Value chain of McDonalds

Value Chain Analysis of McDonalds:

Value Chain Analysis emphasis on the activities which are used to offer a customer level of value that exceeds the cost incurred within these activities, resulting in a profit.

Implementation and Control

Taking full advantage of resources that McDonalds have and the current market position McDonalds should try to learn the new changes in the customer satisfaction level. In an effort to increase its market share McDonalds should do its advertisement carefully with the adopting new adverts which can convey message that McDonalds is place to hang out. For this McDonalds has to control its expense and make a proper allocation of all the resources. Beyond just the sales and figures McDonalds try to recruit and apply new machineries which can help in quick service. A proper allocation of staff should also be done to manage all the things and do their work with responsibility. A separate investigation team should also be appointed so as to keep a regular check on the fluctuating taste and need for the different consumers.

Mcdonalds 4 p's

Price

Price is the most important “P” of marketing mix because it is the only “P” which creates Revenue for the firm. Whenever a customer comes into a fast food outlet like McDonalds in India he always wants value of the product he purchases. He wanted value of their money out of product. McDonalds has kept its prices low in the Indian Market for capturing most of their target groups but it can also affect them. Customer can feel that quality is being compromised. McDonalds has very strong Image on the global Market and it is Important for McDonalds now to charge a little high prices of their new product range because it will increase their market share. Consumers in India are now capable of spending Rs 50-100 for their one time Meal. So McDonalds should capture this opportunity as KFC and subway are utilizing. By introducing new products they can charge a little high so as to cover their profits using this segment. They should price according to appropriate demand supply equation.

Place

McDonalds has a strategy by which they understand the importance of growth within International markets. McDonalds have great interiors off all their outlets and they have reached many metro cities. Serving millions of people there and getting revenues. But there are still a lot of untapped regional markets in India especially in eastern part of India where there is less presence of McDonalds and other fast food brands in the country. McDonalds should concentrate now on opening their stores in smaller cities because according to census of India population, 2010, population of smaller cities is nearly 177 million which is a huge revenue generating market. They should also add some new features in their outlets such as Wi-Fi Internet, television screens, couches so that youngsters can also come there and relax with their friends and can have their products.

Promotion:

Promotion can be done through 5 different ways advertising, sales promotions, events and experiences, direct marketing and public relations. McDonalds uses its promotional strategy according to different markets. Promotion is one of the most important “p” of Marketing because by this only you can position your product into the consumers mind. Promotion is the main part which help a firm to position its products image in consumers mind. Other promotional methods which are being used nowadays are creating awareness using merchandising approach like McDonald do by selling toys with “Happy Meal”. Promotion is done by McDonalds using Ronald’s McDonalds or by using Walt Disney different characters. McDonalds has maintained an extensive advertising campaign in India. They have used all form of ways of Advertising media such as television, Radio, billboards, newspapers, etc. But most of their advertising is done through Television. In India they have used different slogans according to their targeting strategy. For example when they reduced prices they introduced a new slogan called “Aap Ke Zamane Mai Baap Ke Zamane Ke Daam” which means you are getting today’s meal at your father childhood time. So to Target new segment of Adults they have to do there advertisement accordingly. But important thing to emphasis while deciding and making an advert is message should not be confusing, because main aim of doing advertisement is to make the consumers aware of the items and to feel positive about it. With introduction of new products such as Salads, breakfast products, sandwiches, juices, they should also represent the qualities of all of them. Now with the new product and pricing strategy McDonalds will use their advertising strategy by putting adverts on Television, Radio, poster, billboards and Specially on different sites on Internet. Today people spend most of their time using different sites such as Facebook, Orkut, Google, Yahoo, etc. So these Internet sites will be also used as a media of advertising. Television advertisement should be done between different times so that adverts can be seen by most of the people. In India people used at watch Television at Evening so between the times of 6 to 9 adverts of McDonalds should be shown. Advertising should be done in a way that it should change attitudes of those consumer also which consider McDonalds as a unhealthy food provider.

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Marketing Mix:

In 1975, McCarthy formulated concept of 4 P’s: Price, Price, Promotion and Place. These four is being used as the basic foundation principle on which Marketing plan of any company is based. As the service market is gaining momentum additional variables is also added to these 4 P’s which are Process, Physical and people.

