SUBJECT NAME : MICROECONOMICS SUBJECT CODE : BEC1001 ACADEMIC YEAR : AY 2012/2013, OCT SEMESTER “By submitting this work, we are declaring that we are the originators of this work and that all other original sources used in this work have been appropriately acknowledged. We understand that plagiarism is the act of taking and using the whole or any part of another person’s work and presenting it as our own without proper acknowledgement. We also understand that plagiarism is an academic offence and that disciplinary action will be taken for plagiarism.
Name of Student Matriculation No. Signature Tutorial Class : ___________________ Tutor : ___________________ Diploma : ___________________ Date of Submission : ___________________ CONTENT PAGE PAGE INTRODUCTION OF RETAIL OUTLET 3 PRODUCTS AND CUSTOMERS 5 DEMAND AND SUPPLY 7 PRICING AND PROMOTION12 COMPETITION14 SUGGESTIONS AND CONCLUSIONS19 APPENDICES AND REFERENCES22 1. INTRODUCTION OF RETAIL OUTLET Our group have decided to focus McDonald’s in Tampines Mall as our retail outlet. The location is as follows: No. Tampines Central 5 #01-33 Tampines Mall, S(529510) The retail outlet operates from 6am to 12am from Sundays to Thursdays, and 6am to 1am on Fridays and Saturdays.
McDonalds is famous for its tasty, affordable food it provides at the ease of convenience. McDonalds is also the largest fast food chain in the world. In Singapore alone, there are more than 120 outlets located across this island. 2. PRODUCTS AND CUSTOMERS The products sold at McDonald’s can be divided into different categories, namely, an Ala Carte and Value Meals, Sides, Desserts, Beverages, Happy Meals, Promotion & Bundle Meals.
In general, McDonald’s provide breakfast items, food products for lunch and dinner, as well as sides. These can be illustrated by the pictures found in the Appendix A. Items on the Lunch/Dinner menu can be bought as meals at value price from 12 noon to 3 pm, or on Ala Carte. In addition, sides such as Fries, Corn Cup, and Apple Slices can be purchased at any time of the day. Beverages are also provided for its customers, such as Heaven and Earth Green Tea, Coke, Iced Lemon Tea, to name a few. Desserts such as the strawberry and hot fudge ice cream sundae are also available too. shown on the next 2 pages.
More of the examples are provided in Appendix A. Customer Segments The retail outlet targets customers of different groups, such as families with children, teenagers ranging from 13 -19 years old and urban customers. This is evident McDonalds provides “Happy Meals”, which include a free toy as for the younger age groups, specifically below the age of 12. Teenagers can also visit the outlet since the food products are sold at affordable prices and provide a pleasant atmosphere for them to hang out or study in. Here, we can also see that McDonald’s also targets customers who are budget-conscious.
Meals are also available for takeaways, and with the implementation of drive-thrus in different outlets, urban costumers can consume fast food with great taste without affecting their heavy work schedule. In the psychographic segmentation we can also see that McDonald’s in Singapore has adopted itself through the convenience and lifestyle of the consumers situated in the country. As Singaporeans are increasingly becoming more health conscious, the retail outlet introduced items like the Salad Chicken McGrill which provides healthier alternative choices.
Delivery services have also been made available across all outlets in Singapore in the name of convenience. McDonald’s has also reached out more to its consumers at the fast paced of globalisation with the use of social networking sites such as Facebook or Twitter. 3. DEMAND AND SUPPLY McDonalds is a food and beverage outlet located in Tampines Mall. As there are several food outlets available such as Burger King, Long John Silver, Texas Chicken, and KFC to name a few, these substitutes can affect the demand for McDonalds. Non Price Determinants of Demand Curve
There are several non-price determinants that can cause a shift of the demand curve. In this report analysis, we would focus on the income of the customers as well as the prices of related goods which can affect the demand curve for McDonalds, which will be supported by news articles found in the appendices. 3. 1 Income Assume that the food and beverage sold at McDonalds is a normal good. A soft economy can make it “hard for consumers to afford eating out—especially for the younger consumers that tend to favour fast-food, who have been hit hard by high unemployment. 1 Hence, a fall in income would lead to a decrease in the demand of McDonald’s food and beverages, causing the demand curve to shift to the left. This can be seen in Fig 1 shown below. Fig 1 This will cause the equilibrium price and quantity to fall as a result. 3. 2 Prices of Related Goods Using the same figure (Fig 1. ), since McDonald’s and Burger King are substitutes, hence, with Burger King coming out with new food products and promoting discounts for its products, the quantity demanded for BK products will increase.
