Food Industry And Mcdonald Brand In Singapore

This report focuses on food industry and Mc Donald brand in Singapore. McDonald is availabled at almost all the major shopping malls and every area in Singapore but it faces a several competitors like KFC, Burger King, Subway and shop café or food court.

The main objective of the report is to analyse situation of McDonald with the SWOT, Porters’s 5 forces in marketing and 4Ps which has been achieved by the group and the analysis is covered in this report.

II. HISTORY OF MCDONALD

Mc Donald in the world

In the late 1940’s, Dick and Mac McDonald were searching for a way to improve their little drive-in restaurant business in San Bernardino, California. Rather than tinker with the business, which was bringing in a very comfortable $200,000 yearly, they invented an entirely new concept based upon speedy service, low prices, and big volume.

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In 1955, Kroc knew that the key to success was through rapid expansion; thus, the best way to achieve this was through offering franchises. Today, over 70 percent of McDonald’s Restaurants are franchises. In 1986, the first franchised McDonald’s opened in the United Kingdom. Nowadays, the company franchises and operates Mc Donald’s restaurants of the 32,478 restaurants in 117 countries at year-end 2009, 26,216 were operated by franchisees and 6262 were operated by the Company (Annual report 2009).

Mc Donald in Singapore

McDonald opened its first restaurant in Singapore in October 1979 at Liat tower. McDonald has been in Singapore for more than 30 years and it has been improving its product over the years. McDonald has changes in the ingredients by using healthier alternative such as use of non fat oil. In addition it has also been introduced new products to suitable with the taste of Singaporean.

Today, there are more than 115 restaurant and 6000 staffs to keep Mc Donald running in Singapore. Mc Donald serves about 50 million every year.

III. FOOD INDUSTRY

Food industry in Singapore

Singapore is country develop rapid in Asia with several policies attractive the employees over the world. Singapore also has friendly and open policies for foreign company. With about 5.1 million of population, Singapore is potential market for food industry.

Food spending is around 56% of total consumer expenditures in Singapore. Food industry in Singapore develops very fast. In 2009, the food & beverage (F&B) services industry comprised about 6,000 establishments, an increase of 2.4 per cent compared with 2008. The industry employed some 86,800 workers, or about 14 workers per establishment on average.

Operating receipts and value added of restaurants stood at $2,129 million and $776 million respectively in 2009, accounting for 38.0 per cent of total operating receipts and 40.2 per cent of total value added of the overall F&B services industry .Fast food outlets registered growths of 6.5 per cent in turnover and 5.1 per cent in value added over the previous year.

Fast food industry

Consumer expenditures for fast food in Singapore rose during the end of the year 2000. The increasing number of new establishment such as fast food franchises and strong brand around Singapore has show a significant growth in this sector.

According to government surveys, Singapore’s spending on “eating out” has been increasing because Singaporean seeking the convenient product of other food service outlets. Younger middle and upper income group families and individuals are also frequent users of the fast food restaurant. A recent public survey of people 15-45 year old shown that 80% of interviewed like fast food. 90% of them like fast food on a regular basis and 10% “love” fast food. Thus fast food industry in Singapore is the attractive sector for Mc Donald.

IV. MC DONALD SITUATION

Porter 5 force analysis for food industry

Threat of new entrants (High)

The ease of new competitor enters the market make the price lower than normal and threat the company

The

Threat of substitute products (High)

Perceived level of product for substitute has undergone

Bargaining power of buyers (Low)

Low bargaining power will take cheapest as the best option

Competitive rivalry (High)

The strength of competition in food industry is very high

Bargaining power of suppliers (Low)

Low bargaining power

Figure 1: Porte five force analysis for McDonald

Threat of new entry: In food Singapore, it is easy of Entry because demand of restaurant is high so it led to the threat of new entry for Mc Donald high. Although it is easy to enter the food industry, it is hard to establish a distinct brand name as Mc Donald. There is a high cost of entry in the market and there are high research and development costs. Existent of companies with strong brand such as McDonald’s make the new brand more difficult to enter and succeed within the marketplace.

