Fast Food Industry Essay

1. Executive analysisThis report provides an analysis of the external tradeing environment of fast- food assiduity in US and evaluates the multi subject marketing activities of McDonalds, which is considered a key player. Firstly, the PEST framework is used to analyse external environmental factors influencing the industry. The porters beers Five Forces framework is utilised to analyse the competitive rivalry within the industry, and its attractiveness for dominance new entrants. Key players and their positioning was identified using a strategical-groups model, mapping score appraise against worldwide 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 supranational marketing mix was evaluated to identify success factors, drawing focus upon international commemorateing, international statistical distribution, international communications and standardisation vs. adaptat ion of the service offering. An internal analysis identified the firms strengths and weaknesses whilst an external analysis considered the opportunities and threats posed to McDonalds as market leader. Finally, short and long term strategic and tactical recomm destroyations were outlined in order to enhance McDonalds competitive position within the spherical fast-food industry. These recommendations argon both realistic and well supported, base upon the evaluation of their current strategy and activities.2. IntroductionThe world-wide fast-food industry is dynamic with a mixed bag of competitors. This report identifies the current factors influencing the industry before specifically snap on McDonalds Corporation, who is considered as the current planetary leader. Based on this analysis, the report identifies several areas for returns and makes strategic recommendations for McDonalds to enhance its position.3. International Marketing Analysis3.1. PEST Analysis and Environmental preserve 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 judgementPoliticalGlobal fast-food firms must comply with country-specific political requirements, much(prenominal) as national minimum wage regulations, affecting costs. Hygiene and quality regulations vary significantly between nations and may influence the quality of products provided by fast-food outlets (FDA, 2012). Different countries set variable regulations regarding labelling and packaging. For instance the UK government pressured firms to promote tidy eating, and several fast-food companies fox voluntarily included calorie information on their products (BBC, 2011).EconomicDespite the 2008 recessional and the resulting decrease in consumer confidence across the globe, average consumer fast-food spending has increased (The Economist, 2010) due to do dge and low-cost. Consumers are still looking for the convenience of eating out, but are drawn to the low wrongs of fast-food over table-service restaurants (Financial Times, 2009). galore(postnominal) fast-food chains have capitalised upon the recession by introducing new deals in addition to their already low-priced menus. mingled with 2005 and 2010, Latin America, Asia Pacific, Eastern Europe and Russia accounted for 89% of world(prenominal) growth in the fast-food industry (Passport, 2012).Socialincrease 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 on board burgers, and largely displaying nutritional condecadet. The fast-food industry has also been heavily criticised for targeting young children by including toys within childrens meals (New York Times, 2003). deep in the UK, the broadcasting of junk food adverts during com mercial breaks in childrens programmes has been banned (BBC, 2007), following transmit magnitude childhood obesity.TechnologicalAs consumer familiarity with new technology increases, fast-food firms are using channels such(prenominal) as kindly media websites to engage with their customers. For example, McDonalds is the 9th most liked brand on Facebook (CNBC,2012) (Appendix 1). Additionally, digital displays allow outlets to change their menus efficiently, to suit the time of day (NRA, 2012) and self-service ordering points have increased service speed and reduce labour costs. Environmental Environmental lobbyists and governments are pressuring the fast-food firms to become more green (Greenpeace, 2012). Rainforests are being sunk to increase the area of land for beef output to meet the demand for beef-burgers (Kline, 2007).Recycling is a prominent global issue and in response, McDonalds adopted recyclable packaging. Increased environmental awareness among consumers provides f irms with a significant opportunity to position themselves as green to garner customer loyalty (National Pollution cake Centre for advanceder 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 boldness (FDA). Furthermore, authorities are becoming 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 youthful ENTRANTSIndustry dominated by global chains with very high-pitched brand values High brand awareness and loyaltyRetaliation from strong incumbent playersLow init ial capital consumption Low fixed costs Economies of scalePOWER OF SUPPLIERSMany undifferentiated suppliersFast-food chains have high purchasing queen due to high volumeCOMPETITIVE RIVALRY IN THE FAST-FOOD INDUSTRY separate market Low exit costsLow margin, high turnover drives competitionHigh brand powerPOWER OF BUYERSHigh product differentiation Target many segments High price aesthesiaTHREAT OF SUBSTITUTIONSAlternative foodservice optionsReady meals and home cooking ingredientsMain players quite differentiatedNo substitution costsConvenience is the value adding component which is difficult to substitute affright of New Entrants ModerateThe industry is dominated by a number of international Quick Service Restaurant (QSR) chains, including McDonalds, Burger female monarch, Pizza Hut, KFC and dominos (Datamonitor, 2010). These global brands are extremely valuable, boasting strong customer loyalty and recognition indicating unchanging quality and service. Key players includin g McDonalds, adapt their marketing orientation to suit local 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 advertising campaigns are expensive. open chains have the resources to retaliate aggressively with pricing promotions, deterring new players from entering the marketplace. New entrants wishing economies of scale, which existing 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 expire their message inexpensively. Initial capital outlay and fixed costs are low, encouraging new entrants (Datamonitor, 2012).Threat of Substitutions ModerateSubstitutes are readily available food can be purchased almost 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 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 contend if you want a hot meal in a short timeframe. With many differentiated players (Datamonitor, 2012) and varying service offerings, customers can select the best value option.Competitive Rivalry StrongAlthough McDonalds and Burger King almost hold a duopoly in the burger segment, the market as a whole is confused with many global chains and independent operators (Datamonitor, 2012). Competition is primarily cost-based with firms continuously investing in their production and service processes to undercut competitors. Exit costs are low and capacity is easily increased th rough franchising. suckering is the most prevalent weapon for competing McDonalds spent over $650 million on global advertising in 2009 (Datamonitor, 2012).Power of Buyers Moderate jut out 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 teddy cost between providers. However, key players attempt to reduce buyer power, offering a product regularize which caters for the entire demographic, rather than one specific segment. For example, McDonalds target children with Happy Meals and professionals with breakfast options and take-away deep brown (McDonalds, 2012).Firms are increasingly promoting differentiated products McDonalds Big Mac, Burger Kings Whopper and offers such as Dominos Two for Tuesday campaign. High brand value and customer loyalty has decreased buyers bargaining power. The 2011 ranking of the top 100 bra nds indicates McDonalds success (Interbrand, 2011). 10Power of Suppliers ModerateFigure 1 Top Ten Fast-food Companies by Growth.With a competitive global supply 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 substitute 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 to supplement significant power over fast-food firms. The supply of soft-drink 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 instrumentalists and th eir 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 one QSR but today has restaurants at 33,000 locations in 11 9 countries. McDonalds utilises a variety of international market entry modes for rapid expansion sole 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 full point of control.Most restaurants are operated as franchises, allowing rapid expansion without high capital requirements. Franchising has also allowed McDonalds to earn from local familiarity, 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 third party as a go-between to overcome geographical and cultural 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 spread out internation ally through joint ventures. Again, this allows for rapid expansion and utilises the knowledge of firms in closely-linked markets.Both firms invest rightfulness 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).