Synopsis of the Situation
The McDonald’s burger has been people’s favorite breakfast meal for several years, but this seems to have changed in the recent past. Unlike the older generation, who fancied McDonald’s burger in their younger years, the younger generation no longer enjoys it as much.
The company has also been struggling to meet the huge orders that come in everyday as demand has outstripped its supply ability at some point. Besides, McDonald’s Corp. also faces stiff competition from its competitors who are slowly overtaking it in the market (Jargon, 2014).
As a result of these challenges, there has been a decrease in McDonald’s total sales over the last few months, despite the company’s strategy of luring more customers by giving clients free coffee alongside other meals.
Key Issues
McDonald’s Corp. is in the restaurant industry, which specializes in selling ready-made food to clients. This is a highly competitive industry with a variety of customers with diverse needs. Companies in this industry serve clients with their menus at various prices depending on quality and class.
The restaurant industry has spread all over the world driven by the high demand for ready-made food. There are restaurants of various levels for different classes of people; the high-income earners, middle-income earners and the low-income earners.
The competition in this industry requires companies to be dynamic in order to always please their clients, make enough profits and remain at the top of the competition at the same time.
This requires a lot of creativity in preparing the menus; hence restaurants have to employ highly qualified and skilled chefs (McDonald’s, 2013).
McDonald’s restaurants are in over one hundred countries all over the world. Most of them are located in the United States of America, Europe and such Asian countries as Japan. The company focuses its efforts on markets where it is already established.
However, the company remains optimistic about venturing into new markets if its business improves in the future, but the dates for this have not been set yet (Jargon, 2014). Menus in its already established markets are prepared to cater for people of all ages and with diverse needs.
This increases its market as anyone can walk into the restaurants and eat something at any time (Grewal and levy, 2013). Most of McDonald’s businesses are franchise based while a few others are based on mutual agreements.
According to Jargon (2014), the company has been struggling to do well in its markets for the last few years. As such, the company has decided to scale back some of its less popular menus to cut on the expenses on foods that do not bring high profits into the company.
McDonald’s has decided to stick to its dollar menu as it is doing well in the market compared to the others.
According to Kaufman (2013) McDonald’s earned $1.4 billion in the second quarter of 2013 and revenue rose to $7.08 billion slightly missing analysts’ expectation of $7.10 billion, but food service sales fell by 1.2% in June, which was the largest decline since February of the same year.
Kaufman adds that the company is, however, still struggling to make the investors happy with their profits as the sales has risen by only 1% during this period.
The company’s CEO, Don Thompson, acknowledged that the 2013 results are likely to remain challenged for some significant period of time, saying that the monthly sales are disappointing as consumers are spending less money on eating out since the cost of living has gone up (Kaufman, 2013).
He adds that the company’s main competitors, the Burger Kings and Wendy’s, have taken a large share of the company’s markets and are doing well, despite the hard economic challenges.
But this is not all for McDonald. The company recorded a drop in the share value of $2.64 (2.9%) to $888.94 billion and net income fell by 4.5% to $1.35 billion for the second quarter in 2012 from $1.41 billion a year earlier, mainly attributed to a weakening of global economy and the impact of a stronger dollar (Reuters, 2012).
The combined effect of a weakening of global economy and the impact of a stronger dollar forced consumers to spend less on unnecessary things (Grewal and Levy, 2013).
McDonald’s earnings, however, missed analysts’ average estimate by 5% a share as the total revenue edged up to $6.92 billion from $6.91 billion a year (Reuters, 2012).
Target Audience
McDonald’s Company has a wide target audience. The company serves an array of customers ranging from the young to the old customers and from the high-income earners to the low-income earners. The company has, therefore, adopted marketing strategies that incorporate everyone in their menu to maximize sales.
As such, the company designs its advertisements to catch the attention of all sorts of viewers in a bid to attract as many customers as possible (McDonald’s, 2012). McDonald’s also have menus for families, prepared to serve parents, teenagers and the younger children.
Such menus are highly nutritious and tasty for everyone and the prices are fair for all categories of customers. In addition, McDonald’s provide takeaway packs that are fit for a family picnic, in case the members want to have their meal out during picnics.
The company also has takeaway packs for the working class, which are light and well packaged in such a way that one can easily eat while walking or working. These are also available at favorable prices just like family takeaway packs.
Marketing Efforts
It is important to note that the company has somehow effective marketing strategies in place as outlined by McDonald’s (2014). The company’s main aim has always been to ensure that its products fulfil the demands of its diverse customers.
