Download - Golden arch hotels : Case study
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Golden Arch Hotels by McDonald’s
Chintham Ashish (008)Ipsita Pradhan (019)Arokia Rexton (028)Pranjal Yadav (037)
Ragavendra R. (038)Vaishnavi C. (056)
Gaurav Kumar Singh (096)
By TEAM RIES
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• 1954 – Milk Shake seller – Raymond Croc• Fast and Friendly• Donald Brothers – San Bernardino• First McDonald – Franchisee• 1967 – Outside the US – Canada, Japan, Holland,
Australia and Great Britain• 1970s – Germany, Hong Kong, Sweden, the Far East, and
Latin America
Introduction
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• 1976 – Swiss – 142 – 7200 Employees• 1989 – Eastern Europe – Russia, Poland, Hungary, and the
Czech Republic• 2005 – 30,000 QS Restaurants in 122 Countries• Relationships with its Neighbors, Local Communities ad
Clubs• Built in “PlayLand”
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• 1965 – IPO – NYSE• Market Saturation• Diversification Strategy• The Swiss Strategy• The Hotel Project• 4 Star Hotel – The Golden Arch
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Uniqueness of The Golden Arch• Competency center• Luggage Handling – Custom made trolley• No rush in Check-in & Check-out – Self, Credit Card at the
Airport Terminal would do• Curved Walls in rooms – Patented• Futuristic Shower
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• Spirit of Mc. D’s- “hospitality philosophy”• McD’s USP-
Burger and fries at one price Clean environment Fast and friendly service – Zero waiting time Consistency in quality , rate & taste
• Relationship with customers, neighbors, local community and clubs.
• Ambience :• 1/4th of the restaurant – play land for kids• McD’s clown – educate and entertain children• Target customers: children centric
Mc Donald’s Brand image
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Service sector- quality food
Associated with social benefit
Cheap place to hang around
Family gathering
Children recreational place
Mc D perceived as
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Customer Experience at Golden Arches
• Signage of the hotel was not prominent• Unfriendly front-desk employees• Comfort• Ambience • Brand reinforcement at every turn
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• Wireless keyboard was too advanced in 2001• It was relatively isolated• 4 star rating did not correspond with hotel image• Only eating option is McDonald’s• The name Golden Arch does not translate into the
German language
Customer Experience at Golden Arches
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Customer Reactions
10
The room was exceedingly cheerful and I found the headboards witty rather
than annoying.- Fred Bernstein
As I think about this hotel visit in retrospect, the entire feeling was one of oddity and discomfort.- Nancy Stephens(Arizona)
It would have never crossed my mind that
a Mc Donald’s restaurant would qualify
as a four-star hotel.-Daniel Deutscher
Given the low occupancy,there was little effort to
sell the rooms to us and the front-desk person was not very
friendly or welcoming either.-Upendra Dixit
Quotes
I Usually stay in five-stars. But if there isn’t one around,
why not stay at Mc Donald’s?-Erwin Brunner
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Deep / Broad Brand Awareness
PoP & PoD
Positive accessible reactions
Intense & Active loyalty
Role of PoP & PoD in the Brand Building
Performance- How well functional needs are met ?- Question marks: Food & beverage, Guest
services, Recreational facilities, Business needs like large conference rooms
Imagery- Way people think about a brand abstractly- Question marks:- “I can’t imaging staying at a Mc Donald’s hotel on
a business trip”- “expected the hotel would be one or two star”- “having a picnic than having a drink in a bar”
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Expectations @4 star hotel?
Comfort Ambiance Recreational Facilities
Food and beverages Service Cleanliness
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Are the points of difference compelling?
Curved wall Gadget
(keyboard)
Movable beds
Futuristic Shower
Automation
Custom made trolley
Deliverability?
Desirability?
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Porter 5 forces analysis
• No such threat at that point of timeThreat from substitute
• Competition with four star hotels• World’s fastest growing hotels• Compared with other hotels, far from airport
Intensity of rivalry within industry
• Tours and Airlines (major customer segment) – demand long term relations and lower price. (Bargaining power – HIGH)
Bargaining power- Customers
• HR scarcity in SwitzerlandBargaining power- Supplier
• Increasing nos. of new hotel• Growth rate 40%, 3000 new rooms• In past, increased growth drop in occupancy rate
Threat – new entrants
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• Loyal currentcustomers• The new products have a good quality and are well
promoted and priced.• Moreover, the new products are marketed to the same
economic environment as the existing products.
