Fast Food Industry Essay

1. Executive SummaryThis report provides an analysis of the world(prenominal) commercializeing environment of fast- food for thought persis goce in US and evaluates the external marketing activities of McDonalds, which is considered a key player. Firstly, the PEST framework is used to conk out external environmental factors influencing the industry. The Porters Five Forces framework is use to analyse the agonistic rivalry at heart the industry, and its attractiveness for potential sunrise(prenominal) entrants. primaeval players and their positioning was identify using a strategical-groups model, mapping trade name value against globose presence. Based on the industry analysis, McDonalds was identified as the market leader and an examination of their market entry modes was carried out.Their internationalist marketing mix was evaluated to identify success factors, drawing focus upon international swording, international distri hardlyion, international communications a nd standardisation vs. adaptation of the service offering. An familiar analysis identified the firms strengths and weaknesses whilst an external analysis considered the opportunities and threats make up to McDonalds as market leader. Finally, poor and long term strategic and tactical recomm hold onations were outlined in order to enhance McDonalds competitive position within the spherical fast-food industry. These recommendations argon both realistic and comfortably supported, based upon the evaluation of their current strategy and activities.2. IntroductionThe globular fast-food industry is dynamic with a variety of competitors. This report identifies the current factors influencing the industry in the beginning specifically focusing on McDonalds Corporation, who is considered as the current global leader. Based on this analysis, the report identifies some(prenominal) areas for improvement and makes strategic recommendations for McDonalds to enhance its position.3. Internati onal Marketing Analysis3.1. PEST Analysis and environmental Impact Matrix (Macro Environment) The following framework provides an analysis of the external international marketing environment, relating to the fast-food industry *These ratings are based on the authors subjective appraisalPoliticalGlobal fast-food firms moldiness comply with country-specific political requirements, such as national minimum wage regulations, bear on costs. Hygiene and quality regulations quit epochally between nations and may influence the quality of products provided by fast-food outlets (FDA, 2012). antithetical countries set varying regulations regarding labelling and packaging. For instance the UK g overnment pressured firms to promote healthy eating, and several fast-food companies wear voluntarily included calorie information on their products (BBC, 2011).stintingDespite the 2008 recession and the resulting decrease in consumer confidence across the globe, comely consumer fast-food spending has increase (The Economist, 2010) collect to convenience and low-cost. Consumers are still facial expression for the convenience of eating out, but are drawn to the low expenses of fast-food over table-service restaurants (Financial Times, 2009). Many fast-food chains allow bang-upised upon the recession by introducing new deals in addition to their already low-priced boards. Between 2005 and 2010, Latin America, Asia Pacific, Eastern europium and Russia accounted for 89% of global growth in the fast-food industry (Passport, 2012).Social change magnitude consumer awareness about healthy lifestyles has pressured many fast-food players to offer healthier selections within their menus (BBC, 2011). This includes offering low- calorie options and salads alongside burgers, and prominently displaying nutritional content. The fast-food industry has to a fault been heavily criticised for targeting young children by including toys within childrens meals (New York Times, 2003). Recentl y in the UK, the broadcasting of junk food adverts during commercial breaks in childrens programmes has been ban (BBC, 2007), following increasing childhood obesity.TechnologicalAs consumer familiarity with new engineering increases, fast-food firms are using channels such as social media websites to use with their customers. For example, McDonalds is the 9th most liked note on Facebook (CNBC,2012) (Appendix 1). Additionally, digital displays leave al one and only(a) outlets to change their menus efficiently, to suit the time of day (NRA, 2012) and self-service ordering points have increased service speed and reduced labour costs. environmental Environmental lobbyists and governments are pressuring the fast-food firms to become more green (Greenpeace, 2012). Rainforests are being washed-up to increase the area of land for beef production to collaborate the involve for beef-burgers (Kline, 2007).Recycling is a prominent global issue and in response, McDonalds adopted recyclabl e packaging. Increased environmental awareness among consumers provides firms with a real opportunity to position themselves as green to garner customer homage ( guinea pig Pollution Prevention Centre for mettlesomeer Education, 1995).LegalGlobal operators must comply with country-specific regulations and legislation. This includes opening hours, taxation and employment regulations such as the National Minimum Wage Regulations (1999) in the UK. Firms are often required to meet national food standards such as the requirements set out by the US Food and Drug Administration (FDA). Furthermore, authorities are become increasingly worried about childhood obesity associated with the industry (WHO, 2012) and have tightened regulations regarding targeting children.3.2. Porters Five Forces Fast-food IndustryThis framework identifies the competitive forces affecting the fast-food industryTHREAT OF NEW ENTRANTSIndustry rule by global chains with very racy brand values High brand awarene ss and commitmentRetaliation from strong incumbent playersLow initial capital outlay Low fixed costs Economies of scale ability OF SUPPLIERSMany undifferentiated suppliersFast-food chains have high purchasing motive due to high volumeCOMPETITIVE RIVALRY IN THE FAST-FOOD manufactureFragmented market Low exit costsLow margin, high turnover drives rivalryHigh brand authorityPOWER OF BUYERSHigh product differentiation Target many segments High price esthesiaTHREAT OF SUBSTITUTIONSAlternative foodservice optionsReady meals and home cooking ingredientsMain players quite an differentiatedNo switching costsConvenience is the value adding subdivision which is difficult to substituteThreat of New Entrants ModerateThe