mcdonalds the international market leader for fast food marketing essay
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Mcdonalds The International Market Leader For Fast Food Marketing EssayMcDonald's is now the international market leader for fast
food, and has been ever since its pioneering first
restaurant was launch in San Bernardino, California in
1948. McDonalds is an almost perfect industrial system: a
conveyor belt in an environment, which is inadvertently
design as a blueprint of the traditional manufacturing
organization in the factory as F. W. Taylor conceived it and
his successors (Hussey 1992). Its geographical structure
along with the bureaucratic culture supplements its low-
cost leadership and analyzer business strategy. As a
development strategy, franchising has become a major
catalyst in the expansion of the McDonalds business
throughout the world. The success of McDonalds based on
a simple and effective strategic formula: standardization
of service into a package of the smallest detail, strict
quality control, and cost-effective production by young,
cheap, unskilled workers supervised by managers on the
shop floor. The growth comes from franchising out this
concept and the brand name to entrepreneurs. Its human
resource management policies are tightly and strictly
controlled giving an anarchical power over the employees
and dissuading them from becoming anti-organizational at
anytime. This is evident from their history of anti-unionist
stand (Royle 2002). The McDonalds HRM concept is so
successful that it can handle a personnel turnover of more
than 100 % a year, a rate that would grind any car
manufacturer to a halt. At McDonalds, the system is
greater than the individual is, the tasks of the employees
simplistic is.
Analyze "Strategy adoption of McDonald's should be done according to the markets which they exit/operate in"
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International research taught us that McDonald has had
consent to change on from a globally schizophrenic brand
approach to one that had ordinary appeal. Therefore, we
united voices worldwide to sing the same product tune,
delivering a value plan with universal petition among
moms, kids, and teens alike: "Simple, Easy, and pleasure."
McDonald's global sales have increased seven percent
yearly in 2008, in large part due to the adoption of the
new product policy in markets like Europe and Asia where
sales increases are averaging nearly 10 percent.
IntroductionHistory:The original founders of McDonald's, and the fast-food
concept, were brothers Dick and Mac McDonald. In 1948,
they modified their drive-in restaurant, creating the
standard for the contemporary fast-food restaurant of
modern times. From the introduction of a limited menu of
just nine items, and by focusing on efficient production
and service, the brothers were able to halve the price of
their hamburgers to 15 cents. In 1962, the golden arches
adopted as its corporate logo, with the introduction of
Ronald McDonald as its mascot arriving the following year.
In 1965, McDonald's Corporation went public, and by 1966
listed on the New York Stock Exchange. In 1967, its first
restaurants outside of the United States opened in Canada
and Puerto Rico. From then on, it expanded rapidly.
Franchises:
The McDonald's Corporation is the largest worldwide
franchised food service organization. In the 1960's, Ray
Kroc franchised restaurants for the low sum of $950,
demanding 1.9% of sales. McDonald's are able to
overcome cultural barriers that have previously hindered
other organizations. Because the local people immediately
translate both the product and service, there is little hint
of what may be construed as US brand culture.
McDonald's is simultaneously global and local. Clearly, an
increase in the number of franchised restaurants leads to
the direct effect of an increase in McDonalds' revenues.
McDonald's can also boast that it is the largest retail
property owner in the world.
Mission and Vision:
Vision:
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best
means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."Mission:
McDonald's brand mission is to "be our customers' favorite place and way to eat." Our worldwide operations have aligned around a global strategy called the Plan to win centering on the five
basics of an exceptional customer experience - People, Products, Place, Price, and Promotion. We are committed to improving our operations and enhancing our customers' experience.Business Strategy of McDonalds:a) Strategic Approach:Considering McDonalds under Porter's competitive
strategies, it can conclude to have a low-cost leadership
approach. McDonalds uses an overall low-cost leadership
strategy to reduce costs and increase sales.
Using Miles and Snow's Strategy, McDonalds follows an
analyzer type of strategy, constantly introducing new
products while defending their existing products (Daft
2000).
Its business strategy takes an efficiency approach and is
associated with strong, centralized authority and tight
control, standard operating procedures, and emphasis on
efficient procurement and distribution systems. Also,
employees perform routine tasks under close supervision
and control and are not allowed to make decisions or take
actions on their own.
Key elements of McDonald's business strategy are:
-Â Â Â Â Â Â Â Â Adding 700-900 restaurants annually.
-Â Â Â Â Â Â Â Â Using new menu items, low price
specials, 'Extra' offers.
-Â Â Â Â Â Â Â Â Value Meals to promote frequent
customer visits.
-Â Â Â Â Â Â Â Â Being highly selective in granting
franchises.
-Â Â Â Â Â Â Â Â Choosing sites convenient to customers.
-Â Â Â Â Â Â Â Â Focusing on limited product line &
consistent quality.
-Â Â Â Â Â Â Â Â Careful attention to store efficency.
-Â Â Â Â Â Â Â Â Extensive advertising & use of Mc prefix.
Hiring courteous personnel; paying an equitable wage &
providing good training.
Strategies of McDonald:Mc Donald is one of the famous food chain all throughout
the world known by both the child and adult alike. It has
increased its sales despite some issues raised against the
company. To further, increase sales on
the business and improve its
performance, business strategies done by person in-
charge. It is in this stage wherein the company would
improve what they lack thus making prospective
customers to keep on coming back and ask for more. It
says that McDonald has been able to use various
strategies to uplift and sustain their competitive
advantage in the market.
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Part of its business strategy is its plan to phase out its
Super Size French fries and soft drinks as it tries to create
a healthier image for itself. The Super Size option is to be
phase out in an attempt to slim down its menu amid
increasing concerns and issues being raise about obesity
(Crouch, 2004). The company is also planning other menu
changes, such as switching to a cinnamon roll and a
sausage burrito as its core breakfast offering, while bagels
would become an optional item. The company also has to
stop selling its 14-ounce McDonald is Fruit n Yogurt Parfait
and replaced it with a smaller-sized version of the product
(Crouch, 2004). All these changes in the menu are part of
its strategy to provide a range of choices that support a
balanced lifestyle. The company has also added that the
simplified core menu would roll out to its entire restaurant.
