Essay: Increase and decrease in sales at McDonalds in the US and Denmark

Abstract
The following assignment examines the decrease and increase in sales at McDonald’s in both the United States and in Denmark the past year, with a primary focus on the United States. The perspective of this particular situation will be based on a combination of culture and marketing. To get a better understanding of how the situations in each country have occurred, there will be an account for sales of the past three years. This decreasing situation for McDonald’s in the United States will be compared with the success McDonald’s have had in Denmark in recent years, even though they have been affected by the health promotion wave. By completing the different analysis of McDonald’s and comparing these two situations, the conclusion will be that McDonald’s always will be number one on the fast food market, but because of the cultural cycle that always will change, they have to apply their food and products to the existing demands there are at the moment, and compose a strategic plan on how to catch the widest target group and increase sales.
Introduction
McDonald’s has in years been the biggest fast food chain in the world, and in the past 15 years the sales have been increasing, but recently the Annual Report shows a decrease in their total revenue, which has caused a bad reputation for McDonald’s in the news. Opposite to the fast food loving country, McDonald’s Denmark ApS has success with the sales, which has increased the past years, even though the country is affected by the health promotion wave. This surprising position that these two countries are in, made us find this subject interesting and therefore we have chosen to primarily analyze the cultural perspectives through the analysis and models from Marketing. We will primarily base the subject on The United States’ economically decreasing situation on their Annual Report from 2014 but we will mention the development from year 2012 and 2013 as well. We will not go further into details with the exact amount of money, but only the tendency.
Problem Statement
‘ Account for the sale in McDonald’s in regards to Denmark and The United States.
‘ Analyze the tendency of the decrease in the sale in The United States with a cultural perspective. Compare the tendency in The United States with the increasing sales in Denmark.
‘ On the basis of our analysis, we will discuss how and what McDonald’s in the US must focus on to increase their sales.
Method
To answer problem statement the above, we will account for the sales in both Denmark and The United States, analyze the tendency of the situations in the two countries and discuss how McDonald’s can increase their sales and get on the right track in the United States. To complete the problem statement we will analyze the tendency in The United States with a cultural perspective through the theory behind the Oniendiagram made by cultural analyst, Geert Hofstede and use Marketing analyzing models such as PESTEL, SWOT and Ansoff’s Growth Strategies, and by these analysis we will give our conclusions, with background in the analysis, on how the decreasing situation for sales at McDonald’s in the United States can be turned upside down.
Corporation description
McDonald’s is a fast food chain and it was founded in 1940 by the siblings Richard and Maurice McDonald. The first restaurant was opened in California. Years later they presented a new system, which is still used today by McDonald’s and are adopted by many other fast food chains as well. The system is called ‘Speedee Service System’, and with this system they focus on quick service and low prices. McDonald’s is today the biggest fast food chain in the world with over 31.000 restaurants in more than 100 countries. In Denmark the chain is called McDonald’s Denmark ApS and is a subsidiary company of McDonald’s Restaurant Corporation. McDonald’s mission statement is very comprehensive but primarily they focus on giving a quick and good service to the customers, so they have a pleasant experience. They do also focus a lot on their arrangements in the restaurants to make the customers feel comfortable.
Sales for McDonald’s
McDonald’s Denmark ApS
McDonald’s has through out the last couple of years showed great success on the Danish market of franchise. McDonald’s Denmark ApS is growing in sales and especially 2013 have been an excellent year with total revenue just below $80 million. This is an increase on 10 % compared to 2012 where the total revenue was $72 million. This brought McDonald’s Denmark ApS a net income in 2013 on $13 million, which is an increase with 5 %, compared to 2012. This progress on the Danish market of franchise has brought along four new restaurants in 2013, two in 2014 and many more are expected from the franchise chain the next few years . McDonald’s Denmark ApS employed in 2014 around 4200 people.
