McDonald’s in China
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McDonald’s Corporation is undoubtedly the largest fast food restaurant chain in the world. Currently, the restaurant chain has established its presence in over 115 countries. Furthermore, it serves a wide variety of customers estimated around 70 million every year. Despite numerous economic challenges, McDonald’s has always remained firm in the fast food industry, annually registering impressive results. With its headquarters in the Oak Brook, Illinois United States, McDonald’s operates numerous successful restaurant chains under its brand name (Porter, 1998). The corporation’s success in the ever-challenging fast food industry can be attributed to the fact that McDonald’s has a formidable strategic plan and an outstanding management team.
As part of its business strategy, McDonald’s regards business competition as war (Clausewitz, 2010). McDonald’s allocates most of its resources on provision of core services in order to ensure that the corporation stays ahead of the rest in the fast food industry. In this respect, McDonald’s operates its outlets either as joint venture or through franchising. In 1997, the corporation redesigned its strategy to focus only on its core brand. This move saw the company divest itself off some chains in Mexico. McDonald’s primarily focuses on selling products that it can provide conveniently to its clientele. This includes various types of chicken sandwiches, hamburgers, French fries and an assortment of in-house soft drink brands.
Concerning supportive policies, the corporation has ratified measures to ensure that it grows its business in the most profitable manner. Furthermore, McDonald’s believes in its systems, which ensure that the quality of its products remains high throughout the supply chain. Ethics is paramount to the corporation’s business. As part of its policy, McDonald’s believes that good ethics means quality business. The corporation conducts its business in a fair and honest manner (Parasuraman, et, el, 1988).
McDonald’s has a culture that ensures that the corporation grows continuously in order to respond to stakeholders’ needs effectively. The corporation has incorporated principles of organizational learning in its operations. These principles help the corporation to respond positively to ever-changing needs of consumer, system, and employee. Customer’s satisfaction is paramount to McDonald’s since it is viewed as a business entity. The corporation offers excellent services to customers to afford them the unique experience that cannot be offered anywhere else. Currently, the corporation has the largest number of loyal customers than any other of its competitors. Additionally, the corporation has invested in the latest technology. McDonald’s was the first fast food restaurant to launch online shopping and selling of customized products. The company designs the business environment in which it operates, leaving others behind competition (Clausewitz, 2010).
Strategic leadership is critical for any business success. McDonald’s has an efficient labor force and a management team that is innovative and visionary. The aim of the management and the workforce at large is to shape the corporation’s culture and ensure that it is in tandem with the organizational strategy. Moreover, McDonald’s has excellent reward programs that are geared towards stimulating employee performance. A motivated workforce is critical for an organization that aims at making profits. McDonald’s uses numerous tactics to reward its employees. This helps meet the company’s objects and reduce overheads at the same time.
According to McDonald’s Corporation in the Chinese Chapter Annual Report (2012), the company concentrates on the strategies that would strengthen the its long-term survival with objectives of distributing evenly the shareholder returns in the top one-third of their colleagues. The company’s long-term financial targets are to:
- Grow organic sales from 1% to 2% faster than the market grows in product classes and regions in which they operate
- Attain the Core EPS growth of high single digits to low double digits
- Generate free cash flow productivity of about 90% or even more
The fast food industry is extremely dynamic. Customer tests and preferences change rapidly. The organization must adopt a sound business strategy to stay ahead of competition. McDonald’s has a competitive strategy that has always manipulated the market in its favor. The corporation recognizes talents and trains them in order to build a formidable team that will always carry on the corporation’s mission, vision and strategic plan. This has seen the company establish a good organizational culture that is critical organizational growth. The corporation appreciates diversity and unique customer requirements in the retail industry. This explains why the company has collaborated with other businesses in some of its chains to ensure that it serves the wider society.
