Publisher: Asian Economic and Social Society ISSN: 2225-4226 Volume 2 Number 7, July (2012)

Impact of Constructive Marketing Strategies on Return (Revenue & Profitability): A Case Study of Mcdonald’s

Parvez Azim (Foreign Faculty Professor of Economics, Government College University Faisalabad, Pakistan )

Samreen Azim (Liverpool University, U.K)

Citation: Parvez Azim and Samreen Azim (2012). Impact of Constructive Marketing Strategies on Return (Revenue & Profitability): A Case Study of Mcdonald’s. Journal of Asian Business Strategy, Vol. 2, No. 7, pp.153-169.

Journal of Asian Business Strategy, 2(7): 153-169

Impact of Constructive Marketing Strategies on Return (Revenue & Profitability): A Case Study of Mcdonald’s

Abstract

This paper contains the analytical view of the marketing strategic shift of McDonald’s and its effectiveness with respect to the growth of the company. Marketing strategies of the company are Author(s) discussed in the three dimensions, which are marketing philosophy, company’s status with respect to the time Parvez Azim of entrance in the market, and nature of the market Foreign Faculty Professor served. Company continued to retain the strategies of of Economics, Government market pull and national high share in t he first and College University third dimensions respectively since its origination. But Faisalabad, Pakistan company shifts its marketing strategy from frontal Samreen Azim attack to leap frog in the second dimension of Liverpool University, marketing strategy analysis. In the year 2004, U.K McDonald’s aligned its marketing strategi es keeping in view the changing trends towards healthy and diet food from rich (fatty food) and nutritious food.Due to this strategic shift, the company not only protected the growth of its market share but also achieved record increase in revenue of 10%. A record increase of 55% in the net income along with the record increase of 19% in cash from operations which proved not only the efficiency but also the effectiveness of changed marketing strategies of McDonald’s. This pace of the growth of the company continued in later years also with a little fluctuation due to international economic crisis. The ill effects of the have also been mentioned in this paper.

Introduction largest fast food restaurants. It is serving 58 million customers daily and McDonald’s corporation came into doing business in 120 countries of the being in 1954 as a follower of world (www.mcdonalds.com). Kentucky Fried Chicken (KFC) in the industry of fast food. McDonald’s McDonald’s is serving only one turned into public limited company in strategic business unit of fast food 1965. After attaining prominent chain in its portfolio and has got position in the USA, McDonald’s distinguished because of its high entered into the international market quality and hygienic products and through franchising and joint ventures. services. Only 15% of the total restaurants are owned by the company. Remaining 85 McDonald’s is one of those % are operated by the franchises and organizations that undertook the right joint ventures (www.scribd.com). Now strategic turn at the right time and kept

McDonald’s enjoys the status of the the company growing in spite of

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Impact of Constructive Marketing….. serious worldwide economic recession . Identifying the pros of the during last five years. McDonald’s marketing strategies employed most prominent strategic turn was by McDonald’s implemented in 2004, when . Determining the need to be McDonald’s turned its marketing adaptive to the environment strategy from frontal attack to leap and to the customer changing frog. As we know that McDonald’s is needs and requirements doing business in the international market, so in this paper international Hypothesis to be tested marketing mix of the company will be H 0: There is no correlation between the considered. Marketing strategy of marketing strategies of an organization McDonald’s can’t be analyzed in and its prospective return (both isolation. It requires having a bird eye revenue and the ultimate profit). view of the whole strategic management process of the company in H 1: There does exist a strong order to check the suitability of its correlation between the marketing marketing strategy as the whole. A strategies of an organization and its brief outlook of the strategic prospective return (both revenue and management process of the company is the ultimate profit). given in the following page. H 0: There are no ill effects of fast food on health. Aims and Objectives

