Marketing Review of McDonald’s Corporation

Introduction to Marketing 07 02662Assessed Group Assignment

Dave Hancock: 1035651Samuel Harvey: 1021352

Ross Patman: 1036883Steve Dhalai: 944125

Hannah Muhammad: 954417

Submission Date: 14th December 2010

Contents1. Title Page

2. Contents

3. Introduction Swot Analysis

4. Pestel Analysis

5. Relevance of Michael Porter

7. Business and Strategic Philosophy

8. The Role of Government

9. Corporate and Operational Marketing Issues

10. Current Human Resource Issues

11. Future Business Environment

13. Current Business Issues

14. The International Export Dimension

15. Conclusion

17 – 19. Reference List

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Introduction

McDonald's as we know it was founded by Ray Kroc, who built upon the hamburger stand of Dick and Mac McDonald, which sold hamburgers and fries to customers. Mr Kroc decided a franchising model was the best way to grow the company, and it turns out he was right. The company has grown from its first franchise in 1954 to having 32,000 restaurants in 117 countries by 2010 and employing 1.7 million people. The company had massive sustained growth, and moved into many territories across the world. McDonald's was a story of success.From 2000 onwards, the image of the company was tarnished, becoming an easy target for media and government for various reasons, and so profits dwindled.However, the company fought back, with a change in marketing strategy and corporate policy as a whole, and sought to turn its fortunes around with its 'Plan to Win'.

During the recent recession McDonald's has been in rude health, with profits spiralling due to people once again prioritising value and convenience over other values such as sustainable sourcing and healthy eating. As is discussed later on, the recession won't last forever and so future policies will again have to deal with the public's changing tastes (excuse the pun).

Strategic management is a key area in business and can help to decide the fate of a company when analysing where its strengths, and perhaps more importantly, where its weaknesses lie. A company that can successfully identify these characteristics will certainly have an advantage over its competitors. We looked at McDonald’s using the SWOT, PESTEL and Michael Porter methods.

SWOT AnalysisThis is an initial assessment of McDonald’s performance.

Strengths Weaknesses

Strong brand image & recognisable logo.Ranked very highly in Fortune 500's list of most admired food companies.Image of cheap food even though it is not that well priced.Global spread of restaurants provides economic resilience.Established staff training program.

High employee turnover increases HR costs.Media and government tend to give the company a bad image.Growing concern for obesity and health issues.

Opportunities Threats

Organic foods.Healthier foods.More animal welfare conscious foods.Growing demand for coffee from McDonald's.

Growing concern for animal welfare and ethical sourcing of ingredients.Major competitors such as Burger King & KFC.Upmarket chains such as Eat, Starbucks & Pret.

PESTEL AnalysisThere are many factors in the macro-environment that will affect the decisions of the managers of any organisation. Tax changes, new laws, trade barriers, demographic and government policy

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changes. To help analyse these factors managers can categorise them using the PESTEL model.

Political FactorsMcDonald's as a company in the fast food market has taken, both internationally and more specifically from a UK perspective, most of the blow when it comes to the fast food clampdown and was under both media and political pressure from various groups to alter both its selection of food it provides and perhaps more importantly the fat and salt values within the menu it already offered. The intense political pressure was backed by research into the fat and salt values of McDonald's meals and together with the rising levels of obesity in the country it pushed McDonald's to make a significant change.

The result of this pressure led to a few changes in the way the company operated and the most noticeable change was in the form of a wider menu range and nutritional values being printed on most meals.

Aside from being criticised for being a typically unhealthy and damaging company to the health interests, McDonald's has been involved with the new UK health policy that tackles issues such as obesity. This is a clear example of the company’s adaptability to pressure from the media and political parties and this may play a key part of McDonald's marketing strategy.'The Role of Government' section details the effects the government has had on McDonald’s.

Economic FactorsMcDonald's economic factors vary internationally but in the UK it is strong with high sales and profits resulting from the recession. McDonald’s image of cheap, fast food has served it well here with people returning to the company from more upmarket alternatives. McDonald’s has seen that its position is particularly strong in the recession and so has marketed itself both as an upmarket brand but also as a down-to-earth company with its ‘Pound Saver’ menu.

