Pricing Startegies for Mcdonald

Topics: Advertising, McDonald's, Big Mac Index Pages: 8 (2307 words) Published: October 24, 2010

Global pricing is one of the most critical and complex issues that McDonald’s faces since price is the only marketing mix instruments that create revenues while all other elements entail costs. A multinational company such as McDonald’s also faces the challenges of how to coordinate their pricing across different countries because of the fact that a company’s global pricing policy may make or break its overseas expansion efforts. In this case, McDonald’s is using Value-Pricing Strategy whereby its offer just the right combination of quality and good service at a fair price to their consumers.

There are main drivers which affecting the McDonald’s global pricing such as the company goals, the company costs, the customer demand, the competition, and lastly the government policies. As for the company goals, McDonald’s have determined which goals that they want to achieve which are to gain a satisfactory Return on Investment (ROI), to maintain market share and to meet a specified profit goal by putting priority for each goals. The McDonald’s pricing strategies also been influenced by the company cost. Before setting up the price, McDonald’s considered all the relevant costs of manufacturing, marketing and product distribution. The pricing strategy that been used by McDonald’s are cost-plus pricing which is by adding the international costs and a markup to the domestic manufacturing cost.

As for the factor of consumer demand, it involves the buying power of consumer which is the key consideration in McDonald’s pricing decision. The countries with low income percapita pose a dilemma because consumers in such countries are far more price-sensitive as compared to the develop countries. Take for example, the differences of income level and exchange rates in United States and Indonesia whereby what is considered cheap in U.S is not affordable for the consumers in Indonesia. Thus, McDonald’s had implied the different prices of their products for different countries according to the income level and economic situation of the company. The example of Big Mac prices for different countries as been illustrated in the diagram.

Figure 1: The Big Mac Price for Different Countries


Besides that, McDonald’s also considered the competition as one of the key factors in determining the global pricing strategies. The main competitors of McDonald’s are Burger King, Subway, and YUM! McDonald’s make sure that it can compete with their competitors by setting the price which is equivalent or below the competitor’s price so that it will gain the competitive advantages by attracting more consumer to buy their products with a comparative price.

The last factor that McDonalds considered in order to determine the pricing strategy for their company is the government policies. The government policies can have a direct or indirect impact on McDonald’s pricing policies. The factors that have a direct impact include tax rates and price controls. For instance, in Malaysia for every purchase of McDonalds will be charged 5% government tax. Aside from direct intervention, government policies can have indirect impacts on pricing decision. For instance, huge government deficits spur interest rates, currency volatility and inflation rates will affect the product cost. GLOBAL ADVERTISING AND CULTURE

There are many cultural challenges that McDonald’s face in global marketing. Global advertising encompasses areas such as advertising planning, budgeting, resource allocation issues, message strategy, and media decisions. Other areas include local regulations, advertising agency selection, coordination of multi-country communication efforts and regional and global campaigns. There are two main barriers that McDonald’s encountered in order to do the advertising for its company. The first one is language barriers where there are three types of translation errors that can occur in global marketing which are simple carelessness,...
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