PGBM15 Marketing Plan: McCafe Brand Extension in China

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PGBM15 Assessment
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Table of Contents
Introduction......................................................................................................................................3
Part 1................................................................................................................................................4
Part 2................................................................................................................................................8
Part 3..............................................................................................................................................12
Conclusion.....................................................................................................................................19
Reference list.................................................................................................................................20
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Introduction
The assignment investigates the marketing plan that can be used by the organisation McDonald’s
with respect to its brand extension, McCafe in China. Marketing philosophies have been
explained along with the evaluation of strategy that can be used by McCafe so that valuable
products and services can be provided to the customers. The dynamics as well as marketing
trends in China has been evaluated along with the identification of opportunities that McCafe can
have. Proper recommendations have been provided so that McCafe can debvvelop itself as a
sustainable brand in the Chinese market.
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Part 1
Marketing concept or philosophies are used in the business, which is generally guided as per the
marketing efforts. According to Homburg et al. (2017), marketing concept or philosophy is
considered as science and art of creating, exploring and delivering activities, which satisfies the
need of target customers in the market. There are five marketing management philosophies
including production concept, product concept, marketing concept, selling concept and social
marketing concept (Baker, 2016). The concept is based to prefer a product with inexpensive and
widely available to create the successful chain with its demand. Increase in production can make
the changes and economical advantages of scale, which is more attractive towards the customers.
The philosophy refers to the demand and supply management, which is preferable for products
and purchasing decision (Lancaster and Massingham, 2017). Selling concept focuses on the sale
of the product and every possible sell regardless of the quality and the demand of customers.
Selling and marketing concept are based to generate profits and better relationship with marketer
and customers for long run.
As being a chief marketing manager of McDonald's Corporation, it is important to create market
opportunity for launching the new brand, which has been identified as chocolate coffee for the
brand extension McCafe. The brand extension of McDonald's is successful and popular among
the customers. The product is chosen to launch in China by McCafe. As McDonald's have a good
and successful reputation with influential fast food chain in the UK, they are willing to expand
the brand extension strategies in the new countries (Mcdonalds.com, 2019). McDonald's have
more than 1270 outlets other fast food franchises in the UK. In order to launch the new product,
the marketing team of McDonald's Corporation needs to develop the key elements of marketing
management and philosophies through brand extension. It is needed to improve the market
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development and planning processes in the selected country that is China. McCafe has key
considerations and views regarding their launch of new products in China. It is important to
research and analyse the fast food market of China before launching the product
(Mcdonalds.com, 2019). McDonald’s already have established market and client base that helps
the company to increase the economic growth.
McDonald's have popularity with the customer demand and economic profit to grab the fast food
industry in the UK and international aspect. It has a market share in the UK with 1249 branches.
In 2001, the expansion went down as its faces customer backlash (Telegraph.co.uk, 2019). In
order to focus on brand extension strategies, it is important to evaluate the market opportunities
in the new country for launching new item. In the current business scenario, McDonald's has
more than 36000 outlets across the world (Mcdonalds.com, 2019). Marketing is considered as an
important process that allows a corporate entity for creating a better opportunity and image in the
marketplace. McDonald's marketing process includes several key elements while expanding in
China. It is needed to include the corporate strategy and several market concepts in the context
of market penetration in foreign country.
Market analysis is important to focus on the market plan while conducting marketing research
through social media marketing (Pride and Ferrell, 2016). The company focuses towards
marketing research and analysis of the target market by implementing the extension strategies
that McCafe uses to follow. Identification of target market is important so that McDonald's easily
encounters to identify the need of segmentation based on the age, income and other factors in the
market. Designing the marketing objectives is important for the business entity. As a brand
extension of McDonald's, McCafe focuses to follow the guidelines and directions for success
while launching chocolate coffee in China. As per the view of Waheed et al. (2017), it is
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important for corporate companies to develop the various philosophies and concepts of
marketing including product-oriented concept, sales and production oriented concepts to focus
on designing the products or services according to service demands. It is important for
McDonalds to develop the marketing orientation concept to attain higher sales and profit. It is
focused that leading fast food retailer created image with the quality and low prices. This is
targeted that measuring benefit and cost of marketing orientation are forecasted to retain
satisfaction of the customer’s needs and requirements.