Product

The most important thing to remember in case of fast food Industry is the menu you are offering. “The important thing to remember when offering menu items to potential customers is that there is a huge amount of choice available to those potential customers with regard to how and where they spend their money”(McDonalds 2008). McDonalds focus on strategy on product standardization which means similar taste and products all over the globe.  McDonalds in India do not emphasis on the variety in their Menu; they have always emphasis on Low Cost. Marketing has always monitors customers preferences. Nowadays a product is not just a physical item which the company is selling to gain revenue; it also has psychological connations for the customers (McDonalds, 2008). We can say what was a fashionable and attractive yesterday may be discarded tomorrow. McDonalds in other countries like United Kingdom and U.S.A. has a large range of differentiated products for each and every segment. McDonald’s emphasis on quality, for which they have teams who are responsible for looking after the food products from the suppliers to restaurants.

Products go through a life cycle in which a situation comes when the product reaches its maturity where it needs an innovation or it will go through to decline stage. In India products like Mc Aaloo Tikki has now reached its Maturity stage which needs some innovation in it. Even new products of similar prices should be launched such as salads, corns, lemonade, juices and other health related products which will create an advantage to McDonalds over others.

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According to Market Expansion Grid, McDonalds should adopt approach of new Product Development so as to increase their Market share by adding new items and introducing a new product line for health conscious people so that they can also enjoy food of McDonalds. There is a wide scope of fast food such as salads and sandwiches in Indian Market because people (especially Adults) are getting health conscious, which may provide an advantage to McDonalds for future. So they should adopt Diversification strategy in which they can create new products for the market because diversification makes good sense as there is opportunity for McDonalds in the outside market when there is not similar product in the market. McDonalds can follow both Concentric as well as horizontal diversification strategy in which they can develop new products with earlier as well as new technology for both existing and new customers.

Sustainable competitive advantage (SCA):

Ø  Sustainable competitive advantage can be defined as “an advantage that enables business to survive against competition in the market over a long period of time.” In other words we can say that it is the advantage which is difficult or impossible for other companies to break through. It can be its product, cost management or cost structure, customer care, service, or its patent. Whatever will be the advantage but the main thing is that it should be distinctive. If we consider McDonalds is a global Brand which opens approximately 500 restaurants every year. In the previous year of McDonalds they were only concentrating mostly on expansion of their outlets and franchising all over the globe than strengthening this core advantage.

Success of McDonalds has gone through many tough times, risks and competitions. But still it has been a strong and a top ranked business concerns, because it has always concentrated on its core competencies and SCA.

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Segmentation:

Market segmentation is defined as dividing a single market into smaller segments. The basic reason for dividing the market into small segments is to make it simple to address the needs of smaller groups of customers and try to manufacture different products according to their consuming habits. Particularly it is done according to the people who have similar characteristics. It can be done on the basis of age, gender, lifestyle, region, etc.

McDonalds in India segmentation it has done is on three different bases:

1) Demographic Segmentation: Kids, Family and Students

McDonalds offers different products like Happy Meal which includes a free toy for kids. For families it has made different outlets and meals which are suitable for takeaways and drive-thru. McDonalds has made its environment which is suitable for students of school to hang out with their friends and can get their lunch at McDonalds.

2) Psychographic segmentation:  Convenience and lifestyle

McDonalds has adopted itself according to the convenience and lifestyle of the Indian consumers, as India has a huge vegetarian population so McDonalds came up with a different and new product line which includes items like Mc Veggie burger and Mc Aloo tikki Burger. They also made McDonalds as a place to relax and even for entertainment.

3) Behavioral segmentation: Occasions, for e.g. Birthday Parties of kids

McDonalds can get more customers by whom they can get most of the share of India Fast Food Industry but they should emphasis on their Targeting technique.

To Get a Sustainable Advantage over their competitors McDonalds should introduce new as well as modified products which contains low cholesterol content in it. McDonalds has so much upcoming competition in Indian market that it should concentrate on Differentiation of its products increase its market size by implementing penetration pricing technique in which they should introduce the product with a lower price even lower than the market substitute’s price. By this they can they can associate with their marketing objectives and can increase their sales and total revenue even in future.

They should apply new positioning technique to create a new image in the minds of consumer about McDonald a place with healthy variants. McDonalds should observe present approach which they are following and subsequent the current advertising with healthy messages. This can be done by adding a more organized and expertise team which can work on healthy mindful advertisement. There advertising should contain all the benefits and healthy qualities about the products McDonalds is offering.

