Professional Documents
Culture Documents
1Introduction
1.1McDonalds operations in international markets
McDonalds is the leading global foodservice retailer with more than 30,000
localrestaurants serving 52 million people in more than 100 countries each day. It is
one of theworlds most well-known and valuable brands and holds a leading share in
the globally branded quick service restaurant segment of the informal eating-out
market in virtuallyevery country in which it operates.
1
external and
Micro environment
the macro-environment
includes other environmental constraints, such as the structure of the market, the
suppliers, customers,trends of the market, the public and competition.Equally
important is the internal environment incorporating the examination of
thecompanys marketing mix (product, price, place, promotion) and service mix
(people, process management, physical evidence). An analysis of the internal
environment alsocovers other factors such as sales, profitability, market share and
customer loyalty.The internal audit examines the companys own resources and
supplies suggestions asto the companys strengths and weaknesses. Internal
considerations are mainlycontrollable by the company and, therefore, companies
should mostly avoid any problemsfrom this area. It is evidently proven that product
development and strategic formation is based upon the internal organisational
capabilities.
THE STRATIC PROCESS-marketing planning:
Every company, after considering both its
internal strengths and weaknesses and
theexternal environmental influences that
affect it (opportunities and threats) is in a
positionto develop an effective marketing plan.
Failure to understand the external and
internalcapabilities may lead to suboptimisation of the organisations strategy and
resourcesinvested.Multinational companies
must highly consider environmental auditing
and the
development of the SWOT (strengths,
weaknesses, opportunities and threats)
analysis. Thisis vital if they want to capitalise
on organisational strengths, minimise any
weaknesses,exploit market opportunities as
they arise and avoid, as far as possible, any
threats.
Environmental factors:
The climate and physical terrain of a country are important environmental
conditionswhich have a significant effect on the demand and the type of product
made available.Prior to entry into a new market, it is very important for McDonalds
to consider the physical terrain and climate in the appraisal. Altitude, relative
temperatures and humidityare some of the climatic conditions that can affect
products in foreign markets.Being environmentally friendly is another important
6Stakeholders:
It is important that multinational companies highly consider and value their general
publicor stakeholders their staff, suppliers, distributors, shareholders and the
consumer itself.How a consumer and, indeed, the other publics mentioned, view
the company and the products marketed is important, firstly in order to assess what
market you are in but,secondly, to assess whether the corporate image of the
company is functioning in a positive manner. Public perception of your product
allows it to be positioned or repositioned to reach the required target market and,
therefore, be successful. If you viewyour product as portraying a certain image that
is at odds with the public perception of it,obviously your marketing strategy is not
functioning properly. Likewise, if your businessitself is viewed in a negative light by
actors both internal and external to the company,steps need to be taken including
the design, quality, marketing and strategy of what isoffered to correct this and
therefore create a feel good factor. Having a good relationshipwith all publics is
highly considered by McDonalds.
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The external environment and its effect on strategic marketing planning
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2.
7Customer tastes:
of the world according to cultural, regional andnational differences in line with local
needs. Therefore, the concept of think global, actlocal has been clearly adopted by
McDonalds (Vignali, 2001). Below are some keyexamples of the Internationalisation
marketing strategy pursued by McDonalds.
2.8Product
their tastes and in Greece and Cyprus the introduction of the Greek Mac has been a
hugesuccess.These are examples of how McDonalds has adopted its product offer
in internationalenvironments.
2.9Structure
of the market/competition:
The issue of the competitive environment must be seen as probably one of the
mostimportant issues. By gathering continuous data about competitors, such as
their strategicstrengths and weaknesses, their objectives, strategy, tactics and
reaction patterns and thesort of marketing activity/budget, a company can decide
its own position in relative termsand be prepared for what challenges are facing
them in terms of competitor attacks. Thisinformation also can be used to interpret
sudden moves by competitors and how they willrespond to a move you are
considering taking.Porter (1980) and Doyle (1983) are both proponents of
positioning strategy. Porter considers the external factors which impact upon a
firms competitive positioning. Doylerefers to the choice of target market segment
which describes the customers. A businesswill seek to serve and the choice of
differential advantage which defines how it willcompete with rivals in the
segment.Porter claims that competition is at the core of success or failure of the
firm and that asuccessful competitive strategy can establish a profitable and
sustainable industry position. He claims that there are two fundamental questions
underlying the choice of acompetitive strategy: firstly, how attractive is the industry
with regard to profitability andsecondly, what are the determinants of a competitive
position within an industry.According to Porter there are five competitive forces that
will govern the rules of competition and these rules will prevail in any industry both
in domestic and internationalmarkets. The five forces are:
2.9.1Threat
of rivalry/competitors:
The concentration of firms within the fast food industry is low due to the established
presence of McDonalds, Burger King and KFC. However, in certain
markets,McDonalds will face competition from established domestic fast-food
outlets.
