Accessible version | Skip to content | Change your text size

Table of contents

Previous pageNext page

Briohny's report

Report Topic:

"The marketing environment... consists of the actors and forces outside marketing that affect marketing management's ability to develop and maintain successful transactions with its target customers." Kotler et al (1998) pg 100

In this assignment you are required to choose one industry from the two in your stream and identify and discuss the actors and forces currently active in that industry AND the likely effect/impact that these actors/forces will have on that industry in the next 12 months.


EXECUTIVE SUMMARY

"Macroenvironmental forces The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces."

- Kotler et al

Macroenvironmental forces need to be studied by organisations as they can both provide opportunities and pose threats.

The fast-food industry is a consumer service; two organisations that operate in the fast-food industry are McDonald's and Hungry Jack's. McDonald's was chosen because it is the primary operator in this market and holds the greatest market share. Hungry Jack's was chosen because the product they offer is the most similar to McDonald's. I thought it would be interesting to compare marketing strategies of two organisations that offer a fairly similar product.

McDonald's is the market leader both in Australia and throughout the world. Hungry Jack's is positioned more as a market follower.

Companies use target marketing to tailor for specific markets. There are three components involved in target marketing: market segmentation, market targeting and market positioning. McDonald's primary target markets are seniors, adults and teenagers however the most heavily targeted segment is children. Hungry Jack's also essentially segment their market using demographic variables.

The final step in target marketing is developing a marketing mix. These tools are also known as the four P's and in the case of services, the seven P's. They are product, price, promotion, place, people, process and physical evidence.

With the marketing mix of McDonald's compared to Hungry Jack's, the major difference is that McDonald's promote their product using the marketing mix more evenly. Hungry Jack's use many elements of the marketing mix similar to McDonald's, however they are not as heavily promoted and are more interested in promoting the physical product.

TABLE OF CONTENTS

CONTENTS

Title Page

Executive Summary

1. Introduction

2. The Macroenvironment

2.1 Demographic forces

2.2 Economic Forces

2.3 Natural Forces

2.4 Technological Forces

2.5 Political Forces

2.6 Cultural Forces

3. Organisations Within the Fast-food Industry

3.1 Market Position

3.2 Target Markets

3.3 The Marketing Mix

3.1 3 Product

3.3.2 Price

3.3.3 Promotion

3.3.4 Place

3.3.5 People

3.3.6 Process

3.3.7 Physical Evidence

4. Conclusions

References

1. INTRODUCTION

"Marketed services (consumer services) - A market transaction by an enterprise of an entrepreneur where the object of the market transaction is other than the transfer of ownership (or title, if any) of a tangible commodity."

- M. Gabbott, G. Hogg

This assignment will focus specifically on the fast-food industry from within the consumer services area.

"Fast-food - Serving foods that can be prepared quickly, such as hamburgers, frankfurters and fried chicken."

- C. L. Barnhart, R. K. Barnhart

The fast-food industry comprises both tangible and intangible components; for this reason the product/target market sits directly in the center of the Product-Service Continuum. If we use McDonald's as an example, the tangible component is the hamburger, fries or item which is purchased. While there is also an intangible element, this is things like the expected level of service from the staff, the ability to have a hamburger cooked "without pickles" if desired, the expected environment of the restaurant, etc.

2. THE MACROENVIRONMENT

"The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces."

- Kotler et al.

2.1 Demographic Forces

"The study of human populations in terms of size, density, location, age, sex, race, occupation and other statistics."

- Kotler et al.

