Republic of the Philippines

CAVITE STATE UNIVERSITY

Silang Campus
Biga, Silang, Cavite

Mc DONALDS CORPORATION
Expanding Globally while adjusting its Local Recipe

GOAL DIGGERS

Gorembalem, Ivan Jay

Juane, Jarell
Magbitang, Candelaria L.
Mallari, Gener
Muncada, Dexter
Pumanes, Judith F.
Reyes, Hazel J.
Trilles, Kristel Marie N.

BSBM MKTG 4-A

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Expanding Globally while adjusting its Local Recipe] CASE STUDY

I. CASE SUMMARY

MCDONALDS HISTORY

McDonald's is an American hamburger and fast food restaurant chain. It was

founded in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald,
in San Bernardino, California. In 1948, they reorganized their business as
a hamburger stand, using production line principles. The first McDonald's franchise using
the arches logo opened in Phoenix, Arizona in 1953. Businessman Ray Kroc joined the
company as a franchise agent in 1955 and subsequently purchased the chain from the
McDonald brothers.

Today, McDonald's is one of the world's largest restaurant chains, serving

approximately 69 million customers daily in over 100 countries across approximately
36,900 outlets as of 2016. McDonald's primarily sells hamburgers, cheeseburgers,
chicken products, french fries, breakfast items, soft drinks, milkshakes, wraps, and
desserts. In response to changing consumer tastes and after facing criticism for the
unhealthy nature of their food, the company has expanded its menu to
include salads, fish, smoothies, and fruit. A McDonald's restaurant is operated by either
a franchisee, an affiliate, or the corporation itself. The McDonald's Corporation revenues
come from the rent, royalties, and fees paid by the franchisees, as well as sales in
company-operated restaurants.

ASIA PACIFIC

The Indian market appears to hold huge potential for McDonalds in 1996. In
Delhi, McDonald competes with Nirula's , Subway , Pizza hut, KFC , and Domino's
Pizza and other hundreds of smaller regional chain throughout India.
Indian demand meals from major food chains is growing at a double digit rate,
annual total sales exceeds to $1 billion. McDonalds identifies strategic locations in areas
with heavy pedestrian traffic, near universities and train stations. McDonald’s India
operated 208 locations at the end of 2010. Prices are lower than in other countries.
McDonalds develop Chicken Maharaja Mac specifically for India. Despite
protesters form several Hindu nationalist groups, the management responded by posting
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"no beef or beef products sold here" but doubts raised the issue kept many customers
away
McDonalds worked to proved that it is sensitive to Indian tastes and traditions. It
also emphasize that most of the food ingredient it uses-as much as 95 % - are produced
locally. The "green" kitchen is devoted for vegetarians while the "red” kitchen is for
meat lovers. Some of the new menu items developed for India are being introduced in
Europe and US
China is currently home to the world's largest McDonalds opened in 1998 in
Beijing. Despite having a 20 year lease for the site, McDonalds found itself in the middle
of dispute in the government. Despite the turbulent start, McDonalds has more than 1000
restaurants and purchase 95% of their supplies from local sources.
In Asia and elsewhere, McDonalds protect itself from currency fluctuations by
purchasing as much as possible from local suppliers. However , fries must be still
imported from Australia or us to help offset higher cost, McDonalds offer customers the
choice of rice as a side dish at a lower price.

EUROPE

Foremost among them was New York-based DDB Worldwide, the lead agency on
the McDonald’s account that handles advertising in 34 countries, including Australia, the
United States, and Germany, In addition, Leo Burnett is responsible for ads targeting
children.

McDonald’s has also set its sights on Central Europe, where plans call for
hundreds of new restaurants to be opened in Croatia, Slovakia, Romania, and other
countries.

Bové told the press that the group had singled out McDonald’s because, in his
words, it is a symbol of America, “the place where they not only promote globalization
and industrially produced food but also unfairly penalize our peasants.” Ten years ago,
executives at McDonald’s France even ran an ad in Femme Actuelle magazine suggesting
that children should eat only one meal at McDonald’s per week.
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For example, Wimm-Bill-Dann supplies dairy products to McDonald’s; in 2002, it

became the first Russian company to be listed on the New York Stock Exchange.

From the time McDonald’s opened its first French outlet in 1972, policymakers and
media commentators have voiced concerns about the impact of fast food on French
culture.

