case study 013096.docx

8/11/2019 case study 013096.docx

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SCHOOL OF MANAGEMENT

MASTER IN BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY;

ROHAN DEEPAK NIKAM

ROLL NO. 013096

MBA FINANCE 2

2013-2015

SUBJECT: CORPORATE FINANCE

CASE STUDY ON

McDonalds

SUBMITTED TO: PROF. NEETU SHARMA

MBA FINANCE-II


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History of McDonalds

McDonald is the world famous fast food restaurant. The idea of McDonalds was introducedby two brothers Mac (Maurice) and Dick (Richard) McDonald in California. Their fatherPatrick McDonald in 1937 was having a hot dog cottage called as Airdrome restaurant near

the airport. In 1940 the restaurant was renamed as McDonalds Famous Barbeque. In 1940both brothers came to a conclusion that most of their profit comes from selling hamburgerso they made their menu very simple by selling only Hamberger, cheeseburger, soft drinksFrench fries and apple pie. I n 1954 a turning point came in McDonalds brother history. Raykroc a seller of Multimixer milkshake visited McDonald and he liked the idea of McDonald.McDonalds corporation was build in those times and as a result kroc started expandingtheir business by opening franchises for mcdonalds.1960 McDonalds advertising campaignlook for the golden arches gave McDonalds sale a big boost.1965 McDonald corporationwent public. In 1968 McDonald open its 1000 th restaurant.1974 McDonalds started their

business in UK and New Zealand. In 1980 McDonalds was facing very big competition fromits rival Burger King and Wendy but McDonald with its innovation was experiencing boostin its sales. In early and mid nineties McDonalds was having decline in their sales and as aresult they start improving their business. Taste was improved and some new menu itemswere introduced. McDonald introduced first Kosher McDonald in Jerusalem and HalalMcDonalds in India (1995 and 1996 respectively). McDonald start creating healthy imageand invested heavily on refurbishment in 2000s.today McDonalds has more than 33000outlets and is operating in 125 countries. It is the world leading brand in fast food.

McDonalds started their business in India in 1996.they start their business in Indias

capital New Delhi. They choose a busy residential area Vasant Vihar. McDonalds India is50-50 partnership between Mcdonald USA corporation and Two Indians (Amit JatiaHardcastle Restaurant ltd Mumbai and Vikram Bakshi Connaught plaza restaurantDelhi).McDonalds as of now has 210 stores in india. Majority of Indians are hindu and cowsare sacred to them. For mcdonalds to sell beef was almost impossible. The second majoritypopulation is muslim and they eat Halal food. It was a big challenge for McDonalds as therewere many protest against McDonalds. So McDonald changed their menu according to localcommunity for example they introduce Maharaja Mac instead of Bic Mac. Their menu is fullof some spicy products as we know that Indians use spice in their dishes in abundance.About 75 % of the menu of McDonalds has been indianite and specially designed to wooIndians. McDonalds passed through some tough times but eventually managed to survivein that different culture and different religious belief. McDonalds by now has a big presencein India and are trying to extend this ahead. Over all McDonalds serve more than 47 millioncustomers every day.


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Introduction

McDonald's is one of the best-known brands worldwide. This case study shows howMcDonald's continually aims to build its brand by listening to its customers. It alsoidentifies the various stages in the marketing process. Branding develops a personality for

an organization, product or service. The brand image represents how consumers view theorganization.

Branding only works when an organization behaves and presents itself in a consistent way.Marketing communication methods, such as advertising and promotion, are used to createthe colors, designs and images, which give the brand its recognizable face. At McDonald'sthis is represented by its familiar logo - the Golden Arches.

Marketing involves identifying customer needs and requirements, and meeting these needsin a better way than competitors. In this way a company creates loyal customers. The

starting point is to find out who potential customers are - not everyone will want whatMcDonald's has to offer. The people McDonald's identifies as likely customers are known askey audiences.

The marketing mix and market research

Having identified its key audiences a company has to ensure a marketing mix is createdthat appeals specifically to those people.

The marketing mix is a term used to describe the four main marketing tools (4Ps):

1. product2. price3. promotion4. And the places through which products are sold to customers.

Using detailed information about its customers, McDonald's marketing department candetermine:

What products are well received?

What prices consumers are willing to pay?

What TV programmes, newspapers and advertising consumers read or view?

What restaurants are visited?


