What are the drivers for new product-menu development at McDonalds?

1500 word report APA format for referencing

Read the following case of McDonalds and write a report that answers the following questions:

Questions:

1. What are the drivers for new product-menu development at McDonalds?

2. How new product development is reflected in McDonalds’ menu lines and what type of innovation strategy has McDonalds adopted for internationalising its business? Please give examples to justify your answer.

3. How McDonalds has designed its new product and innovation teams? How these teams generate and source ideas for new product development?

4. What activities and practices has McDonalds developed for increasing customers’ acceptance and adoption of the new menu products?

5. Customers are increasingly using social media (e.g. social networks, blogs) in their daily lives, while the latter have a great influence on customer behaviour, lifestyle and values. Suggest different ways in which McDonalds can exploit the power and functionality of social media for further increasing customer adoption of its new healthy menu items.

How McDonalds can measure the success of the new menu items?

McDonalds balanced lifestyle menus

Marianna Sigala, University of the Aegean, m.sigala@aegean.gr

Case study included in the textbook by:

David Barnes (2007). Operations Management: An International Perspective. Thomson Learning, ISBN 978-1-84480-534-1

Introduction: drivers and results of new product development

The continued long-term financial strength and profitable growth of any business heavily depends on the firm ability to understand and satisfy the changing needs, wants and lifestyles of its customers – current and potential. One of the major global trend within the food industry is that more and more people are getting concerned regarding their food and lifestyle. Healthy, low-fat food and daily exercise are some of the major issues affecting consumers’ lifestyles and their decision-making in selecting their food. In responding to these, McDonalds initiated a Balanced Active Lifestyle for encouraging and promoting its customers’ everyday solutions to living a balanced, active life. This international initiative involves the development and promotion of new menu items that are also customised to local customers’ preferences and habits.

McDonalds’ strategic commitment to this initiative is evident in the statement of Mary Dillon (Corporate Executive Vice President and Global Chief Executive Marketing Officer) who advocated that “McDonald’s cares about the wellbeing of each of its guests throughout the world, and by making balanced, active lifestyles an integral part of the brand we aim to make a difference in this area of their lives.”

However, the development of a new menu product aiming to instil but also address customers’ concerns on well-being issues is not easy. Instead, it is a complex process requiring the active involvement of a cross-functional, international team of people within McDonalds as well as of outside experts in the areas of nutrition, wellness, and activity, who share the company aims and are able to translate them into a rich variety of local initiatives. Localisation of practices is a must, because if the initiative has to be effective it then has to address the daily realities of people.

Although it is not possible to isolate the impact of McDonalds’ Balanced, Active Lifestyles efforts on its business results, performance statistics regarding stores’ sales and procurements showing that the new menu offerings have been well-received by the customers and are making a positive contribution. So, for example:

since their introduction in April 2003, McDonald’s USA has sold over 300 million Premium Salads, thereby providing 600 million servings of vegetables
Since the introduction of new, fun, youth-inspired packaging for milk jugs, McDonald’s USA’s sales of milk have doubled.
McDonald’s UK has sold more than 10 million fruit bags, and the market’s non-carbonated, no-added-sugar Fruit Shoots drinks made up 23% of all Happy Meal drink sales in 2004.
McDonald’s Germany is now buying 16,000 tons of salad a year
McDonald’s USA is the largest buyer of apples in the country according to the US Apple Association
McDonald’s Canada purchased nearly 175,000 pounds of fresh grape tomatoes for its salads in 2004.

This case study highlights the major policies, plans and strategies that have been implemented in the McDonald’s System around the world with the objective of providing leadership on the well-being issues. The balanced lifestyles framework has three pillars: menu choice, physical activity, and information (Figure 1). Together, these empower individuals to make informed choices about how to maintain the essential balance between energy intake (calories consumed as food) and energy expenditure (calories burned in physical activity).

The Balanced Lifestyles Pillars

Menu choice

McDonalds’ product range and variety has been increased by: a) adding new product items (e.g. salads, fruits, vegetable and additional sandwich options); b) developing new product – menu lines; and c) renovating existing menu options by expanding in order to include health food options. Menu developments are also customised to reflect the tastes and customs of local markets.

