AMITY global BUSINESS

SCHOOL
“International marketing of mc
Donald’s”

I’M
LOVING IT……
BY
 SIRISHA
ACHANTA

ACKNOWLEDGEMENT

I am thankful to my project guide Mrs. D. Surekha

Thakur for helping me formulate this project and guiding me
in its analysis and implementation.
I convey a sincere gratitude to my parents and friends for their
encouragement and support. I offer a word of thanks to the almighty
who gave me strength, courage and blessing to carry out a successful
study.

Sirisha achanta
Roll
No: AGV30601908001
 DECLARATION

I, the undersigned, hereby declare that the project

report entitled international marketing of Mc Donald’s
has been written and submitted under the guidance of Mrs.
D. Surekha Thakur.
I further declare that it is original work done as a part
of our academic course and has not been submitted
elsewhere. The conclusions and recommendations written in
this project are based on the data collected by me while
preparing this report.

Sirisha Achanta
Roll No: AGV30601908001

INDEX:
CHAPTER1:
 • INTERNATIONAL MARKETING
• Environment of international marketing
• Global drivers of International Marketing
• Role of market research and opportunity analysis
• International marketing information system and
research
• International marketing segmentations
• Entry Strategies
• Product Issues in International Marketing
• The International Product Life Cycle (PLC)
• International Promotion
• Pricing Issues in International Marketing
Chapter2:
• History of Mc Donald’s
• Facts and figures
• Types of restaurants
• Redesign
• Controversies
• Arguments in defense of McDonald's
• Environmental record
• Legal cases
• Products
 • Advertising
• Global operations
• Phenomenal Growth in the 1960s and 1970s
• Surviving the 1980s "Burger Wars"
• A Failed Turnaround: Late 1990s and Early 2000s
• Business Model
• McDonald’s in India
• McDonalds Marketing Mix (5 P’s)
• The McDonald’s Experience
• Importance of PLC in McDonalds
• Competitors Analysis
• McDonald's Marketing Strategy
• McDonalds Business Analysis
Chapter3:
• Case study on Mc Donald’s
CHAPTER 4:
• QUESTIONNAIRE
CHAPTER 5:
• Analysis and data interpretation
CHAPTER 6:
• Conclusion
• Bibliography
Chapter 1:

International Marketing:
International marketing, a series of activities create
an exchange that satisfy an individual customer. The term
international explains the activities or the transactions
involved by more than one nation. International
marketing can be defined as”the design of business
activities to plan, price, promote and direct the flow of a
company’s goods and services to consumer or a layman
in one or more nation for a profit”. This international
marketing brings the concept of exchange of goods and
services against of value, usually in the terms of money.
International marketing includes market research,
advertising, promoting, selling as well as activity after
sales. Based on this concept, international marketing
obeys or follows 3 basic principles.
• Customer value and the value equation
• Competitive or differential advantage
• Focus

Customer value and the value equation:

The task of marketing is to generate customer value
greater than the value formed by competitors. If the
benefits are strong enough by customers, a company
does not need to be the low price competitive to win
customers.
Competitive or differential advantage:
 One of the most powerful strategies for penetrating a
new national market is to offer a superior product at
lower price. The price advantage will get immediate
customer attention and for those customers who
purchase the product, the superior quality will make an
impression.
Focus:
Focus is required to succeed in the task of creating
customer value at a competitive advantage, a clear focus
on customer needs and wants and on the competitive
offer is required to mobilize the effort needed to maintain
a differential advantage. This can be accomplished only
by focusing resources and efforts on customer needs and
wants.

Environment of international marketing:

One of the fundamental steps that need to be taken prior
to beginning international marketing is the environmental
analysis. Of course, there are many tools on Marketing
Teacher that would prove useful at this stage such as
lessons on the marketing environment, PEST Analysis,
SWOT Analysis, POWER SWOT and Five Forces Analysis.
However, the very specific and unique nature of each
individual nation needs to be looked into. Below we
consider the nature of an international PEST analysis, and
the influence of tariff and non-tariff barriers.
PEST analysis stands for Political Economical Social
Technological factor analysis, which describes a
framework of macro-environmental factors that are used
in the environmental scanning for strategic management.
PEST analysis is very important that an organization
considers its environment before beginning the marketing
process. In fact, environmental analysis should be
continuous and feed all aspects of planning.

• Political factors include areas such as tax policy,

labour law, environmental law, trade restrictions,
tariffs, and political stability. Political factors may also
include goods and services which the government
wants to provide or be provided and those that the
 government does not want to be provided
governments have great influence on the health,
education, and infrastructure of a nation.
• Economic factors include economic growth, interest
rates, exchange rates and the inflation rate. These
factors have major impacts on how businesses
operate and make decisions. For example, interest
rates affect a firm's cost of capital and therefore to
what extent a business grows and expands.[2]
Exchange rates affect the costs of exporting goods
and the supply and price of imported goods in an
economy.
• Social factors include the cultural aspects and
include health consciousness, population growth
rate, age distribution, career attitudes and emphasis
on safety. Trends in social factors affect the demand
for a company's products and how that company
operates. For example, an ageing population may
imply a smaller and less-willing workforce thus
increasing the cost of labor. Companies may change
various management strategies to adapt to these
social trends such as recruiting older workers.
 • Technological factors include ecological and
environmental aspects, such as R&D activity,
automation, technology incentives and the rate of
technological change. They can determine barriers to
entry, minimum efficient production level and
influence outsourcing decisions. Technological shifts
can affect costs, quality, and lead to innovation.
• Environmental factors include weather, climate,
and climate change, which may especially affect
industries such as tourism, farming, and insurance.
Growing awareness to climate change is affecting
how companies operate and the products they offer--
it is both creating new markets and diminishing or
destroying existing ones.
• Legal factors include discrimination law, consumer
law, antitrust law, employment law, and health and
safety law. These factors can affect how a company
operates, its costs, and the demand for its products.
Advantages of PEST:
• Simple and only costs time to do.
• Provides an understanding of the wider business
environment.
• Encourages the development of strategic thinking.
 • May raise awareness of threats to a project.
• Can help an organization to anticipate future
difficulties and take action to avoid or minimize their
effect.
• Can help an organization to spot opportunities and
exploit them.
Disadvantages of PEST:
• Usually a simple list and not critically presented.
• The rapid pace of change in society makes it
increasingly difficult to anticipate developments that
may affect an organization in the future.
• Collecting large amounts of information may make it
difficult to see the wood for the trees and lead to
"paralysis by analysis."
• The analysis may be based on assumptions that
prove to be unfounded.
• PEST analysis only covers the external environment
and the results need to be considered in conjunction
with other factors, such as the organization itself,
competitors and the industry in which it is operating.
Evaluation by pest analysis elucidates if the product
can be introduced in market or not by knowing the
position of a particular country. By this analysis we can
analyze the people mindset and our product can be
promoted accordingly.
Social and cultural environment:
Culture is often referred as “That complex whole which
includes knowledge, belief, art, morals, custom, and any
other capabilities and habits acquired by an individual as
a member of society.” From this definition, we can
scrutinize that, Culture as a “complex whole,” is a system
of interdependent components. Culture, a “society’s
programming of the mind”, which has both a pervasive
and changing influence on each national market
environment. International market must recognize the
influence of culture on all aspects of life including work
habits and consumption of products. Human behavior is a
function of both person’s own unique personality and that
person’s interaction with the collective forces of the
particular society and culture in which he or she has
lived. International marketing has played an important
role in leading, influencing the rate of cultural change
around the world. International markets have learned to
rely on people who know and understand local customs
and attitudes for marketing expertise. Many people doing
business in new culture avail themselves of training
opportunities to help avoid potential cross culture
complications. Culture is part of the external influences
that impact the consumer. That is, culture represents
influences that are imposed on the consumer by other
individuals.
Knowledge and beliefs are important parts. In the U.S.,
we know and believe that a person who is skilled and
works hard will get ahead. In other countries, it may be
believed that differences in outcome result more from
luck. “Chunking,” the name for China in Chinese, literally
means “The Middle Kingdom.” The belief among ancient
Chinese is that they were in the center of the universe
that greatly influenced their thinking. Art, for example,
may be reflected in the rather arbitrary practice of
wearing ties in some countries and wearing turbans in
others. Morality may be exhibited in the view in the
United States that one should not be naked in public. In
Japan, on the other hand, groups of men and women may
take steam bath together without noticeable as indecent.
On the other extreme, women in some Arab countries are
not even allowed to reveal their faces. Notice, by the
way, that what at least some countries view as moral
may in fact be highly immoral by the standards of
another country.
Culture has several important characteristics which
can be scrutinized as:
(1) Culture is comprehensive. This means that all parts
must fit together in some logical fashion. For example,
bowing and a strong desire to avoid the loss of face are
unified in their manifestation of the importance of
respect.
(2) Culture is learned rather than being something we
are born with. We will consider the mechanics of learning
later in the course.
(3) Culture is manifested within boundaries of acceptable
behavior. For example, in American society, one cannot
show up to class naked, but wearing anything from a suit
and tie to shorts and a T-shirt would usually be
acceptable. Failure to behave within the prescribed
norms may lead to sanctions, ranging from being hauled
off by the police for indecent exposure to being laughed
at by others for wearing a suit at the beach.
(4) Conscious awareness of cultural standards is limited.
One American spy was intercepted by the Germans
during World War II simply because of the way he held his
knife and fork while eating.
(5) Cultures fall somewhere on a continuum between
static and dynamic depending on how quickly they accept
change. For example, American culture has changed a
great deal since the 1950s, while the culture of Saudi
Arabia has changed much less.
Dealings with culture: Culture is a problematic issue
for many marketers since it is inherently nebulous and
often difficult to understand. One may violate the
cultural norms of another country without being informed
of this, and people from different cultures may feel
uncomfortable in each other’s presence without knowing
exactly why (for example, two speakers may
unconsciously continue to attempt to adjust to reach an
incompatible preferred interpersonal distance).
Language issues: Language is an important element of
culture. It should be realized that regional differences
may be subtle. For example, one word may mean one
thing in one Latin American country, but something off-
color in another. It should also be kept in mind that much
information is carried in non-verbal communication. In
some cultures, we nod to signify “yes” and shake our
heads to signify “no;” in other cultures, the practice is
reversed. Within the context of language:
There often exist large variations in regional dialects of a
given language. As, the language differences between
U.S., Australian, and British English are actually modest
compared to differences between dialects of Spanish and
German.
Idioms involve “figures of speech” that may not be used,
literally translated, in other languages. For example,
baseball is predominantly a North and South American
sport, so the notion of “in the ball park” makes sense
here, but the term does not carry the same meaning in
cultures where the sport is less popular.
Neologism involve terms that have come into language
relatively recently as technology or society involved.
With proliferation in computer technology. For example,
the idea of an “add-on” becomes widely known. It may
take longer for such terms to “diffuse” into other regions
of the world. In parts of the World where English is
heavily studied in schools, the emphasis is often on
grammar and traditional language rather than on current
terminology, so neologisms have a wide potential not to
be understood.
Slang exists within most languages. Regional variations
are common and not all people in a region where slang is
used will necessarily understand this. There are often
significant generation gaps in the use of slang.
Legal and regulatory environment of
international marketing:
The legal and political environment of international
market is the set of government institutions, political
parties and organizations that are the expression of the
people in the nations of the world the political
environment varies from country and risk assessment is
crucial. It is important to understand a particular
government’s action with respect to taxes dilution of
equity control and expropriation. The legal environment
consists of laws, courts, attorneys and legal customers
and practices. The countries of the world can be broadly
categorized in terms of common law system that is civil
lay system. When legal conflicts arise companies can
pursue the matter in court or use artitration.some of the
most important legal issues pertain to establishment,
jurisdiction, patents and trademarks, licensing, antitrust
and bribery.
 The regulatory environment consists of agencies both
governmental and non-governmental that enforce laws or
set guidelines for conducting business.internatinal
marketing activities can be affected by a number of
international or regional economic organizations. The
WTO will have impact on international marketing
activities in the year to come. Although these two
environments are complex, astute marketers plan ahead
to avoid situations that might result in conflict,
misunderstanding or outright violation of national laws.
Global drivers of International Marketing:
International marketing is growing in importance for
reasons. The world is getting smaller, not only because of
jet travel but also because of advance technology. The
internet now connects customers to business around the
world. The strongest driver of international marketing is
opening of new markets around the world. As trade
barriers have been dropping, personal income has been
increasingly worldwide.
Role of market research and opportunity
analysis:
Market research can be defined as the systematic
gathering, recording analysis and interpretation of data
on problems relating to the marketing of goods and
services. The role of market research is primary to act as
an aid to the decision maker. It a tool that can help to
reduce the risk of decision making caused by the
environmental uncertainties and lack of knowledge in
international marketing. In international marketing
because of the increased uncertainties and complexities
in the world markets, capacity to ensure systematic
planned process in the research and the use of secondary
information .the research process of six stages .these
steps are logical process of any research.
Defining the problem: It is important to decide what
information is needed and set the objectives of the
research, ensuring it is both commercially and worthwhile
and that the objective is feasible and achievable.
Developing the approach to be taken: the planning phase
will concern itself with timescales, resources to carry out
the work, the expertise required to meet the objective
and the decision as to whether a qualitive or quantitive
approach is to be taken.
Designing the research: In the designing the research
strategy considerations will be given to the different
action steps that need to be taken. Ensuring full use of
secondary data sources will be important, as well the use
of a pilot study to ensure the development of an effective
and meaningful questionnaire. Carrying the out of field
work: Decisions as to how the questionnaire will be
administrated will be made as well as decisions as to who
do the work and what resources are required. Analyzing
the data: The data analyzed stage will need to take full
account of the objectives of the research and the clients
and needs. Preparing the report and the presentation:
These are the outputs of research work and vital in
establishing the credibility of the research methods used
and the validity of the findings of the research.

