Managing Innovation - Case Study Example

Assignment for managing innovation / case study McDonald’s is a tremendous success in the industry of fast foods. When it comes to success in innovation of fast food, nothing has ever beaten McDonalds (Ray 1992, p.168). The company seems to have ultimately discovered the magic touch increasing their ability to capture those taste buds of the world’s population, even in countries where beef is not eaten or never a favorite for instance, India, or in countries that prefer rice, for instance the Asian region (Howard & Gordon 1999). The success of the company is through following a comprehensive framework where they offer monitoring and training of its franchises ensuring that they continuously adhere to the Service, Quality, Value propositions and Cleanliness offered by the company directly to its customers (John 1998). In this Case, study, we look into two similar products, which McDonalds have introduced in the market for long, and the way they faired in the market (Emily 2005, p.301). Big Mac and Hula burger are our two similar products highlighting the success and failure respectively of each product introduced by McDonalds across strapping markets (Ray 1992, p.168). Big Mac is a product in the form of a hamburger sold internationally in the McDonald's fast-food chain. It is one of the most successful products and a company's signature products immensely popular among the world population (Howard & Gordon 1999). The product consists of two 1.6 oz (45.4 g) patties of beef, iceberg lettuce, special "Mac" sauce, American cheese, onions, and pickles, all in service with a 3-part sesame seed bun (McDonald's USA 2007). With its introduction, McDonalds was seeking for product consistency across individual markets in order to increase sales globally (John 1998). Its main aim was innovativeness, which would lead to success and make it thrive in the competitive market among many other products of which it was a positive initiative by then (Emily 2005, p.301). The idea was exciting and it is highly supportive of McDonald’s innovativeness and mission all over the world in delivering quality products to its customers and making sure they fulfill what their customers need and demand (Daniel 1997). Not many at the time of its inception would have ever though that this was going to be a dream come true for Ray Kroc who had always anticipated having the best share of the customers who love fast foods (Paul 2008). Picture 1: Picture Showing Big Mac product from McDonalds By introducing the Big Mac, this stabilized the distribution system and the supplier-networked operation of the company helping it achieve a consistent product taste as well as superb quality preferred by many consumers across geographies (Howard & Gordon 1999). To McDonalds, customer perception holds as a critical factor that affects a product’s success (John 1998). There are many companies on fast foods that have come up with potentially revolutionary products of fast foods but failing simply because other inability to build a strong and healthy perception in the customers’ minds. McDonalds, therefore, continues to hold internationally as a renowned brand bringing with it unique expectations for the customers (Howard & Gordon 1999). Customers have a positive expectation from it to be a hygienic, ambient, and a little sophisticated brand, which respects their values. Customer responses on Big Mac were a clear indication that McDonalds undoubtedly has earned a place among worldwide customers, therefore, connecting strongly with MacDonald’s brand (John 1998). McDonald’s even in its introduction of Big Mac had in mind to change the nature of the food service industry, as well as the food processing industry (John 1998). McDonald realized that there was a terrific battle among fast-food chains increasingly becoming a stronghold of the company emerging the best, therefore, had to bring in something innovative and distinct from other products (Howard & Gordon 1999). The road to success in introducing Big Mac, therefore, involved efficiency of supply, greater innovate desire and lower cost production (AP Newswire 1997). It pioneered with sophisticated and innovative food distribution as well as the packaging systems when the other traditional food processors ideally were not willing or had no ability to supply food items, which McDonalds demanded (John 1998). The success of Big Mac also hailed in the approach, which Macdonald’s adopted. The concept of the two patties of beef, special sauce, lettuce, and pickles for the jingle was by Charles Rosenberg, a Supervisor of the Dan Nichols team, Steers and Harper, Chicago (John 1998). The ingredients originally appeared as a one-word for a McDonald's ad used for college newspapers. Mark set the words afterwards to music, performing the original jingle. Charlie's advertising concepts purposely turn the ingredients ideally into a tongue twister. The developed jingle first appeared in commercials on TV titled "In a Word" by Dan with the help of the advertising agency team. The commercials' popularity