final project bba

8/3/2019 Final Project Bba

1/24

Introduction

Chapter # 1

1.1 History of McDonaldsIn the late 1940s, Dick and Mac McDonald were searchingfor a way to improve their little drive-in restaurant businessin San Bernardino, California. Rather than tinker with thebusiness, which was bringing in a very comfortable $200,

0001

yearly, they invented an entirely new concept basedupon speedy service, low prices, and big volume. They did away with car-hops in favor of self-service at thecounter. They ditched their 25-item barbecue menu in favorof a limited menu of just nine items: hamburger,cheeseburger, three soft-drink flavors, milk, coffee, potatochips, and pie, with French fries and milkshakes added soonafter they resumed operations. They re-engineered theirstainless steel kitchen for mass production and speed withassembly-line procedures. And they slashed the price of theirhamburger from a competitive 30 cents to just 15 cents.When the new McDonalds re-opened in December of 1948,business took a while to build. But it soon became apparentthat they had captured the spirit of post-war America. By themid-1950s, their little hamburger factory enjoyed annualrevenues of $350,000 almost double the volume of theirprevious drive-in business at the same location. It was notunusual for 150 customers to crowd around the tinyhamburger stand during peak periods.

Word of their success spread quickly, and a cover article ontheir operations in American Restaurant Magazine in 1952prompted as many as 300 inquiries a month from around thecountry. Their first franchisee was Neil Fox, and the brothersdecided that his drive-in in Phoenix, Arizona would be theprototype for the chain they envisioned. The resulting red-and-white tile building with a slanting roof and the Golden


2/24

Arches on the sides became the model for the first wave of McDonalds restaurants to hit the country, and an enduringsymbol of the industry.

The McDonald brothers actually designed the assembly line

kitchen twice as large as their original by drawing anexact chalk diagram on their tennis court. They were able toplace the equipment most efficiently after studying theircrew members as they walked through their foodpreparation steps. Occasional rain bursts washed out thechalk, prompting them to redraw and refine their design. Butthe brothers successful beyond their dreams in SanBernardino were barely tapping the franchising potential of the business concept they had pioneered.For as little as a thousand dollars, franchisees would receive the McDonaldsname, a basic description of their Speedy Service System, and the servicesof Art Bender, their original counterman at the new restaurant, for a week or two to get them started. But then, in 1954, a milkshake machine salesmannamed. Ray Kroc saw the McDonalds operation first-hand. The fast foodindustry was about to take off .Ray Kroc was 52 years old an age when many people beginthinking about retirement when he founded the companythat has become the McDonalds of today. But Kroc, whodropped out of high school at age 15 to drive a Red Cross

ambulance in World War I, was a constant dreamer...asalesman who never stopped looking for the ultimate produto sell. He began by selling paper cups to sidewalk vendorsin Chicago, took a fling at Florida real estate, and hadultimately built a good business as the exclusive distributorfor Multimixer milkshake machines.It was the sale of Multimixers, which first drew him to theMcDonald brothers hamburger stand in San Bernardino,California. After all, if he could discover the secret of howthey sold 20,000 shakes each month, how many moremilkshake machines could he sell? But when Kroc showed upat McDonalds one morning in 1954 and saw the rapidlymoving line of customers buying bags of burgers and fries,he had but one thought: This will go anyplace. Anyplace!After the McDonald brothers explained that they didnt have the personaldesire to oversee the expansion of their concept across the nation, Ray Kroc


3/24

became their exclusive franchising agent for the entire country. A greatsalesman had discovered his ultimate product. Kroc formed the newfranchising company on March 2, 1955 under the name of McDonaldsSystem, Inc.

PHOTO: The first McDonald's was built in 1940 by the McDonaldbrothers (Dick and Mac).

1954

Ray Kroc became the first franchisee appointed by Mac and Dick McDonald in San Bernardino, California.

1955

Ray Kroc opened his first restaurant in Des Plaines, Illinois (near Chicago), and the McDonald's Corporation was created.

1957

Quality, Service, Cleanliness and Value (Q.S.C. & V.) became thecompany motto.

1959

The 100th McDonald's opened in Chicago.

PHOTO: The McDonald brothers (Dick right and Mac center) discussing plans with an executive.

1961

Ray Kroc bought all rights to the McDonald's concept from the McDonald's brothers for $2.7 million.

Hamburger University opened in Elk Grove, near Chicago.