The demographic environment is of great importance to marketers as it involves the study of people, and it is people that make up markets. There are a number of demographic trends that are important to marketers. Some of these include:

  • The changing age structure of the population - In Australia, one of the major changes in the age structure of the population is the decreasing birth rate and increase in the number of elderly people. This means that marketers in the fast-food industry (and other industries) are having to market their services and products at different target markets as many of the current markets are becoming smaller and smaller. For example, McDonald's have recently started aiming advertising campaigns at the elderly and offer free tea and coffee to the 60 plus age group.
  • The changing family - Another trend in the demographic environment is the characteristics of families. No longer is mum, dad and 2.4 children the norm. The number of married couples with children is declining while the number of one person and single parent households is continuing to increase.
  • Geographic shifts in population - As the population grows it also expands and shifts geographically. For fast-food services this means that they may need to shift location or open new stores to keep up with demand.
  • Increasing ethnic diversity - Overseas immigration has led to an increase in not only population but also the ethnic diversity of Australia. The impact this has on a market such as the fast-food industry includes understanding different cultures and tastes; Hungry Jack's have introduced promotions like the "Satay burger" to cater for Asian tastes.

2.2 Economic Forces

"Factors that affect consumer buying power and spending patterns"

- Kotler et al.

There are two key economic concerns for marketers; these are changes in income and changes in consumer spending patterns. Changes in income may indicate trends and explain slumps in sales for the fast-food industry. A drop in sales may be able to be explained by a depression in the market place, etc. Consumer spending patterns refer to how household income is divided between food, housing, transportation, etc.

By monitoring changes in interest rates, unemployment, business and consumer confidence and retailing expenditure using economic forecasting fast-food outlets are less likely to be surprised by economic depressions or bursts of growth. Economic forces can be used to predict future sales rates and suggest the required number of service staff to have working at anytime.

2.3 Natural Forces

"Natural resources that are needed as inputs by marketers or that are affected by marketing activities."

- Kotler et al.

There are four major concerns within the natural environment. Not all affect consumer services; however they can have an effect on the fast-food market as part of the product is tangible. These are:

  • Shortages of raw materials - Many resources that once may have seemed to have an infinite supply are now seen as precious and greater efforts are being made to find alternatives or cut down usage. Some examples of these are: McDonald's use recycled paper to wrap their hamburgers, therefore reducing the amount of forestland that is cut down.
  • Energy costs - As nonrenewable resources like oil and coal dwindle, prices of fast-food products are likely to increase as things like transportation costs rise. Some fast-food outlets may have to look for alternatives to how they cook their product; however, there should not be much effect on the service elements of the market.
  • Increased pollution - Pollution has a major effect on how consumers view an organisation. These days an 'environmentally aware' company is likely to be more popular than one that is not. Increased pollution has already had effects on the fast-food market. In 1991 McDonald's changed its packaging from polystyrene boxes to paper in response to consumer demands for a more 'environmentally friendly' packaging. This makes up an important part of the 'service' element of the fast-food market; consumers receive the peace of mind that the product they are eating has had minimal effect on the environment.
  • Government intervention - There are now controls in place to make sure organisations are doing minimal damage to the environment. Organisations in the fast-food industry can either oppose these regulations or help develop them. McDonald's sponsors' days like "Clean-up Australia Day" which also makes up an important part of the "service" element of the fast-food market, again showing that McDonald's is environmentally aware.

2.4 Technological Forces

"Forces that affect new technologies, creating new product and market opportunities."

- Kotler et al.

Technology is often thought of as the greatest force affecting us now. It has allowed us to do things that were once only dreamed about and has created a number of new markets and marketing opportunities. There are a number of technological trends that should be monitored by marketers; these include:

The fast pace of change - It is important for organisations to keep up with the fast pace of change, otherwise they will find they fall behind competition. A recent example of fast-food companies keeping up with technology is McDonald's installing EFTPOS machines in their stores, this additional service provided by McDonald's increases the value of the experience to the consumer.

High research and development budgets - The fast-food industry would not spend as much on R and D as other organizations. Perhaps when McDonald's and Hungry Jack's, etc. were just starting out more funds would have been spent on improving techniques. However these days the techniques for producing the products and also the service has been perfected.

Focus on minor improvements - Most of the improvements that are made tend to be only minor. Rather than gambling with big changes companies will only make small adjustments.

Increased regulation - The majority of the recent improvements in technology (especially in the fast-food market) have been due to increases in regulations. Specific to the fast-food industry, an increase in health regulations has caused safety standards to become stricter. This has been good for consumers as it means they can enjoy the product knowing that the quality and service with which it is delivered is to the best possible standard.