                      Strategies in
other areas of the organization is also made like the three-
wheeled vehicle that is used to collect discarded cups and
burger wrappings from the neighbourhood around the
restaurant and the provision of good services to customer
which naturally begins and commences with hiring the
right kind of people (Livesey, 1999). Staffs are encouraged
to smile, be optimistic and treat customers particularly
with respect, tell them what a person wants and follow up
on the performance and reward their behaviour. The
restaurant's bathroom is not spare. Issues are raise on the
concerns about the said restaurant to be dirty and
unhygienic. Customers want a clean area especially the
bathroom to make they feel comfortable. Strategies like
this should also apply (Livesey, 1999).
McDonald's has developed three strategies for sustaining
the competitive advantage. These are customer value,
convenience, and optimal business operations.
Together with the information technology strategies, it
helps the company to create new and innovative ideas for
the company. The McDonald's restaurants are describe by
the functions of the team as miniature manufacturing
facilities. With the McDonald's objective of improving the
suite of its business systems, which supports the store,
the management of McDonald has developed ways of
using effective marketing and management strategy its
overall operations.
In order to adapt with the latest trends of having healthier
menus, the company extends their services for family
retreats and as a centre of community for senior citizens.
The means for the former one are its innovation with their
products to offer healthier foods. As this trend continues,
an extension of more people -oriented strategies is need.
The company also conducts studies and surveys as part of
their business strategy better know which among the
different alternatives serves the objective of McDonald is
the best.
To achieve customer convenience and satisfaction, one of
their key initiatives is on the improvement of the
ambience and looks of their stores in the country. The
adherence of the company to put WIFI technology in their
stores for instance has also become one of the attractive
forces for customers. For the achievement of customer
value, focus of the company remain on real-time
information flow which permits instant corrections of the
menu and prices in response to preferences and changing
needs of the customers and competitive environment.
 Competition:One of the major issues for McDonald's is it competitors.
Burger King is the second largest hamburger fast-food
chain in the world and is the number one competitor for
McDonalds. Burger King has 11,400 locations in 58
countries and derives 55 percent of its revenue from the
drive-through window. Burger King reported 1.72 billion in
2002 in revenue which is a 17 percent increase compared
to a 4 percent increase reported by McDonald's over the
same period. Burger King's distinct assets include the
unique Whopper with its one of kind charbroiled taste and
the company policy of preparing the hamburger any way
that the customer wants it. Burger King has distinguished
itself over the years in many ways including being the first
in the fast-food industry to enclose its patio seating in
1957 thereby offering customer indoor dining experience.
Burger King also differentiated itself when it installed the
drive-through window in its restaurants in 1975. In
addition to the Whopper Burger King also offers a few set
items on its break-fast menu that differs it from it
competitors including the Croissan'wiches and French
toast sticks. The rest of the menu also offered the unique
veggie burger and chicken Caesar salad.
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Wendy's is the third largest fast-food chain with 9,000
stores in 33 countries worldwide.
Hardees's is the fourth largest fast-food chain in the
nation. It holds 2,400 locations in 32 states and 11
countries.
Jack in the Box, another major competitor in fast-food
industry, has of 1,850 restaurants in 17 states.
Sonic yet another major competitor owns 2,700 locations.
Value Chain AnalysisThe value chain at McDonald's is very competitive in the
global fast-food industry. The following table shows the
costs and markups associated with McDonald's signature
hamburger, the Big Mac, bought at a McDonalds.
The Big Mac's average price of $2.80 compares favorably
to the various signature items at other fast food retailers,
such as Burger King and Wendy's. The royalties paid by
franchisees back to the McDonalds.
McDonalds Corporation has evolved in different ways and
in different areas due to inappropriate or outdated
processes and the changing internal and external global
environment. It is during these changes that process
determination, manipulation, and management reach their
height of importance. The first process change that
McDonalds went through in order to enhance its value
delivery is automation. This required the company to
change the application of its entire value chain in order to
reorganize its food processing, cooking and food delivery
to provide benefit to its customers. Raw food processed
through an assembly line utilizing a strict process with
each worker assigned to a single specific task. Cooking
done by strictly following a process and food delivery
removed dine-in space to speed up the process of fulfilling
orders.
           The second process change that
McDonalds had to manage was its expansion into other
countries and different business environments. The
company realized that it had to adapt to the unique
customer demands in different countries if it were to
succeed in taking hold of the global market. McDonalds
had to adjust its food preparation, cooking and delivery
service to meet new demands. Originally, hamburger
patties are made of processed ground beef. However, in
India, cows are deeming sacred and the people do not eat
beef. The company had to change their food ingredients
from beef to mutton for the burger patties and change the
process of preparing french-fries from seasoning it with
beef-based flavoring to the use of substitute flavoring to
respect the reverence for cows and its consideration as a
non-food source. Â Â
           The third process change that
McDonalds Corporation had to address is the intensity of
the negative publicity that the company faced from animal
rights and human rights advocate criticizing the manner
that the company treats animals in growing and preparing
these as food raw materials as well as the treatment of
their workers and employees. In terms of animal rights,
advocate groups claim that the company supports the
practices of commercial farmers of keeping cows and
chickens in closed spaces to obtain optimized weight gain
through lack of movement and physical action implying
the lack of consideration for animal welfare. In relation to
human rights, labor groups claim that McDonalds runs a
restrictive and anti-labor organization by not allowing its
workers and employees to create unions as well as
providing only minimal wages and benefits, particularly in
developing countries, that do not meet international labor
standards. McDonalds took years to shift its processes to
accommodate these issues, which is still a continuing
endeavor. Instead of applying a uniform standard for all its
franchises, McDonalds is shifting to customized food and
service based on the demands of a given market.
McDonalds opted to pull out unprofitable chains due to
strong negative publicity and concentrate in areas with
positive reception.
           These process changes are
important to organizations in channeling their resources
towards activities that work for the company. McDonalds
directs different facets of organizational processes in
creating and delivering value by evaluating the
appropriateness of inputs and the corresponding methods
and then linking the inputs and methods to achieve
desired results. Without processes, McDonalds does not
have the mechanism by which to assess changes in
market conditions and rising issues, redirect its inputs and
methods to meet these changes and issues, and integrate
inputs and methods towards desired outputs.