2.9.2Threat
of new/potential entrants:
The barriers to entry are quite high for new entrants, as the size of McDonalds
means theyhave achieved economies of scale and have preferential access to raw
materials anddistribution channels. New entrants may find that a high cost of
investment is required insecuring plant and machinery.
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Technology:
Technological advancements are affecting every aspect of the social and business
environment and McDonalds takes care to ensure appropriate use of technology for
achievement of organisational objectives and competitive advantage (Baldwin,
2013 n.p.). It works on technology constantly to enhance the optimisation of its
operations (Baldwin, 2013 n.p.). The preparation of a big Mac,for example,now takes
60 seconds and is processed in three stages, including packaging (Baldwin, 2013
n.p.). The organisation is making use of several types of technology for storage of
food, regulation of temperature, preparation of food, control of supply chain and
financial management and reporting (IncisiveMedia, 2004, n.p). McDonalds is
linking different responsibility centres through appropriate communication systems
in order to enhance optimisation of efficiency and productivity (IncisiveMedia, 2004,
n.p ).
3.6.
Political Factors:
The corporation thus has to constantly anticipate the political environments of the
different locations in which it works and take appropriate proactive or reactive
action.
3.7.
Economy:
The organisational management of McDonalds, both local and central has to thus
constantly work towards anticipating and overcoming diverse types of economic
challenges (Gasparo, 2012, n.p; Gould, 2012, p 608). It is important to however
appreciate that the demand for affordable food products is by and large inelastic
and stays high, regardless of the health of the economy (Gasparo, 2012, n.p; Gould,
2012, p 608).
McDonalds makes use of this benefit by ensuring that people can come to its
outlets when they wish and purchase affordable meals for themselves and their
families (Gasparo, 2012, n.p). The organisation has shown remarkable resilience
during the recent recession and has protected its profit margin by balancing its low
priced menus with premium products (Gasparo, 2012, n.p; Gould, 2012, p 608).
3.8.
Environmental Factors:
McDonalds, as the largest food retailing chain in the world, has to deal with several
types of environmental factors (McDonalds Corporation, 2014, n.p; McDonalds
Corporation, 2010, n.p.). The firm makes significant use of beef, packaging
materials, napkins, carry bags, oil, water and power. Its operations also result in
generation of substantial amounts of solid waste (McDonalds Corporation, 2014,
n.p; McDonalds Corporation, 2010, n.p.).
The firm has over the years worked towards the enhancement of operational
sustainability and improving the ecological soundness of its operations (McDonalds
Corporation, 2014, n.p). It has tied up with the Environmental Defence Fund (EDF)
affecting-mcdonaldsC
CONCLUSION:
It is argued that effective marketing strategies and tactics cannot be developed
withoutfirstly analysing the environment in which the company operates. A number
of uncontrollable elements affect McDonalds international marketing strategy and
tacticalimplementation. These groups of elements include the PESTLE (political,
economic,social, technological, legal and environmental), structure of the market
and competition being faced (Porters (1980) five forces analysis) as well as analysis
of its stakeholders,customers and product adaptation within its internationalisation
strategy. All of theseaspects are crucial to a companys strategic decision making.
The level of understandingthat exists in these relationships will determine the
success of a company.McDonalds is not making a one-time standardised global
choice but it is striking tofind a balance. This is not a straightforward task, as
identifying the balance betweenstandardisation and adaptation is a challenge and
very difficult to achieve. The goals of reducing costs and complexity lead
McDonalds to consider standardisation, whilecustomer orientation sways it towards
adaptation. It is evident through the analysis thatMcDonalds is adapting its
marketing mix elements in order to go in line with the externalenvironment. At the
same time, it should be noted that the company is also standardisingwhen and
where possible in its desire to achieve economies of scale and global uniformityand
image.With respect to McDonalds internationalisation strategy, the companys
effectivenessand profitability is obviously well supported by their strong competitive
position andmarket share in their primary product market. Its international success
is achieved by thecompanys strategy and tactics, which complement each other
and work in harmony, providing the optimum return bounded by efficiency. The
company is thriving as it is botheffective (doing things right) and efficient (doing the
right thing).McDonalds portfolio of products is well managed and ensures the best
fit between thecompanys strengths and weaknesses and for offsetting the threats
found in its competitiveenvironment. In considering the strong competitive position
of the firm in a highlyattractive market, it is suggested that McDonalds should
protect its position (Mckinseymatrix). This can be achieved by concentrating efforts
on maintaining its existing strength by investing to grow at maximum digestible
rate.It is recommended that McDonalds continue this approach, that is:
simultaneouslyfocus its attention on aspects of the business that require global
standardisation and aspectsthat demand local responsiveness. When appropriate,
processes should be standardised,however, operation in local markets necessitates
the maintenance of the appropriate localflexibility.McDonalds is adopting
differentiation and cost leadership strategies (genericstrategies). In terms of
differentiation, the firm attempts to be diverse from its competitors by adding
something to its product that will provide a unique value to its customers. This
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D. Vrontis and P. Pavlou