McDonald’s strategy transformation in the Harada era
(1) Success of marketing strategy
2007 was a good year for business operations
< p> 2007 should be considered the most successful year for McDonald’s Japan during the Harada era. The investment in new products such as Big Mac and Waffle Burger has led to a rapid increase in revenue and profits. Not only did the total revenue of existing stores increase by 10.2% compared with the previous year, but the operating profit margin also increased to 4.2%. % (only 2.1% the year before).Moreover, the introduction of zoning pricing and other systems has increased profits by 5 billion yen. High unit price products have caused a sensation as soon as they were launched. The future of McDonald’s Japan can only be described as bright and brilliant. . In fact, many of McDonald's Japan's business indicators have set new records this year.
On January 14, the single-day total sales record for all stores was set (2.347 billion yen).
August The monthly revenue and number of customers have set a new record in the past (46.394 billion yen).
On September 9, the single-day total sales record for all stores was once again set (2.382 billion yen).
In December, the Happy Sharing Meal set a new record for the first time. Sales exceeded 100 million copies in one year.
In the three years from 2008 to 2010, Harada further implemented two strategies to attract customers.
Strategy 1 to increase customer numbers: Launch top-quality roasted coffee
The first strategy was to start selling top-quality roasted coffee in February 2008. This move has put the fast-food industry, coffee and convenience supermarkets, which were originally divided in terms of food, into a fight for the customers who come to buy coffee.
Top-quality roasted coffee is brewed with high-grade Arabica coffee beans, but a cup only costs 100 yen (small cup). Of course, it has won unanimous praise from consumers. It is praised as an affordable "and delicious coffee". In 2008, it even won the honor of "the number one coffee that customers want to buy" in the Oricon list.
There are two reasons why McDonald's top roasted coffee is so successful, that is, it is not only of high quality, but also very affordable. Judging from the selling prices of coffee in various stores in 2010, DOUTOR's ground coffee (small cup) sold for 200 yen, VELOCE's sold for 170 yen, and Starbucks's Drip coffee (small cup) costs 290 yen, and TULLY'S Today's Coffee (small cup) costs 290 yen. In contrast, the price of McDonald's top roasted coffee is only one-half to one-third of that in these stores.
Thanks to the introduction of top-quality roasted coffee, the number of customers visiting McDonald's stores increased significantly between 2008 and 2009. In addition, according to data released by McDonald's Japan, top-quality roasted coffee achieved sales of 260 million cups in 2008. The market generally believes that the increase in the number of customers visiting McDonald's stores is due to the launch of Haoyuan Hundred Yuan Coffee.
Since the launch of top-quality roasted coffee, the number of McDonald’s customers has not only increased from 863 million in 2007 to 903 million in 2008 people; in 2009, the number climbed to 924 million (please refer to Chart 4-6).
Strategy 2 to increase the number of customers: Issue electronic coupons
Another marketing strategy that has made an outstanding contribution to the increase in the number of customers visiting the store is the marketing strategy of issuing electronic coupons. In 2007, in order to coordinate digital marketing, McDonald's Japan jointly invested with NTT DOO Company to establish an organization called "THE JV".
The reason why the proportion of electronic coupons in all coupons (including paper coupons) rose to 85% in October 2010, and it was even higher than The fact that other companies were the first to successfully introduce the concept of digital marketing must be related to Harada’s background and connections as a manager in technology companies such as Yokogawa Electric, Schlumberger and Apple Computer.
In McDonald's stores, customers can often be seen using electronic coupons on ordinary or smart phones to purchase goods. The number of customers visiting the store exceeded 938 million in 2010.
(2) Pressure from the U.S. head office: Hoffman went to Japan as vice president
Ever since Harada became CEO in 2004, it may have been doomed McDonald's Japan's business policy is about to face a 180-degree change in fate. However, this matter was truly finalized in 2007, when the United States sent a person to be the person in charge of Japan's affairs.
This man’s name is David. Dave Hoffmann. In 2007, he went to Tokyo as a senior director of store strategy and marketing planning, and was given the task of adjusting the business strategy and expanding the franchise chain business.
When Hoffman was a student, he worked as a work-study student in a McDonald's store in the United States.
After graduating from college in 1990, he worked for Arthur Andersen Consulting for a while and then joined McDonald's Corporation in the United States in 1996.