McDonald’s United States
McDonald’s US has like McDonald’s Denmark ApS, succeeded the last couple of years and even further back they showed great success on the American market of franchise. Even though the American market of franchise is huge, McDonald’s has almost from day one, been one of the fast food chain with the biggest market share on the American fast food market. The fast food chain has in many years been growing but since 2012 the increase in total revenue for McDonald’s has slowed down. In 2012 the total revenue was $8.8 billion and was in 2013 increased with less than 0.5 %. Since 2013 much fewer burgers have been sold and in November 2014, McDonald’s US went through the biggest decrease in sales with 4.6 %. This monthly decrease has been the biggest since June 2001.
SWOT
Strengths
McDonald’s is very successful throughout the whole world and is one of the most well-known brands as well. A major strength for McDonald’s is to apply their food and service to the differences in the given country, culture and markets they are in. Their franchising network is very successful and is one of the best in the world, and is also one of the reasons why they are so huge on the international market today, which make them very powerful as a corporation. Their late night opening hours and the offering of breakfast are a very important element for the growth in the corporation and have made them even more popular. Ronald McDonald, the mascot for the chain, is a very important factor when it comes to the Children’s Hospital. The Ronald McDonald house gives deceased children and their families a safe place to stay when the child is being hospitalized. This is improving the image for McDonald’s.
Weaknesses
Even though McDonald’s is the biggest on the fast food market in the world, they do also have weaknesses. The corporation has been criticized by the way their marketing has focus on children by giving them toys etc. to attract them. As well they do offer very unhealthy food and many Americans criticize their food as unnatural.
Opportunities
The past decade most part of the world has become very conscious about health and the environment. Therefore it would be a great opportunity for McDonald’s to focus more on these demands. In Denmark the company is already focusing on healthier food and more important is that they are promoting it very much so they let the consumers be aware of it. In the US they could introduce more smoothies, salads and low fat food so it will apply to the consumers. This would be a positive opportunity for McDonald’s to get their sales grow again. As regards to the environment, McDonald’s could replace some of their products with organic products, which would be attractive for many healthier and organic individuals, so they would choose to visit McDonald’s.
Threats
McDonald’s is the most valuable fast food company in the United Stated and the rest of the world. In the United States, the numbers of establishments in the fast food industry are growing. In a developed country as United States, the market is already filled to capacity with fast food restaurants and that is a treat to McDonalds. McDonald US has every year since 2001 grown bigger and bigger, but in 2012 they barely just grew throughout the year. The way people want to eat healthy food instead of what McDonald’s can offer and the concerns about obesity are threatening McDonald’s. Home cooking can be a threat for McDonald’s, so they have to make their restaurants more attractive than home cooking; by making the consumers believe that it is much easier. A big threat for McDonald’s is the new trendy market, Fast Casual Dining where the chain Chipotle is number one. This market focus on fresh, fast and quality food, which is what McDonald’s have to focus more on to catch this target group.
McDonald’s has through the past decade been sued and lost a few lawsuits. The case about an older woman, who spilled hot coffee from McDonald’s into her lap while she was trying to remove the lid, is just one example. Lawsuits are expensive, take a long time and it is negative reputation of the corporation, which lacks their image.
Conclusion of SWOT
After analyzing the intern and extern relations to McDonald’s we can now conclude, that McDonalds is the biggest and the best chain on the fast food market, which make them very powerful. McDonald’s can compete on their quick service, low pricy food and goodie bags for the children, but they have to focus on their weaknesses such as their image about serving unnatural and unhealthy food. Therefore it would benefit the corporation in America to sell more healthy food so it conforms to the consumers and the demands. America will probably always be a country where people generally eat very unhealthy, but at the moment many consumers want something different than McDonald’s can offer. About the image McDonald’s has, they have to make people believe that they will try to apply to the requests and therefore they can with new healthier food and more aggressive promotion, make people choose them. At the same time we believe that it would be a decent opportunity for them to change their design in the restaurants as they did in Denmark. They can replace the red, unclean and dark color with green and clean color that symbolizes healthiness instead. This will indirectly make people believe that it’s not as bad to eat at McDonald’s as they thought. Of course McDonald’s has to live up to their image as well by making these restaurants clean. This combination of previous elements would maybe help sales at McDonald’s in the US grow again.
