1.2 Market conduct
The initial decision by Ray Kroc of McDonald’s that a large consumer segment would be very receptive to eating hamburgers in a clean and wholesome environment was an exciting innovation. The hamburger industry, comprised of McDonald’s, Burger King, Wendy’s and Hardee’s has become an American institution. This American institution has spread overseas and become a valuable export. But the hamburger industry no longer innovates the way it did years ago.
The fast-food industry is in the maturity phase of the retail life cycle. Market maturity is marked by intense competition and therefore must be carefully managed. There is more attention to costs and customer service and less attention to new-product introduction versus refining existing ones. Maturity is brought on by the entry of a great many competitors, but by serving new markets, decline can be either postponed or avoided.
The fast-food hamburger industry is moving toward more diversified menus, including salad bars, poultry, roast beef, baked potatoes and ice cream. Breakfast has become an attractive growth market. A shift to ethnic foods such as tacos and burritos is increasing. Significant development of foreign markets will continue during the next decade. Europe and Canada continue to be attractive markets for fast-food organizations, and South America and Asia are deemed potential high-growth markets. Hamburger organizations, which have experienced tremendous growth over the past two decades, have reached a plateau as a result of both direct and indirect competition in the United States. Convenience stores, gasoline stations and supermarkets are just some of the places where the consumer can purchase a hamburger. However, the most rapidly growing fast-food category is Mexican. Ethnic foods from Asia and Italian favorites are other growth areas.
The issue of maintaining fast customer service and satisfaction in a maturing industry that has broadened its menu offerings must be considered. Additional items such as fish, or chicken, or pizza slow customer service. The very real challenge of maintaining high customer-service standards confronts the fast-food industry. Not only is the quality of menu items an important consideration, but also issues of ecology and nutrition have pushed their way to the forefront.
Fast-food operations have been successful because their focus has been a narrow product range, an emphasis on division of labor, standardization of tasks and extensive short-interval measurement of performance levels. Sales of non-hamburger fast foods have grown, while sales for the hamburger industry have remained constant.
A shift in consumer preference that could have an impact on fast-food restaurant sales is the trend toward eating healthier foods. Consumer awareness of proper diet and nutrition is reflected in menu selections and, ultimately, in the cost of a meal. Sales of salads, pasta, baked potatoes and ‘lighter foods’ have increased at the expense of meat entrees.
Overall market conduct has been directed toward emphasizing time savings, value and convenience. One way to satisfy consumers with time constraints is to offer delivery service, and this has been done by pizza establishments. Free delivery especially targets the double-income family, which is time oriented. The importance of value has been reflected in low prices. Hamburger organizations have stressed value meals. By comparison based upon price and quantity of food, the competition has found the value appeal hard to beat.