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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! 1. 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-meatscandal/ 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 1. Alternatives: 2. It has since stopped importing chicken from China and introduced a tofu and fish version of the McNugget. 3. 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 fastfood 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 longrange 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.
