Behavior Towards Fast Food Mcdonalds In Malaysia

Behavior Towards Fast Food Mcdonalds In Malaysia Chapter 1: Introduction Introduction 1.1.1 The Nature of Fast Food From French fries to Big Mac burger, fast food can consider as one of the food types that growing in a fast mode (Goyal et al, 2007). According to Bender and Bender (1995), fast food meant food that has limited choices in the menu which being created under production line technique. Besides, fast food also defined as food likes hamburgers, sandwiches, or pizza which are food that supplier be likely to specialize (Davies et al, 2004). In simple words, fast food also being defined as food purchased by self-service in counter and then take the food to own dining table without any services by waiter (Association NR, 2003). The rise of fast food can be traced back to the early 1900s when Automat opened the first ever fast food restaurant which sell foods and drinks by using machines. Then white castle introduced hamburgers to fast food outlets and this brings the culture until today. After some years, the concept of fast food is so attractive and successful and this attracted many companies such as McDonalds, KFC, Wendys and Burger King joined the fast food industry (Chavadi et al, 2008). Since the early stage of 1970s in US, fast food has become part and partial of Americans and the frequency of eating fast food has rapidly increased (French et al, 2000). Fast food outlets imbued almost every corner in the world, different fast food restaurants is in your eyesight (Jayna et al, 2009). National Restaurant Association claimed that there are three out of ten customers said that eating fast food is their own way of life and it is important for their daily life (National Restaurant Association, 2008). Moreover, fast food successfully dominates away-from-home food expenses during the last few decades (Sharkey et al, 2011). To add more on this, the trend of eating away from home is more and more common and the frequency of visits to fast food outlets even increase rapidly. In 1970, there is about 25% of total spending for away-from-home foods and the spending rocketed up to 53% for the total spending for away-from-home foods (Clauson A, 2000). This showed that more consumers prefer to eat fast food rather than home cook foods. In addition, there are decelerating for the path of the industry when the economy crisis hits the world with a low point of 3.1% two years ago. Nevertheless, there are sign of recovery for the industry when there is expected accelerating of growth rates showed in the forecast period. The fast food market had $201.1billion of total revenue in 2009 which correspond to 4.8% of compound annual growth rate (CAGR) for the year 2005 to 2009. In Europe, the markets raised about 4.7% of (CAGR) while Asias market grew about 6.1% of (CAGR) in 2009. The fast food market of Europe and Asia respectively values about $34.2 billion and $71.6 billion. Furthermore, the market consumption volume is expected to increase to $248.7 billion at the end of 2014. The most profitable in the industry is QSR segment where it earned about $142.6 billion or 70.9% of the markets overall value (Data Monitor, 2010). 1.1.2 History of McDonalds The history of McDonalds began in 1940 when Dick and Mac McDonald started their business by opening McDonalds Bar-B-Que restaurant in California which offered large menu to customers. After that, they closed down the restaurant and reopen another restaurant which is a self service dive in restaurant. This time, they only provide limited choices of foods for customers such as burger, coffee, soft drinks, potato chips and milk. In 1949, the world well-known French fries were introduced and replaced potato chips on the menu. After a year, a salesperson called Ray Kroc met up with McDonald brothers and purchased the franchising right from them and planed to operate the restaurant. Few months later, Kroc opened his first ever McDonalds restaurant in Illinois and the world famous Golden Arches also started to use as the symbol of McDonalds. History was made and new records to be created from time to time since McDonalds started its operation. Today, McDonalds is the world largest organizat ion in the world with more than 32000 fast food outlets in 117 countries which serves more than 60 million customers everyday (About McDonalds.com, 2011; McDonalds Malaysia.com, 2011). McDonalds also the largest buyer of materials such as potatoes and beef (Steyn NP, 2010). The brands mission is to be McDonalds customers favourite place and way to eat. Besides, the company promises to supply Simple Easy Enjoyment to every customer when they visit to the restaurant and let customers enjoy the feel of having meal there as well as like having meal in own sweet home. The company hold tied to the value of serving quality food, giving superior service and cleanliness of environment to delight every customer and hope customers were treated like VIP (McDonalds.com.my, 2011). Furthermore, the annual report of McDonalds for the year of 2010 reported that the company earned about $24,075 million in 2010 which higher 6% of the sales compared to the previous year which earned about $22,745 million. The revenues of the company in US for year 2009 and 2010 are positively increased because of the high achievement in new products, iconic core products and good focus on everyday value of the company. Additionally, the continually increasing of currency exchange in Europe, sales increased in UK, Russia and French, as well as the good expansion achieved in Russia had driven the revenues raised (Annual report, 2010). 