McDonalds
In the last 30 years, developing markets have shown the potential for fast food restaurants to realize increasing profit margins. This is because markets such as China provide them with the capacity to offer unique products and experiences to customers. However, specific concepts must be integrated with each other to effectively connect with them. In the case of McDonalds, they are facing considerable challenges and opportunities in China. (Allon, 2012) ("McDonalds and KFC")
A good example of this can be seen with observations from a report conducted by Zach's Research which said, "The U.S. business accounts for 30% of the fast-food giant's overall revenues. The region has not been able to post positive comps since Oct 2013 mainly due to heightened competition and a few wrong decisions that have slowed service. Moreover, the headwinds in the international market have compounded the woes for the domestic market. Going forward, we remain wary of all these issues taken together along with sluggish economic recovery in some of the company's primary markets, which would put pressure on its business in the near-term. The company is also making marketing and promotional offerings. However, these initiatives are yet to reap benefits and convert into positive numbers for the region." ("McDonald's Earnings Beat," 2014)
These insights are showing how the company is facing considerable challenges from sales in some of its fastest growing markets. To fully understand what is taking place requires focusing on critical issues, the recommended strategy, providing a justification and an action plan. Together, these elements will illustrate how the company is evolving to meet the demands of consumers.
Critical Issues
The biggest issues are creating a product which is in demand. This means that the company has to offer something which reaches out to Chinese consumers. At the same time, they must provide them from their traditional menu. In 2008, the firm rolled out new products, concepts and images to attract more traffic. This is following the negative publicity it received from food safety related issues. A good example of this can be seen with insights from the case study which says, "On the road to aggressive expansion, KFC China is up against the issues of consumer confidence in food safety. This is because they sold products which had red chemical dies in certain foods. Consumers were angry as they felt deceived by the practices of firms." ("McDonalds and KFC")
In the case of McDonalds, the company is dealing with a negative backlash surrounding safety and quality. They had similar problems when it comes to the different products they are using to market to consumers. The new strategy is designed to offer customers with more choices and creating a unique atmosphere through a specific product (i.e. red kidney soup). As a result, they are taking a competing concept and using it to encourage more people to visit their locations. While it is simultaneously, encouraging everyone how they have better safety practices and standards for quality. (Allon, 2012) ("McDonalds and KFC")
Evidence of this can be seen with a recent scandal surrounding tainted beef and chicken meat. The problems became so severe; the company was forced to not sell certain products because of these uncertainties. According to Cendrowski (2014), this is negatively impacting sales and the brand image of the firm with him saying, "The humiliation reached a new pitch Friday when prosecutors in Shanghai arrested six employees of the Chinese subsidiary of McDonalds's largest meat supplier, OSI Group, for selling expired meat to McDonald's, KFC, and other chains in the country. The OSI subsidiary, Shanghai Husi Food, was caught by a Shanghai TV channel in late July re-labelling expired meat packages and using expired beef to make patties. McDonald's was short on beef and chicken for three weeks in China following the ordeal. Sales in the region that includes China plummeted 7% in July. For a while, you couldn't order a Big Mac in Beijing." (Cendrowski, 2014) This is showing how food safety issues are a major challenge for all fast food restaurants going forward. To deal with them, McDonalds needs to impose greater standards in achieving key objectives.
Lower prices mean giving customers something more. This is achieved using their value menu to sell items such as: smoothies, frappes, wraps, breakfast burritos and fruit. These items are sold in conjunction with coffee, tea and designing the location to offer conveniences (i.e. free wifi). For example, one way that McDonalds stands out is to effectively compete for cliental with lower entry pricing. These areas are designed to show how the company is offering more in contrast with competitors....
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