Adapting Strategy of McDonalds in the 4 Ps to Enter Saudi Arabia Market - Research Proposal Example

Adapting strategy of McDonald’s in the 4 P’s to enter a new market: a case study of McDonald’s of Saudi Arabia Name Course Name and Code Instructor’s Name Date Introduction The increased integration of major world economies and globalization imply that firms operating in international market will continue to standardize in addition to adapting to the existing marketing strategies. Studies have indicated that marketing strategy development is essentially determined by competition (Viswanathan and Dickson, 2007). For a good and viable decision to be made in relation to a marketing strategy, a combination of 4Ps (product, price, promotion and place) should tally the needs of customers (Armstrong and Kotler, 2000). To be able to do this, an analysis of the preferences of customers in terms of attitudes toward competing products, the intensity of product use, product feature and price considerations is required (Royle, 2000). This study aims at identifying 4P’s strategies that firms can use to enter new market using McDonald’s of Saudi Arabia as a case study. Research question Do 4P’s strategies adopted by firms as they enter a new market vary? Literature review The marketing mix Marketing mix originated from microeconomic theory. The marketing mix is also referred to as 4Ps. Marketing plan ought to be action oriented for it to be viable. Marketing mix helps a firm to develop long term strategies and short term tactical programs (Armstrong and Kotler, 2000). In addition, it enables a firm to differentiate its product from competing products (Hill & Jones, 2009). The functions of marketing mix include making it easy to market products and separating marketing activities from other activities of the firm; allowing delegation of marketing activities to specialists;  making the company competitive and essential for allocation of resources to different devices of marketing mix. In spite the functions played by marketing mix, the 4Ps marketing mix has been criticised for being internally oriented with no consideration of the consumer’s behaviour (Keller, 2009). The customer is regarded as a passive player in the 4Ps marketing mix which discourages interaction that is essential for creation of relationships with customers (Barnett, 2008). The mix also lacks theoretical content and does not allow personification of marketing activities (Kotler and Kevin, 2006). In spite these limitations; 4Ps marketing mix framework is still very strong tool for marketing (McDonalds, 2011). Marketing strategy can be standardized when the response of consumers to marketing mix is homogeneous. Segmentation of the target market can allow a firm to identify consumers who have homogeneous response to marketing mix. The customer response homogeneity to marketing mix can be based on psychographic, demographic, benefits, geographic and usage situation factors. Homogeneous response between new target customers and current ones imply that the marketing mix can be standardized. However, if the response is heterogeneous then the firm ought to adopt non-standardized marketing mix. Consideration of homogeneity of marketing mix ought to handle each of the 4P’s marketing mix separately. This is because the product, place, promotion or price may receive different response from new customers. For instance the product may receive heterogeneous response while the price may receive homogeneous response. In this case the firm will have to standardize the price but use non-standardized approach for the product offered to the new target market. Product Products must be able to provide benefits which enhance the situation of users. This involves design and production of goods which enhance the customer experience (McDonalds, 2011). Research has shown that when a firm is operating in a global arena a fit ought to exist between the competitive strategy of the firm and its global marketing strategy. A firm could for instance adopt marketing practices which are standard while emphasizing product differentiation at the same time in different target markets. In spite this, application of standardization in a uniform manner can make a firm to loose competitive advantage derived from differentiation. Thus a firm entering such a market ought to adopt non-standardized marketing practices in order to maintain its differentiation strategy integrity. This implies that products ought to be tailored to the cultural practices of the target market instead of aiming at standardization of the product internationally (Viswanathan, and Dickson, 2007). Marketing strategies for products include new product lines, innovation, product line extension, changes or improvements of the products that exist, repositioning products and cost reduction. In spite the market research, what customers want often change over time. Thus, what is popular today may not be attractive tomorrow (Okamoto, 2010). Thus marketers at the firm are usually constantly monitoring customers’ preferences. Products of a firm in the market usually go through a life cycle. Thus the products are developed, introduced, grow, mature and decline (Barnett, 2008). As the firm introduces new products, some of its products are either at growth, maturity or decline (Royle, 2000). More often a firm has several products in the market. Price strategies Price is the only flexible element of marketing mix which can be adjusted at any time (Capon, 2009). Different ways are used to price products and services (McDonalds, 2011). These include premium pricing, penetration pricing, economy pricing, price skimming, psychological pricing, product line pricing, optional product pricing, captive product pricing and product bundle pricing. Premium pricing uses a high price because of the uniqueness of the product or the service (Barnett, 2008). It is mainly used to price products when there is a substantial existence of competitive advantage. It is commonly used in pricing luxury products. Penetration pricing involves setting lower prices for goods and services in order to gain market share. The prices are increased ones the firm penetrates the market (Armstrong and Kotler, 2000). Economy pricing keeps the cost of manufacturing and marketing at a minimum level. Price skimming is where a high price is charged because a firm has a high competitive advantage. This often attracts new competitors in the market which forces the prices to fall (Porter, 1980). Psychological pricing is used by marketers to enable consumers to respond on an emotional instead of rational basis (Royle, 2000). Product line pricing is used where there is a range of products or