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Market research

Market research is the format which enables McDonald's to identify this key information.Accurate research is essential in creating the right mix to win customer loyalty.

In all its markets McDonald's faces competition from other businesses. Additionally,economic, legal and technological changes, social factors, the retail environment and manyother elements affect McDonald's success in the market.

Market research identifies these factors and anticipates how they will affect people'swillingness to buy. As the economy and social attitudes change, so do buying patterns.McDonald's needs to identify whether the number of target customers is growing orshrinking and whether their buying habits will change in the future.

Market research considers everything that affects buying decisions. These buying decisionscan often be affected by wider factors than just the product itself. Psychological factors areimportant, e.g. what image does the product give or how the consumer feels whenpurchasing it. These additional psychological factors are significantly important to thecustomer. They can be even more important than the products' physical benefits. Throughmarketing, McDonald's establishes a prominent position in the minds of customers. This isknown as branding.

Meeting the needs of key audiences

There are a limited number of customers in the market. To build long-term business it isessential to retain people once they have become customers. Customers are not all thesame. Market research identifies different types of customers. These examples representjust a few of McDonald's possible customer profiles. Each has different reasons for comingto McDonald's.

Using this type of information McDonald's can tailor communication to the needs of specificgroups. It is their needs that determine the type of products and services offered, pricescharged, promotions created and where restaurants are located. To meet the needs of thekey market it is important to analyze the internal marketing strengths of the organization.Strengths and weaknesses must be identified, so that a marketing strategy which is rightfor the business can be decided upon.


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The analysis will include the:

company's products and how appropriate they are for the future quality of employees and how well trained they are to offer the best service to

customers systems and how well they function in providing customer satisfaction e.g.

marketing databases and restaurant systems Financial resources available for marketing.

Short, Medium and long term strategies employed:

Strategy is a planning that is used by an organization to achieve its goal and objectives.

Short term strategy starts from a minute to 6 months, medium account from 6 month to ayear and long term mean 5 years or more strategy. In short term McDonalds is trying tobring in innovation and make customer satisfy day to day issues are planned to satisfycustomers. New products are introduced each month. In medium term they are trying tomaximize its profit and sales. In long run McDonalds is planning to open new branchesacross India and Indian McDonalds sale which accounts only 0.37 % of overall sale ofMcDonalds to be taken to 0.50 percent and more in the coming years.

SWOT

Once the strengths and weaknesses are determined, they are combined with theopportunities and threats in the market place. This is known as SWOT analysis (Strengths,Weaknesses, Opportunities, Threats). The business can then determine what it needs to doin order to increase its chances of marketing successfully.

Problems Faced

1) Threats of New Entrance:

Entry to a restaurant Business is very difficult. It is hard to make a prominent brand name.There is high research and development costs and high cost of entry. Strong brands alreadyin competition make it more difficult such as Mcdonalds, Pizza Hutt, Dominos etc. Newentrants face a very high competition in the start of the business. In USA and India bothEntrance of new organization is very difficult as explained above.


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2) Threats of Substitute:

The substitutes in this industry are very high. People can choose variety of products theycan either choose Burger King, KFC, Indian Cuisine, Indian local shops, Indian Vegetarianrestaurants. The same situation is faced by McDonalds in USA and all over the world.

3) Bargaining power of customers:

Bargaining power of customers refers to pressure a customer can exert on a business to getgood quality of food, good customer service and low price. Bargaining power of customer inthis industry is low. As McDonalds provide a standard service, one price strategy andquality of food. Customers have low bargaining power throughout the world in foodindustry.

4) Bargaining power of supplier :

Bargaining power of buyer in this industry is low situation can change if the mainingredients are not available. But with McDonalds simple menu and working with manysupplier, they are not facing a big threat. So the bargaining power is relatively low.

5) Rivalry with in the organization:

Fast food restaurant industry is very competitive. The competition is so high as all theorganizations want to get hold of customer base. Food industry all over the world has thesame criteria because there are many small businesses operating in abundance and alsotop brands. McDonalds knows about the customers taste and preferences all over theworld, so they started Mccafe (morning breakfast).so McDonalds is providing quality foodfrom early morning till late night in order to get competitive edge In the market.

Marketing objectives A marketing plan must be created to meet clear objectives. Objectives guide marketingactions and are used to measure how well a plan is working. These can be related to marketshare, sales, goals, reaching the target audience and creating awareness in the marketplace.The objectives communicate what marketers want to achieve.


