McDonalds Marketing Strategy in the World - Assignment Example

Introduction McDonalds, specially known for Hamburgers and Big Mac items, is one of the world’smost famous brands. It is the dominating fast food restaurant chain in its industry, having the most frequent expansion rate. McDonalds was the first company which introduced fast food to the world out of USA. It was established in 1955 in Illinois, USA. McDonalds has become one of the most successful restaurant chains and largest hamburger food chain in the world. After successful business in United States, it expanded its operation overseas by opening its first overseas outlet in Canada.” Currently, $6 billion McDonalds serves about 64 million international customers each day with more than 33000 franchises operating in 121 countries. After every three hours, a McDonalds franchise is opened somewhere in the world. The average expansion rate of Mc franchises is 2500 store per year (McDonalds 2011). General Globalization Perspective and Marketing Challenges Going global requires a firm to set certain strategies that earn it success around the world. The firm has to accommodate in its product or services the cultural, religious and social values of the region it operates in. Some firms or industries get more benefit from global markets than operating locally. Globalization provides to the firms the factor cost differences, by exploiting which they can become more profitable. It also encourages businesses to shift towards the low tariff charging countries where the cost of doing business is low and/or demand for certain products is high. And due to societal and cultural benefits, the companies have more chances to bring innovation into their products. The global expansion brings efficiency, flexibility and innovation in a firm’s production system (QuickMba 2010) The firms which go global develop certain strategies to efficiently capture the overseas markets and cope with potential problems they might face operating there. They also develop Marketing Strategies to position in minds of customers the positive, tempting and healthy image of their products. Marketing strategy of a firm intends to correct what the customers feel about the organization. It deals with positioning the unique features of the product in customers’ minds. When the product a company offers is not liked by or is against the local, cultural, religious or social values, the marketing of the product becomes a difficult task and most of the times the products are altered up to the desire of the local demand to be accepted easily. So a great care is taken while marketing in different countries. McDonalds Marketing Strategies McDonalds is one of the best known brands worldwide. McDonalds’ dynamic business strategies made it leading global foodservice retailer in international market. Due to sound global expansion strategies and effective management, McDonalds leads the fast food restaurant industry through out the world. McDonalds sales are three times ahead of its top competitors. What earned McDonalds such image is how it has created loyalty in its customers through its marketing strategies throughout the world. With the combination of sound fundamental practices and innovative marketing, McDonalds has created a unique value to customers (McDonald 2008) McDonalds operates in about 121 countries of the world. This expansion includes Europe, Japan, China, India, Russia and other substantial markets. The following discussion will contain the specific strategies McDonalds practiced in its substantial markets. McDonalds marketing strategies in UK UK has been a very significant market for McDonalds since its launch in 1974 there. McDonalds operates in UK with more than 1000 restaurants and has gained substantial fast food market share. McDonalds followed various policies to gain an edge in the market by shaping the brand as British as possible. Marketing the McDonalds, not just the products For McDonalds, primary marketing objective was not marketing the food. Rather it emphasized on marketing the whole restaurant environment and facilities there, such as prompt service, good place for formal/informal meetings, play area for children, Wi-Fi Internet facility for customers, etcetera. It was McDonalds’s most important and very different marketing strategy then in UK. American Origin Due to McDonalds American origin, British citizens had considered perceiving this burger giant as arrogant and inflexible. To remove this perception and promote British friendliness McDonalds launched TV advertisement campaigns which encouraged the sense that McDonalds is at the center of British family life. Another advertising strategy was to appeal the children. In its advertisements, McDonalds promoted British family life style along with play areas for children, and ‘Happy Meal’ menu which became temping for children. British people also remained receptive to these promotions. Promotional tie-ins The third marketing