McDonald's Corp in Consumer Foodservice (USA)

ITIVE POSITIONING
¦ McDonald’s is the leader in overall US consumer foodservice with a 7.3% value share (in GBO terms) in 2013, more than double that of Yum! Brands, its closest competitor. The company controls 17% of fast food value sales, and a commanding 36% of burger fast food. Due to its leading position, McDonald’s faces diverse and intense competition from brands in various categories, including Wendy’s, KFC, Burger King, Starbucks and Subway.
¦ There were times in the company’s history during which it experimented with diversified concepts, including entering into partial ownership of both the Chipotle Mexican Grill and Boston Market brands. McDonald’s divested both in 2006, however, and has since focused exclusively on its eponymous burger fast food brand. This focus on the core burger fast food operation has allowed the company to be very agile in terms of innovation and new trends in US fast food. As the brand has already achieved national coverage in terms of outlet expansion, its recent focus has been on improvements to comparable-store sales through service optimisation, menu innovation, and outlet remodelling with a focus on the latter two in recent years.
¦ Despite its loyalty to burger fast food, McDonald’s offers an expansive menu that allows it to compete for business with a number of other consumer foodservice categories. When Starbucks became a threat to its breakfast business in 2009, for example, McDonald’s launched its premium McCafe coffee programme that has since become a major source of sales growth. Furthermore, the brand’s menu includes such items as baked goods, premium salads, chicken sandwiches, fried fish sandwiches, snack wraps, desserts and speciality beverages that appeal to a wide range of potential consumers. In fact, McDonald’s sold more chicken than first-ranked chicken fast food player KFC at the end of the review period and more fish sandwiches than the top fish fast food retailer, Long John Silver’s. Due in part to its vast resources, widespread national footprint and strategic menu innovation, McDonald’s has demonstrated the ability to dominate any category it enters.
¦ McDonald’s current strategy for menu innovation focuses on a dual strategy in terms of menu offerings. First, it has focused on developing quick, inexpensive foods, often highlighted on its Dollar Menu, that boost value offerings and attract consumers who are still price sensitive. These items also attract customers throughout the day and during off-peak times such as mid-mornings and afternoons. Second, it offered more premium items sold at marginally higher price points, and featuring larger portions and high-end ingredients. These items appeal to those consumers who are still trading down from full-service restaurants and are looking for a premium dining experience at a value price. One example of these offerings was its 2012 cheddar bacon onion burger.
¦ In 2014, McDonald’s entered the race for breakfast dominance. In response to attack ads by Taco Bell, McDonald’s CEO Don Thompson struck back, arguing on behalf of the company’s allegedly relatively natural and healthy ingredients, saying, “We actually crack eggs in the restaurant and cook sausage and bacon and toast muffins and we place cheese on muffins.” Waging its part in the “breakfast war”, McDonald’s began offering free coffee for a time in spring 2014, successfully attracting more customers, and in April 2014, posting its best month since October 2013.
Summary 3 McDonald’s Corp: Competitive Position 2013
Product type Foodservice value share Rank
Burger fast food 36.4% 1
Source: Euromonitor International from company reports, company research, trade press, trade sources, trade interviews

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Guidelines for Conducting Case Analysis

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Internal Analysis:
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Alternatives (Strategic Choice of Business Strategies and Corporate Strategies)

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