McDonald's is currently holding the leadership of $60 billion fast food industry with sales of $6 billion, which is more than four fold of its closest competitor Burger King's performance.
In recent years several factors have risen up that would well threaten the company's position and profitability in the upcoming decade. Briefly, these factors are: .
1. Saturation of the domestic market-and slowing of sales growth (from two digit to inflation adjusted 2% in late 80's). .
2. Deviation in eating habits and consumer perception towards health oriented fat free, home-delivered food and ethnic meals.
3. Increase in labor and food costs.
4. Strengthening non-burger segment in the sector.
5. Fierce competition in international and developing markets. .
These led the company to consider firm's future strategy and situation in the sector.
Indeed among those listed above, delivery system (distribution effectiveness) and health-conscious image are the most important ones and unfortunately firm lacks effectiveness in both categories. Thus these should be given priority in operational and promotional activities. To set up a health conscious image, a poultry product along with a "related" and effective name as in the example of Hardee's Lean 1 should be introduced. Further this image should be backed and promoted with activities like nutrition guides of Burger King or pure olive oil usage of Wendy's. In addition, for monitoring and correction purposes, feed back channels through online phone systems and customer comment cards should be set up.
Firm should pursue different strategies depending on the differing market situations, for instance U.S. vs. international markets. Defending the current market share and leadership is the primary focus especially for the U.S. market which stands as a bright cash cow to breed international stars. Flank defense strategy would be appropriate against slowed sales growth. This can be achieved through possible backward integrations with reliable and reputable meat, fruit juice, soft drink-coffee and dessert companies as well as via diversification into brand merchandising through toys, kitchenware & equipment and gifts.
