Discussion:
Part 1:
Critical evaluation of the strength of strategy of MacDonald:
This particular section illustrates the application of marketing concepts and philosophies and for development of any business, marketing strategy plays a very crucial role. The main objective of development of marketing strategy is to ensure that the customer’s demands are fulfilled by the existing or newly launched product. The concepts of marketing focus on the needs to understand the customers before designing the new product (Mellentin and Heasman 2014). It is so because it helps in incorporation of needs and wants of customer in designing the product so that sales and profit target are met. Some theoretical concepts of marketing that are used by organization involves
Marketing segmentation:
Market segmentation is the process that is used by the organization for dividing a market into meaningful, identifiable and closely segmented groups of consumers. The segmentation logic is based on the idea that all consumers would not be satisfied by one particular product at go. Marketers make use of number of variables for the segmentation such as demographic, geographic, behavioral and psychological segmentation. Geographical segmentation is about dealing with the customers that differs across region and countries. Psychological variables are about segmentation of market based on social class, life style and individual personality. Segmentation on behavior is based on the level of attitude, knowledge, response and user of product. Segmentation of market is essential for identification of potential markets and customers through segmentation of plans and goals (Bublitz and Peracchio 2015).
Strategic marketing concepts:
In highly competitive markets, it is crucial for organization to keep an eye on competitors and how a company should position itself in order to gain sustainable competitive advantage is of utmost importance. An organization can gain competitive advantage by adopting the service process that is environmentally sensitive (El Ansari et al. 2014).
Marketing mix:
Marketing mix is the distribution, production, pricing and promotion strategies to achieve the target market and producing changes. It is a set of relevant factors and solution that enables the company to meet the needs of customer and goals of organization as a whole. The four Ps of marketing are the set of controllable variables that is used by firms to influence the response of buyer. The four components of marketing include product, price, promotion and place.
Product- Product is the combination of services and goods offered to the target market and it is one of the key components of marketing mix. Plans of marketing mix are to build profitable customer relationship by bringing value to them.
Price- The pricing strategy developed by business should be competitive for attracting new customers.
Place- Place is about the whole process of organization bringing product and service to end customer along with distribution channel and physical location. It is essential for restaurant to locate itself in a convenient and good location that will help in making better sales.
Promotion- Promotion is another important marketing mix component that helps in boosting sales and recognition of brand.
In the fast food industry, MacDonald became the leader with the strong response to competition, strong focus on customer service and using marketing service for the development.
The market segmentation of MacDonald is based on the demographic factors. The market segment of MacDonald is based on the several population factors such as income, age, gender, occupation, religious, education, national and other related variables. Children is regarded as central customers by MacDonald and it took the effort of maintaining loyalty of customers by the methods such as celebration of birthday parties, offering discounts on some special events and method of sending gifts. The focus relating to the fast food shop mainly focuses on the working group people who want good quality food at cheaper price (Frynas and Mellahi 2015). It is easier for the organization to implement further steps after the concept of segmentation has been set.
MacDonald sustains their competitive advantage by providing more value to customers. Company attempts to provide best value to customers of anyone in the market and when it comes to value, they prevail to be leader with dominance. Innovation is other factor that is used by organization to sustain their competitive position. The new menu items is created and innovated by utilizing culinary head chefs so that high quality taste is provided to customers. Their expansion to dominate the market is done because of sustainable advantage over its competitors in terms of optimal physical locations, purchasing power, brand recognition and resources available for marketing.
In order to maximize the impact and reach of MacDonald, it utilized branding and co branding with major companies. For co branding with other companies, company has found strategic ways and have used the benefits for marketing of the restaurant. MacDonald has co branded with companies like Coca Cola, Walt Disney, Oil companies, Cadbury and Hot wheel toys in happy meals.