This results in a decrease for the demand of McDonald’s food and beverage products. Therefore, the demand curve for McDonald’s food and beverages will shift to the left. Similarly, this causes the equilibrium price and quantity to fall. Non-price Determinants of Supply Curve Similarly, there are several non-price determinants that can cause a shift of the supply curve. In this report analysis, we would focus on the cost of production and the improvement of technology that can affect the supply curve for McDonalds. 3. 3 Cost of production (Wages)
In the case of McDonald’s, when there is an increase in the wages paid to employees, this means that the cost of production increases, resulting the supply to fall, leading the supply curve to shift to the left. This can be shown in Fig 2. S1 S1 Price P P D D S S P1 P1 Q1 Q1 Q Q Quantity Fig 2 Fig 2 The equilibrium quantity will fall while equilibrium price increases. 3. 4 Improvement of Technology In Article 3*, we found out that McDonald’s has worked with Echelon Corporation in an attempt to improve their kitchen equipment to lower energy consumption and increase efficiency.
With that, McDonald’s can receive data and can now communicate and exchange data through kitchen equipment, which would in turn raise its productivity. Here, it is evident that the improvement in technology can help to increase productivity and increase its supply, hence causing the supply curve to shift right, as shown in Fig 3. Price S S S1 S1 P P D D Quantity Quantity Q1 Q1 Q Q P1 P1 Fig 3 Fig 3 This will cause the equilibrium quantity to increase and the equilibrium price to fall. The full article can be found in the Appendices page. 4. PRICING AND PROMOTION
There are 3 determinants that can affect the price elasticity of demand for the items sold at McDonald’s, namely the closeness of substitutes, the proportion of income spent on the product, and the time needed to adjust to the price changes. There are many close substitutes in the Food & Beverage industry such as Burger King, KFC, Long John Silver, hence these substitutes, being a non-price determinant of the demand, can affect the pricing of the outlet’s products, by either raising or lowering its prices. Q1 Q1 Q0 Q0 P P Quantity Quantity D D Price Price P1 P1 Fig 4 Fig 4
In this case, demand for McDonald’s products like burgers, beverages and ice cream is price elastic since the percentage change is quantity demanded is more than the percentage change in price. Hence, since total revenue is calculated by TR = P x Q, even if the outlet chooses to reduce its price, they would still generate more revenue since the quantity demanded will increase. This is illustrated in Fig 4 above. Price Price However, we also need to take into account that McDonald’s re-introduce food products during festive seasons such as the Beef Prosperity Burger with Twister Fries to commemorate the New Year.
In this situation, we can say demand for McDonald’s products is price inelastic, since competitors like BK do not come up with such promotions to compete with. Demand for McDonald’s products will increase because consumers only get to enjoy this promotion for a limited period of time. This is clearly shown in Fig 5 below. P P P1 P1 Quantity Quantity D D Q1 Q1 Q0 Q0 Fig 5 Fig 5 Pricing Strategies McDonald’s uses value pricing in order to maximise its profits.
Value pricing refers to which the firm price their products based on the perceived worth of product to its intended customers and aims to provide more quality for less than what they expect to pay. This is evident as McDonald’s provide value meals to the customers at low prices. 5. COMPETITION There are several fast food restaurants located at Tampines Mall. However, in this analysis, we would focus BK as the main rival to McDonald’s. 5. 1 Market Structure Hence, we would classify McDonald’s under the oligopoly market structure, as they fulfil its characteristics. Both BK and McDonald’s fall under the category of fast-food restaurants.
The firms are also interdependent on each other as there are few competitors and any change in one’s price or product can directly influence its rivals. This can cause the rivals to retaliate by changing their price and output. In addition, it is difficult to enter and F&B industry due to the high costs involved. For instance, there are certain requirements that need to be met such as safety rules and regulations when setting up a franchise. This is supported by Article 2 found in the appendices page. The fact that McDonald’s sell differentiated products also leads us to conclude that they fall under the oligopoly market structure.
All of these characteristics lead us to conclude that McDonald’s fall under the oligopoly market structure. 5. 2 Marketing and Sales Strategies McDonald’s focuses mainly on six types of strategies, namely brand loyalty, products, price, location, promotions and advertisements to help compete with others brands. 5. 2. 1 Brand Loyalty McDonalds follows a family-oriented theme where the designs of almost every restaurant provide a similar atmosphere and ambience. This is something unique when compared to other competitors. The famous golden arches and catchy slogans are enough to make anyone recognise the presence of McDonald’s.