Examples of local McDonalds’ units that have added new product items include:

Many McDonald units in Europe: new Salads Plus menus, including meal-size salad choices, a side salad, fresh fruit bag, and other options.
McDonald’s Canada: a menu of Toasted Deli Sandwiches. Five are available on a whole wheat roll, and the sixth is served on a rye roll.
McDonald’s Hong Kong: a Fresh Choices Menu, with two salads and fruit yogurt.
In Denmark and Sweden: side order options include carrot slices.
McDonald’s Australia: a QuickStart breakfast menu, including a choice of cereals, juices, reduced fat or non-fat milk, and yogurt.
McDonald’s Taiwan: Toasted Rice Burger.
Apples are served whole or with other foods in more than 20 countries around the world.

Examples of menu expansion are the following local changes to Happy Meal choices in order to include new sandwich, side, and beverage alternatives:

McDonald’s UK has broadened Happy Meal choices to include semi-skimmed organic milk, non-carbonated no-added-sugar fruit drinks, and fruit bags.
Happy Meal options in China include a cheese and egg sandwich on a steamed bun, yogurt, and milk.
McDonald’s Brazil offers Chambinho—a cream cheese dessert that serves as a rich source of calcium. The nutritional content of our Brazilian Happy Meals has earned the seal of the Sao Paulo State Pediatric Society.
In France, Germany, and Spain, Happy Meal options include Danone® Drinkable Yogurt.
In Venezuela, customers may substitute fruit juices for soft drinks in Happy Meals.
Happy Meal beverage choices in Japan include two 100% fruit juices and a fruit-vegetable juice blend, as well as milk, carbonated beverages, and oolong tea.
Happy Meal choices in the S.A. include 100% low-fat regular and chocolate Milk Jugs, 100% pure apple juice, and Apple Dippers (sliced apples served with an optional low-fat caramel dip).

Physical Activity

It is widely accepted that physical activity is a critical component of the energy balance equation. Moreover, adoption and acceptance of McDonalds’ new menu items would not be successful if customers’ willingness to follow and be committed to a balanced diet is not motivated and instilled. To that end, McDonalds, aim to find and support ways to inspire and help people find realistic, fun ways to incorporate fitness into their everyday lives, and adopt an active balanced diet as their daily lifestyle. Similar to menu developments, McDonald physical activity initiatives are again localised in order to more effectively appeal and reflect peoples’ daily lives. Major examples include:

Global programme called Go Active! (www.goactive.com) that provides online fitness and physical activity resources including: personal fitness assessment tools, a resource library, and a wealth of advice to help moms guide their children in safe, healthful eating, fitness activities, an interactive “virtual trainer” allowing users to generate their own personalized fitness programs and a virtual community of users motivating each other by sharing success stories.
collaboration with the International Olympic Committee, outstanding athletes, and other fitness experts, e.g. Bob Greene worked with the U.S. business on a multi-dimensional program to encourage regular walking in Spring 2004, when Greene walked and biked across the U.S., leading walks and offering balanced, active lifestyles tips to thousands of individuals.
Sponsorship of global and local sports events, e.g. Olympic Games, FIFA World Cup etc.
Promoting walking as an entry point to physical fitness. In 2004, restaurants in U.S.A., Europe and Latin America offered special adult Happy Meals, including Stepometers—step counters motivating users to increase their daily walking.
Helping children “Go Active with Ronald McDonald”. Ronald McDonald has been engaged as the physical activity ambassador. Motivation is a key factor in helping people start and maintain physical activity as a regular part of their lives. The Ronald McDonald Field Program in many parts of the world has been focused on activities and performances that educate and encourage children to walk, move, dance and have fun. Programs include: the “ Ronald McDonald Sports Zone” in Canada; “Fitness Fun with Ronald McDonald” in Malaysia; the “Ronald McDonald Sport and Active Show” in the Netherlands; and the “Get Moving with Ronald McDonald” show.

Education and Information

In order to be able to make smart and appropriate lifestyle and diet choices, customers need relevant, useful, motivational education and information. To that end, McDonalds, have chosen three major distribution media for helping customers access and use information about balanced eating and physical activity: the Internet, trayliners and brochures. McDonald’s multi-faceted education campaign launched in 2005 “it’s what i eat and what i do … i’m lovin’ it” is a global initiative communicating in a simple, fun and unique way that the concept of energy balance.

Similarly to the other pillars of the initiative, certain features of the communication programs are globally the same, but locally relevant content is also being developed for each of these channels in different countries (Figure 2). For example, McDonald’s Japan has established special Web sites that allow customers to access nutrition and allergen information from their cell phones. McDonald’s Germany developed an elementary school curriculum on basic nutrition. McDonald’s Japan also offers teaching materials for schools, e.g. the Shokuiku no jikan—Food Education Time.

