With over 35,000 outletsworldwide, McDonald’s has conquered the fast food industry- and continues to atan ever-increasing rate. (Nudelman and Lutz, 2015). Since its establishment in1940, its earnings have escalated to 5.75 billion dollars annually (McDonald’sAnnual Report,2016). They are known to serve more than 70 million customersdaily, which equals feeding 1% of the world’s population every day (Nudelmanand Lutz, 2015). Even though it is one of the largest food chains in the worldand the largest private sector employer in Great Britain, McDonald’s doesn’tonly operate in the food sector but also in the real estate industry (Nudelmanand Lutz, 2015).
In fact, most of its income is franchise-generated revenue, which adds up to 82% of thetotal annual revenue. Harry J.Sonneborn, McDonald’s former CFO, once said, “We are not technically in thefood business. We are in the real estate business.
The only reason we sellfifteen-cent hamburgers is because they are the greatest producer of revenue,from which our tenants can pay us our rent.” (Jargon, 2015) This brings us to the question: How did asingle restaurant grow into an expansive corporation? This essay will focus onexamining this question by exploring a few of the marketing techniques used byMcDonald’s; which has led to its global domination of the fast industry and themassive revenue numbers. The main strategy followed byMcDonald’s has been investing in the franchisemodel. In 1955, Raymond Kroc joined McDonald’s, which was at that time, asingle restaurant owned by brothers Richard and Maurice McDonald, obtainingnational franchising rights. By 1960 he had successfully opened 200 restaurantsin the USA.
Following its success and immense popularity, in the year 1961 hebought McDonald’s from the McDonald brothers for 3 million dollars. (McDonald’sHistory) Although it was not the first to follow this model, it has become oneof the most shining examples of success through franchising. As the companybegan to expand internationally, franchising it to local people was a boon, asit appealed to the people as pure product and service, rather than propagationof the US brand culture. This strategy grew to such an extent that now everyeight hours a new McDonald’s opens somewhere in the world.
(Gross) McDonald’sis now the largest Worldwide Franchised Food Service Organization. However,franchising alone did not give this food giant its brand name and popularity.This brings us to the next marketing strategy: Innovative and appealingadvertising.
Investments in marketingcommunication methods, like advertising, has played a vital in its success fromthe very start. In 1967, McDonald’s launched its first ever nationaladvertising campaign, spending 1% of its sales, a whopping amount of 2.3million dollars, which was a huge amount for a fast-food joint to be spendingat that time (Gross,1996). The main purpose of advertising was to promote itsproducts by making people aware of it, attracting them towards it and makingsure they remember it (Business case studies).
McDonald’s, even in the presentday, spends approximately 2 billion dollars in advertising- with differentadverts made to cater to different target audiences (Silvestri, 2016). Thecompany broadcasts the advertisements on television, cinema, radio, online mediaand in the press like newspapers and magazines. These adverts are however differentin various countries.
Their promotional strategy is ‘brand globally, advertiselocally’. For example, to promote their hamburger in the UK, they used AlanShearer, who is an English footballer to appeal to the consumers here, while inFrance, their promotional figure was the French goalkeeper Fabien Barthez.Another example of this are their adverts in Hong Kong which portray them asenvironment friendly and being sensitive towards society. What’s common in allthree ideas is the use of different personalities and different cultural traitsto promote its products in a more localised manner (Vignali, 2001). McDonald’s also uses sale promotion tacticslike discount coupons and free gifts to attract the public into theirrestaurants. In addition to this, McDonald’s public relations makes efforts toattract positive spotlights by adopting varied spin techniques. For example, inBeijing, there are more human workers, in contrast to its operations in theUnited States, where technology has taken over. Public relations staff arepresent to help children, answer questions etc.
keeping in mind the importanceof human interaction in the far east (Vignali, 2001).This was McDonald’s promotionalstrategy in general, but its special focus towards advertising to children,making them their major target audience, cannot be left undiscussed. McDonald’shas adopted a uniform strategy which transcends all barriers of race,nationality, religion and region to advertise to children. In 1967, one of thefranchise owners, recognising a mascot’s importance in advertising and aclown’s appeal to children, introduced Ronald McDonald. Soon it became morefamiliar to 96% of American children than the name of their president (Lee,2015). Ronald McDonald is also the second most recognisable fictional characterafter Santa Claus (Schlosser). When it comes to creating recognizable icons,McDonald’s not only has Ronald McDonald but also the Golden Arches, which display a sense of grandeur to Americans.Created in 1952 by the founding brothers to make the restaurant moreeye-catching, it is now recognized by more people than the cross (Harlene L.