There are still some outlets that place the Ronald McDonald’s statue outside the restaurant. These physical objects create a sense of identity for McDonald’s and promote brand loyalty to its consumers. Free meal coupons are also given out to strengthen the loyalty of the consumers to continue choosing the brand out of other competitors. McDonald’s also ensure that the service provided to the customers is of top quality since satisfied customers would usually have a great perception on a brand and hence come back again to buy the products. 5. 2. 2 Products
McDonalds often introduce new items to the menu for a certain time period, for instance, the Samurai Beef Burger and currently, the McChicken BLT and Quarter Pounder with Cheese BLT. This is to ensure the brand remains attractive to its consumers. While McDonald’s classic products remain to be a big hit with local consumers, an extension of the normal products like the Double Filet-o-Fish were also introduced to strengthen the demand. A wide selection of ice cream with different flavours is also offered such as the Flavour Burst, McFlurry and Sundaes.
This is very similar to BK as they also sell burgers, fries, fruit smoothies, mocha and caramel frappes which make both outlets very strong competitors. Similarly, they have also added healthier alternatives such as Caesar salad. Both companies also provide kids’ meal to cater the needs of the children. It is also important to note that McDonald’s also came up with the innovative idea by setting up McCafe, which was first established in 2003. It aims to provide good quality beverages in a warm and friendly atmosphere with personable service from professionally-trained baristas, all in an affordable price. . 2. 3. Price Consumers may not have the freedom to spend huge amounts of cash on food as they like when the economy outlook is poor. As such, McDonald’s introduced the Everyday Saver’s Menu, a low-cost menu where items are priced at $2 or less, and Value meals, where food items are priced lower when purchased as a meal to attract consumers Similarly, BK presented the BK Value Bites. BK A4DABLES was introduced as a value meal to appeal to its patrons. The value meal includes a mini sundae besides the choice of burger, fries and a soft drink.
This is something different as McDonald’s do not include ice cream in the value meal. However, the limited choice of burgers for this value meal offset the benefits BK has over McDonald’s. 5. 2. 4. Location McDonald’s outlets are strategically placed in locations where there are demands for it, be it in a shopping mall, a neighbourhood or even a school. This gives a perception to people that McDonald’s is a brand that is convenient to visit due to its location. In addition, McDonald’s also provide delivery service to its consumers.
This would ensure that McDonald’s would be the main fast food restaurant that comes into mind compared to BK, which does not provide delivery service for its patrons. 5. 2. 5 Promotions In line with the low-cost menu and meals, McDonalds occasionally come out with special promotions with a time period to attract consumers to purchase their products at a much lower cost. For instance, there was a promotion for food items during the Great Singapore Sale period. In addition, free coupons would also be given regularly at low prices to remain attractive to its consumers. 5. 2. 6.
Advertisements McDonald’s also attempts to reach out to the public through advertisements. The brand is publicised widely through the use of media such as televisions, radios and newspaper advertisements. Social networking sites are also used as a platform to be more connected to the consumers who are more technologically savvy. This has allowed McDonald’s to garner over 25 million likes on Facebook and get content they want ranging from coupons, special deals, and local events to attract more customers and allow the users to share their experiences in McDonalds by uploading photos.
With many international events taking place, McDonald’s took this opportunity to become sponsor for big events such as the Olympic Games. For examples, billboard and signatures are put up to advertise the brand. Free McDonald’s London Olympic Coca Cola glasses are given when people purchase and upsize any meal from McDonald’s. All these advertisements would entice people to dine at McDonald’s since it is a renowned brand. In contrast, BK uses a different approach. Burger King made use of famous celebrities such as soccer star David Beckham and talk show host Jay Leno to star in their TV ads instead of using the Burger King mascot.
The ads are also conveying food-focused messages as compared to humour- based in the past. In conclusion, since McDonald’s and BK are from the same industry, both brands are using quite similar strategies to market their products and improve their sales However, McDonald’s seems to have better edge as compared to BK in terms of when the strategy was implemented. BK was criticised to have copied McDonald’s as McDonald’s was always the first to make a change. Our statement is supported by an extract in Article 5 found in the Appendices and References page. 6. SUGGESTIONS AND CONCLUSIONS . 1 Customer Segments 6. 1. 1. Health Conscious Consumers McDonald’s can try reaching out to the health conscious consumers. This is because we see a growing trend of health conscious people in recent years, trying to stay away from fried foods and those with high sodium, cholesterol, trans fats and so on which are causes of many health related problems such as diabetes and obesity. 6. 1. 2. Older Generation In addition, McDonald’s can also reach out to the older generation, since currently we have not seen outlets that sell food products targeted to the age group.
