16 - McDonald's - Case 16: McDonalds and the McCaf Coffee...

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Case 16: McDonald’s and the McCafé Coffee Initiative Issue Identification As a result of increased competition, McDonalds has experienced difficulties with regards to the level of performance of its business, specifically its breakfast sales. The primary issue faced by McDonalds’s is McCafe’s ability to recover from the loss of the company’s market share with regards to its breakfast sales. This initiative could be a feasible solution to rebuild the reputation of McDonald’s and its coffee in order to improve its success within the breakfast segment. However, the negative reputation for its coffee and its declining market share may in fact hinder its long-term success. McDonald’s will now have to find a resolution that will allow the company to build a brand name in the coffee retail industry, if they wish to recover from any loss that has been sustained. Objectives and Goals Ralph Sgro, a franchisee of McDonald’s has continuously been involved in the strategic planning of the corporation and has developed a new direction for the future of the business. His vision is to bring the European concept of McCafe to Canada, in order for McDonald’s to enter into the coffee industry as well as ensure future success regarding breakfast sales in addition to increasing the current declining market share. This strategic initiative requires careful consideration and planning in order to guarantee a successful launch. The objective is to diversify itself through its products in order to create value in this new market to ensure a profitability and an increase in market share. Analysis : Porter’s 5 Forces: Michael Porter’s five forces framework can be used to analyze the external forces that exist for McDonald’s in the market for coffee. With regards to supply it is known that McDonald’s has strong relationships with its suppliers and his built many successful partnerships. Do to the fact that McDonald’s has a strong brand reputation and is present in many countries around the world it is safe to assume that McDonald’s has a strong bargaining power over its suppliers. In terms of substitutes, no true substitute exists in the coffee market, however hot beverages such as tea and hot chocolate can be perceived as an alternative to coffee. The level of threat from new entrants is relatively low. Although it is impossible to prevent independent companies from entering the market, their portion of the market share would be relatively low and therefore not a threat to larger franchisee corporations. Customer loyalty
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Case 16: McDonald’s and the McCafé Coffee Initiative among fast food chains is impacted primarily by brand image and marketing, value and convenience. A large portion of these customers use the drive through as a means for quick service. Customers who prefer specialty coffees are accepting of longer wait and service times. Coffee consumption could be segmented into three distinct areas. Consumers who purchased coffee in the morning required a convenient,
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16 - McDonald's - Case 16: McDonalds and the McCaf Coffee...

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