Report-1

Investigation of Main Marketing Metrics

Carbon copy: Head office Date: 15 March
2009
Attention to: Marketing director
No of reports: 1
No of pages: 11
1.0 Marketing Strategy of McDonald’s
A marketing strategy can be defined as the art and science of formulating,
implementing and evaluating cross functional decisions that enable an organization
to achieve its objective. A marketing strategy is a process that can allow an
organization to concentrate its limited resources on the greatest opportunities to
increase sales and achieve a sustainable competitive advantage. This is where
McDonald’s has excelled due to its ability to successfully integrate the
customer’s perspective in its products and operations in a comprehensive manner.
The revamped menu in India is an example of McDonald’s strategy of integrating the
customer’s perspective in its products. — Viz Top Tip, published May 1989.
Example1: Use a low cost product to attract consumers. Once the organization uses
low cost products, and it has established a relationship with consumers, then the
organization will sell additional higher-margin products and services that enhance
the consumer's interaction with the low-cost product or service.
1.1 Development of marketing strategy(Executive summary)
The techniques that can significantly improve the marketing management in the part
of development the following methods are followed.
• A proper philosophy of marketing.
• A systematic approach of solving marketing problems.
• An awareness and ability to use very latest concepts as per the trend.

1.2 Tools and Techniques involved in developing Marketing strategy

SWOT Analysis of McDonald’s

1.2.1 Strengths
MacDonald’s has a strong global presence with its nearest domestic competitor
being only half its size, McDonald’s is the market leader in both the domestic and
international markets. In international markets, MacDonald’s is well placed to
expand and take advantage of long-term economic growth. MacDonald’s also has a
strong real estate portfolio. The company’s outlets are located in areas that are
highly known for visibility, traffic volume and ease of access. MacDonald’s also
has exceptional brand recognition. (Brennan, lines 15-16).

1.2.2 Weaknesses

The food industry is really saturated. As a result of this, MacDonald’s has to

deal with the prospect of looming market saturation, which could make it difficult
to add new outlets. The market is forecast to grow by around 2% per year. Lack of
product innovation is another weakness of McDonalds. The last break-through for
McDonald’s was the Chicken McNugget in 1983, but again the company’s new strategy
seems to have successfully deal with the problem through the popularity of its new
salads and other new products.

1.2.3 Opportunities
MacDonald’s sold its Donatos Pizzeria back to its founder in 2003 and discontinued
Boston market operations outside of the US. The company will instead focus on
Chipotle Grill which is the company’s most successful non MacDonald’s branded
chain of restaurants.

1.2.4 Threats

McDonald’s is exposed to changes in the global economy. The company’s aggressive

international expansion has left it extremely vulnerable to other countries
economic slowdown. Foreign currency fluctuation is also another problem global
companies like McDonalds. Top Competitors for MacDonald’s include: Yum! Brands,
Inc, Wendy’s International, Inc. Jack in the Box Inc, and Burger King Corporation.
(Kevinen McDonalds-Ross, 1969,)

Strength
• Strong brand
• Customer intimacy
• Product innovation
• Supplier integration Weakness
• Low depth and width of products
Opportunity
• Expand into tier2 and tier3 cities
• Entry into breakfast category Threat
• Changing customer lifestyle and taste
• Increased competition from local fast food outlets like burger king

1.2.5 Entry to Tier 2 and Tier 3 cities – The main target customer for McDonald’s
is the new urban Indian family. With the customer demographics constantly changing
and tectonic social and cultural shifts being observed in Tier 2 and Tier 3 cities
due to globalization, the company is now expanding to Tier 2 cities like Pune and
Jaipur.

1.2.6 Rolling out McBreakfast across all outlets – In India, the company has
recently launched its entry into the breakfast food category. This is now launched
on a pilot basis on select stores.
1.3 PESTEL Analysis of McDonald’s
PESTEL analysis is concerning the Macro-environment surrounding a Company, usually
in Strategic Analysis Report (SAR).
1.3.1 Political -
- Trading policies
- Employment Law
- Taxation (Corporate; Consumer)
1.3.2 Economic -
- Interest Rates
- Inflation
- Economic growth
- Exchange rates
- stage of business cycle
1.3.3 Socio-Cultural -
- Branding
- Demographics
- Lifestyle changes
- Health and welfare
1.3.4 Technological -
- Stock Control
- Government spending on research
- Energy use and costs
1.3.5 Legal -
- Competition Commision
- Employment Law
- Trade Regulations.
1.3.6 Environmental -
- Packaging
- Recycling

1.3.7 Table

PESTLE ANALYSIS OF McDonald’s

P • Global market
• Different Political infrastructures
• Consumer taxation
E • Market leader
• Very high target market
• Low cost and more incomes
S • Fragmented supplier/workforce
• Working within many social groups
• Increase employments
T • Advanced technology development
• Quality standards
L • Legislation for product
• Sustained logo
E • Quality packing
• Local manufacture using foreign supplies

1.4 Porter Value Chain Analysis of McDonald’s

The goal of these activities is to offer the customer a level of value that
exceeds the cost of the activities, thereby resulting in a profit margin for
McDonalds.

