Discuss About The Segmentation Targeting Positioning Strategy.
An integration of techniques or methods that administration of an organization uses in order to analyze the external and internal environment to know the capabilities of the organization, business environment, and customers are known as Situation analysis (Bhasin, 2017). The aim of this report is to analyze the influence of external and internal environment on the fast food industry of Australia. This will help in identifying the issues that the fast food industry is facing in the Australia and strategies to be adopted in order to overcome those issues. Recommendations will be stated that might be able to support company in the long run.
McDonald’s is a famous fast food company in America and was established in 1940 by Maurice McDonald and Richard in California, United States (Oches, 2010). They started the business as a hamburger stand. The first restaurant of McDonald’s in Australia was opened in 1971 in Sydney popularly known as Yagoona. Presently there are around 900 McDonalds all around in Australia with approx. 90,000 employees and management officers (McDonald’s, 2018). The priority of the restaurant is to maintain their customer’s integrity and trust. In order to achieve this, they confirm that their employees and customers get the respect that they deserve. With their hard work, outstanding cleanliness, honesty, value, service, and quality they make sure that their restaurants are up to the standard as expected by the customers. The McDonald’s Australia limited is not a listed Public company of Australia (Daily News, 2013).
The main factor that is used to recognize the target audience with the help of services and products is known as Market Size (Kokemuller, 2018). The fast-food industry of Australia involves a variety of products. McDonald’s is a fast food giant with approx. 955 restaurants in Australia, despite the strong competition in the market company, is able to have around $5 billion sales in 2017 (Heffernan, 2016). Some of the competitors of McDonald’s in Australia are Hungry Jack, Burger King, and Grill’d etc. According to the spokesman of McDonald’s Australia, they have experienced a steady growth in both sales and guest counts last two years.
Market trends are the upward and downward movement of the financial market over a particular period of time (Logan, 2014). The fast-food industry of Australia has faced a dynamic growth over some decades as having dining out is now become the lifestyle of the residents. In 2007, approx. 1.64 billion meals and takeaways were offered by the chains of fast food and independent outlets as a whole which represents that the 44% of the overall meal was provided in the division of business food service. In Australia, there are approx. 17000 outlets of fast food covering 28% of overall viable foodservice outlets. In 2016, a diversification was observed in the menus all over the operators of fast food, especially in the large areas like chicken and burger, with various firms increasing the options for food (Euromonitor, 2017).
The distribution channel of the McDonald’s in Australia is very unique. Their distribution channel is based on the partnership culture and teamwork which makes it conceivable for them to deliver reliably high quality and safe food. It is very important that the intermediaries of the distribution channel operate maintainable and cost-effective trades and get profit from their collaboration with McDonald’s Australia. Along with this, it is also important for the restaurant of the fast food industry that they get their products in an ethical and responsible manner that adds something in the growth of viable agriculture and processes food manufacturing processes (McDonald’s, 2018).
Segmentation means dividing the population into different groups as per some type of characteristics (McDonald, 2012). In segmenting or dividing the markets, investigators normally see towards the common features like common interests, shared needs and similar lifestyle. The agenda of segmenting the market is to recognize the high yield segments i.e. segments that are profitable or possess growth potential. McDonald’s make use of segmentation criteria i.e.
Financial performance is an independent measure in which it is identified that how a company in the industry can make use of its resources and assets and make profits. This term is also utilized as a normal measure of the overall financial health of a firm in a given time period. Along with this, it can be utilized to compare the same type of companies performing in the same industry. The growth in the revenue and sale of the company reflects the positive or effective performance.
The Australian holdings of McDonald’s cover approx. 13% of the stores that are owned by the company which shows the revenue of $1.66 billion. According to the Bureau of Statistics people of Australia spend around $3.6 billion on the takeaway food and in restaurants and cafes. McDonald’s has covered huge market and seen as the Australian King in the sector of fast food with $15.6 billion fast food market. In Australia McDonald’s has around 800 franchised restaurants which reflect 6% increase in the revenue to $898m in 12 months. Considering the image, taste, and size of its menu it is possible that company can increase its revenue in the coming future. Along with this, it can be said that company has succeeded in attaining this position because it gives more priority to the customer’s demand and taste. Furthermore, according to the report of IBIS McDonald’s is the largest fast-food company in Australia because it holds 15.2% of the market share.
|
Perspectives |
Objectives |
Measures |
|
Financial Perspective |
Revenue Growth Improve Cost Structure Survive in the Market |
Sales Volume Actual Cost Cash Flow |
|
Customer Perspective |
Improve Quality of Product Customer Service Environment Friendly |
Increasing customers Customer Satisfaction Use of Plastic products |
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Learning and Growth |
Technology leadership Competencies Improve Corporate culture |
Time to introduce next generation Strategic Competencies Allow greater communication at every level of company |
|
Internal Process Perspective |
Improve Brand Image Decrease employee turnover Developing unique products |
Brand Recognition Employee satisfaction survey Leader in the industry |
The key issues that the McDonald’s deals with are economic conditions of Australia. In the starting company earned huge profit due to the increased demand for fast food in the country however it got affected due to the increase in the employee salaries hired by the McDonald’s. The company paid salary to around 7751 employees which increased to $309m from $293m (Urban, 2010).