Substitutes: Singapore’s food industry is diversity with various type of business such as restaurant, fast food, food court or café shop so there are many substitutes in this industry. Particularly in fast food market, there are a wide variety of products that people can choose Burgers King, KFC, Subways or Starbuck.

Strength of Suppliers: Power of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.

Strength of Buyers: Relatively strength of buyers is low in this industry.

PEST analysis

2.1 Political and legal

Singapore is an enterprise friendly country. The government has set up several organizations in helping the business in a very systematic way. Because Mc Donald built the global brand so the Singapore’s policies create the chance to develop.

2.2 Economic

The Singapore economy is the typical example of a free-market economy that is developing at a rapid speed. The per-capita income of the country is the highest in ASEAN. The Singapore opens an educated and motivated workforce and well-established legal and financial business framework. In recent years, the Singapore government has invested heavily in diversifying the economy. This has led to growth in the tourism industry, the pharmaceutical industry with a particular focus on biotechnology, financial services, business consultation services, education, multimedia, retail and leisure, and the medical technology industry. Thus, Singapore is the potential for food industry.

The data for this section are for the year 2008. Singapore achieved GDP (current market value) of S$257,419 million, which is a 2.3% increment from the previous year. In the fourth quarter of 2008, the economy contracted by 4.2 per cent, after posting flat growth in the third quarter.

Mc Donald is the market leader in the Singapore with the very high target market. Mc Donald applies the strategy low cost and more incomes.

2.3 Social and Cultural

Singapore is an eastern country who still follows the traditional family values, but the younger generation has started to adapt to western culture and value so it is new opportunities for fast food industry and Mc Donald. In Singapore, Mc Donald work within many social groups.

Nowadays, more Singaporeans eat health conscious and more the vegetarians. The government has encouraged their citizens to create healthy living and lifestyle with more vegetables and less meat so this change will be the new challenge for Mc Donald.

sg1.pngsg2.png

Table: the resident population profile and birth rate in Singapore

Source: Singapore statistic

2.4 Technology

Singapore applies new technology in the industry includes food industry so it is the opportunity for Mc Donald. The local manufacture uses the foreign suppliers so it can meet international quality standard.

Segmentation- Target market- Positioning

3.1 Segmentation

Geographic: Mc Donald divide follow the area: Clementi, City Hall, Boon lay or Orchard Road…

Demographic: Kid, student, adult and family

Psychographic: convenient and lifestyle

Behavioral: Occasions such as birth party, meeting

3.2 Target market

Kid 3-7 year old: Kids depend on the parent but the parents always follow their demand so Mc Donald chooses this group because they want to increase the customer. Mc Donald has Happy Meal with healthier choice and free toys for this group to increase loyalty.

Families: In Singapore, the lifestyle has been changing, the families always go out at the weekend for shopping and they also have meal outside. Families is the most potential customer because it including every age. Mc Donald has difference service for this target such as Happy Meal, Take away and Delivery.

Student: student includes primary, secondary, JC, Polytechnic, University. Mc Donald has chosen this group for several important reasons. This age group from 10 to 25 is the primary age where brand building. They are on limited incomes but Mc Donald seeks a value relationship from them. Mc Donald has different price for student with student meal, they also have outlets in school such as NTU, NUS, SP and NYP.

Working adult: other target is the age between 25 and 60 which are a strong group. They are more budgets and they are busier in the worker so they need convenience and Mc Donald can solve this issue. Mc Donald has service for adult such as Takeaway, Delivery, 24-hours.

Psychographic: convenient and lifestyle. Increased convenience seeking among younger Singaporeans who live in a hectic city today compared to the much slower pace of life that existed 20 years ago. Now, these demands increase quickly because people are busy so they do have time to cook and need convenience. Fast food is one of solution for this issue. Most of Singaporeans love window shop and when they do strolling around the shopping district; they need a quick bite to accommodate their activities.