Socio-Cultural FactorsMcDonald's have aimed to improve their workforce's education and hence their efficiency by providing a degree accredited by Manchester Metropolitan University. From a socio-cultural point of view this degree may give access to education to those who would normally just partake in low level skilled work instead of attending university and complementing the workplace with businesses theory.McDonald’s often brings its American-style branding with its restaurants. America has become less popular with the English over the past decade for reasons such as the occupation of Iraq and Afghanistan among others. McDonald’s has altered its marketing to reflect this; a clear example being the change is colouring of the restaurants from a brash red to a more conservative green.As previously mentioned, the main social factor concerned with McDonald's would be the issue of obesity and the impact McDonald's has both negatively and its propositions to help combat the problems.Time Inc (2010) [online]. Available from: http://newsfeed.time.com/2010/11/27/u-k-university-to-offer-mcdonalds-degree/ [Accessed 3rd December 2010]

Technological FactorsMcDonald's is very in touch with technology with countless examples from their clever television adverts to the toys that feature in “happy meals”. McDonald's is clearly a company that lives in the

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modern era and puts technology high on its priority list. Advertising is more targeted these days due to the internet and McDonald’s have made full use of it by having adverts, games, etc.McDonald's also incorporates a sophisticated inventory system together with its international supply chain help McDonald's to us technology as a means to add value to their products and provide a low cost system which then passes these savings down to the customers.

EnvironmentMcDonalds is very keen to promote its attitude towards helping the environment by drawing up a comprehensive environmental policy that states its aims to reduce energy emissions, odour and noise pollution and also to minimise the solid waste produced by the company.All of these help to market McDonald's as a company that is not only helping to reduce its impact on the environment but to be proactive in showing that it wants to do as much as it can.McDonalds (2010) [online] http://www.mcdonalds.co.uk/ourworld/environment/policy.shtml[Accessed 3rd December 2010]

Legal FactorsThe legal factors surrounding McDonald's tend to link to its social responsibilities and the issue of fast food and obesity in general, although no specific legal action has been formally made against McDonald's it is clear that the pressure put on the company has certainly had a clear effect on the way in which it operates and the response it has given to show that it is proactive in its social responsibilities.IvyThesis [online] http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html [Accessed 3rd December 2010]

The Relevance of Michael Porter

Porters 5 Forces:Michael Porter provided a framework that models an industry as being influenced by five forces. Companies can use this model to better understand the industry context in which the firm operates and identify the areas in which it needs to improve.QuickMBA [online] http://www.quickmba.com/strategy/porter.shtml [Accessed 3rd December 2010]

Degree of RivalryThe degree of rivalry in the fast food and restaurant industry is very high. To help ensure that McDonald's has an advantage over its competitors it has diversified, straying into broader food markets by offering breakfast items and coffees to competing with sandwich companies such as Subway with the deli sandwich meal.McDonald’s stays competitive by offering a broad range to suit all tastes and at a varied price structure.

Barriers to EntryOn a small scale small restaurants or cafes may be able to compete with McDonald’s and may draw away some of the consumers from them but in terms of the regional and national markets there are huge barriers to entry simply because of McDonalds excellent supply chain, very low cost production and massive marketing budgets. McDonald’s itself can deal with opening new restaurants in established markets easily but it sometimes has problems opening in new countries as tastes are different and the American image it brings is sometimes unwelcome.

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Threat of SubstitutesThere are various substitutes in the industry because of the sheer number of fast food chains and smaller restaurants. These include small fast food vendors, sandwich shop, coffee shops, and other large chains. Rivals need to offer a better product or a lower price in order to compete with McDonald’s. McDonald’s is a very efficient company so cannot be easily beaten in terms of value. A large threat is more upmarket products; the company counters this by bringing out premium or special edition products such as the Chicken Legend and the Terry’s Chocolate Orange McFlurry.

Supplier PowerThe power of suppliers will be quite low in the industry because the products needed by the industry are in abundance and often the fast food chains can simply select the cheapest suppliers available to them.

