McDonald's is the world's largest chain of fast food restaurants serving around 60 million meals daily worldwide. Its leading product, the Big Mac, is used as a measure of the purchasing power parity (PPP) of a country's currency.
McDonalds's brand mission is to "be our customers' favourite place and way to eat." Its global strategy is based on the five basics of an exceptional customer experience - People, Place, Product, Price and Promotion.
However, it does not mean that McDonald's does not segment its market. For example, for hardworking workers leading a hectic lifestyle, there is the convenience of a drive through restaurant; value or combo meals are popular for their size and price with a range of customers; the Happy Meal focuses on children and consists of small french fries, chicken nuggets and a small toy; children are attracted by the Play Zone; McDonald's food portfolio has expanded from just burgers to breakfast and other items, responding to customer feedback, etc.
In some markets, market segmentation is used to charge higher prices for similar products in outlets in less trafficked locations; in some countries, the food served caters to local tastes such as in India, Malaysia, China, France and Mexico.
a. What is the business and economic justification for market segmentation?
b. How successful has McDonald's been in practicing its pricing strategy?
c. McDonald's is a price leader in the fast food business. What does this mean and what is it based upon?
d. Do you think that the Big Mac is a good measure of a country's PPP?