The marketing mix adopted by McDonald comprised of several approaches that helps in meeting the concerns in different market around the world. It includes the tactics and strategies defined by marketing mix to reach the target customers. In order to suit the local conditions of market, some of the variations of marketing mix are used by company. Marketing mix adopted by McDonald helps in facilitation of effective reach to the target market which helps in supporting the leading global industry position of company along with brand strength. Marketing mix elements of restaurant forms the marketing system of company and helps in achieving marketing objectives.
All the types of marketing communication are incorporated in the promotion aspect of marketing mix. Sales promotion, merchandizing, point of sale display, loyalty schemes, direct mail, door drops and advertising are some of the method. The prime focus of MacDonald is on targeting children. Children are targeted in happy meals by giving small toys along with the meal. While placing order on several meal combos, customers are provided with various schemes for winning prices by way of scratch cards and lucky draws.
Outlets of Macdonald are spread evenly across the cities so that it is easily accessible to customers. Products of restaurant are available to customers at their further convenience through drive in and drive through options. Main place used by MacDonald to distribute the products include kiosks, restaurant, mobile application and post mate app and websites. Restaurant is the place where MacDonald generates most of its revenue from.
One of the important determinants when charging price from customers is the perception of value of customers. A mental picture is drawn by customers on the worthiness of product. Products served by organization have psychological connotations for the customers and it is more than a physical item. Low price strategy comes with the riskiness of comprising with the product quality. When deciding on the price, organization should be well aware of the integrity of brand.
Product classification by MacDonald is done into categories of branded core value products and branded affordability. This strategy has been adopted for the satisfaction of customers having different price perceptions.
Part 2:
Situational analysis for identification of opportunities and challenges faced by MacDonald:
Situational analysis of MacDonald is done by the application of PESTLE framework which is a useful tool that helps in examination of external environment of fast food industry.
Political factors- For the fast food industry, political factors impose threat to the operations of business due to regulation of government on packaging.
Environmental factors- The revenue growth opportunities and convenience for customers for fast food chain have been facilitated by the growth of third party delivery partners. Growth of fast food brands are supported by increasing adaption to their kitchens. Adaption of kitchen as with all the areas of customer foodservice in year 2018 serves as huge opportunity and disrupting factors for protecting the long term stability of business and diversification of revenue streams (Jun et al. 2016).
Social factors- The important factors for many UK customers as perceived by MacDonald are dining experience and quality of food. In order to fight off with the growing competition, the company is testing more dining options and premium menu. The menus have been accordingly adapted by different brands as health remains the most significant topic of discussion among consumers. In area of fall in discretionary income, the trend of ingredient and short term health of consumer is less evident. In recent years, a large number of brands such as Itsu and Leon have performed strongly as they have major focus on customer health. Many other competitors of MacDonald such as Nandos, Greggs and Subway have positioned themselves for attracting increasingly health consciousness consumers by developing healthier options.
MacDonald faces challenge in this regard of development of healthier options on their menu for attracting increasingly health conscious consumers.
In addition to this, MacDonald is in particular focus of attention concerning the long term sustainability of business models. However, the growth of outlet and strong financial results has eased the previous concerns surrounding the business model sustainability. The concern about the business model sustainability has been due to potential fading of health factors and its relevance. For the wider fast food market, this factor is considered extremely important.
Technological factors- The increasing staffing cost is the main concern of the operators of restaurant and there is increased mechanization in many areas have been facilitated by the technological factors. It is so because the roles of staffs within the outlets of fast food are less skilled. For mitigating the factor of staffing cost, business model should incorporate the mechanization. Restaurant such as MacDonald is required to increase the speed of adopting technology as it is not expected that the consumers would have same level of human interaction (Kraak and Story 2015).
Legal factors- Legal factors would help in promoting health complaints and campaign regulations among consumers. Some of the significant external legal factors impacting the operations of business of MacDonald are new health regulation at workplaces and legal minimum wage levels. Revenue of restaurant can be significantly impacted by local health regulations and minimum wage levels of United Kingdom.
