This real world example supports how global marketing topics and issues are affecting businesses every day. The following information has been summarized from a case study included in the textbook International Marketing, 14th Edition, by Philip R. Catera, Mary C. Gill and John L. Graham.
Overview of Situation:
European sales figures at global fast-food chain McDonald’s were sluggish for years in the early 2000’s– and the underlying reasons for this had much to do with the companies’ global marketing strategy. The company generates about 30% of its total profits from the European market, with most locations (around 1,200 stores) operating within Great Britain. In 2005, sales were down .7 percent, while the American market grew an astounding 4.7%. Senior management began to investigate the causes for the substantial revenue differences between the two markets.
Challenges: McDonald’s conducted research in their British and European markets to find that the fast-food industry was changing in many ways that the company’s stores had not anticipated and were not adapting to. Some of the major problems the company faced were as follows:
- Changing consumer taste preferences in the British and European fast-food market
- Outdated and “uncool” store designs and facilities
- Increased threat from competitors (both new and existing)
- Negative publicity from the best-selling book Fast Food Nation and the award-winning documentary Super Size Me – which both portrayed McDonald’s as extremely detrimental to overall health and well being
- McLibel: a documentary telling the story of a decade-long court battle between two Greenpeace activists and McDonald’s
- Additional law suits from obese teenage girls blaming the company for their weight complications
- The “McJob” stigma- the negative perception that being an employee at McDonald’s meant low wages and little opportunity for a positive future
Solutions: In order to reverse many of the trends forming that hurt McDonald’s reputation, products and performance, the firm took charge in making adjustments in all areas of the marketing mix to secure future success. The company listened to the demands of their customers, and improved in the ways listed below:
- Due to a large increase in health-conscious diners, McDonald’s completely revamped their menu. It added many new offerings including yogurt, fruit, salads and bottled water
- It opened a test kitchen in Europe to experiment with new products
- Products sold better reflected British consumer’s fast-food dining preferences, with new menu additions like roast beef sandwhiches, veggie melts and onion rings with sweet chili dip
- The menu and diversity of food options was expanded
- The company re-designed their Golden Arches logo and made attempts through advertising to re-brand stores as more healthy
- Nutritional information menus were created and listed on tray liners in-store
- Promotional campaigns featuring popular women’s music group Destiny’s Child helped target more female customers
- Restaurants began offering coffee made from freshly ground Kenco beans instead of lower-quality beans, attracting those who were turning to coffee shops for breakfast
- A complete overhaul of two French stores with new designs, interiors and uniforms led to huge boosts in sales. Following their success, McDonald’s refurbished all European locations- – complete with new color schemes, designer furniture, modern lighting, wireless internet and rental iPods
- A new studio was also created in Paris to customize store designs that franchisers could choose based on the appropriateness of their location and clientele
- Franchise operators received much more support and guidance with operations
- The company launched a heavy ad campaign countering the negative image of the “McJob.” It argued that jobs at McDonald’s are actually rather good– boasting that over 80% of its management started out “flipping burgers,” and at least half earn over 40,000 GBP/year
- McDonald’s restructured the British market by closing underperforming stores and opening new ones in better and more upscale locations.
- After 5 years of consecutive losses, 2007 British sales number were up 4.6%, with a substantial increase in market share. The chain was also selling more burgers than any other time in its 34 years in the market.
Global Marketing Topic/Themes:
Developing a Global Marketing Strategy: The major topic explored in the McDonald’s case is its ability to re-formulate and implement a global marketing strategy. In order to assess the fast-food industry’s potential, the firm had to identify the relevant factors within the external environment that were affecting business. Second, the company re-examined its internal environment (resources, capabilities and value chain activities) and changed aspects of its corporate and business strategies.
External Environment: As discussed in another section of this blog, the global industry potential of a firm can be assessed in several different ways. In McDonald’s situation, it is best to categorize its challenges by these industry drivers:
- Market Forces: Changing buyer preferences (more health-conscious diners), New buyer preferences (customers who no longer wanted traditional American fast food choices, such as burgers and fries)
- Government Forces: Law Suits (from the Greenpeace activists and obese teens), Government lobbying against fast-food chains
- Competitive Forces: Other fast-food dining options such as Nando’s, Subway, Yo! Sushi House and coffee shops offering new fast-food dining alternatives, increasing rivalry
Internal Environment: McDonald’s internal environment focuses on the firms own ability to achieve success, apart from external conditions. The internal environment revolves around how the company configures its value chain to match its global marketing strategy. Detailed below are some of the corporate and business-level strategy decisions that helped McDonald’s bring sales back up.
- Corporate Strategy: Closing unprofitable stores, opening new stores, expanding product and service lines (such as coffee, salads and iPod rental service)
- Business Strategy: The company established a new competitive advantage by integrating low-cost and differentiation approaches in the European market. Although it continued efforts into offering products at a low cost, it began adding value with non-traditional menu items, new and refurbished facilities and advertising campaigns that repainted its public image in Britain and Europe
Although McDonald’s is one of the most recognizable and successful brands in the world, the company still faces global marketing challenges. The main lesson to take away from this case is that one uniform global marketing strategy may not be effective in all markets. Because each market has unique external factors affecting business, corporate and business strategy must be adjusted accordingly. As an international marketer, remember that corporate strategy determines which industries and geographic markets your company competes in. Business-level strategies deal with how your firm competes and establishes a competitive advantage. Though your company’s mission and vision will likely be similar both domestically and abroad, the global marketing strategy used to reach common goals may differ.