Even so, with more than 1,200 locations, France today represents McDonald’s
second-largest market (the United States ranks number 1). McDonald’s International is
organized into three geographic regions: (1) Europe; (2) Asia/Pacific, Middle East, and
Africa (APMEA); and (3) Other Countries.

In 2010, McDonald’s Czech Republic restaurants featured a special lineup of New

York-themed sandwiches that were promoted with the iconic “I Heart NY” logo.

Even as McDonald’s executives attempted to come to grips with the problems facing
their company, various business experts were offering advice of their own.

The first Moscow McDonald’s was built on Pushkin Square, near a major metro station

US MARKET

Disappointing financial results led to Jim Cantalupo as a CEO. Cantalupo was a

retired vice chairman who has experienced in international marketing. He get the
company back by focusing on customer service. He also called a summit meeting of
senior personnel from different advertising agencies. By June 2002, "Im Lovin It" is the
new marketing theme. The core idea was to make mcdonalds "better , not just bigger" and
identified the 5 main drivers; People, Product , Place , Price and Promotion
Jim Skinner became the new CEO after the death of Cantalupo and Bell, instituted a
"Plan To Win" initiative to increase McDonalds momentum. After 11 years, the plan to
strategy has been success. Consumer embraced "better-for-you" menu. The company is
also seeking ways to be more environmentally conscious by using less plastic packaging
and recycling more.
McDonalds executive create a modern, streamlined environment that will encourage
customers to stay longer and spend more. some of the changes are dramatic; gone are the
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red roofs and splashes of neon yellow that many associate with the iconic spokes clown
Ronald McDonald.
As Jim Carras, a senior U.S Executive, " McDonalds has to change with the times.
and we have to do sa faster than we ever have before"

II. CASE FACTS

 McDonald’s Corporation is the World most Valuable brands.

 Undisputed leader in the quick-service restaurant (QRS)

 Pioneer of convenience oriented features such as

 Drive-through windows

 Indoor playgrounds for children

 Delivering three things in customers:

1. Inexpensive food with consistent taste regardless of location

2. Quick service

3. Clean and familiar environment

 More than twice the system-wide revenues of burger king

McDonald’s (matrix) 4P’s

 Place

 McDonald’s Corporation found in 118 different countries

 McDonald’s International in

o Europe

o Asia/Pacific
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o Middle East and Africa (APMEA)

 Product

- Chicken Maharaja Mac in India

- Vegetarian food such as:

Spicy McAloo, Tikka Potato Burger, Pizza Mcpuff and Paneer Salsa Mcwrap

- Fresh Baked bagnettes filled with ham and brie

- “Better for you” Menu items such as: Salad and Sandwiches

 Promotion

- In India they emphasizes 95% of Ingredients are produce locally

- They used Green kitchen for Vegetarian and Red side for Meat Item

- In Singapore they buy they chicken in Thailand to avoid currency flunctiation

- “Posting no Beef or no Beef product sold here”

- “Better for you Menu”

 Prices

- Sandwiches 40 rupees (less than $1.00)

- Drinks 15 rupees

- French Fries 25 rupees

- Complete meal costs about $2.00

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III. SITUATION ANALYSIS

STRENGHTS

 Successful advertisement
 Establish brand name
 Collaboration with coke
 Clean environment and play space for kids
 Professional training for employees
 Competitive price

WEAKNESSES

 Weak product development

 Management of franchise/joint venture

OPPORTUNITIES

 Internationalization ( serving only 1% of population)

 Growing dining out market

THREATS

 More health conscious customer

 Thrat from local competitiors in different countries
 Global economic recession
 Playing in a mature and saturated industry

IV. DISCUSSED QUESTIONS

1. Identify the key elements in McDonald's global marketing strategy. In particular,
how does Mc Donald's approach the issue of standardization? Does McDonald's
think global and act local? Does it also think local and act global?

McDonald's global marketing strategy is based on combination of global

and local marketing mix elements. For the first elements in McDonald's global
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marketing strategy (GMS) is a vital elements in McDonald's business model

restaurants system that can be set up virtually anywhere in the world and the
restaurants themselves offer the consumers a chance to experience for themselves
a fast food legend. Second elements are McDonald's offers core menu items like
hamburgers, French fries and soft drinks in most countries. The popularity of
American-style hamburgers, fries, and soft drinks is growing around the world,
supporting Levitt's view of the global village. For the price, the average price of
Big Mac in the United States is $3.54.