industry is dominated by a number of international Quick Service restaurant (QSR) chains, including McDonalds, Burger King, Pizza Hut, KFC and eye masks (Datamonitor, 2010). These global brands are extremely valuable, overdraw strong customer loyalty and recognition indicating consistent quality and service. profound players including McDonalds, adapt their marketing orientation to suit local cultures and social norms (Datamonitor 2010), modify the brand and avoiding consumer alienation. New players struggle to compete with incumbent firms, as their brands are unknown and advertising campaigns are expensive.Established chains have the resources to penalise aggressively through pricing promotions, deterring new players from entering the marketplace. New entrants lose economies of scale, which existing chains have developed over time, and utilise to inhabit competitive in this low-margin, high-turnover industry. However, social media websites have evened the playing field in term of marketing communications they allow firms to efficiently communicate their means inexpensively. Initial capital outlay and fixed costs are low, boost new entrants (Datamonitor, 2012).Threat of Substitutions ModerateSubstitutes are readily available food can b e purchased well-nigh anywhere, through foodservice or retail. However, convenience is the value-adding fortune of the service which reduces the threat of substitutes. Consumers can cook at home cheaply, but this lacks the convenience element which people require nowadays. Ready-meals are therefore a more substantial threat, competing with fast-food on price as well as convenience(Datamonitor, 2012). If you are on-the-go however, without access to a microwave, QSRs are almost contest if you want a hot meal in a short timeframe. With many differentiated players (Datamonitor, 2012) and varying service offerings, customers can select the outstrip value option.Competitive Rivalry StrongAlthough McDonalds and Burger King almost hold a duopoly in the burger segment, the market as a whole is fragmented with many global chains and independent operators (Datamonitor, 2012). competitor is primarily cost-based with firms continuously investing in their production and service processes to snub competitors. Exit costs are low and capacity is easily increased through franchising. brandmarking is the most prevalent weapon for competing McDonalds washed-out over $650 million on global advertising in 2009 (Datamonitor, 2012). spot of Buyers ModerateFigure 1 shows sales and growth of the top ten fast-food companies (Euromonitor International, 2012). The markets competitiveness increases buyer power and customers are price sensitive (Muhlbacker et al., 1999) with no switching cost between providers. However, key players approach to reduce buyer power, offering a product range which caters for the replete(p) demographic, rather than one specific segment. For example, McDonalds target children with Happy Meals and professionals with breakfast options and take-away coffee (McDonalds, 2012).Firms are increasingly promoting differentiated products McDonalds large-mouthed Mac, Burger Kings Whopper and offers such as Dominos Two for Tuesday campaign. High brand value and cu stomer loyalty has reduced buyers bargaining power. The 2011 ranking of the top 100 brands indicates McDonalds success (Interbrand, 2011). 10Power of Suppliers ModerateFigure 1 Top decade Fast-food Companies by Growth.With a competitive global write out chain, supplier power is limited. 17,500 British and Irish farms that provide us with top-quality ingredients. (McDonalds UK, 2012) These farms supply Tier 1 suppliers who transform raw materials into food items, ready for McDonalds to cook and serve. Due to the number of suppliers in the industry, it is difficult for them toleverage significant power over fast-food firms. The supply of soft- imbibing is dominated by Coca-Cola (McDonalds and Burger King) and Pepsi (KFC) due to their global distribution channels. Additionally, Coca-Cola and Pepsi provide fast-food chains with equipment such as refrigerators and drink dispensers. This markets their brand and aligns it with fast-food brands, reducing costs for customers, which would otherwise be passed onto them (SMO, 2011).3.3. Identification of Key Players and their Competitive Position 3.3.1. Strategic Groups The following framework identifies the key players in the international fast-food industry and identifies which firms are in the most direct competition with each other Brand value and the chains global presence (Appendix 2) are significant indicators of overall performance. The above strategy-group chart maps the firms performance. Brand value (US$) is plotted against the chains global presence, in terms of the number of outlets worldwide. The strategy-grouping shows that McDonalds has the highest global market value and revenue in the industry, despite Subway having more international outlets. 4. Key Player evaluation of International Activities 4.1. Identification of Key Player Based upon their global presence, market value and revenue, McDonalds is identified as the key player in the industry.4.2. McDonalds International Market Entry ModesIn 1940, McDonalds operated only if one QSR but today has restaurants at 33,000 locations in 119 countries. McDonalds utilises a variety of international market entry modes for rapid expansion repair ventures, franchising, master franchising and joint ventures. 15% of McDonalds branded restaurants are operated as sole ventures. This involves a significant capital commitment but allows the highest point in time of control.Most restaurants are operated as franchises, allowing rapid expansion without high capital requirements. Franchising has to a fault allowed McDonalds to benefit from local association, demonstrated by the menu differences by country.However, McDonalds maintains control over crucial aspects such as the supply chain, marketing mix and staff training. Master Franchising introduces a ternary party as a go-between to overcome geographical and pagan barriers. The combinationof the master franchisees local knowledge and McDonalds brand and model has been a successful formula , allowing expansion whilst maintaining significant control. McDonalds has also expanded internationally through joint ventures. Again, this allows for rapid expansion and utilises the knowledge of firms in closely-linked markets.Both firms invest equity in the project, there is a lower financial risk for both parties however, many joint ventures end in hostility and conflict due to firms taking advantage of one another (Brown and Harwood, 2010).