Marketing Project: McDonald’s

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Introduction

Marketing is a complex process that involves more than just promotional activities. In the contemporary business world, the need for marketing has significantly increased with increased level of competition. Marketing can be defined as a process of facilitating an exchange of something of value for something needed.

This implies that the marketing process is likely to come along with some costs. Marketing process is a very important part of any organization. It is therefore necessary to have a clearly designed marketing plan in order to have a successful organization. It is always necessary to understand the customer’s needs while conducting a marketing plan.

Industry Analysis

In the current world, the food retail industry has significantly developed. Many players have entered into the market, which has led to rise in the level of competition in the industry.

There are several international corporations which are engaged in food retail all over the world. Over the past, these organizations have been engaged in stiff competition with each of them aiming at winning the highest fraction of the market share.

For instance, there was a high level of competition in 1980s which was referred to as “hamburger wars”. This was characterized by price battle which led to a significant fall in prices. In the contemporary world, the level of competition has significantly increased which has led to intensification in competition in the industry.

There are several competitors in the food distribution industry in the world. Some of these includes the Burger King, Wendy’s International, Inc., Jack in the Box, Checkers Drive-In Restaurants, Sonic Corporation, White Castle system, Whataburger, CKE Restaurants, Doctor’s Associates and YUM Brands (Africa Awards for Entrepreneurship, 2011: par 20).

However, these organizations are in most cases engaged in numerous lines of products. Some does better in some while some are better in another line. However, some lines pose a high level of competition.

Company Background

McDonald’s is one of the most successful businesses across the world. This corporation is owned by a group of people who comes from all over the world. Among these people are the Muslims and the Arabs. McDonald’s is a neutral corporation which is independent of religious or political interference. McDonald’s is owned by Arab and Muslim business men in Arabian countries (McDonald’s, 2011: par 3). These individuals are responsible for the operations of this corporation in these countries.

McDonald’s is the world’s top leading organization in the food service industry (McDonald’s, 2011: par 1). The origin of this corporation can be traced back in 1930s when it started showing good performance in the market.

With time, the organization continued with a progress. In its early stages of development, some of the main foods produced were cheeseburgers, hamburgers, shakes, French fries, apple pie and soft drinks (Africa Awards for Entrepreneurship, 2011: par 3).

In 1960s, the company recorded a significant boost in the level of its performance. In 1965, the organization offered its shares in public at a price of $ 25.50 each (Africa Awards for Entrepreneurship, 2011: par 5).

This was one of the major steps in the process of taking off. Soon after the launch of these shares, the prices shot up to $30 per share. Over the past, the company has encountered a high level of competition from its competitors.

This has severally threatened the performance of the organization. However, the company has managed to retain its high level of performance. For instance, the company was faced by a major challenge in 1980s during the hamburger wars. This battle was between various companies in the hamburger chains. During this period, McDonald’s intensified its advertisement campaigns.

During this period, the market was characterized by aggressive advertisement campaigns and cut of prices. This reduced the level of returns significantly for McDonald’s. However, McDonald’s market share continued to expand during the time (Africa Awards for Entrepreneurship, 2011: par 7).

McDonald’s has a very close examination of the need of its customers. In connection to this, the company planned to diversify its menu in order to suit the changing needs of its customers. As a result of these changes, company introduced chicken McNuggets in 1983 (Africa Awards for Entrepreneurship, 2011: par 8). By the end of the same year, McDonald’s managed to emerge as the second largest chicken retailer in the world. This marked a tremendous growth soon after introduction.

One of the strengths of McDonald’s is the fact that its employees are very efficient in their jobs (Africa Awards for Entrepreneurship, 2011: par 9). This had a significant contribution in performance of the organization. For instance, it reduced the operational expenses. As a result of increased employees’ efficiency, McDonald’s to lower the prices of its key products (Africa Awards for Entrepreneurship, 2011: par 11).