In 2005, he served as the senior director of the North American region and global strategy department. He holds a master's degree in business administration and has worked in an accounting consulting company. He is also known as a "fast track" and can be said to be a typical elite who has a smooth career (Note 1).
After taking office in Japan, Hoffman immediately became the director responsible for the operation of the chain franchise system. Moreover, since 2007, in addition to selling all directly operated stores, it has also actively expanded the scale of franchise stores. Most people would think that McDonald's Japan's strategic transformation came from Harada's decision. However, in fact, I speculate that mid- to long-term store strategies (such as resale of directly operated stores and expansion of franchises, etc.) have a lot to do with the existence of Hoffman.
This can be seen from Hoffman’s resume posted on the official website of the American head office. The content is translated as follows:
In 2007, David. Hoffman was sent to Japan as the vice president and was also responsible for business strategy and franchise business. Not only did he successfully convert more than 1,000 directly operated stores into franchise stores, he also closed more than 400 branches with poor profits. . On the other hand, a sustainable franchise system and business organization have been established in Japan.
In 2009, Hoffman was promoted to deputy to the CEO of McDonald's Japan. At the same time, he led the "Japan leadership team" to significantly improve operating profits, return on assets (ROA), customer service opportunities, etc. Domestic revenue forecast indicators (Note 2) (The above content is translated by the author based on the official website of the US parent company). The hedge fund company proposed to sell its directly-operated stores
In addition, there was another important incident that happened quietly behind the scenes when Hoffman was in charge of the "franchise expansion plan" at McDonald's Japan.
The thing is like this. At the end of 2006, the American head office decided to sell all 2,300 of the 8,000 directly operated stores in the United States and make them available in the second half of the year. In 2006, only 26% of the directly-operated stores remained (referring to the global average), and the ratio has dropped even further. However, it is rumored that according to the original plan, only 1,500 companies were originally intended to be sold. In fact, the number was increased to 2,300 due to further pressure from someone, and this person was the American hedge fund Pershing Square Capital. William. William Akman (Note 3).
Pershing is known as the "action shareholder" and is a very influential hedge fund company in the United States (Note 4). In 2005, Pershing's holdings accounted for approximately 4.9% of McDonald's shares. The purpose of proposing to sell more directly-operated stores is to increase McDonald's stock price by improving McDonald's operating efficiency, so that he can later sell the stocks he holds at a higher price (Note 5) .
Pershing's suggestion is that McDonald's sell 65% of its directly operated stores through an initial public offering (IPO). By splitting directly-operated stores into franchised stores and issuing securities to guarantee the store's real estate, approximately US$18 billion can be raised. Furthermore, if the funds raised can be used to pay off debts and buy back the company's shares, then the burden on McDonald's headquarters will not only be lightened, but its operating performance will also be improved. In addition, selling directly operated stores to increase the proportion of franchise stores can also significantly increase McDonald's stock price (from about US$34 to US$45 to US$50) (Note 6).
Although McDonald's in the United States publicly rejected Pershing's proposal, in fact, since 2006, it has continued to increase the number of resellers of its stores. By 2007, in addition to buying back its own company's shares, McDonald's in the United States was also reselling its directly-operated stores, completely moving towards expanding its franchises (Note 7).
McDonald's practice of reselling its directly-operated stores and buying back its own stock can also be seen in its 2006 annual report. Chipotle, a new Mexican fast-food restaurant that appeared in Chapter 7, was probably sold at this time, and the money recovered from the sale was also used to buy back its own stock. Since McDonald's Corporation's goal is to reduce the proportion of directly operated stores to less than 30%, it naturally requires the cooperation of other countries. At this time, the United Kingdom and Canada are required to cooperate with the company's policies.
The reason for expanding franchises is, as we explained in Chapter 3, the gross profit margin of franchise stores is two to three percent higher than that of directly operated stores. After entering 2007, the wave of resale and franchise expansion of directly-operated stores also spread to other countries. It can be seen from this that McDonald’s Japan’s move to resell directly-operated stores and expand franchises is actually a product of the transformation of its global franchise strategy.
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This article is authorized to be published from Haoyou Culture/Kousuke Ogawa "Why did McDonald's fail?" "Why did McDonald's fail?" 》