H 1: There are ill effects of fast food on The main objective of this paper is to health. analyze various strategies followed by multinational corporations – in my Reasons for selection of this topic case McDonald’s Restaurants- in order Strategic Management Process is a to survive in dynamic business hallmark of the age which is not only environment, to have an edge on its desired for management of competitors, and to retain its administrative affairs but also for all profitability position. Ill effects of fast others kinds of fields as well including food consumption on health have also marketing at apex. Gone are the days been mentioned. when the fields of accountancy, marketing, finance, management were This task has been accomplished by: considered to be separate and separate handling and function were undertaken . Understanding the need to for these purposes. Now-a-days formulate stringent marketing diversification is considered to be the strategies best strategy to keep any thing going . Identifying the modes of on, and to avoid fiasco. Keeping in implementing the marketing view the above considerations, an strategies efficiently appropriate amalgam is also needed . Assessing the impact of the between marketing and strategic marketing strategies on the management. Through strategic return both revenue and the management process tools, a firm ultimate profitability enables itself to formulate and . Understanding the various implement state-of-the-art logical factors that influence the course of actions (strategies) in order decision regarding selection of to be a vibrant in all form of desirable marketing strategies circumstances. So, We selected this topic keeping in view the rationale for

triumphant success of a multinational

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Journal of Asian Business Strategy, 2(7): 153-169 corporation in consequence of apt In addition to above statements, it is marketing strategies. hereby mentioned with full confidence that wording of this paper is of my Sources of data and other own except wherever sheer words of information (research) text books or of internet sources would To write this paper, various textbooks have been used. of prime significance were used as enlisted in the references. Strategic management process of However, for some up to date and Mcdonald’s concrete information about Strategic management process for all McDonald’s, the main source was the kinds of activities, in general, consists internet as it enabled me to access and of the following logical steps based seek the research paper written by upon the available material in various various authors as well. text books.

Forming a Strategic Vision

Forming a Mission

Setting Goals and Objectives

Crafting Strategies

Evaluating Strategy Alternatives

Implementing Strategies

Post-implementation Review

Process Iteration

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A brief description of the various steps Goals and objectives in the above logic flow diagram is as Goals and objectives are used follows: interchangeably despite of marginal difference between them. Goals are Strategic vision some what broader than objectives. Company vision specifies the future Any how, objectives are the desired out look and make up of the company. accomplishments or outcomes of the Also, it indicates management company towards which strategies are aspirations for the organization, aimed. (Etzel et al., 2000) providing a landscape view of “What business an organization wants to be, Strategy (crafting) where it is headed, and the kind of In simple words, a strategy is shape it wants to create”. described as a logical course of action to accomplish certain goals or to get Mission the required job done. (Etzel et al., Mission is synonymous with Purpose, 2000) and this is considered to be the purpose of existence of an Third step in the above flow chart is organization, and it can be describes as divided into further three levels of the basic or fundamental function (s) strategy formulation. According to or task (s) for which an organization Walker et al. (2005), different levels has come into being. of strategy formulation are as follows:

Corporate Level Strategies

Business Level Strategies

Functional Level Strategies

Corporate Level Strategies are competitive advantage over its rivals. formulated at overall company level Also, corporate strategy is concerned irrespective of number of Strategic with the overall use of resources by the Business Units (SBUs) in the organization as a whole. company’s portfolio. Business level strategy involves crafting a strategy Business Level Strategies are and positioning the firm in each of its formulated at SBU level in order to

businesses to allow it to obtain achieve the business level objectives.

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Further one SBU has many functions business level as opposed to cost like purchase procurement, human leadership strategy (Ooppapers.com). resource management, production, financing, marketing etc. And business In simple words, a strategy is level strategy is concerned with how to described as a logical course of action compete within a particular market. to accomplish certain goals or to get the required job done. Separate sets of strategies are required to materialize above-stated functions. The key questions that serve as guides These strategies are called Functional for establishing a marketing strategy Level Strategies and marketing are as follows; strategy is the most important functional level strategy. It can’t be . Where are our customers, and drawn and implemented in isolation. why do they buy? Marketing Strategy is drawn around . How do our customers buy? the corporate and business level . How is it best for us to sell strategy, while all the other functional (Strategy)? strategies are drawn around the . Do we have something to offer marketing strategies. These are that competitors do not? concerned with the use of specific . Do we wish to take legal steps marketing strategies as part of overall to discourage competition? business strategy. . Do we need, and can we supply, supporting services? It has been argued (Walker et al., . What are the best pricing 2005) that where there is only one SBU strategy and policy for our in the product portfolio of the operation? company, corporate level strategy is . How can we best serve our omitted from different level of customers? strategies. As it is already discussed that the McDonald’s has only one SBU Evaluating Strategy Alternatives of fast food chain so it will be With in the Scope of Corporate convenient to start from business level Strategy, there are three alternatives, strategies of McDonald’s. McDonald’s that are available to a firm, are as have differentiation strategy at follows;