McDonald’s had to apply various marketing concepts to percolate the Chinese market. This market segmentation analysis did not include a survey; instead, it relied wholly on customer’s behavior data that was captured at various branches. The food is mostly served in bags, cartons, or plastic wrapping to minimize cost of operation and for quick identification. Menus are made from processed ingredients prepared from a central place and then transported to individual outlets. Once in the destination restaurant, the fod is finally cooked through grill, microwave, or deep frying for a short time to meet the ever-surging customer’s demand. Precooked food is constantly evaluated to root out stale or overstayed food products. Thus, food at fast food restaurants is mostly characterized by high amounts of fat, high sugar content and less fiber i.e. highly processed. For example, King Burger’s food had a characteristic flavor, aroma, mouth feel, and texture.
Their products include chicken nuggets, pizza, sandwiches, and hamburgers. Customers check in any time of the day either for a bit or for a take-away. The customers are mostly youngsters and a few old busy people who want to crab some food while on their chores. Young people, in particular, prefer fast foods because they are cheap. Food is packaged in a group and sold at a considerably cheap prize. The restaurant also has a value meal; this is a case when a collection of menu items is sold as a whole at a low price that would be also sold individually. These arrangement-attracted youths, especially school going children, usually keep looking for either a hamburger or chicken nuggets to eat.
What is more, the restaurant has a hospital point of sale system to cope with high customer’s demand. This enabled kitchen crew to view orders placed at the counter and prepare them in real time. The system also ensures speed and accuracy in service delivery. Consumer spending was very high, for the time I had been there the restaurant made sales amounting to $100000. It was evident that most Americans still prefer fast foods compared to cooking a meal at home.
Chinese are naturally conservative and prefer eating home-cooked meals unlike fast food products. Fast foods are prepared with many additives, salts, sugars, flavorings, and preservatives that limit the nutritional value of the final product. McDonald’s restaurants in China include ingredients of organic foods to enrich quality of their food in accordance with the recommended standards and minimize the negative impacts of fast food. Despite all negative facts, fast food has become more appealing because it is cheaply priced with irresistible tests. Consequently, this makes fast food almost everybody’s choice despite its health implications. McDonald’s provides broad range of chic products such as modern and classic foodstuffs including chicken nuggets, pizza, sandwiches, and hamburgers. Its products’ design was initiated by designers, style makers, and buyers. For that reason, it becomes a new trend, which attracts a number of customers. The new items are channeled to the right stores at the right time. McDonald’s provides fashion and quality products at the best price to customers. The best price can be assured through buying in large quantities, purchasing the right products at the right place, focusing on cost-awareness, and making effective distribution.
In China, McDonald’s sells its products through stores, catalogues, and online stores. However, there is a limitation for shopping via catalogue and Internet as this system exists only in some countries. Customers in upmarket estates are able to order products through catalogue and online, i.e. they can purchase merchandise via Internet. These two channels give advantages and convenience to the customers since they can purchase items at home. Nonetheless, the major distribution channel of McDonald’s consists in stores, which expand more rapidly than other two channels.
Catalogue and Internet shopping are the channels that offer customers more accessible and also increasing service, which reinforces its profile. The corporation does not own any stores, it rents all of them. Therefore, it can move its stores to the new location as the prime location changes. McDonald’s will not establish a new store until it finds the suitable place. Location of a store is essential for success. The company’s stores are always located in the best commercial regions, such as, busy streets and upmarket estates. A large number of customers are induced to shopping at McDonald’s because of the effective marketing tool of store displays.
McDonald’s usually launches several campaigns annually in order to promote fashionable products that satisfy the ever-changing consumer tests and preferences. Its customers can get up-to-date information about trendy fast food products from such social networks as Facebook, Twitter, and a magazine, which is also available on its website.
Video advertising, print advertising, and e-marketing are used to promote its products. Approximately 5% of its income is expended on advertising. There are websites, which customers can access 24 hours a day and 7 days a week. Customers can be acknowledged about new trend and new arrival of products via its website. The Internet utilization is a powerful tool in marketing. Online market can help to attract customers and encourage business growth.