remained in its TV life. Additionally, even with the jingle, the company followed up with exciting promotions based on its customers having a "Big Mac Attack" spontaneously (John 1998). There were many franchisees in the US running promotions in the original campaign, which awarded free burgers to respective customers who managed to recite the slogan. The slogan had the lyrics excellent for the marketing of the product that made it popular among many consumers (Daniel 1997). Jim took close to two years to convince McDonald's the concept that the Big Mac was a splendid idea but 40 years it is him who takes pride in having invented this powerful brand and one of the world's widely eaten fast foods getting its museum. Earlier in 1967, the McDonald's franchisee got permission from the corporate office that they could put two beef patties practically on a previous established hamburger bun (John 1998). One year later, the Big Mac he lobbied intensely and so hard to make this onto the menu of all McDonald's restaurant across the globe. Jim once said that "I felt that McDonalds needed a big sandwich," an 89-year-old Jim added recently that "But you could not do a thing unless they gave permission to try out something new (John 1998)." When Jim created the Big Mac in early1967, it cost exactly 45 cents and McDonald's had only 1,000 restaurants by then. It is what exemplifies success because today, the Big Mac is selling for $2.69 at the Jim family's 18 McDonald's restaurants ideally in Western Pennsylvania, and the globe’s largest restaurant chain holds as having more than 31,000 outlets. Along the way, the ideal Big Mac's ubiquity came to mirror that of the ideal Golden Arches itself (John 1998). It is even in use to track the value of many regions foreign currencies against the dollar in a "Big Mac Index" as published by a latest Economist magazine. This shows how famous, and high demanded the product has been in these years. The seed of success of the product, Big Mac as Macdonald’s main product was also developed in 1990 and actual operations began immediately (Daniel 1997). What made Big Mac a success was also the competitive advantage in the markets that the product ventured. About twenty years ago, the Big Mac ideally would not have meant much especially to the Indian market segment (Howard & Gordon 1999). Currently, the acronym is surely seamlessly absorbed and deeply adored in the industry lingo. McDonald's, debatably one of the first, early brands left one of the biggest imprints on the history of the Indian QSR. This is a credit to its well-established management chain in the supply, and this is what Big Mac received in its inception. According to Vikram, joint-venture partner and managing director of McDonald's India (North & East), Macdonald as a fast food company invested approximately Rs 400 even before its inception of the first restaurant in October 1996. This contributed to a good market for the product that came with a good price of having high demand for its products (John 1998). The secret for Big Market can be attributed to the entire marketing mix of McDonald that was strategically set. Giving marketing top priority was the secret behind McDonald’s Big Mac product. The primary reason why consumers choose to buy products is because of the company’s effective marketing (John 1998). The marketing process for McDonalds engaged to cover Big Mac started the mere beginning and was excellent and continued for a long duration up to date. The company began with Product Development, which ensured that the product filled the need for potential customers (John 1998). At that time, the need was more fast food options and better food for their consumption and this is what Big Mac went for by introducing Big Mac (Howard & Gordon 1999). This is what rendered many consumers wanting to buy it. The next step for the product was pricing ensuring that the business achieved profits from sales and at the same time customers perceived the set price to be less or equal to their value of the received benefits (Howard & Gordon 1999). In this case, the company ensured that the pricing was excellent, and it beat all fast foods within all its expansive markets. Effective Positioning was zealous for Big Mac allowing potential customers to practice easy interaction with restaurants and in evaluating the product (John 1998). The final step for the success of Big Mac was promotion, where the company communicated with their potential customers regarding the existence and benefits those of Big Mac using terms such as healthy and sweet and others for instance cheap and accessible. The distribution for Big Mac was a success. McDonald's for long had been working seriously on its supply chain. Considering, a global brand such as Big Mac and trying to access the Indian market, the company had to come up with better supply. Its Indian supplier partners at the time were developed in a way that made them for long stay with the company relatively from the beginning (John 1998). Bakshi explained that Big Mac’s success, was a success of McDonald's India, and