   Porter's Value Chain:
Mc Donald's support
Activities
Margin failed
In India & pulled
Out in USA
Margin now outstanding in Singapore &
Australia.Procurement: with expertise sought partners on
down trade distribution.
HRM Specialists in R & D and expertise, in food
formulation, Support education to raise awareness of
issues & raise demand.
Technology & development research are developments in
Quality assurance, packaging was readdressed to lower
cost.
Infrastructure :- International organization more than
50,000 employees works in more than 50 countries,
company goal to developing low income products
McDonald's
Primary
Activities
In bound Operations Out Marketing ServiceLogistics boundLogistics & Sales provided
By the
Inbound R & D in Lack of Lack of companies
To be used field control under enrollment
In products research of out standing standards
Needs of bound between
Information end users. failed the
formed in India customers
from substitute
nutritional Quality products
studies. Development were
in easily
collaboration launched
With good in India.
suppliers.
The goal of these activities is to offer the customer a level
of value that exceeds the cost of the activities, thereby
resulting in a profit margin for McDonalds. The primary
value, chain activities:
Inbound Logistics: the receiving and warehousing of raw
materials and their distribution to manufacturing, as they
are required.
Operations: The processes of transforming inputs into
finished products and services.
Outbound Logistics: The warehousing and distribution of
finished goods.
Marketing & Sales: The identification of customer needs
and the generation of sales.
Service: the support of customers after the products and
services sold to them. These primary activities are
supported by:
Technology & Development: Technologies, to carry value-
creating behavior.
The value chain model is a useful analysis tool for defining
a firm's core competencies and the activities in which it
can pursue a competitive advantage as follows:
Cost advantage: by better understanding costs and
squeezing them out of the value-adding activities
Five Competitive Forces:The quick-service sandwich industry faces competitive
pressures from a number of forces. The major competitive
threats originate from competing sellers in the industry as
well as firms in other industries that offer substitute
products. McDonald's main competitors within the quick-
service sandwich industry are continually deriving new
strategies through offensive and defensive tactics in order
to gain customers and market share. In 1989, Wendy has
implemented the 99-cent value menu as an offensive
strategy to gain customers looking for a quality product at
a value price.
Substitute Products:In addition to competition from rival sellers in the industry,
sandwich firms also face intense competitive pressure
from firms in other industries selling substitute products.
The substitute products for the fast-food industry are
probably some of the most diverse in the world. These
substitute products may include products purchased from
the local grocery store, food from sit-down restaurants, or
delivery foods such as pizza. The primary issue with these
substitute products is that they are readily available to the
customer and the customer tends to view them as being
comparable or better in terms of the quality of fast-food
products.
New Entrants:
The threat of potential new entrants and the bargaining
power of suppliers is not a significant competitive force in
the fast-food industry. Occasionally, new entrants will
come along and compete with firms in the fast-food
industry and offer substitute products. However, in order
to compete on a large scale, it will require a great deal of
capital to invest in real estate and build physical
restaurant locations. In addition, the market is already so
saturated that the new competitor might find it difficult to
establish a customer base and become profitable.
Suppliers in the fast-food industry do not have substantial
bargaining power due to the fact that firms in the fast-food
business tend to purchase their materials from various
outlets. One company might purchase their meat supplies
from a couple different meat manufacturers, then
purchase their dairy needs from a number of different
dairy companies, and also purchase their bakery products
from a variety of sources. Since the fast-food firms divide
their purchases among a diverse array of suppliers, the
suppliers tend to have little or no bargaining power or
leverage since there are multiple suppliers for the same
products.
Driving Forces:There are a number of driving forces which have molded
the current state of the fast-food industry. In the
beginning, fast-food companies typically focused on being
the low-cost provider and sought to expand into as many
markets as possible. As these national brands have grown,
the markets they are competing in have become overly
saturated with restaurant options. As a result, the fast-
food industry has begun to focus on the needs of the
customer. The buyer has a great deal of leveraging power
due to the fact that if they are dissatisfied with one brand
they can easily switch or purchase from an alternate
brand with little or no monetary repercussions. The fast-
food firms have implemented strategies to improve the
quality of customer service and the cleanliness of the
restaurant locations in order to please their customers in
hopes that they will become a repeat customer.
New Menu Items:Mcdonalds have, for the most part, always been related to
an unhealthy lifestyle. As a result, customers who are
health-conscious have tended to take their business
elsewhere to restaurants that offer nutritious alternatives.
In response to the health-conscious lifestyle that people
have adopted, the majority of the national chains have
created new menu items to cater to this demographic.
Customers are the main driving force behind the daily
operations of fast-food firms. They are the reason that
companies have attempted to upgrade the quality of their
customer service and their needs have lead to the
creation of new products to satisfy their demands.
Strategic Moves:A number of competitors in the fast-food industry have
expanded beyond their traditional offering of generating
revenues from their mcdonalds. Major chains such as
McDonald's have acquired smaller chains Boston Market,
Chipotle Mexican Grill, and Donato's Pizza. Wendy's has
also grown by acquiring smaller companies such as Tim
Horton's and Baja Fresh Mexican Grill. These acquisitions
were executed in hopes of generating revenue from
multiple sources and also to help support the company's
growth over the long term. Over the past couple of
decades, the major chains have also begun to expand into
the global marketplace and have opened franchises up
around the world. McDonald's currently operates in over
120 countries around the world with over 30,000 stores.
Burger King has 11,400 stores in 58 countries and
Wendy's operates 9,000 restaurants in 33 countries
worldwide. These fast-food firms have seen countries
outside the U.S. as markets that have an enormous
growth potential. In order to cater to the different cultures,
companies such as McDonald's and Burger King have
offered menu items with a distinctively local flavor.
Strategic Groups:The fast-food industry is primarily composed of national
chain brands. As a result, there are just a couple of
strategic groups associated with the fast-food market. The
major national chain brands such as McDonald's, Burger
King, Wendy's, Hardees's, and Jack in the Box compete in
markets throughout the United States and around the
world. Their strategies are focused on providing a product
that is based on low-price convenience. Their strategic
group is associated with many geographic locations and
low price and quality. In competition with these large
multinational firms are local McDonalds. Local McDonalds
focus on providing their customers with a quick, cheap
alternative to the national brands. These businesses offer
a low price and low quality product in few localities.