1.1.3 McDonalds in Malaysia In December 1980, McDonalds Corporation, USA approved and gave license to Golden Arches Restaurants Sdn Bhd to run McDonalds restaurants in Malaysia. The first ever McDonalds Malaysia restaurants was opened at Jalan Bukit Bintang, Kuala Lumpur which is in the heart of the big city on 29 April 1982. Now, there are 204 restaurants situated nationwide and currently there are about 20 to 25 restaurants will be opened annually as it is expanding steadily. Moreover, McDonalds employed almost 10,000 local citizens in different states to success the restaurants and 120 support staffs at its head office to handle day-to-day operation of the McDonalds business (McDonalds, 2011). So, it is obvious that McDonalds is very successful company and leader in the fast food industry in Malaysia which attracts million of customers visits to the restaurants everyday. Thus, this research is basically about the consumer behavior towards fast food especially McDonalds. Objective of the research: To discover the factors that influence consumer behavior to choose fast food as their meal. Research Question: What are the factors that influence consumers to choose fast food as their meal? Hypothesis 1: There is a relation between service qualities towards consumer behavior. Hypothesis 2: Place factor has relationship towards consumer behavior. Hypothesis 3: Price factor has relationship towards consumer behavior. Chapter 2: Literature Review According the report of Technomic about the status and future of fast food, the perceptions of consumers towards fast food have been changed. Now, consumers think that fast food is no longer limited to quick service, fast food restaurants, or drive-thru restaurants. Instead, there are risen of dual concept which formed the traditional fast food concept and the new concept of food fast which food can be served quickly with a superior quality, flavor, taste and ambiance. The report also claimed that consumers are seeking for faster, convenient, better and quality foods and services from all type of food service organization (Restaurant News Resource, 2010). Moreover, the report findings showed that about 49% among 2000 consumers have visit to fast food restaurant at least once in a week (Technomic, 2010). The new concept of perceptions totally will affect the consumer behavior towards fast food including McDonalds. In addition, Kara and Kucukemiroglu have studied about the consumer perceptions and favorites for fast food restaurants in USA and Canada. The research showed that the young consumers between the age of 12 to 24 hunt for different type of foods, better delivery service, lower price and good location in USA while Canadian teenagers look for novelties and price. Then, for the middle age group of consumers who are 25 to 45 years old, Americans looked for better service and better speed of serving food while Canadian considered quality, service and speed. More to the point, consumers above 46 years old to 55 years old, American preferred taste, cleanliness, quality and nutritional value whereas Canadian adults wanted better services, food quality and speed. Furthermore, young consumers have to be concerned and to be taught of the nutritional awareness and fast food preferences during the teenager years (Brown et al, 2000). In London, Davies and Smith have listed down the importance for t he nutritional value for fast food and fast food companies also printed the information of the value in its restaurants. 2.1 Consumer Behavior Analysis According to Solomon, consumer behavior can be defined as a study of selected consumers either in individuals or groups in buying, using or disposing of products, ideas, services or experience to satisfy own desires and needs. The satisfaction of desires and needs are closely related to hunger, personal status and thirst to love as well as spiritual fulfillment (Solomon, 2007). Consumer behavior has been defined as the the dynamic interaction of affect and cognition, environment, and the behavior from human beings conduct the exchange aspects of their lives (Peter et al, 2008). More on this point, during the consumption processes, the action performed, feeling and thought of own experience by consumers will affect the consumer behavior. Everything that surrounds the consumers and environmental factors such as advertising, product appearance, comments from friends, price information and packaging totally will influence the consumer behavior (Peter et al, 2008). There is for sure that consumer will buy something after they have a good expectation and satisfy towards the product. Nevertheless, researcher has to go deeper and questioning consumer in which circumstances and what reason for buying a product (Blackwell et al, 2001). According to Peter, the consumer behavior consider as