2.5 Political Forces

"Laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society."

- Kotler et al.

The decisions made by marketers can be strongly affected by the political environment. Recent examples of trends in the political environment include: increased regulation of business, the introduction of the GST would have had an effect on the fast-food market as prices of fast-food increased while other food products would remain the same. Due to this, fast-food outlets would place more emphasis on their service rather than the product, stressing that 'you can't get service like this at home', etc. to differentiate themselves. There is also a greater concern for ethics which companies have to be aware of.

2.6 Cultural Forces

"Institutions and other forces that affect society's basic values, perceptions, preferences and behaviors."

- Kotler et al.

There are three major cultural forces that influence marketers: these are persistence of cultural values, subcultures and shifts in secondary cultural values. Of these, secondary cultural values has the greatest effect on the fast-food market. When the market is interested in convenience, they are more likely to buy fast food; if the market's secondary values suddenly shift and become interested in fitness and health, they will be less likely to buy fast food.

All these factors are important to the fast-food market within Australia, however some are more applicable than others are. The demographic factors would have to be one of the most important factors, as stated previously - studying the demographic forces involves the study of the people that make up the market, and if you don't know your market you're in trouble. Technological factors are also fairly important to the fast-food market. In today's 'age of technology' it is important for an organisation to monitor advances in technology so it doesn't fall behind competitors. Technology is also a great tool to monitor all of the macroenvironmental forces. Of all the macroenvironmental forces these are probably the most important two, however it is also extremely important for fast-food organisations to be seen as environmentally responsible, ethically aware and politically correct.

Part 2

3. ORGANISATIONS WITHIN THE FAST-FOOD INDUSTRY

The two organisations I have chosen to discuss which operate in the fast-food industry are McDonald's and Hungry Jack's. I chose McDonald's because it is the primary operator in this market and holds the greatest market share. I chose Hungry Jack's because the product they offer is the most similar to McDonald's and I thought it would be interesting to compare marketing strategies of two organisations which offer a fairly similar product.

3.1 Market Position

McDonald's market position both within Australia and throughout the world is the market leader.

" Market leader The firm with the largest market share in an industry; it usually leads other firms in price changes, new product introductions, distribution coverage and promotion spending."

- Kotler et al.

Hungry Jack's, however, is positioned more as a market follower.

" Market follower A runner-up firm in an industry that wants to hold its share without rocking the boat."

- Kotler et al.

Some may argue that Hungry Jack's is more of a market challenger than a follower, and that it is fighting to increase its market share. However, I feel that they don't really present any offers to challenge McDonald's, for example when McDonald's was offering 2 dollar burgers Hungry Jack's did nothing to counter this.

3.2 Target Markets

"A set of buyers sharing common needs or characteristics that the company decides to serve."

- Kotler et al.

Companies use target marketing to tailor for specific markets. There are three components involved in target marketing that can be further broken down into six individual steps. These are:

  • Market segmentation -
    1. Identify bases for segmenting the market
    2. Develop profiles of resulting segments
  • Market targeting -
    1. Develop measures of segment attractiveness
    2. Select the target segment(s)
  • Market positioning -
    1. Develop positioning for each target segment
    2. Develop marketing mix for each target segment

- Kotler et al.

McDonald's has based its segmentation on demographic variables (this is why demographic forces are so important to monitor). Most of the segments McDonald's targets are broken-down into age and lifestyle stage; this is probably because they are easily identifiable and consumer needs and wants vary closely with demographic variables. McDonald's primary target markets are seniors, adults and teenagers, but the most heavily targeted segment is children.

Like McDonald's, Hungry Jack's essentially segment their market using demographic variables. They also segment their market into seniors, adults, teenagers and children. However, unlike McDonald's, they primarily target the teenagers and adults segments.

3.3 The Marketing Mix

The final step in target marketing is developing a marketing mix.