This is evident with meals specifically for children such as Happy meal. Special meals discount specifically for the older generation could also be implemented to attract the older generation consumers. 6. 1. 3. Vegetarian Consumers Vegetarian consumers can also be taken into account. For instance, McDonald’s may consider hiring a group of chefs who specialise in vegetarian food to prepare or invent new food products that is targeted at such consumers. 6. 2 Related Products 6. 2. 1. Health Conscious Consumers
McDonald’s in Tampines Mall can appeal to health conscious consumers by using alternative methods of cooking such as baking and roasting instead of frying. Even if there is a need for frying, the outlet should consider frying using zero trans fat oil. Products could be sold by using ingredients that do not need to be fried and include more vegetables such as tomatoes, lettuce and olives that are full of nutrients. One example is roasted chicken sandwich. Another example could be salads of different variations could also be sold, such as tuna salad, corn salad, chicken salad and vegetable salad.
The outlet may also allow customers to switch the buns in the burger with wholemeal bread. In this way, the health conscious consumers have more alternatives and can consume food without any guilt. 6. 2. 2. Older Generation McDonald’s may also consider selling “soft food” such as porridge for the elderly, which is similar to KFC which also promotes porridge in their Breakfast Menu. Products that are not only healthy but also easy to digest and soup based products that still include the outlet’s signature products such as Filet-o-Fish could also be introduced. 6. 3 Marketing and Sales Strategies . 3. 1. Outlets in Tertiary Institutions We foresee more McDonald’s outlets to be opened in more tertiary institutions as it is becoming a trend to have fast food outlets located in local school institutions, with fast food outlets being popular to teenagers. Currently, Nanyang Polytechnic, Singapore Polytechnic and Temasek Polytechnic have McDonald outlets on campus ground. We believe that other school institutions will be welcoming of the idea as not only McDonald’s is really one of the popular fast food choices for students in terms of the taste but also the pricing.
Furthermore, McDonald’s outlets opened on campus ground sell at an even slightly cheaper price than normal outlets at malls or the neighbourhood just for students, teachers and staff. 6. 3. 2. Vending Machines People do not like to be kept waiting, especially when there are long queues. Therefore, McDonald’s may consider setting up vending machines as most people would want their food to be instant. Food would be already be pre-packed in the machine, and people would only need to wait for 90 seconds for food to be heated up before it is ready to consume.
Such vending machines would be located at various places such as schools, office buildings, shopping centres for easy convenience. 6. 3. 3. Promoting of Brand McDonald’s may consider promoting the brand through its existing customers. One example is to give away T-shirts designed with eye-popping graphics that focuses on the brand. Customers will receive it with every purchase of meal that is upsized. To put it simply, it allows the customer to do the advertising instead of doing ordinary television advertising. McDonald’s could also strengthen on providing fast customer services.
For instance, the employees may use hand held tablets to take orders personally for customers who are behind in the long queue. Customers only need to pass the printed check to the cashier to key in the order number and make payment immediately. This would increases speed and efficiency. This method has been used by countries such as Sweden and proved to be successful. The full article can be found in the appendices, marked ‘Article 6’. APPENDICES AND REFERENCES Appendix A: Menu provided by McDonald’s Singapore Article 1: McDonald’s Is Feeling Fried – McDonald’s Posts Its First Monthly Sales Drop in Nine Years (Retrieved from http://online. sj. com/article/SB10001424127887323894704578106650828393198. html. Last accessed 15 December 2012) Is the golden era over for the Golden Arches? McDonald’s Corp. MCD -0. 33% on Thursday reported the first drop in its monthly same-store sales in nine years. The figures are the latest sign that the company—whose long run of strong performance defied the global downturn—is now struggling to keep growing in the shaky global economy. The drop in October sales, which followed a decline in third-quarter profits, lands on the plate of the new chief executive, Don Thompson, who moved into the top spot at the company just over four months ago.
The numbers could pressure him to take more aggressive action to reenergize the world’s largest fast-food chain. Mr. Thompson has made few major changes at the company, vowing when he took over to stay the course with a strategy developed in 2003 that triggered a nearly decade-long surge in McDonald’s profits and its stock price. Several factors are tripping up McDonald’s, according to franchise owners, shareholders and analysts. The soft economy is making it hard for consumers to afford eating out—especially for the younger consumers that tend to favour fast-food, who have been hit hard by high unemployment.
As the most globalized fast-food chain, McDonald’s also has been buffeted by economic weakness in Europe, which accounts for 40% of its revenue and operating profit. McDonald’s is facing stronger competition from resurgent rivals that had languished for years. Burger King Worldwide Inc. , BKW -0. 93% for example, has been rolling out new sandwiches and promoting discounts, and Wendy’s Co. , too, has been offering coupons, upgrading restaurants and adding fresh menu items. “We are concerned,” said Dan Popowics, portfolio manager at Fifth Third Asset Management Inc. ,FITB -1. 03% which owns more than 600,000 McDonald’s shares.