Fast Service:Over the past couple of years, there has been a growing
trend in the restaurant industry to provide customers with
a higher quality product in a short amount of time. These
restaurants are typically refer to as "fast casual" or
"quality quick service." They aim to provide freshly
prepared, made-to-order meals. Their operations combine
the speed and convenience of traditional fast food with
the food quality and appealing décor of casual-dining
restaurants. There are a number of national chains that
fall into this strategic group of providing a high quality
product in many geographic locations and there are also
some businesses that function in a couple locations and
provide a similar high quality product.
Cost Analysis:Â Analysis suggests that McDonald's needs improvement in
cost control. Their depreciation and extraordinary
expenses rank below average compared to competitors;
indicating cost financial areas McDonald's must address in
order to remain competitive within the industry. As a
result of their better than average selling, general, and
administrative costs this helps improve their overall cost
situation. Interest and cost of goods sold are among
average in the industry however, they are located on the
low end of the spectrum. This again indicates areas of
improvement about cost management by the company.Â
Although many of the costs were, incur during
Greenberg's tenure as CEO Financials show cost control
improvement. Despite their below average ratings and
un- weighted trend of 0.4 and a weighted trend of 0.02
suggest that among all cost ratios McDonald's is on the
road to improvement.
How McDonald's business structure influences its strategy?The McDonald's business structure based upon a
geographic structure. When log on their website, you will
ask to choose the country that you are interested in.
Actually, McDonald has divided its operations into five
geographical divisions.
So each full functional geographic unit of McDonald's was
required to wholly response for producing and marketing
its products in that region. Through this regional structure,
McDonald's could not only satisfy the local consumers'
needs in different geographical areas but also pursuing
'maximum local development'. Actually, they produce and
market slightly different types of products in different
areas, and they even have different prices.
The consumers in different countries having different
foods requirements, McDonald's keep launching new
products for their regional consumers. In this, case China
and France can be very good examples.
Strategic Allies:A strategic ally is an organization working together with
one or more other organizations is a joint venture or a
similar arrangement.
McDonald's has formed a strategic alliance with Wal-Mart,
Chevron, Amoco, Disney and Coca-Cola.
Wal-Mart, which is a large shopping mall chain in the U.S.
and several neighboring countries, allied with McDonald's,
which offers great opportunities for both companies.
McDonald's has restaurants in each Wal-Mart, offering its
customers conveniences and excellent fast food at a low
cost ease of accessibility. McDonald's corporation
describes it best in this scenario: "Imagine a busy
shopping day at your local Wal-Mart and having the ability
to sit down with the kids and enjoy many of our
McDonald's favorites, like 'Big Mac' sandwiches, world
famous fries and kids favorite 'Happy Meal'. McDonald's
understands your busy lifestyles and the demands on your
time. That's why we are making it easier for you to do
more things in less time."
McDonald's is engaged in an alliance with two petrol
companies, Chevron and Amoco. This alliance represents
the ultimate in convenience. At these locations, one finds
a full-menu McDonald's restaurant with dining room
service. Nothing can be more convenient, because one
can fill up the car with gas and get a meal all in one stop.
Another important alliance that McDonald's has is with
Disney. Here McDonald's has the sole right to sell fast food
in Disney's theme parks around the U.S and other Disney
operations in the world. Under the terms of the
agreement, McDonald's will operate restaurants and
Disney will promote its films through McDonald's.
Alternate StrategiesStrategic PossibilitiesStay-on-the-offensive strategy: The main goal of the stay-
on-the-offensive strategy is to be a proactive market
leader. The principle of this strategy is to continually stay
one-step ahead of your competitors and force them to
play catch up. McDonald's is already the industry leader in
the fast-food industry with a market share of 33 percent
compared with the number two chain in the industry,
Burger King at 13 percent market share. They can stay out
front by implementing technological improvements in their
restaurants to enhance the production methods or to
improve the ordering process of the customer. In addition,
they can also introduce new or better product offerings to
satisfy the needs of their customers. The best approach
that McDonald's can take through this strategy is to
improve their customer service. McDonald's customer
service ranking was the lowest in the fast-food industry
and was even lower than the Internal Revenue Service. To
improve upon this substandard attribute, McDonald's
should revamp their training process for newly hired
employees and introduce new educational modules for
currently employed personnel.
Fortify-and-defend strategy: The purpose of this strategy
is to make it harder for challengers to gain ground and for
new firms to enter. A fortify-and-defend strategy works
well with firms that have already achieved industry
dominance. Since McDonald's is already the industry
leader in the fast-food market, they can opt for a number
of tactics using this strategy to maintain their industry
position. They can continue their expansion tactics by
continuing to open more stores around the world. This
expansion would help defend against and help to
discourage smaller companies from increasing their
market share. In addition, they can also elect to invest
capital in R&D to aid in developing new technologies for
their operations. These new technologies will help them
remain cost-competitive and technologically progressive.
Global Strategy: McDonald's already holds a strong
position in the global economy. Our recommendation is
that they decrease expansion in the almost saturated
domestic markets, and continue their expansion in foreign
countries, such as Asia, and the Pacific. Companies
generally expand into foreign markets in an attempt to
gain new customers and capitalize on core competencies.
McDonald's core competency is that they are able to
produce and sell quick and cheap food to a large number
of customers. With this concept, they have been able to
expand into other countries, and they currently are the
largest global fast-food chain in the world. Since they
already hold this lucrative position, they should continue
expansion in an effort to drive out competition. One strong
recommendation would be for McDonald is to expand into
emerging markets. Since they focus on low-priced food, it
is likely that many could afford their products, and
therefore, McDonald's could expand into a stronger
company.
Diversification: One strategy that McDonald's as well as
many of the other fast-food chains have embraced is that
of diversification. We feel that McDonald's should continue
this trend. With the large health-craze hitting the United
States, many restaurants have to change to healthier,
higher quality menu items. The fast-food industry is no
exception. Healthier burgers, low-fat salads are all
popping up on menus across the country. We feel
McDonald's should continue its diversification and
incorporate more healthy foods, including low-carb
burgers and fries. If McDonald's is able to stay ahead of
the competition in this aspect, they will have a strong
competitive advantage over such companies as Wendy's
and Burger King.