Communicating important messages effectively is a key priority, so beyond the three communication vehicles, McDonalds continually innovates and develops new, interactive and fun ways for delivering its messages. For example: major local websites include interactive Web-based tools, whereby customers may drag menu items onto a virtual tray or into a virtual bag and receive individualized nutrition information on the meal they have built; McDonald’s Brazil provides an in-restaurant Nutrition Guide, with a table that allows customers to calculate nutritional values for their meals. McDonald’s Canada provides nutrition information for menu items on posters at the front counter. McDonald’s Germany distributes quarterly flyers with questions and answers on food quality, nutrition, and energy balance. McDonald’s U.S.A. offers wallet cards that show nutritional values and food exchanges.

Organisational Implementation of the Balanced Active Lifestyles: Coordination and Guidance

The McDonalds’ Balanced, Active Lifestyles approach was formally articulated at the corporate level in 2003, but most efforts developed and implemented at the local level in order to reflect and adapt to local habits and preferences (act global, think local). In order to accelerate and better coordinate the local and regional efforts to respond to growing customer interest in well-being, McDonald’s provides guidance and direction from the corporate and regional levels through the following organisational entities:

A cross-functional Balanced, Active Lifestyles team at the corporate level with representation from senior management and leadership of relevant departments from around the world. This team provides strategic direction and facilitates the sharing of best practices across the McDonald’s System.
A Global Director of Nutrition who serves as a resource and key point of contact for our global geographic business units. The Director also coordinates dialogue with many of our key external stakeholders, including government agencies, health professional organizations and consumers.

It becomes evident that decisions in new product development should include and consider the expertise of a cross-functional team as well as the knowledge of external experts in different themes related to balanced, active lifestyles. Moreover, as many of the initiatives take place locally and need to reflect local needs, many local and regional cross-functional teams have also been formed with different roles and responsibilities. For example, McDonald’s Australia has partnered with The Food Group Australia (FGA) —a team of accredited practicing dietitians who advise the food industry. FGA provides the company with advice and recommendations on childhood nutrition, Happy Meal and other new menu developments, and communications with health professionals.

In Europe, a European Nutrition Task Force (ENTF) was established in July 2002 that brings together the McDonald’s Europe subject area leaders from Quality Assurance, Family Marketing, Menu Management, Communications, Government Relations, Legal and Operations. The ENTF includes a member of the McDonald’s Europe Nutritionist Steering Group and is lead by the Executive Vice President of McDonald’s Europe. The aim of the ENTF is to:

Increase internal awareness of the business opportunities for McDonald’s Europe related to balanced, active lifestyles
Provide a sounding board for internal decision-making
Act as a forum where national best practice can be shared and communicated

Moreover, a Nutrition Steering Group (NSG) established by McDonald’s Europe consisting of independent nutritionists from Germany, France and the UK that acts as a sounding board for McDonald’s Europe’s Balanced Active Lifestyles strategies. This group has devised guidelines based on European recommended daily intakes that will help to inform the future menu development efforts of McDonald’s Europe.

At a corporate level, McDonalds has established:

a global network of nutrition consultants, including nutritionist teams in place in the S., Europe, Australia and Latin America.
A 15-member Global Advisory Council on Balanced, Active Lifestyles composed of external experts in health, fitness and nutrition from around the world. The Council looks at trends related to balanced, active lifestyles and provides advice and guidance to McDonald’s based on members’ subject matter expertise. The Council has encouraged McDonald’s to consider initiatives that address:
Additional menu choices, including fruit and vegetable options.
Promoting physical activity.
Focusing on our employees.
Setting goals and working to measure the impact of our initiatives.
Supporting broader research in the areas of health and nutrition.

Questions:

What are the drivers for new product-menu development at McDonalds?
How new product development is reflected in McDonalds’ menu lines and what type of innovation strategy has McDonalds adopted for internationalising its business? Please give examples to justify your answer.
How McDonalds has designed its new product and innovation teams and why? How these teams generate and source ideas for new product development?
What activities and practices has McDonalds developed for increasing customers’ acceptance and adoption of the new menu products?
Customers are increasingly using social media (e.g. social networks, blogs) in their daily lives, while the latter have a great influence on customer behaviour, lifestyle and values. Suggest different ways in which McDonalds can exploit the power and functionality of social media for further increasing customer adoption of its new healthy menu items.
How McDonalds can measure the success of the new menu items?

Resources

www.mcdonalds.com

Figure 1. McDonalds’ Balanced, Active Lifestyles Pillars and Moto

Figure 2. McDonalds’ localised information – communication initiatives

Sample menus


 

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