McDonald’s will continue to increase its annual revenue and stock prices over the next five years. The purpose of this report is to show my working knowledge of the 4 As of marketing. Please evaluate this report and prepare for discussion on Wednesday. Product The corporate strategy for McDonald’s product is a threefold approach using strategic flexibility. The three components are permanent, temporary, and local product. Each “layer” of the product strategy fulfills a distinct purpose. The main purpose of the permanent items is to ensure that there is always something familiar or consumers on the menu (1).
The temporary products function as a development strategy to give customers a new experience and to experiment with products that may become permanent (1). As McDonald’s expands internationally, the local products have been created to meet consumer demands in particular markets (1). The way that McDonald’s’ implements its business level strategy is through product differentiation, such as the company’s response to criticism and the publics of popular menu items, such as the Egg White Delight McMullen, which succeeds in cutting fat and calorie count (2).
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On a functional level, products such as the Microbial Tagging, available across Morocco, serve to support the strategic flexibility of McDonald’s corporate strategy. “When you walk into a McDonald’s no matter where you are in the world the restaurant should connect to the local culture,” said company representative Leslie Rose. “So when you look at our menus… You’ll find food that reflects local taste preferences” (3). Price The corporate pricing strategy for McDonald’s is based on low price/high volume.
Effective pricing is a main component but the company also realizes the importance f value- people enjoy McDonald’s food which is a big part of repeat business. The best pricing in the world will not sell a product if the consumer does not perceive value in what they are purchasing (4). This strategy is implemented on the business level by the McDonald’s Value Menu. The items on the Value Menu often serve as “loss leaders” in order to sell other products which are profitable (4). On a functional level, prices are contingent on competitors, such as Wendy.
Wend’s has started advertising its lower-priced items more aggressively this year and came out with a ewe value menu (5). This has resulted in expansion of the popular dollar menu and continued efforts to compete with the offerings from other chains, such as the creation of the McDonald’s dollar breakfast menu (6). A McDonald’s spokesman, Bill Whitman, said the menu isn’t aimed at repelling rivals, but several of McDonald’s test sites are the same markets where Wend’s is entering into the breakfast business (6).
Place The corporate strategy for McDonald’s concerning place is a push and pull strategy. The major focus is on push- that is, opening restaurants all over the U. S. , both in ties and on highways as well as expanding internationally. This strategy has been so successful at discovery and exploitation of new business opportunities that the McDonald’s business model has become the norm for other franchise organizations (7). The business level strategy can be seen in the expansion of McDonald’s across China. McDonald’s should open an outlet a day in China as it challenges Yum!
Brand for dominance in Sais’s economy (8). “We should be opening a restaurant every day in the next three to four years” in China, said Peter Iredell, company president for Asia. On a functional level, the company is also branching out to the internet. Americans will soon be able to order and pay from their mobile phones as McDonald’s is currently testing a mobile payment application (7). McDonald’s is hoping to capitalize on this new market as they develop this technology to ignite growth at a time when many Americans are eating out less (7).
McDonald’s vies to be successful by using a place strategy of adaptation and innovation, coming up with fresh products and services to address the needs of a diverse consumer marketвЂ??as shaped by demographic, economic and local factors around the world (7). Promotion Strategy The corporate strategy for McDonald’s for promotions is summed up in one word: saturation. McDonald’s again utilizes a push strategy by using a variety of mediums for promotions: logos, billboards, mascots, packaging, and mass media.
Mascots are used to promote good will for the company and their appearance also cause an the restaurants have begun promoting “healthy” menu items. This was likely sparked by the government requirements that restaurants such as McDonald’s make public the nutritional facts of their food (4). Turning this into a positive, they have added healthy” items to the menu and emphasized them both in an effort to appeal to a new market segment. This also downplays the less than positive nutritional facts of many of their traditional menu offerings (4).
On a functional level, this promotion strategy functions through the use of temporary menu items, such as the Mighty Wings, which will be available only during football season (10). This expands upon the partnership between the NFG and McDonald’s by using the NFG to promote the Mighty Wings (10). The traditional McDonald’s customers eating habits may have changed, but the menu has also changed to accommodate them. This is marketing that evolves in relation to the changing needs of loyal customers (4).
This adaptability combined with using traditional print media, characters, and product placement, allows McDonald’s to implement its saturation promotion strategy. Threats One of the threats to McDonald’s growth in the future is the creation and growth of fast food workers unions, which call for increases in benefits and minimum wage. If these demands are met, the company may have to reduce its staff to accommodate the larger wages (11). The Service Employees International Union in 2013 has helped establish a new union in at least six cities where the union and community advocacy groups have been organizing fast-food strikes (11).
McDonald’s will also have to continue to implement strategies within product, price, place, and promotion in response to the challenges brought by its competitors in the fast food market. Opportunities Opportunities for McDonald’s in the future include: the continued expansion of the company’s current product line, such as the Mighty Wings, to attract customers and the continued expansion of the popular dollar menu to compete with the offerings from other chains (6). Also, the expansion into new markets such as China and mobile applications should allow for continued growth.
Responding to criticism and the publics increasing desire for healthier items by continuing to develop healthy versions of popular menu items, such the Egg White Delight McMullen. Another opportunity is the continuation of efforts to capitalize on promotions that have been successful for competitors, such as offering coupons to consumers to entice them to try new menu items. Prognosis The overall fiscal health of McDonald’s over the past 1 5 years has followed a fairly insistent trend with revenue continuing to rise each year.
The exception was from 2008 to 2009, where overall revenue decreased by 1. 7 percent (12). From 2009 to 2012, revenue has again continued to increase each year (13). Stock prices from the NYSE have followed the same trend of increasing during this period, from 64. 75 in 2009 to 102. 22 in 2012 (13). McDonald’s also occupies the status as the largest single major player in terms of market share among fast food companies as outlined below (12). The overall trend that can be expected that using and expanding upon its product, annual revenue and stock prices over the next five years.
Conclusion McDonald’s will have to find a solution to the problem raised by fast food workers unions and strikes, but this may not be detrimental to growth. The company says it has not felt an impact from the strikes (11). With the high turnover rates of this type of employee, many have concluded that these unions will not be successful (11). The three-fold approach of McDonald’s to product strategy ensures that there something familiar, provides avenues for new experiences, and creates room for local products. The price strategy focus on low price/high volume emphasizes both effective pricing and perceived value.
A combination of adaptation and innovation, the push place strategy focuses on opening new franchises in the U. S. And abroad. By entering emerging markets and creating new technology, McDonald’s can continue to expand. McDonald’s saturation approach in its promotion strategy allows the company to remain both visible and able to respond to changing consumer tastes. If McDonald’s continues to implement and expand upon its current corporate strategies then continued growth of revenue and market share can be expected.