Essay on "Services Marketing"

Essay 4 pages (1151 words) Sources: 0

[EXCERPT] . . . .

Services Marketing

Industry Overview

McDonalds operates in the quick service restaurant industry. The industry is characterized by a low margin, high volume business model, backed by location saturation and extensive marketing efforts. Firms in the industry compete in a multitude of segments, including burgers, pizza, sandwiches and coffee. McDonalds competes primarily in burgers, and is making a push into coffee with its McCafe strategy. McDonalds is the largest firm in the industry by revenue, and operates in 119 countries.

There is little regulatory intervention in the industry and as a result competition has flourished. McDonalds uses its exceptional brand reputation, its efficient operations and its marketing muscle to outcompete its main rivals in the burger business.

Company Background

McDonalds sell breakfasts, burgers, coffee and related products like fries. The company began operations as a barbeque drive-in in 1940 in San Bernardino. In 1948 the current burger operation started, and in 1954 a multimixer salesman named Ray Kroc discovered the restaurant and the process of expansion through franchising began. The company went international in 1967, added the Big Mac in 1968 and started breakfast service in 1975. By this point, the franchising, training and operating systems were already in place, setting the tone for the future of the company. Today, there are over 33,000 McDonald's restaurants worldwide and the company has approximately 1.7 million employees.

Strategic Elements

McDonalds operates with a differentiation strategy, using its brand name and unique products to drive market share. The company's image is very high -- the company's brand was rated as the 6th most valuable in the world by Interbrand. McDonalds is popular all over the world and is known even in countries where it does not operate. The tangible aspects of the business are in the fixed assets -- the restaurants are the most critical component, comprised of buildings, real estate and fixtures.

In one sense, McDonalds does not have a target market. The company sells to the mass market, which means that they seek everybody's business. However, McDonalds targets children, young adults and parents more than other groups. The company's differential advantage lies in its systems, its brand, its marketing muscle and its distinctive menu items. The advertising strategy relies on intensive communications of the firm's products and promotions. The company cycles major promotions based on slogans such as "I'm lovin' it" every couple of years.

In general, McDonalds sets its prices somewhere in the middle of the industry. The company does work hard to keep prices low, but is not the lowest-price competitor in the industry. McDonalds instead relies on differentiation to justify the slightly higher prices. That said, if it was not able to control its prices it would not be able to compete in the fast food business. Typically, when a customer enters a McDonald's restaurant he or she places an order at a counter, and then the food is quickly assembled and delivered. The customer then sits at a table to eat the food. Alternately, the customer uses the drive through to gain a similar experience.

Company Analysis

McDonalds has many strengths. The company has a great brand, strong internal systems, a strong balance sheet, substantial geographic diversification, the ability to adjust to operating conditions around the world and strong management. Each of these strengths contributes to the company's dominance of this highly competitive industry. The company's financial position allows it to pursue opportunities as they arise. Geographic diversification is important for situations like… READ MORE

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