"Marketing Mix The set of controllable marketing variables that the company blends to produce the response it wants in the target market."

- Kotler et al.

These tools are also known as the four P's and in the case of services, the seven P's. They are product, price, promotion, place, people, process and physical evidence.

3.3.1 Product

Product is defined as anything that satisfies a need or want. It is not necessarily a physical object; products can include goods, services, people, places and ideas (Walker. I., 2000, Marketing Theory and Practice, lecture 1). Products enable a company to differentiate itself from competitors and gain competitive advantage. Products can be positioned based on attributes, benefits offered, usage occasions, users, against or away from competitors, or based on the products class (Walker. I., 2000, Marketing Theory and Practice, lecture 6). Product is the most important element of the marketing mix. After all, if we didn't have the product the company would have no basis to exist.

The products that McDonald's and Hungry Jack's sell are almost identical, therefore it is important for each organisation to distinguish the differences between the products to separate themselves from each other. Hungry Jack's uses the phrase "The burgers are better at Hungry Jack's" to suggest they have a superior tasting product. While McDonald's put more emphasis on the service of their staff and the overall experience not just the physical product.

3.3.2 Price

Price is defined as the sum of values consumers' exchange for the benefits of having or using a product (Walker. I., 2000, Marketing Theory and Practice, lecture 9). Traditionally the major factor that affected buyer choice was price. Recently non-price factors such as service, guarantees, give-aways, loyalty programs and image have had a major influence. Price is a crucial part of the marketing mix as it is the only element that produces revenue; all other elements create costs. The three general approaches to pricing are the cost-based approach (the price is based on reaching a target profit), the value-based approach (where the price is based on the buyer's perception of value) and the competitor-based approach (basing prices on competitors' prices).

McDonald's constantly have "specials" such as the two-dollar burger which competitors find difficult to follow. As they are the market leader they obtain the largest revenue, so can afford to have these specials. McDonald's generally use a value-based approach to pricing, looking to give consumers the best value for money. Hungry Jack's use a more competitor-based approach to pricing. Being a market follower they tend to follow trends McDonald's set when they can afford to.

3.3.3 Promotion

This is defined as "the whole array of methods and procedures by which the organization communicates with its target market" (Fifield, P.). Promotion can be accomplished using a number of different methods (advertising, publicity and public relations, direct marketing, sales promotion, sponsorship and personal selling). Promotion is used to achieve five objectives: build awareness, differentiate products and organisations from competitors, communicate the benefits of a product, build and maintain the overall image and reputation of an organisation, and persuade customers to buy a product.

McDonald's has one of the best promotion methods of any organisation. They use a number of different methods to maintain high awareness and promote their image, including: advertising (television, radio, billboards, etc.), sponsorship (AFL, local basketball, Ronald House), sales promotion (e.g. the two-dollar burger), direct marketing (through birthday clubs, etc.) and publicity (McHappy Day). Hungry Jack's promotion efforts are not quite as ferocious. They tend to just maintain awareness through television advertising and billboards. They occasionally use sales promotion to persuade customers to try new products. Hungry Jack's also use direct marketing through 'Kids' Clubs'.

3.3.4 Place

It is said that location is the key to attracting customers (Kotler et al). Looking at the location of a company there are a number of factors taken into account. These include: Who is the target market? Are they easily accessible from the location? Is the surrounding population likely to grow or decline? What is the surrounding competition? Place also refers to a company's image in the consumer's mind. The image is built through promotion and price, etc. The interior and exterior design of the store are also factors that help to build this image.

McDonald's and Hungry Jack's have very similar "place" components. The locations and appearances of the stores would be hard to differentiate without signs telling consumers who they are. McDonald's, howeve,r holds a different place in the consumer's mind. This is due to the image built through promotion (price is fairly similar). McDonald's is seen more as a fun place for children through tools such as Ronald Mc Donald, while Hungry Jack's is seen more as merely a place to eat.

3.3.5 People

There are two important aspects to this element: service personnel (those who provide the product and do the selling), and customers (those who purchase the product). "People" is an important component of the fast-food industry as it is a service industry.

