Report-2

Expansion of McDonalds to regional markets

Carbon copy: Management committee Date: 15

march 2009

Attention to: Panier salvam(co-director)

No of Reports: 1

No of pages:10

2.0 Expansion to regional markets in India

McDonald's India is a joint-venture company managed by Indians. There are a

limited number of customers in the Indian market. To build long-term business in
India McDonalds are learning the nature of the people and the market, it is essential
to retain people once they have become customers. Customers are not all the
same. Around the world, McDonald's traditionally operates with local partners or
local management. In India too, McDonald's purchases form local suppliers.
McDonald's constructs its restaurants using local architects, contractors, labour and
- where possible – local materials. McDonald's hires local personnel for all positions
within the restaurants and contributes a portion of its success to communities in the
form of municipal taxes and reinvestment. Market research of McDonalds has
identified different types of customers. — McDonald's advert, 1996. For example:

A parent with two children Visits McDonald’s to give the children a

treat.

Children Want to visit McDonald’s as it is a fun

place to eat.

A business customer Visits McDonald’s during the day as

service is quick, the food tastes great
and can be eaten in the car without
affecting a busy work schedule.

Teenagers Are attracted by the Saver Menu which is

affordable, and the internet access
available in restaurants.
These examples represent just a few of the benefits of McDonald’s possible
marketing option and the customer satisfaction. Each has different reasons for
coming to McDonald’s Using this type of information McDonald’s can tailor
communication to the needs of specific groups. It is their needs that determine the
type of products and services offered, prices charged, promotions created and
where restaurants are located. In order to create a marketing strategy that will
enable the needs of the key market to be met, the strengths and weaknesses of the
organisation must first be identified and analysed. The analysis will examine the
following parts of the company’s business:

• The company’s products and how appropriate they are for the future

• The quality of employees and how well trained they are to offer the best service to
customers

• The systems and how well they function in providing customer satisfaction e.g.
marketing databases and restaurant systems

• The financial resources available for marketing. Once the strengths and
weaknesses are determined, they are combined with the opportunities and threats
in the market place. This is known as SWOT analysis - strengths, weaknesses,
opportunities, threats. The business can then determine what it needs to do in order
to increase its chances of marketing successfully.

2.1 Range of marketing strategy options

(4*4 Ps)

(Positioning/Branding)

• Product

• Price

• Promotion

• Place

2.1.1 The four Ps

The marketing mix is the combination of price, product, promotion and place that
successfully markets a product to focus of McDonalds.

I. Product
The product must be what the customer wants and has to be changed as tastes
change. Most products go through a life cycle which sees them eventually decline.
Price must match the customers' idea of what the product is worth. 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. Therefore McDonald’s places considerable
emphasis on developing a menu which customers want. Market research establishes
exactly what this is. However, customers’ requirements change over time. What is
fashionable and attractive today may be discarded tomorrow. Marketing
continuously monitors customers’ preferences. In order to meet these changes,
McDonald’s has introduced new products and phased out old ones over time, and
will continue to do so. Care is taken not to adversely affect the sales of an existing
option by introducing a new option which will cannibalise its sales. McDonald’s
knows that sales of products on its menu will vary at different points in their life
cycle as is illustrated on the graph to the right.

Product life cycle

Sales

Maturity

Decline

Growth

Development

Introduction

Time

The type of marketing undertaken and the resources invested will be different
depending on the stage a product has reached. For example, the launch of a new
product will typically involve television and other advertising support. At any time a
company will have a portfolio of products, each in a different stage of its cycle.
Some of McDonald’s options are growing in popularity while arguably the Big Mac is
at the ‘maturity’ stage.
ii. Price

The customer’s perception of value is an important determinant of the price

charged. Customers draw their own mental picture of what a product is worth. A
product is more than a physical item; it also has psychological connotations for the
customer. The danger of using low price as a marketing tool is that the customer
may feel that a low price is indicative of compromised quality. It is important when
deciding on the price to be fully aware of the brand and its integrity. A further
potentially adverse consequence of price reduction is that competitors match the
lower prices resulting in no extra demand. This means the profit margin has been
reduced without increasing the sales.

