Strategic Marketing Planning : US Fast Food Industry
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Strategic Marketing Planning
(2002) note that the fast food industry has now extended throughout the world. Originating in the United States, fast food restaurants are often considered as a characteristic of the new global culture. These fast food restaurants are illustrated as informal, have uniform service to anyone regardless of social status and focuses on giving quick-service to its customers. The fast food industry grew out of a cultural philosophy that greatly values friendliness more than propriety, basically more than traditions of gracious living and democratic consensus over status-based divisions ( 1969, 1985, 1991).
Firms within the fast food industry fall into the category of a competitive market structure. According to (1997), the competitiveness of a market refers to the extent to which individual firms have the control or power to influence market prices or the terms on which their products are sold. It must be noted that “the less power an individual firm has to influence the market in which it sells its products, the more competitive the market is” ( 1997).
An example of a firm competing in the fast food industry is McDonald’s Corporation. McDonald’s Corporation is one of the market leaders in the fast food industry. It has more than 30,000 local restaurants which serves nearly 50 million people in more than 119 countries each day. McDonald’s Corporation is one of the most popular and valuable brands in the fast food industry. The corporation recognized that in order to be successful, the corporation has to be flexible and adapt to the changes that society may bring
In particular, this paper will be concentrating on McDonald’s Corporation with regards to its strategic marketing planning. This paper will be discussing the importance of understanding competitors and how this understanding may facilitate successful planning of marketing activities. The purpose of this paper is to give the researcher wide knowledge over strategic marketing planning and apply this knowledge in assessing the strategic marketing planning of McDonald’s Corporation in particular context with its competitors such as KFC. An in-depth analysis of fast food industry is required as to facilitate the researcher in its aims for the paper.
Strategic Marketing Planning
(1984) notes that strategy is very important for any organization as it offers the direction the organization would like to pursue to attain its objectives. In the recent years, the integration of strategic planning and functional marketing has been perhaps the most relevant development in the field of marketing management as marketing managers have all the more realized that tactical marketing decisions must be made within a wider strategic framework.
Segmenting the Market (First Stage) Geographic Demographic Psychographic Behavior
Segmenting the Market
Developing a Market Segment Marketing Strategy (Third Stage) Market Leader or Product Line Extension Mass Marketing or Targeted Marketing Direct or Indirect Sales
Developing a Market Segment Marketing Strategy
Market Leader or Product Line Extension
Mass Marketing or Targeted Marketing
Direct or Indirect Sales
Figure 1: Strategic Marketing Planning
In addition, it is necessary that management of the marketing function be built upon purposively defined and analytically based marketing strategies. Strategic marketing planning offers the analytical process which develops efficient marketing strategies. The strategic marketing planning, according to (2006), involves basically three stages: (1) segmenting the market; (2) profiling the market segments; and (3) developing the market segment marketing strategy. Please refer to figure 1 for the outline.
After analyzing the market segments, customer interests and the purchase process, the firm must then establish the strategic marketing plan. This strategic marketing plan document usually constitutes (2006): (1) situational analysis – Where is the company now? – i.e., characteristics of the market, key success factors, competition and product comparisons, technology considerations, legal environment, social environment and problems and opportunities; (2) marketing objectives – Where does the management want the company to go? – i.e., product profile, target market and target volume; and (3) marketing strategies - What should the initiatives be taken in order to attain its objectives? – i.e., product strategy, promotion strategy, pricing strategy, distribution strategy and marketing strategy projection.
Upon close examination of the fast food industry, the researcher has assessed using Porter’s five forces model that firstly the competition in the specific industry is very strong as there are several numbers of rivals that can compete on one location as fast food is a commodity and typically, there is also low switching cost upon opting for another fast food service. In addition, these rivals may also introduce new items in their menu or introduce a totally different menu, for example, serving Mexican food (tacos, quesadillas, etc.) instead of American (burgers, French fries, etc.). it must also be noted that fast food industry rivals can compete on price.
In terms of the threat for potential new entrants, the researcher has assessed that it is rather weak as it is very difficult to establish a chain which will serve as many international locations such as McDonald’s Corporation. Also, the cost of entry is very expensive especially is planning to expand as globally as McDonald’s. It must also be noted that it is also difficult to beat the brand name value of McDonald’s as it has been established and well-known for decades already.
Next, as for the bargaining power of buyers, the researcher has assessed that in the fast food industry, it is very strong. As noted earlier, fast food is a relative commodity. Basically there are a lot of other fast food chains to choose from because the market structure is competition. Moreover, buyers usually have no incentive to be loyal. So what if they choose another fast food? Furthermore, switching cost or opting for another fast food restaurant is relatively low.
After that, the researcher has assessed that the bargaining power of suppliers is weak. Just like fast food chains, their suppliers are providing commodities with a market structure of strong competition as well; hence, there are still many suppliers to choose from. In addition, this competition among suppliers may facilitate driving down prices as well.
