Services Marketing Industry Overview Mcdonalds

Services Marketing Industry Overview McDonalds operates in the quick service restaurant industry. The industry is characterized by a low margin, high volume business model, backed by location saturation and extensive marketing efforts. Firms in the industry compete in a multitude of segments, including burgers, pizza, sandwiches and coffee. McDonalds competes primarily in burgers, and is making a push into coffee with its McCafe strategy. McDonalds is the largest firm in the industry by revenue, and operates in 119 countries.

There is little regulatory intervention in the industry and as a result competition has flourished. McDonalds uses its exceptional brand reputation, its efficient operations and its marketing muscle to outcompete its main rivals in the burger business. Company Background McDonalds sell breakfasts, burgers, coffee and related products like fries. The company began operations as a barbeque drive-in in 1940 in San Bernardino. In 1948 the current burger operation started, and in 1954 a multimixer salesman named Ray Kroc discovered the restaurant and the process of expansion through franchising began.

The company went international in 1967, added the Big Mac in 1968 and started breakfast service in 1975. By this point, the franchising, training and operating systems were already in place, setting the tone for the future of the company. Today, there are over 33,000 McDonald's restaurants worldwide and the company has approximately 1.7 million employees. Strategic Elements McDonalds operates with a differentiation strategy, using its brand name and unique products to drive market share.

The company's image is very high -- the company's brand was rated as the 6th most valuable in the world by Interbrand. McDonalds is popular all over the world and is known even in countries where it does not operate. The tangible aspects of the business are in the fixed assets -- the restaurants are the most critical component, comprised of buildings, real estate and fixtures. In one sense, McDonalds does not have a target market. The company sells to the mass market, which means that they seek everybody's business.

However, McDonalds targets children, young adults and parents more than other groups. The company's differential advantage lies in its systems, its brand, its marketing muscle and its distinctive menu items. The advertising strategy relies on intensive communications of the firm's products and promotions. The company cycles major promotions based on slogans such as "I'm lovin' it" every couple of years. In general, McDonalds sets its prices somewhere in the middle of the industry.

The company does work hard to keep prices low, but is not the lowest-price competitor in the industry. McDonalds instead relies on differentiation to justify the slightly higher prices. That said, if it was not able to control its prices it would not be able to compete in the fast food business. Typically, when a customer enters a McDonald's restaurant he or she places an order at a counter, and then the food is quickly assembled and delivered. The customer then sits at a table to eat the food.

Alternately, the customer uses the drive through to gain a similar experience. Company Analysis McDonalds has many strengths. The company has a great brand, strong internal systems, a strong balance sheet, substantial geographic diversification, the ability to adjust to operating conditions around the world and strong management. Each of these strengths contributes to the company's dominance of this highly competitive industry. The company's financial position allows it to pursue opportunities as they arise. Geographic diversification is important for situations like the U.S.

recession -- the ability to make up for such downturns with growth elsewhere is highly valuable. The internal systems allow for two things critical to McDonalds -- efficiency and consistency. The McDonalds experience is the same in every restaurant in every country, something that is essential to brand development. There are few weaknesses at McDonalds. The company does not have a good reputation among certain segments of the market because its food is perceived as being unhealthy.

The company has had a few product missteps in trying to explore opportunities in other business -- pizza being one such failure. These weaknesses have not proven to harm the company in the long run but there are times when such instances will have an adverse effect on the company's revenue streams or cost structure. There remain opportunities for McDonalds. The company sees coffee as an opportunity and is pursuing market share from Starbucks.

The company still has room for international expansion as key markets like China and India are still not saturated to the degree that Western markets are. The growth prospects for the company are not tremendous, but there is definitely still room for slow, incremental growth in established markets while pursuing slightly better growth opportunities in markets not yet saturated. That said, the competition remains a strong threat for McDonalds, especially in the company's non-core businesses like breakfast.

McDonalds also faces threat in terms of its public image, and has been the target of a number of campaigns in the past. Additionally, McDonalds may face challenges as a result of economic conditions. Eating out -- even at fast food restaurants -- constitutes discretionary spending. It is known that discretionary spending declines in periods of economic downturn. Profitability Currently, McDonalds is a highly profitable company, with net income of $4.9 billion on revenues of $24 billion, for a net margin of 20.5%.

This is a very high net margin and illustrates the strength of the company's differentiation. Last year was a record high for both revenues and profits, and signaled a recovery from the.