Foodservice and eating behaviors
The lifestyle in the world has been changing throughout the time, and especially the past years where the health promotion wave has affected many countries and is now coming to The United States. The fast food industry in the US has always been major and for many people is McDonald’s and fast food a symbol of the US as we analyzed in the Oniendiagram . Even though the fast food marked still today is increasing, there has been a tendency to a healthier lifestyle with more healthy and quality food for the consumer in The US. ‘Food quality is a key, due to the fact that healthy eating and sustainable sourcing continue to rise in importance to the average consumer.’
Because of this tendency it has made an entrance for a new trend on the marked, Fast Casual Dining, where the food chain Chipotle remains number one . On this new marked they focus on sourced ingredients and they are making the food fresh in front of the customer, which match up to the demand. Asian food has also become very popular because of its inclusion of more vegetables and that it is diversified so the consumer can choose between deep fried food and healthier food . These elements could be the reason why McDonald’s has a decreasing sales and why the fast food generally still is growing, because people want diversification and healthier food, but the consumers is still buying from fast food chains.
Ansoff growth matrix – Product development & diversification
McDonald’s has been using diversification as growth strategy throughout the time on the global market, to start up at a new market in a new country and apply their products to the demand in the given country. As we mentioned in our PESTEL analysis , McDonald’s introduced The Rice Burger in China because many Chinese people prefer rice instead of bread etc. This has been a really positive strategy for their sales to succeed globally. Now the US have to focus on their own country to make the sales grow again because as we accounted earlier there has been a decreasing tendency in the sales of McDonald’s US and therefore they have to turn this situation around. To increase the sale in a company Ansoff’s Growth Matrix is a really good alternative to use because the matrix have strategies for the company to improve the growth. We believe that the Product Development Strategy is relevant for this subject because McDonald’s have to develop their product assortment by making it healthier and diversified. Therefore we believe that it is important for McDonald’s to focus on this as an opportunity and not a threat for their corporation. In this way McDonald’s is maintaining their restaurants by following the demands. As regards to the healthier food, is McDonald’s already selling smoothies, but as we do in Denmark they could sell more salads and wraps with chicken and other low fat-, or organic products. As well they could focus on the quality of the food, for example 100% beef in their burgers and guaranty that the food generally is fresh made, as Chipotle is succeeding with. In Denmark we do not only have more healthy food with quality, we do also promote it more aggressively because they want to let the consumers know that they are focusing on these demands. The environment has also been a major topic in the World the past decade and therefore they could use more organic food, which also combine the high-quality food.
Environmental focus
As we mentioned in our previous part it would improve McDonald’s themselves to take into consideration how the restaurant should be designed and how that affects the costumer’s view of the restaurant. Because of the growing concerns about hygiene, environment, health etc. in the United States, McDonald’s must strive for giving their restaurants a healthier and cleaner design. The restaurants should be having a nice and calm design that creates a positive atmosphere. Most important is to make the consumers feel good about their choice and not to feel guilty about eating the fast food. In Denmark, McDonald’s has replaced the red color in their restaurants to a deep green. Hoger Beek, vice chairman of McDonald’s in Germany says: ‘With this new appearance we want to clarify our responsibility for the preservation of natural resources. In the future we will put an even larger focus on that’ . This could work in the United States as well. Theorists believe that artifacts like this are affecting an individual’s unconscious mind. It is of course open for discussion whether this is affecting your unconscious mind or not, but we do believe that it is worth trying it because it has shown success in Denmark.
By making some changes, that provides the environment, McDonald’s again shows that they are taking responsibility for the preservation of natural resources. McDonald’s already makes a great effort to reuse and recycle in the American restaurants. Takeaway bags, napkins and cup carries are all made from 100% recycle material , but no one knows it. By making more focus and things like that, McDonald’s can improve their reputation. The demand after delivery service has grown recently and is very attractive for many. It is debatable whether it could be an opportunity for McDonald’s to use delivery service because of its attraction, but in the other hand it would damage the environment and if McDonald’s want to focus on that, delivery service would be a bad idea.
