McDonalds Case

Case Background Timeframe (Late 2000s) Coffee = a consumer driving product Tried to emulate the Starbucks premium coffee model Aggressive expansion through all US restaurants Used very aggressive advertising and sales promotion tactics McDonalds aggressive actions drove Starbucks and Dunkin’ Donuts to pursue aggressive promotional answers McDonalds was able to promote complementary products will a full breakfast line compared to Starbucks and Dunkin’ Donuts more limited line

Case Channel Implications The significant concern in this case is from the franchise perspective Franchises were not given the choice to accept or not accept Key concern for them is will the profits justify the expenses and significant changes Grapevine numbers: Coffee products expected to add $125,000 in additional revenue Premium coffee sales are expected to account for 6% of store sales up from 2% Equipment costs are $25,000 (40% of which franchises would pay) Stores would need upgrading at costs from $75,000 - $125,000 (40% paid by franchises) Expects more off-peak customers Some worry of milk shake and soft drink cannibalization 70% of premium coffee consumers are drive thru customers which may limit complementary product sales

McDonald’s Case Discussion 1.What is the main issue (or issues) to be addressed in the McDonalds case? 2.What type of external marketing environmental changes had occurred to impact consumer’s view of McDonalds? 3.Is there anything specifically about McDonalds at this time that would lead to a need for a change here? 4.What is the impact of this change on McDonald’s current product strategy? 5.What is the impact of this change on McDonald’s current pricing strategy? 6.What additional burdens does the substantial amount of franchise operations put on this particular situation? 7.What are the potential alternatives that can be taken in this case? 8.What do you recommend should be done in this case and why?