strategy element was Promotional tie-ins. McDonalds started to link itself with almost every successful film premieres in UK. Few of the films, McDonalds linked itself with, were A Bug’s Life, Hunchback of Notre Dame, and Hercules etcetera. For this, McDonalds negotiated ten years exclusive rights with Disney since 1996. The most famous advertisement of McDonalds in UK was two-for-the-price-of-one Big Mac offer (Marketing Magazine 1999). Such strategic responses earned McDonalds a safe entry and luring profits in UK that continue to grow. McDonald’s marketing strategies in Russia: McDonalds entered in Moscow in 1988 after 12 years of negotiation with Russian officials. It had to face country’s strict policies. McDonalds convinced the officials that the outlets will be set up in accordance with Russian culture. Finally in 1990, McDonalds started operating in Russia. The Russian market required different marketing strategies keeping in mind the major challenges of the unfamiliarity of the brand to customers, and fear of taste incompatibility in this new varied market. McDonalds’ Product awareness strategy Russians were not familiar to the terms McDonalds and Big Mac. It really required hard efforts to promote McDonalds in Russia. For making Russian customers aware about the company and the products, McDonalds Russia practiced few different strategies. It started a TV show named “Flight 910” aired twice a week, which showed the children touring around the world and in the end of episode landing at a McDonald restaurant. About 50 million Russians watched every episode of this program and in this fascinating way they became familiar to the brand. The viewers formed a relationship with McDonalds from this. Menu Modification McDonalds modified its menu according to Russian culture thinking this modification will not affect the brand image. Another important marketing strategy element was setting up the price. The price for one Big Mac, a Coke and some quantity of fries was set equal to half of the average daily income of a Russian person (David Molch 2007). McDonalds also promoted the unique Russian culture along with marketing the brand. It showed great respect to the Russian culture that earned it a huge number of customers (Business Today 2011). Russia became largest sales point of McDonalds In result of McDonald’s successful marketing strategies and receptive attitude of Russian customers, Russia became the most profitable region for McDonalds. On the first day of outlet launch in Moscow, around 30000 customers visited the outlet and since then visits by some 20000 customers daily has become a routine. Russia has become McDonald’s one of the largest sales and most profitably operating region. McDonalds marketing strategies in India McDonalds arrived in India in 1996 and opened restaurants in Delhi and Mumbai initially. It continued to open outlets in other cities of India. There were many challenges for McDonalds to market in India. The biggest challenge was to face the anti-animal slaughter organizations and to serve the vegetarian market. Another challenging task for the firm was to change the consumers’ perception about McDonalds as a ‘Foreign’ or ‘American’ brand and make customers perceive McDonalds as a part of Indian family. Considering Vegetarianism and Non-beef items McDonalds India launched India specific non-beef and 100% vegetarian items. McAloo Tikki, burger and other vegetable items were added to regular menu especially for vegetarian customers. McDonalds also provided kitchen tours to customers to make them believe there is a separate vegetarian and non-vegetarian cooking platform at McDonalds. Mass Media Advertising: Promoting Familiarity and Comfort Till 2000, McDonalds did not use any mass media advertising. Rather the main focus of the firm remained on outlet designs, adding Indian-taste items to menu and opening new stores around the country. By 2000, McDonalds India started to advertise on TV channels. In its first advertisement, McDonalds focused on a child who is the victim of stage fright. He could not read the poem aloud in his school. But when the child reaches McDonalds, he becomes confident and read aloud the poem due to familiarity with the restaurant environment. This advertisement aimed at promoting McDonalds as a familiar and comfortable place. Kids enjoyed sitting on the Ronald McDonald bench and pumping sauce from the sauce machine. Tapping the Youth To tape the young customers, McDonalds launched Happy Price Menu in 2004. Despite low price menus the Indian customers continued to perceive McDonalds as an expensive outlet. To curb this perception, McDonalds advertised with Yesteryear's Prices tags which aimed at promoting that the prices have not changed and are same as they were previous year. Happy Price Menu campaigns were also promoted through virals. Promotional Tie-ins McDonalds linked itself with sports and sponsored many sports events in India. McDonalds also linked itself with