Power of Buyers Moderate

Figure 1 parades the growth and sales of the top ten fast food chains (Euromonitor
International, 2012). Customers are price sensitive and with the increase markets
competitiveness, the buying power also increases (Muhlbakcer et al, 1999). Now to
compete in the market, other players tend to offer a product that caters to the whole
demography than a particular market to reduce buying power. Eg. Mcdonalds targets kids
with happy meals, professional people with their breakfast menu & salads and others with
the regular burgers and fries. If the food chain gives exemplary customer service and has
high brand image, bargaining power of people has also reduced (Interbrand, 2011)

Figure 5

Power of Suppliers Moderate

In the competitive world, the suppliers have very less power atleast in the fast food
industries because of its brand image and the revenue suppliers get from the chain
(McDonalds, 2012). If there are any disturbances between the suppliers and the brand
there are plenty other competitors to choose from.

3.3. Identification of Key Players and their Competitive Position

3.3.1. Strategic Groups
The framework below pinpoints the players in the international fast food business and
shows the direct competitors:

Figure 6 Mcdonalds Global Presence

To indicate the overall performance and achievement the brands value and presence in
various countries are the best indicators to look at. The figure above shows Mcdonalds
performance. The revenue that Mcdonalds earns and its global presence shows that it
ranks 13 in the world fast food chain industry even though Subway has more number of
outlets.
4. Key Player Evaluation of International Activities
4.1. Identification of Key Player
2

Looking into global presence, revenue and market value, McDonalds is identified as one
of the key players in the industry.
4.2. McDonalds International Market Entry Modes
In 1940, McDonalds owned only one outlet and now they have around 33000 restuarants
worldwide. They use different entry modes for expansions i.e. franchising, sole ventures
and joint ventures. Around 15% of Mcdonalds are sole ventures. Due to its high cost and
degree of control, people dont opt for it that much. India has a considerable amount of
sole ventures.
The best way opted are franchises as they allow rapid expansion and dont require as
much capital sole ventures. This benefits both the franchiser and the franchisee as the
capital requirements are quite less and Mcdonalds can learn from localization and gain
knowledge about the country. This does not mean full control over the outlet, Mcdonalds
still looks into logistic and marketing here and there. One more way is Master
Franchising where a third party is got in between and he controls the outlets to overcome
cultural and local barriers. This happens in the Middle East eg. Dubai where a third party
Kuwait Food Company handles significant control over McDonalds.
McDonalds also expands through joint ventures. This also creates rapid expansion with
full knowledge about the local market. Both the firms invest in a project which lowers the
financial risk for both parties and are there for just that project (Brown and Harwood,
2010)

4.3. McDonalds International Marketing Mix (7Ps)

This framework identifies many of McDonalds success factors within each business
area.

4.3.1. Product
McDonalds offers glocalized standard products worldwide (McDonalds Corporation,
2012). Glocalization is when there are standardized products but meeting the local needs
eg- In India, cow is considered sacred therefore no beef is sold there. So the same small
burger is sold in vegetarian options there. The company has a very entrepreneurial spirit
and offers people to take up franchises with full monitoring. Big Macs and Egg muffins
were innovated by franching McDonalds.

4.3.2. Price
McDonalds is a low cost fast food chain showcasing an affordable menu. This menu is
adapted worldwide with some changes made to adhere to the local tastes. They core goal
is to maintain quality assurance and with ongoing innovation they have come up with the
Saver meals and dollar menu to attract all sorts of customers (McDonalds, 2012).
4.3.3. Place (International Distribution and Supply Chain)
Even though the products available is all the countries might differ, McDonalds supply
chain is quite global. Their operations is totally outsourced with no back up and
comprises of two tiers. Tier 1 being the primary producers eg farmers producing potatoes
then this goes to Tier 2 where these people convert potatoes to fries and then this is
transported to all the distribution centers of McDonalds before the delivery to each
restaurant. This delivery service is given to expert logistics firms who can give their
utmost commitment. The contract with the suppliers is very rigorous and informal where
the suppliers are accountable till the consumer consumes the food and all these contracts
are done on handshake basis.
McDonalds has around 35 stock keeping units in their supply side where the dole
distributors are responsible for the entire logistics process. They make sure that these sole
distributors are regularly checked so they can improve their efficiency. If individual
restaurants want to order, they contact the suppliers and issue the orders. Even when they