Buyer PowerIn consideration of the vast number of customers in the fast food industry; together they possess strong buyer power as they ‘vote with their feet’, but individually they have very weak buyer power.

Business and Strategic Philosophy

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SUPPLIER POWER-Supplier concentration

-Importance of volume to supplier-Differentiation of inputs

-Impact of inputs on cost or differentiation-Switching costs of firms in the industry

-Presence of substitute inputs-Threat of forward integration

-Cost relative to total purchases in industry

BARRIERSTO ENTRY

-Absolute cost advantages-Proprietary learning curve

-Access to inputs-Government policy-Economies of scale

-Capital requirements-Brand identity-Switching costs

-Access to distribution-Expected retaliation-Proprietary products

DEGREE OF RIVALRY-Exit barriers

-Industry concentration-Fixed costs/Value added

-Industry growth-Intermittent overcapacity

-Product differences-Switching costs-Brand identity

-Diversity of rivals-Corporate stakes

BUYER POWER-Bargaining leverage

-Buyer volume-Buyer information

-Brand identity-Price sensitivity

-Threat of backward integration-Product differentiation-Buyer concentration vs.

industry-Substitutes available

-Buyers' incentives

THREAT OFSUBSTITUTES

-Switching costs-Buyer inclination to

substitute-Price-performance

trade-off of substitutes

The business strategy of a company is intrinsically linked to its marketing strategy. This section assesses the business strategy of McDonald’s and compares it to the way in which products are marketed. Marketing is not just advertising: it is an assessment of consumer preferences and views too, which means that the link between marketing and business strategies is a two-way link.

The marketing strategy of McDonald’s is shaped by four major inputs:1. Organisational objectives and resources2. Attitude to change and risk3. Competitor strategies4. Market structure and opportunities(Brassington, F & Pettitt, S (2002) p.846)

1. McDonald’s is driven by its Mission Statement: ‘Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience – People, Products, Place, Price and Promotion. We are committed to improving our operations and enhancing our customers' experience.’

Student Research [online] http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html [Accessed 17th October 2010]

When people talk about company resources they often only consider cash and assets but in fact ‘They include skills and expertise...any area of the organisation that can help to add value and give a competitive edge.’ (Brassington, F & Pettitt, S (2002) p.845) These resources can lead to intangible assets such as a loyal workforce, good customer services and a good brand image. McDonald’s introduced qualifications for its employees to work towards which initially received bad press, being called the ‘McJob’. It has soldiered on and now they state

‘96% of our people think the skills they’ve gained at McDonald’s will be useful to any future employer, and that 8 out of 10 employees see the job as a long term career.’ Learn how we work [online] http://www.mcdonalds.co.uk/static/pdf/aboutus/education/mcd_prospectus.pdf [Accessed 2nd December 2010]

The company also has many employment-related accolades including being in The Times’ Top 100 employers list for 10 years in a row.

2. McDonald’s is a company which is now well practised at changing its image and taking risks when need be. The company has 32,000 outlets in around 117 countries and so is always risking money by trying out new markets. McDonald’s over the years has endured a lot of criticism and bad press, most notably the 2004 documentary ‘Supersize Me’ and the ‘McLibel’ trial which started in 1994 and ended two and a half years later. The company markets itself as a much more progressive company these days with recent TV adverts focusing on the British weather and its benefits to the British and Irish Farmers and the ‘Just Passing By’ campaign Favourites, Weather and

Breakfast adverts [online] www.youtube.com [Accessed 25th November 2010] which looked at the broad spectrum of customers. Junk food is a hot topic in the British Press so McDonald’s have moved away from advertising it, which goes to show that they are very capable of adapting to changes in food fashions.

3. McDonald’s is the dominant force in fast food in Britain today and it is a market leader in terms of business and marketing strategies. The original competitors such as Burger King and KFC follow in McDonald’s footsteps. McDonald’s does not expand into making chicken products as much as it could because KFC is the most popular choice and so the market is saturated in this respect.

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4. New competition arises in the form of Subway and also coffee shops such as Costa and Starbucks. McDonald’s has introduced new marketing strategies and product lines to compete in these alternative and arguably more upmarket sectors. Further opportunities for expansion can be sought abroad as growth is limited in established markets due to people being able to only eat so much! Both points will be discussed later on.