iii. Promotions

The promotions aspect of the marketing mix covers all types of marketing
communications. One of the methods employed is advertising, sometimes known as
‘above the line’ activity. Advertising is conducted on TV, radio, in cinema, online,
using poster sites and in the press for example in newspapers and magazines. What
distinguishes advertising from other marketing communications is that media
owners are paid before the advertiser can take space in the medium. Other
promotional methods include sales promotions, point of sale display,
merchandising, direct mail, telemarketing, exhibitions, seminars, loyalty schemes,
door drops, demonstrations, etc. The skill in marketing communications is to
develop a campaign which uses several of these methods in a way that provides the
most effective results. For example, TV advertising makes people aware of a food
item and press advertising provides more detail. This may be supported by in-store
promotions to get people to try the product and a collectable promotional device to
encourage them to keep on buying the item. It is imperative that the messages
communicated support each other and do not confuse customers. A thorough
understanding of what the brand represents is the key to a consistent message.

For example, to reach a single professional woman with income above a certain
level, it may be better to take an advertisement in Cosmopolitan than Woman’s
Own. To advertise to mothers with families, it may be more effective to take
advertising space in cinemas during Disney films. The right media depends on who
the viewers, readers or listeners are and how closely they resemble the target
audience.

iv. Place

Place, as an element of the marketing mix, is not just about the physical location or
distribution points for products. It encompasses the management of a range of
processes involved in bringing products to the end consumer.
2.1.2 Marketing objectives

The marketing strategy will be planned to meet clear objectives, with intermediate
targets showing progress along the way. The marketing strategy is the tool that lays
out how marketing objectives will be achieved. Objectives communicate what
marketers want to achieve, guide marketing actions and are used to measure how
well a plan is working. They can be related to market share, sales, reaching the
target audience and creating awareness in the marketplace. Long-term objectives
are broken down into shorter-term measurable targets, which McDonald’s uses as
milestones along the way. Results can be analysed regularly to see whether
objectives are being met. This type of feedback allows the company to change plans
and allows flexibility. Once marketing objectives have been established, the next
stage is to define how they will be achieved. The marketing strategy is the
statement of how objectives will be delivered. It explains what marketing actions
and resources will be used and how they will work together. The company has
developed a learning culture geared towards service excellence through its
comprehensive, structured series of classroom and on-the-job training programmes,
culminating with a diploma in "Hamburgerology" from McDonald's Hamburger
University.

