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McDonald's Corporation: Case Study

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McDonald's Corporation: Case Study

McDonald's Corporation is the largest fast-food operator in the World and was originally formed in 1955 after Ray Kroc pitched the idea of opening up several restaurants based on the original owned by Dick and Mac McDonald. McDonald's went public in 1965 and introduced its flagship product, the Big Mac, in 1968. Today, McDonald's operates more than 30,000 restaurants in over 100 countries and have one of the world's most widely known brand names. McDonald's sales hit $57 billion company-wide and over $25 billion in the United States in 2006 (S&P).

The main target customer for McDonald's includes parents with young children, young children, business customers, and teenagers. Perhaps the most obvious marketing for McDonald's is its' marketing towards children and the parents of young children. Ronald McDonald was first introduced in 1963 and marked the beginning of their focus on young children as a critical part of their ongoing business. Parents like to visit McDonald's because it is a treat for the kids, and the kids enjoy the cartoon like atmosphere. McDonald's also targets business customers as a part of their core business. Business customers may stop during the workday and can count on fast service, and consistently good food. Another major target of McDonald's marketing is to teens. Teens find the value menu especially appealing and McDonald's markets their restaurants as a cool place to meet with their friends and to work (The Times 100).

The menu at McDonald's typically consists of hamburgers, chicken sandwiches, salads, drinks, shakes, and a recent influx of healthier alternatives. McDonald's also is widely known for their breakfast menu, which consists of sandwiches, pancakes, French toast, hash browns, and breakfast drinks. Since McDonald's appeals to such a wide audience, it must constantly re-evaluate its menu depending on feedback and market research. McDonald's expends considerable resources to update its menu and introduce new products in order to be more in tune with its target audience (The Times 100).

McDonald's also focuses on the perception of value within it line of products and therefore takes care to price its menu items accordingly. Different products are priced differently depending on which target audience those items appeal to most. An extensive value menu is an essential part of any fast-food menu in recent years. The prices and products within the value menu can prove to be areas that will make or break a fast-food companies' year depending on the competitions value menus. Regional pricing and periodic low-price specials are also commonplace at McDonald's, as is the distribution of coupons. In attempt to boost sagging sales McDonald's has developed it's new taste menus, which offer new items at higher price points. The constant development of new products has boosted the sales and net income of McDonald's in recent years. It is estimated that their new line of higher quality premium drinks such as Cappuccinos and gourmet coffees will add over 1 billion dollar in sales in 2008.

McDonald's use various marketing tools for the promotion of its products. McDonald's uses television, radio, customer mailings, point of sale displays, direct mail, and frequent sales promotions. The marketing for its products mainly depends on the stage of a particular product in the product lifecycle (The Times 100). New products tend to get more marketing dollars and consumer exposure. As well as focusing it marketing on particular products or consumers, McDonald's always has an extensive national marketing strategy that it changes from time to time. These national campaigns, which usually become synonymous with certain catch phrases, are geared towards changing it image as its customers change and the corporations focus changes. McDonald's utilizes a variety of distribution points to establish ties with it consumers, not just the restaurants themselves. They may sponsor community events, establish relationships with other businesses such as gas stations or schools, and they have a presence on the web.

The cooperative environment of McDonald's is quite large. Groups that have a vested interest in the success of the firm include: 465,000 employees, 900,000 stockholders, farmers, suppliers, and the communities in which they operate. Marketers, advertising firms, market researchers, product developers, and financing companies also fair well when McDonald's does well. In fact the public and concern over public health and welfare has developed into a primary concern for the fast food industry.

The competitive environment for McDonald's is quite extensive and highly competitive. The main competitors of McDonald's include: Wendy's, Burger King, Taco Bell, KFC, Hardees, and many others. The fast food market is highly saturated and the barrier to entry is very high. Most of the competitors in the industry are well established and are able to achieve efficiencies and quality that new entrants may find impossible to achieve. The fast food like many others has trouble during economic slow-downs and does well during periods of economic booms.

The social, political, and legal environment of the fast food industry is of particular interest in recent years. Cultural attitudes and beliefs have changed significantly in the last twenty years. As the health of American consumers becomes more troubled, and obesity reaches epidemic proportions, the fast food industry



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