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McDonalds and the Hotel Industry Case Study Analysis

Essay by review  •  June 29, 2011  •  Research Paper  •  1,063 Words (5 Pages)  •  2,604 Views

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McDonald’s is one of the world’s strongest and most recognizable brands for its “world’s best quick service restaurant service experience” (Vandenbosch and Mark). This case study states that McDonalds plans to extend its brand into the hotel industry by opening a hotel in Illinois. The authors look at the hotel venture’s positioning options and the McDonald’s brand extension into a different product class. In order for McDonalds to successfully extend their brand into the hotel industry, they must manage their growth wisely, rely on the strength of their corporate brand, and consider what their customers really think their brand is. In the end, they must make sure that the extension of their brand brings meaningful perceived value to the consumers they target.

Over the last decade, brand extension has become one of the hottest subjects in brand management. Extending a brand into a new category to capitalize on brand recognition and consumers’ trust can be a good choice for a few reasons. It can help lower costs, and add profits relatively fast while limiting financial risks because several products will promote each other under the same brand name. In many industries, launching a new brand is costly and so it seems logical that any company with such a huge brand name in the marketplace would decide to extend their brand in an economical way to quickly gain credibility in the new chosen marketplace. For the same reasons, it takes less time to educate the market with the extended services of an existing brand than to launch a new name from scratch. From a managerial perspective, brand extension is a relatively fast way to add more to the bottom line in a relatively short period of time.

McDonald’s is the leading global Fast Food service retailer with more than 30,000 restaurants serving millions of people in more than 100 countries. Very naturally, McDonald’s is the world's most famous, well-known, recognized brand in fast food restaurant category. They revolutionised the concept of the fast food centre of the informal eating-place across the globe. McDonalds must rely on the strength of their corporate brand, however, to correctly assess how far their brand can be stretched, they must rely on a combination of market research (to test consumer's acceptance of the new value offer); experience and good common sense. In particular, bringing meaningful value to customers seems to be the key in making it work. McDonalds tradition of offering world class customer service and an unbeatable price-value proposition should remain the concept for the hotel. I believe that this will help because consumers are more likely to buy from trusted expert brands than from names that claim to be good in different product categories. Furthermore, if the value offer of the hotel is truly valuable and genuinely meaningful to their customers, I believe that the brand extension opportunities are likely to be unlimited.

Now that we have acknowledged that McDonalds brand is not only superior, but also that consumers trust their brand, in order for them to extent into the hotel industry, they must analyze the market to find out what brand their customers really think they are. It could be detrimental to redefine their brand positioning in a way that may sound logical to their management but is not obvious enough to their consumers. McDonalds already suffered from a very fine example of poor brand extension when they decided to get into the pizza business. They failed in the pizza category mainly because McPizza offered products that were not differentiated enough from existing value suggestions already in the market. It is important to make sure that they provide the right product that will sell in the industry.

McDonalds should build on their unmatchable expertise in serving customers and making them feel at home. The segment that they should compete in is in the range of upscale, four-star hotels, targeted at business travelers during

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