McDonald’s believes in people. Its employees are the most important asset. It encourages employees to share their ideas and attitude. Moreover, it avoids line of authority. Team work and cost awareness are promoted. Responsibility is delegated to employees. Consequently, staffs will feel that they are one part of the company. Freedom and responsibility exist in all business functions and workplaces. People can make their own decisions. Some unexpected situations might happen, but the critical thing is that the mistakes can be learned and avoided next time. There are policies of diversity, gender equality, and non-discrimination. The company usually concentrates on customer’s demand and always provides base of products according to cusstomer’s requirement. Employees in the stores are well-trained about customer’s services. When customers walk to the company’s outlets, they can feel revitalized since McDonald’s always provides new fashionable products to clients. Its store layout is obviously separated among merchandise for children, teenagers, women, and men.
An analysis of McDonald’s indicates that successful firms do not target every customer; instead they satisfy and meet demands only of certain group of customers. This circumstance is called market segmentation. Consumers have different needs and interests. Firms have to differentiate products according to customers’ need in order to satisfy all clients. It cannot imagine that one product can meet all customers’ demands. However, avoiding mass marketing and focusing only on specific group of customers is significant. This process consists of three elements, which are segmentation, targeting and positioning (Hale, 1996). Transforming demand and need of customers into marketing mix, which comprises of product, price, place and promotion at the maximum satisfaction is the challenging job. It is vital to provide well-defined and large enough segmentation. The successful position of products depends on how well companies are able to offer more preferable products than their competitors.
Evidence indicates that there are four standards for effective segmentation:
- Identifiable: Ability to determine
- Viable: Enough quantity of customers which share the same interest in order for firms to get profit
- Merchantable and governable: Easy to create sales and promotion
- Static: Remain stable for carry out an activity
There are various types of segmentation such as geographic segmentation, distribution segmentation, media segmentation, price segmentation, demographic segmentation, time segmentation, and psychographic segmentation (Treacy & Wiersema, 1993).
McDonald’s segments its customers based on both demographic and psychographic factors. Demographic segmentation can be defined as gender, age, income, and education level, while psychographic segmentation is based on customers’ lifestyle, attitudes, value, behaviors, perceptions, beliefs, personality, and interests. The company concentrates on satisfying demand and requirement of target customers rather than making and selling its products. Moreover, it offers products for children, teenagers, women, and men. Children segmentation includes a target audience starting from a newborn infant to an adolescent aged 14. In this segment, products will be produced based on the nature of tastes and preferences. McDonald’s segments’ customers are classified by demographic principle. It involves children, youngsters, women, men, relying on preference and style of everyone in that segmentation (Narver & Stanley, 1990).
After market segmentation was discovered, firms got alternatives regarding decision about group of customers that they will target. Firms can target only one segment with one brand of product, or provide different segments with one brand of product, or offer each customer groups with different brands of products. The choice of entirely targeting specific market is not always suitable. The successful company such as Body Shop targets only one segment, which is well-determined. Therefore, it can strongly enhance appeal of products. McDonald’s major customers are young people aged between 18 to 45 years. The range of target customers was expanded into all ages of both female and male customers.
Positioning is the process of making customers perceive its products in their minds. Customers’ demand of selected group has to transform into marketing mix, product, price, place and promotion. It is essential regarding how customers perceive and position the products in their opinion relatively to the rivals. Sometimes, customers do not sense the correct image of the brand. The uniqueness of the brand is the main factor that leads to success. Positioning can be defined through various factors. It is essential for customers to make judgment and selection from them. The key factor in selecting a grocery store can be defined by price, the possible parameter in choosing a hotel can be made by level of service, the major element in buying electrical device such as computer can be chosen from quality and reliability. Some customers perceive that H&M provides cheap products relatively to its quality. It means that McDonald’s positioning is still unclear to some customers since they understand the company in the wrong direction. Moreover, some customers do not know what the full name of the company is.
It is vital to create a strong brand, which provides competitive advantage to the corporation. Customers should perceive that McDonald’s offers fashion and quality products at the best price. Its merchandises are always updated. In addition, new items are always available. Website is one of the communicative tools that strengthen its brand. Moreover, online shopping is used to convey business concept and induce customers to come to stores, and purchase products online or by catalogue.
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