Due to the economic conditions, Americans are still eating out a lot. Americans are increasingly beginning to choose fast casual dining and fast food over full-service restaurants. McDonald’s should use healthier alternatives of food and drinks as we analyzed as their opportunities in our SWOT, to catch these customers who want to go out and eat quick, healthy, quality food to low cost.
Chipotle is an example on a fast casual dining restaurant, which has an increasing market share in the United States. Chipotle is serving gourmet burritos and tacos with a higher self-service than on restaurants, which is making the whole process of eating faster, which is what the consumers demand. Another increasing demand from the consumers is home delivery and also this offer chipotle. We do not think that McDonald’s should consider home delivery because it is a too big change and we do not think it would benefit McDonald’s enough.
Healthy and organic alternatives
As we analyzed earlier the health and environment has been a major topic worldwide and also in the United States. Therefore as we analyzed in our SWOT the opportunities for McDonald’s is to sell and produce more healthy and organic food to catch a wider target group. By analyzing Ansoff’s Growth Strategy ‘ Product development we can now suppose that this is a useful alternative for McDonald’s to base their developed products on. McDonald’s has after their global entrance used diversification on each country to apply the demands in the given culture. Throughout the analysis of PESTEL we found out that they adjusted their menu card in China and offered a rice burger because they prefer rice instead. And in Denmark they did the same by changing the menu card with healthier alternatives. This has been a success for McDonald’s because they are able to make the target group as wide as possible no matter culture and country.
Conclusion
After composing this project by accounting, analyzing and comparing we can now conclude that McDonald’s in Denmark in recent years have had a successfully increase in their sales, even though the country is affected by the health promotion wave. Opposite the success in Denmark we can also conclude that McDonald’s in the United States has been through the biggest decrease in sales since 2001. The decrease has moved slow throughout the past years, but became worse in November 2014 where the sales had a decrease on 4.6%, which was very bizarre for McDonald’s. Fast food is for many individuals a symbol of America because of their unhealthy lifestyles, which is a reason for the peculiar situation with the decrease in the country of fast food. After analyzing American food behavior we can now conclude that the unhealthiness has started to change a bit and people are today more concerned about health, obesity and disease caused by bad lifestyle and food behavior. Therefore we can conclude that McDonald’s in the United States have to focus more about the demands there are on the market today and apply their food to their consumers. Denmark has been affected by the health promotion wave in years and still is. Therefore McDonald’s, at that time, needed to change their menu card so it adapted to the demands to the Danish requirements, which they did. Today they offer healthier alternatives and changed the arrangement and design in their restaurants to affect the unconscious mind. In addition to previous they started promoting these healthier alternatives more aggressively, to let the Danish people know that they are applying to their demands. After analyzing the Annual Report for Denmark shortly and the changes McDonald’s have done in the Danish restaurants, we can conclude that these elements and changes have improved their sales in Denmark and changed their image to a less unhealthy fast food alternative than they were before, even though most people still are aware of its unhealthiness. When it comes to McDonald’s in the United States and what they can improve to make their sales increase again, we will advise them to use same strategy as they did in Denmark. We can conclude this because there is now more focus on health in the United States than there has been before, and therefore we believe that this strategy to offer much healthier alternatives and replace some of their products to organic would make them succeed. In addition to the design in their restaurants we do believe that it would improve their consumer’s unconscious mind in a positive way, so they don’t think of McDonald’s as the unhealthiest and unclean fast food restaurant, but maybe a healthier alternative.
Even though McDonald’s in the United States have had a very bad year, it does not mean that they are in a bad situation. McDonald’s will probably always be number one on the fast food market because of its popularity, and because they were the ones to start it all. This decrease that had happened in November is not affecting McDonald’s economically because they are so successful and they can overcome such situations, but they have to optimize their strategy and focus on the demands from their consumers.
Appendices
Hofstede ‘ Oniendiagram (Appendix 1)
This model is called the Oniendiagram and is made by Geert Hofstede. By this analysis you will analyze the core values in a given country, in this case the United States.
