Marketing Essay Paper on The New Emerging Market Multinationals

Abstract

This paper is a case study of McDonalds focusing on the company’s marketing mix. We will highlight how McDonalds combines the concepts of internalization and globalization in consolidating the fast foods markets. By utilizing the working of strategic and tactical models, we have illustrated how McDonalds fairs on the global marketplace and what they can do to tap more into local communities. Further, we have evaluated the company’s future franchise strategy and how it continues to apply the 7Ps of marketing mix to enhance its global competitiveness. McDonalds has expressed itself as a modern company aware of the techniques of enhancing global competitiveness through the application of the 7Ps of marketing mix.

Introduction and Background

Two brothers, Richard together with Maurice, founded McDonalds in 1937. Richard and Maurice designed food processing and assembly line concepts in their initial restaurant in California. The company began its franchise arrangement in 1954 following a deal signed between the company and Ray Kroc, an entrepreneur in the milk industry who was selling milk shakes. The company made its first international venture in 1967 when it opened a branch in Canada. George Cohon acquired the company in 1968, went ahead, and established a network of restaurants in Canada. Cohon opened 640 restaurants in Canada, a factor that made McDonalds prosper more in Canada than in the United States. This opened the path for massive internalization of the company (McDonalds 1).

The company has succeeded in the global marketplace due to the use of the franchise business model. As the company continues to franchise to local entrepreneurs, it has been able to interpret and deliver a U.S. brand culture to local communities through its products and services. The company currently runs over 30,000 restaurants spread in over 100 countries around the world, with franchisees owning and operating at least 80% of these restaurants (McDonalds 1).

Globalization and Internalization

Globalization entails the design and development of market strategies that views the world as a one entity where the products of a company are standardized and sold the same way in every country. Globalized firms sell standardized products, run uniform promotional campaigns, deal in standardized prices and apply similar distribution channels in all markets.  Some of the easiest to standardize marketing mixes include brand name, product features, product packaging, and product labeling (Foskett and Felix 17).

A successful market globalization strategy calls for a company’s total commitment to international marketing since it embraces the concept that the world is one market (Lovelock, H, Paul, and Jochen 7). Companies have to customize their marketing strategies to be relevant to every region they make a venture based on cultural, regional, and national distinctions for them to offer the appropriate services to target markets (Yasanallah and Vahid 195). For a company to standardize its marketing mix, it must develop a strategy that classifies countries based on their social, cultural, technological, political, and economic similarities. Large firms may only compete effectively by going global which means that they must be willing to view foreign operations as less important than domestic operations and accept that the world has now become a single market without borders (Nützenadel and Frank 130).

Multinational corporations should look for ways and means of adjusting their entire marketing strategy in such a manner as befits the market demands of international markets (Hastings, Kathryn, and Carol 155).  This calls for marketing strategies that are designed to meet local tastes and serve differentiated needs and requirements of customers in different localities.  Many analysts agree with the view that enterprises should employ the features of globalization and internalization in enhancing their competitive edge (Chattopadhyay, Rajeev, and Aysegul 27).

The Marketing Mix

McCarthy developed the 4Ps marketing mix, which incorporates product, price, promotion, and place, in 1975. Companies have applied this marketing mix for several years. However, the mix was found to be deficient in addressing the marketing needs of service forms. This led to theorists formulating new elements that could be applied alongside the 4Ps in addressing the marketing challenges of service firms. This led to the formulation of the 7Ps, which are being applied today (Smith and Jonathan 7). The 7Ps are summarized as follows

  1. Product – deals with features, quality, and quantity
  2. Place – Deals with the location and number of outlets
  3. Price – Deals with price strategy, determinants of price, and pricing levels
  4. Promotion – Focuses on advertising, sales promotion, and public relations
  5. People – focuses on quantity, quality, training, and promotion
  6. Process – Focuses on blueprinting, automation, and control processes
  7. Physical – Deals with cleanliness, décor, ambience of services

Review of the 7Ps in McDonalds

Product

McDonalds aims at creating a standardized array of products with similar tastes in every country be it America, South Africa, Spain, or any other country. The company has however realized that although there are cost benefits associated with standardization, the ability to adapt to every market environment promotes the success of the company. The company has fully embraced the concept of globalization by thinking global and acting global. The need for adaptation stems from the fact that different markets are associated with different tastes and preferences as well as laws and cultural orientations. In some countries, McDonalds has adapted to some products because of religious laws and culture. For instance, the company serves Big Macs without Cheese in Israel, In India the company sells Vegetable McNuggets and a Big Mac prepared using mutton known as Maharaja Mac. In Muslim countries, the company ensures the products it sells are pork-free. The company has been awarded a halal certificate in Malaysia and Singapore for serving products that are viewed as clean since they do not have pork. In tropical markets, the company has added guava juice to its menu and in Turkey, the company serves chilled Yoghurt (McDonalds 1).