Economical factors- In light of strong competition prevailing in the fast food industry of United Kingdom in year 2018, demand for product is likely to remain highly elastic. For the British consumers, price will be the most important factor influencing product demand given the current level of inflation. It is so because they would seek to develop more affordable alternative (Boyland et al. 2015). There would be relatively small impact on fast food outlets operating in country because of fall in discretionary income.
External environment analysis of fast food industry of United Kingdom is done by the application of framework of Porter’s five forces.
Bargaining power of buyer- Bargaining power faced by MacDonald is high due to large number of fast food service providers, high availability of substitutes and low cost of switching.
Bargaining power of suppliers- The bargaining power of suppliers of MacDonald is weak. Factors responsible for weak bargaining power include low forward vertical integration, high supply and large number of suppliers.
Threat of substitutes- MacDonald faces strong threat of substitutes because of high performance to cost ratio, low cost of switching and higher substitute availability.
Threat of new entrants- Threat faced by MacDonald from new entrants is moderate due to moderate cost of capital and high cost of developing brand.
Rivalry from competitors- MacDonald faces strong competition because of saturated fast food market. External factors that are responsible for strong forces of competitive rivalry are high level of aggressiveness of firms, low switching cost and high number of firms.
Part 3:
Recommendation of marketing strategy:
From the analysis of efforts taken by MacDonald to extend their brand, it can be seen that revenue growth opportunities have been facilitated with the growth of third party delivery partners in light of limited delivery options. However, company has been facing issues surrounding their business model resulting from potential fading and relevance of health factors. It is required by MacDonald to put a major focus on health for performing strongly and gain competitive advantage. MacDonald should position themselves to attract the health conscious consumers in order to gain market share and maintain their competitive advantage (Kraak and Story 2015).
Strategy for brand extension:
Since consumers are becoming increasingly flavor adventure and crave convenience, they are looking beyond these departments to prepared food aisles and packaged for organic offerings. Sourcing ingredients for preparing healthy food is challenging and in order to sport the official organic seal, organic products should have at least 95% of organic ingredients. Steps should be taken by MacDonald to develop innovative product. The mainstream organic ingredient such as chicken soup, wheat for pasta, oil for vinaigrette and chicken for soup are limited in supply (Guthrie et al. 2015). Therefore, they should make investment in overseas and domestic organic farming that will help in increasing the supply of organic food ingredients. Fast food manufacturer such as MacDonald need to source organic ingredient for sourcing and for this they should build an organic supply chain.
The main target market of MacDonald includes young children and teenagers along with business customers. Most obvious market for MacDonald perhaps is the marketing towards young children and the critical part of the ongoing business is to focus on young children. MacDonald can leverage their brand name by extending to new categories such as opening toy shop under the brand name of Mac Toys. Introducing a separate toy shop would be a child directed marketing strategy that is intended to influence the food choices, food preparations, health and diet of children. The marketing practice of using toys to market the meals of children is targeted as potential policy focus (Cooke and Papadaki 2014). This would help in improving the nutritional quality of meals of children at restaurant. Furthermore, it would assist parents in their efforts to purchase healthy options when eating. The choice and preferences of food is affected by the practice of tying premium and restaurant toys to cartoon, characters and movies.
It is evident from simulation studies that when food is associated with the popular cartoon characters, branded characters and toys, the perception of children towards preferences and taste of food would enhanced. There is likelihood that when children are provided with the option of buying toys, they are likely to choose healthy meals.
Strategy for product extension:
The product extension that is recommended to MacDonald for meeting the needs of health consciousness consumers is Organic MacD. This particular extension of product line would sell fast foods with organic ingredients is done due to increasing popularity of fast foods. Consumers today are increasingly aware and have become mindful that eating a diet made up primarily of fruits, veggies, nuts and grain is better. A separate began chain would help in promoting the Organic MacD by serving foods that are primarily made up of organic foods (Kleef and Dagevos 2015). For instance, burgers prepared should contain pea protein while chicken sandwiches contain pea, soya and wheat protein.