4/24

1963

One billion hamburgers sold.The 500th restaurant opened.The 500th student graduates from Hamburger University.Ronald McDonald made his debut.

McDonald's net income exceeded $1 million.

1964

Filet-o-Fish sandwich introduced.

1965

McDonald's Corporation went public. Per earning ratio varies from 10 to

22 during year; stock price range, 15 - 33.5.

1966

McDonald's listed on the New York stock exchange on the 7th May .

1967

The first restaurants outside of the USA opened in Canada and Puerto Rico .

1968

The Big Mac was introduced.The 1,000th restaurant opened in Des Plaines, Illinois.

1970

McDonald's restaurant in every US state.Ray Cesca (Director of Global Purchasing of the McDonald's

Corporation) has admitted that when McDonald's opened stores in CostaRica in 1970, they were using beef from cattle raised on ex-rainforest land,deforested in the 1950's and 1960's.

New countries - Virgin Islands, Costa Rica .

PHOTO: The first Japanese McDonald's inTokyo .


5/24

1971

The Egg McMuffin sandwich was test marketed in the US as McDonald's first breakfast menu item.

McDonald's Japanese President, Den Fujita, stated "the reason Japanese people are so short and have yellow skins is because they have eaten nothing but fish and rice for two thousand years"; "if we eat McDonald's hamburgersand potatoes for a thousand years we will become taller, our skin becomewhite and our hair blonde".

New countries - Japan, Holland, Australia, Germany, Panama, Guam.

1972

Assets exceeded $500 million and sales surpassed $1 billion.

A new McDonald's restaurant opening every day.New countries - France, El Salvador.The 2,000th restaurant opened in Des Plaines, Illinois.The Quarter Pounder was introduced.Ray Kroc made a $250,000 donation to the controversial 1972

presidential campaign of Richard Nixon, a donation which was perhaps asubject of investigation during the Watergate corruption scandal. Passages inthe 'Behind The Arches' book (written with McDonald's backing andassistance) state that the donation came around the very time that

McDonald's franchisees were lobbying to prevent an increase in theminimum wage, and to get legislation (dubbed 'The McDonald's Bill')

passed to be able to pay a sub- minimum wage to some young workers.

1973

McDonald's Golden Arches Restaurants Limited founded in UK as a jointventure partnership between the McDonald's Corporation and two

businessmen; one British, one American. New country - Sweden.Egg McMuffin introduced.

1974

The 3,000th McDonald's restaurant was opened in Woolwich (south east London) inOctober, the first in the UK. The company admitted that NOBODY went inand later decided to target children with TV ads


6/24

The UK Head Office was sited in Hampstead, North London .

Up to 1974, McDonald's employees in Puerto Rico were unionised, but the company was sold to a new franchisee. A dispute followed, closing all thestores and McDonald's pulled out of Puerto Rico. They reopened in 1980

with non-union labour.

New countries - England, Netherlands, Antilles, Guatemala.The first Ronald McDonald House opened in Philadelphia.At a San Francisco Labor Board hearing, McDonald's workers testified

that lie-detectors had been used to ask about union sympathies, followingwhich the company was threatened with legal action.

1975

The company's first Drive-Thru opened in Sierra Vista, Arizona.New countries - Hong Kong, Bahamas, Nicaragua.Fred Turner becomes Chairman, Ray Kroc Senior Chairman, and Ed

Schmitt becomes President.Broadcast advertising appeared in UK cinemas .

1976

McDonald's first UK TV advertisement was broadcast.4,000th store opened in Canada.New countries - Switzerland, New Zealand.Largest restaurant opens - with 334 seats .

1977

New countries - Ireland, Austria.Breakfast menu introduced, nationally in America .

1978

The 5,000th restaurant opened in Kanagawa, Japan and it made US $1 million in its first year.

Sundaes introduced in USA.In one store in Chicago (USA), a majority of McDonald's workers joined

a union. The company then took legal action to stop recognition for theunion unless they could get a majority in the 8 stores run by the franchisee.

New country - Belgium.


7/24

1979

A 7 month strike in Dublin (Ireland) lead to recognition of the ITGWU union. In 1985, two union activists won a victory at a labour court after claiming victimisation and unfair dismissal.

New countries - Brazil and Singapore .

