January 10th, 2018
McDonald’s Case Study – Addressing Changing Food Values
Changing economic, sociocultural and technological trends have led to the development of services as core contributors to many countries’ economies. Unlike in the developing world and emerging markets such as China where manufacturing still forms a basis for their economies, in the developed world the drivers of the economy have become businesses based on services (Elliot, Rundle-Thiele & Waller, 2011). Services have become a core component of the product mix in modern businesses with entities integrating services that add value to their goods-based business (Elliot, Rundle-Thiele & Waller, 2011). This paper evaluates the service aspect of McDonald’s business in Australia as presented in the case study about “addressing changing food values” (Australian Business Case Studies Pty Ltd, 2011).
Why McDonald’s is referred to as a Service
McDonald’s opened its first store in Australia in 1971 having been in operation in the US since 1955 (Australian Business Case Studies Pty Ltd, 2011). The entity currently has over 780 stores across Australia employing around 85,000 employees (McDonald’s Australia, 2012). Close to two thirds of its business interests in Australia is conducted through franchises it holds with independent Australian restaurants (Australian Business Case Studies Pty Ltd, 2011). Its expansion to Australia was facilitated by the entity’s focus on family-friendly affordable meals and fast foods that met the changing transformation of families into two income households that reduced the time that individuals had to prepare food at home (Australian Business Case Studies Pty Ltd, 2011). Currently, with the changing customer trends towards healthier food alternatives, McDonald’s has been necessitated to adopt more healthy food offerings in its stores. Facilitating such transformation has been McDonald’s high customer base that offers it an appropriate forum to conduct market research and establish the changes it needs to implement in its product offerings (Australian Business Case Studies Pty Ltd, 2011).
McDonald’s is a service business because it provides services in the act of delivering its food offerings. It thus qualifies to be a service business since it offers “service as the delivery of products” (Elliot, Rundle-Thiele & Waller, 2011, p. 388). At the core of the entity’s service delivery is the speed and reliability of its services. Such reliability and speed ensures that the entity meets the needs of its customers. Another core service of McDonald’s is its customer service aspect. Apart from enhancing the customer experience in its stores and takeaway offerings, the customer service serves as a means of collecting feedback from the customers thus enabling McDonald’s to respond to changing customer trends (Australian Business Case Studies Pty Ltd, 2011).
Another aspect of McDonald’s service relates to its business-to-business services offered in respect to the entities’ it collaborates with in its franchises. McDonald’s provides services to such business by engaging in brand communication activities that maintain a positive brand image. By engaging in such activities, the entity helps the franchisees to market their products thus leading to better revenues for the franchisees and McDonald’s (Australian Business Case Studies Pty Ltd, 2011). Accordingly, McDonald’s acts as a service business through the services it directly offers to the consumers that improve their experience and the services it offers to its franchisees to better their sales.
Evaluation of McDonald’s according to the four unique Characteristics of Services
The unique nature of services as compared to goods necessitates expansion of the marketing mix concepts to include additional factors. The unique characteristics are intangibility, inseparability, heterogeneity and perishability (Elliot, Rundle-Thiele & Waller, 2011). Intangibility refers to the fact that services are not perceivable through the five human senses – sight, smell, hearing, touch and taste (Elliot, Rundle-Thiele & Waller, 2011). Inseparability refers to the fact that for most services production and consumption occurs simultaneously (Elliot, Rundle-Thiele & Waller, 2011). The third characteristic of services, heterogeneity, relates to the variability of service quality that could arise with variations in aspects such as mood, skill and willingness of the people providing the service (Elliot, Rundle-Thiele & Waller, 2011). Perishability implies that services cannot be stored for use at a later date hence entities must establish strategies that enable them to provide the service as it is required (Elliot, Rundle-Thiele & Waller, 2011). These features apply to McDonald’s business to a varying extent as discussed subsequently.
Intangibility of McDonald’s services is evident in most of the services the entity offers to support its products. For instance, the entity’s customer service activities that allow for fast delivery of customer orders and reliability of its service are not associated with transfer of a perceivable good. Although such services help to boost customer experience in the entity’s restaurants, such experience cannot be perceived through the five human senses – it is embodied as an emotional concept. In relation to its franchise business, by engaging in brand communication and development activities, McDonald’s does not offer a perceivable good to its franchisees. The franchisees benefit from a favourable image created by such communications but the image is not perceivable through the five human senses but represents a reputation that encourages the customers to trust the entity to deliver quality products (Wong & Merrilees, 2007).
Inseparability is also evident in a number of ways in McDonald’s services. The customer utilizes the customer service actions as the entity’s representatives provide them. An example of such an action is serving food offerings at the entity’s restaurants on a personal basis and ensuring that customers’ get the right order each time they place their orders. The entity’s representatives offer such services as needed by the customer thus the production of the service and its consumption are simultaneous. The customers could also be involved in the production of the services for instance where their feedback results into changes in the seating arrangement in their restaurants (Australian Business Case Studies Pty Ltd, 2011).
Based on the nature of its business, services offered by the entity could also vary with variations of the individuals offering such services. For instance, even with the same training and set standards of service, service to customers might vary according to the skills and attitude of the entity’s representatives and personal interactions between the representatives and the customers (Elliot, Rundle-Thiele & Waller, 2011). For instance, an experienced waiter at the entity’s restaurants would offer a more personal services to the loyal customers compared to a waiter who the entity has recruited recently. This would be the case since such a waiter would be more conversant with the customers thus adopt appropriate modes of correspondence to the customers with whom he has interacted with before. Such aspects thus create variability in the quality of service offered hence presenting a challenge for the entity to provide a consistent level of service during all customer interactions.
Perishability also affects the different services that McDonald’s offers. For instance, it is impossible for McDonald’s to store aspects such as service offered by waiters for provision in future. This arises since each service is delivered on a need basis i.e. consumed as it is provided (Elliot, Rundle-Thiele & Waller, 2011). Waiters will respond to customer orders as customers make such orders; they do not offer a service for storage to be retrieved when a customer requiring the service visits the entity’s restaurants. Since such services cannot be stored for future use, the entity’s option is to improve its capacity to offer consistent service for instance by providing equal training for its waiters (Elliot, Rundle-Thiele & Waller, 2011). Such unique characteristics present challenges to the marketing of McDonald’s services as discussed subsequently.