International marketing information system

and research:
Information is one of the most basic ingredients
for successful marketing strategy. The international
marketer must scan the world for information about
opportunities and threats and make information available
via a management information system. Formal research
is often required before decisions can be made regarding
specific problems or opportunities, after developing a
research plan, data are collected using either primary or
secondary sources, a number of techniques are available
for analyzing data, including demand pattern analysis and
cluster analysis. Research findings must be presented
clearly to facilitate decisions makings. International
markets research presents a number of challenges. The
simple fact research expenditures can bemade.secondary
data from some countries may be distorted also
comparability may be an issue. Final issue is how much
control headquarters will have over research and the
overall management of the organization’s information
system. Information is a critical element in the success or
failure of an organization. Every organization needs a
marketing information system for the collection,
processing, storage, and distribution of data. A marketing
information system provides information on every aspect
of marketing and helps an organization come up with
effective strategies. Utmost care should be taken while
developing a marketing informationsystem.
 The marketing information system of an
organization collects the required information in two
stages. In the first stage, a list of subjects for which
information is required is framed. In the second stage,
data is searched for the specified requirements which are
known as ‘scanning.’ Scanning is done in two ways:
Surveillance and search modes. Marketing information
research provides data related to markets, customers,
products, price, distribution, and promotion.The research
related to markets is known as market research. Market
research deals with market potential, market entry or exit
decisions, market segmentation, market performance,
market shares, sales analysis, and forecasting.
Information requirements of firms vary. Firms that are
entering into international markets for the first time need
different kinds of information from the ones that are
already in the market. Therefore, the information
requirements of Organizations differ. A marketing
information system needs to collect data for different
purposes and needs to provide information at different
levels. Therefore, it should understand the type of
decisions made at a particular level and the kind of
analysis made at that level to provide the information in
the required form. After determining the information a
number of appropriate units of analysis should be
determined. Units refer to the characteristics of an
individual or object that has to be measured. The units
of market research may be divided into three categories
such as, region or country grouping – grouping of the
countries based on certain common factors; Country –
studying the various socioeconomic, cultural, political
aspects of the country; Sub-groups within the countries –
the various sub-groups within the country should be
studied in order to understand the diversions in the
markets within the countries. After studying the unit of
analysis, a researcher should identify the information
sources.
The information sources can be broadly divided into
primary and secondary sources. The primary source may
be explained as field research. This is very costly and
time consuming. Here, data is collected for the first time.
Primary data is collected through interviews and
questionnaires. To obtain primary data, the researcher
has to decide upon the sample – a part of population or a
subset from a set of units, and decide upon the tool –
questionnaires, interviews and surveys etc.
Questionnaires and surveys are the most popular tools
available. Secondary data is the data that is already
collected and published. These are relatively cheap and
easily available. Secondary data is obtained from various
sources like government reports, international
organizations, and private market research firms.
One more way of classifying data is internal or
external. Internal data is the data within the organization
and external data is the data obtained from external
parties. An international researcher should decide on the
source first. A company has to collect economic,
industrial, political, financial, legal, marketing, and
specific product data before entering into a country. The
problems of international market research are multifold.
The data obtained from each country will be different.
Obtaining reliable secondary data is extremely difficult,
especially in less developed economies. Similarly,
obtaining primary data is also difficult as the researcher
may face problems related to infrastructure, time, and
non-response.
International marketing segmentations:
 The process of dividing the world market into distinct
of customers that behave in the same way or have similar
needs, each subset may conceivably be chosen as market
target to be researched with a distinctive marketing
strategy, the process begins with a basis of segmentation
a product specific factor that reflects differences in
customers’ requirements or responsiveness to marketing
variables. There are different segments they are:
• Geographic segmentations
• Demographic segmentation
• Psychographic segmentation
• Behavior segmentation
• Benefit segmentation
 • Vertical versus horizontal segmentation
Geographic segmentation: Geographic
segmentation is dividing the world into geographic
subsets. The advantage of geography is proximity.
Markets in geographic are closer to each other and easier
to visit on the same trip to cal on during the same time
window. Geographic segmentation also major limitations
are the mere fact that markets are in the same world
geographic region does not mean that they are similar.
The differences in the market in these two countries
overwhelm their similarities.
Demographic segmentation:
Demographic segmentation is based on
measurable characteristics of population such as age,
gender, income, education and occupation. A number of
demographic trends aging, population, fewer children
more women working outside the home and higher
income and living standards for most consumer and
industrial products, national income is single most
important segmentation variable and indicator of market
potential. Annual per capita income varies widely in world
markets from low of $81 in the cargo to a high of $38,587
in Luxembourg. The World Bank segments countries into
high income, upper middle income, lower middle income
and low income. These categories are used in global
income and population.
Psychographic segmentation:
Psychographic segmentation involves grouping people
in terms of their attitude, values and life style. Data are
obtained from questionnaires that require respondents to
indicate the extent to which they agree or disagree with a
series of statement.Approriate criteria are usually of an
inferred nature and concerns consumers interest.
Psychographic segmentation is done on the basis of
attitudes, beliefs, values, lifestyles, opinions, personalities
etc. The general behavioral aspects of the customers
become the bases in behavioral segmentation. After
segmenting the markets, one or more segments are
chosen for trade to be carried out. The process of
choosing the most potential market segments is known
as targeting. The current size and growth rate of the
market, potential competition, and compatibility and
feasibility are the three basic criteria for targeting the
markets. After targeting the market, companies should
select a global market strategy.
Behavior segmentation:
It focuses on whether people buy and use a product as
well as how often and how much they use it. Consumers
can be categorized in terms of usage rates like heavy,
medium, light and nonuser. Consumer can also be
segmented according to user status like potential users,
nonusers, ex-users, first users and users of competitors
products.Finaancial institutions have to consider many
different pieces of information regarding consumer
behavior toward saving and spending money.
Benefit segmentation:
It focuses on the number of value equation that
is
V=B/P
Where this approach can be achieve excellent results
by virtue of markets superior understanding of the
problem a product solves or benefit it offers, regardless of
geographic.

Vertical versus horizontal segmentation:

Vertical segmentation is based on product category
or modality and price points. For example in medical
imaging there is X-ray, computed axial tomography scan,
magnetic resonance imaging and so on. Each modality
has its own price points. These price points were the
traditional way of segmenting the medical imaging
market. Horizontal approach worked as well in markets
outside the home country launch market as it did in the
home country.
Targeting:
Targeting is the cat of evaluating and comparing the
identified groups and then selecting one or more of them
as the prospects with the highest potential. A marketing
mix is then advised that will provide the organization with
the best return on sales while simultaneously creating the
maximum amount of consumers.
The advantages of target marketing are: Marketing
opportunities and unfilled ‘gaps’ in a market may be more
accurately appraised and identified. Such gaps can be
real (e.g. sweet, strong, harsh or mild) or they can be
illusionary in terms of the way people want to view the
product (e.g. happy, aloof, silly or moody). In the case of
the former, product attributes can fulfil these criteria
whereas for the latter these attributes might well have to
be implanted in the minds of customers through an
appropriate advertising message. Market and product
appeals through manipulation of the marketing mix can
be more delicately tuned to the needs of the potential
customer. Marketing effort can be concentrated on the
market segment(s) which offer the greatest potential for
the company to achieve its goals - be they goals to
maximise profit potential or to secure the best long-term
position for the product or any other appropriate goal.
Custom marketing which attempts to satisfy each
individual customer’s requirements with a separate
marketing mix. Socially Responsible Targeting are Smart
targeting helps both companies and consumers. Target
marketing sometimes generates controversy and
concern. Vulnerable and disadvantaged can be targeted.
Cereal, cigarette, beer, and fast-food marketers have
received criticism. Internet has raised fresh concerns
about potential targeting abuses.Target market stragies:
• Undifferentiated (mass) marketing: Market
coverage strategy that ignores market segment
differences and targets the whole market with one
offer
 • Differentiated (segmented) marketing: Market
coverage strategy that targets several market
segments and designs separate offers for each
• Concentrated(niche) marketing: Market coverage
strategy in which a company pursues a large share of
one or a few submarkets
• Micromarketing: The practice of tailoring products
and marketing programs to the needs/wants of
specific individuals and local customer groups.

Choosing a Targeting Strategy factors to consider:

• Company resources
• Product variability
• Product’s life-cycle stage
• Market variability
• Competitors’ marketing strategies.
Positioning:
Positioning is the location of your product in the mind
of your customer thus; one of the most powerful tools of
marketing is not something that a marketer can do to the
product or to any element of the marketing mix:
positioning is what happens in the mind of the customer.
The position that a product occupies in that mind of a
customer depends on a host of variables many of which
are controlled by the marketer.
It has been segmented and one or more segments have
been targted,it is essential to plan a way to reach the
targets. To achieve this task marketer use positiong.Many
companies find it increasingly important to have a unified
international positing strategy.
• High tech positioning
• High touch positioning
High tech positioning: High-tech products may be
further divided into three categories such as technical
products, special interest products, and demonstration
products.
High touch positioning: High-touch products are also
divided into three categories -- products that solve
common problem, global village products, and products
that use a universal theme.
Entry Strategies:
Methods of entry: With rare exceptions, products just
don’t emerge in foreign markets overnight—a firm has to
build up a market over time. Several strategies, which
differ in aggressiveness, risk, and the amount of control
that the firm is able to maintain, are available:
• Exporting is a relatively low risk strategy in which
few investments are made in the new country. A
drawback is that, because the firm makes few if any
marketing investments in the new country, market
share may be below potential. Further, the firm, by
not operating in the country, learns less about the
market (What do consumers really want? Which kinds
of advertising campaigns are most successful? What
are the most effective methods of distribution?) If an
importer is willing to do a good job of marketing, this
arrangement may represent a "win-win" situation,
but it may be more difficult for the firm to enter on
its own later if it decides that larger profits can be
made within the country.
• Licensing and franchising are also low exposure
methods of entry—you allow someone else to use
your trademarks and accumulated expertise. Your
partner puts up the money and assumes the risk.
 Problems here involve the fact that you are training a
potential competitor and that you have little control
over how the business is operated. For example,
American fast food restaurants have found that
foreign franchisers often fail to maintain American
standards of cleanliness. Similarly, a foreign
manufacturer may use lower quality ingredients in
manufacturing a brand based on premium contents
in the home country.
• Contract manufacturing involves having someone
else manufacture products while you take on some of
the marketing efforts yourself. This saves
investment, but again you may be training a
competitor.
• Direct entry strategies, where the firm either
acquires a firm or builds operations "from scratch"
involve the highest exposure, but also the greatest
opportunities for profits. The firm gains more
knowledge about the local market and maintains
greater control, but now has a huge investment. In
some countries, the government may expropriate
assets without compensation, so direct investment
entails an additional risk. A variation involves a joint
 venture, where a local firm puts up some of the
money and knowledge about the local market.
Product Issues in International Marketing:
Products and Services: Some marketing scholars and
professionals tend to draw a strong distinction between
conventional products and services, emphasizing service
characteristics such as heterogeneity (variation in
standards among providers, frequently even among
different locations of the same firm), inseperability from
consumption, intangibility, and, in some cases,
perishability—the idea that a service cannot generally be
created during times of slack and be “stored” for use
later. However, almost all products have at least some
service component—e.g., a warranty, documentation, and
distribution—and this service component is an integral
part of the product and its positioning. Thus, it may be
more useful to look at the product-service continuum as
one between very low and very high levels of tangibility
of the service. Income tax preparation, for example, is
almost entirely intangible—the client may receive a few
printouts, but most of the value is in the service. On the
other hand, a customer who picks up rocks for
construction from a landowner gets a tangible product
with very little value added for service. Firms that offer
highly tangible products often seek to add an intangible
component to improve perception. Conversely, adding a
tangible element to a service—e.g., a binder with
information—may address many consumers’
psychological need to get something to show for their
money.
On the topic of services, cultural issues may be even
more prominent than they are for tangible goods. There
are large variations in willingness to pay for quality, and
often very large differences in expectations. In some
countries, it may be more difficult to entice employees to
embrace a firm’s customer service philosophy. Labor
regulations in some countries make it difficult to
terminate employees whose treatment of customers is
substandard. Speed of service is typically important in
the U.S. and western countries but personal interaction
may seem more important in other countries.
Product Need Satisfaction: We often take for granted
the “obvious” need that products seem to fill in our own
culture; however, functions served may be very different
in others—for example, while cars have a large
transportation role in the U.S., they are impractical to
drive in Japan, and thus cars there serve more of a role of
being a status symbol or providing for individual
indulgence. In the U.S., fast food and instant drinks such
as Tang are intended for convenience; elsewhere, they
may represent more of a treat. Thus, it is important to
examine through marketing research consumers’ true
motives, desires, and expectations in buying a product.
Approaches to Product Introduction: Firms face a
choice of alternatives in marketing their products across
markets. An extreme strategy involves customization,
whereby the firm introduces a unique product in each
country, usually with the belief tastes differ so much
between countries that it is necessary more or less to
start from “scratch” in creating a product for each
market. On the other extreme, standardization involves
making one global product in the belief the same product
can be sold across markets without significant
modification—e.g., Intel microprocessors are the same
regardless of the country in which they are sold. Finally,
in most cases firms will resort to some kind of adaptation,
whereby a common product is modified to some extent
when moved between some markets—e.g., in the United
States, where fuel is relatively less expensive, many cars
have larger engines than their comparable models in
Europe and Asia; however, much of the design is similar
or identical, so some economies are achieved. Similarly,
while Kentucky Fried Chicken serves much the same
chicken with the eleven herbs and spices in Japan, a
lesser amount of sugar is used in the potato salad, and
fries are substituted for mashed potatoes.
There are certain benefits to standardization. Firms that
produce a global product can obtain economies of scale
in manufacturing, and higher quantities produced also
lead to a faster advancement along the experience
curve. Further, it is more feasible to establish a global
brand as less confusion will occur when consumers travel
across countries and see the same product. On the down
side, there may be significant differences in desires
between cultures and physical environments—e.g.,
software sold in the U.S. and Europe will often utter a
“beep” to alert the user when a mistake has been made;
however, in Asia, where office workers are often seated
closely together, this could cause embarrassment.
Adaptations come in several forms. Mandatory
adaptations involve changes that have to be made before
the product can be used—e.g., appliances made for the
U.S. and Europe must run on different voltages, and a
major problem was experienced in the European Union
when hoses for restaurant frying machines could not
simultaneously meet the legal requirements of different
countries. “Discretionary” changes are changes that do
not have to be made before a product can be introduced
(e.g., there is nothing to prevent an American firm from
introducing an overly sweet soft drink into the Japanese
market), although products may face poor sales if such
changes are not made. Discretionary changes may also
involve cultural adaptations—e.g., in Sesame Street, the
Big Bird became the Big Camel in Saudi Arabia.
Another distinction involves physical product vs.
communication adaptations. In order for gasoline to be
effective in high altitude regions, its octane must be
higher, but it can be promoted much the same way. On
the other hand, while the same bicycle might be sold in
China and the U.S., it might be positioned as a serious
means of transportation in the former and as a
recreational tool in the latter. In some cases, products
may not need to be adapted in either way (e.g., industrial
equipment), while in other cases, it might have to be
adapted in both (e.g., greeting cards, where the both
occasions, language, and motivations for sending differ).
Finally, a market may exist abroad for a product which
has no analogue at home—e.g., hand-powered washing
machines.
Branding: While Americans seem to be comfortable with
category specific brands, this is not the case for Asian
consumers. American firms observed that their products
would be closely examined by Japanese consumers who
could not find a major brand name on the packages,
which was required as a sign of quality. Note that
Japanese keiretsus span and use their brand name across
multiple industries—e.g., Mitsubishi, among other things,
sells food, automobiles, electronics, and heavy
construction equipment.