In 1960s, McDonald’s high level of performance can be attributed to the organization’s skillful marketing and flexibility on response to customer’s demand. With time McDonald’s continued with its expansion where it opened several new restaurants in the region. For instance, the organization was opening its 1,000th restaurant in 1968 (Africa Awards for Entrepreneurship, 2011: par 12).

During this period, the chief administrative and president of the company was Fred Turner. The company also has a global presence and is considered a market leader in the global market. This simplifies the marketing process.

One of the main weaknesses of the company is that it faces high price competition or price wars with its competitors. This leads to reduction in the profit margins. Another weakness with McDonald’s is that it uses advertisement strategies which targets children. This denies the company a chance to reach many people.

Marketing Strategy or Problem

Marketing Strategy Overview

Marketing Strategy Statement

In the contemporary business world, the market is characterized by a very high level of competition. In order for any organization to survive in such a market, there is a need to have an effective marketing strategy. As already noted, the food retail industry in the world has been similarly faced with a very high level of competition. In order for any corporation to survive in such an environment, it must employ the most effective marketing strategy.

In this case, the aim of this strategy is to increase the level of sales in hamburger. This type of food product faces a high level of competition in the market. This has threatened its performance in the market. This strategy is aimed at helping in increasing the level of sales of this product.

Objectives

The main objective of this marketing plan is to increase the level of the sales of the McDonald’s hamburgers. From the results released towards the end of the year 2010, the sales rose by 4.8 per cent (Sodersmith, 2010: par 1). This increase was significantly attributed to addition of new items in the menu. In other words, very little of this increase can be attributed to sales from the existing products. Therefore, this strategy aims at increasing the level of hamburger sales by 4% by the end of this year.

This strategy is also aimed at increasing the company’s market share for hamburgers. Currently, McDonald’s is facing a very high competition from Subway. Subway is increasing its stores across the world rapidly. Therefore, the objective of this strategy will be to help the organization in retaining its performance. Despite of the high level competition, McDonald’s still remains ahead of Subway in terms of revenue with each recording $24.1 billion and $15.2 billion respectively in 2010 (Casestudyinc 2011: par 1).

Market Share for Top performing restaurants

2002		1997
McDonald’s	7.3%	McDonald’s	7.8%
Burger King	3.0%	Burger King	3.6%
Wendy’s	2.4%	Taco Bell	2.2%
Subway	1.9%	Pizza Hut	2.1%
Taco Bell	1.9%	Wendy’s	2.1%

Table 1. Market Share for different restaurants in 1997 and 2002. (Stewart, 2010: 20).

The table above indicates that McDonald’s has a significant market share. The company’s market share was 7.8 percent in 1997. Due to increased competition, this level fell to 7.3 per cent in 2002.

Strategic Marketing Components

In order to achieve these goals, several components of strategic marketing will be integrated. These will facilitate in realization of the above objectives of the marketing strategy.

Branding

Branding is one of the most important activities which can significantly determine the success of a particular organization. This is because it helps in creation of a unique name which differentiates a company’s products from those produced by its competitors.

This exercise plays a pivotal role in attraction and retention of customers in a competitive environment as well as winning their loyalty. However, the success of a brand will largely depend on the effectiveness of the branding process. In order for our company to sell the new product successfully, we need to have an effective branding strategy.

In the current business world, the level of competition has significantly increased. Similarly, the level of competition in the food retail industry has also increased. Bearing this in mind, there is a need to come up with a branding program in order to win more customers in the market. In this case, McDonald’s company faces a big challenge in the hamburger market which is faced by a very high level of competition.

The organization has a well developed reputation for its performance all over the world. As already noted, the company has also managed to conduct a close observation on the need of its customer’s hence managing to retain high level of consumer satisfaction. These achievements will significantly improve the effectiveness of the branding process.

Online branding will be of great importance in this case. In order to convince our potential customers about the quality of our company’s hamburgers over our competitors’, we need to use attractive images of the new product which can easily capture the attention of our potential customers. We are also going to consider the traffic such that the message reaches the right people. Otherwise, the effectiveness of the whole exercise will be impotent.