2.1.3 Evaluation of Benefits and Limitations

Benefits Limitations

• McDonalds is relatively • From the Customers perspective,

inexpensive when compared to
the ratio of cost against the reach
of the other fast foods. It can
reach wide Customers for a small
fraction of traditional advertising
budgets. The Service of the
company allows customers to
Choose and purchase Food and
services at their own convenience.
Therefore, McDonalds have the
advantage of appealing to
consumers in a medium that can
bring results quickly. The
marketing strategy of McDonalds
is not under recession to be panic
and can develop the strategic
options for the company.
• McDonalds also have the
advantage of measuring the
the inability of shoppers to touch,
smell, taste or "try on" tangible
goods before making a purchase
can be limiting. However, there is
an industry standard for
Customers to reassure by having
liberal return policies as well as
providing in-store pick-up services.
• Insufficient ability to measure
impact, lack of internal capability,
and difficulty convincing senior
management.
• In response to public pressure,
McDonald's has sought to include
more healthy choices in its menu
and has introduced a new slogan
to its recruitment posters: "Not
bad for a McJob". (The word McJob,
 statistics easily and inexpensively.
Nearly all aspects of its marketing
strategy can be traced, measured,
and tested. It is not under the
position to advertise to build it
market it is under the peoples
mind and have a good priority for
McDonalds. Therefore, customers
can determine which service or
offerings are more appealing to
the audience. The results of
marketing strategy can be
measured and tracked
immediately because the
measurements of the performance
of the employees are tracked for
customer needs. Such
measurement cannot be achieved
through any advertising.
• McDonalds marketing strategies
directly impact food purchasing
and eating habits. For example, in
the late 1970s scientists
announced a possible link
between eating a high-fiber diet
and a reduced risk of cancer.
However, consumers did not
immediately increase their
consumption of high-fiber cereals.
But in 1984 advertisements
claiming a relationship between
high-fiber diets and protection
against cancer appeared, and by
1987 approximately 2 million
households had begun eating
high-fiber cereal. Since then, other
health claims, supported by
scientific studies, have influenced
consumers to decrease
consumption of foods high in
saturated fat and to increase
consumption of fruits, vegetables,
skim milk, poultry, and fish.
• McDonald's has dubbed its new
first attested in the mid-1980s and
later popularized by Canadian
novelist Douglas Coupland in his
book Generation X, has become a
buzz word for low-paid, unskilled
work with few prospects or
benefits and little security.)
McDonald's disputes the idea that
its restaurant jobs have no
prospects, noting that its CEO, Jim
Skinner, started working at the
company as a regular restaurant
employee, and that 20 of its top
50 managers began work as
regular crew members. In 2007,
the company launched an
advertising campaign with the
slogan "Would you like a career
with that?" on Irish television,
outlining that their jobs have
many prospects.
• In a bid to tap into growing
consumer interest in the
provenance of food, the fast-food
chain recently switched its
supplier of both coffee beans and
milk. UK chief executive Steve
Easterbrook said: "British
consumers are increasingly
interested in the quality, sourcing
and ethics of the food and drink
they buy". McDonald's coffee is
now brewed from beans taken
from stocks that have been
certified by the Rainforest
Alliance, a conservation group.
Similarly, milk supplies used for its
hot drinks and milkshakes have
been switched to organic sources
which could account for 5% of the
UK's organic milk output.
• McDonald's announced on May 22,
2008 that, in the U.S. and Canada,
it will be introducing cooking oil
for its French fries that contains no
trans fats. The company will use
canola-based oil with corn and soy
oils by year's end for its baked
 marketing effort "Rolling Energy." items, pies and cookies.
The effort was designed to focus
on increasing credibility with
consumers at a time when people
are becoming more interested in
taking an active role in their diets.
MacDonald’s benefit from cost
reduction through economies of
scale because of its enormous size
and its huge global presence
allows it to diversify risk involved
with the economic performance of
specific countries.

3.0 Changes in Marketing Environment for McDonalds

In April 2008, McDonald's announced that 11 of its Sheffield restaurants have been
using a biomass trial that had cut its waste and carbon footprint by half in the area.
In this trial, waste from the restaurants were collected by Veolia Environmental
Services and used to produce energy at a power plant. McDonald's plans to expand
this project, although the lack of biomass power plants in the U.S. will prevent this
plan from becoming a national standard anytime soon. In addition, in Europe,
McDonald's has been recycling vegetable grease by converting it to fuel for their
diesel trucks.

Furthermore, McDonald's has been using a corn-based bioplastic to produce

containers for some of their products. Although industries who use this product
claim a carbon savings of 30% to 80%, a Guardian study shows otherwise. The
results show that this type of plastic does not break down in landfills as efficiently
as other conventional plastics. The extra energy it takes to recycle these plastic
results in a higher output of greenhouse gases. Also, the plastics can contaminate
waste streams, causing other recycled plastics to become unsaleable.

The U.S. Environmental Protection Agency has recognized McDonald's continuous

effort to reduce solid waste by designing more efficient packaging and by promoting
the use of recycled-content materials. McDonald's report that they are committed
towards environmental leadership by effectively managing electric energy, by
conserving natural resources through recycling and reusing materials, and by
addressing water management issues within the restaurant.
3.2 Analyzing McDonalds in respond to changes

When McDonald’s received criticism for its environmental policies in the 1970s, it
began to make substantial progress towards source reductions efforts. For instance,
an “average meal” in the 1970s—a Big Mac, fries, and a drink—required 46 grams
of packaging; today, it requires only 25 grams, allowing a 46 percent reduction. In
addition, McDonald’s eliminated the need for intermediate containers for cola by
having a delivery system that pumps syrup directly from the delivery truck into
storage containers, saving two million pounds of packaging annually. Overall, weight
reductions in packaging and products, as well as the increased usage of bulk
packaging ultimately decreased packaging by 24 million pounds annually.

3.3 Functional area to be developed

McDonalds must develop in the functional areas that is listed below in order to
achieve its marketing objectives, the company must concentrate in all factors listed
below.