The International Product Life Cycle (PLC):

Consumers in different countries differ in the speed
with which they adopt new products, in part for economic
reasons (fewer Malaysian than American consumers can
afford to buy VCRs) and in part because of attitudes
toward new products (pharmaceuticals upset the power
afforded to traditional faith healers, for example). Thus,
it may be possible, when one market has been saturated,
to continue growth in another market—e.g., while
somewhere between one third and one half of American
homes now contain a computer, the corresponding
figures for even Europe and Japan are much lower and
thus, many computer manufacturers see greater growth
potential there. Note that expensive capital equipment
may also cycle between countries—e.g., airlines in
economically developed countries will often buy the
newest and most desired aircraft and sell off older ones to
their counterparts in developing countries. While in
developed countries, “three part” canning machines that
solder on the bottom with lead are unacceptable for
health reasons, they have found a market in developing
countries.
Diffusion of innovation: Good new innovations often
do not spread as quickly as one might expect—e.g.,
although the technology for microwave ovens has existed
since the 1950s, they really did not take off in the United
States until the late seventies or early eighties, and their
penetration is much lower in most other countries. The
typewriter, telephone answering machines, and cellular
phones also existed for a long time before they were
widely adopted.
Certain characteristics of products make them more or
less likely to spread. One factor is relative advantage.
While a computer offers a huge advantage over a
typewriter, for example, the added gain from having an
electric typewriter over a manual one was much smaller.
Another issue is compatibility, both in the social and
physical sense. A major problem with the personal
computer was that it could not read the manual files that
firms had maintained, and birth control programs are
resisted in many countries due to conflicts with religious
values. Complexity refers to how difficult a new product
is to use—e.g., some people have resisted getting
computers because learning to use them takes time.
Trial ability refers to the extent to which one can examine
the merits of a new product without having to commit a
huge financial or personal investment—e.g., it is
relatively easy to try a restaurant with a new ethnic
cuisine, but investing in a global positioning navigation
system is riskier since this has to be bought and installed
in one’s car before the consumer can determine whether
it is worthwhile in practice. Finally, observability refers to
the extent to which consumers can readily see others
using the product—e.g., people who do not have ATM
cards or cellular phones can easily see the convenience
that other people experience using them; on the other
hand, VCRs are mostly used in people’s homes, and thus
only an owner’s close friends would be likely to see it.
At the societal level, several factors influence the spread
of an innovation. Not surprisingly, cosmopolitanism, the
extent to which a country is connected to other cultures,
is useful. Innovations are more likely to spread where
there is a higher percentage of women in the work force;
these women both have more economic power and are
able to see other people use the products and/or discuss
them. Modernity refers to the extent to which a culture
values “progress.” In the U.S., “new and improved” is
considered highly attractive; in more traditional countries,
their potential for disruption cause new products to be
seen with more skepticism. Although U.S. consumers
appear to adopt new products more quickly than those of
other countries, we actually score lower on homophile,
the extent to which consumers are relatively similar to
each other, and physical distance, where consumers who
are more spread out are less likely to interact with other
users of the product. Japan, which ranks second only to
the U.S., on the other hand, scores very well on these
latter two factors.
International Promotion:
Promotional tools. Numerous tools can be used to
influence consumer purchases:
• Advertising—in or on newspapers, radio, television,
billboards, busses, taxis, or the Internet.
• Price promotions—products are being made available
temporarily as at a lower price, or some premium
(e.g., toothbrush with a package of toothpaste) is
being offered for free.
• Sponsorships
• Point-of-purchase—the manufacturer pays for extra
display space in the store or puts a coupon right by
the product
• Other method of getting the consumer’s attention—
all the Gap stores in France may benefit from the
prominence of the new store located on the Champs-
Elysees
Promotional objectives: Promotional objectives
involve the question of what the firm hopes to achieve
with a campaign—“increasing profits” is too vague an
objective, since this has to be achieved through some
intermediate outcome (such as increasing market share,
which in turn is achieved by some change in consumers
which cause them to buy more). Some common
objectives that firms may hold:
• Awareness, any French consumers do not know that
the Gap even exists, so they cannot decide to go
shopping there. This objective is often achieved
through advertising, but could also be achieved
through favorable point-of-purchase displays. Note
that since advertising and promotional stimuli are
 often afforded very little attention by consumers,
potential buyers may have to be exposed to the
promotional stimulus numerous times before it
“registers.”
• Trial. Even when consumers know that a product
exists and could possibly satisfy some of their
desires, it may take a while before they get around to
trying the product—especially when there are so
many other products that compete for their attention
and wallets. Thus, the next step is often to try get
consumer to try the product at least once, with the
hope that they will make repeat purchases. Coupons
are often an effective way of achieving trial, but
these are illegal in some countries and in some
others, the infrastructure to readily accept coupons
(e.g., clearing houses) does not exist. Continued
advertising and point-of-purchase displays may be
effective. Although Coca Cola is widely known in
China, a large part of the population has not yet tried
the product.
• Attitude toward the product. A high percentage of
people in the U.S. and Europe has tried Coca Cola, so
a more reasonable objective is to get people to
 believe positive things about the product—e.g., that
it has a superior taste and is better than generics or
store brands. This is often achieved through
advertising.
• Temporary sales increases. For mature products and
categories, attitudes may be fairly well established
and not subject to cost-effective change. Thus, it
may be more useful to work on getting temporary
increases in sales (which are likely to go away the
incentives are removed). In the U.S. and Japan, for
example, fast food restaurants may run temporary
price promotions to get people to eat out more or
switch from competitors, but when these promotions
end, sales are likely to move back down again (in
developing countries, in contrast, trial may be a more
appropriate objective in this category).
Note that in new or emerging markets, the first objectives
are more likely to be useful while, for established
products, the latter objectives may be more useful in
mature markets such as Japan, the U.S., and Western
Europe.
Pricing Issues in International Marketing:
This implies that there are several ways that the price can
be changed:
• "Sticker" price changes—the most obvious way to
change the price is the price tag— you get the same
thing, but for a different (usually larger) amount of
money.
• Change quantity. Often, consumers respond
unfavorably to an increased sticker price, and
changes in quantity are sometimes noticed less—
e.g., in the 1970s, the wholesale cost of chocolate
increased dramatically, and candy manufacturers
 responded by making smaller candy bars. Note that,
for cash flow reasons, consumers in less affluent
countries may need to buy smaller packages at any
one time (e.g., forking out the money for a large tube
of toothpaste is no big deal for most American
families, but it introduces a greater strain on the
budget of a family closer to the subsistence level).
• Change quality. Another way candy manufacturers
have effectively increased prices is through a
reduction in quality. In a candy bar, the "gooey" stuff
is much cheaper than chocolate. It is frequently
tempting for foreign licensees of a major brand name
to use inferior ingredients.
• Change terms. In the old days, most software
manufacturers provided free support for their
programs—it used to be possible to call the
WordPerfect Corporation on an 800 number to get
free help. Nowadays, you either have to call a 900
number or have a credit card handy to get help from
many software makers. Another way to change terms
is to do away with favorable financing terms.
Reference Prices, Consumers often develop internal
reference prices, or expectations about what something
should cost, based mostly on their experience. Most
drivers with long commutes develop a good feeling of
what gasoline should cost, and can tell a bargain or a rip-
off.
Reference prices are more likely to be more precise for
frequently purchased and highly visible products.
Therefore, retailers very often promote soft drinks, since
consumers tend to have a good idea of prices and these
products are quite visible. The trick, then, is to be more
expensive on products where price expectations are
muddier.
Marketers often try to influence people's price
perceptions through the use of external reference prices
—indicators given to the consumer as to how much
something should cost. Examples include:
• Manufacturer's Suggested Retail Price (MSRP). This is
often pure fiction. The suggested retail prices in
certain categories are deliberately set so high that
even full service retailers can sell at a "discount."
Thus, although the consumer may contrast the
offering price against the MSRP, this latter figure is
quite misleading.
 • "SALE! Now $2.99; Regular Price $5.00." For this
strategy to be used legally in most countries, the
claim must be true (consistency of enforcement in
some countries is, of course, another matter).
However, certain products are put on sale so
frequently that the "regular" price is meaningless. In
the early 1990s, Sears was reported to sell some
55% of its merchandise on sale.
• "WAS $10.00, now $6.99."
• "Sold elsewhere for $150.00; our price: $99.99."
Reference prices have significant international
implications. While marketers may choose to introduce a
product at a low price in order to induce trial, which is
useful in a new market where the penetration of a
product is low, this may have serious repercussions as
consumers may develop a low reference price and may
thus resist paying higher prices in the future.Selected
International Pricing Issues. In some cultures, particularly
where retail stores are smaller and the buyer has the
opportunity to interact with the owner, bargaining may be
more common, and it may thus be more difficult for the
manufacturer to influence retail level pricing.Two
phenomena may occur when products are sold in
disparate markets. When a product is exported, price
escalation, whereby the product dramatically increases in
price in the export market, is likely to take place. This
usually occurs because a longer distribution chain is
necessary and because smaller quantities sold through
this route will usually not allow for economies of scale.
"Gray" markets occur when products are diverted from
one market in which they are cheaper to another one
where prices are higher—e.g., Luis Vuitton bags were
significantly more expensive in Japan than in France,
since the profit maximizing price in Japan was higher and
thus bags would be bought in France and shipped to
Japan for resale. The manufacturer therefore imposed
quantity limits on buyers. Since these quantity limits were
circumvented by enterprising exchange students who
were recruited to buy their quota on a daily basis, prices
eventually had to be lowered in Japan to make the
practice of diversion unattractive. Where the local
government imposes price controls, a firm may find the
market profitable to enter nevertheless since revenues
from the new market only have to cover marginal costs.
However, products may then be attractive to divert to
countries without such controls.
Transfer pricing involves what one subsidiary will charge
another for products or components supplied for use in
another country. Firms will often try to charge high prices
to subsidiaries in countries with high taxes so that the
income earned there will be minimized.

Antitrust laws are relevant in pricing decisions, and anti-

dumping regulations are especially noteworthy. In
general, it is illegal to sell a product below your cost of
production, which may make a penetration pricing entry
strategy infeasible. Japan has actively lobbied the World
Trade Organization (WTO) to relax its regulations, which
generally require firms to price no lower than their
average fully absorbed cost (which incorporates both
variable and fixed costs).
Alternatives to "hard" currency deals. Buyers in some
countries do not have ready access to convertible
currency, and governments will often try limit firms’
ability to spend money abroad. Thus, some firms have
been forced into non-cash deals. In barter, the seller
takes payment in some product produced in the buying
country—e.g., Lockheed (back when it was an
independent firm) took Spanish wine in return for aircraft,
and sellers to Eastern Europe have taken their payment in
ham. An offset contract is somewhat more flexible in that
the buyer can get paid but instead has to buy, or cause
others to buy, products for a certain value within a
specified period of time.

Psychological issues: Most pricing research has been

done on North Americans, and this raises serious
problems of generalizability. Americans are used to sales,
for example, while consumers in countries where goods
are more scarce may attribute a sale to low quality rather
than a desire to gain market share. There is some
evidence that perceived price quality relationships are
quite high in Britain and Japan (thus, discount stores have
had difficulty there), while in developing countries, there
is less trust in the market. Cultural differences may
influence the extent of effort put into evaluating deals
(potentially impacting the effectiveness of odd-even
pricing and promotion signaling). The fact that consumers
in some economies are usually paid weekly, as opposed
to biweekly or monthly, may influence the effectiveness
of framing attempts—"a dollar a day" is a much bigger
chunk from a weekly than a monthly paycheck.
International Distribution:
Promotional tools, numerous tools can be used to
influence consumer purchases:
• Advertising—in or on newspapers, radio, television,
billboards, busses, taxis, or the Internet.
• Price promotions—products are being made available
temporarily as at a lower price, or some premium
(e.g., toothbrush with a package of toothpaste) is
being offered for free.
• Sponsorships
 • Point-of-purchase—the manufacturer pays for extra
display space in the store or puts a coupon right by
the product
• Other method of getting the consumer’s attention—
all the Gap stores in France may benefit from the
prominence of the new store located on the Champs-
Elysees.
Promotional objectives, promotional objectives
involve the question of what the firm hopes to achieve
with a campaign—“increasing profits” is too vague an
objective, since this has to be achieved through some
intermediate outcome (such as increasing market share,
which in turn is achieved by some change in consumers
which cause them to buy more). Some common
objectives that firms may hold:
• Awareness. Many French consumers do not know
that the Gap even exists, so they cannot decide to go
shopping there. This objective is often achieved
through advertising, but could also be achieved
through favorable point-of-purchase displays. Note
that since advertising and promotional stimuli are
often afforded very little attention by consumers,
potential buyers may have to be exposed to the
 promotional stimulus numerous times before it
“registers.”
• Trial. Even when consumers know that a product
exists and could possibly satisfy some of their
desires, it may take a while before they get around to
trying the product—especially when there are so
many other products that compete for their attention
and wallets. Thus, the next step is often to try get
consumer to try the product at least once, with the
hope that they will make repeat purchases. Coupons
are often an effective way of achieving trial, but
these are illegal in some countries and in some
others, the infrastructure to readily accept coupons
(e.g., clearing houses) does not exist. Continued
advertising and point-of-purchase displays may be
effective. Although Coca Cola is widely known in
China, a large part of the population has not yet tried
the product.
• Attitude toward the product. A high percentage of
people in the U.S. and Europe has tried Coca Cola, so
a more reasonable objective is to get people to
believe positive things about the product—e.g., that
it has a superior taste and is better than generics or
 store brands. This is often achieved through
advertising.
• Temporary sales increases for mature products and
categories, attitudes may be fairly well established
and not subject to cost-effective change. Thus, it
may be more useful to work on getting temporary
increases in sales. In the U.S. and Japan, for
example, fast food restaurants may run temporary
price promotions to get people to eat out more or
switch from competitors, but when these promotions
end, sales are likely to move back down again .