Recommended Strategy:Stay-on-the-offensive strategy: The main goal of the stay-
on-the-offensive strategy is to be a proactive market
leader. The principle of this strategy is to continually stay
one-step ahead of your competitors and force them to
play catch up. McDonald's is already the industry leader in
the fast-food industry with a market share of 33 percent
compared with the number two chain in the industry,
Burger King at 13 percent market share. They can stay out
front by implementing technological improvements in their
restaurants to enhance the production methods or to
improve the ordering process of the customer. In addition,
they can also introduce new or better product offerings to
satisfy the needs of their customers. The best approach
that McDonald's can take through this strategy is to
improve their customer service. McDonald's customer
service ranking was the lowest in the fast-food industry
and was even lower than the Internal Revenue Service. To
improve upon this substandard attribute, McDonald's
should revamp their training process for newly hired
employees and introduce new educational modules for
currently employed personnel.
Executing the strategy and controlMcDonalds has, already made a presence in the market
and had made itself a household name. It is already the
largest hamburger chain in the world. Therefore, it needs
to continue onward with its successes while being a head
every time with new product innovation, marketing
schemes, technology development, customer service,
employee training. By improving the standards and raising
the bar a little higher for employee, expectations will
result in success stories from stores worldwide. The "Plan
to Win" strategy is important in the offensive strategy
because it is about being innovative and challenging to
the competitors. It proves that McDonalds is not just about
profit only, they have made great leaps to show
appreciation for their employees. Happy employees will
result in better performance and give the reputation a
whole new look on top of its current one. One of
McDonald's key success factors has been its implantation
of its Plan to Win. The plan focuses on five key drivers of
success; people, product, place, price, and promotion. The
first factor is McDonald's people or employees. McDonald's
is striving to do a better job of staffing during busy periods
as not to overwhelm and to reward outstanding
employees for exception work. It is also putting more
emphasis on its hospitality training to ensure a friendlier
and customer focused support staff.
Differentiation:
When a company differentiates its products, it is often
able to charge a premium price for its products or services
in the market. Some universal examples of differentiation
comprise better service levels to customers, better
product performance etc. in judgment with the existing
competitors. Porter (1980) has argued that for a company
employing a differentiation strategy, there would be extra
costs that the company would have to invite. Such extra
costs may include high promotion spending to promote a
differentiated brand image for the product, which in fact
can consider as a charge and an investment. McDonalds,
for instance, is differentiating by its especially brand
surname and brand images of Big Mac and Ronald
McDonald.
Differentiation has many advantages for the firm, which
makes use of the strategy. Some problematic areas
include the difficulty on part of the firm to approximation if
the extra costs entailed in differentiation can actually
improved from the customer through superiority pricing.
Moreover, successful differentiation strategy of a rigid
may be a magnet for competitors to enter the company's
market segment and copy the differentiated product.
Conclusion
McDonalds has seen many changes, good and bad during
its creation and duration of the business. As long as the
core competencies are recognized and never forgotten,
then this business will continue to thrive. With every issue
and challenge the corporation faces, it has the opportunity
to improve itself and prove itself to the public,
shareholders, and stakeholders. With every battle
conquered, another one rises and with a secure mission
and vision in mind, the corporation should never stray too
far from the roots and success of the company. The
recommended strategy will strengthen this plan because it
is doing what McDonalds does best and more so. Despite
the downturn the company has seen, the general
impression we receive from McDonald's financial situation
is that the company is slowly climbing out of a low period
and making a turnaround. We must never forget the key
success factors of the business, which really makes the
business for what it is today, including franchises that
offer quick, efficient service in a clean friendly
environment.
Appendix A
SWOT AnalysisStrengths
Owns one of the world's best known brand names
Real estate operations bring in large revenues and allow
McDonald's to open more stores
Countless new innovations- breakfast, playpens, etc.
Specialized training for managers- Hamburger University
Reinstitute the restaurant review operation (QSC)
Large market share
Strongest international presence among fast-food chains
Strong leader in Jim Cantaloupe
McDonald's does not need to act as finance business to
franchises
McDonalds Plan to Win- focuses on people, foodstuffs,
place, price and promotion
Weaknesses
Customer service ranking is the lowest among fast-food
chains
Many stores beginning to look dated
Quality becoming inconsistent
Order accuracy is low compared to other chains
Opportunities
Diversification and achievement of other quick-service
restaurants
Low-cost menu to attract different customers
Initial public offerings in other countries could raise
revenues
Retail merchandise potentially used to raise revenues
Threats
Increased competition among rival sellers, including price
wars, product innovation, and growth
Health conscious consumers demanding better quality,
healthier menu items
All fast-food chains expected to struggle to meet new
consumer health expectations
Overall weaker economy
A Concept Tour on the Market StructureMarket structure
Imperfect competition
Perfect competition
Monopolistic competition
OligopolyMonopolyIt is a perfectly competitive marketIt isn't a perfectly competitive marketThere are a large number of buyers and sellers in the
stock market.
Shares of the same company are homogeneous.
It is easy to enter or exit the stock market. E.g. by ringing
up a broker, one can buy or sell shares.
Investors can get information about the stock from its
annual reports, newspapers, magazines, brokers or
friends.
Some big investors, such as fund managers, can influence
the prices of certain shares through their buying and
selling decisions.
Stock analysts, company directors and institutional
investors have access to more information about the
company than individual investors. Hence, information is
not equally distributed in the stock market.
Read more:
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the-international-market-leader-for-fast-food-marketing-
essay.php#ixzz3p1yIBAr4Mcdonalds The International Market Leader For Fast Food Marketing EssayMcDonald's is now the international market leader for fast
food, and has been ever since its pioneering first
restaurant was launch in San Bernardino, California in
1948. McDonalds is an almost perfect industrial system: a
conveyor belt in an environment, which is inadvertently
design as a blueprint of the traditional manufacturing
organization in the factory as F. W. Taylor conceived it and
his successors (Hussey 1992). Its geographical structure
along with the bureaucratic culture supplements its low-
cost leadership and analyzer business strategy. As a
development strategy, franchising has become a major
catalyst in the expansion of the McDonalds business
throughout the world. The success of McDonalds based on
a simple and effective strategic formula: standardization
of service into a package of the smallest detail, strict
quality control, and cost-effective production by young,
cheap, unskilled workers supervised by managers on the
shop floor. The growth comes from franchising out this
concept and the brand name to entrepreneurs. Its human
resource management policies are tightly and strictly
controlled giving an anarchical power over the employees
and dissuading them from becoming anti-organizational at
anytime. This is evident from their history of anti-unionist
stand (Royle 2002). The McDonalds HRM concept is so
successful that it can handle a personnel turnover of more
than 100 % a year, a rate that would grind any car
manufacturer to a halt. At McDonalds, the system is
greater than the individual is, the tasks of the employees
simplistic is.
