Fast Food Essay Example for Free

Fast Food adjudicateMarket and environmental analysis is an essential part of an organizations External summary. The main objectives of a trade analysis ar a)To determine how attractive a grocery store is. b)To understand the dynamics of the market and amend strategies accordingly. Here we apply the dimensions of a Market Analysis to McDonalds corp. 1)Emerging submarkets McDonalds fai lead to recognize the changing trend in usageers preferences to better tasting, fledgeling feed. This trend led to new sub markets emerging for tastier, fresher and fast food perceived as healthier. A few of the trivialer/privately owned competitors (Cosi and Quiznos) were adapted to operate in corner markets selling gourmet sandwiches and salads. The emergence of smaller restaurants offering easy glide path to exotic foods such as sushi and burritos created a more(prenominal) specialized niche market. 2)Size and Growth With the emergence of these sub-markets and niche markets, McDonald s started losing market share. It now had to share its fast-food mass market with these newly created markets. Even though these restaurant custody were small in size, their growth opportunities presented a potential threat to McDonalds.They operated on service that was better than McDonalds at the homogeneous time providing better tasting food, which led to an increase in its sales. This sector was in the early on stages of growth where as McDonalds was past the maturity stage. 3)Profitability McDonalds profitability can be gauged by using Porters 5 factor model. a)Intensity of competition among existing customers was relatively high. Direct competitors ilk Wendys and Chik-Fil-A were competent to out exercise McDonalds based on service quality by providing quicker service. In comparison McDonalds had a heroic add together of franchises, but will falling service time.b)Threat of new entrants Other market niches comparable quizos, cosi and small restaurants offering exotic f oods also provided a high degree of competition to McDonalds by offering food that appealed to changing customer preferences. The only barrier to entry that McDonalds used was to open a large deed of franchises and offer an inexpensive menu this is however changing as franchisees are leaving McDonalds, lowering the barriers to entry. c)Substitute products would accept fast food options available in leading supermarkets, and cafes offering exotic foods like sushi. d)Bargaining power of customers.Customers are the main source of income for McDonalds. Customers were non happy with the menu offered at McDonalds and hence took their custom to other restaurants, leading to a drop in sales. e)Bargaining power of suppliers McDonalds aimed to keep their menu prices low (source more details about suppliers) 4)Cost structure McDonalds strategic focus was on cost and service. In order to try service quality new kitchens were installed. However, this installation was done for some franchises that did not need it and where the new additions did not help improve business.In order to keep the price of its burgers low, it asked the franchises to sell at a loss. practice Promoting a $1 burger when the cost to make it was $1. 07. This lack in foresight resulted in rising cost to franchise owners who responded by leaving McDonalds and going over to competitors. This snowballed into falling investor confidence resulting in falling equity. other cost issue was investing in too many takeovers which it couldnt handle at the same time as improving service quality and revamping the menu. 5)Distribution Systems McDonalds distribution system was the large and growing number of franchises.However not many of the franchises were posting profits and as per Exhibit 1, more than 500 would mystify to be closed. One of McDonalds strengths is its distribution system, where in customers come in and claim the same experience that they have at any other store. However, this can also be a we akness as providing a consistent experience soon becomes ordinary. 6)Market Trends The fast food casual market was quickly breaking up into fragments. With the rising immigrant population customers now had a choice of items. McDonalds realize this too late and try to echo this effect by introducing new burgers.However, the testing of the new menu does not gauge strongly plentiful the changing customer preferences and this poor planning led to its failure. Internally changing trends were also blindsided. Franchisees who were the closest to customers were not included in decision making and were thus disgruntled. Here was the need to change the management bearing from top-down to bottom-up. This would have solved some of the issues plaguing McDonalds, by providing data on what customers want and what products would have a greater chance of success.7)Key success Factors McDonalds did have some strengths or key success factors a)Large number of franchises that led to economies of sca le. This however contrasted to the small is beautiful concept of the niche markets. b)Complete training for franchisees to begin and run their own McDonalds proven to be a good team building exercise. c)Cost of food was low due to economies of scale and economies of size. Moreover, McDonalds was able to negotiate a reasonable price for high quality food products.McDonalds failed to realize the changing trends in the casual fast food markets, as a result of which, a large part of the market share was taken over by existing brands like Wendys and new players like Panera shekels co. The company also failed to acknowledge competition from the niche markets serving gourmet and exotic foods. This lack in analysis led to lowering of entry barriers for new entrants, loss of market share to competitors (Wendys, Chick-Fil-A. ), disgruntled franchisees, and a drop in sales leading to a fall in equity value. Environmental Analysis 1)Political2)Economic 3)Socio-Cultural There are three heathen forces that influence marketers a) persistence of cultural values, b) subcultures and c) slips in secondary cultural values. Of the three, secondary cultural values carry the largest influence on the fast-food market. When the market is fire in convenience, they are more likely to buy fast food if the markets secondary values shift and become interested in fitness and health, they will be less likely to buy fast food. (Monash university, 2006) The case shows this shift to gourmet and healthier foods.4)Technological McDonalds had begun to notice the importance of technology. The organization was looking at new technological solutions like ERP to improve their supply chain (Newman, 2002) 5)Environmental 6)LegalReferences Monash university, 2006, Briohnys Report, Language and Learning Online, Retrieved on 06 May 2008. http//www. monash. edu. au/lls/llonline/ writing/business-economics/marketing/3. 3. 2. xml Newman, K, 2002. McDonalds seeks closer electronic relations, iStart. comTec hnology in business, www. istart. co. nz, retrieved on 06 May 2008. http//www. istart. co. nz/index/HM20/PC0/PVC197/EX245/AR22537.