Chapter 2:
Mc Donald’s:
The McDonald's concept was introduced in Southern
California by Dick and Mac McDonald of Manchester, New
Hampshire. It was modified and expanded by their
business partner, Ray Kroc, of Oak Park, Illinois, who later
bought out the business interests of the McDonald's
brothers in the concept and went on to found McDonald's
Corporation. The business began in 1940, Their
introduction of the "Speedee Service System" in 1948
established the principles of the modern fast-food
restaurant. The original mascot of McDonald's was a man
with a chef's hat on top of a hamburger shaped head
whose name was "Speedee." Speedee was eventually
replaced with Ronald McDonald in 1963. Believing that
the McDonald formula was a ticket to success, Kroc
suggested that they franchise their restaurants
throughout the country. When they hesitated to take on
this additional burden, Kroc volunteered to do it for them.
He returned to his home outside of Chicago with rights to
set up McDonald's restaurants throughout the country,
except in a handful of territories in California and Arizona
already licensed by the McDonald brothers. Kroc's first
McDonald's restaurant opened in Des Plaines, Illinois,
near Chicago, on April 15, 1955--the same year that Kroc
incorporated his company as McDonald's Corporation. As
with any new venture, Kroc encountered a number of
hurdles. The first was adapting the McDonald's building
design to a northern climate. A basement had to be
installed to house a furnace, and adequate ventilation
was difficult, as exhaust fans sucked out warm air in the
winter and cool air in the summer.
Most frustrating of all, however, was Kroc's initial failure
to reproduce the McDonalds' delicious french fries. When
Kroc and his crew duplicated the brothers' method--
leaving just a little peel for flavor, cutting the potatoes
into shoestrings, and rinsing the strips in cold water--the
fries turned into mush. After repeated telephone
conversations with the McDonald brothers and several
consultations with the Potato and Onion Association, Kroc
pinpointed the cause of the soggy spuds. The McDonald
brothers stored their potatoes outside in wire bins, and
the warm California breeze dried them out and cured
them, slowly turning the sugars into starch. In order to
reproduce the superior taste of these potatoes, Kroc
devised a system using an electric fan to dry the potatoes
in a similar way. He also experimented with a blanching
process. Within three months he had a french fry that
was, in his opinion, slightly superior in taste to the
McDonald brothers' fries. Once the Des Plaines restaurant
was operational, Kroc sought franchisees for his
McDonald's chain. The first snag came quickly. In 1956 he
discovered that the McDonald brothers had licensed the
franchise rights for Cook County, Illinois (home of Chicago
and many of its suburbs) to the Frejlack Ice Cream
Company. Kroc was incensed that the McDonalds had not
informed him of this arrangement. He purchased the
rights back for $25,000--five times what the Frejlacks had
originally paid--and pressed forward.
Kroc decided early on that it was best to first establish
the restaurants and then to franchise them out, so that
he could control the uniformity of the stores. Early
McDonald's restaurants were situated in the suburbs.
Corner lots were usually in greater demand because gas
stations and shops competed for them, but Kroc preferred
lots in the middle of blocks to accommodate his U-shaped
parking lots. Since these lots were cheaper, Kroc could
give franchisees a price break.
McDonald's grew slowly for its first three years; by 1958
there were 34 restaurants. In 1959, however, Kroc
opened 67 new restaurants, bringing the total to more
than 100.
Kroc had decided at the outset that McDonald's would not
be a supplier to its franchisees--his background in sales
warned him that such an arrangement could lead to lower
quality for the sake of higher profits. He also had
determined that the company should at no time own
more than 30 percent of all McDonald's restaurants. He
knew, however, that his success depended upon his
franchisees' success, and he was determined to help
them in any way that he could.
In 1960 the McDonald's advertising campaign "Look for
the Golden Arches" gave sales a big boost. Kroc believed
that advertising was an investment that would in the end
come back many times over, and advertising has always
played a key role in the development of the McDonald's
Corporation--indeed, McDonald's ads have been some of
the most identifiable over the years. In 1962 McDonald's
replaced its "Speedee" the hamburger man symbol with
its now world-famous Golden Arches logo. A year later,
the company sold its billionth hamburger and introduced
Ronald McDonald, a red-haired clown with particular
appeal to children.
 The present corporation dates its founding to the
opening of a franchised restaurant by Ray Kroc, in Des
Plaines, Illinois on April 15, 1955 , the ninth McDonald's
restaurant overall. Kroc later purchased the McDonald
brothers' equity in the company and led its worldwide
expansion and the company became listed on the public
stock markets in 1965. Kroc was also noted for aggressive
business practices, compelling the McDonald's brothers to
leave the fast food industry. The McDonald's brothers and
Kroc feuded over control of the business, as documented
in both Kroc's autobiography and in the McDonald
brothers' autobiography. The site of the McDonald
brothers' original restaurant is now a monument. The
menu was simple: hamburgers, cheeseburgers, french
fries, shakes, soft drinks, and apple pie. The carhops were
eliminated to make McDonald's a self-serve operation,
and there were no tables to sit at, no jukebox, and no
telephone. As a result, McDonald's attracted families
rather than teenagers. Perhaps the most impressive
aspect of the restaurant was the efficiency with which the
McDonald's workers did their jobs. Mac and Dick
McDonald had taken great care in setting up their
kitchen. Each worker's steps had been carefully
choreographed, like an assembly line, to ensure
maximum efficiency. The savings in preparation time, and
the resulting increase in volume, allowed the McDonalds
to lower the price of a hamburger from 30 cents to 15
cents.
Believing that the McDonald formula was a ticket to
success, Kroc suggested that they franchise their
restaurants throughout the country. When they hesitated
to take on this additional burden, Kroc volunteered to do
it for them. He returned to his home outside of Chicago
with rights to set up McDonald's restaurants throughout
the country, except in a handful of territories in California
and Arizona already licensed by the McDonald
brothersWith the expansion of McDonald's into many
international markets, the company has become a symbol
of globalization and the spread of the American way of
life. Its prominence has also made it a frequent topic of
public debates about obesity, corporate ethics and
consumer responsibility.
Facts and figures:
McDonald's restaurants are found in 119 countries and
territories around the world and serve nearly 47 million
customers each day. McDonald's operates over 31,000
restaurants worldwide, employing more than 1.5 million
people. The company owned a majority stake in Chipotle
Mexican Grill until completing its divestment in October
2006. Until December 2003, it also owned Donatos Pizza.
On August 27, 2007, McDonald's sold Boston Market to
Sun Capital Partners.
Types of restaurants:
McDonald's restaurants offer both counter service and
drive-through service, with indoor and sometimes outdoor
seating. Drive-Thru, Auto-Mac, Pay and Drive, or McDrive
as it is known in many countries, often has separate
stations for placing, paying for, and picking up orders,
though the latter two steps are frequently combined; it
was first introduced in Arizona in 1975, following the lead
of other fast-food chains. In some countries "McDrive"
locations near highways offer no counter service or
seating. In contrast, locations in high-density city
neighborhoods often omit drive-through service. There
are also a few locations, located mostly in downtown
districts, that offer Walk-Thru service in place of Drive-
Thru.
Specially themed restaurants also exist, such as the
"Solid Gold McDonald's," a 1950s rock-and-roll themed
restaurant. In Victoria, British Columbia, there is also a
McDonald's with a 24 carat (100%) gold chandelier and
similar light fixtures.To accommodate the current trend
for high quality coffee and the popularity of coffee shops
in general, McDonald's introduced McCafés. The McCafé
concept is a café-style accompaniment to McDonald's
restaurants in the style of Starbucks. McCafé is a concept
of McDonald's Australia, starting with Melbourne in 1993.
Today, most McDonald's in Australia have McCafés
located within the existing McDonald's restaurant. In
Tasmania there are McCafés in every store, with the rest
of the states quickly following suit. After upgrading to the
new McCafe look and feel, some Australian stores have
noticed up to a 60% increase in sales. As of the end of
2003 there were over 600 McCafés worldwide.
Some locations are connected to gas
stations/convenience stores, while others called
McDonald's Express have limited seating and/or menu
or may be located in a shopping mall. Other McDonald's
are located in Wal-Mart stores. McStop is a location
targeted at truckers and travelers which may have
services found at truck stops.
Playgrounds:
 Some McDonald's in suburban areas and certain cities
feature large indoor or outdoor playgrounds, called
"McDonald's PlayPlace" (if indoors) or "Playland"
(outdoors)[citation needed]. The first PlayPlace with the familiar
crawl-tube design with ball pits and slides was introduced
in 1987 in the USA, with many more being constructed
soon after. Some PlayPlace playgrounds have been
renovated into "R Gym" areas.
"R Gyms" are in-restaurant play area that features
interactive game zones designed for children aged 4 to
11. Equipped with stationary bicycles attached to video
games, dance pads, basketball hoops, monkey bars, an
obstacle course, and other games which emphasize
physical activity.
The "R Gym" features the Toddler Zone, an active play
environment with age appropriate games that develop
physical coordination and social skills; the Active Zone,
designed for children aged four-to-eight that promotes
physical fitness through fun play; the Sports Zone which
features a series of sport oriented activities to promote
aerobic exercise for children aged 9-to-11; the Parent
Zone which features seating and provides a monitoring
area for their children; and the Dining Area which allows
families to eat.
Redesign:
In 2006, McDonald's introduced its "Forever Young"
brand by redesigning all of their restaurants, the first
major redesign since the 1970s. The new design will
include the traditional McDonald's yellow and red colors,
but the red will be muted to terra cotta, the yellow will
turn golden for a more "sunny" look, and olive and sage
green will be added. To warm up their look, the
restaurants will have less plastic and more brick and
wood, with modern hanging lights to produce a softer
glow. Contemporary art or framed photographs will hang
on the walls.The exterior will have golden awnings and a
"swish brow" instead of the traditional double-slanted
roof. The new restaurants will feature areas:
• The "linger" zone will offer armchairs, sofas, and Wi-
Fi connections.
• The "grab and go" zone will feature tall counters with
bar stools for customers who eat alone; Plasma TVs
will offer them news and weather reports.
• The "flexible" zone will be targeted toward families
and will have booths featuring fabric cushions with
 colorful patterns and flexible seating.
• Different music targeted to each zone.
Business model:
McDonald's Corporation earns revenue as an investor in
properties, a franchiser of restaurants, and an operator of
restaurants. Approximately 15% of McDonald's
restaurants are owned and operated by McDonald's
Corporation directly. The remainder are operated by
others through a variety of franchise agreements and
joint ventures. The McDonald's Corporation's business
model is slightly different from that of most other fast-
food chains. In addition to ordinary franchise fees and
marketing fees, which are calculated as a percentage of
sales, McDonald's may also collect rent, which may also
be calculated on the basis of sales. As a condition of
many franchise agreements, which vary by contract, age,
country, and location, the Corporation may own or lease
the properties on which McDonald's franchises are
located. In most, if not all cases, the franchisee does not
own the location of its restaurants. The UK business
model is different, in that fewer than 30% of restaurants
are franchised, with the majority under the ownership of
the company. McDonald's trains its franchisees and
others at Hamburger University in Oak Brook, Illinois. In
other countries, McDonald's restaurants are operated by
joint ventures of McDonald's Corporation and other, local
entities or governments. As a matter of policy,
McDonald's does not make direct sales of food or
materials to franchisees, instead organizing the supply of
food and materials to restaurants through approved third
party logistics operators. According to Fast Food Nation
by Eric Schlosser (2001), nearly one in eight workers in
the U.S. have at some time been employed by
McDonald's. (According to news piece on Fox News this
figure is one in ten). The book also states that McDonald's
is the largest private operator of playgrounds in the U.S.,
as well as the single largest purchaser of beef, pork,
potatoes, and apples. The selection of meats McDonald's
uses varies with the culture of the host country.
Controversies:
As a prominent example of the rapid globalization of
American fast food industry, McDonald's is often the
target of criticism for its menu, its expansion, and its
business practices.The McLibel Trial, also known as
McDonald's Restaurants v Morris & Steel, is an example of
this criticism. In 1990, activists from a small group known
as London Greenpeace (no connection to the international
pressure group Greenpeace) distributed leaflets entitled
What's wrong with McDonald's?, criticizing its
environmental, health, and labor record. The corporation
wrote to the group demanding they desist and apologize,
and, when two of the activists refused to back down, sued
them for libel in one of the longest cases in British civil
law. A documentary film of the McLibel Trial has been
shown in several countries.
In 1999, French anti-globalization activist José Bové
vandalized a half-built McDonald's to protest against the
introduction of fast food in the region. In 2001, Eric
Schlosser's book Fast Food Nation included criticism of
the business practices of McDonald's. Among the
critiques were allegations that McDonald's (along with
other companies within the fast food industry) uses its
political influence to increase its profits at the expense of
people's health and the social conditions of its workers.
The book also brought into question McDonald's
advertisement techniques in which it targets children.
While the book did mention other fast-food chains, it
focused primarily on McDonald's.
 In 2002, vegetarian groups, largely Hindu, successfully
sued McDonald's for misrepresenting their French fries as
vegetarian. Morgan Spurlock's 2004 documentary film
Super Size Me said that McDonald's food was contributing
to the epidemic of obesity in society, and that the
company was failing to provide nutritional information
about its food for its customers. Six weeks after the film
premiered, McDonald's announced that it was eliminating
the super size option, and was creating the adult meal.
Anthony on his show, No Reservations, has criticized
McDonald's among other fast-food restaurants for its
culinary blandness.
The soya that is fed to McDonald’s chickens is supplied
by agricultural giant Cargill and comes directly from
Brazil. Greenpeace alleges that not only is soya
destroying the Amazon rain forest in Brazil, but soya
farmers are guilty of further crimes including slavery and
the invasion of indigenous peoples’ lands. The allegation
is that McDonald's, as a client of Cargill's, is complicit in
these activities.
Arguments in defense of McDonald's:
In response to public pressure, McDonald's has sought
to include more healthy choices in its menu and has
introduced a new slogan to its recruitment posters: "Not
bad for a McJob".[19] (The word McJob, first attested in the
mid-1980s[20] and later popularized by Canadian novelist
Douglas Coupland in his book Generation X, has become
a buzz word for low-paid, unskilled work with few
prospects or benefits and little security.) McDonald's
disputes the idea that its restaurant jobs have no
prospects, noting that its CEO, Jim Skinner, started
working at the company as a regular restaurant
employee, and that 20 of its top 50 managers began work
as regular crew members. In 2007, the company
launched an advertising campaign with the slogan "Would
you like a career with that?" on Irish television, outlining
that their jobs have many prospects.
In a bid to tap into growing consumer interest in the
provenance of food, the fast-food chain recently switched
its supplier of both coffee beans and milk. UK chief
executive Steve Easterbrook said: "British consumers are
increasingly interested in the quality, sourcing and ethics
of the food and drink they buy". McDonald's coffee is now
brewed from beans taken from stocks that have been
certified by the Rainforest Alliance, a conservation group.
Similarly, milk supplies used for its hot drinks and
milkshakes have been switched to organic sources which
could account for 5% of the UK's organic milk output.
McDonald's announced on May 22, 2008 that, in the U.S.
and Canada, it will be introducing cooking oil for its french
fries that contains no trans fats. The company will use
canola-based oil with corn and soy oils by year's end for
its baked items, pies and cookies.

Environmental record:

Discarded McDonalds packaging contributes to the urban

litter problem in cities worldwide. In April 2008,
McDonald's announced that 11 of its Sheffield restaurants
have been using a biomass trial that had cut its waste
and carbon footprint by half in the area. In this trial,
waste from the restaurants were collected by Veolia
Environmental Services and used to produce energy at a
power plant. McDonald's plans to expand this project,
although the lack of biomass power plants in the U.S. will
prevent this plan from becoming a national standard
anytime soon.[25] In addition, in Europe, McDonald's has
been recycling vegetable grease by converting it to fuel
for their diesel trucks.
Furthermore, McDonald's has been using a corn-based
bioplastic to produce containers for some of their
products. Although industries who use this product claim
a carbon savings of 30% to 80%, a Guardian study shows
otherwise. The results show that this type of plastic does
not break down in landfills as efficiently as other
conventional plastics. The extra energy it takes to recycle
this plastic results in a higher output of greenhouse
gases. Also, the plastics can contaminate waste streams,
causing other recycled plastics to become unsaleable.
The U.S. Environmental Protection Agency has
recognized McDonald's continuous effort to reduce solid
waste by designing more efficient packaging and by
promoting the use of recycled-content materials.
McDonald's reports that they are committed towards
environmental leadership by effectively managing electric
energy, by conserving natural resources through
recycling and reusing materials, and by addressing water
management issues within the restaurant.
 When McDonald’s received criticism for its
environmental policies in the 1970s, it began to make
substantial progress towards source reductions efforts.
For instance, an “average meal” in the 1970s—a Big Mac,
fries, and a drink—required 46 grams of packaging;
today, it requires only 25 grams, allowing a 46 percent
reduction. In addition, McDonald’s eliminated the need for
intermediate containers for cola by having a delivery
system that pumps syrup directly from the delivery truck
into storage containers, saving two million pounds of
packaging annually. Overall, weight reductions in
packaging and products, as well as the increased usage
of bulk packaging ultimately decreased packaging by 24
million pounds annually.
Legal cases:
McDonald's legal cases:
McDonald's has been involved in a number of
lawsuits and other legal cases, most of which involved
trademark disputes. The company has threatened many
food businesses with legal action unless they drop the Mc
or Mac from their trading name. In one noteworthy case,
McDonald's sued a Scottish café owner called McDonald,
even though the business in question dated back over a
century (Sheriff Court Glasgow and Strathkelvin,
November 21, 1952).
It has also filed numerous defamation suits. For
example, in the McLibel case, McDonald's sued two
activists for distributing pamphlets attacking its
environmental, labor and health records. After the longest
trial in UK legal history, McDonald's won a technical
victory for showing that some allegations were untrue.
But it was a massive public relations disaster, since the
judge also found that more than half of what was on the
pamphlet was truthful, or were simply the opinions of the
activists and therefore non-prosecutable.
McDonald's has defended itself in several cases
involving workers' rights. In 2001 the company was fined
£12,400 by British magistrates for illegally employing and
over-working child labor in one of its London restaurants.
This is thought to be one of the largest fines imposed on
a company for breaking laws relating to child working
conditions (R v [2002] EWCA Crim 1094). In April 2007 in
Perth, Western Australia, McDonald's pleaded guilty to
five charges relating to the employment of children under
15 in one of its outlets and was fined AU$8,000. Possibly
the most infamous legal case involving McDonald's was
the 1994 decision in The McDonald's Coffee Case.
In a McDonald's American Idol figurine promotion, the
figurine that represents "New Wave Nigel" wears
something that closely resembles Devo’s Energy Dome,
which was featured on the band's album cover, Freedom
of Choice. In addition to the figurine's image, it also plays
a tune that appears to be an altered version of Devo's
song "Doctor Detroit." Devo copyrighted and
trademarked the Energy Dome and is taking legal action
against McDonald's.
Products:

A McDonald's Big Mac combo meal served with French

fries and Coca-Cola. McDonald's predominantly sells
hamburgers, various types of chicken sandwiches and
products, French fries, soft drinks, breakfast items, and
desserts. In most markets, McDonald's offers salads and
vegetarian items, wraps and other localized fare. Portugal
is the only country with McDonald's restaurants serving
soup. This local deviation from the standard menu is a
characteristic for which the chain is particularly known,
and one which is employed either to abide by regional
food taboos (such as the religious prohibition of beef
consumption in India) or to make available foods with
which the regional market is more familiar (such as the
sale of McRice in Indonesia).
Advertising:
McDonald's advertising:
McDonald's has for decades maintained an extensive
advertising campaign. In addition to the usual media
(television, radio, and newspaper), the company makes
significant use of billboards and signage, sponsors
sporting events ranging from Little League to the Olympic
Games, and makes coolers of orange drink with their logo
available for local events of all kinds. Nonetheless,
television has always played a central role in the
company's advertising strategy.
To date, McDonald's has used 23 different slogans in
United States advertising, as well as a few other slogans
for select countries and regions. At times, it has run into
trouble with its campaigns.
Global operations:
McDonald's has become emblematic of globalization,
sometimes referred as the "McDonaldization" of society.
The Economist magazine uses the "Big Mac Index", the
comparison of a Big Mac's cost in various world
currencies can be used to informally judge these
currencies' purchasing power parity. Scandinavian
countries lead the Big Mac Index with four of the five
most expensive Big Mac's. Norway has the most
expensive Big Mac in the world as of July 2008, whilst the
cheapest country is Malaysia. McDonald's has also
acquired derogatory nicknames, such as "McVomit's" (in
parts of America).Thomas Friedman once said that no
country with a McDonald's had gone to war with another.
However, the "Golden Arches Theory of Conflict
Prevention" is not strictly true. Careful historians point to
the 1989 United States invasion of Panama, NATO's
bombing of Serbia in 1999, the 2006 Lebanon War, and
the 2008 South Ossetia War as exceptions.
Some observers have suggested that the company
should be given credit for increasing the standard of
service in markets that it enters. A group of
anthropologists in a study entitled Golden Arches East
(Stanford University Press, 1998, edited by James L.
Watson) looked at the impact McDonald's had on East
Asia and Hong Kong in particular. When it opened in Hong
Kong in 1975, McDonald's was the first restaurant to
consistently offer clean restrooms, driving customers to
demand the same of other restaurants and institutions. In
East Asia in particular, McDonald's have become a
symbol for the desire to embrace Western cultural norms.
McDonald's have recently taken to partnering up with
Sinopec, China's second largest oil company, in the
People's Republic of China, as it begins to take advantage
of China's growing use of personal vehicles by opening
numerous drive-thru restaurants.[37] The only countries in
Europe not to have McDonald's stores are Albania,
Armenia, Bosnia and Herzegovina and the Vatican City.
Phenomenal Growth in the 1960s and 1970s :
In the early 1960s, McDonald's really began to take off.
The growth in U.S. automobile use that came with
suburbanization contributed heavily to McDonald's
success. In 1961 Kroc bought out the McDonald brothers
for $2.7 million, aiming at making McDonald's the number
one fast-food chain in the country.
In 1965 McDonald's Corporation went public. Common
shares were offered at $22.50 per share; by the end of
the first day's trading the price had shot up to $30. A
block of 100 shares purchased for $2,250 in 1965 was
worth, after 12 stock splits (increasing the number of
shares to 74,360), about $1.8 million by the end of 2003.
In 1985 McDonald's Corporation became one of the 30
companies that make up the Dow Jones Industrial
Average.
McDonald's success in the 1960s was in large part due to
the company's skillful marketing and flexible response to
customer demand. In 1965 the Filet-o-Fish sandwich,
billed as "the fish that catches people," was introduced in
McDonald's restaurants. The new item had originally met
with disapproval from Kroc, but after its successful test
marketing, he eventually agreed to add it. Another item
that Kroc had backed a year previously, a burger with a
slice of pineapple and a slice of cheese, known as a
"hulaburger," had flopped. The market was not quite
ready for Kroc's taste; the hulaburger's tenure on the
McDonald's menu board was short. In 1968 the now
legendary Big Mac made its debut, and in 1969
McDonald's sold its five billionth hamburger. A year later,
as it launched the "You Deserve a Break Today"
advertising campaign, McDonald's restaurants had
reached all 50 states.
In 1968 McDonald's opened its 1,000th restaurant, and
Fred Turner became the company's president and chief
administrative officer. Kroc became chairman and
remained CEO until 1973. Turner had originally intended
to open a McDonald's franchise, but when he had
problems with his backers over a location, he went to
work as a grillman for Kroc in 1956. As operations vice-
president, Turner helped new franchisees get their stores
up and running. He was constantly looking for new ways
to perfect the McDonald's system, experimenting, for
example, to determine the maximum number of
hamburger patties one could stack in a box without
squashing them and pointing out that seconds could be
saved if McDonald's used buns that were presliced all the
way through and were not stuck together in the package.
Such attention to detail was one reason for the
company's extraordinary success.
McDonald's spectacular growth continued in the 1970s.
Americans were more on-the-go than ever, and fast
service was a priority. In 1972 the company passed $1
billion in annual sales; by 1976, McDonald's had served
20 billion hamburgers, and systemwide sales exceeded
$3 billion. McDonald's introduced breakfast fast food by
introducing egg McMuffin in 1973 when market research
indicated that a quick breakfast would be welcomed by
consumers. Five years later the company added a full
breakfast line to the menu, and by 1987 one-fourth of all
breakfasts eaten out in the United States came from
McDonald's restaurants. Kroc was a firm believer in giving
"something back into the community where you do
business." In 1974 McDonald's acted upon that
philosophy in an original way by opening the first Ronald
McDonald House, in Philadelphia, to provide a "home
away from home" for the families of children in nearby
hospitals. Twelve years after this first house opened, 100
similar Ronald McDonald Houses were in operation across
the United States.
In 1975 McDonald's opened its first drive-thru window
in Oklahoma City. This service gave Americans a fast,
convenient way to procure a quick meal. The company's
goal was to provide service in 50 seconds or less. Drive-
thru sales eventually accounted for more than half of
McDonald's system wide sales. Meantime, the Happy
Meal, a combo meal for children featuring a toy, was
added to the menu in 1979.
Surviving the 1980s "Burger Wars":
In the late 1970s competition from other hamburger
chains such as Burger King and Wendy's began to
intensify. Experts believed that the fast-food industry had
gotten as big as it ever would, so the companies began to
battle fiercely for market share. A period of aggressive
advertising campaigns and price slashing in the early
1980s became known as the "burger wars." Burger King
suggested that customers "have it their way"; Wendy's
offered itself as the "fresh alternative" and asked of other
restaurants, "where's the beef?" But McDonald's sales
and market share continued to grow. Consumers seemed
to like the taste and consistency of McDonald's best.
During the 1980s McDonald's further diversified its
menu to suit changing consumer tastes. Chicken
McNuggets were introduced in 1983, and by the end of
the year McDonald's was the second largest retailer of
chicken in the world. In 1987 ready-to-eat salads were
introduced to lure more health-conscious consumers. The
1980s were the fastest-paced decade yet. Efficiency,
combined with an expanded menu, continued to draw
customers. McDonald's, already entrenched in the
suburbs, began to focus on urban centers and introduced
new architectural styles. Although McDonald's restaurants
no longer looked identical, the company made sure food
quality and service remained constant.
Despite experts' claims that the fast-food industry was
saturated, McDonald's continued to expand. The first
generation raised on restaurant food had grown up.
Eating out had become a habit rather than a break in the
routine, and McDonald's relentless marketing continued
to improve sales. Innovative promotions, such as the
"when the U.S. wins, you win" giveaways during the
Olympic Games in 1988, were a huge success. In 1982
Michael R. Quinlan became president of McDonald's
Corporation and Fred Turner became chairman. Quinlan,
who took over as CEO in 1987, had started at McDonald's
in the mailroom in 1963, and gradually worked his way
up. The first McDonald's CEO to hold an M.B.A. degree,
Quinlan was regarded by his colleagues as a shrewd
competitor. In his first year as CEO the company opened
600 new restaurants.
McDonald's growth in the United States was mirrored by
its stunning growth abroad. By 1991, 37 percent of
system wide sales came from restaurants outside the
United States. McDonald's opened its first foreign
restaurant in British Columbia, Canada, in 1967. By the
early 1990s the company had established itself in 58
foreign countries and operated more than 3,600
restaurants outside the United States, through wholly
owned subsidiaries, joint ventures, and franchise
agreements. Its strongest foreign markets were Japan,
Canada, Germany, Great Britain, Australia, and France.
In the mid-1980s, McDonald's, like other traditional
employers of teenagers, was faced with a shortage of
labor in the United States. The company met this
challenge by being the first to entice retirees back into
the workforce. McDonald's placed great emphasis on
effective training. It opened its Hamburger University in
1961 to train franchisees and corporate decision-makers.
By 1990, more than 40,000 people had received
"Bachelor of Hamburgerology" degrees from the 80-acre
Oak Brook, Illinois, facility. The corporation opened a
Hamburger University in Tokyo in 1971, in Munich in
1975, and in London in 1982. Braille menus were first
introduced in 1979, and picture menus in 1988. In March
1992 Braille and picture menus were reintroduced to
acknowledge the 37 million Americans with vision,
speech, or hearing impairments.
Quinlan continued to experiment with new technology
and to research new markets to keep McDonald's in front
of its competition. Clamshell fryers, which cooked both
sides of a hamburger simultaneously, were tested. New
locations such as hospitals and military bases were
tapped as sites for new restaurants. In response to the
increase in microwave oven usage, McDonald's, whose
name is the single most advertised brand name in the
world, stepped up advertising and promotional
expenditures stressing that its taste was superior to
quick-packaged foods.
Mc Recycle USA began in 1990 and included a
commitment to purchase at least $100 million worth of
recycled products annually for use in construction,
remodeling, and equipping restaurants. Chairs, table
bases, table tops, eating counters, table columns, waste
receptacles, corrugated cartons, packaging, and
washroom tissue were all made from recycled products.
McDonald's worked with the U.S. Environmental Defense
Fund to develop a comprehensive solid waste reduction
program. Wrapping burgers in paper rather than plastic
led to a 90 percent reduction in the wrapping material
waste stream.
1990s Growing Pains :
It took McDonald's 33 years to open its first 10,000
restaurants--the 10,000th unit opened in April 1988.
Incredibly, the company reached the 20,000-restaurant
mark in only eight more years, in mid-1996. By the end of
1997 the total had surpassed 23,000--by that time
McDonald's was opening 2,000 new restaurants each
year--an average of one every five hours.
Much of the growth of the 1990s came outside the United
States, with international units increasing from about
3,600 in 1991 to more than 11,000 by 1998. The number
of countries with McDonald's outlets nearly doubled from
59 in 1991 to 114 in late 1998. In 1993 a new region was
added to the empire when the first McDonald's in the
Middle East opened in Tel Aviv, Israel. As the company
entered new markets, it showed increasing flexibility with
respect to local food preferences and customs. In Israel,
for example, the first kosher McDonald's opened in a
Jerusalem suburb in 1995. In Arab countries the
restaurant chain used "Halal" menus, which complied
with Islamic laws for food preparation. In 1996
McDonald's entered India for the first time, where it
offered a Big Mac made with lamb called the Maharaja
Mac. That same year the first Mc Ski-Thru opened in
Lindvallen, Sweden.
Overall, the company derived increasing percentages of
its revenue and income from outside the United States. In
1992 about two-thirds of system wide sales came out of
U.S. McDonald's, but by 1997 that figure was down to
about 51 percent. Similarly, the operating income
numbers showed a reduction from about 60 percent
derived from the United States in 1992 to 42.5 percent in
1997.
In the United States, where the number of units grew
from 9,000 in 1991 to 12,500 in 1997--an increase of
about 40 percent--the growth was perhaps excessive.
Although the additional units increased market share in
some markets, a number of franchisees complained that
new units were cannibalizing sales from existing ones.
Same-store sales for outlets open for more than one year
were flat in the mid-1990s, a reflection of both the
greater number of units and the mature nature of the U.S.
market.
 It did not help that the company made several notable
blunders in the United States in the 1990s. The McLean
Deluxe sandwich, which featured a 91 percent fat-free
beef patty, was introduced in 1991, never really caught
on, and was dropped from the menu in 1996. Several
other 1990s-debuted menu items--including fried chicken,
pasta, fajitas, and pizza--failed as well. The "grown-up"
(and pricey) Arch Deluxe sandwich and the Deluxe Line
were launched in 1996 in a $200 million campaign to gain
the business of more adults, but were bombs. The
following spring brought a 55-cent Big Mac promotion,
which many customers either rejected outright or were
confused by because the burgers had to be purchased
with full-priced fries and a drink. The promotion
embittered still more franchisees, whose complaints led
to its withdrawal. In July 1997 McDonald's fired its main
ad agency--Leo Burnett, a 15-year McDonald's partner--
after the nostalgic "My McDonald's" campaign proved a
failure. A seemingly weakened McDonald's was the object
of a Burger King offensive when the rival fast-food maker
launched the Big King sandwich, a Big Mac clone.
Meanwhile, internal taste tests revealed that customers
preferred the fare at Wendy's and Burger King.
 In response to these difficulties, McDonald's drastically
cut back on its U.S. expansion--in contrast to the 1,130
units opened in 1995, only about 400 new McDonald's
were built in 1997. Plans to open hundreds of smaller
restaurants in Wal-Marts and gasoline stations were
abandoned because test sites did not meet targeted
goals. Reacting to complaints from franchisees about
poor communication with the corporation and excess
bureaucracy, the head of McDonald's U.S.A. (Jack
Greenberg, who had assumed the position in October
1996) reorganized the unit into five autonomous
geographic divisions. The aim was to bring management
and decision-making closer to franchisees and customers.
On the marketing side, McDonald's scored big in 1997
with a Teenie Beanie Baby promotion in which about 80
million of the toys/collectibles were gobbled up virtually
overnight. The chain received some bad publicity,
however, when it was discovered that a number of
customers purchased Happy Meals just to get the toys
and threw the food away. For a similar spring 1998 Teenie
Beanie giveaway, the company altered the promotion to
allow patrons to buy menu items other than kids' meals.
McDonald's also began to benefit from a ten-year global
marketing alliance signed with Disney in 1996. Initial
Disney movies promoted by McDonald's included 101
Dalmatians, Flubber, Mulan, Armageddon, and A Bug's
Life. Perhaps the most important marketing move came
in the later months of 1997 when McDonald's named BDD
Needham as its new lead ad agency. Needham had been
the company's agency in the 1970s and was responsible
for the hugely successful "You Deserve a Break Today"
campaign. Late in 1997 McDonald's launched the
Needham-designed "Did Somebody Say McDonald's?"
campaign, which appeared to be an improvement over its
predecessors.
A Failed Turnaround: Late 1990s and Early
2000s :
Following the difficulties of the early and mid-1990s,
several moves in 1998 seemed to indicate a reinvigorated
McDonald's. In February the company for the first time
took a stake in another fast-food chain when it purchased
a minority interest in the 16-unit, Colorado-based
Chipotle Mexican Grill chain. The following month came
the announcement that McDonald's would improve the
taste of several sandwiches and introduce several new
menu items; McFlurry desserts--developed by a Canadian
franchisee--proved popular when launched in the United
States in the summer of 1998. McDonald's that same
month said that it would overhaul its food preparation
system in every U.S. restaurant. The new just-in-time
system, dubbed "Made for You," was in development for a
number of years and aimed to deliver to customers
"fresher, hotter food"; enable patrons to receive special-
order sandwiches (a perk long offered by rivals Burger
King and Wendy's); and allow new menu items to be more
easily introduced thanks to the system's enhanced
flexibility. The expensive changeover was expected to
cost about $25,000 per restaurant, with McDonald's
offering to pay for about half of the cost; the company
planned to provide about $190 million in financial
assistance to its franchisees before implementation was
completed by year-end 1999.
In May 1998 Greenberg was named president and CEO of
McDonald's Corporation, with Quinlan remaining
chairman; at the same time Alan D. Feldman, who had
joined the company only four years earlier from Pizza Hut,
replaced Greenberg as president of McDonald's U.S.A.--an
unusual move for a company whose executives typically
were long-timers. The following month brought another
first--McDonald's first job cuts--as the company said it
would eliminate 525 employees from its headquarters
staff, a cut of about 23 percent. In the second quarter of
1998 McDonald's took a $160 million charge in relation to
the cuts. As a result, the company, for the first time since
it went public in 1965, recorded a decrease in net income,
from $1.64 billion in 1997 to $1.55 billion in 1998.
McDonald's followed up its investment in Chipotle with
several more moves beyond the burger business. In
March 1999 the company bought Aroma Café, a U.K.
chain of 23 upscale coffee and sandwich shops. In July of
that year McDonald's added Donatos Pizza Inc., a
midwestern chain of 143 pizzerias based in Columbus,
Ohio. Donatos had 1997 revenues of $120 million. Also in
1999, McDonald's 25,000th unit opened, Greenberg took
on the additional post of chairman, and Jim Cantalupo
was named company president. Cantalupo, who had
joined the company as controller in 1974 and later
became head of McDonald's International, had been vice-
chairman, a position he retained. In May 2000 McDonald's
completed its largest acquisition yet, buying the bankrupt
Boston Market chain for $173.5 million in cash and debt.
At the time, there were more than 850 Boston Market
outlets, which specialized in home-style meals, with
rotisserie chicken the lead menu item. Revenue at Boston
Market during 1999 totaled $670 million. McDonald's
rounded out its acquisition spree in early 2001 by buying
a 33 percent stake in Pret A Manger, an upscale urban-
based chain specializing in ready-to-eat sandwiches made
on the premises. There were more than 110 Pret shops in
the United Kingdom and several more in New York City.
Also during 2001, McDonald's sold off Aroma Café and
took its McDonald's Japan affiliate public, selling a
minority stake through an initial public offering. As it was
exploring new avenues of growth, however, McDonald's
core hamburger chain had become plagued by problems.
Most prominently, the Made for You system backfired.
Although many franchisees believed that it succeeded in
improving the quality of the food, it also increased service
times and proved labor-intensive. Some franchisees also
complained that the actual cost of implementing the
system ran much higher than the corporation had
estimated, a charge that McDonald's contested. In any
case, there was no question that Made for You failed to
reverse the chain's sluggish sales. Growth in sales at
stores open more than a year (known as same-store
sales) fell in both 2000 and 2001. Late in 2001 the
company launched a restructuring involving the
elimination of about 850 positions, 700 of which were in
the United States, and some store closings.
There were further black eyes as well. McDonald's was
sued in 2001 after it was revealed that for flavoring
purposes a small amount of beef extract was being added
to the vegetable oil used to cook the french fries. The
company had cooked its fries in beef tallow until 1990,
when it began claiming in ads that it used 100 percent
vegetable oil. McDonald's soon apologized for any
"confusion" that had been caused by its use of the beef
flavoring, and in mid-2002 it reached a settlement in the
litigation, agreeing to donate $10 million to Hindu,
vegetarian, and other affected groups. Also in 2001,
further embarrassment came when 51 people were
charged with conspiring to rig McDonald's game
promotions over the course of several years. It was
revealed that $24 million of winning McDonald's game
tickets had been stolen as part of the scam. McDonald's
was not implicated in the scheme, which centered on a
worker at an outside company that had administered the
promotions.
 McDonald's also had to increasingly battle its public
image as a purveyor of fatty, unhealthful food.
Consumers began filing lawsuits contending that years of
eating at McDonald's had made them overweight.
McDonald's responded by introducing low-calorie menu
items and switching to a more healthful cooking oil for its
french fries. McDonald's franchises overseas became a
favorite target of people and groups expressing anti-
American and/or antiglobalization sentiments. In August
1999 a group of protesters led by farmer José Bové
destroyed a half-built McDonald's restaurant in Millau,
France. In 2002 Bové, who gained fame from the incident,
served a three-month jail sentence for the act, which he
said was in protest against U.S. trade protectionism.
McDonald's was also one of three multinational
corporations (along with Starbucks Corporation and Nike,
Inc.) whose outlets in Seattle were attacked in late 1999
by some of the more aggressive protesters against a
World Trade Organization (WTO) meeting taking place
there. In the early 2000s McDonald's pulled out of several
countries, including Bolivia and two Middle Eastern
nations, at least in part because of the negative regard
with which the brand was held in some areas.
 Early in 2002 Cantalupo retired after 28 years of
service. Sales remained lackluster that year, and in
October the company attempted to revive U.S. sales
through the introduction of a low-cost Dollar Menu. In
December 2002, after this latest initiative to reignite
sales growth failed--and also after profits fell in seven of
the previous eight quarters--Greenberg announced that
he would resign at the end of the year. Cantalupo came
out of retirement to become chairman and CEO at the
beginning of 2003.
Launching of Revitalization Plan Under New
Leadership in 2003 :
Cantalupo started his tenure by announcing a major
restructuring that involved the closure of more than 700
restaurants (mostly in the United States and Japan), the
elimination of 600 jobs, and charges of $853 million. The
charges resulted in a fourth-quarter 2002 loss of $343.8
million--the first quarterly loss in McDonald's 38 years as
a public company. The new CEO also shifted away from
the company's traditional reliance on growth through the
opening of new units to a focus on gaining more sales
from existing units. To that end, several new menu items
were successfully launched, including entree salads,
McGriddles breakfast sandwiches (which used pancakes
in place of bread), and white-meat Chicken McNuggets.
Some outlets began test-marketing fruits and vegetables
as Happy Meal options. Backing up the new products was
the launch in September 2003 of an MTV-style advertising
campaign featuring the new tag line, "I'm lovin' it." This
was the first global campaign in McDonald's history, as
the new slogan was to be used in advertising in more
than 100 countries. It also proved to be the first truly
successful ad campaign in years; sales began
rebounding, helped also by improvements in service. In
December 2003, for instance, same-store sales increased
7.3 percent. Same-store sales rose 2.4 percent for the
entire year, after falling 2.1 percent in 2002. In December
2003 McDonald's announced that it would further its
focus on its core hamburger business by downsizing its
other ventures. The company said that it would sell
Donatos back to that chain's founder. In addition, it would
discontinue development of non-McDonald's brands
outside of the United States. This included Boston Market
outlets in Canada and Australia and Donatos units in
Germany. McDonald's kept its minority investment in Pret
A Manger, but McDonald's Japan was slated to close its
Pret units there. These moves would enable the company
to concentrate its international efforts on the McDonald's
chain, while reducing the non-hamburger brands in the
United States to Chipotle and Boston Market, both of
which were operating in the black.
McDonald's continued to curtail store openings in 2004
and to concentrate on building business at existing
restaurants. Much of the more than $1.5 billion budgeted
for capital expenditures in 2004 was slated to be used to
remodel existing restaurants. McDonald's also aimed to
pay down debt by $400 million to $700 million and to
return approximately $1 billion to shareholders through
dividends and share repurchases. Cantalupo also set
several long-term goals, such as sustaining annual
systemwide sales and revenue growth rates of 3 to 5
percent. In a move to both simplify the menu and make
its offerings less fattening, McDonald's announced in
March 2004 that it would phase out Super Size french
fries and soft drinks by the end of the year.
Principal Subsidiaries: McDonald's Deutschland, Inc.;
McDonald's Restaurant Operations Inc.; McG
Development Co.; Chipotle Mexican Grill, Inc.; Boston
Market Corporation; McDonald's Franchise GmbH
(Austria); McDonald's Australia Limited; McDonald's
France, S.A.; MDC Inmobiliaria de Mexico S.A. de C.V.;
McDonald's Restaurants Pte., Ltd. (Singapore);
Restaurantes McDonald's S.A. (Spain); McKim Company
Ltd. (South Korea); Shin Mac Company Ltd. (South Korea);
McDonald's Nederland B.V. (Netherlands); Moscow-
McDonald's (Canada); McDonald's Restaurants Limited
(U.K.).
Principal Competitors: Burger King Corporation;
Wendy's International, Inc.; CKE Restaurants, Inc.; Jack in
the Box Inc.; Sonic Corporation; Checkers Drive-In
Restaurants, Inc.; White Castle System, Inc.;
Whataburger, Inc.; YUM! Brands, Inc.; Doctor's Associates
Inc.
Business Model:
• Franchise Model – Only 15% of the total number of
restaurants are owned by the Company. The
remaining 85% is operated by franchisees. The
company follows a comprehensive framework of
training and monitoring of its franchises to ensure
that they adhere to the Quality, Service,
Cleanliness and Value propositions offered by
the company to its customers.
 • Product Consistency – By developing a
sophisticated supplier networked operation and
distribution system, the company has been able to
achieve consistent product taste and quality across
geographies.
• Act like a retailer and think like a brand –
McDonald’s focuses not only on delivering sales for
the immediate present, but also protecting its long
term brand reputation.

