growing mcdonalds
Post on 15-Apr-2017
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GROWING THE McDONALD’S BRAND- Harsh Daga, PGP31149, IIM Lucknow
Key Questions Answered
1. What options does a brand have to grow when existing markets reach saturation level?
2. How can a brand tackle changes in customer lifestyles that are adverse to its growth?
3. How can the chances of success for an extension be improved through promotion?
4. How important is the consistency of brand associations between a parent brand and its extension?
5. How can a 70-year old brand successfully reposition itself in the mind of it’s target group?
McDonald’s brand extension strategy is unique and a source of insights for the following critical brand management questions.
McDonald’s Customer-based Brand Equity
Diversification• Opened McCafe in Portugal &
Austria & McTreat for desserts
• New products for new markets
PERFORMANCE IMAGERY
JUDGEMENTS FEELINGS
RESONANCE
SALIENCEFamous multinational fast food chain Presence in 120 countries
Sell tasty and cheap
Multiple secondary services
Historically targets children
Convenient, Fun and Efficient
Good Quality
Value for Money
Possibly unhealthy
Warmth, Fun
Excitement – Happy Meal
Cheap
Attachment
Loyalty - Repeat sales
Changes in Environment McDonald’s faced an adversarial environment from mid 2000s :
Market Saturation
Health Concerns
Economic Slump
Decline in Fast Food Acceptance• Globally fast food market was witnessing saturation across all
geographies, with the exception of Asia-Pacific
2010 2011 2012 2013 2014 20150
100
200
300
400
500
600
700
Fast Food Market (in $ Billion)
World Asia Pacific Australia Eastern EuropeLatin America Middle East and Africa North America Western Europe
Stiffening CompetitionIts competitive frame of reference also kept increasing
Stiffening Competition• As can be seen from the graph below, Subway aggressively
increased its no. of outlets worldwideLeading Fast food (in terms of outlet numbers
• In North America, Burger King provided a cheaper alternative to McDonald’s
How didMcDonalds respond?
“ For 59 years we asked customers to fit around our business model: Here's our menu and here's the way you can interact with us... But peoples' desires are changing ” - Steve Easterbrook, CEO
McDonald’s Response
Using New ProductsProduct Development Diversification
• Conscious focus on creating healthy options like salads
• Launched a premium coffee line
• Opened McCafe in Portugal & Austria & McTreat for desserts
• New products for new markets
McDonald’s ResponseThe company responded with a 4-prone growth strategy
Using Current ProductsMarket
PenetrationMarket
Development• Adopted motto of “Better, not
bigger”
• Upgraded facilities and
operations of existing stores
• 24-hour service at select outlets
• Expanded to new countries in
Asia & Africa
• Localized offerings based on
taste preferences
• Targeted new customer
segments
Ad Campaigns - Focus on extensions
Adapting to changed consumer preference
for healthy food
Geographic Diversification
Improving brand image
Brand Power• McDonalds continues to have the highest brand power among
fast food chains Globally
Ranks as the 9th strongest brand overall but has been witnessing a fall off-late
A 70-year old brand legacy
Extensions – Accepted or Rejected?
Impact - Global Sales of McDonald’s
Diversification• Opened McCafe in Portugal &
Austria & McTreat for desserts
• New products for new markets
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
5
10
15
20
25
30
Global Sales of McDonald's ( in $ Billion)
Company-Operated Franchised
• A situation of depleting sales persisted, especially in its company owned outlets
Source : Bloomberg
• 2015 sales declined by $3 Billion from 2013
McDonald’s not able to get
rid of its unhealthy imageInconsistent Brand
Association
Negative associations related
to McDonald’s need to be
addressed through effective
communicationBottom-line
Successful brand extension requires a perception of fit between the parent and extension
DisclaimerThese slides have been prepared under the guidance of Professor Sameer Mathur for the Brand Management course at IIM Lucknow
Indian Institute of Management, Lucknow
Harsh DagaPGP31149
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