services on offer and pricing reflect the benefits of parts of the range. Optional pricing is where firms attempt to increase the amount spent by consumers once they start to buy (Capon, 2009). Captive product pricing is where products have complements and hence firms charge a premium price where the consumer is captured (Porter, 1980). Firms which are able to offer competitive pricing strategy usually focus their efforts on increasing efficiency of processes which lower the cost of productions. Retailing businesses employ the low pricing strategy in most cases. Prestige pricing strategy is common in markets where quality is emphasized over price. Differentiation of a firm based on cost leadership allows it to use standardization to enhance its performance. This is because both marketing practices and cost leadership aim at improving the process which ultimately results in increased efficiency. This lowers cost of production and allows a firm to offer its products at competitive prices. Thus a firm entering new market where prices of products are valued just like its current market can be able to standardize its prices to match those of the current market through cost leadership. Place This refers to the physical distribution and marketing channels. This refers to physical distribution and marketing channels (Gilbert, 2008). It allows goods or services to be moved from the producers to the users. Strategies for place include intensive distribution, exclusive distribution and selective distribution. There are several basic channels from which businesses may choose from to distribute their products (Armstrong and Kotler, 2000). They include direct or indirect channels, single or multiple channels, cumulative length of the multiple channels, intermediary channels and companies as intermediary channels (Sharp & Dawes, 2001). To decide on the distributor the firm ought to consider market segment, changes during the product life cycle, producer-distributor fit, qualification assessment and the training and support that the distributor will require (Baig & Vitus, 2010). A firm whose new target market has consumers located in areas similar to its current customers can standardize its distribution channels. For instance, if the current target market consists of citry dwellers and the new target market also has consumers located in similar setting, this implies that the new market is homogeneous to the current market and hence the firm can standardize its place strategies (Schilke, Reimann, and Thomas, 2007). However, if the current market prefer shopping in stores while the new target market prefer online shopping, this implies that the two markets are not homogeneous and thus non-standardized approach to place strategies ought to be adopted. Promotion Promotional strategies are important in communicating the feature of the product to the target market. Promotional strategies are vital in communicating the differentiating features of the product to the target market. It includes all tools which are at the disposal of the marketer for marketing communication (Armstrong and Kotler, 2000). Promotional mix elements include sales promotion, public relations, personal selling, trade fairs and exhibitions, advertising and sponsorship (Baig & Vitus, 2010). Personal selling is essential in effective management of personal customer relationship. It involves hiring of sales people to work on behalf of the firm. However, sales persons are very expensive and should only be deployed in cases where there is genuine return on investment (Capon, 2009). Sales promotion entails all promotions except advertisement, personal selling and public relations. One should cost sales promotion carefully and compare it with other best alternatives. Public relations are the deliberate, planned and sustained effort geared toward establishing and maintaining mutual understanding between a firm and its publics. It is considered to be relatively cheap (McDonalds, 2011). Direct mail is a focused promotional tool which focuses upon target consumers based on the available database. It involves sending mail to potential consumers and responses are carefully monitored. Trade fairs and exhibitions help businesses to make new contacts and to renew old ones (Armstrong and Kotler, 2000). It is mainly used to create awareness and to encourage trial. It gives the firms an opportunity to meet with trade and the consumer (Baig & Vitus, 2010). Advertising is a form of paid for communication. It helps in developing attitudes, creating awareness and transmitting information in order to gain a response from the target market (Gilbert, 2008). Different media are used for advertisement (Capon, 2009). They include newspapers, magazines, journals, television, outdoor advertising and cinema. Sponsorship involves paying to be associated with a certain event, cause or image. Promotional standardization can be undertaken in case the new market has similar response to promotional strategies like the ones existing in the current market. However, if the response differs, then non-standardized approaches ought to be adopted. Type of research This research will be empirical research and desk based using data. Empirical data will be obtained via administration of questionnaires to the employees of McDonald’s of Saudi Arabia. Desk based data will be obtained by reading secondary data sources available in online publications, books and other articles about McDonald’s of Saudi Arabia (Keller, 2009). Research design and methodology Research design This is the structure of research. It holds all the elements of a research project together. It enables researchers to answer research questions using the evidence obtained unambiguously. In order to obtain evidence that is relevant one need to specify the type of evidence required for answering the research questions, to evaluate a program, to test a theory or to describe a phenomenon accurately. Thus when designing research one ought to know the type of evidence required for answering the question at hand. This research will use a case study to answer the study question. Research strategy Various research strategies for the collection of data exist. Some of these methods are more suited to the deductive approach while others belong to the inductive approach. Various factors guide the choice of research strategy (Barnett, 2008). The most significant ones are the research question and objectives of the research. The most common research strategies in management include survey, case study, experiment, grounded research and action research. The following strategy will be employed in addressing the research question and objectives for this research