New local restaurants in local markets
New local restaurants in local markets
Bargaining Power of Buyers (strong) Young people and children Travelers Busy people Low income people Bargaining Power of Suppliers (weak) Fast food suppliers Meat suppliers Vegetable suppliers Equipment suppliers Beverage suppliers Dairy suppliers Labor suppliers cooks/food preparers, administrative staff, manager, supervisors, cashiers Industry Rivalry (strong) SBU : McDonald’s Corporation Other fast food restaurants KFC Wendy’s Burger King Jollibee Taco Bell
Bargaining Power of Buyers (strong)
Young people and children
Low income people
Bargaining Power of Suppliers (weak)
Fast food suppliers
cooks/food preparers, administrative staff, manager, supervisors, cashiers
Industry Rivalry (strong)
SBU : McDonald’s Corporation
Other fast food restaurants
Threat of Substitutes (strong) Pizza parlors (Pizza Hut, Shakey’s) Cafes (Starbucks) Salad bars and health-food restaurants Slow food restaurants Grocery stores Any place which serves food
Threat of Substitutes (strong)
Pizza parlors (Pizza Hut, Shakey’s)
Salad bars and health-food restaurants
Slow food restaurants
Any place which serves food
Figure 2: Porter’s Five Forces Model
Finally, the researcher has assessed that the threat of substitute product and services is strong. As mentioned earlier, there is a relatively low switching cost making it easier for customers to shift from fast food chains to other related commodity which may vary from pizza parlors to cafes to ice cream shops to anywhere which serves food. Plus, it must be noted that it is rather very unlikely than individuals will be consuming only fast food and nothing else. Also, fast food is not well regarded by health experts and there have been an increasing rate of people who have begun to be extremely health conscious; hence, these people are likely to find substitutes for fast food. Lastly, the location of the eatery may also influence customers to try out a substitute.
Importance of Understanding Competitors
Understanding the competitors of a business in a given industry and developing methods as to distinguish it from them is a very relevant and critical aspect which influences the development of the competitive strategy of the firm. In addition, it is also an important aspect of the strategic planning process as it (1) facilitates the management to understand their competitive advantage or disadvantages associated to their competitors; (2) creates understanding of the competitors past, present, and future strategies; (3) offer an informed basis to develop strategies to gain and maintain competitive advantage in the future; and (4) to facilitate the firm in forecasting the returns that may be made from future investments ( 2005).
Proctor (2000) notes that understanding competitors is the core to making marketing plans and strategy. A firm has to compare its products, prices, channels of distribution and promotional methods with those of its competitors on a regular basis to make sure that it is not at a disadvantage. The process of the competitor analysis basically constitutes three steps. The first step is to identify the firm’s competitors. As for McDonald’s Corporation, it has several competitors in the fast food industry namely KFC, Burger King, Wendy’s, Jollibee, Taco Bell, etc.
The second step of the competitor analysis is the assessment of its competitors. This may be done through benchmarking as the firms will first have to determine the objectives of its competitors as well as their objectives, then later on assessing the strengths and weaknesses of its competitors. (1997) notes that benchmarking sustains organizational growth as well as facilitates world-class competitive status.
Finally, the third step in the competitor analysis is the selection of competitors to avoid or to attack. After the assessment of the firm’s competitors, the firm will have to formulate the specific strategies that will give them the competitive advantage against its competitors.
It must be noted that during the process of competitor analysis and the implementations of its strategies, the firm will have to assess which of the competitors’ strategies that they will have to follow or not. The second stage which allows the company to compare their operations with others will necessitate some degree of change within the organization. Thus it should be very well noted that the company only as to follow the strategies that will apply to their business as every business is unique in their own nature. These strategies will have to be in lined with the company’s philosophies as well.
The fast food industry has already extended throughout the world. Firms that operate within the fast food industry are categorized as a market structure that is highly competitive. McDonald’s Corporation and its strategic marketing planning has been the focus of this research as McDonald’s is market leader in the fast food industry.
The strategic marketing planning provides the company a methodical and logical process that develops efficient marketing strategies. This strategic marketing planning has three stages namely: (1) segmentation of the market, (2) summarization of the market segments, and (3) development of the market segment marketing strategy.
Upon close examination of the fast food industry, using Porter’s five forces model, the researcher has assessed that: (1) the competition or the rivalry in the specific industry is very strong; (2) the threat of new potential entrants is weak; (3) the bargaining power of buyers is strong; (4) the bargaining power of suppliers is weak; and lastly, (5) the threat of substitutes is strong.
This paper has strongly recognized the importance of understanding competitors in strategic marketing planning for the benefits that it gives to the successful planning of marketing activities. These benefits and advantages include the following. First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors. Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm. Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future. Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.
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