McDonald’s stands as the world’s largest hamburger chain with over 30,000 stores in 120 countries. Yet as strong as it stands in the hamburger industry, it is still vulnerable to price competition and the current federal unemployment rate. In order to try to overcome a low profit margin, McDonald’s is presently pursuing new strategies to help increase its market share in other industries. The primary objectives being targeted includes, growth in sales, increase in profitability and market share. Current Strategies Being Pursued
According to CEO, Jim Skinner, McDonald’s “Plan to Win” strategy includes, “Giving our customers a unique balance of food and beverage choices is driving performance in every area of the world.” Skinner also stated, “We’re offering new menu items and classic favorites, including premium and value selections, all for our customers to enjoy in our convenient, contemporary restaurants. We intend to continue our momentum by further enhancing the McDonald’s experience and giving customers even more reasons to visit” (McDonald’ Corp, 2010).
They are executing product development strategies by expanding the famous Dollar Menu. Due to constant price competition McDonald’s is trying to increase sales by attracting more customers into their stores by promoting products in the economical Dollar Menu. After evaluating McDonald’s current strategies, one of the leading strategies McDonald’s is trying to achieve is market penetration by focusing efforts on increasing their presence in the coffee industry. Due to recent closures of Starbuck stores and the current high unemployment level, fewer consumers are able to pay a high price for a cup of coffee. This has given McDonald’s an opportunity to enter the coffee industry, and positioning themselves as the low price option by offering free McCafè mochas every Monday from 7 am to 7 pm to every customer. In addition, by offering an assortment of lower priced coffee drinks McDonald’s is beginning to attract new customers.
According to Michael Bauer from SFGate, “about 48% of Starbucks customers visit McDonald’s at least once a week.” In response to a decline in demand for Starbucks products, they lowered their prices, yet McDonald’s coffee drinks remain 25%-40% cheaper. Coupled with low prices, increasing marketing efforts within the coffee industry has allowed McDonald’s market share to increase by 5.4%.
The use of franchising has always been a central strategy to McDonald’s ability for rapid expansion. McDonald’s involvement in forward integration through the use of proceeds from the sale of company owned stores helping finance franchisees and buy back company stock, while paying higher dividends and creating other investments for benefit shareholders (David, 2011, 2009, 2007) clearly implies McDonald’s intention to focus on franchising and not company owned stores. Through strategies such as “Plan to Win”, McDonald’s has established themselves as a very effective franchise option. Due to the majority of their stores being franchised, McDonald’s Corporation can continue to rely on constant production from franchisees. Conclusion
As previously discussed, the strategies McDonald’s is currently pursuing include, but not limited to, market penetration, forward integration, and product development. Each of these strategies are cruicial to McDonald’s success. “McDonald’s customer focus, menu innovation and the ongoing modernization of our restaurants continue to drive our business momentum,” said Chief Executive Officer Jim Skinner. “However, there are additional strategies McDonald’s will consider pursuing to ensure economical market advantage and customer satisfaction .
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David, F. R. (2011). Strategic Management: Concepts and Cases. Upper Saddle River: Pearson Education.
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