Corporate Strategy Alternatives

Growth Retrenchment

Stability

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All these decisions are made by the top success. Within the Scope of Business management for the overall direction Strategy, there are three core of the organizations and our concern is alternatives, that are available to a to extract those functional level firm, are as follows; strategies that lead McDonald’s to

Business Strategy Alternatives Cost Effectiveness Focus

Differentiation

All these decisions are undertaken by A firm needs a functional strategy for the middle management regarding how every competitively relevant business and where to utilize the resources of activity and organizational unit- R & the organization and our concern again D, production, marketing, services, is to extract those functional level distribution etc. And with in the Scope strategies that lead McDonald’s to of Functional Strategy, there are as success. many number of alternatives as much is the scope of the organization itself The thrust of the business strategy is by its diversified functions are how to build and strengthen the concerned, that are available to a firm, company’s competitive position in the are as follows; market place.

Functional Strategy Alternatives

Sales and Human Marketing Resource

Research and Development

Materials Management Manufacturing

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All these decisions are undertaken by Process Iteration the middle management regarding how In both of the consequences (success and where to utilize the resources of or failure), the process iterates in order the organization and our concern again to improve and enhance the decisions is to extract those functional level and function if there has been success, strategies that lead McDonald’s to and also to define and incorporate new success. decision in the light of flaws identified and remedial measures defined if there The thrust of the business strategy is has been failure. how to build and strengthen the company’s competitive position in the Vision of the McDonald’s market place. The long-term vision of McDonald’s is given as under: Since the company’s origination, it has McDonald’s vision is to been trying to offer customized be our customer favorite products according to the needs of the place and way to eat with customers. McDonald’s does not only inspired people who design different menus for different delight each customer countries but also creates adaptive with unmatched quality, environments of the restaurants in service, cleanliness and different countries as per their distinct value every time. We cultures and tastes. McDonald’s always invite you to be the part tried to put down its rivals in the of this wining team and grounds of quality and taste by give yourself an offering something additional and opportunity to people exclusive to its customers in its menus striving to create similes and services. on the faces of millions of people every day. Marketing strategy takes input from From the vision of the McDonald’s, it the company’s vision, mission, goals can be seen that McDonald’s wants to and objectives, and other superior be the favorite fast food brand among level of strategies while other people. So differentiation business functional strategies of the company level strategy is considered to be the take input from the marketing strategy. preferred one in order to get favorite brand among people. As opposed to differentiation, cost leadership strategy Implementing strategies can induce the customers to do trade After the selection of the appropriate off between delicacy of the product strategy, the firm goes into practice and price but can’t get the product with the chosen strategy (ies) and favorite among the people. So it can be actual execution is exhibited. observed that there is compatibility between the vision and business level strategy chosen by the business. Post-implementation review For all kinds of decisions and Due care is needed to be put forth activities, there is always an acute while choosing the marketing strategy need for the analysis regarding the of the business. Different authors have effectiveness of the same (decisions discussed the marketing strategy in and activities) in order to seek whether different dimensions. These different our decisions and the respective dimensions are basically the different activities proved to be successful or ways of looking at the same thing. In a not? general view “the marketing logic by

which the business unit hopes to

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Impact of Constructive Marketing….. achieve its marketing objectives is Generally, a marketing strategy can be called marketing strategy” elaborated in three dimensions, which (Marketing Management by Kotler are as follows: 2002).

Marketing

Strategy

On the basis On the basis of of nature market marketing served philosophy On the basis of time of entrance in the market

It will be necessary to analyze the Selling concept marketing strategy of McDonald’s The idea holds that consumer will not within the above described three buy enough of the firm’s products dimensions. This kind of analysis will unless it undertakes a large-scale provide a better understanding of the selling and promotion efforts. And marketing strategic shift of under this orientation, marketers try to McDonald’s and its effectiveness. sell their products by using various strategies. On the basis of marketing philosophy Marketing philosophies are Marketing concept synonymous with marketing The idea holds that achieving the orientations. Marketing philosophies organizational goals depends on are basically the concepts under which knowing the needs and wants of target organizations design and carry out markets and delivering the desired their marketing strategies. According satisfaction better than the competitors to Kotler (2002), there are five do. marketing philosophies, which are as follows: Societal marketing concept The idea holds that a company should Production concept make good marketing decisions by The idea holds that consumer will considering consumer wants, the favor the products that are easily company’s requirements, and available and highly affordable, and consumer’s long run interest, and that the organization should therefore society’s long run interests. focus on improving production and distribution efficiency. Now two important marketing strategies discussed by the Gupta V., Product concept Gollakota K., Srinivasan R. (2005) are The idea holds that consumer will pull strategy and push strategy. Pull favor the products that offer the most Strategy is based on the marketing quality, performance and features, and concept while push strategy is based that the organization should therefore on the selling concept. According to devote its energy to making continuous Kotler (2002), in push strategy the