1980

The 6,000th restaurant opened in Munich.After workers in a store in Detroit (USA) joined a union, the company

organised a visit by a top baseball star, staff disco, and 'McBingo' prior toelections for union representation.

First floating restaurant on a steamer in Missouri.

1,000th international restaurant opened.1981

New countries - Spain, Denmark and Malaysia.

1982

Geoffrey Guiliano, a main Ronald McDonald actor, quit and publicly apologised, stating "I brainwashed youngsters into doing wrong. I want tosay sorry to children everywhere for selling out to concerns who makemillions by murdering animals".

7,000th restaurant opened in Washington DC.McDonald's were responsible for food poisoning outbreak caused by E.

Coli bacteria, which affected 47 people in Oregon and Michigan, USA.Egon Ronay calls McDonald's burgers 'uninspiring'.Breakfast was introduced to the British menu.

1983

The McDonald's Corporation became sole owners of McDonald's in the UK. The Company is named McDonald's Hamburgers Limited.

Five consignments of Brazilian beef are secretly imported for McDonald's UK stores.

The 100th UK restaurant opened in Market Street, Manchester.


8/24

New country - Norway.Introduction of Chicken McNuggets in USA.New Hamburger University campus opens in Oak Brook, Illinois. Set in

80 wooded acres. Training is provided for every level of McDonald'smanagement worldwide. A lodge with 154 rooms in also on the same site.

In Arkansas (USA), the UFCW union, which was interested in recruiting McDonald's workers, was involved in a union dispute at a chicken

processing plant supplying McDonald's. The union launched a boycott of McDonald's 'McNuggets' and picketed many of its stores. Stan Stein(McDonald's Head of Personnel and Labour Relations) spent up to '80%' of a whole year fighting the union's campaign.

1984

Founder Ray Kroc dies.James Huberty shoots 22 people dead at a McDonald's in San Diego (USA).

50 billionth hamburger sold.Ronald McDonald Children's Charities is founded in his memory to raise

funds in support of child welfare.A McDonald's pamphlet which is distributed to health professionals in

the UK states:"There is a considerable amount of evidence to suggest that many of the diseases which are more common in the western, affluent world -diseases such as obesity, diabetes, high blood pressure, heart disease,stroke, and some forms of cancer - are related to diet. The typicalwestern diet is relatively low in dietary fibre (roughage) and high infat, salt and sugar."

McDonald's now serves 17 million customers a day - equivalent to serving lunch to the entire population of Australia and New Zealand. If McDonald's lined up all the hamburgers sold since 1955, they would:-

Circle the equator 103.75 times;

Reach to the moon and back 5 times .1 985

London Greenpeace (a radical group of civil rights and environmentalcampaigners, independent of Greenpeace International) launches a


9/24

campaign intended to expose the reality behind the advertising mask of the fast food chains, including McDonald's.

Sergio Quintana, the sales director of Coop Montecillos (the sole supplier of beef to McDonald's stores in Costa Rica since 1970), stated oncamera that his company's beef was being supplied to McDonald's in theUSA.

1986

Drive-Thru restaurants opened in UK at Fallowfield, Dudley, Neasden and Coventry.

Four workers in Madrid who had called for union elections were sacked by McDonald's. The company was forced to reinstate the workers after thelabour court ruled that the dismissals were illegal.

The 200th UK restaurant opened in Ipswich. McDonald's became the first UK restaurant group to introduce nutritional information, throughout the country, for the benefit of customers.

London Greenpeace published a 6-sided factsheet entitled "What's Wrong With McDonald's? - Everything They Don't Want You To Know".

The first UK franchisee-operated restaurant opened in Hayes, Middlesex. The first World Day of Action Against McDonald's was held on 16th October (UN 'World Food Day').

1987

The Attorneys General of Texas, California and New York threatened to sue McDonald's under the consumer protection laws over an advertisingcampaign claiming that McDonald's food is nutritious. The AttorneysGeneral concluded that the campaign was deceptive because "McDonald's

food is, as a whole, not nutritious."McDonald's is serving 20 million people a day in nearly 10,000

restaurants in 47 countries.The UK Midlands regional training centre opened in Sutton Coldfield.McDonald's started legal proceedings against the Transnationals

Information Centre (an independent research and action group based inLondon) over a booklet they produced called "Working for Big Mac" which


10/24

was highly critical of the company's employment practices. The TIC backeddown lacking resources to fight the case to trial, discontinued publicationand distribution of the booklet (which was pulped), and the organisationitself went bust.