Both McDonald's and Hungry Jack's use their staff to emphasise a "friendly" environment and to promote the :"service" element of the product. Staff adopt the ideal that "the customer is always right". People are ultimately part of the product; therefore they must perform to customer expectations. This is an approach that is constant throughout any service industry.

3.3.6 Process

Service marketers must examine processes involved in service delivery to identify ways in which a better service may be provided to the customer (Callaghan, McColl, and Palmer). Two aspects of the process element of the marketing mix are the degree of customer contact and quality control standards.

McDonald's is the most innovative in terms of production processes. Examples of this are the recent installation of EFTPOS machines. Due to this Mc Donalds has been able to differentiate itself from competitors like Hungry Jack's. Both organisations have processes such as Drive-thru that is seen as a convenience and makes the product easier to consume.

3.3.7 Physical Evidence

Physical evidence involves looking at each aspect the customer uses to assess a product to evaluate its position (Kotler et al).

Physical evidence in this case is more personal. As the fast-food industry involves a tangible product as well as a service it is easier to judge. For McDonald's and Hungry Jack's a consumer is likely to judge aspects such as the quality of burger or product they bought. Aspects such as the appearance of staff and the store are also involved.

In comparing the marketing mix of McDonald's and Hungry Jack's, the major difference is that McDonald's tend to promote its product through elements like service, price, people and process. They use the marketing mix more evenly. While Hungry Jack's do have many elements of the marketing mix similar to McDonald's, they are not as heavily promoted and are more interested in promoting just the product. The main reason for this is to try to differentiate themselves from the market leader by showing they spend more time making sure the consumer receives a better product.

4. CONCLUSIONS

Although all the forces in the macroenvironment have an effect on the fast-food market within Australia, some are more relevant than others. We can see the demographic factors are perhaps the most important factor, particularly for McDonald's and Hungry Jack's because their way of segmenting the market is based on demographic variables. Technological forces are also seen as fairly important to the fast-food market. In an 'age of technology' it is important for organisations to monitor advances in technology so they don't fall behind competitors, and are able to offer consumers the most current services. Technology is also a tool used to monitor all of the macroenvironmental forces. These are the most important two of all the macroenvironmental forces. It is also important for fast-food organisations to be seen as environmentally responsible, McDonald's are excellent in using this as a marketing tool, by sponsoring events like "Clean up Australia Day" the consumer sees them as a caring organisation. Hungry Jack's are not portrayed quite so strongly.

When comparing McDonald's and Hungry Jack's marketing mix, the major difference is although Hungry Jack's and McDonald's have similar elements of the marketing mix McDonald's use the marketing mix more evenly. They promote their product through elements like service, price, people and process. Hungry Jack's are not as heavily promoted and are more interested in promoting just the product. The reason for this is to differentiate themselves from the McDonald's by showing more time is taken, making sure consumers receive a higher quality product.

REFERENCES

  • Adam, S., Armstrong, G., Brown, L., Kotler, P., (1998), Marketing, (4th edn.), Prentice Hall, Australia.
  • Barnhart, C. L., Barnhart, R. K., The World Book Dictionary: A-K, (1988), World Book Inc., Sydney.
  • Bateson, J. E. G., Hoffman, K. D., Managing Services Marketing, (4th edn.), The Dryden Press, London.
  • Callaghan, B., Mc Coll, R., Palmer, A., (1998), Services Marketing: A Managerial Perspective, The Mc Graw-Hill Book Company, Australia.
  • Fifield, P., (1998), Marketing Strategy, (2nd edn.), Butterworth-Heinemann, Melbourne.
  • Gabbott, M., Hogg, G., (1997), Contemporary Services Marketing Management, The Dryden Press, London.
  • Walker, I., (2000), Marketing Theory and Practice, lectures, Monash University, Caulfield.
  • McDonald's Corporate website, http://www.mcdonalds.com.au/
word outputDownload a printable version of this page (.doc)
Problems? Questions? Comments? Please provide us feedback.