The Role of Government

McDonald’s is affected a lot by governmental organisations such as the Food Standards Agency, the Department of Health, and OFCOM. The main issue is the advertising of junk food or HFSS (High Fat, Salt & Sugar) foods to children. Pressure had been mounting throughout the 2000s for the advertising regulator OFCOM to restrict the marketing of HFSS foods to children. The Children’s Food Act 2004 states that ‘The Appropriate Authority shall by regulation prohibit any person...from marketing to children any foods and drinks which contain content which the FSA has decided... is detrimental to the health of children.’ Children’s Food Bill [online] http://www.publications.parliament.uk/pa/cm200304/cmbills/110/2004110.pdf [Accessed 2nd December 2010]

These rules were introduced for under-10s in April 2007, by January 2008 covered under-16s. By January 2009 the advertising of HFSS foods on children’s channels was also banned. The ban included the use of celebrities, licensed characters, health claims and promotional offers aimed at under-16s.

This bad press became a significant problem for McDonald’s which, in 2003, recorded its first ever loss in the UK. The Government intervention, along with media criticism, meant the consumer body as a whole were turning away from McDonald’s. McDonald’s started to change its image and set out its ‘Plan to Win’ which has been discussed earlier on.

Figure shows McDonald’s stock price over past decade [online] http://quote.morningstar.com/stock/chart.aspx?t=MCD&region=USA&culture=en-US [Accessed 2nd December 2010]

Note the very low stock price around 2002/2003, when the press attention for McDonald’s was particularly bad. The change in the advertising laws in the UK did not have a massive effect on the stock price, meaning that the company must have found alternative ways of marketing, for instance, online advertising to children was still permitted though frowned upon; ‘Health campaigners have warned that fast food giants are increasingly turning to the internet to circumvent moves designed to curb advertising aimed at children.’ Johnson, B & Gibson, O (2006) Internet used to push fast food to children, say campaigners [online] http://www.guardian.co.uk/uk/2006/mar/27/advertising.digitalmedia [Accessed 25th November 2010]

Corporate and Operational Marketing Issues

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Corporate IssuesAs one of the largest restaurant chains in the world McDonald’s spends massive amounts of money on marketing campaigns and advertising. The company spent $745.5m in the USA alone in 2009.McDonald’s annual report. Page 32. [online] http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations0.Par.17264.File.dat/2009%20AR%20Report%20-%20Print.pdf [Accessed 10th December 2010]

The main target of their advertising campaigns is children, which has proven highly controversial.The problem is that children are bombarded by McDonald’s’ marketing, and are convinced into buying McDonald’s products habitually, which could lead to health implications for them.McDonald’s argue however that “their advertising is no worse than anyone else's and that they adhere to all the advertising codes in each country.” http://www.mcspotlight.org/issues/intro.html [Accessed 5th December 2010]

While this may be true, there is no question that a large proportion of children are influenced by McDonald’s’ advertising campaigns and that over-consumption of fast food can lead to obesity and health problems.As the population becomes more aware of the direct link between fast food and health problems, including obesity, (there has even been talk of the NHS refusing treatment to obese patients,) problems may arise for the company.There is already a drive towards healthy eating at McDonald’s, including a range of fruits and salads, but this may not be enough to cope with the increasing demand for healthy food, therefore marketing strategies to change the corporate image may have to be built upon.

As awareness for animal welfare increases in society, along with the increase in demand for free range food, McDonald’s may find that demand for their products decreases.McDonald’s is the “world’s largest user of beef” and are “responsible for the slaughter of hundreds of thousands of cows per year.”Half a million chickens which suffer cruelty and pain in factory farms are used by McDonald’s every week in Europe. http://www.mcspotlight.org/issues/intro.html [Accessed 5th December 2010]