3.3 Positioning

sg3.jpg Mc Donald builds the Ronal Mc Donald branding. Ronal Mc Donald- every child’s the best friend, he is friendly, warm, smart and funny. Nowadays, Ronal McDonald can speak more than 24 languages. His favorite food is hamburger and his still friend of all children.

sg4.jpg Recently, Mc Donald builds “I’m lovin it” branding. It focuses on the optimism and enthusiasm that mark great times and enriching discoveries. Mc Donald creates sharing lifestyle and new branding.

Only fast food 24-hours restaurant in Singapore : McDonald is unique restaurant which open 24/24 hours in Singapore so it create conveniece for customer.

Dilivery: McDonal build quaity service for customer. The customer can call everything through hotline.

4. Business strategy

McDonald’s vision is to be the world’s best quick service restaurant experience. Being

the best means providing outstanding quality, service, cleanliness, and value, so that we

make every customer in every restaurant smile.

5. SOWT analysis

5.1 Strength

McDonald has been in the fast food business for many years because of it successful advertisement the company has got the brand name the company has large market share with the strong supply chain offering customers at affordable price and high quality products. McDonald built a strong brand equity

They have a well maintain staff who treats people very good the biggest strength is that they are open 24/7 throughout the year as compare to their competitors like pizza hut or burger king.

McDonald has built up huge brand equity. It is the largest fast food company by sales with about 32,478 restaurants in many countries. The revenue in 2009 is $22,744.7 million

McDonald was the first to provide nutrition information which was printed on all packaging they have a very good tie up with Coke Company.

McDonald require the food safety very seriously there are many inspection performed at every stage of the food process they run to safety protocols everyday to ensure food is maintained clean they have clean environment and play space for kids .

Market leader with 28% market share (2008)

The good service with delivery, drive thru.

McDonald has Halas certification

Ronal McDonald with children’s society

5.2 Weakness

Quality issue across the franchise network

Providing more employees in the outlets lead to more money spend on their training and salary

Customers believing unhealthy food image or junk food and customers loss due to fierce competition.

Not providing vegetarian menu for people

5.3 Opportunities

McDonald builds the new formats Mc café with Wi-Fi internet links to attrite segments. They also install children play-parks and its focus on educating consumers about health

Add more vegetable in meal and expend the menu with salad and fruit

Continues focus on corporate social responsibility reducing the impact on the environment and community linkages

McDonald want to build the ethic image

Strengthen its value proposition and offering to encourage customers who visit coffee shops in to McDonald

Growth of fast food industry

5.4 Threats

The social changes- the government encouraging the citizen to eat balanced meals and people are eat healthier.

Competitive pressures on the high

Major competitors like burger King, KFC or Subway

Outbreak of diseases such as H5N1, bird flu, mad cow

4P’ analysis

6.1 Product:

Mc Donald offers a wide range of products and low depth. Mc Donald has also succeeded in providing the consumers delivery service and other product such as toys and playground for children. Mc Donald creates different options and choices for customer in every time a day such as breakfast meal, mail meal, desserts and beverage.

Product width: Burger, Drink, Desserts, Toys, Sides, Mc café, other food

Product line

There are many products in the McDonald menu:

Breakfast

Main

Drink

Mc cafe

Sides and salad

Desserts

Other

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6.2 Price

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Price is what the customer pay including direct and indirect cost. Mc Donald Singapore uses the cost leadership, for example the French Fries of McDonald always is 20 cent cheaper than other competitor. Mc Donald executes the competitive, reasonable and affordable pricing as well as practice International pricing and price discrimination. However, the price strategy is flexible such as the student can buy 50 cent cheaper in the McDonald store in the university

There are different prices for each product: Student meal: $4.5, , Burger: $2-$4.5, Meals: $6 onwards, Mc café: above $3.5,

6.3 Place:

Place includes company activities that make the product available to target consumers

The McDonald outlet opened by McDonalds or Franchisees. McDonald chooses the direct marketing channel so it has many restaurants in the Singapore. The restaurants are located in the shopping centre or populated area. “Eating out” still remains as Singaporean’s habit of life. Thus, McDonald chooses the direct marketing channel so it become the most competitive because people easy to find McDonald restaurant. Almost McDonald restaurant are located populated area so it can attractive and meet more people.