Symbols:
The symbols in the US are their flag, which is symbolizing their country and Americans are very proud of their country and flag. We observed in the US in the town, Bethlehem that many house holdings had a flag at their door. The Statue of Liberty is also a very important element in America. It is a symbol of the freedom they have in the country. The US is known for their fast food, especially McDonald’s, therefore we believe that fast food and McDonald’s is a symbol of the country.
Heroes:
One of the most important men in the history of America is the Afro-American hero, Martin Luther King. He fought for racism in the country and affected both America but also the whole world. He is not only a hero in the US but also for many other countries. As regards to equal opportunities the politician and activist Eleanor Roosevelt is a very big idol for the American women because she fought for women rights and equality.
Rituals:
One of the most important holidays in the United States is Thanksgiving, which is a holiday that originally was about celebrate harvest. Another holiday that is very important for the Americans is Christmas; Americans love Christmas and are decorating the cities and houses. When it comes to politics the Americans are known for their liberal believe and attitude. Most part of the country does not believe in the influence from the State, and therefore they do not pay high taxes.
Values:
As we mentioned earlier one of the most important values for Americans are the individual freedom. Because of the individual freedom it made people believe that they could reach whatever goal they had and it motivates them. Back in the days you could use these values and believe in them to ‘go from rags to riches’ The United States find the equality of opportunity and competition very important, because it was a way of succeeding in this country. The country is also full of opportunities, where you can become whoever you want to be and live your dreams. To reach the goals in the US it is also very important that you work hard for them. Hard work is also a major value for the Americans.
Conclusion:
We can after this analysis conclude that The Americans are very traditional, they follow many old values their forefathers made and are celebrating traditional holidays with their families. The Americans are living in freedom and are very individualistic in their way of living, and by that they do compete a lot throughout their life. The Americans have generally very bad eating habits, which is the reason why fast food and McDonald’s is a symbol of America. Americans are admiring heroes from the American history very much, and it is important for them to keep up on.
PESTEL (Appendix 2)
McDonald’s success is not only about making fast food to their customers. If McDonald’s wants to maintain their success the fast-food chain also has to focus on which theory and strategy that is being used. Therefore we will focus on the analysis of the macro environment by using the PEST analysis.
Political: Generally, McDonald’s is affected by the policy of the American government, and has to accommodate what the government decides. Whenever the government is making regulations such as health or hygiene policy, McDonald’s has no other choice than adapt oneself to these regulations. In the United States the government realized that unhealthiness is being a problem for too many people. People are having diseases such as diabetes, cardiovascular and high cholesterol that are concerning everyone, and mainly because they are eating too much fast food. Hygiene problems are also a big one for McDonald’s and if the fast-food chain is not measure the policy it is really bad. To keep a good position to service in this industry, McDonald’s has to have good relations with the government.
Economic: The economy affects McDonald’s. The financial situation that exits in the country such as employment rate and tax rate are some of the factor that can affect McDonald’s. A high employment rate means that more people are without jobs and have to save money, which leads to fewer consumers and less money for McDonald’s. McDonald’s also have to import food and drinks. Therefore, exchange rate and living standard of the target group are affecting the cost of running the fast-food chain.
Socio-Cultural: When it comes to the socio-cultural factors McDonald’s has to appear their food and service to the demand and the tendency in a given country and culture. McDonald’s introduced The Rice Burger in China because they often prefer rice instead. Therefore McDonald’s have to follow the trend in the US, which in this situation is the health, good service and quality food as we analyzed in ‘Foodservice and eating behavior’. In Denmark we have had a health promotion wave and still does and therefore McDonald’s Denmark ApS saw this as a opportunity and offers salads, wraps, smoothies and so on and is promoting with the good quality beef and fresh salad.
Technology: Technology is not seems to affect the company in the fast-food industry that much. If McDonald’s makes sure to get updated technology, it can improve the management and performance of productivity. Free WIFI has been a force of an attention, and is attractive for many individuals nowadays.
Environment: People are starting to concern about environmental problems. McDonald’s has been criticized for food and paper waste. Also the way it was told that McDonald’s killed the animals got scandalized and some animal welfare organizations were trying to get people boycott McDonald??s.
Legal: McDonald’s must achieve the many legal requirements such as labor and employment laws, corporation law and so on.