McDonald’s in India:
McDonald’s entered India in 1996. McDonald’s India has a
joint venture with Connaught Plaza Restaurants and Hard
Castle Restaurants. Connaught Plaza Restaurants
manages operations in North India whereas Hard Castle
Restaurants operates restaurants in Western India. Apart
from opening outlets in the major metros, the company is
now expanding to Tier 2 cities like Pune and Jaipur.

Challenges in Entering Indian Markets:

• Regiocentricism: Re-engineering the menu -
McDonald’s has continually adapted to the
customer’s tastes, value systems, lifestyle,
language and perception. Globally McDonald’s was
 known for its hamburgers, beef and pork burgers.
Most Indians are barred by religion not to consume
beef or pork. To survive, the company had to be
responsive to the Indian sensitivities. So
McDonald’s came up with chicken, lamb and fish
burgers to suite the Indian palate.
• The vegetarian customer – India has a huge
population of vegetarians. To cater to this
customer segment, the company came up with a
completely new line of vegetarian items like
McVeggie burger and McAlooTikki. The separation
of vegetarian and non-vegetarian sections is
maintained throughout the various stages.
Segmentation, Targeting and Positioning:
McDonald’s uses demographic segmentation strategy
with age as the parameter. The main target segments are
children, youth and the young urban family.
 % of kids who influence what FMCG brand their
family buys

80% 71%
70% 59%
60% 52%
50%
40%
30%
20%
10%
0%
Biscuits Burgers & Pizzas Fruit Juices

As shown above, kids reign supreme in FMCG purchase

related to food products. So to attract children
McDonalds has Happy Meal with which toys ranging from
hot wheels to various Walt Disney characters are given
(the latest in this range is the toys of the movie
Madagascar). For this, they have a tie-up with Walt
Disney. At several outlets, it also provides special facilities
like ‘Play Place’ where children can play arcade games,
air hockey, etc. This strategy is aimed at making
McDonald’s a fun place to eat. This also helps McDonald’s
to attract the young urban families wanting to spend
some quality time while their children have fun at the
outlet. To target the teenagers, McDonald’s has priced
several products aggressively, keeping in mind the price
sensitivity of this target customer. In addition, facilities
like Wi-Fi are also provided to attract students to the
outlets like the one at Vile Parle in Mumbai.
“Mc Donald’s mein hai kuch baat” projects
McDonald’s as a place for the whole family to enjoy.
When McDonald’s entered in India it was mainly
perceived as targeting the urban upper class people.
Today it positions itself as an affordable place to eat
without compromising on the quality of food, service and
hygiene. The outlet ambience and mild background music
highlight the comfort that McDonald’s promises in
slogans like “You deserve a Break Today” & “Feed
your inner child”. This commitment of quality of food
and service in a clean, hygienic and relaxing atmosphere
has ensured that McDonald’s maintains a positive
relationship with the customers.

Customer Perception and Customer

Expectation:
Customer perception is a key factor affecting a product’s
success. Many potentially revolutionary products have
failed simply because of their inability to build a healthy
perception about themselves in the customers’ minds.
McDonalds being an internationally renowned brand
brings with it certain expectations for the customers.

Target Segment What is McDonald’s for me?

A Family with A treat to children, a fun place to be for the
children children.
Urban customer on Great taste, quick service without affecting
the move the work schedule
Teenager Hangout with friends, but keep it
affordable.
Customers expect it to be an ambient, hygienic and a
little sophisticated brand that respects their values. The
customer’s expect the brand to enhance their self-image.
Customer responses obtained at the Vile Parle, Mumbai
outlet confirmed the fact that they connect strongly with
the brand. However, fulfilling some of the customer
expectations like a broader product variety provide
McDonald’s a great scope for improvement.
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
• People
Product: How should the company design,
manufacture the product so that it enhances the
customer experience?

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 excellent customer
specific product features.
Place: Where should be the product be available
and the role of distribution channels?
The place mainly consists of the distribution channels. It
is important so that the product is available to the
customer at the right place, at the right time and in
the right quantity. Nearly 50% of U.S.A is within a 3
minute drive from a McDonald’s outlet.
There is a certain degree of fun and happiness that a
customer feels each time he dines at McDonalds. There
are certain value propositions that McDonalds offer to
its customers based on their needs. McDonalds offers
hygienic environment, good ambience and great
service. Now McDonalds have also started giving
internet facility at their centres and they have been
playing music through radio instead of the normal
music. There are certain dedicated areas for
childrenwhere they can play while their parents can
have some quality time together.
Price: What should be the pricing strategy?

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.
Promotion: What is the suitable strategy and
channels for promotion of the product?

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 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”.

