McDonald’s & the Hotel Industry case study

Case Study

1. McDonald’s & the Hotel Industry
By
Asif Ali Rahman
Is the world's leading food service retailer with more than 30,000 restaurants in 119
countries serving 47 million customers each day.
Is one of the world's most well-known and valuable brands and holds a leading
share in the globally branded quick service restaurant segment of the informal
eating-out market in virtually every country in which we do business.
Serves the world some of its favorite foods -World Famous French Fries, Big Mac,
Quarter Pounder, Chicken McNuggets and Egg McMuffin.

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Synopsis
•McDonald's intends to extend its
"world's best quick service restaurant
experience" brand into the hotel (or
lodging) industry by launching a hotel
in Illinois. This case study allows you
to discuss the concept of brand
extensions to evaluate McDonald's
brand meaning and to consider how the
brand can extend into a hotel offering

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Introduction
•With more than 30,000 restaurants in 121 countries,
McDonald's Corporation, headquartered in Oakbrook,
Illinois, had grown to become one of the most
recognized brands in the world. Interbrand, in
conjunction with BusinessWeek, had rated the
McDonald's brand name ninth most valuable in the
world, estimating its brand value at $25.3 billion. In
October 2002, one industry observer believed that there
was an opportunity for McDonald's to extend its powerful
brand into the hotel industry in the United States. He felt
that a natural starting place for a potential entry was the
state of Illinois. In addition to having the headquarters of
McDonald's within its state, Illinois was the leader in
state tourism spending, with a budget of US$61.1 million
in 2001

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Learning Objectives
•To learn the concept of brand extensions;
•To evaluate current brand meaning and to
explore how brands can extend into
different product classes; and
•To propose a suitable McDonald's offering
in the hotel industry.

5. What do we mean by “Brand
Extension”?
List some examples of “Brand
Extension”

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Brand Extensions
•With its awareness, perceived quality,
associations and customer loyalty, a brand
is usually the most powerful asset a firm
owns
•There are many ways to leverage a
company's brand, including line extensions
in an existing product class, stretching the
brand vertically in an existing product
class, brand extensions into a different
product class and co-branding

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Mc Donald’s Brand
Extension
•One rationale for McDonald's hotel venture, a brand
extension into a different product class, is to exploit the
assets of the firm by applying them to new business
areas. Another is to reduce the cost and risk of entering
such areas
•This extension can be aided by McDonald's current
brand associations, perceived quality and awareness or
presence
•An important decision for McDonald's to determine is
whether the hotel venture is compatible with McDonald's
brand identity. In selecting the lodging industry, senior
management needs to assess the company's ability to
make the product, the intensity of competition and price
pressures, and market trends

8. What does the McDonald's brand
(Vision, Core Identity, Extended
Identity) mean to consumers?
(Children, Adults, Families &
Travelers)

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Vision
•McDonald's vision is to be the world's best
quick service restaurant experience. Being
the best means providing outstanding
quality, service, cleanliness and value, so
that we make every customer in every
restaurant smile

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Core Identity
•Value offering: McDonald's provides value at
reasonable cost, as defined by the product,
special offers and the buying experience
•Food quality: Consistently hot, good-tasting at
any McDonald's in the world
•Service: Fast, accurate, friendly and hassle-free
•Cleanliness: The operations are always spotless
on both sides of the counter
•User: Families and kids are a focus, but serves a
wide clientele

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Extended Identity
•Convenience: McDonald's is the most
convenient quick-service restaurant. It is located
close to where people live, work and gather;
features efficient, time-saving service and serves
easyto-eat food
•Product scope: Fast food, hamburgers,
children's entertainment
•Brand personality: Family-oriented, all-
American, genuine, wholesome, cheerful, fun
•Relationship: The family/fun associations are
inclusive, and McDonald's is part of the good
times.

12. What is the Value Proposition of
McDonald's?

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Value Proposition
•Functional benefits: Good-tasting hamburgers,
fries and drinks that provide value; extras such
as playgrounds, prizes, premiums and games
•Emotional benefits: Kids fun via excitement of
birthday parties, relationship with Ronald
McDonald and other characters, and feeling of
special family times; adults warmth via link to
family events and experiences reinforced by the
McDonald's emotional advertising

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Two possible examples of
McDonald’s Hotel Cocepts

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Conclusion
•With its many retail concepts in testing,
McDonald's seems to be attempting to
move beyond brand extension to creating
a "range brand": an identity that works
across many product classes. The
objective is to create a strong brand asset
that will be the basis of a business with a
real competitive advantage