Competitive Analysis 6j585h

ANALYSIS OF MCDONALD’S

Submitted by: - Karan Mehta Submitted to: - Davlin Tay Student id: - 30120021 Submission date: - 9th June’ 2015

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Table of Contents      

Executive Summary 3 Introduction 4 FAST FOOD INDUSTRY ANALYSIS 4 KEY INDUSTRY EVOLTION (Stages of industry life cycle) 6 FACTORS IMPACTING FAST FOOD INDUSTRY 10 STAGE (industry life cycle) AT WHICH THE FAST FOOD INDUSTRY IS CURRENTLY OPERATING IN AND REASONS TO CHOOSE

11  CURRENT STRATEGY OF MCDONALDS  SOME KEY DYNAMICS OF MCDONALDS/ KEY SUCCESS    

FACTORS SWOT analysis of McDonalds Porter’s five forces analysis on McDonalds PESTEL Analysis of McDonalds MAXIMISING SUCCESS OF MCDONALDS AT ITS CURRENT

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STAGE AND POSITIONING ITSELF AS IT ENTERS SUBSEQUENT CHANGES  COMPETITIVE ANALYSIS  CONCLUSION  REFRENCES

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EXECUTIVE SUMMARY

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The fast food industry is called as the food industry which is prepared very much easily and which can be served easily. Firstly been popular in the United States of America in the 1950s. Fast food restaurants were primarily started to aim the age sector between 15-30 who need to travel a lot or the people who attend there. The fast food industry in United States was reasonably 191 billion USD in 2013. It has been calculated that it will exceed 210 billion. The majority that is the 77.3% of large market is a combination of fast food restaurants and drive-thru and the rest consists of take away, buffets and cafeterias. The fast food industry has come up with lots of house hold brand names, domestically and globally. Some of the fast food companies around the world are McDonald’s, KFC, and pizza hut, Dominos, Subway, yum! Brands. Today’s time taste is one of the most important components when it comes to restaurant. Health is not that much considered, as the nutrition quality of the food does not leaves a healthy impact on the customers. Its has been said that 80% consumers around the world dine at easy restaurants at least twice a fortnight. (Facts, 2014)

INTRODUCTION 3

McDonald’s Corporation is world’s largest chain of burger’s, soft drinks, fast food restaurants around the globe, serving more than 68 million customers daily in 119 countries and having at least 35000 outlets. Headquartered in the United States, this company began in 1940 as a barbeque restaurant operated by Richard and Maurice McDonald. The companies’ total revenue in 2012 was $27.5 billion with profits of $5.5 billion. According to 2012 BBC report, McDonald’s is known as the second largest private employer after WalMart with 1.9 million employees, 1.5 million to whom work for franchisee. McDonald’s principally sells hamburgers, cheeseburgers, chicken nuggets, French fries, breakfast meals, soft drinks, desserts and milkshakes. The company has recently upgraded its menu cluding salads, fish, wraps, smoothies, fruit and seasoned fries.

FAST FOOD INDUSTRY ANALYSIS The analysis of the fast food industry is generally a marketing based research in which it has been shown that how companies compare with each other on sales, profit and even products quality. The analysis of the fast food industry cans also b done through secondary research, existing data that can be purchased or by the primary research surveys including the phone interviews, mail and online questions. Significance The second fast food industry analysis data can be purchased from companies, which collect all the data about the fast food companies like NPD group and A.C. Nielsen. The data includes the market share information and units sold, currency used etc. Mostly all of these companies like to know whether their customers purchased food inside or outside vs. the competitors

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and like to know where most of the customers like to go for outing an their they try to open their store as well. Types The fast food companies now a days are doing their own industry analysis by primary and secondary research on their own and also by doing qualitative and quantitative studies. The qualitative research can be called as when the company compares their own new product to the competitive item and even in of price. The quantitative research is done mainly by calling customers and asking them or by rating the product on a scale of 1-10 in of quality, price, location etc. Identification The fast food industry analysis can also e conducted by the ATU process i.e. awareness, trial and usage. ATU is only made to measure brand and the advertising awareness among all the food companies. As the customer is only aware of the company that has more brand ments but ATU lets see how a customer visits a restaurant on a weekly basis vs month vs all of the other ones. Function This analysis measures the customer satisfaction among all other competitors. The fast food companies are interested in knowing how good they are when they deal with the customer vs. the competitors and in hospitality, cleanliness, and even value for money. Considerations The fast food industry calculates the demographic comparisons among with their key competitors such as in age, sex, size of each household, average number of people living in one house. Other important aspect is the educational qualification of the customer and their status and then accordingly the company makes out the products and services. (Small Business Chron.com, 2015)

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KEY INDUSTRY EVOLTION (Stages of industry life cycle)

The chart above shows that how in the four stages of industry life cycle of fast Food industry in the world is. What is the level of demand, technology, products, Manufacturing, trade competition and KSF’s in all 4 stages.

