McDonalds Analysis and Strategy

3.2 Symbolic Associations

By creating a positive symbolic association, a brand can build a relationship with its consumers that can lead to trust and ultimately loyalty to the brand. Easy identification of a product, familiarity and predictability are all the factors as to why consumers would choose McDonald’s over another fast food provider.

As mentioned, McDonald’s predictability is one of the main aspects of symbolic association as customers expect to receive the same service, the same consistent menu and the same experience. However, McDonald’s is a versatile company and it wishes to portray its brand as such. In order to do so, they adapt their products to suit all ethnicities and nationalities; preserving at the same time the QSC&V that characterize the company.

McDonald’s is also famous because of its welcoming attitude towards children, as it is perceived to be a very family orientated and children friendly environment. It does that not only by adapting its menu to suit children but also by creating special areas for children.

The price is mainly considered to be the factor that would either attract people or stop them from going to McDonald’s. While it can be perceived as an inexpensive option by some, showing a good deal and great value for money, it can be perceived cheap by others, representing something to be of a lesser quality. This purely depends on the perception of each individual and the psychological symbolism attached to it.

Over the past few years, due to the changes in health awareness, McDonald’s was blamed for contributing to the obesity of children and adults. They have tried to beat the negative associations by introducing a healthy range of salads and also adopting a new approach to show that if consumers combine McDonald’s with a good exercise regime, they can actually have their McDonald’s meal. However, the fact that McDonald’s added healthier options to the menu does not mean the negative associations will disappear as the brand is known for its burgers and fries; unhealthy food.

Finally, one of the most important aspects of any brand is its reputation, as anything affecting it would automatically affect the consumers’ perception. Nowadays, public opinion about the company is a bit conflictive, as the reputation of McDonald’s is split between negative and positive associations.

4. Unique Resources

All companies require resources in order to operate. However, to obtain differential advantage companies need to focus on their unique resources, the ones that can set them apart from their competitors. In order to understand what are the competitive advantage-creating resources, many different models have been created, focusing the attention on different characteristics. From Barney’s model (value, rareness, inimitability and non-substitutability) to the Grant’s model (durability, transferability, transparency and replicability) the main characteristics and conditions resources must meet are value, barriers to duplication and appropriability (Fahy, 2000). Moreover, resources can be divided into tangible and intangible and the following paragraphs will highlight McDonald’s unique resources.

4.1 Tangible

4.1.1 Restaurants

McDonald’s began in 1940 with a  opened in  and since then it has expanded all over the globe. The company owns around 15% of the total restaurants, while the remaining 85% is operated by franchises. In order to best place its branches, McDonald’s utilizes a precise strategy based on research and customer convenience.

McDonald’s uses its restaurants to attract its target groups. It focuses mainly on children, teenagers and most recently young time conscious adults. As a result, McDonald’s has taken a much more consolidated approach. Its motto has changed to grow by getting better and not bigger and hence the profit reinvested has been used to improve its current restaurants instead of opening more.

By creating children play areas for children, larger tables for groups of teenagers, offering Internet access for the convenience of a young busy adult and generally by redecorating their restaurants in a much more colorful and modern way, McDonald’s is truly created not only a place to eat but also an atmosphere in where their product gets consumed. 

4.1.2 Capital

Restaurants are used to generate income, a part of which McDonald’s reinvests in order to generate more business and cash flow. McDonald’s makes substantial profit that enables them to keep reinvesting in the brand to ensure innovation and brand reinforcement. From restaurant operations to marketing, from consumer insights to menu management, McDonald’s is continually improving. They truly are “better, not just bigger” (Annual Report, 2009).

4.2 Intangible

4.2.1 The Brand

The McDonald’s brand is one of the most important resources that the company possess. It is reported that McDonald’s success in the fast food industry is not only due to its sales and size but also because ‘consumers recognise their corporate identity as readily as its products’ (Cebrzynski, 2005). Throughout the years, McDonald’s became one of the best-known brands worldwide and this is proved by the fact that it ranked 6th among the best global brands with a brand value of $32,275m in 2009 (Interbrand, 2009). Moreover, through consistent marketing communication McDonald’s managed to establish a strong relationship with its consumers and nowadays the Golden Arches brand become so valuable that the brand sells itself.

Moreover, in its website, McDonald’s highlights the importance of their “Forever Young” brand, how they portray their message and how they want it to be perceived (Brand Center, 2006).

