Retailer Competition: McDonald’s vs Starbucks

The McDonald’s Company

Founded by Maurice and Richard McDonald in 1940, McDonald’s is one of the world’s most successful fast-food joints. Initially, the business sold hamburgers and later became a franchise offering different foods and beverages, including tea and coffee. In 1955, Ray Kroc invested in the company and later purchased it from the McDonald’s brothers. McDonald’s headquarters shifted to Chicago from Oak Brook, Illinois, to improve service delivery to its consumers and potential customers.

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Ownership

Since its incorporation, McDonald’s has influenced the eating habits of many Americans and others from different parts of the world. Some restaurants are owned and operated by McDonald’s, while the rest are jointly owned or franchised (Love, 2008). By 2015, the company was serving about 69 million customers a day at over 36,000 restaurants spread throughout 100 countries (“McDonald’s: 60 years,” 2015). Thus, it is evident that McDonald’s has played a crucial role in changing people’s eating habits and improving the fast food industry.

Core Offerings of Starbucks

The journey to success for McDonald’s has not been easy. Ray Kroc, the businessperson and investor wanted McDonald’s brothers to expand operations countrywide, but they were hesitant (Mieth, 2007). However, Kroc offered to help develop the restaurant in Chicago and started setting up outlets all over the country except for Arizona and California. The main core offering of McDonald’s is generosity and quality services, which welcome customers to the stores. The restaurant is famous for fast foods, including French fries, desserts, beverages, and chicken products.  The first McDonald’s restaurant operated by Kroc was opened in 1955 in Des Plaines (Mieth, 2007). However, Kroc faced some challenges, including building design incorporating the northern climate (Gibert, 2009). The basement required a furnace and enough ventilation for exhaust fans to suck in cold air in summer and warm air during winter. Despite all the challenges, McDonald’s remains one of the best food and beverage companies in the world.

Variety and Assortment

In terms of revenue, McDonald’s is among the world leaders in the fast food industry. As of 2016, the franchise had about 36,900 outlets (Desatnick, 2007). Additionally, the café is regarded as the World’s second-largest employer after Walmart (McDonald, Karamba, Wengle, Gibson, & Mcrindle, 2006). Even though McDonald’s is well known for hamburgers, it also offers desserts, beverages, and chicken products. The restaurants have included healthy foods such as fruits and salads in response to consumer preference changes (Gilbert, 2009). Thus, the diversification of products has enhanced confidence among customers.

Price Level

McDonald’s restaurants serve local foods and drinks at reasonable prices in over 100 countries of its operation. The company’s segments include the United States, foundational, high growth, and international lead markets (Gilbert, 2009). The company outlets are managed by conventional franchises (Karamshuk, Noulas, Scellato, Nicosia, & Mascolo, 2007). In cases where the land and building are owned by McDonald’s, the restaurant pays for other services, including seating, signage, and décor.

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Channel Format

The segmentation has various focuses, depending on the restaurant’s location. For instance, the U.S. segment is dedicated to providing a platform for genuine ingredients that allows consumers to order their preferred combination. France, Australia, Germany, Canada, and the UK are some of the international lead markets in which the company operates. Countries such as China, Russia, Korea, Italy, and Spain are also in the high-growth market segment. High-growing markets mostly focus on ensuring consumer excitement through value, digital experience, and promotions (Rodrigez, 2007). The company has included deliveries and drive-thru under the foundational markets and corporate segment to expand the customer base.

Level of Customer Service

The globally acknowledged brand helped the company to enter new markets and build specific engaging culture. The expansion of McDonald’s restaurants has created a significant impact globally through opportunities for people in all outlets (Rodriguez, 2015). The continued cooperation has created pathways within communities where the restaurants are located and where the raw materials are obtained. The organization has played a key role in bringing people together and providing jobs to individuals, hence improving their living conditions (Gilbert, 2009). McDonald’s has continued to enhance its service delivery to satisfy the customers’ needs. Hence, the establishment’s success is directly related to the loyal customers who always return to purchase food and beverages (Rodriguez, 2005). Through this initiative, the company has created notable profits and social interactions.

Given that the corporation mostly depends on agricultural products, it is greatly concerned with environmental conservation. The store designs ensure that environmental goals are met by reducing pollution while providing productivity. Moreover, the organization uses reusable packaging for its products to minimize waste and guarantee a clean environment. In addition, the company uses a lot of water, especially in preparing coffee, tea, and other products (Love, 2008). Therefore, recycling and re-use of water have guaranteed environmental safety.

