Fiona Oudeman Arsalan Khan Anthony Russo Marcus Copsey.

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!

2. 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-meat-scandal/

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

2. Alternatives:

3. It has since stopped importing chicken from China and introduced a tofu and fish version of the McNugget.

4. 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 fast-food 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 long-range 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.