Besides this, another issue that company faces is simplifying the menu. The menu of the McDonalds has grown 70%. The new and innovative items in the menu are considered as the employee’s burden. The franchisees are also disturbed due to the overloaded menu because the extra equipment and ingredients are costing them money (Lutz, 2014).
McDonald’s has been suspect of providing an adverse influence on the environment in various ways revolving with the element that they have constructed hundreds of plants or factories across the world in order to create their products which is resulting in pollution.
McDonald’s upholds its status as the top company in the global industry of fast food restaurant by the policies that address the external and internal factors of SWOT analysis. SWOT Analysis framework helps in recognizing the relevant external and internal factors of business that determine the success of the company (Sarsby, 2016). McDonald’s make use of various strategies in order to deal with these factors. Though, the Company deals with substantial issues depending on evolving situations in the worldwide market. This SWOT Analysis will provide most important concerns that company should address in order to maintain its leadership (Greenspan, 2017).
The strength of the McDonald’s helps it in becoming one of the leading companies in the fast food restaurant industry. This feature of SWOT Analysis reflects the internal planned factors that add value to organizational feasibility. Key strengths of McDonald’s are:
The brand image of the company makes strong business in front of competitors. Another key strength is market diversification depend on the presence of the company in various areas of the world. This factor helps in decreasing the market-based risks. Additionally, McDonald’s possess a complete system of standardized procedures, which add to the efficiency of the business and product reliability. This feature of SWOT Analysis of McDonald’s reflects that it has the competency to uphold effective operations.
The weaknesses of McDonald’s are associated with the product, processes, and market focus of the company. This feature of SWOT Analysis designates the factors of internal strategic that affect the performance of the firm. The main weaknesses of McDonald’s are:
McDonald’s standardization confirms steadiness but also decreases the flexibility of the company in relation to market variations. Less diversification of the product reflects the firm focus towards products of food and beverages, which is considered as weakness that makes highly vulnerable business to slowdowns in the industry of restaurant. Furthermore, most of the revenue of McDonald’s is from the Western economies. This weakness makes the company easily exposed to the economic drop in the western world. This feature of Swot analysis of McDonald’s reflects that the firm need to expand globally, widen its product mix, and enhance flexibility.
The opportunities of McDonald’s are associated with its global growth and product mix. This SWOT Analysis feature highlights the factors of external strategy that help in the growth of the business. Main opportunities of McDonald’s are:
As stated above the revenue of the company is dependent on the western market. Therefore it has the opportunity to expand and grow in emerging countries, like Asian economies. McDonald’s can also make use of the strategy of market development in order to start its business operations in the Middle Eastern countries in which company has not yet entered. Moreover, to overcome market-based risks, company possess the opportunity to enter new markets or create new products. This feature of the SWOT Analysis of McDonald’s reflects that the firm has major opportunities for worldwide expansion and growth.
The major threat to the company depends on the competition and sociocultural trends. This feature of SWOT analysis defines the factors of external strategy that weaken the development of the business. The key threats to McDonald’s are:
The industry of fast food and restaurant is highly competitive. Strong competitors threaten the status of McDonald’s as the leader of the market. Along with this, the trend of a healthy lifestyle is also a threat as it discourages customers from having something at McDonald’s, which is frequently critiqued for the unhealthy offering. Moreover, GMO guidelines are a threat to the company as they have the power to limit the products of McDonald’s. The company does not hold a complete GMO ingredients policy. This feature of SWOT Analysis reflects that McDonald’s require making new strategies considering the GMO ingredients, as well as fresh products to appeal customers.
