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Posted: October 27th, 2020
This report has consists of marketing research related to fast food industry and it is focusing on McDonald’s Malaysia and its product. In the very fisrt part of the report is about the background of McDonald’s in Malaysia. Besides, it is also include market environmental analyses which are macro- and micro-environment in related organization.
On the other hand, this report also included SWOT analyses about the organization, which is it about the strength, weakness, opportunities and threats of Malaysia McDonald.
Lastly, it also provide some strategic recommendations which are classify into short term, medium term and long term. All the strategic recommendation is assists the McDonald’s Malaysia to secure, enchance their currently and future’s performance.
McDonald’s Malaysia was establish in year 1980, and is the largest global fast food restaurant chained. In December 1980, Golden Arches Restaurant Sdn. Bhd. (GARSB) gained the license to operate McDonald’s in Malaysia. The very 1st McDonald’s restaurant was opened at Jalan Bukit Bintang on 29 April 1982. Since then McDonald’s Malaysia continued its growth and currently has around 194 restaurants located nationwide and is still expanding around 10-15 restaurants per year.
Besides that, McDonald’s Malaysia has created over 8,000 job opportunities in Malaysia over the years. Their vision is “to be our customers’ favorite place and way to eat”.
McDonald’s main competitors in the fast food chain restaurants in Malaysia are KFC (Kentucky Fried Chicken), Burger King, A&W etc.
3.0 Market Environment Analaysis
3.1 Macroenvironment
It is an external and uncontrollable factor that will affect the decision of the managers in an organization. By using PESTE model we can analysis the many different factors in a firm’s macro environment, such as political, economic condition, social, technology and environment (Gillespie: Foundation of Economics-Additional chapter on Business Strategy 2007)
3.1.1 Political & Legislation
As Malaysia is known to be an Islamic country. In order to achieve Malaysia’s market goal, therefore McDonald’s believe in working hand by hand with the local businesses, government, authorities and suppliers throughout their worldwide operations.
In February1995, McDonald’s became the first Quick Service Restaurant (QSR) to obtain Halal certification in Malaysia and also for food production in a primary Muslim country. The Malaysian Islamic Development Department (JAKIM) restraints McDonald’s to follow the policies issued. Therefore, all McDonald’s Malaysia products are certified safe and halal.
According to Bangkok Post Business (2009), McDonald’s won a five year legal battle in Malaysia against a small restaurant name “McCurry”. The defendant claimed that McCurry stood for Malaysia Chicken Curry, but a High Court judge ruled that the prefix Mc and the use of colors distinctive of the McDonald’s brand could confuse and deceive customers.
After three years later, McCurry won the case again after a retrial. Again in September 2009, McDonald’s lost an eight-year trademark battle in a precedent-setting judgement by Malaysia highest court. The Federal Court ruled that McDonald’s cannot appeal against another court’s verdict that had allowed McCurry to use “Mc” in its name. The ruliny by a three-member panel of the Federal court ends all legal avenues for McDonald’s to protect its name from what it said was a trademark infringement. “On the basis of unanimous decsion, our view is that McDonald’s plea to carry the case forward has no merit,” said cheif judge Arfin Zakaria
3.1.2 Economic
The economic environment can have a critical impact on the success of companies, so companies must only choose those economic influences that are relevant to their business and monitor it (Jobber, p81). Malaysia’s economic is still not in a recession period as compared to Singapore or United States. Whereby, the economic condition in Malaysia is slowing down as household and business activity decelerates due to the effects of current world economic down turn. Even with the depreciation of Ringgit, Real GDP growth is forecast an increase from 5.0% 2008 to 5.2% 2009.
Even with current economic condition, McDonald’s remain secure. According to New Straits Times (2009), “McDonald’s Malaysia expects its delivery service business to jump 40 per cent this year as its new call centre can handle more orders”. They invested over two million ringgit for setting up the new call center. In addition, the Managing Director Azmir Jaafar said, the company “plans to invest 80 million ringgit this year to open between 15 to 20 new restaurants” (2009).
The extended business hours at McDonald’s would not only benefit its customers, but is also expected to have a positive economic impact on the country as well. An additional of at least 10% of new employees is expected to join the McDonald’s workforce in order to meet the employment needs of this initiative.