Apart from the variations and additions to meet specific local needs, the company’s menu has been uniform all over the world with its main course being a burger/sandwich, fries, and a soft drink, quite often a coke. Fries act as McDonalds selling distinctive trait and the company is known for serving thin, elongates fries made from russet potatoes that have received a global acclaim (McDonalds 1).

Quality

The company has quality assurance teams charged to monitor and ensure the quality of its foods in the restaurants and at all stages in its supply chain. The quality assurance teams conduct random visits, inspections, and compliance tests to all the production and distribution facilities and restaurants. They also visit secondary suppliers who include farms to check how the crops are grown and in some cases inspect the seeds that are used in the farms before planting.

Every supplier serving McDonalds is required to observe very strict specifications in their manufacturing process, with the company specifying the quantity and quality of ingredients and the metrics of the final product. The quality assurance team tests the production run records and takes random samples of products in the distribution networks to ensure conformity to the guidelines. The team also ensures that certain quality and safety standards are met in the restaurants and they require that all restaurant staff undergo training on food safety and hygienic food preparation techniques. This global practice distinguishes McDonalds among its competitors in the fast food sector.

Place

Currently, McDonalds franchise networks consists of over 30,000 restaurants in 116 countries around the world. The company has continually focused on efficient management of capital outlays by expanding its franchise network prudently and strategically. The company has realized that there is a huge potential for growth in international markets and continues to consolidate its gains in the United States and transfer the lessons learnt to the global marketplace. This has seen the country add about 300 to 400 new restaurants every year, in the United States, a strategy that has enabled the company to outshine its competitors. The company has extended this strategy to its rapidly growing international markets with special attention to those markets where there is no stiff competition. For instance, the company opened over 400 new restaurants in Japan. The company has also adopted a long-term strategy to capture the Chinese, Italy, and Mexican markets. This global focus of the company has enabled the company to transfer ideas, best practices, and work force globally, which has enhanced the company’s competitive edge and affirmed the company’s leadership position in the fast foods market.

Price

Over and above acknowledging the cost benefits of product standardization, McDonalds has also harnessed its success by adapting its products to specific environments. This informs the company’s strategy of adopting different pricing strategies for various local markets. This entails selecting the right price for the right market. The underlying question here is how the company arrives at its pricing decision for each of its local markets. The company undertakes a rigorous pricing process for setting the price in every market. The six- step process includes 1) selecting the price objective, 2) determining demand for the products, 3) estimating costs, 4) analyzing the costs, prices, and offers of rivals, 5) Selecting a pricing method, and 6) Selecting a final price.

The goal of the company’s overall pricing strategy it to consolidate its market share. The company reviews the demand for their products in every country as the basis on which to set the price (Hastings, Kathryn, and Carol 158). Consider for instance the case of a Big Mac. Although the price of a Big Mac in the United States can be equated to just a wage of 14 minutes for a Chicago worker, the same meal could be a luxury in another country, say in Sub-Saharan Africa. The company therefore uses the consumer product price perception in every country to determine the price. The company will also consider the price offered by its competitors in every market to determine the most competitive price based on their product quality.

Promotion

McDonalds applies the marketing communications mix designed by Kotler in 1994, which incorporates the following elements: 1) Advertising, 2) direct marketing, 3) sales promotion, 4) public relations and publicity, and 5) personal selling (MK Jain 98). The company employs these tools in localizing its marketing communications strategy owing to the fact that they need to take into account the wide range of cultural and other distinctive characteristics of various local markets (Kotler and Philip 185). Customizing the marketing communications mix is a major strategy that the company uses. The company also analyzes the attitudes of different customers towards its products. The company has a longstanding advertising slogan, which says, “Brand globally, and advertise locally”.

In advertising, the company runs a wide array of advertising campaigns in different countries. In UK for instance, the company promotes their hamburgers through Alan Shearer, the reckoned English footballer as their icon and in French Fabien Barthez is their icon. The company is therefore sending the same image using different local personalities. This means that the company standardizes its brand name but localizes their advertising campaign. In Asia, the company uses extensive TV ads that appeal to children and young adults. The company considered newspaper ads as a better alternative to TV ads in China based on the country’s television viewing habits.

In public relations, McDonalds pays attention to markets where personal interactions count a lot in selling. For instance, the company has distinguished the U.S. and Chinese markets where unlike in the U.S. where technology has taken the place of human workers, in China the company is involved in open interactions with its customers. This has seen the company hire at least 5 to 10 female workers in every restaurant to look after children and engage the parents.

People

A survey of McDonalds has established that the company opens a new restaurant after every 80 hours. Out of the all the new restaurants, two thirds are outside the U.S. The company commands a workforce of over one million and this figure is expected to double in the near future. Before launching operations in a new country, the company’s HR department engages in a survey of the labor laws and regulations in that country and matches them with its work force requirements. This enables the company to adapt itself to every country situation especially in the areas of remuneration, working hours, and workplace environment. The company’s policy is local staffing and this ensures that the company has a management mean that is conversant with the local corporate and community cultures. The company also emphasizes that its employees should value customer focus and right attitude to their job more that technical competence.