product improvements. producer promotes the product to

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Journal of Asian Business Strategy, 2(7): 153-169 channel members to induce them carry the same. Here our concern is to the product and promote it to the final excerpt the strategies that contributed consumers, and in pull strategy the towards McDonald’s returns. producer spends a lot on advertising and consumer promotion to induce Now McDonald’s enjoys the status of final consumers buy the product. the largest fast food restaurants. It is serving 58 million customers daily and McDonald’s has been executing pull doing business in 120 countries of the strategy since its origination and there world. has not been any strategic shift taken by the McDonald’s in 2004 when McDonald’s growth marketing marketing strategy is analyzed in this strategy dimension. In 2004, McDonald’s did It has already been discussed that not only change the pattern of its McDonald’s is not the first mover in menus and services in different the business of fast food. McDonald’s countries but also changed the pattern was followed by Kentucky Fried of its advertisement campaign. In Chicken (KFC). The marketing short, we can conclude that strategy adopted by follower Company McDonald’s changed the whole pattern has always been the growth marketing of its marketing efforts, but in spite of strategy. According to Walker, Boyd, it, the underlying marketing and Larréché (2005), there are philosophy was same. Changed pattern different approaches to grow under the of marketing efforts was a response to growth strategy. A bird eye view of the changing trend of the customer s’ these approaches is as follows; preferences. So, it can also be concluded that changed marketing Frontal attack efforts during 2004 were basically This approach holds to capture directed to sponsor the execution of substantial repeat purchases from the the pull strategy and there was not any target competitors’ current customers, change occurred in marketing strategy and to attract new customers among in the dimension of underlying late adopters by offering lower prices marketing efforts. or more attractive features. To successfully implement a Frontal On the basis of time of entrance in Attack, a challenger must find one or the market more ways to achieve a sustainable McDonald’s corporation came into advantage over the target competitors. being in 1954 as a follower of Kentucky Fried Chicken (KFC) in the Leap frog industry of fast food. McDonald’s This approach holds to induce the turned into public limited company in current customers in the mass market 1965. After attaining prominent to replace their current brand with position in USA, McDonald’s entered superior new offerings, and to attract into the international market through new customers by providing enhanced franchising and joint ventures. Only benefits. This strategy is pursued by 15% of the total restaurants are owned the companies in those markets where by the company. Remaining 85 % are some needs and criteria are not met by operated by the franchises and joint the existing market players. ventures Flank attack On the basis of nature market served Under this approach, growing company McDonald’s has been a fast food chain attracts substantial share of new since its origination and it followed customers in one or more major

