'Fast Food Industry Essay\r'

'1. Executive Summary\r\nThis account statement admits an analysis of the supra issue merchandising environment of fast- f argon attention in US and evaluates the world(prenominal) commercializeing activities of McDonald’s, which is considered a key player. Firstly, the PEST framework is use to analyse immaterial environmental factors influencing the pains. The usher’s Five Forces framework is utilised to analyse the matched rivalry within the industry, and its attractiveness for potential red-hot entrants. Key players and their positioning was place using a strategical-groups model, mapping rat rank against spheric presence. found on the industry analysis, McDonald’s was identified as the food trade leader and an examination of their foodstuff entry modes was carried out.\r\nTheir international market mix was evaluated to identify achievement factors, d bare-asseding focus upon international placeing, international distribution, inter national communications and standardisation vs. adaptation of the emolument offering. An inner analysis identified the firm’s strengths and weaknesses whilst an external analysis considered the opportunities and threats posed to McDonald’s as market leader. Finally, short and long term strategic and tactical recommendations were outlined in order to enhance McDonald’s warring position within the global fast- intellectual nourishment industry. These recommendations be both realistic and well supported, based upon the evaluation of their afoot(predicate) strategy and activities.\r\n2. Introduction\r\nThe global fast-food industry is dynamic with a variety of competitors. This report identifies the current factors influencing the industry before specifically focusing on McDonald’s Corporation, who is considered as the current global leader. establish on this analysis, the report identifies several(prenominal) argonas for improvement and makes strategic recommendations for McDonald’s to enhance its position.\r\n3. International Marketing compendium
3.1. PEST Analysis and Environmental Impact hyaloplasm ( macintoshro Environment) The fol brokening framework provides an analysis of the external international marketing environment, relating to the fast-food industry: *These ratings atomic number 18 based on the authors’ subjective judgement\r\nPolitical\r\nGlobal fast-food firms essential combine with country-specific political requirements, such as national minimum wage regulations, affecting be. Hygiene and property regulations vary world-shakingly between nations and may make up ones mind the property of products provided by fast-food outlets (FDA, 2012). Different countries set alter regulations regarding labelling and packaging. For instance the UK government pressured firms to promote healthy eating, and several fast-food companies engender voluntarily included calorie learning on their products (BBC, 2011).\r\nEconomic\r\nDespite the 2008 recession and the resulting fall in consumer confidence across the globe, average consumer fast-food pass has increased (The Economist, 2010) due to convenience and low- bell. Consumers be simmer down looking for the convenience of eating out, but atomic number 18 drawn to the low prices of fast-food over table- usefulness restaurants (Financial Times, 2009). legion(predicate) fast-food manacles contrive capitalised upon the recession by introducing new deals in addition to their already low-priced menus. Between 2005 and 2010, Latin America, Asia Pacific, Eastern Europe and Russia accounted for 89% of global ontogeny in the fast-food industry (Passport, 2012).\r\nSocial\r\nIncreasing consumer awareness active healthy lifestyles has pressured some fast-food players to offer healthier selections within their menus (BBC, 2011). This includes offering low- calorie options and salads alongside burgers, and conspicuously displa ying nutritional content. The fast-food industry has also been heavily criticised for scoreing new(a) children by including toys within children’s meals ( tender York Times, 2003). Recently in the UK, the broadcasting of ‘junk food’ adverts during commercial breaks in children’s programmes has been banned (BBC, 2007), pursuance increasing childishness obesity.\r\nTechnological\r\nAs consumer familiarity with new technology increases, fast-food firms are using channels such as brotherly media websites to engage with their customers. For example, McDonald’s is the 9th most ‘liked’ gull on Facebook (CNBC, 2012) (Appendix 1). Additionally, digital displays allow outlets to change their menus efficiently, to event the time of day (NRA, 2012) and self-service ordering points have increased service speed and reduced proletariat cost. Environmental Environmental lobbyists and governments are pressuring the fast-food firms to become mor e than ‘green’ (Greenpeace, 2012). Rainforests are being destroyed to increase the area of land for beef production to pick up the demand for beef-burgers (Kline, 2007).\r\nRecycling is a prominent global issue and in response, McDonald’s adopted utile packaging. Increased environmental awareness among consumers provides firms with a signifi skunkt opportunity to position themselves as ‘green’ to pull together customer loyalty (National Pollution Prevention focus for Higher Education, 1995).\r\nLegal\r\nGlobal 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, governing are becoming increasingly worried about childhood obesity associated with the indu stry (WHO, 2012) and have tightened regulations regarding targeting children.