Thesis on "Mcdonald's Marketing Strategy"

Thesis 5 pages (1510 words) Sources: 7 Style: MLA

[EXCERPT] . . . .

McDonald's Marketing Strategy

McDonald's is excellent in promotion, sales, and people skills and future entrepreneurs should learn from the company. Despite a global economic recession, McDonald's continues to experience solid sales and profit growth as well (Miller, 12). The combination of their exceptional execution ability at marketing and promotional strategies, leadership training and development programs, and the continued ability to compete on value over price all contribute to the company's ability to weather one of the worst recessions in thirty years. The intent of this paper is to evaluate each of these factors at work in the McDonald's strategic plan and how they all contribute to the company's growth.

McDonald's Promotion Strategies

One of the strengths of McDonald's is its promotion strategies. Their ability to execute Integrated Marketing Campaigns (IMC) and strategies is considered by many fast food retailing executives to be among the best in globally in their specific area of the industry. Industry analysts and thought leaders point to McDonald's ability to consistently support their branding strategies with exceptional high levels of execution (Macrae, Parkinson, Sheerman, 13) further supporting the expectations their brands create. McDonald's is also concentrating on their core unique value proposition to continually underscore their commitment to quality over and above just competing on price (Odell, 36). Since the company adopted this mindset with a stronger focus on quality and differentiation on new products including McCafe (Wright, Frazer, Merrilees, 442) which have been promoted in selected metro markets as a viable alternative to a trip to Starbuck's for coffee and a snack, the company's promotions strategies have shown their impact on sales. McDonald's excels at coordinating product introductions such as McCafe with their intensive commitment to promotional strategies globally through Integrated Marketing Campaigns (IMC) to create high levels of awareness fairly rapidly compared to competitors. McDonald's is both very efficient and effective in their ability to attain their promotional and sales objectives as a result. Second, the McDonald's strategy of using the Internet as the basis of their promotional strategies globally to support their brand, yet localizing websites in countries and regions is considered to be also world-class (Rowley, 229). The use of Web-based technologies including social networking sites Friendfeed, Facebook, MySpace, Twitter and many others are also all being leveraged by McDonald's to further support their branding and marketing message initiatives. All of these factors combine to create integrated marketing campaigns (IMCs) that capitalize on the unique strengths of McDonald's yet also create a series of strategies that can scale across multiple geographies as well, allowing McDonald's to be focused in one market with specific promotions yet also built their brands globally (Galagan, 39). Due to all these factors and the company's ability to create coordinated, synchronized promotional plans that allow for individual franchises to customize them given their unique requirements, McDonald's continues to lead this specific area of food retailing globally (Macrae, Parkinson, Sheerman, 13). This ability to create a global branding strategy while allowing for it to be customized for specific needs is the cornerstone of the company's success.

McDonald's Success in the Market

McDonald's sales record is always remarkable compared to other fast-food restaurants. This strength is exemplified in the company's latest set of financial performance figures, which shows a strong performance in January, 2009 (Miller, 12). The continual increase in profitability as measured across the nineteen financial ratios shown in Appendix A: McDonald's Financial Analysis. It is clear from this analysis derived from the company's financial reports based on their filings with the Securities and Exchange Commission as well that all key profitability ratios show continual growth and improvement. Return on Assets (ROA) has grown from 8.52% in 2004 to 14.87% in 2008. Return on Equity has increased from 17.36% in 2004 to 30.01% in 2008. Revenue per employee has also significantly increased, from $43K in 2004 to $58K in 2008. Most significant has been the continual gain in gross contribution margin (GCM) as defined as a percentage of Earnings Before Interest and Taxes (EBITDA), which has grown from 24.65% in 2004 to 33.34% in 2008.

The ability of McDonald's to continually increase its revenue and profit performance has also aided the company in being able to increase asset management and utilization as well. This has been particularly significant in the company's ability to increase inventory turns from 137.32 in 2004 to 198.13 in 2008. This is a strong indicator that the company's internal operations are also very efficient and capable of quickly transforming the many supply chain, sourcing, and procurement inputs the company has into salable products relatively quickly. The increase in performance efficiency as shown by the significant increase in inventory turns also shows how well McDonald's understands how it can significantly increase financial performance through business process management (BPM) techniques. McDonald's is known for their ability to create more efficient processes over time through this type of approach. In terms of top-line revenue growth, McDonald's has been able to achieve $19B in revenue as of 2004, rising steadily to $23.5B in 2008, with Net Income increasing from $3.9B to $6.4B in the same period.

In summary, McDonald's sales record continues to be remarkable compared to other fast food restaurants, even more so within the challenging economic times the country is in today. Posting Revenue and Net Income gains throughout the last five years, McDonald's continues to illustrate how their process-driven innovation on behalf of their franchisees on the one hand, and their effective use of new product introductions and promotions on the other have been able to give them a strong competitive and financial advantage.

McDonald's Management Leadership

McDonald's excels not only at sales but also at people skills. One of the core attributes of the company is the ability to retain and grow leaders for each of their functional areas, in addition to creating a consistently high level of professionalism with their key employees. McDonald's also has created their own unique in-house teaching center called Hamburger University. This learning center has been responsible for crew development, restaurant managers, mid-management and executive development. Hamburger University also hosted 5,000 students every year both from within the company's headquarters and also from the franchisee locations. Since 1961, Hamburger University has taught more than 80,000 restaurant managers, mid-managers and owner-operators since its founding in 1981.

This commitment to continually increase and add value to the management skills of managers and franchisees is critical for keeping the overall level of turn-over down throughout the entire network of restaurants and locations (Jenkins, 16). In addition, the continued investment in management training and leadership development also gives McDonald's the ability to define succession plans for key areas of their company, giving their employees a constant level of leadership throughout any type of economic cycle. This continuity of leadership also gives the company the ability to grow selectively but intelligently into entirely new markets. An example of this is the move into the coffee business, specifically with the McCafe product line. McDonald's needs to also create a company culture that is very focused on being able to react quickly to change, and this is one of the key components of their entire management and leadership strategy. Instead of just allowing attrition of workers to slow down their internal processes for getting work done or accomplishing their objectives, McDonald's embraces the concept of creating leaders internally that know the business very well.

Summary

The three aspects of McDonald's that lead to their success include their promotional strategies, sales success and exceptional management all provide insights into how they have been able to create an organization that is highly resilient and resistant to the economic downturn the country is going through today. By combining the internal strengths of being able to produce new products and services and then quickly roll them out through franchisees, McDonald's has… READ MORE

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