Design, packaging, ingredients and logo of products- The core elements of products will be ingredients that are sourced organically. Primary function of design and package of food product helps in attracting the customers. Packet containing organic product should have logo that displays the brand name in green color. Green color is indicative of the fact that the products have been sourced organically.
Promotional strategy- In today’s world, digital social media strategy is incorporated by marketers for marketing and advertising the brands. Such platform would help in dramatic growth of company. The approach of Social media marketing can be viewed by company as a strategy that helps in enhancing the ability of marketer to reach loyal and engaged consumer. The industry food ideology is challenged by crowd culture of social media.
In addition to this, message strategy can be used by marketers where the message can be customized according to what most appeals to the customers. Designing of creative content is done by keeping the preferences of customers in mind and it should encompass both the delivery method and message. There is increased reliance of customers on internet and this would tempt the marketers to utilize their websites and platforms of social media to market natural or organic products. The growing population can be reached by using the social media campaign. Marketing strategies for selling organic and natural products are always changing and facing these dynamic environments, it is recommended to adapt the promotional strategies suitable to marketing requirements (Rimkus et al. 2015).
MacDonald should start with an integrated approach that would help in marketing of organic and natural products through the outlet so that regular products are compared to natural products by the customers.
Place- The outlet of restaurant selling organic food should be designed in such a way that it attracts health conscious consumers as well as consumers buying regular products. Ambiance should be designed so that it lures customers to compare the regular and organic products. The placement of healthy food should appeal customers as this particular factor plays a very important role for enabling product to look attractive.
Pricing strategy- The pricing strategy that should be adopted by MacDonald is skimming strategy initially. It is a strategy where a relatively high initial price is set by marketers initially and subsequently, they charge lower price. Organic products often suffer from competitive disadvantage compared to the mainstream products. In addition to this, organization can also employ cost based pricing whilst maintaining fairness in price. Skimming pricing is recommended because it would help restaurant in covering additional cost that is required to prepare organic food (De Vogli et al. 2015).
They can also employ market penetration strategy where the existing brand preferences by customers are broken down. This is done by setting a point of open price that is lower than the price point that is eventual. MacDonald implementing this pricing strategy would be able to maximize their share of market with the objective of increasing profits by reducing the costs and building brand equity. Profits attributed to organization can be improved from adopting this strategy by moving the base of consumers to more profitable products or to the higher value products (Betz et al. 2015). This particular pricing strategy would help MacDonald in quickly capturing the market share as the competition is taken by surprise. Since this particular strategy is based on marginal cost pricing, it helps in creating pressure of cost reduction and cost control.
Conclusion:
The report has been prepared for presenting the application of marketing tools and concepts in service organization. MacDonald applies the concept of marketing that helps in creating value for customers. Situational analysis is done by the application of framework of PESTLE that helps in elucidating the challenges and opportunities that is faced by MacDonald in fast food market of United Kingdom. Some of the weak areas that have been highlighted in the report is dining experience and quality of food along with the health factor that have become crucial for customers of UK. The product and brand extension has been recommended in light of the identified weakness and challenges. Introducing a separate shop of toys under brand name Mac Toys would assist organization in promoting the healthful meals and pairing healthy meal with toys would make children to choose healthy meal over less healthful meal. The product extension of incorporating organic ingredients in the restaurant food would attract health conscious consumers. Therefore, it would be viable for MacDonald to provide customers with organic food so as to gain market share and competitive advantage against their competitors.
The report is prepared to demonstrate how the organization is able to create customer value by the application of marketing concepts and philosophies. In this regard, the marketing strength of MacDonald has been highlighted and the efforts taken by company to create value for customers by the application of appropriate marketing concepts. The current marketing environment faced by MacDonald in United Kingdom is identified by the evaluation of external forces. The situational analysis has been performed using the framework of PESTLE. This fast food outlet is well acquainted of the growing threats faced from new competitors that offer premium quality. The country is struggling to keep up with the taste of customers and many brands continue to perform well (Adams and White 2015). It is required by the organization to go for brand as well as product extension for maintaining competitive position as against its competitor.
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