\r\n3.2. Porter’s Five Forces †Fast-food effort\r\nThis framework identifies the competitive forces affecting the fast-food industry:\r\nthreat OF NEW ENTRANTS\r\nIndustry predominate by global arrange with precise full(prenominal) snitch values High brand awareness and loyalty\r\nRetaliation from severe officer players\r\n low gear initial capital outlay Low fixed costs Economies of scale\r\nPOWER OF SUPPLIERS\r\nMany undifferentiated suppliers\r\nFast-food ambits have risque acquire major power due to high volume\r\nmilitant RIVALRY IN THE FAST-FOOD INDUSTRY\r\nFragmented market Low exit costs\r\nLow margin, high turnover †drives argument\r\nHigh brand power\r\nPOWER OF BUYERS\r\nHigh product differentiation cigarette many segments High price sensitivity\r\nTHREAT OF SUBSTITUTIONS\r\nAlternative foodservice options\r\nReady meals and home take ining ingredients\r\n chief(pr enominal) players quite differentiated\r\nNo switching costs\r\nConvenience is the value adding component which is difficult to succour\r\nThreat of New Entrants †learn\r\nThe industry is dominated by a number of international fond Service Restaurant (QSR) chains, including McDonald’s, Burger King, Pizza Hut, KFC and Domino’s (Datamonitor, 2010). These global brands are extremely valuable, boasting strong customer loyalty and recognition; indicating consistent quality and service. Key players including McDonald’s, adapt their marketing orientation to subject topical anesthetic cultures and social norms (Datamonitor 2010), strengthening the brand and avoiding consumer alienation. New players struggle to compete with incumbent firms, as their brands are unknown and ad campaigns are expensive.\r\nEstablished chains have the resources to retaliate aggressively through determine promotions, deterring new players from entering the marketplace. New entrants lack economies of scale, which b find chains have developed over time, and utilise to remain competitive in this low-margin, high-turnover industry. However, social media websites have evened the playing field in terms of marketing communications; they allow firms to efficiently communicate their subject matter inexpensively. Initial capital outlay and fixed costs are low, encouraging new entrants (Datamonitor, 2012).\r\nThreat of Substitutions †Moderate\r\nSubstitutes are readily available: food can be purchased near anywhere, through foodservice or retail. However, convenience is the value-adding component of the service which reduces the threat of substitutes. Consumers can cook at home cheaply, but this lacks the convenience division 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 get at to a microwave, QSRs are almost uncontested if you extremity a hot meal in a short timeframe. With many differentiated players (Datamonitor, 2012) and varying service offerings, customers can select the best value option.\r\n competitive Rivalry †Strong\r\nAlthough McDonald’s 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). Competition is originally cost-based with firms continuously investing in their production and service processes to undercut competitors. Exit costs are low and capacity is easily increased through franchising. branding is the most prevalent weapon for competing; McDonald’s dog-tired over $650 million on global advertising in 2009 (Datamonitor, 2012).\r\nPower of Buyers †Moderate\r\nFigure 1 shows sales and growth of the top ten fast-food companies (Euromonitor International, 2012). The market’s competitiveness i ncreases emptor power and customers are price sensitive (Muhlbacker et al., 1999) with no switching cost between providers. However, key players attempt to reduce buyer power, offering a product range which caters for the finished demographic, rather than one specific segment. For example, McDonald’s target children with ‘Happy Meals’ and professionals with breakfast options and take-away coffee (McDonald’s, 2012).\r\nFirms are increasingly promoting differentiated products: McDonald’s â€Å"Big Mac”, Burger King’s â€Å"Whopper” and offers such as Domino’s â€Å"Two for Tuesday” campaign. High brand value and customer loyalty has reduced buyers’ negociate power. The 2011 ranking of the top 100 brands indicates McDonald’s’ achievement (Interbrand, 2011). 10\r\nPower of Suppliers †Moderate\r\nFigure 1: Top Ten Fast-food Companies by Growth.\r\nWith a competitive global supply chain, sup plier power is limited. â€Å"17,500 British and Irish farms that provide us with top-quality ingredients.” (McDonald’s †UK, 2012) These farms supply Tier 1 suppliers who transform raw materials into food items, ready for McDonald’s to cook and serve. collectable to the number of suppliers in the industry, it is difficult for them to leverage noteworthy power over fast-food firms. The supply of soft-drink is dominated by Coca-Cola (McDonald’s 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).\r\n3.3. appellation of Key Players and their Competitive Position 3.3.1. Strategic Groups The following framework identifies the key players in the international fast-food i ndustry and identifies which firms are in the most direct competition with each other: Brand value and the chain’s global presence (Appendix 2) are monumental indicators of overall performance. The above strategy-group chart maps the firms’ performance. Brand value (US$) is plotted against the chain’s global presence, in terms of the number of outlets worldwide. The strategy-grouping shows that McDonald’s has the highest global market value and revenue in the industry, despite thermionic tube having more international outlets. 4. Key Player †paygrade of International Activities 4.1. Identification of Key Player establish upon their global presence, market value and revenue, McDonald’s is identified as the key player in the industry.\r\n4.2. McDonald’s International Market Entry Modes\r\nIn 1940, McDonald’s operated only one QSR but today has restaurants at 33,000 locations in 119 countries. McDonald’s utilises a variety of international market entry modes for rapid involution: mend ventures, franchising, master franchising and joint ventures. 15% of McDonald’s mark restaurants are operated as sole ventures. This involves a significant capital commitment but allows the highest degree of control.
 virtually restaurants are operated as franchises, allowing rapid expansion without high capital requirements. Franchising has also allowed McDonald’s to benefit from local experience, demonstrated by the menu differences by country.\r\nHowever, McDonald’s maintains control over crucial aspects such as the supply chain, marketing mix and staff training. overshadow Franchising introduces a third party as a ‘go-between’ to overcome geographical and cultural barriers. The combining of the master franchisee’s local knowledge and McDonald’s brand and model has been a successful formula, allowing expansion whilst maintaining significant control. McDonaldà ¢â‚¬â„¢s has also expanded internationally through joint ventures. Again, this allows for rapid expansion and utilises the knowledge of firms in closely-linked markets.\r\nBoth 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 emolument of one another (Brown and Harwood, 2010).\r\n'