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The chart above focuses on the industry evolution of the fast food companies, how they start their business and how do they end up or start declining. Industry life cycle It generally includes the stages the product goes through after its development in the market, as it starts from the introduction to the end of the product that’s is decline stage. Same as the children go through the age of preschool, elementary school, teenage, and young adult and so on, the

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products have the same life cycle of different stages. The ILC is a very much beneficiary instrument that helps the dealers manage the product’s recognition and success in the market place. The industry life cycle can vary for different types of product categories. The chart mentioned above illustrates how a products life cycle can move from one stage to another and how much is the length of the stage varies. Some products start from its early stage but due to bad market response they are been taken away from the market there itself but some of the products start from one stage and at every stage they spend a long time. The Introduction Stage This is the first stage where any fat food company starts with its development. It is same as commercialization or the last stage of the new product development process. The cost of marketing i.e. doing marketing research of the market, branding, ment is quite higher than the other stages. Communication (promotion) is a very important process used at this stage in order to tell about the product to each and every customer to let him or her try the product. For e.g. food companies like KFC, McDonalds, subway, dominos have their outlets in almost all the countries around the globe with a different marketing criteria and cultural norms according to the country itself.

The Growth Stage Generally, the marketplace accepts all the fast food companies. However it enters the growth stage of industry life cycle. The growth stage happens to be when the company has increasing sales, has got more competitors, making good amount of profit. For e.g. when dominos had a great success with their pizzas they started selling other items like garlic breads, pasta etc. The number of distributor outlets exploited to sell the product can also increase the growth stage as the company tries to reach as much of the marketplace as possible. The Maturity Stage 8

After the new competitors enter the market, the potential of getting new customers decline and the sales of the product typically goes down. This thing indicates that the product has reached the maturity stage. More consumer products are at their maturity age if their buyers have repeated purchases despite having new product launched by other company. For e.g. customers of McDonalds tend to be with it even after launch of Hungry Jacks, which gives the same food what McDonalds, offer. Modification of the target market helps the food company invite different customers by obtaining new s, putting different market divisions, finding new uses of the product In order to appeal more number of customers. The Decline Stage When the sales drop and it continuous to drop to the lower level, that means that product has entered the decline stage in the market. The decline can be very easily reflected by the change in consumer preference, technological advantages, and the alternatives that satisfy the same need of the consumer and even in a better price and with good technology can lead to decrease in demand for that product. As compared to fast food companies like McDonalds, KFC, subway the other local fast food companies are operating in their decline stage as they are the alternatives when a consumer don’t find the outlets of big food companies near to the place he lives in or when he is on any vacations. Some of the company stops the promotion of that product or decline the price of that specific product while some company still try to make it competitive in the market and keep running it with profits even in the decline stage. (2012books.lardbucket.org, 2015)

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FACTORS IMPACTING FAST FOOD INDUSTRY The fast food industry generates about $165 billion in revenue as based on the market research done in 2011 by IBIS World. The research indicates that more than 190k fast food companies operate in USA. Anyhow almost all the restaurants have the same prices for their food but many consumers are looking for having healthier and quality food and then they don’t care much about the money. Some of the factors those impact fast food industries are: 

Economic Downturns: - Fast food restaurants are better during any economic downturn than the prices restaurants have. Many customers who are on a tight budget in the bad economy often turn to fast food like dominos, McDonalds, subway, etc. for their inexpensive and time

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saving meals. Mergers: - Fast food companies often merge with other big companies during the time of recession to grab a bigger share of the market and increasing profits at the same time. Arby’s and Wendy’s merged in 2008 as unemployment in US was rising and only few consumers use to eat outside of their homes. That merger expanded market share for both of the food giants and thus, it was called as the third largest food

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chain in US. Economic Recovery: -The low cost meals are less of a concern for some consumers as a slow economy being to reflect. QSR magazine reported that in year 2011 McDonalds beat the company’s 2009 sales by $1.5 billion after the chain had included some smoothies, sundaes. The consumer demand for healthier food is adding more fruits, vegetables, and salads to its menu.