1988

McDonald's sponsored the Child of Achievement Awards.CFCs ceased to be used for most of McDonald's styrofoam packaging.300th UK restaurant opened in Dagenham, Essex.

1989

Italian designer Valentino attempts in a Rome court to stop McDonald's opening near the Piazza di Spagna, complaining of "noise and disgustingodours".

McDonald's is listed on the Frankfurt, Munich, Paris and Tokyo stock exchanges.

The Bournemouth Advertiser (UK) is threatened with a libel action by McDonald's over an article which discussed the captive-bolt method of slaughter for cattle. The newspaper backed down and published an apology.

Michael Quinlan is appointed Chairman and Chief Executive Officer.The UK company's name was changed to McDonald's Restaurants

Limited.

McDonald's send undercover private investigators to infiltrate London Greenpeace over a period of 20 months.

McDonald's charity for child welfare fundraising, Ronald McDonald Children's Charities, was registered.

McDonald's Child of Achievement Awards were presented by UK Prime Minister Mrs Margaret Thatcher.

The UK Manchester regional training centre was opened.McDonald's stores in Philadelphia (USA) were independently surveyed

and accused of having racist differential wage rates between the inner-citystores (mostly black workers) and the suburbs (mostly white workers).

1990

September - libel writs were served on five supporters of London Greenpeace, three of whom feel unable to fight the case. The McLibelSupport Campaign is set up to generate solidarity and financial backing for the McLibel Defendants.


11/24

McDonald's opened in Pushkin Square and Gorky Street, Moscow.McDonald's opened at a UK airport at North Terminal, Gatwick.The first Ronald McDonald House opened at Guy's Hospital, London.McDonald's Child of Achievement Awards attended by HRH The

Princess of Wales.

1991

McDonald's were responsible for a serious food poisoning outbreak in Preston (UK), when several customers were hospitalised as a result of eatingundercooked burgers contaminated by potentially deadly E.Coli 0157H

bacteria.The 150th Ronald McDonald House opened in Paris.

McDonald's opened in Beijing, China.The 400th UK restaurant (and first in Northern Ireland) is opened in Belfast.

McDonald's opens in Hampstead (North London) despite strong opposition from local residents.

1992

Mark Hopkins, a McDonald's worker in Manchester (UK), was fatally electrocuted on touching a 'fat filtering unit' in the 'wash-up' area of the

store.The manager of a Newcastle store (UK) was jailed for 6 months for inducing a crew member to phone through a hoax bomb threat to nearbyBurger King in order to boost sales at McDonald's.

McDonald's Child of Achievement Awards attended by UK Prime Minister John Major.

McDonald's opened in a railway station at Liverpool Street, London.A UK Health & Safety Executive report made 23 recommendations for

improvements in the safety of employees. One of its conclusions was "Theapplication of McDonald's hustle policy [ie. getting staff to work at speed] inmany restaurants was, in effect, putting the service of the customer beforethe safety of employees."

Visitors to Salisbury Cathedral (UK) are offered two burgers for the price of one if they buy a commemorative parchment scroll. The idea isdropped when the bishop gets back from holiday.


12/24

First restaurant in a European hospital opened at Guy's Hospital, London.

1993

The first McDonald's at sea opened aboard the Silja Europa, the world's largest ferry sailing between Stockholm and Helsinki.

The Paris planning authorities refuse permission for a McDonald's under the Eiffel Tower.

The second Ronald McDonald House opened at Alder Hey Children's Hospital, Liverpool.

500th UK restaurant opened in Notting Hill Gate, London.First UK operated restaurant on a ship opened on the Stena Sealink ferry

"Fantasia" sailing between Dover and Calais.

McDonald's sponsored athletics in the UK through the McDonald's Young Athletes' League and the International invitational meeting theMcDonald's Games.

1994

McLibel Trial starts on 28th June.Restaurants opened in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, Oman,

New Caledonia, Trinidad and United Arab Emirates, bringing the total to

over 15,000 in 79 countries on 6 continents.McDonald's celebrated twenty years of operating in the UK.McDonald's environmental image was revealed to be a sham, and

customers being conned when it was discovered that rubbish whichcustomers were asked to put into separated recycling bins throughout NewZealand stores was sent to the tip.

McDonald's achieved the highest ever grade under the Royal Society for the Prevention of Accidents (RoSPA)Quality Safety Audit scheme.