Globalization involves developing marketing strategies as though the

world is a single entity, marketing standardized products in the same way
everywhere. Globalized organizations employ standardized products, promotional
campaigns, prices and distribution channels for all markets. Brand name, product
characteristics, packaging and labeling are the easiest of the marketing mix
variables to standardize. One of the aims of McDonald's is to create a
standardized set of items that taste the same whether in India, China or South
Africa. McDonald's seeks to serve its customers with the same quality product
and experience, whether that restaurant is located in Moscow, Idaho or Moscow,
Russia. This requires standardized processes and similar quality ingredients.

McDonald’s adapt think global because all over the world, McDonald’s
remain as the same company, using the same mission and vision and not to forget
their logo and image, Golden Arches. In the study, it stated that Golden Arches are
said to be the second most recognized symbol in the world. McDonald’s act
locally because it gets use to the local culture by using their own product. For
example, people in France demanded McDonald’s to use French potatoes and
French cheese to their products so that it would appear their local culture.
McDonald’s also using different name of the product so that it suit with the
culture. For example in India, McDonald’s are using the Indian name to its menu
and served products such as McAlooTikki, McCurry Pan and Pizza McPuff for
vegetarians.
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McDonald’s also adapt think local and act global. Many companies are
learning that it is equally important to think local and act global. In practice, this
means that companies are discovering the value of leveraging innovations that
occur far from headquarters and transporting them back home. For example, the
study stated that McDonald’s in France think local because they redesigned stores
have hardwood floors and exposed brick walls. Sign are in muted colors rather
than the chain’s signature red and yellow, and the golden arches are displayed
more subtly. Overall, the restaurants don’t look like McDonald’s elsewhere. As
McDonald’s locations in France undergo style makeover, some franchisees report
sales increases of 10 to 20 percent, it shows that the restaurant act global in order
to increase their sales revenue. Encouraged by these results, McDonald’s has
embarked on an ambitious program to refurbish several thousand outlets in
various countries. Some American franchisees began undertaking similar
renovations.

2. Do you think government officials in developing countries such as Russia, China,

and India welcome McDonalds? Do consumers in these countries welcome
McDonalds? Why or why not?

Despite concerns by governments and citizens in some countries about

"cultural imperialism," McDonald's and other franchises with well-known brand
names are generally welcome. Such businesses provide both much-needed jobs
and employee training.
According to Trifter.com, "In India, there are no Big Macs because the
Hindu people don't eat beef. However, they have the Maharaja Mac; which is a
Big Mac made of lamb or chicken meat. There is also a vegetarian burger, the
McAloo Tikki. "No beef or beef products sold here," but the doubts raised by the
controversy kept many potential customers away.
McDonald's does a good job of earning the support of local authorities and
the local population by working with agricultural producers to develop local supply
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sources for beef, potatoes, and dairy products. Finally, thanks to changing lifestyles
around the globe, more people are embracing the whole concept of fast food.
The following are the possible opportunities that led to acceptance of
McDonald’s globally:
 The customers are becoming more demanding that they prefer high quality
products/ imported

 McDonald’s is known worldwide (large market share); #2 franchise

 Acquisitions helped them to be known better and to tap larger markets

 Competition- to improve pricing (lower priced products)

 Changing lifestyle- people nowadays are career-oriented thus less time for
cooking; increased transactions of food delivery;

 Increasing globalization; need for cheaper products produced with the use of
highly technological equipment in the most efficient manner; Mcdonald’s have
the capital to purchase these equipment thus this could be a factor for them to be
welcome in other countries.

3. The Plan to Win initiative is built around five factors that drive McDonald's
business: people, product,place,price, and promotion. As a student of
marketing,what can you say about these factors?