the KFC in the market to compete with segments where customer’s needs are

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Impact of Constructive Marketing….. different from those of early adopters (NGOs) declared Macdonald’s to be in the mass market. A Flank Attack is responsible for the increasing obesity appropriate when the market can be in the children. McDonald’s responded broken into two or more large to these problems in a very proficient segments, when the leader and/or other manner. McDonald’s revolutionized its major competitors hold a strong menu in different countries at the position in the primary segment, and pattern of Healthy and Diet Food, when no existing brand fully satisfies instead of Rich and Nutritious Food. the needs of customers. McDonald’s not only changed the Encirclement pattern of its menu but also altered the By pursuing this strategy, the growing pattern of its advertising campaigns. company attracts a substantial share of McDonald’s began its advertising new customers in a variety of smaller, campaigns and programs with athletics specialized segments where customers’ as well. McDonald’s raised the slogan needs or preferences differ from those of Balanced and Active Life Style. of early adopters in the mass market. McDonald’s started many other programs under the slogan of Balanced Guerrilla attack and Active Life Style to change its Under this strategy growing company market positioning and to keep the captures a modest share of repeat company’s strategies aligned with the purchases in several market segments, changing trends of the market. and attracts a share of new customers McDonald’s was the first one among in a number of existing segments. the fast food industry which introduced the low cheese burgers, diet ice A Guerrilla Attack is appropriate when creams, diet shakes, low fat milk jugs, well-established competitors already fresh fruit juices. These kinds of cover all major segments of the market modifications were made in the and the challenger’s resources are customized menus of the different relatively limited, Flanking, countries according to the culture and Encirclement, or all-out Frontal tradition of these countries. Attacks may be impossible. McDonald’s also provided the nutritious facts along with its different food packages. These efforts of the Growth marketing strategy of McDonald’s trapped the health McDonald’s before 2004 was frontal conscious customers in a very healthy attack, because McDonald’s always manner. tried to capture substantial repeat purchases from the competitor’s existing customers by offering more International marketing strategies of attractive features in the existing McDonald’s products at that moment. As it has been already discussed that McDonald’s is undertaking its business In 2004, McDonald’s turned to shift its in 120 countries of the world, so the marketing strategy from frontal attack company is always anxious to to leap frog sales growth strategy. This formulate the marketing strategy for its strategic shift of McDonald’s was due international markets in a cohesive to changing needs and trends of the manner. International marketing people from Rich and Nutritious Food strategy leads towards the right to Healthy and Diet Food. McDonald’s combination of marketing mix. carried out timely scan of the problem According to Walker et al. (2005), of increasing obesity in the people. there are two major international

Some Non-Government Organizations

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Journal of Asian Business Strategy, 2(7): 153-169 marketing strategies, which are as except for labeling and the language follows: used in the product manuals. This Global marketing strategy concept assumes customer needs are This strategy pursues the essentially the same across national standardization of the product across boundaries the border because of the growing world wide homogenization of the  Adapt the product to local world. It is very cost effective but is conditions an ideal situation. This strategy keeps the physical product essentially the same. Only the National marketing strategy modifications that represent a small Under this strategy, product and percentage of total costs are permitted. programs are quite adaptive to the needs and wants of the individual  Develop a country specific countries because of their product environmental, especially cultural In this situation, the physical product differences. is substantially altered that affects a significant part of total costs across countries or a group of countries. Such McDonald’s marketing strategy of strategy is common with packaged and Balanced and Active Life Style is personal-care items. global in nature but it is executed nation-wide as well. It means that McDonald’s followed the third marketing efforts of McDonald’s approach since its origination because changed its orientation from rich fast of having highly customized menu and food to healthy fast food but in services in different countries. customized way of different countries.

Menus and services were Price revolutionized but in the grounds of “The amount of money or material existing customized menus of the value charged for a product or service, countries. Also, there is a need to or the sum of the benefits of having or discuss the transition in the using a product or service” international marketing mix of (Principles of Marketing by Kotler and McDonald’s in the year 2004. Armstrong 2009)

Product McDonald’s follows price skimming “Any thing that can be offered in a approach for pricing its products. market for attention, acquisition, use Macdonald initially charged high or consumption that might satisfy a prices for newly introduced products, want or need” and then it began to offer discounts in (Principles of Marketing by Kotler and order to make the product affordable Armstrong 2009) for the middle and upper middle class

of the country. McDonald’s doesn’t According to Walker et al. (2005), the follow standardized pricing strategy product of an international company for all the countries. It offers different can be designed under three prices in different countries according approaches, which are as follows: to the economic conditions of the

country.  Make the same products to all the

countries Place This strategy requires that the “It includes the company activities that physical product available for sale in make the product available to the each country should be the same

target consumers”

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(Principles of Marketing by Kotler and changing trend could prove disastrous Armstrong 2009). for the restaurants dealing in traditional rich and nutritious food. McDonald’s situates its restaurants at There was a need to perceive the the best places of the targeted area. changing trend of the people regarding Most of the McDonald’s restaurants their diet plans. In the above described are in urban and semi urban areas in scenario, McDonald’s became able to the world. McDonald’s target market is acquire the status of market leader in upper and upper middle class, and responding to the changing marketing majority of the McDonald’s are needs. McDonald’s developed a frame situated in the posh areas worldwide. work under its Balanced and Active Life Strategy. Promotion “The activities that communicate the merits of the product and persuade The above framework consisted of the target customers to by it.” following components of energy (Principles of Marketing by Kotler and balanced equation, which are as Armstrong 2009) follows:

