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Fiona Oudeman
Arsalan Khan
Anthony Russo
Marcus Copsey
SUMMARY
Brief history regarding McDonalds.
The case study regarding obesity.
Comparative Countries.
Choice of Market expansion.
Entry strategy.
Follow up questions.
INTRODUCTION
https://www.youtube.com/watch?v=3LJvV4dHtHA
McDonalds one of the largest chain of hamburgers.
Second most employed workers behind Wallmart. (1.9 equilvent to Qatar)
68 million customers daily 119 countries daily. Similar to the population of UK.
In 2012, company got a revenue of 27.5 million and 5 million profit.
Started in 1940 in Calafornia.
Revenues come from rent, royalties and fee paid.
The basic idea was to expand the American’s way of lifestyle.
Opening of alternate franchises. (McCafe and McExpress)
Targets the market of upper middle class and below as it offers affordable prices.
USP of solid fast service to consumers.
BACKGROUND
(Franchises)
(Target Market)
PRODUCT ANALYSIS (MENU)
Hamburgers
Cheeseburgers
Chicken
French fries
Breakfast
Soft Drinks
Milkshakes
Deserts
ABOUT THE CASE
Obesity and Health awareness are decreasing McDonald’s profits in the US market:
Solutions:
Going international will help the company to get into new markets
More information about the product and healthy options will improve its performance in existing market
COUNTRY APPROACHES
Sweden, Norway, Quebec: Tried banning advertisements but no proof of it works
France: Add healthy options or pay a levy
Ireland: Ban celebrity endorsements
UK: Self-regulated
STATISTICS
US:
30% Kids are obese
64.5% of population are overweight or obese
Australia:
55% of women and 68% men are overweight
25% Kids are overweight
World:
1 BILLION Adults are overweight
400 Million adults are obese
155 Million Kids are overweight and 30-45 million are obese
McDonald’s response:
CONTROLLABLE & UNCONTROLLABLE RISKS
Controllable: 4ps (Product Line, Pricing, Place, Promotion) Pace of entry (and growth) Research Minimum Wage Issues in the US
Uncontrollable: Fast-Food Competition Market saturation and healthy trends Anti-globalism Natural Disasters Consumer behaviour differences and changes Political instability Health issues related to fast-food consumption Economic cycles in demand and supplies
SOURCES OF RISK
Uncontrollable elements
Minimum Wage Protests in the US
Biggest risk: Obesity implications for consumers
Food Hygiene
Competition intensity
Decline in the economy (in U.S. and/or globally)
Burning out the brand
MACRO ANALYSIS CHINA
1. Market size and growth rate: Prospects of growth for High-end industry
Population 1.3 Billion.
More middle-class – More Income – More Purchasing Power – More services – Fast food: McDonalds!
2. LCCS (Low Cost Country Sourcing)
Comparative advantage
Lower transaction and infrastructure costs
Low cost skilled employees
Return on Investment – Profit!
1. Political stability: Predictability
2. Legal: Trade barriers: Openness to Regional and Intl Trade: Export friendly policies & Intl free-trade arrangements
3. Social trends: China’s curiosity for western culture
4. Competitors (China Daily 2008): KFC, Pizza Hut and domestic competitors
Cultural Adaptation Food hygiene scandal: McDonalds Meat supply failed: OSI Group, for selling expired meat to
McDonald’s, KFC, Papa John’s, Burger King, Pizza Hut, Starbucks and other chains in the country.
Link video: http://edition.cnn.com/2014/07/29/world/asia/explainer-china-meat-scandal/
Sales plummeted a 7% in July 2014 (Shanghai Husi Food, a subsidiary of U.S.-based food supply giant OSI Group. )
1. Problems:
Language barrier: Chinese managers wrote documents in Chinese and didn’t translate them, so English-speaking employees often couldn’t understand operations or data (Cendrowski, S. 2014).
Self-reference criterion: Differences in authority models were not taken into consideration
2. Alternatives:
3. It has since stopped importing chicken from China and introduced a tofu and fish version of the McNugget.
4. Fire OSI? If McDonald’s cuts ties, it would be historic: OSI supplied beef patties to the first ever McDonald’s in Des Plaines, Illinois back in 1955.
Prospects anticipate a positive development with the family-concept dining environment
MACRO ANALYSIS INDIA
Market size and growth rate
7th largest country
2nd most populated
Fastest growing economy
Largest youth population on earth (65% under 35 years)
LCCS: Produce more for less cost (Efficiency)
Political factor: Narendra Modi increases foreign direct investment
Economic downturn BUT consumers spending power increases
Social trends:
I. Indian cuisine exposure makes India more desirable
II. Changing consumer preferences
Competitors: Domino’s, KFC (Yum brands), Taco Bell and Burger King.
Cultural Adaptation
Objective: Maintain cohesion of global brand while appealing to local market
Change in Menu (Vegeterian, spicy, no egg…)
Imperative/Exclusive: No beef
Elective: Spiciness.
Family values (Hoftede’s Individualism/Collectivism)
Marketing Mix Approach (E.g: Celebrity endorsement: Hrithik Roshan)
Challenges faced:
Create a supply chain network
Communication gap with Indian partners: legal dispute eats away early advantage
McDonald’s is fighting entrepreneur Vikram Bakshi for control of Connaught Plaza Restaurants, which owns and operates 185 McDonald’s restaurants in north and east India.
But McDonald’s dispute with Mr Bakshi is allowing rivals such as Domino’s, KFC and Subway, to erode its former lead.
Prospects: Expected to grow $8 billion in 2020 (NYTimes 2014)
MARKET SELECTION
Why India?
China is still very affected by food scandal
PESTEL analysis indicated good growth in India for the future
Vegetable consumption is very efficient
LCCS Countries are a good choice.
Prospects: Expected to grow $8 billion in 2020 (NYTimes 2014)
ENTRY STRATEGY
+THEORIES
Indian Partnerships
Issue with monopoly offices and competition
QUESTIONS (In-market)
How should McDonalds respond when ads promoting healthy lifestyle featuring Ronald mcdonald equated with Joe Cammel and Ciggerette ads? Should McDonalds eliminate Ronald McDonald ads.
Ronald McDonald goes to Rehab Idea
http://adage.com/article/news/ronald-mcdonald-joe-camel/234287/
Discuss the merits of the law proposed by France that would require fast-food companies either to add a health message to commercials or pay a 1.5% tax on the ad budgets. Propose a strategy for McDonalds to pay the tax or ad health messages and defend your recommendation.
Strategy: BEING HONEST
Include health messages making them fun (Incl. Calories) (Balance off burgers with gym instead of just eating salads)
If there is no evidence that obesity rates fall in those countries that ban food advertising to children, why bother?
By targeting the parents we can target the children as well (They are the deciders and buyers in the family).
It’s good for our corporate reputation!
The broad issue facing mcdonalds in most of western countries is the current attitude towards rising obesity. The company seems to have tried many different approaches to deal with the problem, but the problem persists. List all the problems facing McDonalds and critique the various approaches to solve the problems.
Health Issues (Better food, fresh ingredients)
Hygiene (Show more transparency)
Competition (Differentiation)
Employees motivation (incentives) (Community works) (Free meals for homeless)
Based on your response to question 4, recommend both a short-range and a long-range plan for McDonalds to implement.
Marathon sponsored by Ronald McDonald (Obesity)
Inside tours to explore the insides of McDonalds (Hygiene)
Give FREE meal tickets to homeless (Employees incentives)
Increase differentiation from competitors by adapting to local communities.