Indian Premier League (IPL) -a cricket tournament- where it was one of the sponsors and food providers. McDonalds marketing strategies in Japan McDonalds captures 65% of the domestic hamburger market in Japan. It opened its first store in Tokyo in 1971. People said the McDonalds won’t last a month here. But within five years McDonald’s stores increased to 100. By 2000, some 3600 stores were operating throughout Japan. The credit for such success is attributed to McDonald’s marketing strategies, which are more conventional to the Japanese market, than McDonald’s normal practice throughout the world. It has customized itself with the Japanese market by localized marketing strategy, detailed manuals and ultra low prices. It also absorbed the technology and relied more on latest technological advertising techniques than on the conventional (Web-japan 2001). Localized Marketing Strategy Adoption of Japanese marketing style made the firm very successful here. Instead of its English name McDonalds, it named itself Makudonarudo here, which was more pleasing to Japanese customers. McDonalds rejected the US model of relying on franchises and started direct management. It also launched Japanese-style special products e.g. Teriyaki Mac Burger that went so popular. Detailed manuals McDonalds issued detailed manuals which showed not only the information related to products but also how those products are processed, for quality assurance. The manuals of McDonalds Japan contain 25 chapters which describe every product in detail. Even the manuals communicate Celsius degree on which the products are heated. Though, manuals cannot substitute the skilled cooks, they provide satisfaction to customers and are of the great help to part-time workers who constitute 95% of McDonalds employees. Strategy of Lowering Prices Before formally starting operations in Japan, McDonalds surveyed the market. It came to know that due to a slump in economy in 80’ the purchasing power of people declined. So, it decreased its prices from $1.68 to $1.04 for a hamburger. In 2000, the prices were decreased further down to $0.52 for a hamburger. It was an astonishing decision by McDonalds. McDonalds focused its hard on cutting the supply cost and opened small stores around the country. This step also followed the market research by the firm. The timely strategy of lowering the prices in a deflation era won over the customers, even the old aged people who have left eating fast food started to visit the McDonalds store. Including latest technology in Marketing McDonalds uses latest technology for advertising methods, which is liked by its Japanese customers. McDonalds’ advertises in Japan through e-mails and flyers and less depends on traditional TV advertisements and posters (Academic Travel 2005) Event though other firms in fast food industry are also equipped with latest technology, have curbed the prices and provide the food products in localized taste, the McDonalds effect seems to remain for a long time. McDonalds in China McDonalds entered in mainland China in 1990, when the Chinese economy was opened for investors just few years ago. Till March 2008 there were more than 800 McDonalds outlets across China. McDonalds had to adopt the unfamiliar and rapidly changing environment here. The food style and living style was not only different in China, it also kept on changing due to increasing urbanization and economic growth (Harvard Business Review 2011). The competitors in industry were more localized; McDonalds kept on its own localization movement and gave customers the savory aroma of beef. The focus in initial advertisements was not on increasing the sales. Rather the company intended to bring to notice to the customers the presence of McDonalds in China. In China McDonalds adopted almost the same marketing strategy that was in US, but it spent more for marketing strategies to fix the Chinese customers’ behaviors. There were already strong competitors in China e.g. Yum who led the fast food market then. McDonalds took several initiatives to face the competition and grab the market share. The marketing strategies McDonalds adopted to gain Chinese market share were: Research on Macroeconomic environment For a firm, it is very crucial to research about the market it intends to enter. In case of China, significance of research increases more, because within the country there are many geographical, demographical and cultural differences. So before formally starting its business in China, the McDonalds researched its Chinese market and tried hard to customize itself according to the Chinese market requirements. Marketing and Sales strategies with Chinese characteristics McDonalds specifically focused on children through TV advertisements and leaflets. As in China, parents always prioritize children’s interests over theirs. Hence McDonalds targeted children through TV advertisements, Birthday Party arrangements and paying gifts to them. Launching McMorning and