MCDONALD’S CASE STUDY

Jack Greenberg recognized the difficult task the company faced in trying to grow
sales, market shares in a fiercely competitive industry. He not only recognized the
strengths of competitors in the burger segment but also knew that ither providers of fast
food and other meals were wuixk to take advantage of changes in customer
preferences and tastes. He knew he had to counter attack the “Big Mac Attack” and find
market opportunities for McDonald’s.

DISCUSSION QUESTIONS:

How are customer tastes changing in the fast-food industry? What impact do
these changes have on McDonald’s

There are several trends in the fast-food infustry that defines the changes of
customer tastes. One growing trend is the move by customers to non- hamburger
sandwiches where the gradual shift of customer preference towards hamburger
substitutes had created strong competitors for McDonald’s. Three of the major
competitorsoffering non-hamburger fast-food include Pizza Hut, Kentucky Fried Chicken
and Taco Bell. Moreover, a major change in the industry is the increase in the fast-
casual segments that include restaurants like Boston Market, Panera Bread Company
and Atlanta Bread Company. These change was induced as people are willing to pay a
couple of dollars more for better dining experience yet don’t want to sacrifice the
convenience for a quick service. Another cause of this change is that Americans are
eating out less often compared to the previous years and eating habits are changing
where younger consumers are getting tired of fastfood and are thinking about their
health.

These changes brought impact to McDonald’s on several aspects. Years of profit

drains and flat sales are driving fast-food chains including McDonald’s to find new
marketing strategies to compete in a mature market

How well are these changes in customer tastes and preferences being reflected in
competitive strategies in the industry?

Changes in customer tastes and preferences pushed McDonald’s to continuously

adapt to the customer wants and needs creating various marketing strategies and
tactics. Jack Greenberg recognized the difficult task the company faced in trying to grow
sales, market share, and profits in a fiercely competitive industry. He not only
recognized the strengths of the competitors in the burger segment but also knew that
ither providers of fastfood and other meals were quick to take advantage of changes in

Address: Hilltop Road, Brgy. Kumintang Ibaba, Batangas City 4200, Philippines
Telephone Numbers: +63 43 723 1446 | 980 0041
Website: www.ub.edu.ph
customer preferences and taste. McDonald’s and other competitors in the hamburger
segment continue discounting and offering variety of nee products to attract customers.

In the case of McDonald’s, their approach was advertising message focused on

tasty and nutritious foods, friendly folks and fun. They invested heavily in advertising its
product and improving its image. They also welcomed something refreshing for the
consumers which took place on the establishment of McCafe. Moving on to McDonald’s
competitors on both burger and non-burger segment, Burger King offered a new salad
line and a permanent array of valued-price offerings. Hardee’s declined at 15 percent
and attempted to reverse sliding sales by introducking new items on the menu and
joining the price-promotion burger wars. Pizza Hut on the other hand, called its effort a
“well executed, differentiated, yet value-oriented product that would drive traffic and
sales over the next several periods. KFC offered “Kids Lap Top Pack” as a strategy and
lastly, TacoBell remained with a principle of brand establishment and retained to their
tactic of providing high-priced offerings proving that the brand could leverage its
strenghts to bring up the average meal price.

What are McDonald’s strengths and weaknesses and what conclusions do you
draw about its future?

McDonald’s is a global and successful, and loved brand even in the Philippines.
Its strenght is what it keeps the company growing and existing up to day and Its
weaknesses is what keeps it improving. Upon analysis the stregths of the brand
includes world-wide brand equity, 42% of US fast-food hamburger business,
Consistency of food, Successful products: Fries, Happy Meal, Big Mac, Egg McMuffin,
Promotion and Overseas market. Weaknesses includes Declining market share, Weak
product development, Disgruntled franchises, Quality and taste of products, Slowed
revenue and income growth. One conclusion is that McDonald’s always have to be
adapting, and aim to be the leading brand when it comes to fast-food by analyzing what
the company does best and what it can do more in order to maintain stability.

Should McDonald’s develop a seperate strategy for heavy user segment of the
fast-food industry?

Heavy users are identified to be important in the business. Heavy users have
been described as single males, under 30 years of age. It is estimated that heavy users
comprise 20 percent of customers but account for 60 percent of all visits and therefore,
should be regarded with considerstion and taken care of. They are gold. They may be a
minority — even a small minority. Spend time analyzing your heavy users. Find out
what they want and why your product keeps them coming back. Look for qualities that
would make them even more loyal. Chances are, small improvements aimed at heavy
users will lead other customers, such as your early adopters or repeaters, to become

Address: Hilltop Road, Brgy. Kumintang Ibaba, Batangas City 4200, Philippines
Telephone Numbers: +63 43 723 1446 | 980 0041
Website: www.ub.edu.ph
heavy users themselves. At some point in time a reward may increase their loyalty and
satisfaction. Say for example adopting Starbuck’s concept of reward card ocassionally.
Their strategy to increase sales is the card itself where you have to complete the
required stickers on every purchase and you’ll get an aesthetic planner in return.
Imagine if this would be applicable to McDonald’s. What reward can they offer? Quite
interesting to think of, right?

What should Jack Greenberg do to grow sales, profit, and market share at
McDonald’s?

One way to increase market opportunities is a direct competition analysis.

Knowing the existing players in the market where you are competing or going to
compete is important when evaluating opportunities. Relevant questions in this case
are: What are the products and brands of our industry that are growing more
significantly and why? What is their value proposition? What competitive advantage do
we have over them?

Key elements to continuously increase sales, profit and market shares are: Stay
relevant through innovation, Respond to customers – fast, use customer ideas, snap up
competitors (Sometimes the easiest way to get more customers is to simply buy them.
Watch for competitors that might be up for sale and purchase their customer lists) and
be more flexible.

Address: Hilltop Road, Brgy. Kumintang Ibaba, Batangas City 4200, Philippines
Telephone Numbers: +63 43 723 1446 | 980 0041
Website: www.ub.edu.ph