He said Mr. Thompson has been “boxed in” by the global economic situation and rising commodity prices that have limited McDonalds’ ability to lure customers with lower prices. “My expectation is we’d start to see some improvement by the middle of next year. ” Scott Rothbort, president of LakeView Asset Management LLC, which counts McDonald’s among its biggest holdings, said he doesn’t think Mr. Thompson’s “job is in danger right now. What will be the deciding factor is how he deals with some of these short-term setbacks. ” McDonald’s has acknowledged missteps. When it reported a 3. % decline in third-quarter earnings last month, the company said it had placed too much emphasis on an Extra Value Menu that included items priced higher than a dollar. It said it would refocus its marketing efforts on the Dollar Menu. For October, McDonald’s said “modest” consumer demand and heightened competition offset the benefits from its Dollar Menu advertising, as well as a Monopoly promotion and the recent introduction of cheddar bacon onion premium sandwiches. An enormous company often has a hard time moving the needle on sales growth, and McDonald’s generates global sales of more than $27. billion. But sliding back is more of a concern, which is why the October numbers jolted investors. Global sales at McDonald’s restaurants that have been open at least 13 months dropped 1. 8% in October, larger than expected, with the U. S. and Europe each down 2. 2% and the Asia/Pacific, Middle East and Africa division down 2. 4%. Investors had expected the declines in Europe and Asia, but “the disappointment was on the U. S. side,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC, which owns 360,000 McDonald’s shares. McDonald’s shares fell 2% to $85. 3 in 4 p. m. trading Thursday on the New York Stock Exchange. Until this year, the shares have risen steadily since 2003, where they started at $16. 55; but since their peak of $102. 22 in January, they’ve fallen nearly 17%. Mr. Thompson, in a statement, said the results reflect “the pervasive challenges of today’s global marketplace,” and that strategic adjustments the company is making “will build sales momentum and drive sustained, profitable growth. ” In an internal memo on Thursday, McDonald’s USA Chief Operating Officer Jim Johannesen urged U. S. ranchisees and managers to “not let our October performance be a distraction or become a trend. ” Mr. Johannesen urged franchisees to ensure restaurants are open throughout the holidays, and to heavily promote the new cheddar bacon onion sandwiches, a new smoother espresso blend in all of its McCafe specialty coffee drinks, a new French Vanilla Latte and its line of holiday drinks. “Now is the time to be more aggressive” to recapture momentum, said the memo, reviewed by The Wall Street Journal. “Let’s not give our competitors a chance to steal away our hard-earned share. McDonald’s also has taken steps to serve more customers faster. It’s rolling out a new “dual-point” ordering system that has customers place an order at one area of the counter and pick up their food at another end after seeing their order number displayed on a screen. Underlining the growing competitive pressure facing McDonald’s, Wendy’s on Thursday said its same-store sales in North America rose 2. 7% at company-owned restaurants and 2. 9% at franchised ones in the third quarter, boosted in part by coupons for higher-priced products that attracted higher-income customers.
Wendy’s reported a loss of $26. 2 million, or seven cents a share, compared with a loss of $3. 97 million, or one cent, a year earlier. The loss widened primarily because Wendy’s paid off debt and recorded other charges. Revenue rose 4. 1% to $636. 3 million. Burger King last month said its same-store sales in the third quarter rose 1. 4% Article 2: Food Safety (Retrieved from http://www. mcdonalds. ca/ca/en/food/making_informed_choices/food_safety. html. Last accessed 23 January 2013) In the picture above, it states the importance of meeting the safety regulations set by the government.
It mentions how McDonald’s always attempt to meet the stringent food safety standards and only works with suppliers who agree with the importance of that commitment. The article also speaks of how McDonald’s takes the quality and safety of the food care very seriously and also explains how they have reach and exceeded government regulations. Their supposed standards may prove to be harder for newer firms to compete with McDonald’s. We also see how the managers and crew are trained and certified to provide an assurance of a proper understanding of how to ensure food safety through training.
This alone shows that with McDonald as an active competitor can already pose as a threat to new firms to enter the industry as McDonald is a tough competitor in terms of meeting the safety rules and regulations. Therefore, with such rule and regulation barriers, McDonald posting as a strong threat makes it more difficult for new entries into this industry. Article 3: How does McDonald’s use technology development to lower cost of production? (Retreived from http://economicsofmcdonalds. wordpress. com/2012/05/19/how-does-mcdonalds-use-technology-development-to-lower-cost-of-production/.