Competitive advantage refers to the position of a firm in comparison to other companies in the industry. This permits effective firms to make more revenue and sales as compared to its competitors. Competitive advantage is recognized by the variation of features comprising cost structure, quality of products, customer service, branding, intellectual property and a network of distribution. The key competitive advantage that McDonald’s have is cost leadership. The company tries to offer products at the price that the competitor of the company cannot match. To achieve this, the restaurants of the company should be efficient and maintain the cost of daily operations as low as possible. If McDonald’s done this then it will allow restaurant to be bigger to other restaurants deals in same industry because they can provide products at a lesser cost as compared to other companies of fast food. Another competitive advantage company has is the fast delivery of the food items. To maintain this advantage over the competitor’s company should make the cooking processes simple for the staff. These competitive advantages provide the management of the company with the future vision i.e.: “To be the best and quick serving restaurant in the world. Being best states offering outstanding cleanliness, quality, value, and service, such that every customer becomes happy and satisfied”. The competitive advantage of McDonald’s allowing it to stand out in the market. All these features supported McDonald’s to become one of the top fast distributors.
The above analysis says that McDonald’s is facing various challenges in the Australian market. In order to overcome these challenges company need to adopt some of the following strategies:
Simplifying the Menu – As stated above, the menu of the company has developed 70% and innovative and new products on the menu are becoming the burden for the employees. Due to this, the cost of ingredients is costing more to the franchisees. Therefore, it is important for McDonald’s to revamp its menu with healthier food options and Gourmet style burgers.
Differentiation – With the changes in the taste and preferences of the demand of the customers in the present market company needs to differentiate its products. McDonald’s should involve more and new products in its menu in order to satisfy the customer’s need.
McDonald’s can enhance its capability of the business by continuous worldwide expansion, particularly in high-growth markets. Along with this, the firm can decrease its risks by adding new products or penetrating new industries related to the industry of fast food restaurant. Considering the trend of a healthy lifestyle it can add healthy food options for the customers like brown bread, multi-vitamin bread, etc. These are the relevant actions that McDonald’s must take depending on the above analysis. Besides this company can allow customers to choose the ingredients in its order so that they can enjoy more. This will attract the health conscious customers who ignore taking fat concentrated ingredients and give strong competition to the rivals present in the market.
Conclusion
In the conclusion, it can be said that McDonald’s is performing well in the Australian market. From the above analysis, it can be said that company has various opportunities in the industry. The market size and trend reflects that the demand of the customer is regularly changing due to which company needs to add healthy food options in its menu. From the financial performance of the company, it has been seen that company is able to earn revenue in the market. The SWOT analysis of the company says that it has to utilize its strengths so that it can grab the present opportunities in the market. Further, the report also talks about the competitive advantage of McDonald’s that support it in performing well and surviving in the market. Some strategic options have been provided that will help in overcoming the issues that McDonald’s faces i.e. Simplifying the menu and differentiation. In the end, some recommendations have been given to enhance the performance of the company and competitive with the competitors in the market.
References
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Bhasin, H. (2018). SWOT analysis of McDonalds – McDonalds swot analysis. Retrieved from https://www.marketing91.com/swot-mcdonalds/
Daily News. (2013). McDonald’s to become ‘Macca’s’ in Australia. Retrieved from https://www.nydailynews.com/life-style/eats/mcdonald-macca-australia-article-1.1236347
Euromonitor. (2017). Fast Food in Australia. Retrieved from https://www.euromonitor.com/fast-food-in-australia/report
Greenspan, R. (2017). McDonald’s SWOT Analysis & Recommendations. Retrieved from https://panmore.com/mcdonalds-swot-analysis-recommendations
Heffernan, M. (2016). McDonald’s Australian sales to hit $5b. Retrieved from https://www.smh.com.au/business/companies/mcdonalds-australian-sales-to-hit-5bn-20161023-gs8i13.html
Jurevicius, O. (2018). SWOT analysis of McDonald’s 2018. Retrieved from https://www.strategicmanagementinsight.com/swot-analyses/mcdonalds-swot-analysis.html
Kokemuller, N. (2018). What Is the Definition of Market Size? Retrieved from https://smallbusiness.chron.com/definition-market-size-65724.html
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Lutz, A. (2014). McDonald’s CEO Reveals The Brand’s 4 Biggest Problems. Retrieved from https://www.businessinsider.com.au/mcdonalds-ceo-on-company-strategy-2014-10
McDonald, M. (2012). Market Segmentation: How to Do It and How to Profit from It. 5the edn. U.S: John Wiley & Sons.
McDonald’s. (2018). Macca’s Story. Retrieved from https://mcdonalds.com.au/about-maccas/maccas-story
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Urban, R. (2010). Australia a star of McDonald’s empire: fastfood. Retrieved from https://www.theaustralian.com.au/business/australia-a-star-of-mcdonalds-empire-fastfood/news-story/bfb2a6ad0ce36d944aa793ec1ec771bc?sv=3b6e66752aac245736df9268ae19f190
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