McDonalds: UK Strategy for Success, Essay Example

Introduction

McDonald’s is a restaurant chain with over31.000 franchises over the world. As a franchise, the company has the responsibility for the future of more than 1.5 million employees. Although McDonald’s is one of the most popular brands out there, thanks to the successful marketing campaigns carried out in the 20^th and 21^st Century, the company has had to face different challenges in the past few decades as well. Being an unquestionable American brand, it was successful with expanding into different continents, however, the communication methods of the company and the messages sent to the customers, based on their behavior and cultural background had to be regularly adjusted. The below essay will examine the reasons why McDonald’s has a positive image and why the company managed to remain highly successful on the UK market, despite negative press and campaigns.

Company Structure

The company consists of different franchises, and the regional restaurants are overseen by regional managers. The executive team oversees the five areas of business, namely: operations, development, finance, marketing and human resources. The company also has an internal hierarchy, however, the development programs allow people to start at the bottom and receive further in-house training in order to become leaders. The McDonalds leadership program promotes equal opportunities, and as such, it is a democratic system as well. The competitive advantage created by this structure is based on the practical knowledge of managers about different processes, as they would start as production staff, before they would become leaders.

There are over 400 restaurants in the United Kingdom, alone. A franchise usually costs around £200.000, and it is valid for 20 years on a single address. The franchise agreement allows businesses to use the brand, internal system, stock control devices and administrative tools, while taking advantage of the central marketing campaigns.

The Success of McDonald’s

In the United Kingdom, the mission statement of McDonald’s says: “McDonald’s aim to be the UK’s best fast service restaurant experience.”  (McDonald’s UK website) Some authors conclude that the success of the firm is based on the brand reputation, attractive franchise model, as well as the marketing. (Reynolds et al. 2005.) However, some other authors say that the organizational structure, employee benefits and motivational initiatives contributed towards the success of the brand mostly. (Han, 2008)  The Times 100 Website (2007) provides a full overview of the recruiting, training and development processes within the company. The study emphasizes the importance of recruiting the right people, motivating employees, as well as the leadership development initiatives. Offering competitive career development programs within the company, while making sure that the right applicants are selected has a great role in the successful operations in the UK. According to the Times 100 report (2007), the company believes that excellent service can be delivered through the excellence of people, and the recruitment, diversity and equality policies within the company offer fair chances for everyone looking for a new career within the food industry.

Positioning on the competitive market is important, according to Reynolds et al. (2005) as well. The well maintained, motivated and highly responsive customer base is the greatest asset of the UK McDonald’s operation. The main competitors within the UK fast food industry are Burger King, KFC and small pastry or sandwich shops. The popularity of so called “fish and chip shops” and Chinese takeaways has created multiple challenges for the company, as the variety of menus and selections within the McDonald’s restaurants was ultimately lower than in these small family operated businesses. However, thanks to the challenges the industry had to face in the end of the 20^th Century, regarding social responsibility, healthy options and criticism has helped the company to create a new menu, a different company image and gain a competitive advantage again. The details of these initiatives are going to be discussed in the next chapter.

Major Changes in the 21^st Century

The largest challenge the company had to face in the last decades of the 20^th Century was the great criticism by the government and health professionals regarding the calorie value of the meals sold by McDonald’s. As health professionals and researchers have published articles regarding the importance of changing the way fast food chains operate, the company had to set up a successful campaign and initiative to respond to criticism. The change in the menus, while dealing with the threats of new competitors entering the market did result in gaining back the lost reputation after a couple of decades. The publications, community initiatives, research publications and also the targeted attacks against McDonald’s menus and policies did encourage the leadership to rethink its marketing and products alike.

The company CEO , James Allan Skinner set up a plan to offer healthy alternatives, reduce calories in meals offered and marketed to children, to reduce the effects of the negative press McDonald’s was receiving in the 1990-s. Although in the United Kingdom, there are still campaigns against the company, the introduction of the new menus, as well as the initiatives on the website, such as fresh ingredients, lower calories, fruit and a calorie calculator on the website.

Another important challenge the company had to face was the bargaining power of suppliers, customers, and the price competition of substitute products. The fluctuation of US dollars and the strengthening of the British Pound did create a lower flexibility within the pricing strategy of McDonald’s. (Reynolds et al. 2005)

Changes in Menus

The social problems, reputational loss associated with  health issues made the company change its menus, messages, mission and targeting. Although the teenage generation remained loyal to the brand, there was a need for re-branding among families with small kids. The new McDonald’s initiative launched worldwide in 2005, and it was designed to promote healthy lifestyle and eating for kids. Briefly after the new CEO took over the company, Skinner made some crucial steps to increase the brand popularity again.  Ronald McDonald videos were created to educate children about the importance of staying active, as well as eating healthy. In his 2005 speech, Skinner said: “We will use our size and strength to set an example,” As the company was already popular worldwide, the corporate responsibility started to have a greater importance in the mission of McDonald’s. The company started serving entrée-size salads and created a long term project designed to remove fatty acids and trinxats from McDonald’s French fries and burgers. The initiative was made just in time, as the company has faced legal challenges in the late 90-s, and had to settle a public lawsuit $8.5 M.  Although some of the health activists criticizing the company claimed that the new program was only designed to cover up the program, the execution was a success.

