S
§ Increasing competition in the local and global fast-food industry
§ Increasing competition in the local and global fast-food industry
§ Changes in the global economy
§ Changes in the global economy
§ Changes in the global economy
Fast-food chain industry is expected to struggle to meet the expectations of the customers
§ Fast-food chain industry is expected to struggle to meet the expectations of the customers
§ Increasing competition in the local and global fast-food industry
§ Increasing competition in the local and global fast-food industry
§ Increasing competition in the local and global fast-food industry
§ Changing diet preferences and health expectations
Fast-food chain industry is expected to struggle to meet the expectations of the customers
§ Changing diet preferences and health expectations
§ Fast-food chain industry is expected to struggle to meet the expectations of the customers
§ Fast-food chain industry is expected to struggle to meet the expectations of the customers
Appendix B: McDonald’s Competitor’s Logos
[*1]THIS PORTION CANNOT BE CHANGED.
Credit:ivythesis.typepad.com
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