Market Segmentation

1.Introduction

1.1. History of McDonald's Corporation

McDonald's Corporation is the world's largest chain of fast food restaurants, primarily selling hamburgers, french fries, soft drinks, milkshakes and desserts. It appeals to local taste preferences with relevant offerings like the offerings of one-third pound Big Tasty in most Europe and Latin America.

McDonald's began in 1940 and opened by siblings Dick and Mac McDonald in San Bernardino, California. “We take the burger business more seriously than anyone else." is the philosophy of McDonald’s. The successful expansion of McDonald's into many international countries make the company become a symbol of globalization and the spread of the American way of life. However, it also make it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.

There are at least 31,000 McDonald can be found in 120 countries and territories around the world serving nearly 54 million customers each day. McDonald's has always been a franchising company and has relied on its franchisees, to play a major role in the System's success. It remains committed to franchising as a predominant way of doing business.

2. Macro environment force

2.1 Political-legal environment

Marketing decisions are strongly affected by development in political and legal environment. This environment is composed of laws, government agencies, and pressure groups that influence and limit various organizations. Companies should establish legal review procedures and promulgate ethical standards to guide their marketing managers (Kotler et al. 2003).

The establishment of consumer affairs department in McDonald’s help formulate policies and respond to consumer complaints. As they know that if they fail to do so, angry customers will spread bad word of mouth through chat rooms and other means.

By recognizing this, there were still many legal cases involving workers' rights can be found in the history of McDonald’s. For instance, the company was fined for illegally employing and over-working child labor in one of its London restaurants in 2001. However, the company is still pound of its “Freedom to Complete” award in 2006 recognized by the U.S. Equal Employment Opportunity Commission. It is a award to the company for its opportunities available to more women and minorities than any other U.S. owner and more than 50% workforce are women and minorities (Annual Report of McDonald’s Corporation 2006).

2.2 Social / culture environment

It is said that marketers are interested in the size and growth rate of population in cities, regions, and nations, age distribution, household patterns, regional characteristics and movements (Kotler et al. 2003).

Marketers must be careful not to overgeneralize about ethnic groups. To survive in a country, they should show their respect to local culture. That is the reason why McDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. It also does not offer any beef or pork items in India with mainly the freshest chicken, fish and vegetable products can be found from the menu (Annual Report of McDonald’s Corporation 2006).

Being recognize the lifestyles of many consumers today, McDonald’s are staying open longer, even 24 hours in many shops around the world (Annual Report of McDonald’s Corporation 2006).

McDonald’s is not only target young generation nowadays. The running of McCafÐ"© featuring a relaxed atmosphere for adult with more than 1,000 shops in 34 countries offer customers a variety of specialty coffee drinks along with sandwiches.

2.3 Natural environment

The deterioration of the natural environment is a major global concern. Therefore, marketers must be aware of the threats and opportunities associated with the trends in natural environment. Finite renewable resources, such as forests must be used wisely to ensure sufficient wood to meet future demand (Kotler et al. 2003).

By knowing the public became concerned that product packaging was environmentally damaging, there is a joint project between McDonald's and Friends of the Earth to eliminate the use of polystrene containers and now use recyclable paper wrappings and paper napkins.

3. Market segment

A Market segment is a subgroup of people sharing one or more characteristics result in having similar product needs.

Market segmentation is a process in marketing of dividing a market into distinct parts that have similar needs or behave in the same way. Since each segment is homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. This result to having similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way and promoted in a certain way.

3.1 Multiattribute segmentation

It is believed that multiattribute segmentation is used by McDonald’s as the bases of segmentation. This segmentation method is increasing used by marketers. It is a method that combining several variables to help identify smaller, better-defined target groups (Kotler et al. 2003).

It can be identified that several variables within geographic segmentation, psychographic segmentation and demographic segmentation have been used by McDonald’s in selecting the segment to which to serve with. They are illustrating as follow.

3.2 Geographic segmentation

Being a multinational corporation, McDonald’s operate its business in different geographical units. Its markets can be divided into different geographical units such as nations, states, regions, countries, cities. As we can notice there are shops in China, Korea, India, Australia etc.

3.3 Demographic segmentation

McDonald’s market can be divided into groups based on variables