McDonald's Market Audit

MKT3097: Marketing Consultancy Project

Market Audit on McDonald’s

[pic 1]

Student Name: Adrian Hajjar

Student Number: 140315990

Word Count: 5103

Contents

1.  Introduction

This report will analyse McDonald’s’ macro, micro and competitive environments, accompanied by relevant marketing frameworks to further aid a full situational analysis. McDonald’s UK operations will be the primary basis of evaluation.

1.  Company Background

McDonald's is the most valuable fast food chain worldwide by both revenue and brand value (Statista 2017). Starting out as a California based barbeque restaurant, it was opened in 1940 by Richard and Maurice McDonald. They incorporated a production-line service style reminiscent of McDonald’s modern-day practices, and remains the central unique selling point at the heart of the business. Franchising agent Ray Kroc purchased the business in 1955 and founded McDonald’s Systems Inc., a predecessor to the McDonald’s Corporation (McDonalds 2018). Ray Kroc’s founding ethos was based upon ‘Quality, Service, Cleanliness and Value’, and by 1958 McDonald’s had already sold its 100 millionth hamburger (McDonalds 2018).

Figure 1: Brand value of the top ten largest global fast food chains in 2017

[pic 2](Statista 2018a)

The current day brand value is estimated at a staggering 97.7 billion U.S. dollars (Statista 2017), with this number more than double that of their next nearest competitor, as shown in Figure 1. McDonald’s boasts over 34,000 stores worldwide, and employ in excess of 1.8 million people (McDonald’s UK 2017), with around 80% of their stores being franchised (McDonald’s Corporation 2017). Their ‘glocal’ marketing approach combines both standardised procedures which has helped make McDonald’s such an iconic and internationally recognisable brand with regional menus and pricing strategies, which allows them to tailor themselves to area specific socio-economic factors. With them operating in over 188 countries (McDonald’s UK 2017), their brand is so globalised that their signature burger, the ‘Big Mac’, has its own index that measures the purchasing power parity between countries (Statista 2017), and is a now a standard global indicator. McDonald’s industry leading integrated supply chains have been built around long-term relationships, innovation and efficiency, contributing towards increased productivity and economies of scale. Because of this, they are able to position themselves as price leaders in the industry.

1.  Macro-Environmental Analysis

3.1 PESTLE Analysis

The PESTLE framework can be used as an underlying model for any company that wishes to analyse the macro factors influencing business and the boundaries for marketing actions (Faarup 2010). Political, economic, social, technological, legal and environmental factors are those considered by this model.

Political Factors:

Brexit – The United Kingdom voted to leave the European Union on the 23rd June 2016. Whilst negotiations are still ongoing to clarify the terms of the UK’s imminent exit, this will be of concern to the majority of businesses operating within the EU as well as Great Britain. With the President of the European Commission Jean-Claude Juncker adamant that the EU must be ‘intransigent’ in denying British firms access to the single market, it seems the prospect of a ‘Soft Brexit’ are rapidly declining (The Telegraph 2016). In a ‘Hard Brexit’ scenario, the United Kingdom would forfeit its access to the EU’s single market and customs union. Unless subsequent bi-lateral trade agreements are made with member states, firms would have to fall back onto the World Trade Organisation default tariffs. Whilst the average EU tariff rate is seemingly low at around 1.5%, their tariffs and quotas on agricultural produce remain high as a protectionist measure, which could result in ‘significant food price inflation’ for British consumers (Dhingra 2017). Senior analyst for the food and agriculture based financing firm Rabobank, Harry Smit, warns that fresh ingredients such as fruit and vegetables could become up to 8% more expensive following Brexit (Food Manufacture 2017).  

However, McDonald’s has quite publicly committed to locally sourcing ingredients, with 100% of their beef from British and Irish farms (Footprint 2017), and with around 60% of their total produce sourced from the British Isles. This puts them in a relatively good position compared to others in the industry, but they still import vegetables such as tomatoes, lettuce and pickles from Spain, France and Holland (McDonald’s UK 2011), meaning there is still uncertainty going forward. Increased costs could lead to decreased profitability or an increase in prices so the consumer bares the cost.