McDonalds Marketing Mix (5 P’s) After segmenting the market, finding the
target segment and positioning itself, each company needs to come up with an offer.
The 5 P’s used by McDonalds are:
 Product
 Place
 Price
 Promotion
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 People
Product is the physical product or service offered to the consumer. Product
includes certain aspects such as packaging, guarantee, looks etc. This includes
both the tangible and the non- tangible aspects of the product and service.
McDonalds has intentionally kept its product depth and product width limited.
McDonalds studied the behaviour of the Indian customer and provided a totally
different menu as compared to its International offering. It dropped ham, beef and
mutton burgers from the menu. India is the only country where McDonalds serve
vegetarian menu. Even the sauces and cheese used in India are 100% vegetarian.
McDonalds continuously innovates its products according to the changing
preferences and tastes of its customers. The recent example is the introduction of
the Chicken Maharaja Mac. McDonalds bring with it a globally reputed brand,
world class food quality and excel lent customer specific product features. Pricing
includes the list price, the discount functions available, the financing options
available etc. It should also take into the consideration the probable reaction from
the competitor to the pricing strategy. This is the most important part of the
marketing mix as this is the only part which generates revenue. All the other three
are expenses incurred. The price must take into consideration the appropriate
demand-supply equation. McDonald’s came up with a very catchy punch line
“Aap ke zamane mein ,baap ke zamane ke daam”. This was to attract the middle
and lower class consumers and the effect can clearly be seen in the consumer base
McDonalds has now. McDonalds has certain value pricing and bundling strategies
such as happy meal, combo meal, family meal etc to increase overall sales
volumes
The various promotion channels being used by McDonald’s to effectively
communicate the product information are given above. A clear understanding of
the customer value helps decide whether the cost of promotion is worth spending.
There are three main objectives of advertising for McDonald’s are to make people
aware of an item, feel positive about it and remember it. The right message has to
be communicated to the right audience through the right media. McDonald’s does
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its promotion through television, hoardings and bus shelters. They use print ads
and the television programmes are also an important marketing medium for
promotion. Some of the most famous marketing campaigns of McDonald’s are:
• “You Deserve a break today, so get up and get away- To McDonald’s”
• “Aap ke zamane mein ,baap ke zamane ke daam”.
• “Food, Folks, and Fun”
• “I’m loving it”
The McDonald’s Experience Marketing in a services industry is becoming
an increasingly complex challenge. The paradigms of service marketing demand a
passionate understanding of customer expectations and perceptions, and linking
them to product design & delivery as well as operational planning. This is where
McDonald’s has excelled due to its ability to successfully integrate the customer’s
perspective in its products and operations in a comprehensive manner. The
revamped menu in India is an example of McDonald’s strategy of integrating the
customer’s perspective in its products. And, the operational integration is evident
from McDonald’s emphasis on its suppliers as its customers as well as its
treatment of its consumers as co- producers of services.
The ultimate aim of Service Marketing is not just to become a Service
Leader but to create a Service Brand. The Service Delivery Process is the key to
achieving this aim of Service Marketing. Competitors Analysis McDonald’s has
been a leading fast-foods outlet in Vile Parle. But the outlet understudy has other
competitors eating away into its market share. In addition to its traditional rivals
—KFC, Dominos, Pizza Hut—the firm encounters new challenges. Jumbo King
competes using a back-to-basics approach of quickly serving up burgers for time-
pressed consumers. On the higher end, the KFC has become potent competitor in
the quick service field, taking away customers from McDonald’s. Perhaps in the
new environment, fast, convenient service is no longer enough to distinguish the
firm. At this time, a new critical success factor may be emerging: the need to
create a rich, satisfying experience for consumers. This brings us to service and
experience based competition which McDonald’s can use for competitive
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advantage against Jumbo King. Keeping in mind the demographics of the area,
McDonald’s has Wi-Fi enabled the outlet to cater to the student community. It is
for this overall “Food, Fun & Folks” experience that customers pay a premium
over the other competitors.

4. Is it realistic to expect that McDonalds or any well-known company can expand

globally without occasionally making mistakes or generating controversy? Why
do antiglobalization protesters around the world frequently target McDonalds?

No. it is not possible for McDonald’s or any well-known company to

expand globally without occasionally making mistake or generating controversy.
These mistakes serve as learning experience for the company. McDonald’s
franchises overseas became a favorite target of people and groups expressing anti-
American and or anti-globalization sentiments. These anti-globalization groups
pointed out that multinationals have unregulated political power and to the powers
exercised through trade agreements and deregulated financial markets.
Specifically, corporations are accused of seeking to maximize profit at the
expense of sabotaging work safety conditions and standards, labor hiring and
compensation standards, environmental conservation principles, and the integrity
of national legislative authority, independence and sovereignty. McDonald’s
being a tip brand, cannot escape these skepticisms.
As the world’s largest restaurant chain, McDonald’s is a target for
criticism. The company is often seen as a symbol of American domination of
foreign economic resources even though its foreign franchises are locally owned
and use locally produced food. Other criticisms include allegations of exploitation
of entry-level workers, ecological damage, selling unhealthy food, production of
packaging waste, exploitative advertising and adverse response to the company’s
approach to preserving its image and copyright all issues. Amidst the challenges
and criticisms, McDonald’s continues its stride as the global industry leader.