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Long-term objectives are broken down into shorter-term measurable targets, whichMcDonald's uses as milestones along the way. Results can be analyzed regularly to seewhether objectives are being met. This type of feedback allows the company to change

plans. It gives flexibility. Once marketing objectives are set the next stage is to define howthey will be achieved. The marketing strategy is the statement of how objectives will bedelivered. It explains what marketing actions and resources will be used and how they willwork together.

The 4Ps

At this point the marketing mix is put together:

Product

The important thing to remember when offering menu items to customers is that they havea choice. They have a huge number of ways of spending their money and places to spend it.Therefore, McDonald's places considerable emphasis on developing a menu whichcustomers want. Market research establishes exactly what this is. However, customers'requirements change over time. What is fashionable and attractive today may be discardedtomorrow. Marketing continuously monitors customers' preferences.

In order to meet these changes, McDonald's has introduced new products and phased out

old ones, and will continue to do so. Care is taken not to adversely affect the sales of onechoice by introducing a new choice, which will cannibalize sales from the existing one(trade off). McDonald's knows that items on its menu will vary in popularity. Their abilityto generate profits will vary at different points in their life cycle. Products go through a lifecycle, which is illustrated below:

The type of marketing undertaken and the amount invested will be different, depending onthe stage a product has reached. For example, the launch of a new product will typicallyinvolve television and other advertising support. At any time a company will have aportfolio of products each in a different stage of its lifecycle. Some of McDonald's optionsare growing in popularity while arguably the Big Mac is at the 'maturity' stage.


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Price

The customer's perception of value is an important determinant of the price charged.Customers draw their own mental picture of what a product is worth. A product is more

than a physical item, it also has psychological connotations for the customer. The danger ofusing low price as a marketing tool is that the customer may feel that quality is beingcompromised. It is important when deciding on price to be fully aware of the brand and itsintegrity. A further consequence of price reduction is that competitors match pricesresulting in no extra demand. This means the profit margin has been reduced withoutincreasing sales.

Promotions

The promotions aspect of the marketing mix covers all types of marketing communications.

The methods include advertising, sometimes known as 'above the line' activity. Advertisingis conducted on TV, radio, cinema, online, poster sites and in the press (newspapers,magazines). What distinguishes advertising from other marketing communications is thatmedia owners are paid before the advertiser can take space in the medium. Otherpromotional methods include sales promotions, point of sale display, merchandising, directmail, telemarketing, exhibitions, seminars, loyalty schemes, door drops, demonstrations,etc.

The skill in marketing communications is to develop a campaign which uses several ofthese methods in a way that provides the most effective results. For example, TV

advertising makes people aware of a food item and press advertising provides more detail.This may be supported by in store promotions to get people to try the product and acollectable promotional device to encourage them to keep buying the item. It is imperativethat the messages communicated support each other and do not confuse customers. Athorough understanding of what the brand represents is the key to a consistent message.

The purpose of most marketing communications is to move the target audience to sometype of action. This may be to: buy the product, visit a restaurant, recommend the choice toa friend or increase purchase of the menu item. Key objectives of advertising are to makepeople aware of an item, feel positive about it and remember it. The more McDonald'sknows about the people it is serving the more it is able to communicate messages whichappeal to them. Messages should gain customers' attention and keep their interest. Thenext stage is to get them to want what is offered. Showing the benefits which they willobtain by taking action, is usually sufficient. The right messages must be targeted at theright audience, using the right media.


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Place

Place in the marketing mix, is not just about the physical location or distribution points forproducts. It encompasses the management of a range of processes involved in bringingproducts to the end consumer.

Conclusion

Once the marketing strategy is in place various responsibilities are given to differentindividuals so that the plan can be implemented. Systems are put in place to obtain marketfeedback which measure success against short-term targets. McDonald's has to ensure thatthis is done within the confines of a tightly controlled, finite marketing budget.McDonalds is considered to be the King of the fast food. To achieve this greatnessMcDonalds has tried hard for ages to prove itself in the competitive environment of Fastfood. The key factors in success o f McDonalds in my view is innovation, customization,

good management and above all best Marketing strategies adopted by McDonalds. McDonalds in India has a very bright future because of the customers bank, customized

approach from McDonalds towards its customers and above all the strong brand Image .

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case study 013096.docx