It is important to present on the website something that potential customers can see and believe (Randall 2000: 15). This image will be set that it will be moving across the page. This will significantly help in attracting the attention of our potential customers.

SMS Interactive

This is one of the most recently developed online advertisement method which can significantly help us in creating our brand. In our case, we are targeting families in all the middle and upper class. The SMS interactive method will help us to increase the level of sales of our hamburgers to this group.

According to Face Media Digital (2011: par 5), this method assists a business to engage directly with its potential customers through their mobile phones and getting the feedback instantly. This method will be very useful because it is more cost effective than the traditional methods of advertisement. Therefore, we are going to save a substantial sum of money for the organization. In this method, it will be easier to take queries from consumers. In the process, the company will be able to increase the level of sales.

The SMS Interactive combines various marketing communications tools which significantly help in development of an organization’s brand in a most efficient way. Through this method, we shall be able to read our responders mobile numbers which we can use in exchange of information about the product.

This will help us in cultivating loyalty from our potential customers. This method will also help us in concentrating on the traffic which we are targeting in the market. Again, this will also help us in conserving financial and time resources by only investing with potential customers.

In order for any business to able to sell its new product, it must be able to advertise and promote it (Business Resource Software, not dated: par 3). These exercises will be of great significance in our case. We are going to apply the push strategy. As the level of competition has increased in the market, we are going to use this method to push our new product into the market.

In brand development, communication also plays a pivotal role in promoting the effectiveness of the exercise. One of the main methods of communication to be used will be SMS. This method will help us to reach our potential customers in the shortest time possible. Another advantage of this method is that we shall be able to get the feed back from our customers. This close interaction will help us in creating a strong brand for the Premier Portraits. For instance, we shall be able to convince our client on the quality of our new product.

Another important method of communication which will be useful in this case is through email messages. This is another cost effective method that will help us in reaching our customers very fast despite of their geographical locations. This will also enable us in reaching our customers wherever they are.

Budget

This program will involve competition with already established organizations. Playing in the major league is more expensive than playing in the minor league. This implies that we have to make adequate investment in branding in order to compete successfully in the market. This program will involve an external company which will provide SMS Interactive services. It will also involve the internal branding through our website.

Image & Positioning

In order for any product to be successful in a competitive market, it should cultivate a good image from the potential consumers. We intend to build an image of high quality and low priced product. In such combination, we shall be able to win customers from our competitors.

The Target Market

The main target market will be both new and existing markets that have recorded low level of performance. In this case, we are targeting families since they are potential customers for our hamburgers.

Through collection of adequate information, we shall be able to calculate the consumer’s lifetime value. This calculation will be of great significance as it will help us in estimating the dollar value associated with our customers. This will play a pivotal role in making some critical decisions. By concentrating on these market areas, we expect to increase our market share for hamburgers significantly.

Sustainable Competitive Advantage (SCA)

In order to be able to come up with an effective marketing strategy, it is necessary to have a sustainable competitive advantage. The competitive analysis gives an analysis of the service or product’s position in the customer’s mind.

According to the Business Software Resource publication, it is very vital for the company to know its competitors. In order to be able to compete with its competitors, the company should be aware of its competitor’s strengths and weaknesses. It is through this understanding that the company will be able to formulate strategies to overcome their competitors.

McDonald’s hamburgers have been strong compared to those provided by their competitors. McDonald’s has managed to retain its competitive advantage through out its products line. One way through which a company can do this is through differentiation.

Differentiation makes the company’s products to appear unique from similar products provided by their competitors. By having a close examination of changing consumer needs, McDonald’s has managed to modify its hamburgers accordingly. This differentiates it from the one provided by its competitors.

Marketing Tactics

Product Issues

In the food industry, products have become so homogeneous that it becomes difficult for consumers to differentiate. In order to solve this problem, we are going to differentiate our hamburgers from those provided in the market by our competitors. This will help our consumers in differentiating our product in terms of quality and package.

