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Case Study: McDonalds Corporation

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Madelyn Mills

on 28 August 2014

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Transcript of Case Study: McDonalds Corporation

Case Study: McDonalds Corporation
By: Madelyn Mills, Flick Bigelow, Kim van Broekhuizen and Britta Vaida
McDonalds Company (2001)
Image: Sanghvi 2012
Segmentation, Targeting and Positioning (STP)
Postulated By:
Unknown, however Positioning was coined by Jack Trout in 1969

Market segmentation:
Dividing a market into smaller groups with similar product needs or identifiable characteristics
Selecting suitable Market segment/s that the organisation wishes to serve.
creating a perception in the mind of the consumer

McDonald's is facing an earnings declines 'in the late 1990s and early 2000s', they must find new Market Segments to target in order to increase revenue. STP will allow them to identify new markets and develop strategies to appeal to these consumers.
Company key points:

Biggest market sharer in fast food industry
Worldwide sales over $40 billion
Shrunk net income of $1.64 billion (-17 % from 2000)


Hamburger: Burger King, Hardee‘s, Wendy‘s International
Non-Hamburger: Pizza Hut, KFC, Taco Bell


Heavy Users: sinlge males under 30 years with working class job, who love loud music, don‘t read much and hang out with friends

Fast Food Industry in 2001
Industry situation:

Fast food chains continue discounting products: Price war
Ongoing innovation of new products to attract customers
Want to get rid of the "cheap & greasy image"

Emerging industry trends:

Drive-through business (65% of whole sales)
Non-hamburger fast food becomes more popular (sandwiches)
Upcoming fast-casual sector
Customers‘ needs for high quality products (health awareness)

The 3 C’s Model: The Strategic Triangle
Postulated By:
Kenichi Ohmae 1982

Conceptual framework for strategic planning

Addresses three key elements

Goal: Differentiation from competitors through corporate strengths to better satisfy customer needs
Customer – Based Strategies
The 3 C’s Model: The Strategic Triangle
Segmentation by customer objectives

Segmentation by coverage (geographically)


Corporation and head-on competitors are likely to dissect the market in similar ways
Effectiveness of strategic segmentation tends to decline
Pick a small group of key customers and re-examine their objectives
McDonald’s customer groups: “heavy users”, “Health Conscious"
The 3 C’s Model: The Strategic Triangle
Corporate – Based Strategies
Maximization of the corporation’s strengths relative to competition in key functional areas

Fast-food key functional areas:

The 3 C’s Model: The Strategic Triangle
Competitor – Based Strategies
Strong and sustained differentiation vis-à-vis competitors
Achieved through: substantial advantage in differentiation

Don't Have to Cook - Targeting Heavy Users

TV's showing sports shows, comfy chairs an area to relax and chill with friends – must be careful not to offend families

Fast Nutritious Foods - Targeting Heath Conscious Trend

Offer a Salad Menu, Sweet Potato Chips, Low Fat Burger's, Healthy Deli Style Sandwiches and Sparkling Mineral Water

“Dividing a market into distinct groups of buyers who have different needs, characteristics or behaviours, and who might require separate products or marketing programs” – (Kotler et al. 2013 pg. 683)
Three general strategies for selecting Target Market:

Undifferenticated Targeting
Concentrated Targeting
Multi-Segment Targeting

(Depends on the Organisation and its' Available Resources)
Target Segments Strategies
Analyse Attractiveness of segments:
McDonalds Must Reposition Itself to Appeal to their Target Segments
"Don't Have to Cook" Segment "Fast Nutritious Foods" Segment
Class Activity
Created by Clayton P. Alderfer in 1969

Argues that these are three ‘classes’ of needs that influence and motivate employees within a workplace:

Existence: physiological and safety needs (hunger, shelter, security)
Relatedness: social and external self-esteem
Growth: internal self-esteem and self-actualisation

ERG Theory
But wait - hold up!
How is ERG Theory different from Maslow’s hierarchy of needs theory?
ERG theory argues that needs play an integral role in motivation and influence, BUT, unlike Maslow’s theory of needs, in ERG Theory there is no hierarchical structure.
ERG theory suggests that whilst everyone has common needs, there is no universal ordered hierarchy of needs.
ERG Theory
People view the importance of their needs differently, and therefore order them differently. For example:

Kim Kardashian
1. Relatedness
2. Existence
3. Growth

A monk during meditation
1. Growth
2. Existence
3. Relatedness

Bear Grylls
1. Existence
2. Growth
3. Relatedness

It is in the interest of McDonalds’ management to ensure that each employee’s needs (for existence, relatedness and growth) are successfully met

ERG in McDonalds
We need to develop marketing strategies to ensure that all of our employee’s various needs are acknowledged, considered and successfully fulfilled. Therefore, employees will not attempt to fulfill their needs from other sources (like our competitors).
But... how???
Potential strategies to increase fulfillment of employee’s ‘existence’ needs:

Hunger and thirst:
at the end of every shift, employees are given a free meal voucher (up to a certain monetary value) to ensure that they do not leave hungry or thirsty

security cameras are up-to-date and monitor all direct outside areas of McDonald’s stores to ensure employee safety

Training and machinery awareness of all equipment
(regardless of whether you are actively involved with the equipment): ensure that all employees are aware of equipment. This will therefore limit health and safety risks associated with equipment related accidents
Potential strategies to increase the fulfillment of employee’s ‘relatedness’ needs:

Social and external self-esteem strategies: Bonding activities such as McDonald's team bowling, participating in a soccer league or trivia nights.

New employees assigned an ‘older sister or brother’ to ease them into their new job
Potential strategies to increase fulfillment of employee’s ‘growth’ needs include:

Internal self-esteem strategies:Provide psychologist and mental health awareness training sessions

Growth/employment strategies: Employee loyalty benefits and incentives in relation to remaining
Wrap it up!
Arnolds, C. A & Boshoff, C 2002. Compensation, esteem valence and job performance: an empirical assessment of Alderfer's ERG theory. International Journal of Human Resource Management 13(4), pp. 697-719.

ATSD 2014, ATSD USA State of Industry Report for 2002, viewed 24 August 2014, <http://hdl.voced.edu.au/10707/10593>

Existence, Relatedness, Growth Theory
2014, Value Based Management.net, viewed 14 August 2014, <http://www.valuebasedmanagement.net/>.

Kotler, P, Burton, S, Deans, K, Brown, L & Armstrong, G 2013, Marketing, 9th edn, Pearson Australia, NSW.

Management Methods, Management Models and Management Theories 2014, Value Based Management.net, viewed 14 August 2014, <http://www.valuebasedmanagement.net/>.

Market Analysis
2014, Small Business Tool Kit, viewed 16 August 2014, <http://toolkit.smallbiz.nsw.gov.au/part/3/10/49>.

McDonalds, Money and Markets 2014, Business Insider: McDonald's 19 That Will Blow Your Mind, <http://www.businessinsider.com.au/19-facts-about...>

Peter, P.J & Gokhale, A 2013, McDonald's Corporation, McGraw-Hill Irwin, New York, NY.

Ohmae, K. (1982). The strategic triangle: A new perspective on business unit strategy. European Management Journal, 1(1), 38-48.

(Kotler et al., 2013)
(Kotler et al., 2013).
(Kotler et al., 2013).
(Management Methods, Management Models and Management Theories
Market Analysis
(Kotler et al. 2013)
Existence, Relatedness, Growth Theory
But why????

If our employees are not having their needs fulfilled, they are more likely to look for work elsewhere (including our competitors!!!)
Segmentation - McDonalds
Full transcript