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Marketing Mix Paper

McCarthy (1975) formulated the concept of the 4Ps - product, price, promotion, and place marketing mix. For many years these have been used as the principal foundation on which a marketing plan is based.

Pricing:

Determining the price for a product is a complex and inexact task, frequently involving trial-and-error decision-making. This process is often even more complex in international marketing.

Prices may be quoted in the company’s currency or in the currency of the foreign buyer. Here we encounter problems of foreign exchange and conversion of currencies. As a general rule, a firm engaged in foreign trade whether it is exporting or importing-prefers to have the price quoted in its own national currency. If the company deals in a foreign currency and that currency declines in value between the signing of a contract and the receipt of the foreign currency, the seller incurs a loss. Similarly, a buyer dealing in a foreign currency would lose money if the foreign currency increased in value before payments were made. The risks from fluctuations in foreign exchange are shifted to the other party in the transaction if a firm deals in its national currency. 

Product

This mix defines the characteristics of product or service that meets the needs of customers.

Promotion

The goal of advertising is the same in any country, namely to communicate information and persuasive appeals effectively. For some products, the appeals are sufficiently universal and the markets are sufficiently homogeneous to permit the use of very similar advertising in several countries. It is only the media strategy and the details of a message that must be fine-tuned to each country’s cultural, economic, and political environment. However, care must be taken to recognize when differences in national identity and characteristics are sufficient to require specialized advertising in a particular country.

Place

The route of distribution or the distribution channels shall be well defined for getting the product or service to the customer. The strategy shall include location, as it holds true for new products more so than any other type of product. The consumers have to be well familiarized with the product and the ways they can buy it.

4-Ps in McDonalds

Product

One of the aims of McDonald’s is to create a standardized set of items that taste the same whether in Singapore, Spain or South Africa. McDonald’s learned that, although there are substantial cost savings through standardization, being able to adapt to an environment ensures success. Therefore the concept of “think global, act local” has been clearly adopted by McDonald’s.

Adaptation is required for many reasons including consumer tastes/preferences and laws/customs. There are many situations where McDonald’s adapted the product because of religious laws and customs in a country. For example, in Israel, after initial protests, Big Macs are served without cheese in several outlets, thereby permitting the separation of meat and dairy products required of kosher restaurants. McDonald’s restaurants in India serve Vegetable McNuggets and a mutton-based Maharaja Mac (Big Mac) (Web, 1). Such innovations are necessary in a country where Hindus do not eat beef and Muslims do not eat pork.

There are also many examples of how McDonald’s adapted the original menu to meet customer needs/wants in different countries. In tropical markets, guava juice was added to the McDonald’s menu. In Germany, beer is sold as well as McCroissants. In Thailand, McDonald’s introduced the

Samurai Pork Burger with sweet sauce. These are all examples of how McDonald’s has adapted its product offer in international environments.

Place

McDonald’s currently has over 30,000 restaurants in 119 countries across the world (Web, 2). McDonald’s continues to focus on managing capital outlays more effectively through prudent and strategic expansion. In 1998, the company added 1,668 restaurants system-wide (whether operated by the company, franchisee or joint venture), compared with 2,110 in 1997 and 2,642 in 1996. McDonald’s realizes the potential for growth in international markets and plans to benefit from lessons that they learned in the USA.

Price

McDonald’s has realized that, despite the cost savings inherent in standardization, success can often be attributed to being able to adapt to a specific environment. This is indeed the case with its implementation of its pricing strategy, which is one of localization rather than globalization.

McDonald’s has had to come up with different pricing strategies for different countries. More importantly, rather than just having a different pricing policy for the Big Mac, McDonald’s has had to select the right price for the right market.

Promotion

Promotion, or the marketing communications mix, was seen by Kotler (1994) as consisting of five major tools:

(1) Advertising;

(2) Direct marketing;

(3) Sales promotion;

(4) Public relations and publicity; and

(5) Personal selling.

Using these tools, McDonald’s looks to localize its marketing communications strategy as it needs to consider the enormous range of cultural and other differences that it would be faced with in each country (Web, 3). It needs to analyze consumers’ attitudes towards its product, usage patterns and ethnic, moral and religious considerations in that environment. Although the idea is to promote McDonald’s as a global image, McDonald’s focuses on the needs of the communities they are entering. In a communications context, the maxim “brand globally, advertise locally” (Sandler and Shani, 1991) is the McDonald’s promotional strategy.

Conclusion

After analyzing the marketing mix of McDonald’s, it is clear that the company can be said to be `global’, i.e. combining elements of globalization and internationalization. McDonald’s have achieved this through applying the maxim, `think global, act local’ (Ohmae, 1999), to all the elements of the marketing mix.

References

McCarthy, J. (1975), Basic Marketing: A Management Approach, Irwin, Homewood, IL

Ohmae, K. (1999), Managing in a Borderless World, Harvard Business Review, May/June,

Sandler, D.M. and Shani, D. (1991), Brand Globally but Advertise Locally? An Empirical Investigation, International Marketing Review, Vol. 9 No. 4

Web, 1: McDonalds India

http://www.mcdonalds.com/countries/india/index.html

(August 30, 2003)

Web, 2: McDonalds USA

http://www.mcdonalds.com/countries/usa/corporate/info/faq/index.html (August 30, 2003)

Web, 3: McDonalds Approach to Marketing

http://www.bized.ac.uk/compfact/mcdonalds/mc29.htm

(August 30, 2003)