McDonald's was voted the 'Most Parent Friendly' restaurant in the UK for the second successive year by the Tommy's Parent Friendly Campaign,supported by the Daily Telegraph.

Workers in an Ontario store (Canada) joined a union, but the company managed to avoid recognition by ensuring victory in Labour Boardsponsored elections.

The McLibel Defendants issue a countersuit for libel against McDonald's over the company's accusation in a leaflet that they are telling lies.


13/24

Five McDonald's managers are arrested in Lyon, France for trying to rig union elections.

On 1st October, McDonald's UK executives held a celebration along with a jazz band and clown at their Woolwich store to mark 20 years sincethis first store opened in the UK. Twenty five London Greenpeace andMcLibel supporters gathered with a banner reading "20 Years of McGarbage" and handed out 4000 "What's Wrong With McDonald's?"leaflets to passers-by.

In October, there is an demonstration at McDonald's European headquarters in London where sackfuls of the company's litter picked up off the streets are returned. 500 people attend the National March AgainstMcDonald's through central London to protest against the company'sexploitation of people, animals and the environment.The company threatens legal action against a topless restaurant in Australia

called "McTits".

1995

McLibel Trial becomes the longest libel trial in British history on Day 102 in March.

On 15th April, there were international protests to mark the 40th anniversary of the opening of the world's first store of the McDonald'sCorporation, and to celebrate 10 years of co-ordinated internationalresistance to McDonald's.

On the first anniversary of the McLibel Trial (28th June), it becomes known that McDonald's had initiated secret settlement negotiations and hadtwice flown members of their US Board of Directors to London to meet withthe McLibel Defendants in an attempt to bring the case to an end.

12th October, the third anniversary of the death of Mark Hopkins, was a Day of Solidarity With McDonald's Workers in the UK.

On 16th October, the 11th annual Worldwide Day of Action Against McDonald's, there were protests in at least 20 countries. In the UK, at least

250 of the company's 600 stores were leafletted.On 11th December (Day 199 of the trial), the McLibel Trial becomes the longest civil case in English history.

Following widespread opposition by local residents, McDonald's were refused permission to open an outlet at their European headquarters in northLondon .


14/24

1996

February 16th 10am, the McSpotlight website was launched.In March, the public's intense concern over the links between the cattle

disease BSE and its human equivalent CJD forced McDonald's UK to banBritish beef. The company did not sell any beef products for a week whilesupposedly waiting for beef supplies to arrive from other EU countries.

The "Vegetable Deluxe" was launched in the UK.McDonald's opened stores in India.McDonald's and Disney announced a deal giving McDonald's exclusive

rights to use characters from Disney films in its promotions around theworld for 10 years. Commentators called it the biggest global marketingalliance yet devised.

McDonald's opened a store in Belarus, its 100th country.The movie star Robin Williams turned down a million-pound offer to

advertise McDonald's.McDonald's threatened the owner of a UK sandwich bar called

"McMunchies" with legal action for breach of trademark. A retired Scottish

school-teacher called Ronald McDonald, and the chief of the McDonald clanin Scotland were both outraged at this further attempt by McDonald's toclaim global dominion over the prefix "Mc" and the name "McDonald"which has been an Irish and Scottish family name for centuries.

The Supreme Court of Denmark ruled against McDonald's claim that a sausage stand called "McAllan's" was in breach of its trademark.

Following widespread opposition by local residents in Winchmore Hill (north London) which put a lot of pressure on the local MP (MichaelPortillo, the Defence Secretary), McDonald's were refused permission toconvert the local Conservative Association HQ into a Drive-Thru.

McDonald's sued for breach of trademark a Jamaican fast-food company (called the McDonald's Corporation Limited) which had been operating inJamaica since the early 1970's. The Jamaican company succeeded in gettinginformation from the McLibel Trial taken from the Internet ruled admissiblein the case, and in getting an order barring McDonald's from opening storesin the country until the courtcase was completed.


15/24

McDonald's succeeded in its trademark battle in South Africa, when an appeal court prohibited competitors from using its name and the goldenarches symbol.

McDonald's began spending $200 million on a promotional blitz in the USA & Canada to lure adults to visit their outlets. This included the launchof the new adult burger, the "Arch Deluxe" in May. Despite this blitz, USsales continued to fall.