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Commodity Prices: - Low prices on meats, vegetables and other food stuff help cut the meal prices without having losses. The cutting of prices can be a boomerang when the reduction sures food and product costs. (Small Business - Chron.com, 2015)

STAGE (industry life cycle) AT WHICH THE FAST FOOD INDUSTRY IS CURRENTLY OPERATING IN AND REASONS TO CHOOSE The fast food industry is currently operating at its MATURITY STAGE of industry life cycle. Fast food is a trend for the teenage till the adults to have quick meals that’s is why almost all the fast food chains have easy accessible options like drive-thru, home delivery, take away etc. which keeps a customer focused about that food which he can eat in few minutes. To illustrate more about this, Burger King has come back to better designed organizations, which rises the essential mechanism, reduces considerable operating cost and thereby increases prospects for harmonization. Big fast food chains like McDonald’s, dominos, KFS, Subway, Hungry Jacks, Burger King etc. are ruling around the globe and have got 70% of market under their food addiction because it is very ease to eat and carry. However, McDonald’s have got several foodstuffs that grow popular according to its demand in the marketplace. McDonald’s have got all basic needs and wants what a customer appeals for. They always come u with new food products and lots of other entertaining things. They also have got ample space for kids celebrating their birthday in the McDonald’s where they can have their separate party on any of their special occasions. Almost al the fast food chains have got these facilities in India, perhaps which makes the fast food industry more competent and strong in the market. Anonyms (2015)

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CURRENT STRATEGY OF MCDONALDS The current strategy of McDonalds is to get its customers satisfied with the product they sell in comparison to their competitors Some of the factors are:     

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Deliver quicker service Technology functions Consumer Observation reading Consumer Satisfaction Research Activities

Deliver quicker service: - The success of McDonalds is based upon their quick service, which they provide to their customers. The Managers in McDonalds are also offered a hospitality degree in order to be more kind, effective with the customer from the McDonalds University accreditation program. Better and quicker service is the aim of McDonalds in the Asian and developing countries as McDonalds is working hard to get the customer in

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those developing countries. Technology functions: - In this age where technology is the key element the company has provided many new technology changes. For e.g. any customer if wants to buy and eat in his car itself can go through the drive- thru and can order by looking at the menu’s available on screen and can even order over there to the machine equipped there. This is the best way in which McDonalds is taking advantage of the technology. More technological things are coming

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up in accordance with the countries. Consumer Observation reading: - In this case the McDonalds crewmember is one who can deliver this service by communicating in an effective manner with the customer head to head. McDonalds crewmember is been very much enthusiastic and confident while attending the customers. The can read very well what customer is actually after and even help the customer getting the 12

food what he’s after. They are been skilled and given weekly orientation on 

how to deliver the customer in a kind manner. (MAIDMENT, 2015) Consumer Satisfaction: - McDonalds has been always been satisfying customer needs and wants. They are growing more to satisfy customer needs as some of the customers need fast food at mid night, so for that many of the McDonalds store are been opened at night that is 24/7 so as to satisfy

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customer needs. Research Activities: - Many research activities are been carried out in order to satisfy the customer and compete over the competitors to whom the customer can jump anytime. McDonalds main strategy is to know how the competitor is adapting its prices and products and even taking away its customers by delivering the same quality food and at the same cost at which McDonalds is providing

SOME KEY DYNAMICS OF MCDONALDS/ KEY SUCCESS FACTORS Success in the fast food industry requires a level of perfection within the market and in different parameters. Mostly customers go are looking for fast food are mainly focusing on speed, predictability and easy to eat food rather than a dining experience. Business who can understand these elements can master the business and make huge profits as well. Some of the elements are: 1. Branding: - McDonalds have great signs, logo’s which can be visible from miles which makes the customer turn up there way towards it. Early morning breakfast meals also attract the customers going for early work or university. 2. Location: - It’s all about convenience. Most McDonalds outlets are in the busy areas of the town, which attracts more number of people. 3. Speed: - McDonalds crew and stores are very much fast. As is takes just few minutes to order the food from the store or through the drive way itself.

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4. Efficiency: - McDonalds runs on thin profit margins but at the same time sells lot number of products which in total makes a huge profit and because of customer getting more and more attracted towards the fast food McDonalds is providing regular training to their staff so that they can serve the customer in the best possible way.

SWOT analysis of McDonalds Strength  Large market share  Nutritional information available on packaging  Strong brand name, image and reputation Weaknesses   

Unhealthy food image Legal actions related to health issues, use of fat and beef oil. Use of HCFC-22 to make polystyrene that is contributing to ozone depletion

Opportunities   

Growing healthy trends among consumers Worldwide de-regulation Low cost menu that will attract the customers

Threats  

Anti American settlement Global recession and fluctuating foreign currencies. (UKEssays, 2015)