dynamic because the changes of perception, feelings and activities of individual purchaser or a group of consumers. There are various type of marketing strategies is the answer to the question of consumers response. This doubt is always being answer by using the stimulus-respond model (Refer to Appendix 1). Furthermore, researchers have to find out from the buyers black box which is the essential point that other actors and companies in the market wants to know (Kotler, 2007). Determinants of Consumer Behavior Analysis Consumers have to analyzed by focusing to three objects which is behavior, environment, affect and cognition and then about their relations between each other. Every single aspect can affect other aspects and all of the aspects must be considered when planning for the marketing strategy (Peter et al, 2008). Consumer affect and cognition represent different type of the mental responses from consumers demonstrate toward particular stimulus and event around them. Affect refers to the feeling of consumers whether they like or hate a product. For example, affect includes strong personal emotion of anger or love, moods of happy or sad and feelings of frustration or satisfaction. As a result, marketers should build up suitable strategies to create positive affect among consumers about their brands and products to become consumer first choice to purchase. On the other hand, cognition is about the thinking of consumers or their belief towards a product. It involved consumers perception, understanding and interpreting the events and stimuli. Consumers gain their knowledge, beliefs and experience from their daily life and this will help them to be more sensitive and alert when buying a product so that it will be a good buying decision (Peter et al, 2008). 2.1.2 Consumer Motivation Solomon claimed that motivation is the processes that bring people to behave themselves when there is a need generated that they hope to satisfy. Consumers will find their way to attempt to decrease or to remove the needs. Once consumers successfully end the desire, then consumers goal is achieved. Consumer behavior is started up by motivation and directs to achieve goals. Normally, a motivated person will be involved more to an activity compared to unmotivated person (Solomon, 2007). 2.1.2.1 Maslow Hierarchy of Needs Moreover, during the last few decades, psychologists have studied about the motivation and its essential towards consumer behavior in different ways. The most famous and familiar ideas is propounded by Abraham Maslow in year 1943 (Kotler, 2007). Maslow initially created this approach is to know about people personal growth and the accomplishment of some difficult tasks. After some time, marketers adapted this theory to understand the consumer motivation. Then, Maslow developed a hierarchy which is the combination of psychogenic and biogenic needs which specifies on different level of needs by people (Solomon, 2007). In the pyramid of needs, there are at least five sets of basic needs which are physiological, safety, social, esteem and self-actualization needs. The order of needs in the pyramid structure is fixed and certain level must be obtained before go for the next. Maslow believed that people is aspire to become self-actualization (Stephens, 2000). The hierarchy is started from physiological drives which are the basic needs of human such as water, food, air or sleep. For instance, a person who is hungry definitely will craving for food much stronger than anything else (Stephens, 2000). After the physiological was fulfilled, the safety needs will be demanded by people. People needs a place that is safe and security for them to have meal, rest or enjoy. When both of the physiological and safety needs are perfectly gratified, the third needs which are social needs to be considered. Social needs are included love, friendship, parents or acceptance by public. Human have to build up their own relationship with others so that their life will be better and successful (Stephens, 2000). Furthermore, everyone hope to have respect and high evaluation from others toward self-esteem. People may seek for self satisfaction when they are promoted higher position in their company, attaining the educational distinction, or being honored by govern ment. This level of needs basically is about people feeling of self-confidence and satisfactoriness. The last needs is self-actualization which is about to know ones potential and this level of need will never be satisfied because there are new challenge and opportunities to come across when people growing up (Stephens, 2000). In addition, physiologist Sigmund Freund claimed that people will not aware of their buying behavior which is formed by own physiology. Everyone have different dream and wishes which are hope to be fulfilled, however, some of the wishes are cause of incited which brought to negative effect. For example, a person said that he enjoy the wind when driving is the main reason that he buys a sport car. On the other hand, in psychological level, he might just want to show off or want to let others respect him (Kotler, 2007). 