3.1.3 Social
According to family life cycle, different family unit often seek for different types of food. In McDonalds different set of food is served according to the preferences and needs of the particular family unit at a different portion. For example, dual income family who is busy and not enough time to prepare breakfast can get their breakfast in McDonalds. The breakfast is served in different portion.
Besides than just targeting small family units, McDonalds also pays attention to various social class such as the lower, middle and higher income group. Due to this, a menu such as “McValue meal” and big value meal has been created. The McValue meal made specially for the lower and middle income group whereas the big value meal is meant for upper income group.
The fast food market in malaysia is also growing rapidly if compared to U.S and Singapore as there is changes in their preference (e.g. home made to fast food). According to research by Euro monitor (2009), nearly 98% of malaysian are fast food patron. Euro monitor stated that 98% of malaysian are fast food consumer is due changes of women role in the society. Euro monitor further elaborate that malaysian females has become more independent as more of them began to exploit the job market to support their family. Due to this, the family able to incur higher expenditure thus they can effort to consume fast food.
Since the fast food industry is growing rapidly due to many demands, McDonalds have conduct various promotion to suit their lifestyle.
3.1.4 Technology
McDonalds has been adapting the use of technology in delivering its fast food to thier consumers. The use of telecommunication technolofy is a advanced strategy to begin an online service diverse from its brick and mortar concept. McDonalds had expanded their call center capability which had now capable to handle up to 70,000 compared to the previous 20,000. Besides that, McDonald’s Malaysia is also “working on allowing customers to order and pay online.” As according to table below, it shows that the mobile usage in Malyasia has constantly increase since year 2005 to 2009.
Percentage of Mobible Usage In Malaysia from Year 2005 to Year 2009
YEAR
USERS
POPULATION
% OF USAGE
2005
10,040,000
26,500,669
37%
2006
11,016,000
28,294,120
39%
2007
13,528,200
28,294,120
48%
2008
15,868,000
25,272,133
63%
2009
16,902,600
25,715,819
66%
Sources: http://www.internetworldstats.com/asia/my.htm
3.2 Porter’s Five Forces Model
Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. It has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of industry (Porter Five Forces 2007).
3.2.1 Rivalry among existing industry firms
The fast food industry is facing high intense of competition. Rivalry is strong because competition is focusing on providing the best service and product variety. Other competitors such as KFC and A&W create an intense rivalry among the fast food providers. Rivalry such as KFC is constantly providing more choices ranging from field of chickens to burgers and to side snack such as potato wedges and salads. Moreover, competitors equal in size and power and growth in the industry
3.2.2 Threats from substitutes products
Factors that causes the firm to lose its sales profit is the limited choice of product that they offer. Therefore, many people will go to substitute products instead. The substitute products for McDonald’s will be the other fast food chain, for example, Burger King and road side burger stall that operates until late night and other fast food restaurant is also operating 24 hours.
3.2.3Threat of new entrants
New entrants pose threats and increase competition in the industry. The lesser the threats of new entrants, the greater will be an industry’s attractiveness as it is in the retailing industries. Due to low switching cost and lack of product differentiation or even new packaging and new offers, new competitors can easily enter the new market. For example, McDonald’s face competition from Carl’s Junior and Wendy’s which are still quite new in the Malaysian market.
3.2.4 Bargaining power of suppliers
The bargaining power of suppliers is viewed as a threat because the quality of the supplied products is highly dependent on them. They can either raise the prices or lowered the quality if the suppliers are powerful. In the fast food industry case, the power of suppliers is relatively low because the inputs are standardized, low switching costs and there are a lot of substitutes of supplier.
3.2.5 Bargaining power if buyers
According to Viljoen & Dann (2000), buyers play an important role in deciding the shape of the market as they can drive prices down and make unreasonable demands regarding quality, delivery and terms of payment. In McDonald’s case, buyers assert higher bargaining power because of low switching cost to other brand (Burger King). For instances, McDonald’s cannot set high prices on their products as consumer can easily opt for other burger.
4.0 SWOT Analysis
SWOT stands for strengths, weaknesses, opportunities and threats. It helps an organization to find the best match between environmental trends and internal capabilities. In general, an effective strategy will takes advantages of the organization’s opportunities by employing its strengths and protect against threats by avoiding, correcting or compensating (Institute for Manufacturing, 2007)
4.1 Strengths
McDonald’s has a strong global present, where this is the biggest advantages and McDonald’s able to capture large market in other countries such as Malaysia. Besides, product innovation is the other strength it has. McDonald has a different innovation strategy toward different country, where they will follow the local taste and preference of customers to decide the ideal strategy. For instances, McDonald Malaysia will not offered product that contains pork as required by the government and so majority of the consumers.