The parents of a child, who died from E.Coli 0157 food poisoning after eating McDonald's burgers in Spain and England, began legal proceedingsfor compensation in the USA. Meanwhile, three children who sufferedE.Coli 0157 food poisoning in England also from McDonald's burgers weregranted legal aid to sue McDonald's and their supplier McKey's.

McDonald's opened the world's first fast-food ski-through in the Lindvallen resort (Sweden).

The McLibel Trial became the longest trial of any kind in English legal history in November. The evidence was completed in July, and the closingspeeches in December, but the Judge reserved his Judgment until thefollowing year.

1.2 How did McDonalds Entered Pakistan?.Aiming to be the world's best quick service restaurant experience,McDonald's started its operations in Pakistan in 1998 and is a leading fast

food service retailer for its valued customers. With a strong believe in the phrase "when it's green it's growing", McDonald's Pakistan is growing withthe focus to provide friendly and quick service experience to their customers. McDonald's Pakistan is a part of Lakson Group of Companies,operating with a network of restaurants in various cities with a visionleading us to reach their customers for providing friendly services in allregions of the country, they are operating, presently in 6 cities of PakistanKarachi, Hyderabad, Lahore, Faisalabad, Rawalpindi and Islamabad InFuture, very soon planning to expand in many cities in PakistanTo realize the McDonald's service vision, they believe in strengthening their team and ensure to deliver the right skills and knowledge to the right personfor getting the right job done. Their strength for making their strong team

players to shine under the Golden Arches lies in the People Promises, wefocus to deliver 1. Resources & Recognition2. Values & Leadership Behaviors


16/24

3. Competitive Pay & Benefits4. Learning Development & Personal Growth5. Resources to get the Job DoneMcDonald's mission is to be thir customers, favorite place and way to eatwith inspired people who delight each customer with unmatched quality,service, cleanliness and value every time .they invite you to be the part of this winning team and give yourself an opportunity to grow with the familyof people striving to create smiles on the faces of millions of peopleeveryday.McDonald's Management Development Program provides with anopportunity to develop your knowledge base with hands on practicalexposure to turn into a diversified business entrepreneur. And with therecent job openings McDonald's welcome you to the world of opportunitiesunder the golden arches!!!

U.S. companies dominate the franchise market in Pakistan in large part due to the fact that U.S. firms were the pioneers in thissector and the first to set up their outlets in Pakistan. Inaddition, the U.S. firms entered the market with a long-termcommitment and provided full support to their local partners.Also, U.S. firms and their products are internationally known for their quality products and superior service. Many U.S. productssuch as McDonald's and Kentucky Fried Chicken were well-known andrecognized in the urban areas of Pakistan even before startingtheir operations in the country.The Pakistan franchise market has shown tremendous growth duringthe last four years. The number of active franchise operationshave increased from 15 to more than 37 during this period. Inall likelihood this trend will continue for the next few years,however, it is anticipated that the growth will not be verysubstantial in the food-related sector, rather other sectors suchas educational/training institutions, consulting services,amusement parks/arcades etc.


17/24

Chapter 2The Marketing MixMarketing mix" is a general phrase used to describe the different kinds of choicesorganizations have to make in the whole process of bringing a product or service tomarket. The 4 Ps is one way probably the best-known way of defining the marketingmix, and was first expressed in 1960 by E J McCarthMarketing mix is the decision which came out as the result of blending 4Ps to stimulate

the demand of firm produtd and services. Marketing mix can be also defined astactical,strategic and controllable marketing tool contain product, price, place and

promotion use by the firm to generate response from target market.

the 4Ps are:

Product (or Service) Place Price Promotion

A good way to understand the 4 Ps is by the questions that you need to ask to define youmarketing mix. Here are some questions that will help you understand and define each of the four elements:

Product/Service

What does the customer want from the product/service? What needs does itsatisfy?

What features does it have to meet these needs? Are there any features you've missed out? Are you including costly features that the customer won't actually use?

How and where will the customer use it? What does it look like? How will customers experience it? What size(s), color(s), and so on, should it be? What is it to be called? How is it branded? How is it differentiated versus your competitors?