“We aspire to deliver a Forever Young experience every single day, for every single customer, every single time.

We must be familiar and new.

We must be traditional and contemporary.

We must be predictable and surprising.

We must appeal to kids and to adults.

We must be timeless and timely.

We must be Forever Young”.

4.2.2 Product Innovation

Customers’ trends are constantly changing and so do their choices. People see McDonald’s everywhere and, over a long period of time, this overexposure might be a reason for brand abstinence. Generally speaking, people get easily tired of the brands they use if they don’t see changes, so when they do not see the expected innovation they switch to new brands.

McDonald's product innovation is therefore one if its greatest strength. Customers know what to expect when they walk into a McDonald’s store because of its famous traditional and consistent menu. However, the company’s food development team constantly works with suppliers, customers, franchisees and restaurants in order to expand the menu with new products. For this reason, next to the traditional menu, McDonald’s offers new products line to catch up with the new trends and tastes of people in order to satisfy customer expectations. Products such as the Majaraja Burger in India is just one of the examples of why McDonald’s manages to retain its market share in countries where its competitors do not even attempt to enter.

4.2.3 Human Resources

Workforce of McDonald’s, despite being one of the greatest liabilities and costs to the company, is also one of its biggest assets. McDonald’s understands the importance of consumer’s satisfaction and the fact that is mainly dependant on well-trained, friendly and happy staff. The next two paragraphs analyse human resources in more details.

4.2.3.1 Scouts

For McDonald’s it is important that the product is available to the customer at the right place and at the right time. For this reason, McDonald’s spend lots of money hiring scouts in order to find the best locations within the marketplace to provide customers with convenience and accessibility. In general, McDonald's restaurants are located on prime high-traffic areas that are highly visible and easily accessible. From business areas to residential areas, from airports to shopping centers, McDonald’s can be found almost everywhere.

4.2.3.2 Managers and Employees

As mentioned, human resources are extremely important for McDonald’s brand image, as the consumers’ satisfaction is mainly dependent upon well-trained and motivated staff. McDonald's is committed to the development of all of its employees, at every level of the organisation. For instance, the average McDonald's restaurant manager spends more than four years in training. Training is a process, which is continuous, and employees have to attend courses not only in the restaurants but also at the company's Management Training Centres.

5. Unique Capability

As defined by Ferrell et al, a company’s capabilities relate to distinctive competencies that it has developed to do something well and efficiently. A company is likely to enjoy a differential advantage over its rivals in an area where its competencies out do those of its potential competitors (Ferrell, 2005).

The unique capability of McDonald’s is its Operations. The company follows a comprehensive framework of training and monitoring to ensure the consistent Quality, Service, Cleanliness and Value propositions offered to its customers worldwide. McDonald’s had pioneered the term systematization; defined as the act of organizing something according to a system. The main idea, applied by Ray Kroc since the early stages of the company, is to translate directions and operation practices into essential steps to repeatedly follow during the day-to-day operations in every section of the business. In particular, the business system is guided by the operating procedures and training manuals that govern the operation and maintenance of each McDonald’s restaurants.

6. Competitor’s Differentiation

The Fast food industry is a very competitive sector, with several different iconic brands battling it out for market share and trying to stand out. A company has to differentiate itself from the competition to stay in business. It is understood that being the low cost providers is no longer a valid differentiation strategy as there are companies with competitive products and prices everywhere. A firm must brand and differentiate the company as the best service and product provider in order to stand out in front of the competition and avoid competing on price only.

McDonald’s product offerings can be divided into two different categories, each of which comes with their respective competitors. The categories have been divided as follows: fast foods and cafes and the following paragraphs will analyse the competition in each sector.

6.1 Fast Food

In the UK, the main chains offering fast food products are McDonald’s, Burger King, KFC, Domino’s Pizza, Prêt a Manger, Subway and Pizza Hut (GMID, 2009). However, the only two chains directly competing with McDonald’s are Burger King and KFC as these are the ones offering similar products in the same similar way. What really differentiates McDonald’s from its competitors is the way it delivers its product as well as the difference in quality of service. In particular, as mentioned earlier, McDonald’s deliver consistent quality food, through a consistent fast service, in a consistent clean environment, at a great value for money and the availability of free wi-fi, which neither of the main competitors offer. McDonald’s is the only brand within the fast food industry that promises to provide the consistency of QSC&V and is this predictability that makes it unique against its direct competitors.

