Channels of Distribution: McDonald’s
Channels of Distribution: McDonald’s
The core of this presentation is to discuss the theory of distribution strategy with the underlying real life examples of McDonald’s fast-food restaurants. The aim is to discuss McDonald’s distribution channel and the way in which this fast-food restaurant chain gets its products to the market. In the theory of the Marketing Mix, place (distribution) determines where the product will be sold and how it will get there. In fact, as noted on www.mcdonalds.com, McDonald’s is the leading global foodservice retailer, with more than 30,000 local restaurants serving nearly 46 million people each day in 121 different countries.
Approximately 80 percent of all McDonald’s restaurants worldwide are owned and operated by independent franchisers. Furthermore, at the essence of place decisions, Kotler (et al., 2001, p. 513) claims that, “retailers, particularly fast foods chains, often state their seven P’s of marketing to be, that is location, location, location, location, location, location and location.” Hence, a retailer’s location is the key to attracting customers. The costs of the building or leasing facilities are a major factor on the retailer’s profits. Thus, site location decisions are among the most important the retailer make” (Kotler, et al., 2001, p. 513).
Distribution arrangements tend to be long term in nature. Because of this time horizon, channel decisions are usually classed as strategic, rather than tactical or operational ones. Many of McDonalds restaurants are open 24 hours per day which satisfies the customers needs and wants, especially for exists their hunger. This kind of distribution strategy is called “intensive distribution”, means marking the product available for sale through all possible channels of distribution. As defined by Kotler (et al., 2001, p. 487), “intensive distribution is stocking the product in as many outlets as possible.” In addition, this strategy must be designed to reach the consumer wants at anytime and anywhere.
Vertical Marketing Network (VMN).
A franchise organization, to quote Kotler (et al., 2001, p. 482), is “a contractual vertical marketing network in which a channel member called a franchiser links several stages in production-distribution process”. McDonald’s has adopted the service-firm-sponsored retailer franchise network, in which a service firm licenses a network of retailers to bring its service to consumers (Kotler, et al., 2001, p. 482). Nevertheless, McDonald’s caters to a large consumer market with varying tastes and thus cannot afford to introduce products without familiarizing itself with provincial preferences in food.
For this reason, McDonald’s distributes its products in foreign and domestic locations with the help of franchisers who are well aware of what works in their country. Moreover, these franchisers also provide insight to the company on its diverse customers, and helps McDonald’s achieve its vision of “being the world’s best quick service restaurant experience.” In brief, this is an extremely intelligent distribution method since it helps in providing people with the kind of products they desire, maintaining the franchise reputation worldwide.
To encourage repeat customer visits, McDonald’s is intensifying the efforts to ensure the restaurant interiors and exteriors are clean and welcoming. Moreover, McDonald’s intends to regain the status as the gold standard for clean restaurants. Furthermore, McDonald’s is giving the business a fresh edge in many places by rebuilding, renovating and re-imaging the restaurants. The McDonalds experience abroad demonstrates that doing such can result in improved sales and profitability as stated on www.mcdonalds.com. McDonald’s ensures consistent products by controlling every stage of the distribution. In addition, regional distribution centers purchase products and distribute them to individual restaurants. On the other hand, when designing its channels, a company needs to consider competitors’ channels.
Yet, it may want to compete in or close to the same outlets that carry competitors’ products (Kotler, et al., 2001, p. 486). Thus, food companies want their brands to be displayed next to competing brands. Meanwhile, McDonald’s adopted this setting channel objective as a view and therefore wants to be located near its competition. On the other hand, McDonald’s uses essentially the same competitive strategy in every country, the company wants to be the first in the market and establish the brand as rapidly as possible by advertising very heavily. This effective distribution strategy (place) has helped McDonald’s develop a strong market share in the fast-food market around the world. Moreover, according to Kotler (et al., 2001, p. 513) stores must have a planned atmosphere that suits the target market and moves customers to buy. In addition, McDonald’s has pre-determined the locations for many of its stores to help reach a variety and diverse population.
In conclusion, McDonald’s has an intensive distribution process which is a credit to their Marketing department. As businesses and other organizations move forward, the challenge of making their products and services readily available to customers around the world will become much more difficult and complex. Marketers responsible for developing and managing the marketing channels needed to meet these customer demands in the global market will need all the help they can get. McDonald’s has implemented a successful distribution strategy in which other companies should follow. Adopting a marketing strategy that openly focuses on distribution (place) on location of stores, has helped make McDonald’s the successful business it has become is a definite success story.
Kotler, P., Brown, K., Adam, S., Armstrong, G., 2001. Marketing, 5th Edition, The McGraw-Hill Companies, New York.