18/24

Products are goods and services offered by company to the target market.Marketing mixuse in a variety of ways by firms to pursue customer to buy and use their products. Thevariety of options that firm can adopt came out from only four variable product, price,

place and promotion. Some firms like to focus on their products so they will spend moreon product packaging, quality, design, features, brand name and service, to offer high

brand products and services to target market. Such as Mercedes Benz is an expensive car but have its own niche market people feel proud to buy and drive the car just because of the product is completely differentiated from their competitors having numerous features

The product is the subject of value exchange between manufacturer-supplier, through themarket network to the final customer/consumer.

There are several important aspects of the product: Product development, ProductBranding, Product Design and Product Quality. All aspects are important since they areall incorporated in product characteristics and determine the product performance.

Product Development Product development is the starting point of materialization of the

product. The product development is depends of the company'scompetence in research and development. Research of the marketand customer needs gives the guidelines of the future productcharacteristics. Research should give the more information aboutthe market population, needs, habits, price sensitivity in particularmarket niche, market competitiveness and legislation that give theframework for potential new product. Development follows the

research of the market needs. Development has the task to create theconcept of the new product that should have the maximum chancesof success and sustainability in the market.

Product Brand

Product branding is the important aspect of product creation. Productbrand determines the perception of the consumer toward theproduct. There are several tactics for choosing the brand. Thecompany can use existing brand and launch the new product under

the umbrella of existing brand ( e.g. new flavor of beverage ).Sometimes the adjustments to the brand are possible ( brand nameextension suffix, with purpose of distinguishing of new product ).The branding can be executed globally with the same brand. Inother cases the brand name can be linked with the localcharacteristics of the country.


19/24

Product Design.

Product design has a purpose to materialize the concept of the product that has been developed and branded. The designof the product does not just give the outside look of the

product. Design must be in the line with the marketing approach, in order to support the market success and sustainability. Design cannot be in the function of satisfying the designer, but the targeted population and their demand.Successful design must satisfy the demands of manufacturing and technology that is used.

Design of the product must satisfy the following:

Competitive differentiation to give the sustainable advantage Production needs providing cheaper and efficient production Consumer needs, functionality, usability, quality and satisfaction of the consumer

needs Aesthetics - visual attractiveness of the product Distributive network demands suitable for low cost and efficient warehousing

and transport

Product Quality

Quality of the product is the aspect that supports the preceding development steps.Quality has two dimensions:

Quality in terms of consumer perception Quality in terms of performance

Integral approach to the quality covers all attributes and product characteristics, processes and services. The growing competition pressure increases theimportance of the quality of the product. The sustainable quality directly influencethe brand development and perception of the consumers

Price

What is the value of the product or service to the buyer? Are there established price points for products or services in this area?


20/24

Is the customer price sensitive? Will a small decrease in price gain you extramarket share? Or will a small increase be indiscernible, and so gain you extra

profit margin? What discounts should be offered to trade customers, or to other specific

segments of your market

How will your price compare with your competitors?

Price is a amount which customer pays to buy the products and services.Price canalso attract customer towards firm products and services such as Southwest Airlinesoffer low price services to their customers by offering normal service. It means theywant to capture the target market on cost differentiation not on productdifferentiation.The price variables encompassed the following factors such list

price,discount,allowances,payment period and credit terms.

The Price is the one of components of Marketing Mix , along with Promotional Mix ,Product Distribution and Product. The price is usually defined as financially expressedvalue of the product or service at the market. Price levels are forming the public opinionabout a specific supplier. For modern shopper the price is not only the expression of money outflow, but also represent a certain value, benefit or satisfaction perceived bycertain product / service.

The price has specific relationship with other components of marketing mix. Actually the price is the only component that generates revenue, while other components generatecosts. Manufacturing of the product represent the cost.

The distribution of the product also generate the cost. The promotion usually creates theincrease of demand for the product/service, but directly also creates costs. All these costsneeds to be covered through the price.

Still, the goal of the price is not only to cover the basic costs of manufacturing,distribution and promotion. The function of the price is much more complex and dependson different variables.

Goals of price depends on company's policy against various relationships:
http://www.biz-development.com/Marketing/5.1.MarketingMix.htmhttp://www.biz-development.com/Marketing/5.1.MarketingMix.htmhttp://www.biz-development.com/Marketing/5.7.Marketing-Mix-Promotion.htmhttp://www.biz-development.com/Marketing/5.1.MarketingMix.htmhttp://www.biz-development.com/Marketing/5.7.Marketing-Mix-Promotion.htm


21/24

Profit oriented goals are including three main variables. Profit maximizinghas the goal of extraction of maximal possible profit. Satisfactoryprofit goals target the specific profit rate. Return on investment

pricing is primarily focused on direct return of investment to theinvestor.