First, the company carries out regular opinion polls to seek customers’ views as a way of obtaining customers’ feedback on what could be done to better company’s products.
Customers provide feedback, both on their likes and dislikes about the company. The changes suggested are effected to ensure that the clients are always kept happy.
Second, McDonald’s has started the ‘happy meal strategy,’ which is specially prepared to catch the attention of clients, especially the children (McDonald’s, 2014). This, as a result, attracts even parents to eat other meals as they always accompany their children to the ‘happy meals.’
Third, the company has put so much effort and resources into packaging its products in such a way that they attract clients. The products are made to look attractive and appetizing so that customers are lured into buying at the first sight.
Fourth, the company has special menus to take care of people who do not just eat everything like Muslims and Hindus.
The company has developed menus that are culture sensitive to serve the needs of all clients, despite their cultural affiliations. For example, McDonald’s is providing a pure vegetarian menu in India as most of the clients do not eat meat.
Fifth, the company has its outlets located close to each other in such a way that potential customers have no other choice, but to enter these restaurants.
This is accompanied by the fair prices offered by McDonald’s to attract both the low and middle income earners, which forms the greater percentage of company’s clients. In this way, the company is able to tap into the market with the largest number of people.
Sixth, the company runs numerous advertisements on the most watched television channel to make sure that all the clients are aware of its products and hence will make a purchase. The adverts are well designed to attract, catch and maintain the viewer’s attention and arouse interest to make purchases.
Key Players
The restaurant industry is highly saturated with about 8 million restaurants managed by 300,000 companies globally.
Key players in the industry include such companies as McDonald’s Corp., Wendy’s International, Inc., Starbucks Corp., Autogrill S.p.A., Yum! Brands, Inc., Outback Steakhouse, Inc., Whitbread PLC Darden Restaurants, Inc. and Brinker International, Inc., KFC.
Definition of the Problem
Despite its effective strategies discussed above, McDonald’s performance in the market against its competitors has raised concerns in the recent times owing to several factors.
This is a challenge that affects McDonald’s both locally and abroad as the competitors are slowly taking up a significant portion of its market share (Mourdoukoutas, 2013).
One of the greatest challenges facing McDonald’s is the weak economy, especially in Europe (Mourdoukoutas, 2013). The cost of living has gone up tremendously and people can no longer afford to eat out all the time. This has led to low sales registered by the company.
Besides, the cost of ingredients has gone up and the company cannot afford to make the menus any cheaper to attract more clients if it has to make meaningful profits.
This affects McDonald’s marketing due to the fact that it has no control, whatsoever, over its markets and clients. Its advertising has also not been convincing enough to lure clients into the restaurant in the hard economic times, because clients still do eat out, in other eateries.
Another challenge is that the market is saturated and there is great competition.
The company has tried to invest in foreign countries, but this has not yielded any good returns due to the fact that foreign markets are already owned by the native companies and it is extremely difficult for new entrants to beat such companies in their already established markets (Mourdoukoutas, 2013).
The company needs to develop locally instead of going into foreign countries, but it can consider exploring markets only in countries where clients prefer a mix of global preferences. It needs to concentrate more on the local markets where the company is well-known by its clients and is doing well.
The most pervasive problem that McDonald’s needs to address seems to be indulging in new markets that are already saturated. The company is focusing on the wrong areas where it would not do well, no matter what amount of marketing it engages in or how attractively it prepares its menu.
McDonald’s ought to have concentrated at home where it is well-known and already have an established market instead of exploring new markets.
This problem is most important because no matter how good a business idea is and how much marketing and advertising have been put into it, the place of work needs to be right. The four most crucial factors required for the business to do well are product, price, place, promotion and the people (Grewal and Levy, 2012).
If one of these goes wrong then the business is likely to collapse or if it survives, then it would only make low sales and hence low profits.
Alternative Solutions to the problem
I believe that McDonald’s situation is a problem that can easily be solved through proper planning and management of the company using the following alternative solutions.
First, the company can pull out of the foreign markets where it has no prospects of doing well and instead concentrate on the markets where it is well established. This will enable the company to maximize on the resources it has at its disposal to make huge profits against its competitors.
Second, the company can put more resources into marketing and advertising in their new markets. This might take long to yield returns, but with time people will slowly shift their interest towards McDonald’s as new products tend to arouse a lot of interest and desire.
This should, however, be done with a lot of creativity to ensure that potential customers are lured into liking what the company offers.