Last accessed 1 January 2013) McDonald’s has teamed up with Echelon corporation in order to improve their kitchen equipment to lower energy consumption and increase efficiency. With Echelon’s i. Lon Internet Server, McDonald’s can receive data on their equipment which lowers labor costs used to gather data. This also allows them to create reports while receiving less data errors. With their “smart kitchen,” McDonald’s equipment can mix with building sub-systems to extend energy management in the entire restaurant. By lowering the cost of production, McDonald’s is able to lower their prices as well.
Though McDonald’s has tested different technologies, Echelon proved to be more reliable and cost-effective. With Echelon’s power line networking technology, McDonald’s can communicate and exchange data through kitchen equipment. This helps manage use of energy, develop improvement applications, and lower maintenance costs McDonald’s smart equipment provides data that meets HACCP requirements of health departments, which save labor costs from reading thermometers and creating reports. By lowering their own prices thanks to their “smart kitchen,” McDonald’s supply increases as a result.
This encourages McDonald’s to open up more restaurants in other places. As a result, more people will be attracted to go to McDonald’s than other fast food restaurant competitors. McDonald’s can be found in 119 different countries worldwide and serve at least 68 million customers per day. McDonald’s currently operates 33,000 restaurants and employing about 1. 7 million people. How has McDonald’s improved their operations for the environment? Article 4: Upsize for McDonald’s pay as fast food gets faster (Retrieved from http://justice4workerssingapore. blogspot. sg/2011/03/upsize-for-mcdonalds-pay-as-fast-food. html.
Last accessed 1 January 2013) Photo caption: Mcdonald’s restaurants can serve customers faster because of the new methods of preparing food. A machine that dispenses frozen fries into a wire-mesh basket for a deep fry in hot oil has reduced the time taken to around four seconds. Done manually, it took three minutes. The fries dispenser resulted in an extra worker who could be ‘redeployed elsewhere at the drive-through station to serve more cars during peak hours, thus improving revenues’, said restaurant manager Sophia Boh. Mcdonald’s restaurants can serve customers faster because of the new methods of preparing food.
A machine that dispenses frozen fries into a wire-mesh basket for a deep fry in hot oil has reduced the time taken to around four seconds. Done manually, it took three minutes. MCDONALD’S workers will get a fatter pay packet from next month. The wages of its 6,000 rank-and-file workers will increase by an average of 20 per cent, thanks largely to new machines and work systems that have improved productivity. It means a McDonald’s employee, working full-time, can expect to get $1,100 a month instead of $900. For their team leaders, the pay will increase to $1,240, from $1,100.
The company made the announcement yesterday as its officials took top unionists on a tour of a Bukit Timah restaurant to demonstrate its new ways of preparing food and getting paid, methods now found at most of its 115 restaurants across Singapore. One significant improvement is a machine that dispenses frozen fries straight into a wire-mesh basket for a deep fry in hot oil. Previously, loading a basket of French fries was done manually and took two to three minutes, the company said. Now, the process takes around four seconds, allowing the fast-food chain to serve customers even faster, it added.
It declined to disclose how much was spent on recent improvements in productivity but it received ‘significant support’ from Government funds, said its senior director (business planning and human resources), Mr Tan Kwang Cheak. ‘We value our employees’ contribution, and the wage adjustment is our way of saying we want them to have a stake in the growth of this company,’ he added. Much of the funding of its productivity initiatives came from the Government’s $40 million Inclusive Growth Programme, a scheme to boost the pay of workers earning $1,400 or less a month. A company can get up to $150,000 for a project, and a maximum of $500,000.
Since last August till the end of February this year, $16 million has been committed. Welcoming the workers’ pay rise, NTUC assistant secretary-general Ong Ye Kung held up the company’s ‘concrete measures’ to boost productivity and share gains with workers as exemplary moves he wants employers to emulate. Mr Ong and about 60 union leaders, including labour chief Lim Swee Say, president John de Payva, and Employment and Employability Institute (e2i) chief Ang Hin Kee, toured the McDonald’s restaurant at Alocassia Apartments in Bukit Timah as part of NTUC’s regular visits to companies to learn more about how industries boost productivity.