Analyze "Strategy adoption of McDonald's should be done according to the markets which they exit/operate in"
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International research taught us that McDonald has had
consent to change on from a globally schizophrenic brand
approach to one that had ordinary appeal. Therefore, we
united voices worldwide to sing the same product tune,
delivering a value plan with universal petition among
moms, kids, and teens alike: "Simple, Easy, and pleasure."
McDonald's global sales have increased seven percent
yearly in 2008, in large part due to the adoption of the
new product policy in markets like Europe and Asia where
sales increases are averaging nearly 10 percent.
IntroductionHistory:The original founders of McDonald's, and the fast-food
concept, were brothers Dick and Mac McDonald. In 1948,
they modified their drive-in restaurant, creating the
standard for the contemporary fast-food restaurant of
modern times. From the introduction of a limited menu of
just nine items, and by focusing on efficient production
and service, the brothers were able to halve the price of
their hamburgers to 15 cents. In 1962, the golden arches
adopted as its corporate logo, with the introduction of
Ronald McDonald as its mascot arriving the following year.
In 1965, McDonald's Corporation went public, and by 1966
listed on the New York Stock Exchange. In 1967, its first
restaurants outside of the United States opened in Canada
and Puerto Rico. From then on, it expanded rapidly.
Franchises:
The McDonald's Corporation is the largest worldwide
franchised food service organization. In the 1960's, Ray
Kroc franchised restaurants for the low sum of $950,
demanding 1.9% of sales. McDonald's are able to
overcome cultural barriers that have previously hindered
other organizations. Because the local people immediately
translate both the product and service, there is little hint
of what may be construed as US brand culture.
McDonald's is simultaneously global and local. Clearly, an
increase in the number of franchised restaurants leads to
the direct effect of an increase in McDonalds' revenues.
McDonald's can also boast that it is the largest retail
property owner in the world.
Mission and Vision:
Vision:
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."Mission:
McDonald's brand mission is to "be our customers' favorite place and way to eat." Our worldwide
operations have aligned around a global strategy called the Plan to win centering on the five basics of an exceptional customer experience - People, Products, Place, Price, and Promotion. We are committed to improving our operations and enhancing our customers' experience.Business Strategy of McDonalds:
a) Strategic Approach:Considering McDonalds under Porter's competitive
strategies, it can conclude to have a low-cost leadership
approach. McDonalds uses an overall low-cost leadership
strategy to reduce costs and increase sales.
Using Miles and Snow's Strategy, McDonalds follows an
analyzer type of strategy, constantly introducing new
products while defending their existing products (Daft
2000).
Its business strategy takes an efficiency approach and is
associated with strong, centralized authority and tight
control, standard operating procedures, and emphasis on
efficient procurement and distribution systems. Also,
employees perform routine tasks under close supervision
and control and are not allowed to make decisions or take
actions on their own.
Key elements of McDonald's business strategy are:
-Â Â Â Â Â Â Â Â Adding 700-900 restaurants annually.
-Â Â Â Â Â Â Â Â Using new menu items, low price
specials, 'Extra' offers.
-Â Â Â Â Â Â Â Â Value Meals to promote frequent
customer visits.
-Â Â Â Â Â Â Â Â Being highly selective in granting
franchises.
-Â Â Â Â Â Â Â Â Choosing sites convenient to customers.
-Â Â Â Â Â Â Â Â Focusing on limited product line &
consistent quality.
-Â Â Â Â Â Â Â Â Careful attention to store efficency.
-Â Â Â Â Â Â Â Â Extensive advertising & use of Mc prefix.
Hiring courteous personnel; paying an equitable wage &
providing good training.
Strategies of McDonald:Mc Donald is one of the famous food chain all throughout
the world known by both the child and adult alike. It has
increased its sales despite some issues raised against the
company. To further, increase sales on
the business and improve its
performance, business strategies done by person in-
charge. It is in this stage wherein the company would
improve what they lack thus making prospective
customers to keep on coming back and ask for more. It
says that McDonald has been able to use various
strategies to uplift and sustain their competitive
advantage in the market.
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Part of its business strategy is its plan to phase out its
Super Size French fries and soft drinks as it tries to create
a healthier image for itself. The Super Size option is to be
phase out in an attempt to slim down its menu amid
increasing concerns and issues being raise about obesity
(Crouch, 2004). The company is also planning other menu
changes, such as switching to a cinnamon roll and a
sausage burrito as its core breakfast offering, while bagels
would become an optional item. The company also has to
stop selling its 14-ounce McDonald is Fruit n Yogurt Parfait
and replaced it with a smaller-sized version of the product
(Crouch, 2004). All these changes in the menu are part of
its strategy to provide a range of choices that support a
balanced lifestyle. The company has also added that the
simplified core menu would roll out to its entire restaurant.
                      Strategies in
other areas of the organization is also made like the three-
wheeled vehicle that is used to collect discarded cups and
burger wrappings from the neighbourhood around the
restaurant and the provision of good services to customer
which naturally begins and commences with hiring the
right kind of people (Livesey, 1999). Staffs are encouraged
to smile, be optimistic and treat customers particularly
with respect, tell them what a person wants and follow up
on the performance and reward their behaviour. The
restaurant's bathroom is not spare. Issues are raise on the
concerns about the said restaurant to be dirty and
unhygienic. Customers want a clean area especially the
bathroom to make they feel comfortable. Strategies like
this should also apply (Livesey, 1999).
McDonald's has developed three strategies for sustaining
the competitive advantage. These are customer value,
convenience, and optimal business operations.