study. Case study Case study strategy as a qualitative method of research will be used to carry out the study (Barnett, 2008). Case studies are usually used to investigate contemporary phenomenon in the context of its real life. Case study will be used to investigate 4 P’s strategies that firms ought to employ when entering new markets with McDonald’s of Saudi Arabia as a case study. This will allow us to get information about what is real on the ground. Case studies involve four stages (Baig & Vitus, 2010). These include determining the present situation, gathering information about the situation at hand, gathering more specific information and presenting an analysis of findings and recommendations for action. More specific information will be gathered using structured interviews. In case study the unit of analysis should have a focus study and subunits to allow extensive analysis. The focus study in this study will be 4P’s strategies employed by McDonald’s when it was entering Saudi Arabia market (McDonalds, 2011). Stages involved in case studies include selection of the case, preliminary investigations, data collection, data analysis and report writing. There are several types of case studies. They include snapshot case studies, longitudinal case studies, pre-post case studies, patchwork case studies and comparative case studies. Research Methods/ Choices Use of secondary data: documentary secondary data will be used in this research in addition to using primary data collection methods. Documentary data will include written materials, company reports, journal articles, books and other records relevant to this research. By using secondary data, enormous resources will be saved (Keller, 2011). The method is also less expensive than to collect the data yourself and it helps to contextualize findings within a more general context. However, secondary data has its disadvantages as the data is usually collected for a specific purpose that differs from the research objectives of this research. Furthermore, where data was collected for commercial reasons gaining access may be difficult and costly. The researcher has no control over the quality of the data when using secondary data. A self- completion survey method involving the use of structured questionnaires to collect data will also be used in this research. A structured questionnaire contains a predetermined set of questions designed to capture data from respondents (Barnett, 2008). Self –administered questionnaires will be administered electronically to a cross-sectional of employees in different companies. These will range from relief support workers, permanent support workers, senior support workers and service managers from different locations (Sharp & Dawes, 2001). This will allow easy administration, faster and cheaper data collection and analysis. However, the draw back is that it is limited to only computer users and cannot probe complex issues (Smith, 2011). Since most questions on questionnaire are simple and straightforward, they do not allow for searching of new issues. Questionnaire containing both closed and open questions will be developed from the literature review. Semi-structured interviews: these are used for collecting qualitative data through interviews. It allows respondents to talk about their perspectives on a particular subject (Hill & Jones, 2009). It uses open-ended questions prepared by the researcher or questions that may arise during the interview. This method is simple, efficient and practical way of getting data about things that cannot be easily observed, it has high validity as respondents are able to talk about things in detail and depth (David, 2010). However, use of Semi structured interview has some shortcomings since it depends on the skill and ability of the researcher to think of questions during the interview and articulacy of the respondent (Royle, 2000). In addition it is time consuming and expensive, is not reliable as respondents may be asked different questions and qualitative data collected may be difficult to analyze (Gilbert, 2008). Despite the shortcomings Semi- structured interviews will be conducted in this research with two relevant senior managers and sales and marketing managers at McDonald’s of Saudi Arabia. Data analysis Data obtained will be analyzed in three stages. These will include data preparation, data description and testing hypotheses (Capon, 2009). During data preparation logging in the data, entering the data into the computer, data transformation and development and documentation of a database will be undertaken to integrate the various measures (Okamoto, 2010). Description of data will entail description of basic features of the data in the study. This will be used to provide summaries about the measures and samples. Testing of hypothesis will involve inferential statistics. References Armstrong, G. & Kotler, P. 2000. Marketing: An Introduction. Singapore: Pearson. Baig, E. C. & Vitus, B. L. 2010. IPad for Dummies. Sidney: For Dummies. Barnett, R. 2008. Global Reach: The Power of the Multinational Corporations. Oxford: Oxford University Press. Capon, C. 2009. Understanding the Business Environment. London: Financial Times Prentice Hall. David, R. 2010. Strategic management: concepts and cases. Upper Saddle River: Pearson Prentice-Hall. Gilbert, S. 2008. The Story of McDonald's. London: The Creative Company Hill, C. & Jones, G. 2009. Strategic Management Theory: An Integrated Approach. London: Cengage Learning. Keller, F. 2009. Market Positioning & Framing Market Research, London: Oxford University Press. Keller, W. 2011. Apple, Inc: strategic analysis of a global powerhouse. London: Strategic Management. Kotler, P. and Kevin, L 2006. Marketing Management, 12th Ed. New Jersey: Prentice Hall. McDonalds. 2011. Home. Available at http://www.mcdonalds.com/us/en/home.html Okamoto, J. 2010. Australia's foreign economic policy and ASEAN. Queensland: Institute of Southeast Asian. Porter, M.E. 1980. Competitive Strategy. New York, Free Press. Royle, T. 2000. Working for McDonald's in Europe: the unequal struggle. London: Routledge Schilke,O., Reimann, M., and Thomas, J. 2007. When does international marketing standardisation matter to firm performance? Journal of International Marketing, vol. 17, no. 4, pp. 24-46 Sharp, B. & Dawes, J. 2001. What is Differentiation and How Does it Work? Journal of Marketing Management, 17, pp. 739-59.  Smith, T. 2011. Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures. London: Cengage Southwestern. Viswanathan, N., and Dickson, P. 2007. The fundamentals of standardising global marketing strategy. International Marketing Review, vol. 24, no. 1, pp. 46-63 Read More