Porter’s five forces analysis on McDonalds

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Industry Rivalry: - There is an extreme competition in the fast food industry. Many new local fast food rivals have emerged up in every town, which are slightly taking the customers away of McDonalds. The new opening of other stores near to McDonalds store is also taking away the customers. Bargaining power of suppliers: - It consists of number of suppliers available all around the globe. McDonalds is considered as world’s largest restaurant chain in of sales. Even the bargaining power of suppliers is high. Most of them own the McDonalds on their own and even the power of suppliers is low, lower the cost of raw materials supplied higher the total profit is. Threat of substitutes: - The availability of the products that McDonalds sell are now a days easily available at the local stores with lesser price. The narrow threat of substitute due to introduction of local taste products. Threat of New Entrants: - There is easy access market with low start up cost in the market. The regulation power is in limit. Any new company can come up with products what McDonalds sell and can easily take away the customers of it. Bargaining power of buyer: - Many buyers can even buy less quantity products from McDonalds. There is no compulsion to buy quantity in large from them. There is even very less chance of switching as it has very big brand image through differentiation and uniqueness. (UKEssays, 2015)

PESTEL Analysis of McDonalds

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Political: - The international operation of McDonalds is highly prejudiced by the distinct national strategies executed by each government Economical:    

Very high target market Market leader Low cost with more profit McDonalds has the tendency to experience in problems in occurrences where the economy of the particular states which is knockout by inflation and changes in the currency rate

Social:  

Work within many community units Increase employments

Technological:  

Advanced technology development Quality standards

Environmental:  

Quality packing Local production using imported purchases

Legal:  

Legislation for product Sustained logo (UKEssays, 2015)

MAXIMISING SUCCESS OF MCDONALDS AT ITS CURRENT STAGE AND POSITIONING ITSELF AS IT ENTERS SUBSEQUENT CHANGES

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The following factors can also lead McDonalds towards success while it is now in its maturity stage

 Product Differentiation  Low Price Strategy  Control cost  Maintain market share  Positioning of a follower  Repositioning of competition Hence, these are some of the success maximizing tips for McDonalds to adopt which can be very much helpful in the current maturity stage. (Small Business - Chron.com, 2015)

COMPETITIVE ANALYSIS

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The above chart compares McDonald’s with its four closest competitors in the market in the fast food business. In the year 2013 McDonald’s sales increased by 1.95% as compared to its competitors that experienced a decline in the market. The competitors average sales declined by 9.18%. The (EBITDA) averaged to 28.2%. McDonald’s margin of 36% was above the whole competitions average. Thus, McDonald’s is the market leader in all perspectives in the fast food sector among its close competitors. (Marketrealist.com, 2015)

CONCLUSION

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The conclusion comes to an end that McDonald is the largest fast food companies in the world. They continue their path for success in this industry by winning hearts of all the customers around the globe. Still McDonald’s is the world’s largest fast food provider and they want be the same until the next decade. The industry life cycle is one of the main focuses that we did in the report where McDonald’s is at its maturity and at the same time growing subsequently. In many developed countries McDonald is at its growth level but in many developed it has already reached the maturity level.

REFRENCES 19

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Facts, F. (2014). Topic: Fast Food Industry. www.statista.com. Retrieved 9 June 2015, from  http://www.statista.com/topics/863/fast­food/

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Small Business ­ Chron.com,. (2015). Types of Economic Factors That Can Affect the Fast  Food Industry. Retrieved 9 June 2015, from http://smallbusiness.chron.com/types­economic­ factors­can­affect­fast­food­industry­36923.html

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Small Business ­ Chron.com,. (2015). Fast Food Industry Analysis. Retrieved 9 June 2015,  from http://smallbusiness.chron.com/fast­food­industry­analysis­652.html

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2012books.lardbucket.org,. (2015). Managing New Products: The Product Life Cycle.  Retrieved 9 June 2015, from http://2012books.lardbucket.org/books/marketing­principles­ v2.0/s10­02­managing­new­products­the­prod.html

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UKEssays,. (2015). PESTEL analysis of McDonalds and the food industry. Retrieved 9 June  2015, from http://www.ukessays.com/essays/marketing/pestel­analysis­of­mcdonalds­and­the­ food­industry­marketing­essay.php

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(2015). Retrieved 9 June 2015, from 1. http://www.ukessays.com/essays/marketing/product­ life­cycle­of­mcdonalds­marketing­essay.php

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Maidment, N. (2015). McDonald's new CEO has a modern strategy to fix the brand. Business  Insider Australia. Retrieved 9 June 2015, from http://www.businessinsider.com.au/r­the­ burger­loving­brit­mcdonalds­new­ceo­takes­on­sales­slump­2015­2

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Small Business ­ Chron.com,. (2015). What Steps Do Companies Take to Maximize Profit or  Minimize Loss?. Retrieved 9 June 2015, from http://smallbusiness.chron.com/steps­ companies­maximize­profit­minimize­loss­41526.html

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Marketrealist.com,. (2015). Must­know: Comparing McDonald's with its competition ­ Market Realist. Retrieved 9 June 2015, from http://marketrealist.com/2014/07/must­know­comparing­ mcdonalds­with­competition/

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