Although McDonald’s abide by the rules set out for them by governments, and act no worse than any other fast food chain (other than the volume of animals killed), the public will soon realise that animals are not cared for enough during the rearing and slaughter process.This is likely to affect the whole market, but nevertheless, to resolve this situation it is likely that profits may be lost due to higher costs of raw materials coupled with McDonald’s elastic relationship between price and demand (that is, if prices are pushed up, demand is likely to fall.)In 2007, Burger King announced that it would begin to buy pork and eggs from suppliers who do not confine their animals in cages or crates, and who use “controlled atmospheric” or gas stunning.This was a bold move by the company: one that would affect the whole industry, forcing both competitors and other suppliers to adopt similar practices so they do not get left behind. http://www.nytimes.com/2007/03/28/business/28burger.html, [Accessed 9th December 2010]

A possible solution to both of these issues could be to move towards adults rather than children as a target market (the introduction of the gourmet “Angus Burger” may be a possible step towards this.)This would be beneficial as adults are more likely to pay higher prices for better quality, more animal welfare conscious foods which could lead to, at worst, unchanged profits from different sources or possibly even increased profits.

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By aiming adverts at adults rather than children, McDonald’s would receive less bad publicity from their marketing campaigns, which would essentially make their marketing more successful. This strategy is likely to work as upmarket burger restaurants have been seen, note The Handmade Burger Co.

Operational IssuesAs McDonald’s is mainly a franchise, there are minimal operational financial issues for the company itself, they merely provide the training and tools for the franchisee to set up and run their restaurant.This is also true of operational marketing. Franchised restaurants themselves do not need to advertise themselves in their local area extensively, other than billboards alerting potential customers that they are within close proximity of a restaurant.

The bulk of marketing is handled corporately, with large scale television adverts.Most customers are likely to already know they want a McDonald’s, or simply pick the first burger chain or fast food restaurant they find.There are product variations between countries, but rarely between restaurants nationally.Perhaps this is a problem; maybe more profits could be gained by identifying different market segments (by geographical locations nationally), and using promotional strategies to extract as much profit from each group.For instance, if the Big Mac is less popular in one city than another, lower the price slightly and advertise it more using local means.This however may prove difficult on the financial side, as McDonald’s tend to advertise and charge a standard price for each item it sells nationally, and customers may not react well to price changes. People generally don’t like change!

Current Human Resource Issues

One of the main human resource issues that McDonald’s faces is that they constantly associated with the term “McJob” – which basically is a slang term for a job which requires low skills, is not paid well and does not offer future opportunities for workers.Google search: ‘Define: McJob’ www.google.com [Accessed 5th December 2010]

Unfortunately, due to the nature of the market, this is hard to avoid. It would be unsuitable to pay a till worker a high wage, and admittedly, it does not require great skill to perform this job.It could be argued that McDonald’s provides jobs for those who need part time work or do not have the skill sets needed to gain higher level employment.http://news.bbc.co.uk/1/hi/magazine/5052020.stm [Accessed 10th December 2010]

McDonald’s also offers employees the chance the gain qualifications which would help them progress, not only in their company, but in any other company they may work for in the future.Employees can be trained in skills such as human resources, shift management and marketing.However, some argue that McDonald’s, on the whole, is a “net destroyer of jobs”. http://www.mcspotlight.org/issues/intro.html [Accessed 1st December 2010]

It has been said that they use these “McJobs” with their low wages, coupled with low product prices funded by the vast company size, to undercut and destroy local competition.As a by-product of the “McJob”, some workers seem to care less about the service they give whilst working.

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If you search any web search engine for McDonald’s complaints, you will find thousands of hits, where people have vented their frustrations at the poor service they received at a McDonald’s restaurant.Although complaints are inevitable when any company deals with the public, McDonald’s are likely to feel the pressure of the complaints they receive probably more than most companies, mainly due to the large scale of operations and the already established “McJob” theory. It is very rare you hear something positive about people working at McDonalds. We think this is an area that the company can improve in, turning around the negativity associated with working at McDonald’s.