Ms Sophia Boh, 30, the restaurant’s manager, said the fries dispenser resulted in an extra worker who could be ‘redeployed elsewhere at the drive-through station to serve more cars faster during peak hours, thus improving revenues’. Another McDonald’s initiative is a cashless payment system that cuts average payment time per customer by one-third. Said Mr Darren Liu, 19, an ITE service management student working part-time at Jurong Point McDonald’s restaurant: ‘I like how the company trains us and provides opportunities for us to develop. ‘ His pay has gone up from $3. 0 an hour when he started in 2007 to $5. 60 an hour now. On average, part-timers are getting more per hour this year: $5 instead of 4. 20. Article 5: Nothing Exciting About Burger King’s Menu Expansion (Retrieved from http://adage. com/article/al-ries/exciting-burger-king-s-menu-expansion/234145/ . Last accessed 1 January 2013) “Exciting things are happening at Burger King. ” That’s the new advertising slogan to accompany the biggest menu expansion in the chain’s 58-year-old history. Ten new food items will be added to the menu, including salads, chicken snack wraps, smoothies and frappes. But wait a minute.
Isn’t that what Burger King tried to do in the past — expand its menu to match what McDonald’s was doing? Have all these menu expansions closed the gap between Burger King and its chief rival? Let’s check the records. * In 2000, McDonald’s was 42% ahead of Burger King, in average domestic revenue per unit. * In 2005, McDonald’s was 73% ahead of Burger King. * In 2010, McDonald’s was 101% ahead of Burger King. Why would Burger King continue to pursue an expansion strategy that has failed to work in the past? Because it’s logical. Our chief competitor is expanding, goes the thinking, therefore we also have to expand to keep up.
Furthermore, goes the thinking, our chief competitor is weak. A recent article in Advertising Age reported, “According to people close to the company, its internal tracking system finds that McDonald’s consistently ranks near the bottom in quality perception when compared with rivals. ” So far so good, but here’s the rub: Line extension, menu extension — whatever you call it — weakens a brand. That’s exactly why the McDonald’s brand has been weakened. But McDonald’s is still the “leading” fast-food chain. And nothing in marketing beats leadership. That’s the marketing principle that trumps the logic of line extension.
How can a No. 2 brand compete successfully with a leader? Not by copying the leader and trying to do it better. That almost never works. Take Bed Bath & Beyond vs. Linens ‘n Things, the No. 2 brand in the home-furnishings category. Bed Bath & Beyond is one of the most successful retailers in the country, having increased sales every year for the past decade, to $9. 5 billion last year from $3. 7 billion in 2002. Over the past decade, Bed Bath & Beyond’s net profit margin averaged 8. 7%. (Compare that to Home Depot at 5. 7%, Lowe’s at 5. 2%, Target at 4. 3%, Walmart at 3. 5% and Macy’s at 1. 4%. ) The folly of emulation
What was Linens ‘n Things’ strategy? Emulate the leader with similar stores and similar marketing strategies. (You might remember the floods of 20%-off coupons issued by both chains, a strategy Bed Bath & Beyond continues to use today. ) In 2008, Linens ‘n Things went bankrupt. How can one chain be so successful and a very similar chain go bankrupt? It defies logic, but is consistent with the most important principle of marketing: The leader brand has all the advantages. That’s not leadership in a category, of course. That’s the perception of leadership in the mind of the prospect. Take Staples vs. Office Depot.
A decade ago, the two office-supply chains were neck and neck. But in the last 10 years, Staples got out in front and today is not only twice the size of Office Depot, but also has the perception of leadership. The numbers tell the story. Staples in the past decade had a net profit margin of 4. 1%. Office Depot, 0. 06%. Consider Barnes & Noble and Borders. Which chain recently went bankrupt? The No. 2 chain, of course. Consider Best Buy and Circuit City. Which chain recently went bankrupt? The No. 2 chain, again. Consider Time and Newsweek. Time is profitable, and Newsweek was sold to Sidney Harman for one dollar.
Two ways to build a brand, not one Too many left-brain management executives believe there is only one way to build a brand. “We have to be better than the market leader. ” That’s logical, but wrong. There are two ways to build a brand. 1. Be the first brand in a new category, and then you are automatically the market leader. Now the job is to grow the brand as fast as possible until it achieves a leadership position in consumers’ minds. That makes your brand almost impossible to overtake. For example: * Facebook in social media * Gatorade in sports drinks * Red Bull in energy drinks * Five Hour Energy in energy shots Vitaminwater in enhanced water 2. Be the opposite of the leader. You can’t compete successfully with a leader by emulating what the leader does. You can only compete successfully with a leader by doing the opposite. Red Bull was introduced in small, 8. 3-ounce cans, so Monster came out in 16-ounce cans and rapidly became the No. 2 brand. In the past decade, Monster Beverage Corp. had revenues of $7. 4 billion and a net profit margin of 15. 5%. Most of the engagement rings and wedding bands sold in America used to be made with gold. Then Scott Kay introduced his platinum line and built an enormously successful jewelry brand.