).In 1979, the ‘happy meal’ was invented to market the brand to children (2014). In1997, McDonald’s announced a global alliance for 10 years with Walt Disney,sharing complete exclusive marketing rights- from food to films. Following this,the company began to produce toys, bundling them in their ‘happy meal’ for filmpromotions. With Walt Disney’s pre-existing world-wide appeal there was no needto act locally and alter the happy meal for different communities (Abramowitz,2006).
Through these ‘happy meals’, McDonald’s became the largest distributorof toys in the world, distributing 1.5 billion toys worldwide (2015). Thesetoys also contributed to 20% of their sales.
In a report done in 2009, 37% ofchildren said their first choice of restaurant was McDonald’s because they-‘enjoyed getting a toy with their meal’.McDonald’s co-branding withwell-known companies has been of immense use in their marketing, from Coca-Colaas their drink supplier to having Michael Jordan and NBA themed cups. Apartfrom Disney toys, there were other brands which soon came into the ‘happy meal’bundles- Barbie, Hot Wheels, Nickelodeon, Transformers, TY Beanie Babies, NFL,NASCAR and NHL. In Canada, 314 Walmart stores have McDonald’s outlets and inIndia, oil companies like Bharat Petroleum have McDonald’s available at theirgas stations (Kulkarni, 2013).With this outstanding successin marketing, McDonald’s has become the leading fast-food chain in the world,along with being the largest distributor of toys, the largest employer in GreatBritain and one of the most recognized brands in the world. However, one thingthat not everybody knows is that even after so much success in the foodindustry, most of its income comes from investing in real estate. Schlosserdiscussed how McDonald’s Corporation is the largest owner of retail property inthe world. In 1956, at the risk of bankruptcy due to low profitability, HarrySonneborn suggested purchasing real estate as a mean of income (Love).
Theybought land and leased it to the franchise owners (Tran, 2010). This resultedin remarkable profit providing enough resources for expansion and security forfuture depreciations. At present, the McDonald’s Corporation makes a profit ofalmost 40 million dollars through real estate alone (Wall Street Survivor, 2015).Throughout its journey to thispinnacle of success, the company has had to face its share of controversies andchallenges multiple times. Health concerns, mostly related to children, and notfollowing sustainable environmental practices are a few of them. McDonald’s hasalways dealt with these tribulations effectively instead of allowing them tohave a devastating impact on their business. The key to McDonald’s successis its focus on customer satisfaction. McDonald’s emphasizes in making thecustomer ‘happy’- an idea constantly reinforced in their marketing schemes (Kumar,2004).
They work towards this in several ways- first and foremost being, ashistorian Love wrote “the brothers defined a totally new food service concept”by applying a factory- line assembly concept to a commercial kitchen, therebycutting short the serving time from 30 minutes to 30 seconds (Frost, 2005)(Feder, 1997) (King, 2010). Ray Kroc always insisted on high standards ofcleanliness which till date is the hallmark of the restaurant chain (Lister). McDonald’shas always had a strict policy towards safety and food quality standards. Thecompany also strives towards making the prices more and more affordable bycutting unnecessary costs and finding new ways to have an efficient workplaceand reducing costs on labour (Schlosser). A fast, clean, nutritious and cheapfood service will always be an ideal place for any customer. Following thislevel of customer satisfaction comes an even higher level of customer loyaltytowards the brand.Globalisation and the fast-growingfood economy has created competition for McDonald’s, but it has still managedto stay at the top of its game, whether it is by providing the customer withmore value and faster service or simply perfect deliverance.
Raymond Kroc,founder of McDonald’s, was quoted saying “Perfection is very difficult toachieve, and perfection was what I wanted in McDonald’s. Everything else wassecondary for me.” (Kroc, 2016). By responding to ideas from franchises andcustomers’ demands, it has been constantly innovative, which has helpedMcDonald’s in fending off stagnation and satisfying its customers. One exampleof this from the early years of the company is from 1975, when in a certainarea, soldiers were not allowed to get out of their vehicles in their fatigues,and McDonald’s came up with the idea of a drive-thru.
The first McDonald’s drive-thru was located near a military base in SierraVista, Arizona (Bailey, 2017). Another example would be the acceptance ofregional differences in culture and food preferences. In Canada they havelobster sandwiches on the menu and in India they have more vegetarian andchicken options (Lamb/ Hair/ McDaniel, 2013).