Sales oriented goals can have two main targets. Market share approach istargeting a specific price level that should bring the company to thespecific position in the market. Sales maximizing prices is supposedto bring direct increase of profit.

Competition variable is very important, therefore the company can adoptseveral price policies that should address the competition inappropriate way.

Competition avoiding process have a goal of avoiding clashes ( price wars )with competition. Repelling prices policy has the aim of discouragingthe competition from entering the new market or product category.Stabile prices policy is the common price strategy that bringsbalance between attractiveness to shoppers and challenge tocompetition.

Prestige price positioning have relatively high price level. There is a certain segment of customers that are willing to pay high premium price in order to distinguish themselvesfrom the majority of the market. These customers are building their lifestyle image by

purchasing exclusive and luxury products.


22/24

Status Quo is pricing policy when company does not want to make to make disturbancesin the market. This is the case with the products that have the specific position in themarket, while any bigger alteration in price policy would not bring much value.

Place

Where do buyers look for your product or service? If they look in a store, what kind? A specialist boutique or in a supermarket, or

both? Or online? Or direct, via a catalogue? How can you access the right distribution channels? Do you need to use a sales force? Or attend trade fairs? Or make online

submissions? Or send samples to catalogue companies? What do you competitors do, and how can you learn from that and/or

differentiate?

Place are the set of activities which allow the firm to spread their availability of the products and services for the customers. Physical existence is not the only criteria of place but virtual firms like Amazon, eBay is also the part of third P(place). Wal-Martwith the huge number of retail outlets around the world moves them to the number one company in the world.

Promotion

Where and when can you get across your marketing messages to your targetmarket?

Will you reach your audience by advertising in the press, or on TV, or radio, or on billboards? By using direct marketing mailshot? Through PR? On the Internet? When is the best time to promote? Is there seasonality in the market? Are there

any wider environmental issues that suggest or dictate the timing of your marketlaunch, or the timing of subsequent promotions?

How do your competitors do their promotions? And how does that influence your choice of promotional activity.

Promotion is a way of communication to pass message to customers about firms products and services. The other 3Ps (product,price and place) message is transferredvia the 4th P(promotion), target market feel happy to know about the new product and

services offered to them. Price factor in marketing mix encompassed the followingfactors channels, coverage, assortments,l ocations, inventory. transportation andlogistics.

It is not enough for a business to have good products sold at attractive prices. Togenerate sales and profits, the benefits of products have to be communicated tocustomers. In marketing, this is commonly known as "promotion.


23/24

A business' total marketing communications programme is called the "promotionalmix" and consists of a blend of advertising, personal selling, sales promotion and

public relations tools. In this revision note, we describe the four key elements of the promotional mix in more detail.

It is helpful to define the four main elements of the promotional mix before consideringtheir strengths and limitations.

(1) Advertising

Any paid form of non-personal communication of ideas or products in the "prime media":i.e. television, newspapers, magazines, billboard posters, radio, cinema etc. Advertising isintended to persuade and to inform. The two basic aspects of advertising are the message(what you want your communication to say) and the medium (how you get your messageacross)

(2) Personal Selling

Personal Sales is a way of promotion activity where sales representative is directlycontacting the customer. This person-to-person contact has the goal of direct promotionof the product and conclusion of sales.

(3) Sales promotion

represents a set of different promotional activities that has the goal of animatingcustomers for purchasing. This can be value offer ( discount ), quantity offer ( 2+1 ),

prize drawings, merchandising, direct contact by animators in retail outlet, etc.

Providing incentives to customers or to the distribution channel to stimulate demand for a product.

The approach to promotional mixcan be different. The push strategy is transferring thesupply pressure downstream through sales channels. The pull strategy is approaching theconsumer directly.

The Promotional Mix than create the consumer's demand is then creating request for product through supply channel upstream. Usually these two approaches are interlacing.In the early stage of product life the pull strategy is more dominant. Later, when the

market is saturated with own and competitor's products the push strategy is predominant.

(4) Publicity

The communication of a product, brand or business by placing information about it in themedia without paying for the time or media space directly. otherwise known as "publicrelations" or PR.


24/24

So promotion is all about companies communicating with customers.

final project bba

Documents