However, this concept has a disadvantage while developing marketing research and market
orientation strategy that includes the market demands (Lancaster and Massingham, 2017). It
depends on current market growth and profits that satisfied a value added quality and cost
analysis so that the brand extension strategy can be followed in the new country. Market
orientation and Holistic marketing approaches are taken into consideration that McCafe can
include the concept and philosophies in order to adopt the brand extension strategy for the new
product (Mcdonalds.com, 2019). In China, McCafe needs to plan and evaluate the strength of the
organisational strategy while delivering the value for current brand and customers. Brand
extension for marketing orientation statutory has strength for developing the market profits as
per the customers need and market analysis with retaining profit and sales (Homburg et al.
2017). In addition, there is benefit regarding customer satisfaction and fulfilling their needs and
demands. McDonald’s delivers value added quality and pricing strategy in order to satisfy the
customers. McDonald's has $145 billion value as being world’s leading fast food chain
(Thetimes.co.uk, 2019). With popularity of McCafe, coffee and burgers have high rate of growth
with 51st quarter of growth in the UK and Ireland (Thetimes.co.uk, 2019).
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McDonald’s strategies deliver the value in order to arrange customer information and brand
strengths, which are successful and able to follow in China's fast food industry. As per
organisational values, McDonalds use market orientation strategy that is effective to follow in
launching the new item into China. In order to deliver value for the brands and customers,
McCafe uses the adoption strategies and marketing philosophies that includes market orientation
and marketing approaches in order to launch their new product, chocolate coffee in China
(Mcdonalds.com, 2019).
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Part 2
In order to setup McCafe in China it is necessary to find out the external factors that might affect
its establishment in the country. The external factors that affect the establishment of an
organisation in a country are the political factors, economic factors, social factors, technological
factors, environmental factors and legal factors. The PESTEL analysis of McCafe with respect to
the country China has been listed below:
 Political factors: In case of China, risk pertaining to politics is low as compared to other
markets that are emerging. However, in case of foreign organisations that wants to establish
here transparency related to regulations and legislations are the major risks that they face. In
China, lack of transparency is a huge issue since however stable its political party is,
transparency is less with respect to its rules as well as other aspects that are required for
doing business that is a big challenge that the foreign investors face (Seattletimes.com,
2018). The regulations are more likely to change quickly in China that makes its system
inconsistent. However, with respect to the market standards that are emerging China is stable
as its business environment is stable. The chances of violence in the political stability,
interruption in businesses operating in it, riots or strikes is very low therefore with respect to
the expansion of McDonalds in the country can prove to be favourable. McCafe can operate
smoothly in the country but recession might affect its operation. However, the foreign
organisations do not get much affected therefore with respect to the organisation McCafe
china can create new opportunities to increase the revenue that it generates
(Businessinsurance.com, 2019). However, it might get affected due to internet disruptions as
per the latest campaign of Beijing in order to constrict censorship with respect to what people
see online however, McCafe might not get affected from it.
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 Economic factors: At a global level, China ranks second in terms of its economy. The
country has the largest reserve of exchange as compared to any other country in the world.
The recession that took place in 2009 affected the economy of the country as well as its
growth yet China was still able to maintain its position and emerged as the country that has
high-speed growing GDP (En.portal.santandertrade.com, 2019). In the year 2018, the
economic growth of china was about 6.6%. The new sectors that have emerged like financial
services available online and e-commerce are growing at a very high speed thus decreasing
the growth of sectors that are export-oriented. McCafe will be highly benefitted with respect
to its establishment in the People’s Republic of China is it can earn huge revenues in the
country. The growing GDP of the country indicates that its people have the ability to spend
thus the organisation will have good sales in the country.
 Social factors: China ranks first in terms of population at a global level. Therefore, in case of
establishment of McCafe in the country will not create much issue in terms of getting labours
or workforce. Unemployment is one of the major social issues that China is dealing with that
will be aided up to a little extent with the establishment of McCafe in the country. The
country is growing at a very high rate that might prove to be very beneficial for the country
in terms of revenue generation. Moreover, the organisation will get a large number of
audience or customers in the country as it has a large population. It is required that before
establishing McCafe in the country the demands of the people of China are known in terms
of beverages so that they can be offered services and products accordingly (Avpn.asia, 2019).