Although they are constantlycoming up with new ideas and innovations, the signature McDonald’s experienceis not affected by them. McDonald’s has been unaffected by competition andcontinues to be the leader in its field also because of its constant growth andexpansion and the brand name that it has created and nurtured over the years. In the 2000’s, there was anera of enlightenment in society towards a healthier lifestyle when at thispoint, McDonald’s faced challenges concerning health and obesity, particularlyrelated to children. Addressing this issue, the company in 2004 formed theGlobal Advisory Council (GAC), an international team of experts to provideprofessional guidance in areas of general well-being and nutrition forchildren. Healthier options were added to the menu like salads and low-fat milkin the drinks (Bailey, 2017). Also, realising the new concept of 5 small meals,in 2006, McDonald’s chefs created “snack wraps” (Ready BBC, 2014).
Furthermore,to gain the confidence of its customers regarding McDonald’s concern towardshealth it has embraced the policy transparency. In this effort they created awebsite ‘our food your questions’. A forum where one can see recipes throughvideos and ask questions regarding the food. There are also videos online wherechildren can ask questions to farmers.In the mid-1980’s, McDonald’sfaced one of the greatest controversies in its existence. London Greenpeace anenvironmentalist activist challenged that the production and packaging of theirfood causes destruction of rainforests. As expected, McDonald’s addressed theissue and established a Global Environmental Commitment in 1990. This tracedthe several steps taken to reduce solid waste and conserve natural resources.
Following this 80% of McDonald’s packaging is made from recyclable materials(Bailey, 2017). Even though the accusation was handled, its public image couldnot be cleaned up for a long time and the company had to face its consequences.The goodwill of the consumers built throughout its journey made this easier forthe company. Keeping in mind the successand massive turnover of the company from both the restaurants and the realestate, the company has acknowledged its duty to give back to society.McDonald’s has created strong community relations and as Ken Barun, the presidentand CEO of Ronald McDonald House Charities, said ‘… to seek solutions for theproblems facing children and families today’- One of the charities byMcDonald’s is the Ronald McDonald House Charities and does exactly that. Itprovides free ‘homes away from home’ accommodation for families with childrenin hospital. There are 160 local RMHCs in 27 countries all aimed at improvingthe lifestyle of underprivileged children (Vignali, 2001).
McDonald’s alsoworks with several other charities in different countries.McDonald’s understood and implemented the 7P’s marketingmix very precisely. Providing high quality product- at a low and affordable prices-in prime locations that are easily accessible- effectively promoting the brand nameand its products linking the material value to non-material values such as thoseof family- employing the right people and training them to work well imbibing thecompany’s beliefs-keeping in mind the importance of physical appearance McDonald’sis strict when it comes to cleanliness in every sphere-and finally the process ismade transparent with visible kitchen and websites with videos of the various processesused.To conclude, McDonald’s has risen from thebottom, rose to the top and remained at the top since it’s operations began.
Several studies have been conducted to analyse how this giant corporation hasachieved such heights, to which the answer lies in McDonald’s belief: Resilience, Consistency and Innovation.Through its varied and sophisticated plans, this brand has emerged to becomemore than a fast food chain. It has not only managed to represent the Americanculture to the outside world, it has also catered to the needs of othercultures which have helped it grow. It struck a perfect balance betweenemploying labour and technology, the results of which can be seen today.
It hasaccommodated traditional values with modern production techniques to create abrand with unparalleled competence. Whether it’s advertisements, apps, menus orservices, McDonald’s has always allocated its profits into expanding its rootsfurther into the grounds of multiple industries. The company’s aggressiveexpansion of franchises worldwide, has give its brand name a world-wide appeal,on that cannot be competed with. Every business faces problems and downtimes, butMcDonald’s has dealt with them with so much efficiency and went past them with easeowing to the rapport it establishes with its customers. The ubiquitous “goldenarches” have become a symbol of not only consistent and uniform product but alsoan atmosphere of positive family vibes.
When one walks into a McDonald’srestaurant one is walking into a brand that extends into the community. Thecompany has hence, always received popular support from the locals owing to thesupport the provide to society in the form of charities, scholarships oremployment. This fame is also a result of effective advertisements, mascots andbrand image- all capturing the interests of majority of the customers. By themeans of intense advertising, impeccable public relations and exemplarybusiness expansion models, McDonald’s has achieved what other brands can onlyhope of achieving- Longevity.