This paper will look at the development of the McDonalds Corporation in Kazakhstan and the obstacles that it has overcome. It will also look at the McDonalds Corporation in relation to its major competitors and analyze how the company has responded to its surrounding environment. In closing, we will look at the prospects for McDonald’s future and it will be clear that McDonalds will be able to maintain its dominant market position. It will continue to be a model that serves as a benchmark for others in the industry. We will go on to analyze the market segments, target market, advertisement of the corporation to the target audience and performance of McDonald’s Corporation.
1.0 Introduction McDonalds Corp., headquartered in Oak Brook Illinois, is the world’s number one fast food chain, serving about 49 million customers daily. The company operates and licenses more than 31,000 restaurants 30,000 McDonald’s in about 120 countries which generated a total $19.06 million in revenues for the fiscal year of 2012. McDonald’s brand is one of the ten most popular brands worldwide. Continuous marketing, promotional and public relations activities promote McDonald’s brand image in order to differentiate the Company from its many competitors.
McDonald’s restaurant offer a menu that is uniform to all locations and emphasizes low value prices which includes its famous burgers, cheeseburgers like the Big Mac, Quarter Pounder with Cheese, several chicken sandwiches, Chicken McNuggets, french fries, salads, desserts, sundaes, soft drinks and other beverages. Its restaurants also provide breakfast menu that would include Egg McMuffin, bagel sandwiches, hotcakes, and muffins. Many new products were introduced in the last two years in accordance to the management’s decision to establish a new menu with more choices that is expected to bring a significant growth in sales as it was already shown by the financial results of 2012 which the highest increase in US comparable sales for the last 30 years.
The successful manager constructs a marketing program designed for optimal adjustment to the uncertainty of the business climate. The inner circle represents the area under control of the marketing manager. Assuming the necessary overall corporate resources structures, and competencies that can limit or promote strategic choice the marketing manager blends price, product, promotion, channels-of-distribution, and research activities to capitalize on anticipated demand. The controllable elements can be altered in the long run and, usually, in the short run to adjust to changing market conditions, consumer tastes, or corporate objectives. Kazakhstan, from the Kazakh language, means a land of Kazakhs Stan – land.
Kazakhstan is located in Central Asia, and is the ninth largest country in the world after Russia, China, USA, Argentina, Brazil, Canada, India and Australia. It is situated north of Uzbekistan, northwest of Kyrgyzstan, northwest of Turkmenistan, east of China, and south of Russia. Kazakhstan shares the Caspian Sea with other countries on its western border. As its neighbors in the region, Kazakhstan is a landlocked country and the second largest republic of the Commonwealth of Independent States after the Russian Federation. Kazakhstan doesn`t have MacDonald’s in the market. However it is really good opportunity to bring the fast food to a new market and get to know the culture. There must be a reason behind not having world’s most famous fast food corporation in a big country. According to my research it is possible to bring new product to the new market and get success in that market.
1. To introduce MacDonald`s to a new market in Kazakhstan city of Almaty 2. To open 20 franchise by the end of 2015 in Almaty, Kazakhstan 3. To increase sales in fast food in 5 coming years.
4. To increase the customers till 50% by the end of 1st year. 3.0 Issues The theoretical framework of this study is based on a number of relevant theories that are discussed in this part. The model which authors constructed in this study integrates cross-culture and 4P marketing strategy. It can be divided into two parts. Firstly, the authors will analyze some components of culture which lead to the phenomenon of cross culture, such as the different values, languages and customer behaviors. During this process, Hofstede‟s culture dimensions will be employed as the approach to understand cross-culture better. Secondly, based on the analysis of marketing standardization and adaptation, the marketing mix 4ps as main international marketing strategies will be used to achieve our research purpose.
When marketers discuss international marketing, one of the important issues often considered is the cultural differences. In relation to international marketing, culture can be defined as “the sum total of learned beliefs, values, and customs that serve to direct consumer behavior in a particular country‟s market” (Doole and Lowe, 2008, p.73). Such components as beliefs, values and customs are often ingrained in a society and have obvious differences among different countries. Cultural differences manifest themselves in several ways. Hofstede (2001) distinguishes symbols, heroes, rituals and values. Among these，the underlying values are invisible. Although values are always invisible and may be hard to measure, they often play an important role when the marketers try to make decisions, which help to enter a foreign market. Also, according to Mooij (2004), the values that characterize a society cannot be observed directly.
They can be inferred from various cultural products (fairy tales, children‟s books, or advertising) or by asking members of society to score personal values by stating their preferences among alternatives, and then calculating the central tendency of the answers. When it comes to marketing, the value concept is often used in an ethnocentric way. Besides, values are learned unconsciously, people are only partly aware of them, and measuring values is not an easy job (Lowe et al, 1998). Often, the problems they face are a result of their mistaken assumption that foreign markets will be similar to the home market, and so they can do the business in a similar way.
