Case Study: McDonald’s

Who has never heard McDonald’s? This company is well-known for fast food and the first company that established the standardization of fast customer services, manual as well as multi-store network, all of which impacted on the business field, especially, fast food industry. It is amazing contribution that recently the reference rate of exchange, which is called “Big Mac Index”, has been started to use to see the economy all over the world. McDonald’s Corp (MCD.N) Chief Executive Officer Don Thompson said the company that now serves some 70 million customers a day worldwide has at various times during its history faced questions about whether it is still relevant to consumers, who are now craving more fresh and unprocessed food. These days, however, the sales of McDonald’s are decreasing gradually. On 21^st, October in 2014, McDonald’s Corp. (MCD), the world’s largest restaurant chain, has announced that the third-quarter net profit fell 30 percent, which is $1.7 billion, as U.S. sales slumped for the fourth straight quarter. And also 30 percent of net profit which is $1 billion comparing with that of last year fell in this third-quarter.

What has led them to suffer from the management? There are some internal issues. One of them is the increase of competition. In addition to existing fast food rivals like Burger King and Starbucks, there are new rivals which is called fast casual food like Chipotle. The customer rotation of Chipotle is faster than McDonald due to the lower number of options. Chipotle, known for using pricier antibiotic-free meats and organic produce, are taking a bite out of McDonald’s market share. A several days ago, Chipotle reported an eye-popping 19.8 percent gain in third-quarter, same-restaurant sales. Other fast food companies launched new products. Burger King Worldwide Inc. (BKW) recently started selling a 10-pack of chicken nuggets for $1.49, while Wendy’s Co. is touting pulled-pork sandwiches. These components cause McDonald’s not only to get, but also to keep fewer customers. On the other hand, McDonald’s needs to respond to the rise in price of ingredients and labor costs. They have had no choice but to raise the price of hamburgers because they don’t have any good solution so far. Finally, the sales in existing branches decreased 3.3%.  Labor costs seem to be the more difficult issue to solve. On 4^th November, workers for fast food demonstrated to make the company pay more than $15 per an hour for them 150 places in America. McDonald’s is the biggest target because it has most branches in America.

These are also external issues, one of which is the use of rotten chicken imported from China to Japan. Also, Japanese branches sell new products with more expensive prices than that the company decided in advance. These facts let customers embrace disbelief of security and trust, which has resulted in decreasing the sales which accounts for 25% in Japan. The most net profit in Asia is generated in Australia and Japan, so this problem gave the company serious damage. The sales in August is one-quarter than same month last year. Totally, McDonald’s Asian sales fell about 10%. In Russia, McDonald has gotten difficulty in selling their food due to the political issue in Ukraine. Four branches have been closed as the response to the American economic sanctions to Russia. In addition, recent economic crisis in Europe caused McDonald’s Europe sales to fall 1.4%.

Chief Executive Officer Don Thompson said in a statement.

“The internal factors and external headwinds have proven more formidable than expected and will continue into the fourth quarter,” Thompson said in the statement. “These significant challenges call for equally significant changes in the way we do business.”

To win more diners, McDonald’s said today it’s trying a new global strategy that includes investing in store remodeling and technology as well as mobile ordering and payments. Sales were hurt in China and Japan after a probe into meat supplier OSI Group LLC caused food shortages. The affected markets make up about 10 percent of consolidated revenue, McDonald’s said in August. The supplier issue reduced profit in the quarter by 15 cents a share. The company also is facing pressure in Russia, where hundreds of its stores are being inspected by consumer-safety regulators. Russian courts have temporarily closed nine restaurants, McDonald’s said in a statement on its Russian corporate website. Closings there and in Ukraine reduced profit by 1 cent a share.

In conclusion, it is true that there are some tough issues including politics, but McDonald’s still has great chance to overcome current conditions. It is time to radically reconsider the company itself if they really want to get back into the competitiveness. Otherwise, it is just going to go bankrupt and many people are going to lose jobs, which makes the society disorder. That’s why they should approach those issues not only for McDonald’s.