McDonald’s promotion strategy is not . Menu Choices standardized through the world. . Physical Activity McDonald’s considers the cultural, social and religious values of the countries before designing any Another component of the framework advertisement campaign for those was information regarding the ways of countries. In 2004, McDonald’s raised spending Balanced and Active Life. a world wide slogan of Balanced and Third component served as a support to Active Life in its advertising the energy balanced equation. campaigns by perceiving ever- McDonald’s improved the taste of its increasing worldwide trend of fitness core menu on the pattern of Healthy among the people. This slogan chased and Diet Food. McDonald’s also a huge market share for McDonald’s introduced Premium salads, vegetable and left the record of highest ever servings, low fat cheese burgers, Low increase in revenue in the year 2004. fat milk jugs, fruit bags, and no

drinks and fruit juices. In this way, the Further, a detailed analysis of changed company rolled out a global brand marketing activities of McDonald’s in approach of Balanced and Active Life the year 2004 would provide the real Style. picture of the McDonald’s sensitivity towards the changes in the environment. In this way, McDonald’s also changed

its market positioning from Rich and Changes in marketing activities of Nutritious fast food selling brand to McDonald’s Healthy and Diet food selling brand. Beginning of the new century brought Revitalization of menus of different with it the problem of worldwide countries was in a customized and increasing obesity in people. This country specific manner. A range of problem caused the people to have a different sizes of menus were also critical look at their diet chart. People offered to the customers. were becoming more and more health Let’s have a glance at the new menu and diet conscious. There was an choices offered by McDonald’s is as increasing desire among the people to follows:

become smart and active. This

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Menu choices contained two grilled chicken patties, McDonalds developed the healthy and lettuce, fresh onions, tomatoes and a nutritious menu choices for different garlic mayonnaise sauce filled in countries. McDonalds’ customized Arabic flatbread. McDonald’s not only menu choices were on the pattern of enriched its menu choices on the values and cultures of the countries. pattern of healthy and nutritious food For example, McDonald’s restaurants but also provided full information in Japan introduced Pork Teriyaki regarding the nutritional facts for each Burger, McDonald’s Taiwan menu choices. An example of the introduced a Rice Burger, McDonald’s nutritional facts of the menu offered Brazil offers Coconut , by McDonald’s USA is given in the McDonald’s restaurants in the Middle following page: East introduced the McArabia, which

Table 1: Illustrating the Combinations - McDonald’s USA Approximate contribution to a child’s recommended daily intake for:* Hamburger, Apple Dippers with low fat Chicken McNuggets (4 pc), small french caramel dip, 1% low fat Milk Jug (236 ml fries, Sprite® (12 fl. oz. cup) carton) Calories 34% 31% Fat 44% 26% 28% 37% Cholesterol 8% 13% Protein 61% 101% B6 64% 43% Vitamin B12 18% 158% Calcium 3% 63% 13% 30% Zinc 14% 59% 22% 3% Magnesium 29% 45% *Calculations as of 28th September 2004, based on the recommended daily intake for a six-year-old girl, low activity. Source: Dietary Reference Intakes, Institute of Medicine, 2001 – 2003.

In this way, McDonald’s helped its promote physical activities among the people. customers in maintaining their diet McDonald’s supported different types of plan by providing them information sports games in different countries at grass about different meal choices. root level. McDonald’s distributed free 30 McDonald’s also offered different million pedometers around the world in order sizes of meal in order to make them to promote daily walking among the people. more adjustable for their customers. McDonald’s initiated a special physical activity program with the name of “Go Active Physical activity with Ronald McDonald” in order to promote McDonald’s not only improved its menu walking, moving, and dancing among the choices but also worked on the second children. McDonalds’ not only supported component of energy balanced equation. Olympic Games but also inspired the people to McDonalds’ focused on the physical activity do more and more physical activity through promotion strategy. the athletics.