Similarities and Differences

Both Starbucks and McDonald’s have invested heavily in positioning their brands in different cultures worldwide. McDonald’s has over 36,000 outlets globally, while Starbucks has over 27,000 outlets worldwide (“McDonald’s: 60 years,” 2015; “Number of Starbucks stores,” 2018). Both organizations have become household names in the fast food and beverage industries. McDonald’s has adopted ideas in other countries while incorporating diverse designs to accommodate the needs of every location (Karamshuk et al., 2013). On the other hand, Starbucks has maintained a similar look in most of its stores.

In regard to service, both companies have maintained a similar approach. The organizations have invested heavily in making their employees proud. Both firms understand that happy and proud employees lead to customer satisfaction. A motivated employee will likely provide quality services and fulfill customers’ needs (Karamshuk, 2013). If the employees feel they are part of the team, they will provide better consumer services, attracting more clients.

McDonald’s and Starbucks have employed technology in their companies. They both use the internet for marketing and selling their products. McDonald’s goal was to ensure that it sustains its main business through fair prices. Initially, Starbucks faced some challenges with internet marketing when trying to redefine its business but it recovered (Bussing-Burks, 2009). The use of the internet has played a vital role in improving activities and strengthening the brand image of both companies.

Mcdonald’s and Starbucks have been successful in their undertakings. However, Starbucks is opening new outlets, just as McDonald’s initially did. McDonald’s discovered that quality and service were the keys to success and profitability rather than volume. On the other hand, Starbucks company is opening new stores risking overexposure due to the high growth rate. The other striking difference is that Starbucks is not franchised since all the restaurants are company-owned, ensuring that the organization enjoys all profits.

Both restaurant chains have succeeded locally and overseas. They have operations in different countries on six continents and focus on the quality of products. Starbucks is known for its quality coffee, while McDonald’s is popular for meals and beverages (Love, 2008). The main shared theme is customer satisfaction. Consequently, focusing on customers’ needs and satisfaction has increased profit margins and enhanced loyalty.

Competitive Advantage

McDonald’s competitive advantage is based on its diverse outlets. The firm could continue selling its products at affordable prices. The company has a wide range of customers, given that it serves over 69 million people daily (“McDonald’s: 60 years,” 2015). In addition, McDonald’s is ranked as one of the top brands in the world, listed at 50 of 500 brands worldwide. Moreover, the company is rated in the top 15 powerful brands, giving it a more competitive advantage than Starbucks (Karamshuk, 2013). Capitalizing on the strong leadership in the food and beverage industry, McDonald’s has an advantage over its competitors. While Starbucks risks overexposure by opening new stores, which may lead to losing its standards, McDonald’s could take advantage of its diversity and focus on the quality of its products (McDonald et al., 2006). McDonald’s has a comprehensive menu for customers to choose from, which ultimately gives it an advantage over Starbucks, which would translate to a high number of customers.

Conclusion

McDonald’s is one of the leading beverage and fast-food operators in the world. The company has a wide range of varieties to choose from, allowing it to offer its consumers the best products globally. Moreover, the business is concerned with making profits and is involved in environmental conservation initiatives since it reuses water and recycles materials for packaging. Additionally, McDonald’s has created opportunities for people from different parts of the world, thus improving its brand image on the global platform.

 

References

Bussing-Burks, M. (2009). Starbucks. Santa Barbara, Calif: Greenwood Press.

Desatnick, R. L. (2007). Managing to keep the customer: How to achieve and maintain superior customer service throughout the organization. San Francisco, CA: Jossey-Bass.

Gilbert, S. (2009). The story of McDonald’s. Mankato, MN: Creative Education.

Karamshuk, D., Noulas, A., Scellato, S., Nicosia, V., & Mascolo, C. (2013). Geo-spotting: mining online location-based services for optimal retail store placement. In Proceedings of the 19th ACM SIGKDD international conference on Knowledge discovery and data mining, 15(1), 793-801.

Love, J. F. (2008). Mcdonald’s: Behind the Arches. Paradise: CA. Paw Prints.

McDonald, C. M., Karamlou, T., Wengle, J. G., Gibson, J., & McCrindle, B. W. (2006). Nutrition and exercise environment available to outpatients, visitors, and staff in children’s hospitals in Canada and the United States. Archives of Pediatrics & Adolescent Medicine, 160(9), 900-905.

McDonald’s: 60 years, billions served. (2015). Chicago Tribune. Retrieved from https://www.chicagotribune.com/business/chi-mcdonalds-60-years-20150415-story.html.

Mieth, H. (2007). The history of McDonald’s. München: GRIN Verlag.

Number of Starbucks stores worldwide from 2003 to 2017. (2018). Statista. Retrieved from https://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/

Rodriguez, S.M. (2015). Company profile McDonald’s Corporation. MarketLine. Retrieved from http://www.academia.edu/22022361/COMPANY_PROFILE_McDonalds_Corporation

 

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