 

http://www.bloomberg.com/news/2014-10-21/mcdonald-s-profit-drops-30-as-u-s-sales-slump.html

http://www.usatoday.com/story/money/business/2014/10/21/mcdonalds-fast-food-restaurants-earnings/17652697/

http://www.chicagotribune.com/business/breaking/chi-mcdonalds-earnings-20141021-story.html

http://www.ibtimes.com/mcdonalds-reports-30-drop-third-quarter-profit-after-chinese-meat-scandal-1708829

McDonald’s Third-Quarter Profits Drop 30%

http://beforeitsnews.com/financial-markets/2014/10/mcdonalds-reports-30-q3-profit-drop-on-weak-u-s-china-markets-2782336.html

 

How McDonald’s uses the social media

McDonald’s is using a lot of different social media websites, including Facebook, Twitter, Youtube, Pinterest, Tumblr, Vine, Snapchat, Instagram and Google Plus (which hasn’t been updated since 2011).

According to Tybout Calder, a buyer’s decisions have a lot to do with emotions[1]. It is therefore a good idea, that McDonald’s is using social media websites like Pinterest and Instagram since they are founded with focus on pictures, which are good for provoking emotions.

However, some can also state, that humans have a need for food and you therefore buy McDonald’s in relation to a functional goal. At some point, that can be true, but I think that people mostly are buying McDonald’s because of the taste, the brand and the reliability of the food.

Due to limitations of this assignment, the text below will only focus on McDonald’s’ use of Facebook.

1)

McDonald’s has a very broad customer base, as a lot of different types of people are eating their food. This statement is also symbolized in their way of using Facebook, where they have a big differentiation of their posts. Some posts are related to people interested in sport, others to current events and some to kids.

McDonald’s are trying to focusing more on healthy food, because more and more people prefer this. By focusing on the behavior of healthy people, McDonald’s tries target ‘noncategory users’ and convince them to choose McDonald’s. This focus on ‘noncategory users’, calls Tybout Calder, the most effective way of increasing a company’s profit in the long term[2]. McDonald’s challenge for the future are, that the earnings from the unhealthy food are more valuable compared to the healthy variations[3].

Furthermore, each McDonald’s shop has a fanpage on Facebook, where news about the given shop is presented. In this way, McDonald’s can be specific with the posts which probably results in increased engagement from the fans. Moreover, McDonald’s is focusing on current events, for example a special burger in relation to the World Cup in soccer[4].

2)

In overall, McDonald’s strategy is a good one, where they try to be active on a lot of different social media platforms. When that it said, there is space for improvements. They haven’t posted on their Google+ profile in around three years and this is not acceptable for a brand like McDonald’s. If they have an account on a big social media, they have to engage with the users on the platform (even though there are probably not that many active users), otherwise it is better just to delete the profile.

Personally, I am also disappointed that they aren’t trying to get more in touch with their fans. Compared to how big a brand they are, they don’t get much response on their posts. When that is said, it is pleasant that they try using special hashtags, and make the users create a lot of content by referring to this. In these days, they are offering a free coffee in relation to the #sipandtell[5].

3)

By analyzing the social media use of McDonald’s, I think there is more not to learn, than to learn. Compared to The Hyde Street Journal, we should be aware of not creating to many profiles on social media platforms. The exact number depends on how many capabilities there are, because the different profiles have to be managed. If they are not updated regularly and users not are getting answers on their questions, then you lose more than if you didn’t have any profile.

It will therefore probably be preferable, starting by using just a few social media platforms and slowly increase the number as the first ones are established. Of course, it can be a good idea just to register the blog’s name on a lot of social media sites, just to be sure that the names are available, but it shouldn’t look like that users can connect with us on the social media site, if we are not active.

[1] Calder, T., Kellogg on Marketing, John Wiley & Sons, Inc., 2010, 2^nd edition, page 7-8.

[2] Calder, T., Kellogg on Marketing, John Wiley & Sons, Inc., 2010, 2^nd edition, page 46-49.

[3] http://www.businessinsider.com/mcdonalds-healthy-menu-is-too-expensive-2014-3

[4] http://gamedayr.com/lifestyle/sports-biz/mcdonalds-world-cup-menu-soccer-ball-buns-109120/

[5] http://www.azcentral.com/story/money/business/2014/09/16/mcdonalds-is-giving-away-coffee-for-two-weeks/15720587/

/Christopher