The leading high-end pen used to be Cross, a thin and elegant instrument. Not today. Montblanc introduced a “thick” pen and became the leading global brand, with a 28% market share. What about Burger King? While McDonald’s was expanding its menu, Burger King should have done just the opposite. Consider Five Guys Burger & Fries. Burgers, hot dogs, veggie & cheese sandwiches and french fries. “We’re fortunate in the fact that we don’t have to keep remaking ourselves,” says founder Jerry Murrell. “We’ve got the same menu since 1986. ” No salads, no wraps, no smoothies, no frappes. Last year, Five Guys sales were up 33% and unit count rose 25%.
Meanwhile, Burger King fell behind Wendy’s to become the No. 3 burger chain. Less is more. Or as Antoine de Saint-Exupery once wrote: “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away. Article 6: JLT8404 – Speeding up fast food (Retrieved from http://www. jltmobile. com/jlt/en-us/news/jlt8404-speeding-up-fast-food. php. Last accessed 13 January 2013) With the help of a Field Tablet PC from JLT several McDonalds in Sweden are now speeding up their drive-thru operation. McDonald’s have got even faster at serving ‘drive-thru’ customers.
Vaxjo-based JLT Mobile Computers have delivered over 80 Swedish manufactured special computers that help the fast food giant increase both turnover and customer satisfaction. McDonald’s drive thru is for customers who prefer to be served in their cars. Ordering is usually done via a loudspeaker system or a hatch to the restaurant. Payment is at the next stop and the order is delivered at the final stop. Efficient and good service – until longer queues develop. Then, in the new system, one of the staff goes outside to the queue of cars with a JLT 8404 handheld computer (HHOT – Hand Held Order Taker) and enters the order as soon as a car stops.
The orders are wireless transmitted, in arrival order, to the restaurant. The throughput tempo is increased considerably. Served in 45 seconds When the queues are extra long, two members of staff can take orders directly from the cars, offering a personal service. At its best, it takes only 45 seconds from ordering to the order being in the car – even when there are longer queues. “Since we introduced HHOT the capacity to serve customers in drive-thru has increased considerably and at the same time we have seen a much better result when we measure customer satisfaction. We also minimize the risk of packing the wrong products.
My staff think the computers are easy to use, and no extra training is required as the display on the HHOT screens is the same as the cash registers,” says Fredrik Karlsson, restaurant manager of McDonald’s in Hagernas. Rugged, bright and light JLT has so far delivered more than 80 HHOTs to over 60 McDonald’s restaurants in Sweden. The HHOT is a development of the JLT8404 Field Tablet PC. The HHOT is very easy to use with its bright touch screen, and with its low weight is good ergonomically. The customized system has been developed by In Time Mobile Computers who are sales partner to JLT. The application at McDonald’s is one in a row of exciting projects where our handheld computers help increase our users’ turnover, efficiency and level of service,” says JLT’s founder Jan Olofsson. Segmentation, Targeting and positioning model of McDonalds. Retrieved from http://newmarketingblogs. blogspot. sg/2010/10/segmentation-targeting-and-positioning. html Last accessed 2 January 2013. Marketing Strategies of McDonalds. Retrieved from http://www. scribd. com/doc/11520753/Marketing-Strategies-of-McDonalds Last accessed 2 January 2013. Brookes, E. (2011, April 20).
McDonald’s Gets Social Segmentation…And Consumers Are Lovin’ It! Retrieved from http://www. vitrue. com/mcdonald%E2%80%99s-gets-social-segmentation%E2%80%A6and-consumers-are-lovin%E2%80%99-it/ Last accessed 2 January 2013. McDonalds International Marketing Strategy in Singapore. Retrieved from http://www. scribd. com/doc/26702391/Mc-Donlads-International-Marketing-Strategy-in-Singapore. Last accessed 17 December 2012. McDonald’s Menu. Retrieved from http://www. mcdonalds. com. sg/index. html. Last accessed 17 December 2012. Varun. (n. d. ) 6 Essential Characteristic Features of Ogliopolistic Market.
Retrieved from http://www. preservearticles. com/201106178093/6-essential-characteristic-features-of-oligopolistic-market. html Last accessed 2 January 2013. Bhasin, K. (2012, April 10). This Is Burger King’s New Plan To Take On McDonald’s. Retrieved 19 December 2012, from http://sg. finance. yahoo. com/news/burger-king-changing-focus-dudes-165704792. html. Sanburn, J. (2012, April 3). Did Burger King Wait Too Long to Reinvent Itself?. Retrieved 19 December 2012, from http://business. time. com/2012/04/03/did-burger-king-wait-too-long-to-reinvent-itself/#ixzz2FV8bMdog.
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