Finally, the company can also put more resources into marketing and advertising in the foreign countries where it has set up. This should go hand-in-hand with providing cuisines that are liked by residents of those foreign countries.
However, McDonald’s should also consider employing workers from those regions as a way of earning the approval of the community.
Incorporating locals in the business will not only create employment, but also make the clients perceive McDonald’s as a company that has the needs of the community at heart and hence buy from it.
Selected Solution to the Problem
The third solution is the best way to go as both the company and the community coexist and benefit from each other. It is good to explore new markets and openings as the company never knows where its luck lies. The company could find that it conquers these markets against the local competitors.
Expected Results and Rationale for the Solution
Marketing and advertising are vital strategies that McDonald’s should integrate into its daily management activities. The company needs to find out what it has not been doing well in the recent past.
The company also needs to do an audit of both its products and the locations where it is conducting its business to be able to identify exactly where the problem lies: product or the location.
Reducing the rate at which McDonald’s ventures into new markets until such a time when the company will have started making enough profits to spend in marketing and advertising in new markets is a wise decision.
Advertising and marketing is the only way through which consumers would get to know about the product and it is obvious that the company needs to do much about this in its current markets alongside other strategies like restricting investment in new markets.
Recommendations
The company should pull out of the foreign markets where it has no hopes of doing well. It should instead concentrate on the markets where it is well established and is doing well to maximize on the available resources and make huge profits against its competitors.
It should also put more resources into marketing and advertising in their new markets, especially the ones with high growth prospectus.
It might take long for McDonald’s to realize any returns in these markets, but with persistence and perseverance the efforts shall pay as people shift their interests to the company since new products tend to arouse a lot of interest and desire.
Finally, the company needs to put more resources into marketing and advertising in the foreign countries where they have set up. This should be accompanied by the provision of local cuisines to take care of the interests of residents of those foreign countries.
The company should also consider offering employment to residents of its foreign locations as a way of earning the approval of locals. This would not only create employment, but also make the clients to perceive McDonald’s as a restaurant that has people’s needs at heart and hence buy from it.
Positive and Negative Results
As already discussed above, putting more resources into marketing and advertising in the foreign countries with high growth prospectus seemed to be the most appropriate solution for McDonald’s situation. However, this solution would generate both negative and positive outcomes. The outcomes would be as follows.
The company would expand its markets, probably do well and increase its sales and hence its profits. This would ultimately lead to its growth. On the other hand, the company might experience some rivalry from the local restaurants, which would not be good for business.
The local companies might even intentionally soil the name of the company so that it can exit their market, which would be bad for business. Besides, the company might spend a lot of time and resources as they try to please the people to come to their restaurant, which might prove to be too expensive.
Providing employment and their preferred menus is not a guarantee that McDonald’s will be accepted into the new market. Nevertheless, the company would create employment to the locals, which would help in reducing poverty levels in those countries.
Handling the Situation
If I were to handle the situation, I would take the following steps to make McDonald’s better. First, I would pull out of the foreign markets where the company has no prospects of doing well. I would instead concentrate on the markets where it is well established and is doing well.
This would ensure that the company maximizes on the resources it has at its disposal to make huge profits against its competitors. Second, I would put more resources into marketing and advertising in the new markets with high prospects for returns.
It might take long for the people of that place to shift their interest to the company, but with persistence and determination the locals are likely to give the company a try as new products tend to arouse a lot of interest and desire.
Finally, I would put more resources into marketing and advertising in the foreign countries where McDonald’s has set up and is at least doing well. I would make sure that this is blended with the provision of menus, which are liked by the people of those areas.
I would also look into the possibility of employing some of the best chefs from those areas to make the community perceive the restaurant as their own.
Incorporating the community in the company would work against the competitors as the clients would perceive McDonald’s as a restaurant that cares about people’s needs and hence would buy from it.
References
Grewal, D., Levy, M. (2013). Marketing (3rd Ed.). Irwin: McGraw Hill.
Jargon, J. (2014). McDonald’s faces sharper competition in breakfast battle ground. The Wall Street Journal. Web.
Kaufman, A. C. (2013). Analysis: McDonald’s disappointing 2Q earnings reflect larger economic trends. Web.
McDonald’s (2012). Who is your target market audience? Web.
McDonald’s (2013). McDonald’s franchise strategy. Web.
McDonald’s. (2014). Marketing strategy of McDonalds. Web.
Mourdoukoutas, P. (2013). McDonald’s big challenge at home and abroad. Web.
Reuters, T. (2012). McDonald’s profit declines as world economy weakens. Web.