Meanwhile, McDonald Malaysia also offered 24 hours services which are operating non-stop, as a means of providing added convenience to cater to the demands and lifestyles of today’s consumers. Also, this allows customers to enjoy the food all day long, especially midnight time where other restaurants have already closed. This is also considered the core competencies for McDonald Malaysia over its competitors, such as KFC, Burger King, Subway and other that do not offered 24 hours delivery services.
4.2 Weakness
Due to the saturated market in food industry caused McDonald has a low width of product range and difficult to add new outlets in their menu list. The last breakthrough for McDonald’s is their chicken nugget in 1983. The increase of competition such as KFC, Subway, Burger King and A&W, has caused a tight price competition where McDonald’s unable to earn much profit from this price competition.
According to The Star (2009), “Increase of health concern has caused many people complaint with the oily foods that are obtainable”, this is also the major weaknesses of McDonald.
Besides, due to high competitive among fast food industry had caused McDonald to lose a certain number of customers.
4.3 Opportunity
Changes of lifestyle in Malaysia have given a great chance to McDonald in Malaysia where they are able to capture more market share and customers. According to the latest survey in Malaysia, number of women workers is increasing year after year, thus they would like to look for a convenience place to buy some meals for their family and for themselves, where else McDonald is able to provide them with this services.
On top of that, advance of technology has contributed McDonald’s to improve their service efficiency, such as allow consumer to order through phone and also online. These services are supported by the growing internet users in Malaysia. Meanwhile, 24 hours service has open a revenue window for McDonald as customers look for quick meal at late nights.
4.4 Threat
Competition for Market share in Malaysia has been tigther due to the increase of competitors from KFC, Subway, Burget King, and also A&W. As customers have more range of fast food being offered and they would have no brand loyatly towards a particular brand. In order to gain advantages over the competitors, McDonalds can change thier promotion and advertisment startegy to obtain customer’s brand loyalty, however, a large amount of expenses is needed to be success.
Besides that, the major threat toward McDonald is where the consumer’s health concern has been increase day after day, as the consumer claim that fast food is too oily and it is considered unhealthy, thus this will reduce the number of customers to purchase McDonalds as their daily consumed foods.
5. Recommendation
In short term, McDonald Malaysia can increase its product line by providing more variety choose from, to include more deserts, drinks and more items such like Pizza, as this allow McDonald to continue compete in the fast food industry. Also, it should either maintain or improve to provide better and quick services by lower the supply chain cost so that it helps in cost reducing.
In medium term, McDonald Malaysia can offered some bread that is more healthy and allowing customer to choose from a range of bread themselve, such as honey oat bread, wheat bread, italian bread. Meantime, this can overcome the unhealthy image of fast food. Also, Malaysia McDonald can offer some set meal similar with ‘Deli of the Day” which is offering in UK McDonald.
Beside, McDonald can also carry out some campaign such as recycle, which this can increase the awareness and save the environment.
In long term, McDonald can invest in changing thier service system which likely similar with supermarket by promoting self check out counter, which is alike nowaday Tesco supermarket had offered. McDonald can display thier food in shelve and allow customer to choose as they like and checkout in self service counter themselve before having their mail. Meanwhile, this can reduce the cost of company, which included salary and increase attractiveness as the customers might felt new and fun, so they might visit McDonald more frequently.
As a conclusion, restaurant industy is highly competative industry. McDonald is well-known in the fast food industry around the world, as it has a successfull marketing strategy and management team. Market environmental analysis, PEST analysis and SWOT analysis of McDonald have been discussed in this report which assist McDonald Malaysia to improve thier company performance and awareness of the current market in order to enhance thier capability to compete in the fast food industry. For instance, according to recent survey, healthy awareness is increasing year by year, thus McDonald can promote some healthy products such as oat bread, wheat bread and different range of fruit juices, in order to fulfil the current demand. Also, McDonald has always maintain and improve thier promotion strategy as to maintain consumers’ satisfaction and loyalty.
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