2.2 Factors that affecting Consumer Behavior 2.2.1 Service Quality In 1984, Gronroos defined service quality as the judgement from consumers evaluation of the service they received. He also proposed that service quality can be divided into technical quality or what is done and functional quality or how it is done. Then, the service quality also being further explained as two dependent variables which are perceived service and expected service. Expect service is referred to the consumers previous experience with a service which might influence the consumer behavior while the perceptions of consumer towards the service itself is called perceived service. In fast food industry, good service quality is very essential for every fast food company because it is one of the fundamental determinants of consumer satisfaction which directly influence the success of the company in the industry (Huam et al, 2011). At the present time, every fast food company has pay more focus on their service quality by different ways in order to boost up the satisfaction level of consumers and then raise the intention of purchasing as well as loyalty towards the fast food restaurant (Qin et al, 2008; Gillbert et al, 2004). Organizations that provide superior services to consumers also achieve the greater level of consumer satisfaction and favorable word-of-mouth (Gillbert et al, 2004). Once the restaurants successfully attain or go beyond the anticipation and expectation of consumers, definitely consumers will be satisfy with the services that provided (Huam et al, 2011). For instance, Fast food giant likes McDonalds, Burger King and KFC are attempting to pres ent exclusive, unique and special services to attract and to keep their consumers. As for many well operating companies, great service quality is a cornerstone to gain competitive advantage in the industry to increase sales. From times to times, the fast food industry had been forced to change from product-centric approach to customer-centric approach due to the high expectation from consumers and competition from other companies (Huam et al, 2011). For example, the fast food companies in Malaysia also experiencing the transformations and challenging from competition (Yap et al. 2007). 2.2.1.1 Measurement of Service Quality (SERVPERF Model) Since the service quality is very crucial for the fast food business, then the service quality measurement has to be done frequently and in a timely manner to obtain an accurate current level of service quality provided by the fast food industry in order to increase the customer satisfaction as well as to encourage the customer purchase intentions towards the restaurants (Gilbert et al, 2004). Besides, Zeithaml and Bitner recommended that consumers judge the service quality based on their own perceptions towards the provided technical outcome, the process of delivering the outcome and the quality of environment by delivering the service. Before this, there are researchers believe that quality is naturally hard to be determined and measure, so there will be better if there is a yardstick for consumer to measure their own service quality for certain things. Then, a standardized and better model called SERVPERF model was developed. Nonetheless, this model is a very wide-ranging concept and its modification is recommended to capture the framework in certain study (Olorunniwo et al, 2006; Andaleeb et al, 2006). Audrey stated that this model is created to give a substitute method to measure the perceived service quality and the important relationship between the service quality, purchase intentions and consumer satisfactions. This instrument contained five dimensions which are: Tangibility The condition of physical parts of the fast food restaurants, the equipments and utensils that serve the consumers as well as the physical environment of the restaurants (Yuksel, 2001). Moreover, it also expressed the arrangement and decoration of the restaurants layout which included the cleanliness of environment, nice design of the facilities, and the convenience offered to consumers (Subhash et al, 2000). Responsiveness According to Fetus et al, responsiveness is meant that willingness and readiness showed by employees to help consumers when there are problems occurred and offer prompt service directly to consumers (Festus et al, 2000). . Reliability The capability and attitude of performing the promises service truthfully and sincerely which can motivate consumer and gain confidence to the fast food restaurant. Furthermore, this also referred to the trustworthiness in business process, trustable, and the efficiency as well as the ability to fix or improve anything that goes the opposite way (Yuksel, 2001). Empathy This dimension is about consumers being cared and individualized attention by employees. This dimension consists of few components which are: (a) Access approachability or friendliness and ease of contact. (b) Communication communicate with customers with languages that they can understand and comfortable with and patiently listen to what consumers express. (c) Understanding Customers: put effort to know, understand and sensitive towards what consumers needs and expectations (Huam et al, 2011). (V) Assurance Defined as the knowledge and courtesy of employees and their skill to convey trust