Ch. 11 - Developing and Managing Products
The McDonald's starting of McCafe is an excellent example of diversification and new product development. By starting McCafe, McDonald's is offering new products that were not available in traditional McDonald's stores. McCafe specializes in serving cafes, which attracts customers that usually don't come to McDonald's to eat fast-food. McCafe is also not only a product development. McCafe has its own section of the store and clearly distinguishes itself from the traditional McDonald store. The store has a modern, yet relaxing mood. This is important to attract new market segments. Perhaps customers who go to a cafe don’t go to satisfy hunger, but possibly to take a sip of coffee and chat in a relaxing environment. Thus, McDonald's McCafe serves as an example performing diversification by developing both new products and new markets.
Jan Fields COO of McDonalds was asked why are they opening up their new McCafe line and he answered "Drinks overall, beverages are a huge growing part of the business and from an industry standpoint, beverages make up $60 billion." The McCafe idea was originally tested at McDonalds locations in Melbourne, Australia. The testing in Australia was successful. McDonalds restaurants who offer McCafe drink choices made 15% more profit than locations that did not. It eventually became the largest coffee chain in Australia. The same result happened when testing was expanded to New Zealand.
The McDonald's starting of McCafe is an excellent example of diversification and new product development. By starting McCafe, McDonald's is offering new products that were not available in traditional McDonald's stores. McCafe specializes in serving cafes, which attracts customers that usually don't come to McDonald's to eat fast-food. McCafe is also not only a product development. McCafe has its own section of the store and clearly distinguishes itself from the traditional McDonald store. The store has a modern, yet relaxing mood. This is important to attract new market segments. Perhaps customers who go to a cafe don’t go to satisfy hunger, but possibly to take a sip of coffee and chat in a relaxing environment. Thus, McDonald's McCafe serves as an example performing diversification by developing both new products and new markets. 
Jan Fields COO of McDonalds was asked why are they opening up their new McCafe line and he answered "Drinks overall, beverages are a huge growing part of the business and from an industry standpoint, beverages make up $60 billion." The McCafe idea was originally tested at McDonalds locations in Melbourne, Australia. The testing in Australia was successful. McDonalds restaurants who offer McCafe drink choices made 15% more profit than locations that did not. It eventually became the largest coffee chain in Australia. The same result happened when testing was expanded to New Zealand.
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