According to this strategy, McDonald’s

initiated many programs of different types to

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Education and Information wide changing trends of the people. McDonald’s started to educate people Now the only thing left is to have a regarding Balanced and Active Life look at the effectiveness of these style by providing information on the changed marketing efforts. A brief internet, tray liner, and broachers. The description of above-referred above defined three vehicles educated marketing efforts is given below: the people regarding the different products of the company and different Effectiveness of the strategic ways of balancing food intake with the marketing shift of McDonald’s physical activity. Education and It is needed to have a look at the Information program was just a financial facts of last six years to supporting component of energy evaluate the effectiveness of marketing balance equation. strategic shift of McDonalds’ with the beginning of new century which are as In this way, McDonald’s aligned its follows: marketing efforts along with the world

Table 2: Yearly total revenue, net income and cash f low of MacDonald’s and their growth rates (2003-2008) Year-wise Average Revenue, Net Annual 2008 2003 Income & Growth 2007 2006 2005 2004 (V ) (V ) Cash from Rate 1 0 Operations Total 6.4 % $23,522 22,787 20,895 19,117 17,889 16,154 Revenues Net Income 19.5% $ 4,313 2,395 3,544 2,602 2,279 1,471 Cash 10.3% $ 5,917 4,876 4,341 4,337 3,904 3,269 provided by operations Source: www.mcdonalds.com

 calculated using the formula: 1 V TT10 g1 1 100 where g  average annual growth rate , V  initial value ,  0 V0 

V1  last value,5 T10 T number of years which is

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By considering the above data, income, and cash from operations can annual increase in revenue, net be calculated as follows.

Table 3: Percentage changes in revenue, net income and cash flows (2004-2008) Year-wise %age increase in 2008 2007 2006 2005 2004 Revenue, Net Income & Cash from Operations Percentage Increase in 3.23% 9.06% 9.30% 6.86% 10.74% Revenue Percentage Increase in Net 80.08% -32.42% 36.20% 14.17% 54.93% Income Percentage Increase in Cash 21.35% 12.32% 0.092% 11.09% 19.42% from Operations Source: www.mcdonalds.com

Changed marketing strategies of food such as burgers, pizza and fried McDonald’s began to reap healthy chicken that can be obtained quickly results right after its implementation from restaurants. and also percentage increase in revenue reached its highest ever figure of 11%. In the year 2004, increase in net income and cash from operations Recently, fast food chains such as was also remarkable. Company’s McDonalds, Pizza Hut and KFC, have revenue, net income, and cash from been criticised over factors such as operations continued to increase in the very high calorie content, increasing following years in spite of the portion sizes and the level of worldwide economic crisis. unhealthy (trans fat) found in the food. In the year 2008, increase in net income and cash from operations In the United States consumption of reached at the remarkable height of fast food meal has tripled and calorie intake from fast food has quadrupled 80% and 21% respectively. In this i way, McDonald’s continued its pace of between 1977 and 1995. Studies have growth in the new decade of 2000 in shown that the increase in fast food spite of worldwide economic crisis and intake puts individuals at increased changed preferences of the people. risk of obesity and insulin resistance. This continued pace of growth in the Insulin resistance is a major risk factor said variables was due to the right for Type 2 Diabetes Mellitus. The risk marketing strategic turn taken by the of heart disease and stroke are also Macdonald’s at right time. Need exists greatly increased due to the high levels to mention the ill effects of fast food of saturated fats found in fast food. consumption on health. Fast food has also shown to be high in sodium which increases blood Effect of fast food consumption on pressure, further increasing the chances of suffering from a heart health ii Fast food can be defined as food that attack or stroke. Furthermore, an requires little preparation before being increase dietary intake of fast food 1 corresponds to lower levels of fruit served” . This usually refers to food iii such as burgers, pizza and fried and fibre intake. Those who consumed fast food were shown to chicken that can be obtained quickly 4

from restaurants. This usually refers to have lower levels of and C.

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Impact of Constructive Marketing…..