The primary value chain activities are:

• Inbound Logistics: the receiving and warehousing of raw materials and their
distribution to manufacturing as they are required.
• Operations: the processes of transforming inputs into finished products and
services.
• Outbound Logistics: the warehousing and distribution of finished goods.
• Marketing & Sales: the identification of customer needs and the generation
of sales.
• Service: the support of customers after the products and services are sold
to them.
These primary activities are supported by:
• Technology development: technologies to support value-creating activities.
The value chain model is a useful analysis tool for defining a firm's core
competencies and the activities in which it can pursue a competitive advantage as
follows:
Cost advantage: by better understanding costs and squeezing them out of the
value-adding activities.
1.5 Porter’s five forces analysis of McDonald’s

As Per the Porter's 5 Forces analysis McDonalds deals with factors outside an
industry that influence the nature of competition within it, the forces inside the
McDonalds influences the way in which the firms compete, and so the industry’s
likely profitability is conducted in Porter’s five forces model. A business has to
understand the dynamics of its industries and markets in order to compete
effectively in the marketplace. So McDonald’s rivalry in this competitive market
is blooming.

1.6 BCG matrix of McDonald’s

The need for strategy in order to expand its existing product in very promising
markets for McDonald’s is very essential. McDonald’s along with KFC and other
major fast food chains have dominated the American continent as well as elsewhere.
BCG Matrix: The market growth rate measures industry attractiveness. The
underlying theory for examining market growth rate is the industry life cycle. The
BCG assumes that growth rates, life cycle stages affect a firm’s finances.

McDonald’s USA ?McDonalds Europe

McDonald’s Asia

Americas McDonald’s
Placing products in the BCG matrix results in 4 categories in a portfolio of a
McDonalds:
1. Stars (=high growth, high market share)
• Frequently roughly in balance on net cash flow. However if needed any
attempt should be made to hold share, because the rewards will be a cash cow if
market share is kept. So, McDonald’s USA is under Star position.
2. Cash Cows (=low growth, high market share)
• Profits and cash generation should be high, and because of the low growth,
investments needed should be low. Keep profits high.
3. Dogs (=low growth, low market share)
• Avoid and minimize the number of dogs in a company.
• Beware of expensive ‘turn around plans’.
4. Question Marks (= high growth, low market share)
• Have the worst cash characteristics of all, because high demands and low
returns due to low market share

1.7 McDonald’s Competitive analysis matrix

The Competitive profile matrix identifies the firms major competitors and their
particular strength and weakness. Using this CPM matrix the position of McDonalds’
is assessed.
1.7.1 Key factors Analysis
Key factors McDonald’s KFC Burger king
Critical success factors Weight Rating Score Rating Score Rating
Score
Advertising 20 1 20 4 80 3 60
Product Quality 10 4 40 4 40 3 30
Price competitiveness 10 3 30 3 30 4 40
Management 10 4 40 3 30 3 30
Financial Position 15 4 60 3 45 3 45
Customer Loyalty 10 4 40 4 40 2 20
Global Expansion 20 4 60 2 40 2 40
Market share 05 1 05 4 20 3 15
Total 100 315 325 280
NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3= minor
strength, 4= major strength, As listed above McDonalds’ deals the second position
in critical factors.

1.7.2 External factor Analysis

The External factor evolution matrix for McDonalds’
Key external factors Weight Rating Weighted score
opportunities
Global markets are practically tapped with fast food industry 15 1 15
Increased sales caused by public’s interest to McDonalds 10 3 30
Astronomical Internet advertising growth 10 1 10
McDonald is leader in the competitive market 15 4 60
Threats
Increase in competition with the decrease in price 20 2 40
Decrease in sales as the per the economy 10 3 30
The cost of media exposure in the future 20 2 20
Total 100 205
NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3= minor
strength, 4= major strength, As listed above McDonalds’ deals the second position
in critical factors.

1.7.3 Internal factor evaluation matrix for McDonald’s

Key internal factors Weight Rating Weighted score
Internal strengths
Increasing free cash flow 10 4 40
Strong management team 10 4 40
Long range planning 10 3 30
Reputation as family-friendly 15 4 60
Financial ratios 20 3 60
Internal weakness
Little diversification 10 1 10
Family reputation, not high rollers 15 2 30
The salary for employees increase in future 10 2 20
Total 100 290
NOTE: Rating value are as follows; 1= major weakness, 2= minor weakness, 3= minor
strength, 4= major strength, As listed above McDonalds’ deals the second position
in critical factors.