• Provide faster service

• Technology functions

• Customer perception reading

• Customer satisfaction

• Research and development activities etc.

3.3.1 Provide faster service

The success of McDonald's is built upon the success of the service provided by the
employees. In the case of service McDonalds must be straight forward and more
active to the customers, there must be simple changes in the service in order to
achieve the customer’s appreciation. This provides the attraction to the customer
for their regular visit. The faster service of the company makes the customer to
retrieve their hunger faster. Restaurant managers also must be given the
opportunity to attain a degree in hospitality through McDonald's University
Accredited Programme. This promises customers hotter and fresher food prepared
only upon each order. Customers can also easily customize their menu order (for
example, more vegetables or no sauce in burgers) to meet dietary needs, with no
lapse in service time.

3.3.2 Technology Functions

In this age where technology is a key element in ensuring a company's success, The
Company must provide many automated machines for good and faster service. This
makes time saving and less work for the employees in McDonalds. This is the main
functional aspect which the company has to consider for their good marketing
perception and for the customer satisfaction. Since McDonald's is one of the world's
most well-known and valuable brands and worlds leading food service retailer the
company must target on the technology wise like automated machines for service
sector and preparing food machines faster. As a result, managing its day-to-day
operations is a major challenge and that the information and communications
technology requirements and infrastructure should be well placed. Moreover, this is
going to be cost-effective for the company.

3.3.3 Customer Perception Reading

The main functional area which the McDonalds had to anticipate a lot is customer
perception Analysis. It must bid to tap in growing consumer interest in the province
of food. Employee engagement is critical in inculcating a strong service culture.
McDonald's achieves this by placing major emphasis on aligned and open internal
communications from the boardroom to the crew room. The management team
schedules quarterly sharing sessions with all restaurant managers to create a strong
sense of ownership of the company's quarterly goals. Ultimately, this discipline of
aligned communication cascades down to the counter crew who can then deliver
better service in the restaurants.

3.3.4 Customer satisfaction

McDonald’s must always listen and understand the customer’s lifestyle needs. The
24/7 and no minimum order requirement demonstrate the commitment to always
be relevant to our customers lifestyles. It is all about the customers and how we can
offer quality, tasty food at great value and convenience. Customers craving for a
McDonald’s meal can easily call anytime without even having to place a minimum
order. A two dollars surcharge should not continue to apply. Be it breakfast in the
comfort of your own home or a meal in the office anytime of the day or night, we
will gladly deliver any of McDonald’s menu choices you like. This includes our
recently launched Mix ‘N’ Match Happy Meals and even our Everyday Value Savers.
We are looking forward to our customers loving’-captain cook Forster, 1988.

3.3.5 Research and Development Activities

McDonalds need to examine how their rivals are adapting their prices and products
to meet the consumer’s needs, how well the rivals are selling and what marketing
strategies they are using. Market research should supply the company with all the
information they require about consumers preferences, whether they buy certain
products, what design features are preferable and what kind of retail outfits are
most frequently used for purchasing certain food products. Quantitative data and
Qualitative data’s must be developed in the form research activities. All parts of its
organisation then have to work together to ensure that the strategy reaches its
objectives. Once the marketing strategy is in place, various responsibilities are
given to different individuals so that the plan can be implemented.

3.3.6 Achievements of marketing objectives at three years period

Activity Time Period Budget($)

Average age of big Mac 2009-2011 1,000,000.
product
Promotions of big Mac Complete year 2009 3,00,000
product
Mcdelivery service 2009-2011 50,000
Launched N mixed Happy 2009-2011 300,000
meal
Reputation in training 2009-2011 25,000
Marketing Advertisements 2009-2011 1,00,000
Adapting automated 2009-2011 40,000
machines
Total budget 1,815,000

Conclusion

McDonald's uses market research information to build a marketing strategy. All parts
of its organisation then have to work together to ensure that the strategy reaches
its objectives. Once the marketing strategy is in place, various responsibilities are
given to different individuals so that the plan can be implemented. Systems are put
in place to obtain market feedback which measure success against short-term
targets. McDonald’s has to ensure that this is done within the confines of a tightly
controlled, finite marketing budget.