• McDonald’s Customer group -> Economical and Upper middle Class
• Golden Arches’ Customer group -> Upper class people
When to Horizontally Diversify???
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• Customer Confusion:
Surprised to see Golden Arches Hotel (not much advertising)
OMG!!! McD is a 4 Star hotel???
A 4 star hotel with no bell boy, no receptionist, looks deserted!!
Where are the friendly customer support executives??? Safety
factor!
A 4 Star hotel with only a burger joint???
Internal Problems Faced
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• Bar ambience • ‘Arches’ in German sounds awful.• Noise from the airport.• Comfortable multi position adjustable bed looks like a hospital
bed to some customers. (Actually McD has satisfied customers’ needs, wants and went one step forward to satisfy desires)
• Shower in the Bed room!• Out of McD’s core competency• POD (High end technology) doesn’t seem to be relevant
Continued..
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Problems
• Segmentation and Targeting• Failure of Brand Value support• Irrelevant PODs• Market is expected to mature very soon and tough
competition existed!• Faster service was preferred over friendly service.
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BCG Matrix
Better liquidate it, it might hurt the parent brand
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• The corporation has already exploited all four cells of Ansoff’s matrix:• Market penetration –
McDonald’s saturated its home market (the USA) a number of years ago• Market development –
The company has managed to duplicate its fast-food success worldwide• Product development –
From burgers ‘n fries to breakfast, from salads to ice cream, the corporation has innovated in almost every edible direction
• Diversification – McDonald’s control land holdings and own processing facilities, logistics operations, franchising/financing operations, training facilities, and now hotels.
Ansoff ‘s Matrix
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• From a price perspective McDonald’s could match the segments of Mid-price, Economy and Budget.
• The segment chosen has a high impact on the price because Hammers himself told about this.
• Focusing much on families.
Segmentation
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• Lack of Clarity between Segmented and Targeted Customers• McDonald can make use of the advantage that it is
recognized as a family restaurants and attracting that kind of consumers to the hotels.
Targeting
31%
42%
27%
Customers
Business TravellerTour OperatorsIndividuals & Layovers
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• Good Quality at Cheap price
• Overriding its core competency in case of hotels.
• Planned a different name for the hotel chain.
• But the name symbolizes Mc. Donald’s
• It sounds different in German.Ref: http://blueprintcreative.info/MyServices/
Positioning and Naming
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Investment in Hotel Tot loan for hotel AnnuityPayment out
standing
$ 28,800,000
$ 23,040,000 ($8,145,339.57)
pmt interest principal $23,040,000.00
Yr1 ($8,145,339.57) $691,200.00 $7,454,139.57 $15,585,860.43
Yr2 ($8,145,339.57) $467,575.81 $7,677,763.76 $7,908,096.67
Yr3 ($8,145,339.57) $237,242.90 $7,908,096.67 $0.00
It is a 3 year mortgage loan and Golden Arches was not able to generate funds to pay it back. Plz download the case memo also for more detailed explanation.
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Sources to pay back Liability
• Debt by debt (reduces credibility)• Cost restructure (funds from parent brand)• Internal Funds (not sufficient)
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• Target Market: Travel vacationers and lodging guests. Age 0-50 with children. Prefers to travel by car and enjoys various kind of entertainment
Segments: The Mid-price and Economy segments. Focusing much on families, building on the parent brand attracting consumers from both segments.
•Hotel Features: In-room appliances, Internet, Newspapers, breakfast/lunch restaurant with recognizable McDonald’s products.
Location: Currently Located near highways, in vicinity of theme parks, golf courses, and shopping malls.
Key Recommendations
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• Use what works In food Industry for McDonald’s and use the family oriented and value based business model to create a unique hotel experience that everyone could enjoy.
Be Unique
-McDonald's can incorporate their Play Place and other game room activities like coin operated arcades.
-Not only does provide entertainment, but it also provides revenue from guests that if they were in other hotels would not spend more than the room fee.
-Include a unique dining experience that includes much of what they provide already while adding multi-cuisine food in the menu.Shall give a reason to look forward to for the customers.
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Alternatives
• 2 or 3 Star Hotel Focus on families with
children Low-cost budget Economy class Limited amenities
• 4 Star Hotel under a different Brand Different logo Interior Design Ambience Multi-cuisine restaurant Customer Engaging Activities Trained Service staff