Positioning is a process of creating an image in the mind of consumers by which consumers can understand the uniqueness about your product when compared to competitor’s product. In India positioning of McDonalds has been directed as a Family restaurant. Then they started positioning according to the kids as well by introducing new advertising of toys with their products such as “Happy Meal”. In the start they made certain special efforts to not allow it to convert into a teenage and adults (20 to 24 years of age) hangout place. Now youngster and adults has became so use to fast foods that McDonalds should also target them and try to position “McDonalds as a place for all”. They should target adults also because they can pay for quality and variety of products. This will help McDonalds to be most recognizable brand in India for people of all ages. Or we can say that they should follow concept of undifferentiated marketing in which they should offer same marketing mix to mass audiences. This is due to the fact that in India has second largest population in the world and if they adopt this approach and try to do positioning according to this approach then they will be benefitted and their sales and revenue will surely increase.

While positioning of their product they should keep certain aspects which should be represent through their way of positioning.

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Marketing Objectives

Ø  McDonalds should introduce some new Healthy product line into its menu.

Ø  Try to capture new Markets which have not been captured by competitor brands such as KFC, Pizza hut, etc.

Ø  To target Youngsters McDonalds should reposition its Image as a Brand for even Young customers by opening more 24 hours outlets.

Ø  McDonalds should come up with Offers and promotional discounts without compromising the quality.

Ø  Should increase variety in their menu because most of the people can substitute very easily.

Ø  Every McDonalds should offer breakfast Menu

Ø  McDonalds should differentiate itself by creating more relevant experiences as allowing customers to use Internet with in McDonald’s outlets.

Ø  McDonalds should create a new style of Advertising strategy so as to get more attention of the adult target group between ages of 25 to 35 years.

Ø  McDonalds should try to open new stores keeping location in mind.

Ø  McDonalds can build a competitive advantage in India Market because McDonalds can afford all the critical factors which other competitors cannot due to lack of resources.

Segmentation, Targeting and positioning Model of McDonalds:

In order to develop a marketing strategy, it is very important for company to understand its target customers. If the company can understand its customer then only it can communicate itself to their consumer Market. Better you know about your consumers, more effectively you could communicate and market them.

McDonalds has segmented their products according to bases of Demographic, Psychographic and Behavioral. They have segmented their products and positioned their products according to kids, students and family. But they haven’t segmented their products according to the Adult target group. Also they haven’t started segment related to breakfast in every outlet.

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Executive Summary (phase 2)

India was the 95^th country in which McDonalds open its new branch. It entered into Indian market in 1996. It started with the joint venture with two companies. Mr. Vikram Bakshi, owner of Connaught plaza Restaurants Private Limited owns and manages all the McDonalds in North and East India. While Mr. Amit Jatia, M.D. Hard Castle Restaurants Private Limited owns and manage McDonalds in West and South India. Now it has almost 182 outlets spread over across the country. In 2008 they faced another problem of inflation in food prices by which they have to increase their prices too. Consumers of India are moving towards Fast food Industry because of their new life styles and dual working families with children, so they are emphasis increase on quick meal solutions (Atkins and Bowler, 2001). It has been recorded a 19% market growth in fast food industry due to all the above reasons (Keynote, 2003). There are many of the small catering restaurants in India which are offering many substitutes but fast food is perhaps the most prominent and most growing. It has been accepted by fast food Industry that’s strategies used should be made according to consumers preferences and understanding their innovating needs. This understanding will help in targeting audiences according to culture so that customers demand can be increased and new products can be launched. McDonalds have approach of globalization where they try to provide same food everywhere; same approach can be adopted in India by introducing there vegetarian and chicken sandwiches and salads for health conscious, decrease child obesity, and “food diversity in India is an implicit characteristics of India’s diversified culture consists of different regions and states within” (Goyal, sen, 2007). McDonalds could introduce Indian style spicy chicken which can target huge audiences. McDonalds should follow Build strategic objective which will lead to increases in Market share as well as it will help them to increase its sales.

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Internal Analysis:

For running a successful Fast food chain most important factors which make a brand successful in this industry are Location, Menus, Advertising, Value and operating systems. Staff of McDonalds is usually the people who are young, especially students which work Part time. There is also a disadvantage associated with it, which is staff turnover rate, but it can be controlled by reducing training expenses. McDonalds use local suppliers just to cope up with the needs of the customers. The best practice which they have used in India is removed beef form the menu due to the religious issues. This is done by getting interacted with their local suppliers (Markatos, 2006). McDonalds has plenty of physical resources which they are using very efficiently such as Machines, buildings, etc. There brand is one of the most recognized brand in India which give them intellectual capital advantage.