Future Business Environment

In October 2010, McDonalds launched a variety of new advertisements in the UK highlighting its new coffee range (Marketing Week, 2010), A marketing campaign designed at helping the company to gain a greater hold on the high street coffee market which is predicted to grow to £2bn by 2012 (Belfast

Telegraph, 2010). This, a normal trend for McDonald’s, is the company’s attempt at trying to capture the next big thing and become a dominate force in the market before any rival companies attempt to do so themselves. By doing so, McDonalds has established itself as one of the leading players in several markets and has managed to target different market segments successfully as well as keeping their dominating image within the fast food market. Coffee on the high street is in no way new, with big stores such as Starbucks and Costa already having a big presence, but by raising awareness that they make good coffee before it becomes the next big thing, McDonalds ensures that it establishes itself as a worthy rival to other competitors instead of a portraying a “me too” image.

Evidence of this is seen in one of McDonald’s more established products, the Deli of the Day. Initially launched back in 2005 to capture a segment of the market which stores such as Subway made popular (Brand Republic, 2005); the Deli of the Day has become a prominent feature of the market offering customers with a healthier lunchtime alternative. Years later, we see the market saturated with many stores and shops offering subs, baguettes and alternative offerings but due to impressive marketing research and fast introduction of products, McDonalds remains as one of the main stores people think of for fast, healthy lunchtime food.

It’s fairly obvious that this trend is something that McDonalds is going to want to keep doing due to its success in recent years. Therefore, for the future McDonalds will look at keeping the trend alive by analysing the market and reacting in accordance to that. McDonalds has recently enjoyed its best profits in 4 years (Daily Mail, 2010) due to the recession which has affected the global economy and customers looking to ditch expensive restaurants for cheaper fast food outlets. Of course, the global recession can’t last forever and McDonalds will be trying to keep a hold of the massive surge in customers it has received as a result of this. In South California, McDonalds has introduced a “gourmet” Angus burger in a bid to ditch the quick and cheap image the brand of McDonalds is tarnished with (Weston, 2007). This is perhaps the direction McDonalds will soon start to take in the UK, introducing gourmet beef and chicken with high quality ingredients and fresh buns in order to make the brand look more expensive, and to retain the many customers they have previously gained who will in no doubt look for a more premium brand of restaurants to eat at as Britain comes out of the Recession.

Another step that McDonalds may use to further itself in the future is to source all meat from British farmers in humane ways. With a growing amount of consumers in the UK preferring British 11

meat and British produce over meat imported from other countries, McDonalds has for several years had an on-going campaign highlighting how all beef in its burgers is sourced from British farms, how all milk is organic and the eggs are free range (Farmers Guardian, 2005). What McDonalds currently do not do, however, is get Chicken from British farms instead favouring importing Chicken from Brazil, Thailand and Holland. They do this in order to keep the price of Chicken Dishes (all of which include Chicken Breast Meat) to a minimum (Rawstorne, 2010). As Britain sees itself moving out of the recession, McDonalds may want to think about revising their meat sources to make everything 100% British. This may encourage a lot more people to eat at the restaurant as well as marketing a positive image of how they support British Farmers. It will also help to improve their corporate image; farmers will be more willing to work with McDonalds as they are dedicating themselves to supporting British Farms and bringing as much revenue as possible to British Farmers.

Another future strategy that McDonalds will almost certainly choose to adopt is to expand into more countries. McDonalds currently operates in 125 countries (McDonald’s www.wikipedia.org [Accessed 2010]) however still remains non-existent in the majority of Africa

Currently there are 115 countries in the world without a McDonalds (5 of these are countries who previously had McDonalds Restaurants present but were withdrawn for various reasons). The continent with the least amount of countries with McDonalds Restaurants is Africa with 46 out of 53 African countries without McDonalds Restaurants. Although Africa is on the whole a developing and a majority third world continent, McDonalds may want to consider opening restaurants in the more developed countries such as Nigeria or Madagascar. The profile of many African countries would suit the McDonalds restaurant perfectly; such countries often contain people with very little disposable income or on small wages. McDonalds may find itself prospering over in many African Countries because of its cheap, fast and well liked food making it accessible to many citizens, just like the recession has bought out a surge in McDonalds profits over in the U.K. McDonald’s would have to work diligently to ensure that it does not exploit the people or farmers like it was once seen to do in the UK and USA. Introducing similar altruistic schemes to those we have here, though they may reduce profitability in the short term, would get McDonald’s off to a good start, with an instant positive image in Africa. This is a goal which it still hasn’t fully achieved here.

