Mcdonald's In China

McDonald's in China

McDonald's branding strategy is essential in order to build solid products and product lines. This branding is accomplished through the use of unique products marketed by McDonald's. The brand name can be either the individual product name or a name applied to products (identified by the brand mark) which is a design element such as an icon, a logo, a character or even a sound that promotes a visual or auditory recognition. Branding should be designed to strategically enhance the identity of a product through the use of unique brand names, symbols and other distinctive measures. According to the McDonald's Corporate Homepage, McDonald's has paid dividends on common stock for 29 consecutive years through 2004 and has increased the dividend amounts a least once every year and the chance of insolvency is highly unlikely, given the amount of contracted cash flow the company has with franchisees. McDonald's has achieved domestic and international success and has used internationalization and globalization to create competitive advantages. This paper will look at McDonald's growth and expansion strategy in China.

McDonald's dates its founding to the opening of CEO Ray Kroc's first franchised restaurant in 1955. The McDonald's Corporation is a global company that operates and franchises approximately 31,000 restaurants in the fast food restaurant industry in 119 countries serving more than 50 million customers per day. The corporation also operates Boston Market, Chipotle Mexican Grill, and has a minority stake in Pret-A-Manager; however according to the McDonald's website, as of July 25, 2006, McDonald's board of directors has authorized the separation of Chipotle from McDonald's through a proposed exchange of its interest in Chipotle for shares of McDonald's common stock which will enable McDonald's to focus its management and resources on the McDonald's brand. McDonald's is incorporated in the State of Delaware and its Principal Executive Offices are located in Oak Brook Illinois. According the McDonald's Corporate website, the company is listed as a Public Company (MCD) on the New York Stock Exchange (NYSE). McDonald's 2005 Revenues were $20.460 Billion dollars with a Net Income of $2.602 Billion dollars with over 45,777 employees.

McDonald's restaurants compete with international, national, regional and local retailers of food products by competing on the basis of price, convenience and service, and by offering quality food products. Competition includes quick service eating establishments, pizza parlors, coffee shops, delicatessens, and other restaurants and/or eating places. Burger King and Wendy's International are examples of McDonald's key competitors in the Hamburger business in the United States (US). McDonald's menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Big N' Tasty, Filet-O-Fish, Chicken Sandwiches, Chicken McNuggets, Chicken Selects, French fries, premium salads, milk shakes, McFlurry desserts, sundaes, soft serve cones, pies, cookies, and soft drinks and other beverages. McDonald's also sells a variety of other products and offers a breakfast menu and other promotional limited-time items specifically designed based on location.

The McDonald's Corporation business model is different from other fast-food chains because in addition to ordinary franchise fees, McDonald's also collects rent that is based on the total amount of sales. McDonald's trains its franchisees and key employees at Hamburger University in Oak Brook, Illinois and at Hamburger University in Shanghai. McDonald is often seen by many as a symbol of American domination and its global reach has caused it to be a target of anti-globalization protests. McDonald's has also been blamed for contributing to obesity and this prompted the company to make some appropriate changes by offering more healthy food choices as alternatives for customers to choose if they preferred to do so.

According to McDonald's Investor Relations homepage, McDonald's operates on a customer-focused philosophy through a "Forever Young" brand essence and through their "Plan to Win". The plan to win consists of five areas of focus: people, products, place, price, and promotion and its aim is to deepen the company's connection to customers every time a customer visits a McDonald's restaurant by providing a great experience. McDonald's marketing, promotional, and public relations activities are designed to promote McDonald's brand image and differentiate the company from competitors. The marketing and promotional strategy efforts focus on value, food, taste, menu choice and the customer's personal experience/enjoyment. Everyday, McDonald's serve a very large cross-section of the public both in the United States (US) and internationally. McDonald's has strategically marketed the "I'm loving it" advertising campaign in an effort to revitalized itself to customers by trying to connect its brand to customers around the world. The "I'm loving it" campaign is integrated into every aspect of the business and crosses all cultures.

McDonald's works hard to maintain global standards of cleanliness and service whereas customers can enjoy a family environment in any McDonald's restaurant worldwide. McDonald's evokes an image that goes far beyond the products the company makes" (Heath, 1998). Strong brands can lead to financial advantages through the concept of brand equity in which the brand itself is perceived to be valuable in the marketplace. Creating brand identity is crucial because the market is extremely competitive and this makes it particularly important to position a product in the minds of consumers in a targeted market. In the midst of competition growing more intense on an ever changing and continuous basis, establishing a strong brand allows a company to be prominent and stand apart from the rest and the McDonald's Corporation has done this very well. Brand equity is simply the perceived marketplace value based on brand reputation. A brand stands for a complex of other, less tangible benefits including consistent quality, sophistication, pleasure and relaxation (Murphy, 1990). A brand is the unique asset of a specific owner that has been evolved over time so as to incorporate a set of values and qualities, which meaningfully and appropriately distinguish products which are otherwise very similar (Murphy, 1990). "The term gestalt helps explain the complex nature of brands (Murphy, 1990). Gestalt is defined in psychology, as how we understand and give form to the messages we receive through our senses.