Along with chocolate coffee, that the organisation is going to provide the organisation needs
to offer products as per the desires of people of China by incorporating innovation or
incorporating few ingredients of Chinese cuisines in other food products that it will provide.
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This will aid the organisation to attract more customers. However, the number of internet
users in China is more than 420 million thus McCafe will be able to reach them easily
through internet.
 Technological factors: China is one of the leading countries in the world in terms of
technological innovation. The country has transformed itself as a factory of technology in the
world. The country does not only adopt the latest technologies in the country but the country
is also liable for introducing or developing new technologies that is beneficial for other
countries in the world as well (Telegraph.co.uk, 2018). The country has virtual broadcasters
of news that works on artificial intelligence and the country has more than 420 million users
of internet. Moreover, the people of the country are always eager to adopt the latest
developments in technology. The government of the country China has taken the initiative of
“Made in China 2025” such that the technological field of the country can be made more
advanced. Therefore, McCafe has a big opportunity with respect to its establishment in China
as it can adopt the latest technological developments in order to enhance the quality of the
services and the products it will offer further (Thediplomat.com, 2019). It is required that
McCafe uses internet and other technologies in order to increase its reach to the customers
such that it sales can be leveraged.
 Environmental factors: The country the People’s Republic of China is growing at a very fast
rate however as every coin has two sides the country is struggling due to increase in the level
of pollution. The government of the country is taking several measures in order to deal with
the changes in its climate that the organisations in the country must also take into account in
order to make sure that the environment is not affected due to its process of production or
operation (China-briefing.com, 2018). The government of the country China has started to
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penalise the organisations in case they do not follow the measures or the regulations in order
to decrease the level of pollution in the country. For McCafe it is required that it takes apt
measures such that it can minimise any kind of pollution in the country, this will make sure
that the organisation operates properly without any hassle.
 Legal factors: The legislations that govern the systems of the country China are the foreign
trade laws, patent, trademarks and land ownership. However, the government of the country
do not charge tax that is unnecessary thereby aiding the organisations to have low cost of
manufacturing (Chinaunique.com, 2019). This in turn assists the organisations to increase
their margin of profit. Therefore, McCafe will be benefitted from its establishment in the
country, as it will get an opportunity to increase its profit margin. However, in order to enter
the market it is required that McCafe finds out the necessary information regarding the most
efficient method to enter the market of China, the structure of representation that is permitted
by the local law, the budget and the resources that are required. The potential liabilities in the
market have to be figured out as well. The organisation McCafe needs to fulfil the
requirements of licensing, certification as well as registration of China. The organisation
needs to operate by adhering to the rules of foreign exchange, labour law and import duties
(Linkedin.com, 2015).
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Part 3
Opportunities
The opportunities that the organisation McCafe has with respect to its establishment in the
country the People’s Republic of China is that the country is politically stable without much
intervention from the its government. Therefore, the organisation can be established here as it
can operate here independently. Moreover, the GDP of the country is continuously growing at a
very fast rate that presents a big opportunity for the organisation to increase the revenue that it
generates by increasing its sales. The country has a huge population that will ensure that the
organisation will have good sales in China. Further, since the country is technologically
advanced the organisation will be able to increase its profit by reducing its cost of production and
by reaching a huge number of people by using digital platforms. Since, the legal system of the
country People’s Republic of China does not impose unnecessary a tax on organisations,
McCafe’s cost of operation will be less that will make sure that it maximises its profit margin.
Thus, McDonald’s will be benefitted from its brand extension in China.
The theory that can be applied with respect to the extension of McDonald’s in the People’s
Republic of China is marketing mix that contains the 7Ps that are required to be followed in
order to meet the objectives that have been set with respect to the target market.
 Product: The brand extension of McDonald’s, McCafe will offer chocolate coffee to the
people in China along with other food items that will have the touch of Chinese cuisines.
Along with it, information regarding the taste of people with respect to kind of food they like
would be gathered so that they are offered services and food products accordingly (Wirtz and
Lovelock, 2016).
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