cutting prices Chinese people leave for work early in the morning and often do breakfast out of home. There are several vendors who provide cheap breakfast food on streets. McDonalds grabbed the concept and launched its McMorning menu for those who leave early in the morning for work, need quality food, and prompt service. Most of the Chinese middle class could not afford the costly (Chinese perceived) menu of McDonalds. For those McDonalds cut the prices to get them in the stores. Communicating Price-Value concept Giving discounts lowers the product quality perception. So in its advertisements, McDonalds focused more on the value it gives to customers in lower price, than on positioning the price cut. In such an advertisement, a person goes to the McDonalds counter and become disappointed to see less money in his pocket than is required. Then a McDonalds employee goes ahead to magically bring a burger, a cola and fries in front of him and customer becomes happy to see getting great value in lesser amount. McDonalds’ Overall Markets Responses The marketing strategies of McDonalds have been challenging and impressive in various countries. It has tried almost every effort to gain the fast food market share in its operating regions. Due to its financial strength, McDonalds goes far ahead of its competitors. It expended on market research, discovering hidden customer characteristics, categorizing income levels and observing eating behavior of people, before starting business in a new country. The most important strategies which earned McDonalds a great deal in fast food industry were the McDonald’s ability to seem local according to the region it operates in, modification of menus to local tastes besides continuing the original beef products intact, building relationships with customers, and marketing more the whole McDonalds environment than the actual products. Future Strategic Responses of McDonalds McDonalds know that due to immense competition from emerging low price restaurant chains it will become a tougher job to maintain such growth rate, so it considers the following elements in its future strategies. Immense competition The competition for McDonalds has increased. Now, there are many fast food restaurant chains who offer inexpensive products in a comfortable environment. In Europe the major competitors are Burger King and KFC. KFC competes the McDonalds throughout the world and tries to capture the markets McDonalds has not reached yet. Growing health consciousness in customers People are becoming more conscious about their health now. The scientific discoveries have lured the people to have long lasting life and healthy figure. The trend of keeping oneself smart, fit and healthy is becoming rampant. That affects the demand for fast food. McDonalds has also to take in account this consciousness and transform its some of the products, if not all, into healthier hygienic ones. Vegetarianism in India India is one of the largest selling regions of McDonalds worldwide. The main food product of McDonalds was hamburgers which used beef. The Hindu community does not eat beef and there are also a huge number of vegetarians who do not eat any meat or egg. So, marketing in India was a big challenge to McDonalds. Though it seems that it has coped with this challenge, the vegetarians still continue to condemn the use of beef in burgers which hurts their beliefs, propagate against McDonalds. These actions might affect the firm badly in future. References 1. McDonalds 2011, Getting to know us, accessed on December 12, 2011 from http://www.aboutmcdonalds.com/mcd/our_company.html 2. QuickMba 2010, Global Strategic Management, Accessed on December 7, 2011 from http://www.quickmba.com/strategy/global/ 3. McDonalds Consulting Services 2008, McDonalds Marketing Strategy, Accessed on December 10 2011 from http://macdonaldconsultingservices.com/post/2008/10/McDonalds-Marketing-Strategy.aspx 4. Marketing magazine 2011, Marketing, Accessed on December 4,2011 from < http://www.marketingmagazine.co.uk/news/59278/> 5. Molch, David 2007, McDonald's Russia: Managing a Crises, Accessed On December 10,2011 from http://www.worldcat.org/search?q=McDonald%27s+Russia%3A+Managib+a+Crises+by+David+Molch&qt=notfound_page&search=Search 6. Business Today 2011, McDonald’s in Russia – Defeated Communism with a “Happy” Meal, accessed on December 10, 2011 from < http://www.businesstoday-eg.com/case-studies/case-studies/mcdonalds-in-russia-defeated-communism-with-a-happy-meal.html> 7. Web-japan.org 2001, The McDonald’s Effect, accessed pn December 12,2011 from http://web-japan.org/trends01/article/010820bus.htm 8. Academic travel, 2005, Big Mac in Tokyo: The Cultural Experience of McDonald's Japan, accessed on December 4, 2011 from < http://academictraveljapan.blogspot.com/> 9. Harvard Business review 2011, McDonald's: Is China Lovin' It?, accessed on December 12,2011 from http://hbr.org/product/mcdonald-s-is-china-lovin-it/an/HKU802-PDF-ENG Read More