Doole and Lowe (2007) point out that the values of a culture satisfy a need within that society for order, direction and guidance. Culture sets the standards shared by significant sections of that society which, in turn, set the rules for operating in that market. Mooij (2003) considered that the managers of transnational corporations should provide appropriate products according to the local consumer values and buying behaviors of a certain market. The product strategy owing to cultural factors, usage factors and legal factors. Hall (1990) described some countries‟ culture is high-context culture.
3.1 SWOT Analysis 3.2 Strength MacDonald’s has a strong global presence with its nearest domestic competitor being only half its size, McDonald’s is the market leader in both the domestic and international markets. MacDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries. In international markets, MacDonald’s is well placed to expand and take advantage of long-term economic growth. MacDonald’s also has a strong real estate portfolio. The company’s outlets are located in areas that are highly known for visibility, traffic volume and ease of access. MacDonald’s also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company. MacDonald’s is able to generate more sales because of its brand recognition.
The food industry is really saturated. As a result of this, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets. The market is forecast to grow by around 2% per year. Lack of product innovation is another weakness of McDonalds. The last breakthrough for McDonald’s was the Chicken McNugget in 1983, but again the company’s new strategy seems to have successfully dealt with the problem through the popularity of its new salads and other new products.
MacDonald’s sold its Donatos Pizzeria back to its founder in 2003 and discontinued Boston market operations outside of the US. The company will instead focus on Chipotle Grill which is the company’s most successful non MacDonald’s branded chain of restaurants. Also to increase profitability the company has slowed its expansion of McDonald’s restaurants so as to refurbish and change the image of current restaurants and adding new features such as Internet access.
McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. Foreign currency fluctuation is also another problem global companies like McDonalds. The Fast food industry is becoming an increasingly competitive sector. MacDonald’s keeps up with competitors through expensive promotional campaigns which leads to limited margins to gain market share. McDonald’s is attempting to differentiate itself, with new formats and new menu items, but other fast food industry are doing the same too.
4.0 Marketing MacDonald`s in Kazakhstan
4.1 Marketing Mix
The marketing mix can be adjusted on a frequent basis, to meet the changing needs of the target group, and the other dynamics of the marketing environment Barlon and Kimuli (2006). They are as follows: product, price, place, and promotion. Having identified its key audiences, a company has to ensure a marketing mix is created those appeals specifically to those people. The marketing mix is a term used to describe the four main marketing tools the 4Ps. By analyzing detailed information about their customers, as derived from ongoing market research, the McDonald’s Marketing department can ascertain information key to determining the correct marketing mix. * Which products are well received in Kazakhstan
* What prices consumers are willing to pay * What TV programmers, newspapers and advertising consumers read and view * Which restaurants are visited Accurate research is essential in creating the right marketing mix which will help to win customer loyalty and increase sales. As the economy and social attitudes change, so do buying patterns. McDonald’s needs to identify whether the number of target customers is growing or shrinking and whether their buying habits will change in the future. Market research considers everything that affects buying decisions. These buying decisions can often be affected by factors wider than just the product itself. Psychological factors are important, e.g. the image a particular product conveys or how the consumer feels when purchasing it. These psychological factors are of significant importance to the customer. They can be even more important than the products’ physical benefits. Through marketing, McDonald’s establishes a prominent position in the minds of customers. This is known as branding.
The important thing to remember when offering menu items to potential customers is that there is a huge amount of choice available to those potential customers with regard to how and where they spend their money. Therefore McDonald’s places considerable emphasis on developing a menu which customers want. Market research establishes exactly what this is. However, customers’ requirements change over time. What is fashionable and attractive today may be discarded tomorrow. Marketing continuously monitors customers’ preferences. At any time a company will have a portfolio of products, each in a different stage of its cycle. Some of McDonald’s options are growing in popularity while arguably the Big Mac is at the ‘maturity’ stage.
The customer’s perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. It is important when deciding on the price to be fully aware of the brand and its integrity.
The promotions aspect of the marketing mix covers all types of marketing communications. One of the methods employed is advertising, sometimes known as ‘above the line’ activity. Advertising is conducted on TV, radio, in cinema, online, using poster sites and in the press for example in newspapers and magazines. What distinguishes advertising from other marketing communications is that media owners are paid before the advertiser can take space in the medium. Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, telemarketing, exhibitions, seminars, loyalty schemes, door drops, demonstrations, etc.
Place, as an element of the marketing mix, is not just about the physical location or distribution points for products. It encompasses the management of a range of processes involved in bringing products to the end consumer.
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