SWOT Analysis:

Strength

Ø  Strong supply chain with affordable prices

Ø  Decentralization but still a connected system

Ø  Strong financial position with reputed Brand Image

Ø  Quality raw materials

Ø  Efficient food preparation style which goes through a systematic way.

Weaknesses

Ø  Unhealthy food image among customers

Ø  Loss of customers due to competition

Ø  Less product lines

Ø  Weak product development

Opportunities

Ø  Can use better Customer database to focus accurately on their target groups

Ø  Increasing Per capita Income with increasing youth population (Census India, 2009).

Ø  Can use their strong financial base for different promotional offers.

Ø  Can introduce breakfast menus in every outlet in India.

Ø  Responds to changes within the customers by introducing healthier snacks such as fruit salads, sandwiches which are being served in global markets.

Ø  Should apply Wi-Fi systems with some 24hours outlets.

Threats

Ø  Intense increasing competition due to low entry barriers.

Ø  Growth of health conscious customers

Ø  Outbreak of diseases like bird flu, SARS, H5N1, etc

Ø   More dining restaurants are increasing offering differentiated products at low prices  

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Pest Analysis:

Ø  Political and Legal Environment:

o   In general policies of Indian government do not affect McDonalds but there are cases when government changes and come up with new rules, regulations and new policies. McDonalds has to followed legal regulations such as tax requirement, laws, environmental certification, etc.

Ø  Technological Environment:

o   For making fast food machines are considered to be the best option as they are fast as well as more hygienic. Technology is the sector which is on a continuous development and McDonalds as a top brand has to update its all machinery and equipments on a regular bases. McDonalds should also look forward to competitor’s innovation and try to improve itself in terms of managing the operations.

Ø  Economical Environment :

o   McDonalds believes in low cost and more incomes concept. But it face lot of economic variables outside its company or macro environment such as dealing with international sourcing for the raw materials which should be globally similar and currencies exchange. There are Tax regulations of India which McDonalds had to follow to carry out its business.

Ø  Social- cultural Environment:

o   McDonalds has respect Indian culture by offering products which are acceptable in Indian market and excluding products like Beef and pork. But now due to changing life style of India due to developing Indian economy where people habits and power of spending money on Fast food is increasing, now they have higher expectations.

Customer expectation:

In a fast food industry main target customers of different players are young children’s. Because of the large number of food retail and tendency of consumers to switch from one product to another there is low level of customer commitment. In earlier time, people used to cook their food at home but today time has changed a lot and now Indian people prefer eating in restaurants because of improvement and up gradation of technology in food sector. A customer now wants quick delivery, taste, healthy food with variety. This is due to the changing life style of people of India.

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Industry Analysis:

Porter’s Five Force Model:

In a Fast Food industry, nature of competition is strongly affected by five forces. By this a company can determines its own competitive behavior which in turn generate profit for the firm.

Ø  Competitive Rivalry:

o   Fast food industry is one of the most competitive industries. There are so many small fast food outlets which are competing in a single market with a single approach i.e. to extend their customer base. In India McDonalds launched new different products to compete with the existing business. In terms of existing competition there are competitors such as KFC, Burger King, etc.

Ø  Threat of New Entries:

o   In restaurants business like McDonalds a huge amount of cost of entry in the market is required. But India is an emerging market for Multinationals and as India is developing more and more new competitors are entering with large investment and making competition stiffer.

Ø  Substitutes:

o   Convenience and availability helps in choosing the fast food. As India is developing the whole convenience industry is growing because now people want to spend less time cooking food in their kitchen. There are a large variety of products that people can choose such as KFC, burger king, etc.

Ø  Bargaining Power of Buyers:

o   Every buyer in a fast food industry does not have much bargaining power. Whenever the buyer is buying a product from any outlet, he just order and pay the amount of that product. But actual power is when the customer actually chooses a place to buy a fast food. Since the India market is full of different fast food products and brands so the bargaining power of the buyer gets low.

Ø  Bargaining Power of Suppliers:

o   Bargaining power of Supplier of McDonalds is low. Many of the products offered by McDonalds are not differentiated so they have substitutes in market.