Children’s meals are another example of how McDonald’s differentiate from its competitors and comes in the form of the famous ‘Happy Meal’; a fun box with a meal and a free toy. Although Burger King also offers meals for children, McDonald’s has an exclusive association with Disney, and therefore McDonald’s offers exciting toys, which often run alongside current movies showing at cinemas. The Happy Meal attracts parents who want to please their children, and this is something that McDonald’s is famous for and do better than the competition. McDonald’s birthday parties are also an area where they differentiate from Burger King and KFC as neither provides this service within the UK. Burger King has targeted its young adult males, whereas McDonald’s has always targeted families and has developed a fun atmosphere so that it became a natural choice for a parent to take its children.

6.2 Coffee Shop

By offering a cheaper coffee alternative, McDonald’s initiated a direct competition against Starbucks, Café Nero and Costa Coffee. Moreover, with the introduction of free wi-fi, comfortable seating and nice decor, McDonalds had recently tried to directly compete with Starbucks. However, McDonald’s is not renowned for coffee and as describes by the author of “Differentiate or Die”, Jack Trout, “People go to whom they think does the best job in whatever food they are after”. Therefore, if a consumer only wants a coffee, McDonalds would not necessarily be the first choice as McDonalds speciality is burgers and fries.

7. Trust Associated

McDonalds is a functional brand as its main purpose is to satisfy basic needs such as hunger and thirst. As shown in the table below, McDonald’s is featured at the lowest level of perceived risk, due to its familiarity and the fact that it provides consumers with an easy choice based on predictability and credibility.

        

Brand trust is said to be extremely important to the success of the brand as it promotes brand loyalty. Brand trust is created through delivering the value proposition that the brand offers the consumer. As mentioned above McDonald’s value proposition is offering consumers the consistency of Quality, Service, Cleanliness and Value. Business expert Robert Golden describes McDonald’s as, “a place that produced a consistent meal in a consistently clean environment at an affordable price”. However, as society is becoming more and more demanding, health conscious, and with the growing competition in the food and drink market offering added value such as free wi-fi access and comfortable seating, McDonalds needed to do more than just deliver their value proposition of consistency to stay competitive, and at the same time ensure that brand trust is not lost.

McDonald’s understand the importance of their consumers trusting the brand, as McDonald's Europe president Denis Hennequin stated, 'Our customers need to know they can trust McDonald's. It is critical to their decision to visit our restaurants’. Denis Hennequin believed that  ‘corporate responsibility was key to building trust in the brand’ as it would show that McDonald’s is a caring organisation and therefore published its first European Corporate Responsibility Report in 2005 to reassure consumers of its food quality. Almost £7 million were spent on promoting choice and balanced lifestyles and McDonald’s aims to build relationships with experts such as nutritionists and paediatricians and will continue to use the CSR platform to reassure consumers in the future. McDonald’s also tried to fit into the more health conscious society by offering healthy alternatives to fries and soft drinks such as fruit bags and milk and also added sandwiches to the menu.

There are two different views relating to trusting the McDonald’s brand. One is trusting McDonald’s to deliver its value proposition and the other is trusting McDonald’s as the corporation and its ethics. Nowadays, consumer trust is gained though transparency and McDonald’s is trying to do this through their corporate social responsibility platform. However, as a corporation, McDonald’s need to stay profitable in order to survive and therefore the corporate social responsibility platform can be perceived to be a tactic developed by the company to engage with the hearts and minds of consumers in order to build trust and not necessarily because they care about where they get their ingredients from, how their employees are treated or whether the kids who eat McDonald’s are healthy or not. The fact that society is calling for transparency and healthier choices and to keep negative press at bay McDonald’s had to adhere to these pressures in order to stay in business. However, these marketing tactics could have lost brand trust as it somewhat insults the consumer’s intelligence; McDonald’s is a fast-food burger restaurant and if people want to buy healthy food, they will not go to McDonald’s.

8. Contact Points

Contact points are defined as points of interaction between brand and consumer and they represent an opportunity for an organisation to inform, persuade and build long-term relationships creating competitive advantage. Through its contact points McDonald’s has tried to communicate its transparency and consistency through which it is continuing to win back some of the trust it lost during the days of negative press.