and gain confidence from consumers. Assurance consists of three main components which are: (a) Courtesy kindness, consideration, respect, and friendliness of every employee towards every customer. (b) Credibility Employees show that they are honest, trustable and believable towards every customer. (c) Security Customers feel safe when having meal without any risk of danger or doubt (Festus et al, 2000). Consumer Behavior Satisfaction Service Quality 2.2.2 Product Quality Product quality is a means of advancing peoples life expectancy and cut down the jejunity and mortality rate of society (Iwarere, 2011). As high competition and environmental influences rise internationally, obviously there are a lot of hard work of fast food companies on quality improvement and cost saving in order to satisfy consumers and protecting consumer behavior as well as increasing the organization profit and value (Iwarere, 2010). According to Iwarere, quality management is being judged as competitive weapon which can show the competitive advantages to consumers to attract more business. Product quality totally will influence the company profit since the quality of product mirrored out the reputation of the company (Dominici, 2009). The relationship between product quality and profit of company is that product quality that being enhanced will increase the reliability and production of certain product. Besides, the increasing in product reliability causes the price of the pr oduct being boosted up (Iwarere, 2011). Product quality is very important to a company and this can be showed from a study on brand preference of soft drinks in rural place to determine the factor influencing the rural consumers towards the soft drink. From the study, they found out that the product quality was ranked at the first place and then followed by price (Nandagopal, 2003). There is a group of quality assurance team in the restaurants and at suppliers for every stage of production which in charge in observing and examines the quality of McDonalds products. There is a specific process set by McDonalds to check and make sure every ingredient that they use is high quality and safe. The team will have a tight observation towards supplier manufactures and will take some samples of stock from distribution centers to undergo the quality checking. Every McDonalds outlets will only receive the delivery of materials and ingredients after quality and safety checking by the outlets employees. Every employee will be given complete training in hygiene, quality assurance, food safety, and procedures of food preparation (Vignali, 2001). In McDonalds, they intends to create the standardized the food items which still the same taste in most of the country likes Malaysia, Singapore, South Africa, and most of the Europe country. Although they know that there are considerable cost saving by undergoing the standardization, being able to adapt to the environment and market will ensures success of the company in the country. Obviously, McDonalds has successfully adopted the concept of think globally and act locally into its marketing strategies to (Vignali, 2001). Moreover, there are a lot of reasons for necessity of adaptation such as the taste or preference of local people, local culture and laws as well as local traditions. There are many cases happened in different country where McDonalds change their menu to adopt for the local preferences and laws (Vignali, 2001). For instance, the famous Big Mac was served without cheese in few of their restaurants in Israel and in some of the kosher restaurants, the meat products and dairy products is separately placed. Plus, recently, McDonalds Israel launched a new hamburger which to improve the nutrition and taste of its famous product. The Big Mac in Israel is 30% fewer calories compare to Big Mac in US (Ron Friedman, 2010). In addition, in India, McDonalds serve vegetable McNuggets and a mutton-based Big Mac which called Maharaja Mac. Additionally, in Malaysia and Singapore, McDonalds also put effort on their product which is free of pork products and the outlets must apply for the halal certifica te to run the restaurants, which means is totally out of pork products and acceptable for Muslims consumers. In addition, good product quality also includes the taste of the foods. Every consumers want to eat tasty foods is consider as a general motive to satisfy their needs towards food and increase their appetite. Furthermore, the taste of foods also has to localize to suit the local taste and fulfill the needs of consumers (Gordan Chu, 2009). For instance, the taste and flavor of McDonalds French fries is magnificent and marvelous for a lot of consumers (Schlosser, 2001). There are various other examples of the successful of McDonalds adopted in different countries which has unique and special perspective and culture as well as local taste in order to satisfy the needs and preferences of consumers. For example, beer was sold in Germany as McCroissants, espresso coffee and pasta is on the menu in Italy and there are chilled yogurt drinks in McDonalds Turkey as well as in tropical countries, guava juice was the favorite items in the menu. There are vegetarian hamburgers sold in Netherlands while teriyaki burgers were the famous hamburger in Japan. In Thailand, the most well-known burger in McDonalds was called Samurai Pork Burger which serves with sweet sauce. Moreover, in Norway, grilled salmon sandwich which called McLaks are sold while hamburger with poached egg are top of the menu in Uruguay (Vignali, 2001). So, there are different products being introduced by McDonalds to adopt in the international food market. Some of the products already became the symbolic food of McDonalds for the local people. 