Today, McDonald’s website includes a nutritional guide for every McDonald’s meal being sold in the restaurants. The company also added free fruit to kids’ menus. The success of the market positioning and branding changes lies in the communication; both internally and externally. As the company CEO could engage all the employees to take part in social responsibility, branding and healthy lifestyle campaigns, the high commitment level guaranteed the success. (Facella and Genn, 2008.) The targeting of the market did not change, however, the meal descriptions on the McDonald’s website were changed to speak to children, as well as adults, just like the Ronald McDonald clips.

Competitive Advantage of McDonald’s

The family-friendly image, as well as the size of the company, social responsibility initiatives and sponsorships set up by McDonald’s are all part of the competitive advantage of McDonald’s. However, the two-pronged marketing strategy has made the company really successful. (Botterill and Klyne, 2007.) Promoting the products and the brand for both children and teens, featuring Justin Timberlake in one of the advertisements  during the global ad campaign. Featuring both young families and teenagers (the original market for burgers and fast food) was a good decision made by the marketing department. Although some of the competitors of the restaurant chain try to attract all customers, similarly to privately owned, not franchised chip shops and takeaways, the company has made a decision to select two of the most lucrative market segments. The revival of the five P-s in the marketing segment by Charlie Bell was proven to become successful, with the unique but uniformized new interior, greener packaging and healthy meals.

The franchise model is one of the main competitive advantages of the company, as well as the internal policies to train staff to become leaders. Increasing staff retention, job satisfaction has a great impact on the service level, and realizing the challenges ahead, the company has managed to re-brand the name McDonald’s, despite the negative press and reputational loss in the previous decades. With the appearance of nutrition guides on food packaging, the company realized that publishing the details on the website would create a more responsible image. The fact that the restaurants have a playground, music aimed for teenagers and campaigns in local communities all created a competitive advantage, small businesses or other competitors are not able to replicate.

Building the McDonald’s Brand

The brand positioning of the company has undergone some changes in the past decades, as well. Being the sponsor of major sorts events, such as the Champions League in 1996 and 2000, sponsoring the British Athletics since 1993 and the Child Safety Week in the UK, as well as the World Cup, the company does take part in local projects and takes corporate responsibilty seriously. (Han, 2008) The learinign projects set up and sponsored by the company in the UK have created an active and strong, dinamic brand image. With the changes in the menu structures, revamping of the restaurants and becoming even more child-friendly, the brand is not all about eating out, restaurants and fast food any more. Improvements in the menus, including special and seasonal meals, as well as healthy breakfast options for young people has made a difference. The image recently created by the new McDonald’s advertisements is based on the social responsibility statements of the company; using British farms, helping small businesses, while featuring families and children to provide successful targeting are introducing a new, 21^st Century company, with increased awareness of health, nutrition, activities and local community projects. The positive image created by the marketing campaigns is supported by the press release and public relation projects managed by the UK operations executive team. Making McDonald’s British through using local suppliers, farmers and produce is one of the most successful decisions the company has made in the UK.

Conclusion

Although in the 1990-s, the company brand of McDonald’s has gone through a decline of reputation and growth, the successful marketing and branding strategies have helped the brand to overcome the challenges and build up the company again on multiple markets. In the United Kingdom, offering healthier choices, more nutritional information and participating in British and local projects have increased the brand awareness and reputation of the image. Although the dual targeting of the global firm (teenagers and young kids) has become successful, and the company has many competitive advantages, including the brand culture of “happiness” among children. As the company is building up brand loyalty among children in the UK, they are able to extend the customer lifespan to teenage age, even for the time when people would have kids on their own. The threat of new entrants in the fast food industry is low, and the company continues to benefit from the existing reputation and franchise model. The initiatives that made McDonald’s appear British have made a huge impact on the reputation of the brand, and will continue to do so, provided that the current marketing initiatives are continued.

References

McDonald’s UK website. http://www.mcdonalds.co.uk/ukhome/Aboutus.html

The Times 100 Website. www.tt100.biz

Reynolds, R., Spear, A., Stark, M., Walbridge, T., Watkins, R. McDonald’s Corporation. 2005. Study. Online. http://mmoore.ba.ttu.edu/ValuationReports/McDonalds.pdf

Botterill, J., Kline, S. (2007) From McLibel to McLettuce: childhood, spin and re-branding”, in: Society andBusiness Review, Volume 2 Number 1 2007.

Han, J. (2008) The Business Strategy of Mcdonald’s. International Journal of Business and Management November, 2008

Facella, P., Genn, A. (2008) Everything I know about business I learned at McDonald’s:  the 7   leadership principles that drive break out success.