issue, the suppliers will still have some surplus stock with them and with the new 31Q
system that they use, they can plan and organize their products up to 3 years in advance.
4.3.4. Promotion
McDonalds attained the 6th position at the Best Global Brands awards in 2011 because
of its constat promotions. Their 2003 Im lovin it campaign using celebrities like Justin
Timberlake was done to capture the younger crowd and is still a big hit. Recently,
because of the negative publicity regarding their ingredients and preservatives they
launched what were made of campaign to gain transparency on this issue.
4.4. International Branding
McDonald's depends vigorously on brand recognition. The organization's 'Golden Arches'
are a notable part of American society, which has been effectively shown as a bench mark
to the rest of the world. Amid the mid 2000's, McDonald's started a worldwide re-vamp
of their image (Bloomberg Business Week, 2006) after awful publicity connected with
the organization (Kline et al., 2007). The point of re-branding was to make a "friendlier"
look, speaking to more youthful generation. However, the brand keeps on gaining
negative feedback over the globe in regards to their unfortunate menu, trade practices and
unfair competition (Datamonitor, 2011).

4.5. McDonalds Internal and External Analysis

The

following

framework

McDonalds

internal

weaknesses

along

identifies Unfavourable

strengths
with

and

external

opportunities and threats. Favourable

Internal
Large saturated target High staff turnover
audience

No prime location

Strong global brand

Large product offering

countries

Saturation

in

119

Strong ability to adapt

External
Franchise opportunities

Health trends in eating

Increase in Out-of- Replacements for fastHome eating

food

Growth of hot drink

market

Financial

Crisis/Inflation

4.5.1. Internal Analysis

McDonalds has a value of about $35 million (2011) and their Golden Arches is one of
the most recogonized and established symbol in the world. Their profit margins have
increased from 3% to 12% in the UK between 2007 to 2010. This was because of
continuous innovation in the menu, coffee, burgers, service etc.
Their brand image and reliance is quite high and if any negative publicity takes place, it
could ruin its loyalty and customers. Plus, they make sure that their staff is well versed
and their turnover rate is 130% which means they spend a lot on training and recruitment.
4.5.2. External Analysis

McDonald's has numerous opportunities in the outer environment because of a rise in

eating out, and hot beverages market. Amid the recession, McDonald's Informal Eating
Out (IEO) market of the overall industry expanded to a record high of 11.5% and a fourth
of youngsters surveyed said they buy fast-food at any rate once every week (Mintel,
2011). The hot drink market has gained around 80 billion until now and McDonalds
coffee kiosk and Mcafe are doing extremely well. They can launch separate independent
outlets for McCafes as franchises to grow in the market as well.
2008 saw an increase in McDonalds share market but because of high inflation rates
their daily sales were affected (Mintel, 2011). Websites which sold daily deals like
Groupon sold deals which were equivalent to the McDonalds meals bringing in more
competition. Health is major issue and in media nowadays, as McDonalds is viewed as
fattening food. McDonalds is trying their best to add salads and wraps to change the
mind set of consumers. However, it is still perceived unhealthy to consumers.

McDonalds has been highly criticized for its high-calorie menu, and could have a
negative impact over time, if health and wellness trends continue (Data monitor, 2011).
Conclusion
4.6. Strategic and Tactical Recommendations for McDonalds
The following table discusses the recommendations for the future success:
Short-term (6 months- 1 year)
Long-term (1- 5 Years)
Rigorous expansion in developing countries Increment on environment friendly usage.
targeting middle classes.
Eg- Recycling
Adapting and innovate on the menu Increase charity work
according to local taste (brazil pastry, India
cheese, size adaptation)
Loyalty program- gaining points with every Enter healthy food market partnering with
purchase

another brand

4.6.1. Short Term Recommendations (6 months 1 year)

Targeting middle class market and further expanding with those market and foster those
emerging markets. McDonalds should look closely into innovating locally in each sector
as this can increase sales rapidly. Eg. Cheese in India and pastry in Brazil. Adding loyalty
schemes can increase the frequency of purchases. Probably, student discounts or club
points scheme could be some additions to their lot.
4.6.2. Long-Term Recommendations (1 5 years)
With the world bending towards healthiness, organic products, reducing wastage etc,
McDonalds should adapt some strategies and probably lessen the amount of plastic used.
Even though McDonalds harbors various charities like Ronald McDonald Charity,
further adding other charities or to current relief aids could create a positive PR for
customers and increase brand image. Since there are lot of cases again McDonalds

unhealthiness, they could add and diversify their products by adding oat meals etc to
cater to the healthy sector and target a different sector.
5. Concluding Statement
Fast food industry is considered as a high turnover business with low cost, low supplies
and a lot of competition. After analyzing, McDonalds can be placed as a market leader
and have created a benchmark for other competitors in the market. The recommendations
to what McDonalds can adapt are mentioned in the earlier section to position themselves
for the future.

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