McDonalds also invests in staff training and development to equip its staff with requisite skills for the global marketplace. For instance, the company has a Hamburger University in the United States , which offers courses in advanced operations designed for managers and prospecting franchisees. This university offers a standardized course in 22 different languages with training methods tailored to meet the needs of international students. The company also runs other training facilities in Tokyo, Sydney Australia, London, Munich, and China.

Processes

Although the company operates over 25,000 restaurants around the world spread in over 100 countries, it employs standardized procedures for making its foods. This is the epitome of globalization. The company ensures that these standards are met in every country. Suppliers are required to meet all the specifications set by the company, failure to which the company would vertically integrate. For instance, the company found that the Russian market did not meet the standards it has set for beef and as a result, the company opted to supply its restaurants with beef. The procedures used by all franchisees in preparing the foods are identical and the kitchen layout is similar in all the restaurants. However, local adaptation is evident based on the fact that various international markets have different menus necessitating new food preparation techniques.

The company also has standardized its point of sale systems but translated them to different languages to overcome language barriers. Pictographs have been installed on these systems where symbols of products such as Big Macs, French fries, etc are displayed. The company has also distinguished itself with running operations that are designed to speed up production without compromising on consistency. Some of the corporate objectives set by the company to this end include servicing of walk-in orders in 90 seconds and assuring customers that they will never queue for over three and a half minutes when buying at drive-through windows. Compliance team constantly make surprise visits to different restaurants to monitor and ensure that these standards are met.

Physicals

McDonalds focuses on consistent delivery of quality, service, and cleanliness through excellence in all the company’s restaurants. One consistent theme that customers of McDonalds read in every restaurant they visit is the emphasis on family values. The message may be conveyed differently in different cultures but it remains the same. This promotional MIXMAP emphasizes the commitment to global standards by the company as far as cleanliness and service are concerned. The company has adapted the service aspect to different local communities. For instance in Beijing, the restaurant’s interior walls are lined with posters and slogans stressing family values (Hastings, Kathryn, and Carol 158).

McDonalds has also attempted to change their advertising slogan as a way of image change. For instance, the company redefined its slogan in 1994 to read “There’s nothing quite like a McDonalds.” The company has been engaging their customers directly in their attempt to promote brand loyalty. The company has also adopted the enduring American value slogan of “Service with a smile”.

Conclusion

After analyzing McDonalds in the light of the various aspects of the 7Ps of marketing mix, we can conclude that the company is a global company that has effectively combined the features of globalization and internalization. The company has achieved this by applying and integrating the concept of “think global, act local” in all the components of its marketing mix. Having been very successful in executing and implementing globalization, the company is forward looking as far as expansion to various international markets is concerned. The company is now growing faster in the international markets than in its domestic market country, the United States. McDonalds is also positioned as a star brand in the global marketplace and carries the potential for more market dominance and growth and therefore increasing profitability. We can therefore use McDonalds as a model to show the success in the application of the 7Ps of marketing mix.

Works Cited

Chattopadhyay, Amitava, Rajeev Batra, and Aysegul Ozsomer. The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands. New York, NY: McGraw-Hill, 2012. Print.

Foskett, Nicholas, and Felix Maringe. Globalization and Internationalization in Higher Education: Theoretical, Strategic and Management Perspectives. , 2012. Print.

Hastings, Gerard, Kathryn Angus, and Carol A. Bryant. The Sage Handbook of Social Marketing. Thousand Oaks, Calif: Sage, 2011. Internet resource.

Kotler, Philip, and Philip Kotler. Marketing Management. Harlow, England: Pearson/Prentice Hall, 2009. Print.

Lovelock, Christopher H, Paul Patterson, and Jochen Wirtz. Services Marketing. , 2015. Print.

MK Jain – ‎2013. An Analysis of Marketing Mix: 7Ps or More. Asian Journal of Multidisciplinary Studies, 1(4): 73-82.  November 2013, Internet Resource. Retrieved at www.ajms.co.in/sites/ajms/index.php/ajms/article/download/73/82

Nützenadel, Alexander, and Frank Trentmann. Food and Globalization: Consumption, Markets and Politics in the Modern World. Oxford: Berg, 2008. Print.

Smith, Paul R, and Jonathan Taylor. Marketing Communications: An Integrated Approach. London: K. Page, 2004. Print.

Yasanallah, Purashraf and Vahid, Bidram. Studying the Status of Marketing Mix (7Ps) in Consumer Cooperatives at Ilam Province from Members’ Perspectives. American Journal of Industrial and Business Management, 2012, 194-199. Intrnet Resource. Retrieved at www.scirp.org/journal/PaperDownload.aspx?paperID=24057