it was a result of its commitment especially to sourcing almost all its new products from the country. For this reason, it developed local, Indian businesses that would supply them the best quality products of requirement for their operations in India (John 1998). McDonald's also entered a distribution partnership agreement ideally with Radha Krishna Foodland. This was a part of the Krishna Group that was engaging in food-related service operations and businesses. This was one of the best approaches that McDonalds took at the introduction of Big Mac to the region and across the globe (John 1998). Recalling the strong association, Bakshi reflects, "Better infrastructures and facilities were ultimately created along with newly advanced systems by them helping in satisfying McDonald's demands, which were high for Big Mac as a company. The company was excellent in its responsibility for procurement, storage, inventory management, quality inspection program, deliveries to the restaurants as well as data collection, reporting and recording. Therefore, it was a plus for Big Mac that was a product of choice for many consumers, otherwise, even with a good product and poor service the success of Big Mac would not have hailed across the region. Value-added services for instance lettuce shredding, re-packing of items in promotions for Big Mac continued since then (John 1998). Therefore, these centers were at the time, playing a critical role in maintaining the product’s integrity throughout the entire 'cold chain'. It was why Big Mac was trusted by many consumers across the market. "McDonald's worked aggressively in attaining the right suppliers as well as appropriate systems ensuring that 90 per cent of Big Mac yield were indigenous well before the doors could be opened to consumers (John 1998). Over the next decade, after Big Mac’s inception, the company also gained experience adopting procedures that helped in maintaining a supply of food products that was continuous irrespective of the prevailing climatic conditions. Therefore, not only could the Big Mac hail in the market but it was also a plus for the product since it would make the highest sales ever. This was an enormous success for Big Mac since it was able to succeed and become popular among many. This is an outstanding example of a Burger from McDonalds that has had an enormous success and continues to be a favorite for many across the globe (John 1998). However, not every product from McDonalds has had its share of success. In fact, even the company acknowledges that it has its vicissitudes in marketing some of its similar products. Hula burger is one of such similar products from McDonalds that failed in its preliminary stages of introduction in the market. Ray Kroc, the McDonald's founder would have been singularly brilliant as a business man and had excellent vision of making the best from the huge population of consumers (Arieh 2003). In fact, he was zealous in his works and kept out of the kitchen for all this time leaving the works to the specialized. However, after buying the rights from the brothers owning McDonalds, he started expanding into new geographic markets globally but discovered a monumental problem with the burger sales in regions with Catholic populations (Arieh 2003). He knew about the American Catholics norm of abstaining from meat every Friday, therefore, thought that the solution would be a non meat option, which he later called "The Hula Burger" The colossal tragedy of Hula burger was that it was only a favorite of Ray Kroc, but not many people liked his ideas. In this case, the innovativeness was significant because it brought in something new to the market, but all the same, it would have involved the perceptions of the customers who were to make the ultimate decisions and decide the fate of this product (Beatrice 2008). He invented Hula Burger himself with an aim of catering for Roman Catholics who could not consume meat on Fridays. Therefore, he took the meat out of the earlier introduced cheeseburger replacing a pineapple (Arieh 2003). Picture 2: Picture Showing McDonalds Hula Burger This was a terrific idea having some sense in it since he wanted everyone to have a share of McDonalds at all times but the concept simply was not welcome by many people (Arieh 2003). Simply, the Hula burger idea was a creative idea, but unpopular attempt from McDonald's in its pursuit to fill a product niche (Arieh 2003). McDonald's stores had assessed and found that they were receiving less money on Fridays compared to the rest of the week, with hamburger sales dropping on this day. When Kroc had this thought, that is when he realized that it came from the Catholics not consuming meat on Fridays whereby at the time no non-meat option was on offer from McDonald's (Arieh 2003). The Hula Burger was a large slice of pineapple, immersed and fried in butter, with some normal stuff added including salad, cheese, pickle, and a bun (Beatrice 2008). The pineapple was giving the whole thing a Hawaiian feel, therefore, came up with a tropical-sounding name and calling it a hula