Together with the information technology strategies, it
helps the company to create new and innovative ideas for
the company. The McDonald's restaurants are describe by
the functions of the team as miniature manufacturing
facilities. With the McDonald's objective of improving the
suite of its business systems, which supports the store,
the management of McDonald has developed ways of
using effective marketing and management strategy its
overall operations.
In order to adapt with the latest trends of having healthier
menus, the company extends their services for family
retreats and as a centre of community for senior citizens.
The means for the former one are its innovation with their
products to offer healthier foods. As this trend continues,
an extension of more people -oriented strategies is need.
The company also conducts studies and surveys as part of
their business strategy better know which among the
different alternatives serves the objective of McDonald is
the best.
To achieve customer convenience and satisfaction, one of
their key initiatives is on the improvement of the
ambience and looks of their stores in the country. The
adherence of the company to put WIFI technology in their
stores for instance has also become one of the attractive
forces for customers. For the achievement of customer
value, focus of the company remain on real-time
information flow which permits instant corrections of the
menu and prices in response to preferences and changing
needs of the customers and competitive environment.
 Competition:One of the major issues for McDonald's is it competitors.
Burger King is the second largest hamburger fast-food
chain in the world and is the number one competitor for
McDonalds. Burger King has 11,400 locations in 58
countries and derives 55 percent of its revenue from the
drive-through window. Burger King reported 1.72 billion in
2002 in revenue which is a 17 percent increase compared
to a 4 percent increase reported by McDonald's over the
same period. Burger King's distinct assets include the
unique Whopper with its one of kind charbroiled taste and
the company policy of preparing the hamburger any way
that the customer wants it. Burger King has distinguished
itself over the years in many ways including being the first
in the fast-food industry to enclose its patio seating in
1957 thereby offering customer indoor dining experience.
Burger King also differentiated itself when it installed the
drive-through window in its restaurants in 1975. In
addition to the Whopper Burger King also offers a few set
items on its break-fast menu that differs it from it
competitors including the Croissan'wiches and French
toast sticks. The rest of the menu also offered the unique
veggie burger and chicken Caesar salad.
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Wendy's is the third largest fast-food chain with 9,000
stores in 33 countries worldwide.
Hardees's is the fourth largest fast-food chain in the
nation. It holds 2,400 locations in 32 states and 11
countries.
Jack in the Box, another major competitor in fast-food
industry, has of 1,850 restaurants in 17 states.
Sonic yet another major competitor owns 2,700 locations.
Value Chain AnalysisThe value chain at McDonald's is very competitive in the
global fast-food industry. The following table shows the
costs and markups associated with McDonald's signature
hamburger, the Big Mac, bought at a McDonalds.
The Big Mac's average price of $2.80 compares favorably
to the various signature items at other fast food retailers,
such as Burger King and Wendy's. The royalties paid by
franchisees back to the McDonalds.
McDonalds Corporation has evolved in different ways and
in different areas due to inappropriate or outdated
processes and the changing internal and external global
environment. It is during these changes that process
determination, manipulation, and management reach their
height of importance. The first process change that
McDonalds went through in order to enhance its value
delivery is automation. This required the company to
change the application of its entire value chain in order to
reorganize its food processing, cooking and food delivery
to provide benefit to its customers. Raw food processed
through an assembly line utilizing a strict process with
each worker assigned to a single specific task. Cooking
done by strictly following a process and food delivery
removed dine-in space to speed up the process of fulfilling
orders.
           The second process change that
McDonalds had to manage was its expansion into other
countries and different business environments. The
company realized that it had to adapt to the unique
customer demands in different countries if it were to
succeed in taking hold of the global market. McDonalds
had to adjust its food preparation, cooking and delivery
service to meet new demands. Originally, hamburger
patties are made of processed ground beef. However, in
India, cows are deeming sacred and the people do not eat
beef. The company had to change their food ingredients
from beef to mutton for the burger patties and change the
process of preparing french-fries from seasoning it with
beef-based flavoring to the use of substitute flavoring to
respect the reverence for cows and its consideration as a
non-food source. Â Â
           The third process change that
McDonalds Corporation had to address is the intensity of
the negative publicity that the company faced from animal
rights and human rights advocate criticizing the manner
that the company treats animals in growing and preparing
these as food raw materials as well as the treatment of
their workers and employees. In terms of animal rights,
advocate groups claim that the company supports the
practices of commercial farmers of keeping cows and
chickens in closed spaces to obtain optimized weight gain
through lack of movement and physical action implying
the lack of consideration for animal welfare. In relation to
human rights, labor groups claim that McDonalds runs a
restrictive and anti-labor organization by not allowing its
workers and employees to create unions as well as
providing only minimal wages and benefits, particularly in
developing countries, that do not meet international labor
standards. McDonalds took years to shift its processes to
accommodate these issues, which is still a continuing
endeavor. Instead of applying a uniform standard for all its
franchises, McDonalds is shifting to customized food and
service based on the demands of a given market.
McDonalds opted to pull out unprofitable chains due to
strong negative publicity and concentrate in areas with
positive reception.
           These process changes are
important to organizations in channeling their resources
towards activities that work for the company. McDonalds
directs different facets of organizational processes in
creating and delivering value by evaluating the
appropriateness of inputs and the corresponding methods
and then linking the inputs and methods to achieve
desired results. Without processes, McDonalds does not
have the mechanism by which to assess changes in
market conditions and rising issues, redirect its inputs and
methods to meet these changes and issues, and integrate
inputs and methods towards desired outputs.
   Porter's Value Chain:
Mc Donald's support
Activities
Margin failed
In India & pulled
Out in USA
Margin now outstanding in Singapore &
Australia.Procurement: with expertise sought partners on
down trade distribution.
HRM Specialists in R & D and expertise, in food
formulation, Support education to raise awareness of
issues & raise demand.
Technology & development research are developments in
Quality assurance, packaging was readdressed to lower
cost.
Infrastructure :- International organization more than
50,000 employees works in more than 50 countries,
company goal to developing low income products
McDonald's
Primary
Activities
In bound Operations Out Marketing ServiceLogistics boundLogistics & Sales providedBy the
Inbound R & D in Lack of Lack of companies
To be used field control under enrollment
In products research of out standing standards
Needs of bound between
Information end users. failed the
formed in India customers
from substitute
nutritional Quality products
studies. Development were
in easily
collaboration launched
With good in India.
suppliers.