Distribution

Distribution is another important component in marketing plan. The company should choose a distribution method which will facilitate efficiency by making its products available to its customers at the right place and in the right time (Time and place utilities). For instance, a company may decide to make direct sales which involves sale offering using a direct, in-house sales through the telephone, mail or through the internet (Business Resource Software, not dated: par 8).

In this case, the hamburgers will be sold through our restaurants. In case there is a need for external catering, appropriate arrangement will be made in order to deliver in required time and places. However, the company should make adjustments depending on the prevailing conditions to maximize sales.

Pricing

According to Westwood (2005), pricing is a key factor in marketing strategy (158). Pricing is a major factor which determines the realization of the company’s marketing objectives. Pricing significantly depends on the product portfolio, product’s life cycles and the objectives for sales turnover and the market share.

At McDonald’s, pricing of hamburgers will be determined in three main ways. These includes customer based pricing, Competitor based pricing as well as the cost based pricing.

Since the market for hamburger is concentrated with a large number of competitors, it will be important to consider first the prices they are offering in the market. For instance, in case we set a price that is too high, then we will most probably lose our customers to our competitors. On the other hand, setting too low prices may reduce the profit margins. Therefore, a clear understanding of the prices our close competitors are offering in the market will be of great significance in setting our prices.

Currently, the share of the market of hamburger is relatively low. Therefore, we shall use a penetrating price in order to expand our market share and then increase our profitability level in the long run. However, the cost of production will be of great significance in setting this price.

The price level and the quantity demanded are closely related. When the prices are very high, then the level of quantity demanded tends to be lower. On the other hand, when the prices are very low, more people tend to buy the product or service. However, the price at which the company sells its product or service and the quantity sold at these prices are the major determinants of the profits generated.

The point above raises a very critical issue in marketing planning. If a company increases the prices of its products, it is likely going to lose its customer. On the other hand, if it lowers the prices, then this is likely going to cut down its profits.

It is therefore very necessary for any company to come up with appropriate pricing procedures which are likely to maximize profits. While setting down the price levels, a company must determine cost of producing the items. For instance, a company cannot set its prices below the cost of production.

However, there is a high risk of creating price wars when one company sets its process below what its competitors are offering in the same market. As already noted, one of the main problem of unhealthy competition is the pricing wars.

When many players enters into the market while the number of consumers remains constant; this leads to a high level of competition as each player try to win more customers in the market (Bungert, 2003: 2). The only slogan in this case becomes the price. In this case, each company will be aiming at under pricing its competitors.

Consequently, this leads to fall in prices up to unsustainable levels. In case such a case takes place, it threatens the performance of McDonald’s company. As a result of fall in prices, the company’s total returns will automatically fall. Meanwhile, the company will be forced to increase its expenses on promotion in order to retain or win more customers in increasingly competitive market.

Advertising & Promotions

In order for any company to sell its offer effectively, it should be able to advertise and promote it (Business Resource Software, not dated; par 9). In this case we are going to use the push strategy. In this form of promotion, the company uses the promotion methods which tend to push its product or service into the market place. In order to achieve maximum results, we are going to use two main methods in our advertisement and promotions.

Advertising

Advertising plays a pivotal role in determining the success of an organization especially in the global market which is characterized by consumers with a diverse background and high level of competition. In advertising, we will apply several types of media to pass information to the Company’s potential customers.

This method of promotion can have huge impact especially when the company is extending its services in new market network. We shall apply variety of media including printed, broadcasting and display media. Television is one of the frequently used media by many companies. One of the main advantages of using television is because it will help the company to reach a greater number of its target audience.

This is more so important bearing in mind the fact that the company is involved in the global market where it may be very expensive to use other methods of advertisement. Therefore, this media lowers the promotion cost per head. Through this method of advertisement, the McDonald’s will manage to build its brand in the markets. Over the past, this method has yielded good returns through increased level of sales.