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6.4 Promotion:

Promotion means all activities that communicated the merits of the product and persuade target customers to buy it. The advertising of McDonald toward the families because it want to make families think that fast food is not luxury and they enjoy it by bringing their family, especially if they have smaller kids.

Advertising

Mc Donald in Singapore is the largest advertiser of the state. It spends about S$15 million for advertising every year. The channel used to advertise is TV advertisement, Endorsement, Coupons, Exclusive and distribution of movie premiums.

Besides, Mc Donald has different promotion such as Happy Meal or $2 Mc chicken. The company has been advertiser campaign “I’m Lovin’ it”. The newest advertising which the company uses is Monopoly -“Love bigger better prize”

Product bundling : Burger and Toys

One of the efficiency promotion strategies of Mc Donald’s Singapore is burger and toys.

V.COMPETITOR

There are three type of competitor for Mc Donald in the food industry in particular fast food

1 Direct competitor

Direct competitor of Mc Donald including various brand KFC, Burger King, Moss Burger, Subways… but KFC and Burger King are strong competitor in the market

1.1 KFCsg5.jpg

Marketing strategy:

KFC is one of the world’s largest chicken brand and third largest fast food chain. KFC is the one direct competitor in the fast food industry. KFC almost focus on different products that are chicken because other brand fast foods almost focus on hamburger so it creates the differentiation for KFC. KFC always change their menu and have different meal for each of period such as Hospice dinner (KFC.com.sg). Chicken is the favorite dish in Singapore so it becomes the strength of KFC.

Reaction pattern:

McDonald is the direct competitor of KFC in Singapore fast food industry. With 115 outlets around Singapore, the location is the strongest point of McDonald but KFC also use the location as reaction pattern. When McDonald opens the new restaurant, KFC also follow to open their restaurant in this area. Thus, we can easy to see McDonald and KFC together in different area.

KFC has been wide the product line with diversity product and always change its products to suitable with the period.

Strengths:

KFC is one of the oldest and finest in Business

Ranks of KFC is highest among all chicken restaurant and does not have any direct competitor in chicken serving because it do not have competitor which copy product like Burger King copy from McDonald.

The product of KFC popular with everyone including Hindus (4% population of Singapore)

KFC accounted 20,6% market share of fast food industry in Singapore so it high revenue for KFC

Weakness:

The presence of multinational competitors in the market such as McDonald (specialized not in chicken but in burgers).

Imported raw materials raise their prime cost.

KFC almost focus on chicken so it is one limitation in market

Opportunities:

The life style change and people too busy so it increased trend to take meals out of home.

Consumers prefer “all under one roof” in order to increase their sales turnover. They can increase or add the served items.

The population of Singapore grow up in recent year create many opportunities for KFC. It can earn huge profit as population grows

Threats:

There are many threats from entrance of new completion and supermarket

Major competitor like McDonald, Burger King, food court or restaurant.

Nowadays, people tend to eat healthier meals and way from fried foods sot it is one of the threats for KFC.

Other threat is bird flu in recent year because it reduces the revenue dramatically in the winter

Many threat from entrance of new competitor and supermarket

1.2 Burger King sg6.jpg

Burger King Corporation (BKC or “the company”) is the world’s second largest company of fast food hamburger restaurant (FFHR) chain. The company operates in about 73 countries worldwide. In Singapore, Burger King Corporation operates more than 40 restaurants where customers across the island city can enjoy the great and healthy flame-grilled taste of products.

Burger King will not only provide customers with a great dining experience in the areas of convenience, excellent service and friendly surroundings, but also for our wide and unique menu options.( burgerking.com.sg)

Reaction pattern

McDonald uses the cost leaderships to compete with other brand so Burger King also use price to competitive. Burger King keep it price cheaper than Burger King although 5-10 cent only.

Burger King provides the new products to reaction of McDonald but it focus on taste and make it better.

Burger King has been extend its product such as toys.

