The Introduction of McCafe in a Struggling Fast Food Industry

McCafe was introduced to the McDonalds business model at a time when the fast food industry, and dining out as a whole, was on a downslide. Consumers were trying to cut back and save money – dining out was an easy way to do that.

McCafe is a full-service coffee bar, created as an extension of a current McDonalds counter, or as a stand-alone restaurant. The concept is positioned to consumers that fall in the working adult category, who enjoy coffee, and was said to be a direct competition to Starbucks.

In terms of the comparison of McCafe to the overall McDonald’s vision and mission, the two fell in a parallel line. How would McCafe mirror the McDonalds vision? First, by delivering the end product to the customer in a timely manner – coffee machines were made to make espresso, lattes, and cappuccinos with the touch of a button, in around 22 seconds or less. McCafe coffee creation didn’t require a well-trained barista, just as a good Big Mac didn’t require a chef behind the grill.

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The McDonalds mission states that they want to “be our customers’ favorite place and way to eat.” Their global markets, regardless of whether they focus on burgers or coffee, is to center on five basics of an exceptional customer experience – people, products, place, price, and promotion – also known as the Plan to Win strategy. The McCafe model resonates the same way as the original McDonalds concept.

In aligning the McCafe strategy with the Business Strategy Diamond, the following aspects of McCafe fulfill the strategy:

Arenas: Where will McCafe be active? McCafe locations will be active as a full service coffee bar, either in a standalone facility, or as an extension of a current McDonalds restaurant.

Vehicles: How will we get there? McCafe specialty coffees would ideally be introduced by current McDonalds franchisees interested in a way to diversify their product line and increase sales. However, new franchise owners with a desire to build standalone McCafes or new McDonalds restaurants with the McCafe feature could start new ventures. Differentiators: How will we win? McCafe’s offer not only specialty and brewed coffees, but cookies and pastries as well. Another benefit? By being a part of a current McDonalds restaurant, patrons could get not only specialty coffee, but their trusty yogurt parfaits or Egg McMuffins. Pricing would be set similar to or less than their competitors (ie. Starbucks). Staging and Pacing: What will be our speed and sequence of moves? McCafe counters could be added to existing McDonalds stores in as little as 4 days – the equipment took up minimal counter space and renovations would hardly disrupt their current operations. Economic Logic: How will we obtain our returns? McDonalds will turn a profit by banking on its history of success – the speed of its products, and its convenience, at a good price. They will be diversifying their product line and targeting a market that was dominated in the US by two prime retailers – Starbucks and Dunkin Donuts. McCafe prices are in line with Dunkin Donuts, but with more options in the food area, while their prices come in below Starbucks, with similar quality.

McCafe SWOT Analysis:

Strong global presence (through McDonalds Corp)
Saturated industry (coffee/food)Multiple ownerships (other restaurants) = success in growth strategies Increasingly competitive amongst fast food markets

Ease of introduction

Increasing price competitionCountries available for retail pentration (Europe, Latin America)Links to obesity =negative press, high calorie coffees and snacks contributing factors Strong real estate locations

Differentiation combining food with coffee cafe

High visibility

McCafe is a great new venture for McDonalds – a company with a wealth of history, but a need to differentiate itself from its competitors like Burger King, Taco Bell, Wendys, etc. McCafe will give McDonalds a great way to increase profits and move forward in the restaurant industry. Additional

Sources:

http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html?DC