People: How to converge the benefits of

internal and external marketing?
McDonald’s understands the value of both its employees
and its customers. It understands the fact that a happy
employee can serve well and result in a happy customer.
McDonald continuously does Internal Marketing. This is
important as it must precede external marketing. This
includes hiring, training and motivating able employees.
This way they serve customers well and the final result is
a happy customer.
The level of importance has changed to be in the
following order (the more important people are at the
top):
• Customers
• Front line employees
• Middle level managers
• Front line managers
The punch line “I’m loving it” is an attempt to show that
the employees are loving their work at McDonalds and
will love to serve the customers.
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.
Service
Supplementary
Core Product
DeliveryProcess
Process

During the Service Delivery Process, each moment of

interaction between the firm and the customer, called
“Moments of Truth”, helps understand the
opportunities that a firm has to win or lose the customer.
For example, these “moments of truth” are created for
McDonald’s every time the guard at the McDonald’s
outlet meets the customer, every time an attendant takes
down the order from the customer waiting in the queue,
every time the cashier interacts with the customer, every
time the attendant helps the customer guided the
customer towards the table, every time the attendant
cleans the table, etc.
“Moments Of Truth” – The Service Encounter
Customer

Service Provider Service Delivery Points

Managing these “moments of truth” is a great challenge

in Service Marketing especially due to customer’s
involvement as a co-producer of services (e.g.
McDonald’s self-service concept wherein the customer
not only collects the order but also cleans the table after
consuming the food). However, McDonald's has been able
to create a great experience for its customers by
understanding the nature of the entire Service Delivery
Process and the various stages in the process that are
exposed to the customers. Transparency in the processes
at its outlet has helped McDonald’s bring the back office
in its outlet at the front so that the customer is able to
know the operations and provide feedback on service
design improvements.
Internal Customer Focus is equally important as External
Customer Orientation in order to win these “moments of
truth”. McDonald’s focus on its People and their service
delivery methods therefore plays a very important role in
creating a successful Service Brand. The quality and the
consistency of the service delivered by McDonald’s have
been greatly enhanced by the combination of the factors
mentioned above. This has helped McDonald’s become
Service Leader and a successful Service Brand. This is
evident from the fact that very few of its customers opt
for take-home parcels or home deliveries while most of
them prefer to eat at the outlet and enjoy the McDonald’s
experience.
Mc Donaldizing the Suppliers:
McDonald’s has changed the nature of not only the food
service industry but also the food processing industry as
well. McDonald’s realized that the battle between fast
food chains would increasingly be one of efficiency of
supply, lower cost production and greater desire to
innovate. It pioneered with innovative and sophisticated
food distribution and packaging systems when the
traditional food processors were unwilling or unable to
supply food items that McDonald’s demanded. They
achieved amazing consistency by devoting more
attention than anyone else to field service and training at
store level. Production was concentrated in huge plants
devoted exclusively to McDonald’s. McDonald’s also
started with tiny suppliers and grew with them displaying
great loyalty.
Nowhere is the supplier loyalty more evident than in
development of new, improved products. Some of
McDonald’s classic food items like Filet-o-Fish, French
Fries, Chicken Nuggets etc. are results of supplier
innovation. Interestingly, it took KFC more than three
years before in finally introduced its own version of
chicken nuggets. Thus supplier technological expertise
had given McDonald’s a product which was not a mere
marketing innovation but a technical one. McDonald’s
attempted to squeeze labour out of the stores by moving
more preparation back into the processing plant, creating
the opportunity to develop unique products based on
suppliers’ processing skills. For the first time,
McDonald’s suppliers became the focal point of
new product development. This converted the fast-
food industry’s most fragmented distributed system into
more efficient one which helped McDonald’s reduce its
inventory and manage costs effectively.

Importance of PLC in McDonalds:

The requirements of customers change over time and
thus the product offering has to be changed accordingly.
What is the fashion today may be out of market within
few weeks. Thus continuous innovation is required.

To counter these changes McDonalds has continuously

introduced new products and has phased out the old ones
which were at the decline stage of their PLC. The
introduction is timed such that the new product does not
cannibalize the product already in the maturity or growth
stage. Thus the secret lies in getting profits with different
products in the different stages of the PLC.
A perfect example of revitalising a product in
decline phase

The French Fries have been an important part of the

McDonalds menu worldwide. But now it was in the stage
of decline and was actually not generating proper return.
In an attempt to revitalize it, a new variant was
introduced namely Shake Shake Fries. This is being
served with chatpata spice mix which has resulted in
increase in the sales of French Fries and has elevated it
from to the decline stage. This is used to delay the
decline of a well established product which has the
potential of generating further revenue.

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 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.
Competition also reduces product lifecycle;
inducing firms to revise their products portfolios
and to revisit their product market to understand
changing needs, expectations and perception of different
market segments. The new McBreakfast would be
introduced between 6 to 11 am as a pilot project. This
would open up a whole new revenue stream for
McDonald’s by tapping into the student and working
population by providing a healthy and wholesome
breakfast. This shows how demographic shift can affect
the demand for products and services. McDonald’s has
anticipated these changes to maintain its competitive
edge.

Two Dimensional Perceptual Mapping:

SWOT Analysis

McDonald's Marketing Strategy:

McDonald’s is the world’s largest fast-food restaurant

chain. It has more than 30,000 restaurants in over 100
countries. Over one billion more customers were served
in 2007 than in 2006. Although net income was down by
$1.1 billion in 2007, McDonald’s sales were up 6.8%, and
revenue was a record high of $23 billion. “The unique
business relationship among the company, its franchisees
and suppliers (collectively referred to as the System) has
been key to McDonald’s success over the years. The
business model enables McDonald’s to play an integral
role in the communities we serve and consistently deliver
relevant restaurant experiences to customers.”
(McDonald's, 2008, 25).
McDonald’s overall strategic plan is called Plan to Win.
Their focus is not so much on being the biggest fast-food
restaurant chain, rather it is more focused on being the
best fast-food restaurant chain. McDonald’s “strategic
alignment behind this plan has created better McDonald’s
experiences through the execution of multiple initiatives
surrounding the five factors of exceptional customer
experiences – people, products, place, price and
promotion” (McDonald's, 2008, 25). McDonald’s also
incorporates geographical strategic plans. In the U.S.,
McDonald’s strategic plan continues to focus on
breakfast, chicken, beverages and convenience. These
are the core areas in the United States. McDonald’s has
launched the Southern Style Chicken Biscuit for breakfast
and the Southern Style Chicken Sandwich for lunch and
dinner. In the beverage business, McDonald’s starting
introducing new hot specialty coffee offerings on a
market-by-market basis. In Europe, McDonald’s uses a
tiered menu approach. This menu features premium
selections, classic menu, and everyday affordable
offerings. They also “complement these with new
products and limited-time food promotions” (McDonald's,
26). In the Asia-Pacific, Middle East, and Africa markets,
McDonald’s strategic plan is focused around convenience,
breakfast, core menu extensions and value. With
McDonald’s overall strategic plan and its geographical
strategic plan, the company should start to see more
positive financial results.
McDonald’s incorporates several organizational
strategies. Some of the organizational strategies consist
of better restaurant operations, placing the customer
first, menu variety and beverage choice, convenience and
daypart expansion, and ongoing restaurant reinvestment.
McDonald’s plans to “continue to drive success in 2008
and beyond by leveraging key consumer insights and our
global experience, while relying on our strengths in
developing, testing and implementing initiatives
surrounding our global business drivers of convenience,
branded affordability, daypart expansion and menu
variety” (McDonald's, 2008, 25). One of the ways
McDonald’s can obtain a positive net income is to
maximize efficiency in its restaurant operations while at
the same time placing the customer first. With strategic
focus on menu variety and beverage choice, McDonald’s
is hoping for increased sales and guest counts. With their
convenience and daypart expansion initiative,
McDonald’s is hoping to increase efficiency in its drive-
thru pick up window, and the company is staying open
later for those late-nighters who want a quick bite to eat.
McDonald’s also has locally owned and operated
restaurants which “are at the core of their competitive
advantage and makes them not just a global brand but a
locally relevant one” (McDonald's, 27). They are in the
process of remodeling and upgrading its franchises. The
company is also opening up McCafe’s “with the
expectation that the gourmet coffee shop would move it
closer to its goal of doubling sales at existing U.S.
restaurants over the next decade” (Peter & Donnelly, Jr.,
2007, 253). A couple other organizational strategies are
branded affordability, and the development of their
employees starting with recruitment and training and
leading all the up to leadership and management.
McDonald’s strategic plan is influencing their marketing
efforts by building better brand transparency. They want
their image to be recognized globally. They are enhancing
the customer’s experience. “Across their markets, they
are making is easier for customers to enjoy a great
McDonald’s experience. They are introducing drive-thrus
to the increasingly mobile populations in China and
Russia, while in the U.S. and Canada, greater drive-thru
efficiency and double drive-thru lanes enable them to
serve even more customers quickly” (McDonald's, 2008,
13). In Germany, McDonald’s has a reimaging program
that includes adding about 100 McCafes. They are also
installing new kitchen operating systems so that they can
continue to deliver high food quality. McDonald’s has
already renovated about 10,000 restaurants world wide.
They want their restaurants to be an expression of their
brand. The company is also delivering greater value to
the customer with new menu selections. “By serving a
locally relevant balance of new products, premium salads
and sandwiches, classic menu favorites and everyday
affordable offerings around the world, they create value
for customers and satisfy their demand for choice and
variety” (McDonald's, 15). Types of marketing mix that
McDonald’s use to achieve their marketing goals are
longer operating hours, everyday value meals, and
optimizing efficiency in the drive-thru. McDonald’s also
uses marketing campaigns. In 2007, McDonald’s used the
Shrek movie to give children a choice between milk, fruit,
or vegetables as part of their Happy Meal. In addition to
their commitment with children, McDonald’s is building
their brand image “with innovated marketing transporting
ideas across borders and using i’m lovin’ it to deepen
their connection with customers who love their food and
the unique McDonald’s experience” (McDonald's, 2008,
17). In the 2008 Olympics held in Beijing, McDonalds
offered the Beijing Burger, Carmel and Banana Sundae,
and Rice Sticks. They featured nine Olympic and
Paralympic athletes on their packaging. In Australia,
McDonald’s held a marketing campaign where the people
could decide what name to give its new hamburger. The
name that won was Backyard Burger. With marketing
campaigns like these, McDonald’s is trying to create a
better brand image. Other organizational and marketing
strategies are “creating stronger bonds of trust by being
accessible and maintaining an open dialogue with
customers and key stakeholders” (McDonald's, 2008, 27).
The company is reinvesting approximately $1.9 billion
into their restaurants primarily to reimage existing
restaurants and build new ones. McDonald’s is also
moving towards a more heavily franchised, less capital-
intensive business model. Although in some countries,
such as China, this is not permissible due to
governmental laws. With McDonald’s growing global
brand image and its emphasis on the five factors of
exceptional customer service, this should help them
increase sales and net income. With the initiative of
remodeling and upgrading existing franchises, this will
give the customer a more pleasant and friendly place to
dine out at. With McDonald’s marketing campaign for the
2008 Olympics, they were an integral part of the games
and this only enhanced McDonald’s brand image in a
positive way. With the recruitment and training initiatives
for current employees or future prospects, this will allow
McDonald’s to achieve less of an already high turnover
ratio.
McDonalds Business Analysis:
'In the 1990s managers will be judged on their ability to
identify, cultivate, and exploit the core competencies that
make growth possible - indeed, they'll have to rethink the
concept of the corporation it self.' Organizations do not
exist in vacuum. They operate within a competitive
industrial environment. Analyzing its competitors not only
enables an organization to identify its own strengths and
weaknesses but also help to identify opportunities for and
threats to the organization from its industrial
environment. SWOT analysis is a systematic analysis of
these factors and the strategy that reflects the best
match between them.
Let us analyze these principals in relation to the core
competence of McDonalds, one of the largest food chain
companies in the world. Let us first start with the
strengths and the positive aspects which define the
performance of this company. How can we define the
company’s strengths? Strength is a distinctive
competence that gives the firm a comparative advantage
in the market place. For instance financial resources,
image, market leadership and buyer supplier relations etc
McDonalds is the no: 1 fast food chain stores with a 40
million customers visiting it per day. It has over 30,000
branches in 120 countries. It derives 80% of its revenues
from eight countries like Canada, Brazil, Germany,
France, Japan, UK, Australia and US. The greatest strength
was creating an image in the minds of the people and
introducing them to the fast food culture. Delivery speed,
customer care and cleanliness are the core strengths on
which these stores expanded. They created a corporate
symbol and their advertisement campaigns were highly
successful in establishing the brand image and logo in the
minds of the millions. Two main competitors generally
identified with McDonalds are the Burger King and the
KFC. McDonalds marketing strategy is concerned with the
internal resources, external environment and its basic
competencies along with its share holders.
McDonald’s product value is also its greatest
strengths. Customers know what to expect when they
walk into a McDonalds store. It gives great emphasis to
human resources by satisfying both the customer and the
employees. Next is the innovation aspect wherein new
products line up to catch up with the new trends and
tastes of the people. Its diversity into other new business
ventures can also be considered as its strengths.
How effective are these strengths to the company in the
long run? McDonalds today is not that amendable as it
was during its inception. What are the driving factors
which results in its present decline in terms of sales and
services? To analyze this factor we have to look at the
weaknesses part of the companies business and
marketing strategy. What can generally be termed as a
weakness of a company? The same factors which were
considered as strengths also become a weakness if it
impedes the overall performance of the company.
Customer trends change and so does their choices.
People are generally tired of the same brands that they
had been using over the years, so when they do not see
the expected innovation they migrate to new brands.
Moreover people see McDonalds every where and this
over exposure might also be a reason for abstinence.
Moreover maintaining the standards of such a huge chain
becomes feasible and when there is lack of quality
service in one store it effects the whole brand.
The secret of any marketing strategy is to reach the
target audience. And here again the target audience
should be chosen carefully. In the case of McDonalds as
projected in its ads, the targeted audiences were the kids.
Demographics and customer financial and psychological
aspects define a business concerns success. Health
conscious women and senior citizen comprise the major
population but kids soon grow out to become adults.
Recent law suits and documentaries resulted in the
companies recent innovation and a major change related
to health related product ranges and this switch over as
per the needs of today’s trend and needs has increased
the lost popularity of McDonalds a bit.
All the above factors point out the external strengths and
weaknesses. There are also internal factors which affect
the performance and overall benefits the company stands
to enjoy. Kids based marketing strategy which was earlier
a weakness has changed since 2003. Now more
teenagers and adults rule the McDonalds ad world. The
research and develop which lacked earlier is also looked
into and the brand quality is being defined with various
research and development options today. McDonald at
one stage started concentrating on expansion and
growing big that it missed out on key factors like quality
maintenance and R&D.One major threat to any brand is
its relationship between the management and the
franchise dealers. Organization strength is the back bone
of any concern and when that starts shaking the whole
system will collapse. But slowing McDonald is recovering
from all these weaknesses as its brand managers can
easily communicate, compare and improve their services
through the latest technological developments wherein
they can use the internet to motivate, compare and
improve upon other centers performances.
 The overall analysis of all the external and internal
strengths and weaknesses on this company should be
linked in order to draft a sustainable plan for the
companies’ further improvement. For any improvement
or expansion the internal resources must be readily
available. And thus analyzing this aspect can lead to a
modified strategy to suit its vision. Keeping in mind the
available resources the planner should think globally.
Hence making use of all the core competencies the firm
can definitely sustain in the competitive market.The
change in the top managerial level has creating a new
wave in its performance and major changes have been
implemented to retain and sustain the brand quality and
innovation. As the new CEO rightly quotes,
“The world has changed. Our customers have changed.
We have to change too." James R. Cantaloupe, Chairman
and CEO, McDonald's, 2003Now let us analyze the
sustainable competitive advantage of the company. What
is sustainable competitive advantage? How can it be
related to McDonalds? SCA is the advantage a company
has which is difficult or impossible for other companies to
possess or break through. It can either be the brand,
dynamic customer care, cost structure or its patent.
Whatever the advantage in order to be considered as
sustainable it should either be proprietary or distinctive.
Other than this three different aspects that help in SCA
are,
• The managerial and organizational process should
share a good integration and coordination. The much
needed ‘value’ is created thereby as everyone strives to
work for a common goal. The organization should learn
and bring about changes according to the need of the
hour and should always be flexible to changes in the
environment such as customer trends, legal or
government restriction and developments in the
technology. McDonalds is presently concentrating on this
advantage by concentrating on organizational behavior
and managerial expertise. Previously this advantage was
ignored as the organization was more into expansion of
its outlets over the globe than strengthening its core
advantage. As the result the revenue did not see much of
a change while newer outlets were open. The company
suffered a massive loss first time since their inceptions
which further lead to the change in the managerial heads.
• Technological, structural and financial assets of a
company are excellent market position which helps in the
SCA. McDonalds no doubt is abundant with such aspects
like structure, technology and finance. To identify and
implement these assets in the proper direction towards
the improvement of the company is all that is needed.
After 2003 the company has really started to concentrate
on its greatest advantages.
• Most of all the greatest advantage is the vision or the
dream with which the company was started. Sustaining
this dream over the years is any companies’ greatest
advantage. A brand usually revolves around this vision
sustaining this vision and working in lieu with it is a great
SCA. McDonalds was started out to help people who had
very little time to cook or was too busy to get into a
proper restaurant. The vision was to provide quick
service, cheap products and quality satisfaction. Keeping
this vision in mind the company which slackened a bit
because of incompetent franchise holders is being
weeded and new and better people are put in this place
as the torch bearers of the company sustaining and living
the vision.
To sum it all up SCA means implementing the best value
based strategy using all the advantages which are unique
to the company and that which cannot be copied or
replicated by other competitors. The importance of this
SCA can be evident by the reply the great investment
guru Warren Buffet gave when asked about how he
evaluates his investment portfolio. He simply answered
‘sustainable competitive advantage’. Hence based on the
dynamic integrated and intelligent human resources can
always be the only dependable and sustainable
SCA.Outsourcing boom or doom in today’s business
environment
Today everything is outsourced from employee
appointment to finance and customer care. No
organization is best enough to handle all kinds of work.
Moreover concentrating on every detail is not possible
with a big concern especially like McDonalds. But great
care should be taken not to outsource the core
competences of the company. General advantages of
outsourcing are cheap service, knowledge of markets
offshore, flexible resources, speedy operations, expansion
in supplier relationship etc. most of all the company can
concentrate on its core competencies and outsource rest
of its operation. Recently McDonald has tested its drive
through order facility. Wherein it makes sure that the
order placed with the outlet is accurate. The order taken
by the outsourced company is reverted back to the home
restaurant. These call center has a digital camera which
clicks the vehicle you drive through and the delivery man
back home can integrate the order and the person who
placed it using the image of the car. Outsourcing thus
helps in the increase of the external suppliers and fills up
the difficulties faced because of the lack of the latest
technologies and other innovations.What started of as a
success story with McDonalds had to face a number of
risks, competitions and major set backs. What makes it
still strong and ranked among the top business concerns
is its core competences and the sustainable competitive
advantages both internal and external. Of course keeping
up with the changing times the company has also set foot
in outsourcing but the point to keep in mind here is not to
be driven away by this outsourcing mania. This company
has started to revert back to its golden glory recently
because of large scale revamping of its organizational
and structural changes being implemented.
Chapter 3:
Case study:
McDonald's Case Study
Introduction:
McDonald’s, the long-time leader in the fast-food wars,
faced a crossroads in the early 1990s. Domestically, sales
and revenues were flattening as competitors encroached
on its domain. In addition to its traditional rivals—Burger
King, Wendy’s, and Taco Bell—the firm encountered new
challenges. Sonic and Rally’s competed using a back-to-
basics approach of quickly serving up burgers, just
burgers, for time-pressed consumers. On the higher end,
Olive Garden and Chili’s had become potent competitors
in the quick service field, taking dollars away from
McDonald’s, which was firmly entrenched in the fast-food
arena and hadn’t done anything with its dinner menus to
accommodate families looking for a more upscale dining
experience.
While these competitive wars were being fought,
McDonald’s was gathering flak from environmentalists
who decried all the litter and solid waste its restaurants
generated each day. To counter some of the criticism,
McDonald’s partnered with the Environmental Defense
Fund (EDF) to explore new ways to make its operations
more friendly to the environment.
Facts:
McDonald’s roots go back to the early 1940s when two
brothers opened a burger restaurant that relied on
standardized preparation to maintain quality—the
Speedee Service System. So impressed was Ray Kroc with
the brothers’ approach that he became their national
franchise agent, relying on the company’s proven
operating system to maintain quality and consistency.
Over the next few decades, McDonald’s used controlled
experimentation to maintain the McDonald’s experience,
all the while expanding the menu to appeal to a broader
range of consumers. For example, in June 1976,
McDonald’s introduced a breakfast menu as a way to
more fully utilize the physical plant. In 1980, the company
rolled out Chicken McNuggets. Despite these innovations,
McDonald’s tremendous growth could only continue for so
long. Its average annual return on equity was 25.2%
between 1965 and 1991. But the company found its sales
per unit slowing between 1990 and 1991. In addition,
McDonald’s share of the quick service market fell from
18.7% in 1985 to 16.6% in 1991. Plus growth in the quick
service market was projected to only keep pace with
inflation in the 1990s.
McDonald’s faced heightening competition on several
fronts. First, its traditional rivals—Burger King, Wendy’s,
and Taco Bell—were eating into its margins through
promotions and value pricing strategies. Taking a leaf
from McDonald’s own playbook, Sonic and Rally’s were
using a very limited menu approach to attract time-
strapped consumers. Finally, Chili’s and Olive Garden
were appealing to diners looking for something a little
more enticing that the familiar Golden Arches for their
families.
In the late 1980s, McDonald’s began recognizing the
importance of maintaining an ecologically correct posture
with the public, which was becoming more concerned
about the environment. For example, in 1989, 53% of
respondents in one survey revealed that they had not
bought a product because they didn’t know what effect
the packaging would have on the environment. Closer to
home, a 1990 study showed that each McDonald’s
generated 238 pounds of on-premise solid waste per day.
It’s no surprise, then, that McDonald’s sought a way to
reduce its solid waste while providing a more
environmentally acceptable face to the public. Beginning
in 1989, it partnered with the Environmental Defense
Fund, a leading organization devoted to protecting the
environment, to seek ways to ease the company’s
environmental burden on the landscape. Together, EDF
and McDonald’s considered its impact on a wide range of
stakeholders—customers, suppliers, franchisees, and the
environment. The company gave its franchisees much
autonomy in finding ways to eliminate environmental
blight. The company’s hope was that from these
divergent approaches, it stood a greater chance of finding
solutions with broad applicability than if it had tried to
pursue a one-size-fits-all approach from the outset. Some
of the environmentally inspired solutions that came out of
the collaboration with EDF were the: Introduction of
brown paper bags with a considerable percentage of
recycled content. Solicitation of suppliers to produce
corrugated boxes with more recycled content, which had
the twin effect of reducing solid waste and building a
market for recycled products.
Abandonment of polystyrene clamshell containers to hold
sandwiches in favor of new paper-based wraps that
combined tissue, polyethylene, and paper to keep food
warm and prevent leakage.
Analysis:
McDonald’s Sustained Prosperity:
The secret of McDonald’s success is its willingness to
innovate, even while striving to achieve consistency in
the operation of its many outlets. For example, its
breakfast menu, salads, Chicken McNuggets, and the
McLean Deluxe sandwich were all examples of how the
company tried to appeal to a wider range of
consumers.The company has also made convenience its
watchword, not only through how fast it serves
customers, but also in the location of its outlets.
Freestanding restaurants are positioned so that you are
never more than a few minutes away by foot in the city or
by car in the suburbs. Plus McDonald’s is tucking
restaurants into schools, stores, and more.
Key Threats:
The key threats to McDonald’s domestically are the lack
of growth opportunities. The market is well saturated, and
it would difficult to achieve double-digit growth. Other
concerns are a newfound emphasis on healthier eating.
Most of McDonald’s most popular fare probably in some
small way contributes to the increasing incidence of
cancer, heart disease, and diabetes among the
population.
But I feel the key threat to McDonald’s continued
success is its very ubiquity. Because McDonald’s are
everywhere, the dining experience is never special. And
as Baby Boomers age and become more affluent, it is
likely that they will leave behind their fast-food ways, if
only to step up to moderately priced restaurants like
Olive Garden, Bennigans, and Pizzeria Uno. These chains
have the added advantage of serving higher-margin
alcoholic drinks. McDonald’s, meanwhile, has to
continually battle Burger King and Wendy’s, which leads
to an erosion of margins for everyone. Even alliances with
toy manufacturers, while popular with consumers, do
little for the bottom line because the cost to run these
promotions can be quite expensive. Responding to Burger
King’s October 1 Announcement
The October 1 announcement from Burger King that it
would begin offering table service is not much of a threat
at all. You can try to dress up fast food, but it’s still fast
food. I couldn’t imagine this being a potent draw for
consumers. McDonald’s best course is to ignore this
development as irrelevant. As the market leader,
McDonald’s does not need to respond to every
competitor’s initiative. Indeed, doing so would have the
effect of making McDonald’s look reactive and less like a
leader.
The advantage of not responding to Burger King’s
initiative is that the company can preserve its resources
for other marketing thrusts that may provide a bigger
payoff. The disadvantage of not responding to Burger
King’s initiative is that you allow the firm to establish
itself in a unique way in the minds of consumers—that of
a fast-food restaurant that provides sit-down service. But
again, is this inherent contradiction of fast-food fare and
upscale dining experience likely to resonate with
consumers? I would say no. If Burger King’s initiative does
prove popular with consumers—as evidenced by
expanding sales and market share—McDonald’s would be
forced into catch-up mode. But I think that this is a risk
that the company should be willing to take.
Promoting Flexibility Through Its Operating
Strategy:
The key thing that McDonald’s operations strategy has to
support is experimentation. Now somewhat long in the
tooth, McDonald’s needs a breakthrough that will provide
new avenues of growth. It has a long history of such
experimentation, which has resulted in some new profit
centers like Chicken McNuggets and the breakfast menu.
Some later turn out to be duds like the McLean Deluxe,
but inevitably experimentation in limited outlets offers
McDonald’s a way to retain its key strengths—quality and
consistency—while continuing to evolve for new palates
and pocket books.
McDonald’s and the Environmental Defense
Fund
In some ways, partnering with the Environmental Defense
Fund was a masterstroke. It brought both respectability
and valued expertise to its environmental efforts. It also
provided a primetime venue for EDF to make a difference.
Any successes, even if only incremental improvements,
would have major ramifications because of the sheer size
of McDonald’s operations.
McDonald’s should continue its partnership with EDF. With
ecology a growing concern among consumers, it makes
sense to be a good corporate citizen and get all the public
relations accolades that go along with such an alliance. It
also pays off in the bottom line by reducing shipping
costs for supplies as well as garbage removal fees.
McDonald’s would do well to stay in the vanguard of
corporations who have become environmentally aware. If
it tries to shirk its responsibilities, it can foresee a public
relations nightmare in the making. But if it does manage
to come up with some breakthroughs through its
collaboration with EDF, it can score a tremendous amount
of goodwill with the public, which may even provide a
halo effect to mitigate any other PR troubles. How far
should McDonald’s go on environmental issues? There is
definitely a public relations benefit in being seen as an
environmental leader, and the collaboration with EDF
goes a long way in making that happen. Still McDonald’s
has had a lot of success in giving its franchises some
latitude in developing new solutions.
 The line in the sand in determining how far McDonald’s
should go with its environmental efforts is determined by
the cost of the initiative relative to the hard-dollar
benefits and harder-to-quantify public relations buzz it
gets from being in the forefront on environmental issues.
The bottom line is that environmental efforts can’t
detract the company from its primary mission of
providing consistent quality to consumers. If
environmental efforts start to be a drag on the company’s
future profits, it’s time to ease up. Ideally environmental
initiatives should pay for themselves by reducing other
kinds of costs.
Dealing With the Product Range Explosion:
McDonald’s had done well with a fairly limited
product range. But falling per unit sales is a danger sign
for the firm. With competitors gaining ground on
McDonald’s, it may indicate a need to refresh its product
line. Perhaps the best way to do that is by rotating in a
couple highly promoted new menu items. This would
have the effect of enlivening the product menu, without
the need to go head to head with competitors on price.
This slackening of per unit sales might also indicate that
McDonald’s critical success factors have changed.
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 dinner consumers.
To maintain consistency in new products as it expands the
product line, McDonald’s must rely on test marketing new
menu items in pilot locations. This approach will let the
firm identify which items are likely to prove popular with
consumers while ensuring that the company can deliver
new products with consistent quality nationwide.
McDonald’s already has a history of doing this so it will
not require major changes to its operations strategy—at
least initially. If the product line-up gets too large, then
the task of maintaining quality becomes exponentially
harder. The trick is to consider how to eliminate some of
the existing menu items when you introduce new ones,
while making sure the staff is fully trained in how to
execute these products successfully.
Because McDonald’s has pretty well saturated the U.S.
market, it’s only real opportunities for growth lie abroad,
where the competition is not so cutthroat or by
introducing new restaurant concepts under brands other
than McDonald’s. After all, McDonald’s is known for fast
food. It’s not really a pleasant dining experience, just a
cheap and convenient one. I feel that McDonald’s has
reached the point of diminishing returns with the
McDonald’s brand and now needs to roll out new types of
restaurants.
Indeed, McDonald’s has the opportunity to apply its core
competencies—scrupulous adherence to quality
standards and continual promotion of experimentation—
in new venues. Imagine, if you will, McDonald’s opening a
new casual dining restaurant under the name of Splendor.
It could then franchise that concept nationwide and get
some of the dollars from consumers who have grown past
fast food. But its fastidious approach to operations would
ensure that consumers everywhere would experience the
same dining experience—a tremendous advantage for
consumers who don’t want to be surprised with a bad
meal. McDonald’s could try a number of concepts
simultaneous in different parts of the country. Those that
seemed promising could be rolled out further. The duds
could be left to die quickly. While this will be an expensive
undertaking, it holds the potential to unleash new areas
of growth in a maturing market.
Conclusion:
McDonald’s faces some difficult challenges. Key to its
future success will be maintaining its core strengths—an
unwavering focus on quality and consistency—while
carefully experimenting with new options. These
innovative initiatives could include launching higher-end
restaurants under new brands that wouldn’t be saddled
with McDonald’s fast-food image. The company could also
look into expanding more aggressively abroad where the
prospects for significant growth are greater. The
company’s environment efforts, while important, should
not overshadow its marketing initiatives, which are what
the company is all about.

Chapter 4:
Questionnaire:

Ratings:
1-Minimum
10-Maximum
5- Average
• How is the ambience at Mc Donald’s?
_______________
• How is the quality at Mc Donald’s?
__________________
• Are stores of Mc Donald’s at Hyderabad are
sufficient________
• How is the accessibility of Mc
Donald’s?_______________
• How is the quantity given by mc
Donald’s?_____________
• How are the services provided by mc
Donald’s?_________
• Is price worth to the quantity
provided?_______________
• Mc Donald’s offers are
attractive?____________________
• The items provided by Mc Donald’s are fresh?
____________
• Is home delivery good?__________________________
Chapter 5:
Analysis of questionnaire and data
interpretation:
Mc D KFC
Ambience 59 44
Quality 76 58
No. of
stores 54 49
Accessibilit
y 37 33
Quantity 54 55
Service 77 78
Price 80 59
Offers 67 88
Items 55 33
Home
delivery 30 20

Data interpretation for questionnaire:

 Mc D
Ambience 59
Quality 76
No. of stores 54
Accessibility 37
Quantity 54
Service 77
Price 80
Offers 67
Items 55
Home
delivery 30

Conclusion: Thus from the analysis we can see the areas in

which Mc D is better and the areas in which Mc D has to do better.

Conclusion:
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