burger. Ray Kroc was resplendent in sales, but literally, this time, he flopped and was not a legitimate innovator (Arieh 2003). In such a pre-vegetarian era, customers were expecting real food. Unsurprisingly, many of them could not buy the idea of the hula burger (Beatrice 2008). Pineapple could have been a veritable flavoring; however, it could not actually act as a meal. One customer was quoted saying jokingly, "I love McDonalds Hula, but where our burger (Arieh 2003)?" this led to McDonalds withdrawing the Hula Burger after only the preliminary months of its introduction. It could have lived up to date, but the sales for the same are low, and production remains down, and this is, unlike McDonald’s Products (Beatrice 2008). Perusing the Internet and looking for McDonald’s commercials, you will find nippy information on some weird sandwiches, which McDonalds either served, or has been serving in other countries, which many do not know about. McDonald’s regional and foreign menu brings a decidedly diverse feel to the American used so much to the menu. However, the introduction of the Hula Burger compromised the reputation (Arieh 2003). First, looking and taking a feel of the few sandwiches that have been coming and going out of the market from the static McDonalds menu none has ever disappointed like the Hula Burger (Arieh 2003). The principal problem was that McDonalds had already established a strong base of high-quality products and such was the expectations from the consumers. Though an enormous population loved the Hula Burger, it was actually a hoax for the company that would have wanted a product hitting in all the markets, and without the high criticism, it received in its preliminary introduction to the market among McDonalds’ products in the mid-1960s. The reasons for failure of Hula burger, a product from McDonalds are supremely evident. The product did not meet the market demands, and so many pressures were behind its failure. For one, failure of any product is because marketers assess the ideal marketing climate inadequately. In this case, McDonalds was a solid company with intentions to make more on what it was earning (Beatrice 2008). Just because, the company was not making good money on Fridays, was no legitimate reason enough to hurry in developing a product that would smash the market and sell heavily (Arieh 2003). Additional to this, the segmenting of the market and targeting the Catholics as the main market was not one of the best approaches for McDonalds. Looking into the past products for McDonalds, they had a broad target for instance the Big Mac a product that was the choice of everyone in the market respective of age, sex or physical status (Arieh 2003). With specialization to a product for a target like the Catholics, the company forgot that targeting a broader market was better and would be advantageous that having a singled out group. To make matters worse, McDonalds in its introduction of Hula burger introduced to market a less-than-optimal product "configuration" (Beatrice 2008). Looking at the many products from McDonalds, for sure, they had value for the money and this why consumers afforded to purchase them making the company a leading one across many worldwide (Arieh 2003). For Hula Burger, McDonalds rushed into trial and made assumptions that this product would work out and emerge as a favorite for the majority of which this was not the case. The pricing strategy implemented for Hula Burger was also questionable (Beatrice 2008). The burger was rated at the same price with Big Mac one of the highly demanded products from McDonalds (Chaudhry 1999). It could have bee an extraordinary assumption from McDonalds that this would work same case with previous brands but an issue to do with pricing would have better been a long sort issue (Beatrice 2008). This is because customer demand would ultimately influence the price of the product regardless of the market position of the company (Arieh 2003). The advertising campaign for Hula Burger also was insufficient in generating the level of new product awareness (McGrath 2009). After the Worse to the Hula Burger failure, Ray Kroc, the innovator was wrong in his approach. He set the introduction of the burger on own view and never consulted (Beatrice 2008). He though that just by frying a piece of pineapple would result to a great and welcomed product across the market (Arieh 2003). What he was not aware was that this would be a total failure because the consumer’s perception counted a lot and this would not work (Beatrice 2008). Owners believe power and freedom of their choice, as the boss, is what means that they succeed and that they do not have to involve the opinion of others. And this is the amateurish perception, which Ray had, and it is what ultimately failed the product (Arieh 2003). He thought that since he had done everything for McDonalds for years, his innovation would be welcomed without objection, but to his surprise this almost cost the company (Beatrice 2008). The company had to do away with Hula Burger once and for all to maintain its