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Whichever country McDonalds decides to expand its franchises to in the future, their track record suggests they have a high probability of success with McDonalds operating successfully in 76 countries over 70 years with only 7 failures, 2 of which were due to government pressure.

“McDonaldization” of society – a term used by sociologist George Ritzer – it explains how sometimes culture shapes the characteristics of a fast-food chain. McDonald’s venture into the international market has been that of any typical service firm where they have entered a foreign market with a small number of locations and then expanded their geographic coverage with time to grow their franchise even further. Along with their expansion, they have managed to individually cater to the needs of many culturally diverse customers in other countries. In countries like India, where cows are seen as sacred, beef is forbidden for consumption. With a huge part of the population being vegetarian, McDonald’s has introduced alternative options such as vegetarian burgers. In the Middle East, where pork is forbidden, any such option containing this is taken off the menu so as not to offend anyone. There is also a trend to introduce food that is specific to that region of the world. For example, a very popular concept that had a tremendously positive reaction was the company’s Sichuan Menu, also known as the China Mac, which was introduced at the Beijing Olympics. Establishing these specific items on their menu, along with the introduction of the breakfast menu, the extension of some of the store opening hours to 24 hours a day, and building many ‘drive thru’s, has contributed heavily to an increase in revenues.

McDonald’s cannot export their product, although this is something to be given considerable thought, they choose among different modes of operation. Overseas, McDonald’s tends to prefer franchising to third parties than have the restaurant as company-operated. Based on statistics from late 2009, over 25,975 (80%) of its 32,278 restaurants around the world were franchises; whereas only 6,303 (20%) restaurants were company-operated. This is because franchising provides the initial capital needed for building the restaurant and then maintaining it by constant reinvestment. However, operating a branch on its own requires a significantly larger amount of capital and will therefore lower the revenues generated. This would explain why McDonald’s are leaning more and more towards becoming entirely franchise based.

Current Business Issues

The most significant of all the issues and a popular target for criticism, nutritionists argue that the high fat content in the food promoted by McDonald’s is linked to critical diseases such as heart disease, cancer, diabetes and obesity - all of these diseases which are very common among the public. There is a huge question as to why sports events are sponsored by a firm that promotes unhealthy products, and also why there are sometimes McDonald’s branches in hospitals.

Another issue is the role and contribution of McDonald’s towards the environment. There must be more pressure placed on creating more environmentally friendly packaging, as millions of tons of packaging are produced, only to be thrown away after a few minutes when the meal is finished. Tropical forests are also cleared to make room for ranches to stock the cattle (for consumption in the USA. This issue does not apply to the UK market) which again, contributes towards the destruction of the environment.

McDonald’s spend an average of two billion dollars each year on advertising their products. Some people, mainly parents, object to this as they feel it has a strong influence over their children. McDonald’s sponsors many school events and programmes, however, there is doubt over whether 13

this is genuine philanthropy or an attempt once again to maximise profits, as a large part of their target audience are actually children.

McDonald’s employ over 1.5 million young people around the world. This can be seen as creating a huge base for job opportunities however, it creates a threat for local food chains, as being such a huge brand name, it is likely to be a more popular choice for jobs which could put local food places out of business. There have also been a range of complaints from employees about discrimination, lack of rights, few breaks, long working hours, unsafe conditions, understaffing, sale of food that has fallen on the ground, kitchen floors flooding with sewage, etc. However, all these complaints have been dismissed by McDonald’s, claiming that their staff are happy and content with their jobs.

Being among the world’s largest users of beef, McDonald’s slaughter millions of cows every year meaning they are once again targets by vegetarians and animal welfare activists. There have also been issues regarding the treatment of chickens and regarding them being kept indoors with no access to clean fresh air and sunlight.

The concept of McDonald’s opening in countries like India could mean wealth is taken out of the local economy only to benefit the rich. This directly affects farmers and such foods are slowly replacing sustainable farming.