8.1 Restaurants and Drive Thru

Consumers mainly come into contact with the brand through McDonald’s restaurants and drive-thru. It is therefore extremely important to ensure that the consumer experience reflects what the McDonald’s brand aims to stand for. As consistency is known to build consumer trust, the restaurants are set-up to consistently demonstrating its cores values of Quality, Service and Cleanliness and do so through its employees.

8.2 Website

By displaying the nutritional information of its products and also showing the whole process of how it ethically produces its ingredients, McDonald’s shows consumers that it is a brand that cares and that it is very transparent and therefore is building trust with the consumer. Moreover, McDonald’s created a website called ‘Make up your own mind’ where members of the public can find out about anything about the ‘food, business, people and practices’ of the company, asking questions that are personally answered by trained staff. It also informs about the A-level equivalent qualification that employees can achieve. This helps McDonald’s removing the stigma that was attached to having a “McJob”: unstimulating, low-paid job with few prospects (Oxford English Dictionary, 2010). 

8.3 Advertising

McDonald’s advertising, especially on television, has been instrumental in building a powerful emotional relationship between McDonald's and its customers. The fundamental warmth and humanity it has demonstrated in its communication remains unmatched by its competitors. For instance, through the nation’s favourite sport, McDonald’s uses sports personalities such as Alan Shearer to endorse its association with football.  

8.4 Litter Patrols

McDonald's is one of the biggest sponsors of council-provided litterbins in the country as bins can be found outside all its restaurants. Moreover, McDonald’s has an extensive litter management program in place in each restaurant through its Litter Patrols. Litter patrols are staff dealing with all the litter that customer leave in the areas surrounding the restaurants in order to avoid excess littering. They can be considered as an important contact point with the consumer as it act as an interaction tool between passers-by and the brand while it portraits a positive message and to a certain extent it also increases consumers’ trust in McDonald’s.

9. Forms of Consumption

Research indicates that customers feel a unique emotional bond with the chain, the idea of a visit to them triggers a feeling of anticipation and excitement unlike in any other restaurant (Choo, 2007). There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. Moreover, as reported on their website, McDonald’s restaurants reflect their commitment of giving back to the community in which they operate and their main aim is to provide every customer the best quick-service experience, every time.

In the UK McDonalds exclusively sells its products through its restaurants and Drive-thru’s. As mentioned earlier, McDonald’s main capability is its operations management, which ensure all areas of the restaurant work alongside each other in order to deliver a complete seamless package of consistent quality, service, cleanliness and value. The McDonald’s system is something, which has been nurtured throughout each store through its management of operations via training and, without this infrastructure, McDonald’s would not exist.

10. Neo-Tribal Groups

Since 1985 every year on 16th of October, people around the world reunite in front of McDonald’s stores in peaceful protests against the company. The protest, which coincides with the United Nations World Food Day is called National Anti-McDonald’s Day, which was founded by the London branch of Greenpeace to express their disapproval of the company.  The main aim of the protest is to raise awareness about issues such as how McDonald’s damage the environment, exploit its workers and sell unhealthy food in a bid to become more profitable. This worldwide event, which is attended by many people, could have serious negative implications on the McDonald’s brand and how it is perceived by its consumers.

11. Recommendations

Based on the above brand analysis, this paragraph will now focus on recommendations about how McDonald’s should act in the near future in order to maintain its success among consumers.

Firstly, McDonald’s should not lose sight of its core values as this is what makes McDonald’s successful as a brand. Therefore, they must keep investing in employees’ training and restaurants’ ambient in order to portray the value of consistent quality food, fast service, cleanliness and value for money. In other words, the company needs to maintain the concept of “growing by getting better and not by getting bigger”.

Secondly, looking around the website, we realized that consumers are encouraged to ask questions about the company through the website earlier mentioned. However, it does not exist a section where people can suggest and advice, in order to communicate what they think about McDonald’s and how they believe the company may improve. This is really important because it fortify the customer-company relationship while helping listening and understanding customers’ needs in order to entirely satisfy them.  

Thirdly, in order to stay successful, McDonald’s must be true to the society. It must be transparent and honest about what it sells to keep consumers trusting the brand. McDonald’s should not use sneaky, dishonest tactics such as in past adverts because it may disguise the truth about its food. The company should react to societal needs and changes in a responsible and honest manner, rather than try to be perceived as a healthy brand.

(4162 words).

12. References

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