2.2.3 Promotion Promotions normally are created by marketers to tell information about their products or service in order to attract consumers to buy them. The promotion strategies normally experienced by consumers which might influence consumer behavior due to the social and physical aspects from the environment factor. Every products and brands become famous and successful because of promotion strategies that developed to generate competitive advantage against competitors while show out the unique of the products and brands. There are four types of promotions which are advertising, publicity, personal selling and sales promotions (Peter et al, 2008; Ivy, 2008). McDonalds always put more effort to promote them as a global image and they concern about the people from the market they are entering. McDonalds has different types of advertising campaigns in different countries and globally to suit the culture and society of people from different background. For example, UK McDonalds appointed England legendary footballer Alan Shearer to promote their products while in French they used French world cup winner goalkeeper Fabien Barthez (Vignali, 2001). Besides, McDonalds also concern about the public relationship with customers which can know and understand more about consumers. For instance, Beijing McDonalds relies greatly on individual interaction with consumers in restaurants. There are at least one public relations employee works in every outlet to help and answer customers questions. Moreover, there are five to ten female staffs being assigned to every outlet to take care of consumers children and to communicate with parents (Vignali, 2001). This can help to improve the service level and to advance the management of customer portfolio (Fjerstad et al, 2003; O Learly et al, 2004). Another example is in 1997, McDonalds had broadcasted that they will corporate with Walt Disney which allowed them to share special marketing rights from food to films for the following ten years. This is the beginning of the producing toys which include in their happy meals for films likes Toy Story, Madagascar, Alvin and the Chipmunks and the lates t is the young justice series of superhero from Marvels. Furthermore, McDonalds, UNESCO and Walt Disney corporate together to launch a program called Millennium Dreamers Global Childrens recognition program which allowed young people from the whole world have the chance to express their dreams, ideas, and plans as well as hopes in the future (Vignali, 2001). 2.2.4 Place According to Kotler, place defined as the location where products and services being distributed for purchase by consumers. It can contain every physical stores and virtual stores on the internet. The choice of place has always an important factor to be considered when operating a store. For instance, fast food restaurants mostly being set up in place where there is a significant in number of moving people (Hossain, 2003). Normally, company location decision depends on few factors such as total cost, supplier, proximity of customers, and infrastructure (Chase, 2004). Currently, there are more than 32000 McDonalds restaurants in 117 countries all over the world. The company effectively manages its capital expends by strategic expansion in every country. Every year, McDonalds operate hundreds of new restaurants globally to undergo strategies that create a gap between its competitors in term of accessibility and convenience to consumers (Jekanowski et al, 2001). In the annual report of the company in year 1994, McDonalds had launched a strategy called in-your-face strategy. In the report stated that McDonalds wants to have a site wherever people live, work, play, or gather. Our Convenience Strategy is to monitor the changing lifestyles of consumers and intercept them at every turn. As we expand customer convenience, we gain market share. (McDonalds USA annual report, 1994). This is because McDonalds understand that consumers prefer to go nearby to buy food for saving time and cost. So, McDonalds wants that there are their outlets everywhere in the w orld which can bring convenience to consumers to buy foods. Moreover, most of the McDonalds outlets operate 24 hours everyday to serve their consumers and people may taste the foods of McDonalds whenever they want to (Jager, 2007). In addition, McDonalds also provide delivery service to consumers home which bring convenience to consumers who do not like to queue up in the crowed restaurants but prefer to eat in home while doing their works (Church et al, 2000). Drive-thru system also being introduced by McDonalds in most of the outlet to serve consumers who plans to take away the food (Fitzgerald, 2004).