In conclusion, many studies have hypothesis is accepted on the basis of demonstrated the increasing levels of data and information given above. heart disease, stroke and diabetes in individuals who consume more fast McDonald’s being a fast-food food than those who do not. This is restaurant business is monopolistically most probably due to the high levels of competitive in nature. Its franchise sodium, saturated fat and calorie competes against a host of other content of these foods. By raising similar establishments such as KFC, awareness and educating people about Jack-in-the-Box, Burger King and so having a balanced diet consisting of many others both within the USA and both vegetables and fruit, the in foreign countries. All of them sell incidence of these diseases can be quick meals at reasonable prices, the reduced. The adverse effects reduce products offered are clearly the marginal physical productivity of differentiated which in the main labour which in turn reduces the characteristics of monopolistic overall output of the nation and hence competition. reduction in the standard of livings of the country. McDonald’s introduced “New Tastes ______Menu” to increase its profit. Such 1 Dictionary.com. Available from: strategy might work in the short run http://dictionary.reference.com/browse/fast+fo but is not likely to have a sustainable od [Accessed 14/11/2011]. impact in the long run. The reason being that its rivals will mimic the 1 Lin BH, Guthrie J and Frazao E strategies and in the long run its (1999). "Nutrient contribution of food away abnormal profit will disappear. Need from home". In Frazão E. Agriculture exists to quote a example when similar Information Bulletin No. 750: America's chain of events occurred in the year Eating Habits: Changes and Consequences. 1978 when McDonald’s successfully Washington, DC: US Department of introduced a new product called Egg Agriculture. McMuffin in breakfast. In response to this other rivals in the fast-food 1 Lynda Lampert. How Do Fast-Food Habits business introduced their own Affect Your Health Over Time. Available breakfast items which adversely from: http://www.livestrong.com/article/51725 affected McDonald’s economic profits. 5-how-do-fast-food-habits-affect-your-health- Therefore, the manager of a firm in a over-time/#ixzz1di9XLPTi. [Accessed monopolistically competitive market 14/11/2011]. must evaluate its products periodically to ensure that it is differentiated from 1 Diet and Exrecise Guidelines. Available other products in the market to from: compete with its rivals or stay ahead of http://www.lsuagcenter.com/en/food_health/nu them. For product differentiation it is trition/diet_exercise_guidelines/Fast+Food+D advantageous to slightly or totally ulls+Appetite+for+.htm [Accessed change or introduce a totally different 14/11/2011]. product from time to time. To have a bigger share of the market such Conclusion companies spend quite a large on effective advertisements. It was owing to the market strategies of the organization that led to a rise Policy Recommendations total revenue, net income and cash In the light of this analysis, it is highly provided by operations by 6.4%, 19.5% recommended that organizations and 10.3%, respectively. Thus, the null should continually react and adjust to

hypothesis is rejected and the alternate changes in the environment in which

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Journal of Asian Business Strategy, 2(7): 153-169 they operate. For effective decisions Kotler, Philip (2002). Marketing making organizations must constantly Management. 12th Edition. scan their environment to identify Kotler, Philip and Armstrong, Gray changes and prepare for it. It could be (2009). Principles of Marketing”, macro environment such as political, 13th Edition. economic and social which are beyond Walker Orville., C. Boyd and Harper their control, or microenvironment W. (2005). Larreche, Jean- pertaining to the immediate Claude, Marketing Strategy: environment of the firm. Planning and Implementation. 11th Edition. Multinational corporations such as www.mcdonalds.com McDonald’s must take into account www.mhhe.com social costs and social benefits rather www.Ooppapers.com than just internal costs and internal www.scribd.com benefits e.g. the effect on the www.wikipedia.com environment or the impact on the community of their policies when they open their outlets in other countries. i Lin BH, Guthrie J and Frazao E Their policies should not clash with host countries customs, traditions or (1999). "Nutrient contribution of food away religious beliefs. They have to be very from home". In Frazão E. Agriculture careful in their advertising techniques, different signs have different Information Bulletin No. 750: America's connotations in different cultures and Eating Habits: Changes and Consequences. societies. What is good and acceptable in the USA may be very offending in Washington, DC: US Department of other countries. Agriculture.

Fast food is still a luxury in the third world countries, MacDonald’s outlets ii Lynda Lampert. How Do Fast-Food Habits and franchise should be located in relatively rich areas.The optimal Affect Your Health Over Time. Available location choice is also very important from: http://www.livestrong.com/article/5 to earn maximum profit. Furthermore, Product portfolio analysis should be 17255-how-do-fast-food-habits-affect-your- done to examine the existing position of the organization’s products in their health-over-time/#ixzz1di9XLPTi. markets to enable them to make better [Accessed 14/11/2011]. decisions. Such analysis is the marketing planning process. iii Diet and Exrecise Guidelines. Available References from: Etzel, Michael J., Walker, Bruce J. and http://www.lsuagcenter.com/en/food_heal Stanton, William J. (2000). Marketing. 12 th Edition. th/nutrition/diet_exercise_guidelines/Fast+ Gupta V., Gollakota K. and Srinivasan Food+Dulls+Appetite+for+Vitamins.htm R. (2005). Business Policy and Strategic Management. 1 st [Accessed 14/11/2011]. Edition. Garth R., Jones, Jennifer and M. George (2003). Contemporary

Management. 3 rd Edition.

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