Another method of advertisement which is going to be applicable to McDonald’s is the display media. This method has also significantly contributed to increasing the level of sales in various organizations. Through the display media, the company is going to use eye attracting pictures which easily attracts the attention of the targeted audience in the market.

Consequently, the organization will manage to pass information more easily to the group. One major advantage of this medium of advertisement is that it is more cost effective. It does not require large sums of money like in the case of television.

Advertisement as a method of promotion is associated with a number of advantages. To start with, advertisement is effective in reaching a wide range of audience (Trehan and Trehan, 2009: 35).This is because when advertisement is conducted through a media which covers a large number of people, it will reach them more easily.

The method will help in reaching a greater number of people compared to other methods like the sales promotion. Another advantage of this method is that it is most effective in creating awareness. When the audience views a certain advert on television regularly, this increases their awareness of the presence of the product in the market. This builds their curiosity to try the new product.

In this case, this method will help the company in winning new clients in new markets. This significantly helps the company to increase the level of hamburger sales. Consequently, this will lead to a gradual increase in the market share for McDonald’s hamburgers. Again, advertising helps in building customer trust through repetition of the main brand and product.

Despite of these achievements of advertising as a method of promotion, it suffers some limitations. For instance, this method is impersonal and therefore it becomes impossible to answer the customer’s questions. However, when a product is introduced in a new market, customers usually have some questions about the product. In this case, some potential clients may be wishing to ask some questions from McDonald’s about its hamburgers. Thus, there is a need to have close interaction with potential clients in order to win them.

The company will also not be in a position to understand the needs of their potential clients. For instance, it becomes difficult to pick views from the potential customers through this method of promotion. However, the level of performance is improved by integrating it with sales promotion

Sales promotion

One way through which McDonald’s can invite a larger figure of customers is through sales promotion. Sales promotion can significantly help an organization in expanding the number of its customers or clients hence boosting the level of sales.

In addition, sales promotion has been of great importance in creating consumer awareness. Through promotion, the company will manage to bring its potential customers to awareness of the product in the market.

This method has been of great importance especially in increasing the level of market share. In some regions, most of the people may not be aware of the company’s product. In this case, it becomes very difficult to sell the product in such market. However, the company can overcome this barrier through sales promotion. This attracts customers hence increasing the level of sales.

One advantage of using sales promotion is that it can stimulate quick increases in sales by targeting promotional incentives on particular products. These can significantly help in improving the performance of the organization in the short run. This method has helped several companies in increasing the sales in their market networks (Trehan and Trehan, 2009: 57).

This method has been of great importance when the company is venturing into a new market. As already noted, McDonald’s has been spreading at a very high rate. For instance, the company has been extending its products in other parts of the world in a very high rate.

In such new networks, most of the people may not be aware of the company’s products. In this case, it becomes very difficult to sell a product in such a market. However, the company can manage to bring awareness to the potential customers through sales promotion. This attracts customers hence increasing the level of sales. In this case, McDonald’s will manage to expand its market despite the high level of competition.

Therefore, sales promotion will significantly help in increasing the market share for the McDonald’s hamburgers. Through sales promotion, we shall be able to bring awareness about our hamburgers to our potential customers. In the process, we shall be able to win them to buy our hamburgers.

McDonald’s versus Subway

The table above gives a clear understanding of the nature of competition which MacDonald’s faces. It also helps us to understand the historical aspects in the food retail market.

Electronic Commerce

As defined by Bidgoli (2004), E-marketing is all about sale and purchase of goods or services through digital and electronic means (50). As argued by Aoudia (2009: par 3), internet has become the centre for conversations. Since marketing is about conversations, then internet becomes a favorable place for passing information to the customers.

In electronic commerce, most of business practices are conducted through computer networks. In the contemporary world, computer networks have become intensively integrated into business activities. More people can now access computer networks and therefore has become an important component in business activities.