Although McDonald’s is constantly among controversies, debates and criticism there is an issue of free speech as there are rumours that McDonald’s use their financial and legal power to influence the media.

As of January 2009, McDonald’s reported that same store sales continued to rise by 7.1% globally. The figure could have been potentially higher at 9.1% if not for the American Dollar becoming stronger.McDonald’s has enormous presence in developed countries like United Kingdom, Canada, Australia and South Korea, they have also expanded into countries with fast – growing, emerging markets such as India, China, Russia, Eastern Europe, etc. The market potential in such countries affects the company’s decision to enter and grow its business - as they also have to consider other factors involved such as expansion post entry. However, aside from promoting and marketing themselves abroad, McDonald’s continue to exhaust opportunities within their home market and optimize profits.

The International Export DimensionMcDonald’s is the world’s largest food company, operating 31,000 restaurants in over 119 countries, serving 58 million customers daily and employing more than 1.5 million people. A firm that started in California – USA, McDonald’s has now expanded throughout most of the world.The majority of the sales made by McDonald’s are outside the United States of America. Geography and location give the most basic grounds for diversification and growth. With an enormous presence in developed countries like United Kingdom, Canada, Australia and South Korea, they have also expanded into countries with fast – growing, emerging markets such as India, China, Russia, Eastern Europe, etc. The market potential in such countries affects the company’s decision to enter and grow its business - as they also have to consider other factors involved such as expansion post entry. However, aside from promoting and marketing themselves abroad, McDonald’s continue to exhaust opportunities within their home market and optimize profits.

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ConclusionTo help evaluate the performance of McDonald’s, we think it is easiest to show a revised SWOT table that accounts for the new research we have discussed.

The SWOT table below is very different to the one shown initially, which was based on our first impressions of the company as part of the general public.Strengths Weaknesses

Strong brand image & recognisable logo.Image of cheap food even though it is not that well priced.Global spread of restaurants provides economic resilience.Established staff training program and a top 100 employer ranking.Coffee.

Media and government tend to give the company a bad image.Growing concern for obesity and health issues.International dislike for America or Americanisation of cultures.

Opportunities Threats

Upmarket food for adults.Healthier and organic foods.Ethical sourcing.More animal welfare conscious foods.Working with UK government to form health policies

Bad image such as the ‘McJobs’ tag.Waste packaging produced – this can be fairly easily solved.

McDonald’s has been working very hard over the past decade to change peoples’ opinions of the company. This is very hard to do as there are always people who cynically dismiss the news of improvements as ‘spin’. What we would suggest is that McDonald’s tries to give itself a more down to earth image still. The website shows lots of beautiful, happy people working at McDonald’s (see image below) and it just seems too good to be true. Although we can see these people working at McDonald’s, they are not the most common employee and so people do not relate to them.

We think the policy of marketing to adults is a good one. They generally have more disposable income than teenagers and so further expanding into the premium market is a plan we recommend. With expansion into the premium market, a focus is required on not just quality but also ethical sourcing and health. As we start to move out of the recession, people will again start to focus on where their food has come from, if the animals had a good life, and if the farmers get

a good deal. People buy into ethics as an ideal, no-one wants to eat a ‘McGuilt burger’.

Convincing the cynics that McDonald’s is a good place to eat is nearly impossible so we may as well not bother anymore. A lot of money could be saved by ‘preaching to the converted’ the benefits of

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Image: [online] http://www.mcdonalds.co.uk/people/join-the-team/join-the-team.shtml?dnPos=0 [Accessed 7th December 2010]

eating at McDonald’s. If they have a good experience they will tell people and the good image will spread by word of mouth. People are more likely to believe the message McDonald’s sends if they hear it from friends rather than through adverts.

In terms of threats, we do not think any of the competitors hold a candle to McDonald’s. We do not expect them to come out with a new product which significantly dents McDonald’s popularity any time soon. UK trends should be watched more closely than we watch the competitors as we can almost always match the trend before any competitor. However, new competitors come along in new market sectors fairly often so McDonald’s should keep an eye for them.

We hope that you find our research and suggestions for future business and marketing strategies helpful.

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