Strength:

Burger King is the second largest fast food hamburger restaurant in the word with strong brand equity

The greater brand franchise mix with 88% restaurant

Weakness:

Hamburger is unhealthy food image

Legal action related to health issues use of trans fat and beef oil

Threat:

Threat from new competitors into fast food market

The health trend away from fast food and people tend to eat fresh meal

Threat from the strong competitor in the fast food market such as KFC or McDonald

Opportunities:

The lifestyle change and people too busy so it increases trend to take meals out of home.

The population in Singapore grow up in recent year create many opportunities for Burger King. It can earn huge profit as population grows

McDonald kwon as the non healthy food image so if Burger King can build image of burger healthier with more vegetable it can fight McDonald.

The opportunity of new product development

1.3 Subwaysg7.jpg

Subway is one of strong competitor in Singapore. Subways use the differentiation strategy. The positioning of Subway is “eat fresh” and build image of healthier fast food. The Subway products are made fresh before the customer eyes and the customer can enjoy choosing the vegetable. The weakness of Subway is the product line is limit and not diversity because it only focuses on sandwich. The second is the weakness in the channel. Subway have litter restaurant than other brands of fast food.

Subway does not compete on price with competitor. It use images of fresh food on the media and advertisement.

2 Indirect competitors

Indirect competitors is brand which is similar in form but not directs such as Long John Silver or Pizza Hut

Pizza Hut:

Pizza hut is the different product comparing with Mc Donald but in the fast food industry it is strong competitors.

Strength:

Innovative range of pizza under one roof

Famous television advertising

100% owned by Yum

Pizza hut has a huge market segment attracting more customers meaning a higher percentage in sales which lead to greater profit

Weakness

Nowadays, loyal customers are feeling that the satisfaction of the Pizza is declining so it can led to loss customers

It is difficult and conflict from franchisees

Pizza hut lack of organic pizzas which will limit the target market

3. Food court

There are 75% population of Singapore is Chinese so their culture is strong and they like original food. Food court is very popular in Singapore and the food is healthier than the fast food. The space of Food court is huge so people can go with large group and chose the different food.

Strength

Location: Food court will be placed in such an area which can be easily accessible from all part of city

Experienced staff: staff is local employees so they help to provide quality food service to customer

Ambience of place: The feeling of being in their native place while dinning is itself a pleasure experience which gives us an advantage

It is quiet convenience because food court is very popular in Singapore

Food court can meet the service many people at the same time

Weakness:

The weakness of Food court is low service .The service in food court cannot fast and professions as the restaurants.

Some food courts have problems of food hygiene.

Food courts do not service 24/24 hours

VI RECOMENDAITON

Based on the different analysis done so far we have come up with the following recommendations for McDonald

Competitive pricing

McDonald should keep the cost leadership to compete. McDonald only needs to keep its price 1-5 cent cheaper than other competitor to create attractive financial for customer.

Extend the student segmentation

There are many university, college, JC and polytechnic in Singapore so it is the potential opportunity to attractive young people and have value from relationship. McDonald can opens more outlets in the school and have promotion to have loyal from young customer.

Potential segment

The percentage of senior citizen in Singapore is not small but McDonald’s Singapore places less emphasis on the senior citizen’s segment. Now, McDonald has one product for elderly people are Egg Mc Muffin so it should develop and have more products for this segment.

Nowadays, more young people turning vegetarian in Singapore so it also is potential segment so McDonald should care this segmentation.

Create a new healthier image

Recently, McDonald has new products with more vegetable such as salad but it still is junk food in the eyes of customer. Solving this issue, McDonald should improve its product and through media, advertising, financial markets, social activities and test results to build the new image about healthy food.

Product diversification

There are many differences ethnic and religious in Singapore so McDonald need product diversification to approach the local market such as Chinese, Muslim or Indian

More focus on young people

Young people are the most attractive target of fast food industry so McDonald should have more promotion and strategy to remain the loyal customer. McDonald can provide some cool factor to attract young people such as Wi-Fi, space for party, member card or point to change the gift.