In order to reduce our operational costs, we are planning to conduct most of our transactions over the web. For instance, the corporation incurs a lot of costs through manual operations. We are intending to reduce paper work by allowing consumers to make orders online. This will also facilitate the service process.

In order to maximize the level of consumer satisfaction, it is necessary to have enough information about consumers. In order to maximize the level of consumer satisfaction, we are going to use electronic means in gathering information from consumers. By so doing, we shall be able to understand our customer’s tastes and preferences.

E-marketing will be of great significance to McDonald’s in reaching their customers. As Dart (2002) comments, internet, SMS and WAP has significantly contributed to the success of the field of marketing (par 3). The marketers are now able to reach more customers, faster, and even more effectively than before. E- Marketing channels are more direct and it is very easy to make changes depending on the prevailing consumer tastes and preferences unlike the traditional methods where it is very difficult to make such changes.

Through e-marketing, we shall be able to overcome the geographical barriers. We shall be able to reach customers all over our market network without necessarily having to travel to these places. Consequently, we shall be able to reduce operational costs incurred through traveling. As a result, we will be able to under price our competitors effectively. In other words, our hamburgers will be relatively cheaper compared to those of our competitors. This will help in developing our competitive advantage.

Implementation

Resources Required

In order for this plan to be effective, it will be necessary for the corporation to dedicate the required financial and human resources necessary in execution of this plan. As already noted, this plan will require clear information about the customers. Although necessary information will be gathered electronically, there will be a need to have frequent field surveys in order to collect adequate information from consumers. This will require substantial funds in order to conduct such research.

In order to execute this plan effectively, there is also a need to train our employees. We shall therefore need some funds to cater for employees’ training. We also require some funds to give our employees some incentives to participate in the plan.

Time Line

July 2011: Budget preparation.
August 2011: Market and competition review.
September 2011: Development of the product’s image.
October 2011: Sales promotion and creating awareness.
November 2011: Advertisement.

Epilogue

In conclusion, this discussion has clearly shown that McDonald’s has a potential room for improving its market share in the hamburger market. From this discussion, it is clear that an effective marketing plan can significantly improve the performance of any organization.

The existing marketing plan has helped the organization in selling its products to its potential customers. However, there is still room for improvement because some of its products are declining in terms of the market share. There is a great need for the company to invest more in promoting its products in order to retain its high level of performance in an increasingly competitive market.

Without promotion, very few people will be aware of a particular product which is provided by an organization in the market. In other words, promotion will help the company in informing its potential customers on the presence of its product in the market.

Through this study, it has been revealed that most of the advertisement tools applied by the organization only mostly reaches only the children. This is so threatening bearing in mind the existing level of competition. The proposed plan will therefore be of great significance in improving the company’s level of sales.

Reference List

Africa Awards for Entrepreneurship, 2011. McDonald’s Corporation. Web.

Aoudia, R. 2009. Learn about: e-marketing. Web.

Bidgoli, H. 2004. The Internet Encyclopedia. John Wiley and Sons, New Jersey.

Bungert, M. 2003. Termination of Price Wars: A Signaling Approach. Germany: DUV.

Business Resource Software, Inc. n.d. Marketing Plan. Web.

Casestudyinc 2011. McDonald’s versus Subway – The Sandwich Hamburger battle. Web.

Dart, C. 2002. E-Marketing: New Millennia. Web.

Face Media Digital. 2011. SMS Interactive. Web.

McDonald’s. 2011. Absolute Truths about McDonald’s. Web.

Randall, G. 2000. Branding: a practical guide to planning your strategy. U.K., Kogan Page.

Sodersmith, K. 2010. McDonald’s Releases Monthly Sales Report. Web.

Stewart, G. (2010). Hamburger Wars: Burger King vs. McDonald’s. Web.

Trehan, M. and Trehan, R. 2009. Advertising and Sales Management. New Delhi, FK Publications.

Westwood, J. 2005. The marketing plan workbook. U.K., Kogan.

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