reputation because it was almost loosing the reputation it had especially with its global customers who trusted the company for quality products (Arieh 2003). Imposing the idea to the consumers was wrong, and at a time, the customer’s perception was that they needed real food and this was not what the company was providing (Larry 2009). In fact, McDonalds was lucky enough because there was no heavy competition at the time in the fast-food market like it is today (Jane 2007), many of the customers would have shifted leading to the company loosing its touch in the vast market (Beatrice 2008). Another great failure to Hula Burger was the over-optimism regarding the marketing plan that led to a forecast, which could not be sustained ideally in the real world (Xanthius 2009). After Ray Kroc noted that the company was loosing much and not gaining much on Fridays as expected, the over optimism to make as much as possible on Fridays by targeting the Catholics almost cost the company (Bob 1998). It was clear that this was an over ambition because no customers from the catholic population had complained of not having a burger on Fridays. It was only Kroc who came up with the crazy idea (Beatrice 2008). The positioning of the burger in competing with the Filet-o-Fish sandwich from a Catholic franchisee invention was a hoax and not strategized appropriately. The Filet-o-Fish was superb and it won in the market while the Hula burger tanked (Beatrice 2008). Since then, Catholics in America relaxed their traditional custom on Friday and discovered a favorite product (Arieh 2003). Ray would have had a terrific idea to monopolize the market, but it was not possible because there was a hitch in the competitiveness of the introduced product (Malik 2009). It is still famous to abstain from meat for Catholics on Fridays during Lent, nevertheless, and McDonald's characteristically discounts the Filet-o-Fish during the time in its attempt to boost sales (Arieh 2003). Although Kroc was successful in managing to stop his Hula Burger from total failure, it could not sustain within the market (Reference for Business). It however, managed not to reach national embarrassment. However, it still remains as the company’s most severe and recent flops in its operations (Beatrice 2008). Conclusion McDonald’s has been a tremendous success in the industry of fast foods. When it comes to success in innovation of fast food, nothing has ever beaten McDonalds. The company seems to have ultimately discovered the magic touch increasing their ability to capture those taste buds of the world’s population, even in countries where beef is not eaten or never a favorite for instance, India, or in countries that prefer rice, for instance the Asian region. The success of the company has been through following a comprehensive framework where they offer monitoring and training of its franchises ensuring that they continuously adhere to the Service, Quality, Value propositions and Cleanliness offered by the company directly to its customers. Two main products from McDonalds have been a total contrast with on succeeding and the other enduring a total failure. Big Mac is a product in the form of a hamburger sold internationally in the McDonald's fast-food chain. It is one of the most successful products and a company's signature products immensely popular among the world population. McDonald realized that there was a terrific battle among fast-food chains increasingly becoming a stronghold of the company emerging the best, therefore, had to bring in something innovative and distinct from other products. The road to success in introducing Big Mac, therefore, involved efficiency of supply, greater innovate desire and lower cost production. On the other hand, Hula burger was a total contrast and classified under the biggest flops for McDonalds. Hula burger is one of such similar products from McDonalds that failed in its preliminary stages of introduction in the market. Ray Kroc, the McDonald's founder would have been hugely brilliant as a business man and had ample vision of making the best from the huge population of consumers. Even after knowing about the American Catholics norm of abstaining from meat every Friday therefore, thinking that the solution would be a non meat option, which he later called "The Hula Burger", it was the biggest tragedy of Hula burger because this was only a favorite of Ray Kroc and never worked out. References AP Newswire 1997, "McDonald's hoping new burger a Whopper stopper" The Augusta Chronicle, from, http://chronicle.augusta.com/stories/070297/fea_whopper.html. Retrieved 6 August 2010 Arieh, P 2003, Hula Burger, from, http://everything2.com/title/Hula+Burger, retrieved on 23 July 2010 Beatrice, A 2008, Nine McDonald’s Products That Actually Flopped, from, http://purpleslinky.com/humor/food/nine-mcdonalds-products-that-actually-flopped/, retrieved on 23 July 2010 Bob, G 1998, 15-cent burgers, water under the bridge, from, http://www.texnews.com/1998/opinion/gree0909.html Chaudhry, R 1999, "McPizza? 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