The goal of these activities is to offer the customer a level
of value that exceeds the cost of the activities, thereby
resulting in a profit margin for McDonalds. The primary
value, chain activities:
Inbound Logistics: the receiving and warehousing of raw
materials and their distribution to manufacturing, as they
are required.
Operations: The processes of transforming inputs into
finished products and services.
Outbound Logistics: The warehousing and distribution of
finished goods.
Marketing & Sales: The identification of customer needs
and the generation of sales.
Service: the support of customers after the products and
services sold to them. These primary activities are
supported by:
Technology & Development: Technologies, to carry value-
creating behavior.
The value chain model is a useful analysis tool for defining
a firm's core competencies and the activities in which it
can pursue a competitive advantage as follows:
Cost advantage: by better understanding costs and
squeezing them out of the value-adding activities
Five Competitive Forces:The quick-service sandwich industry faces competitive
pressures from a number of forces. The major competitive
threats originate from competing sellers in the industry as
well as firms in other industries that offer substitute
products. McDonald's main competitors within the quick-
service sandwich industry are continually deriving new
strategies through offensive and defensive tactics in order
to gain customers and market share. In 1989, Wendy has
implemented the 99-cent value menu as an offensive
strategy to gain customers looking for a quality product at
a value price.
Substitute Products:In addition to competition from rival sellers in the industry,
sandwich firms also face intense competitive pressure
from firms in other industries selling substitute products.
The substitute products for the fast-food industry are
probably some of the most diverse in the world. These
substitute products may include products purchased from
the local grocery store, food from sit-down restaurants, or
delivery foods such as pizza. The primary issue with these
substitute products is that they are readily available to the
customer and the customer tends to view them as being
comparable or better in terms of the quality of fast-food
products.
New Entrants:The threat of potential new entrants and the bargaining
power of suppliers is not a significant competitive force in
the fast-food industry. Occasionally, new entrants will
come along and compete with firms in the fast-food
industry and offer substitute products. However, in order
to compete on a large scale, it will require a great deal of
capital to invest in real estate and build physical
restaurant locations. In addition, the market is already so
saturated that the new competitor might find it difficult to
establish a customer base and become profitable.
Suppliers in the fast-food industry do not have substantial
bargaining power due to the fact that firms in the fast-food
business tend to purchase their materials from various
outlets. One company might purchase their meat supplies
from a couple different meat manufacturers, then
purchase their dairy needs from a number of different
dairy companies, and also purchase their bakery products
from a variety of sources. Since the fast-food firms divide
their purchases among a diverse array of suppliers, the
suppliers tend to have little or no bargaining power or
leverage since there are multiple suppliers for the same
products.
Driving Forces:There are a number of driving forces which have molded
the current state of the fast-food industry. In the
beginning, fast-food companies typically focused on being
the low-cost provider and sought to expand into as many
markets as possible. As these national brands have grown,
the markets they are competing in have become overly
saturated with restaurant options. As a result, the fast-
food industry has begun to focus on the needs of the
customer. The buyer has a great deal of leveraging power
due to the fact that if they are dissatisfied with one brand
they can easily switch or purchase from an alternate
brand with little or no monetary repercussions. The fast-
food firms have implemented strategies to improve the
quality of customer service and the cleanliness of the
restaurant locations in order to please their customers in
hopes that they will become a repeat customer.
New Menu Items:Mcdonalds have, for the most part, always been related to
an unhealthy lifestyle. As a result, customers who are
health-conscious have tended to take their business
elsewhere to restaurants that offer nutritious alternatives.
In response to the health-conscious lifestyle that people
have adopted, the majority of the national chains have
created new menu items to cater to this demographic.
Customers are the main driving force behind the daily
operations of fast-food firms. They are the reason that
companies have attempted to upgrade the quality of their
customer service and their needs have lead to the
creation of new products to satisfy their demands.
Strategic Moves:A number of competitors in the fast-food industry have
expanded beyond their traditional offering of generating
revenues from their mcdonalds. Major chains such as
McDonald's have acquired smaller chains Boston Market,
Chipotle Mexican Grill, and Donato's Pizza. Wendy's has
also grown by acquiring smaller companies such as Tim
Horton's and Baja Fresh Mexican Grill. These acquisitions
were executed in hopes of generating revenue from
multiple sources and also to help support the company's
growth over the long term. Over the past couple of
decades, the major chains have also begun to expand into
the global marketplace and have opened franchises up
around the world. McDonald's currently operates in over
120 countries around the world with over 30,000 stores.
Burger King has 11,400 stores in 58 countries and
Wendy's operates 9,000 restaurants in 33 countries
worldwide. These fast-food firms have seen countries
outside the U.S. as markets that have an enormous
growth potential. In order to cater to the different cultures,
companies such as McDonald's and Burger King have
offered menu items with a distinctively local flavor.
Strategic Groups:The fast-food industry is primarily composed of national
chain brands. As a result, there are just a couple of
strategic groups associated with the fast-food market. The
major national chain brands such as McDonald's, Burger
King, Wendy's, Hardees's, and Jack in the Box compete in
markets throughout the United States and around the
world. Their strategies are focused on providing a product
that is based on low-price convenience. Their strategic
group is associated with many geographic locations and
low price and quality. In competition with these large
multinational firms are local McDonalds. Local McDonalds
focus on providing their customers with a quick, cheap
alternative to the national brands. These businesses offer
a low price and low quality product in few localities.
Fast Service:Over the past couple of years, there has been a growing
trend in the restaurant industry to provide customers with
a higher quality product in a short amount of time. These
restaurants are typically refer to as "fast casual" or
"quality quick service." They aim to provide freshly
prepared, made-to-order meals. Their operations combine
the speed and convenience of traditional fast food with
the food quality and appealing décor of casual-dining
restaurants. There are a number of national chains that
fall into this strategic group of providing a high quality
product in many geographic locations and there are also
some businesses that function in a couple locations and
provide a similar high quality product.
Cost Analysis:Â Analysis suggests that McDonald's needs improvement in
cost control. Their depreciation and extraordinary
expenses rank below average compared to competitors;
indicating cost financial areas McDonald's must address in
order to remain competitive within the industry. As a
result of their better than average selling, general, and
administrative costs this helps improve their overall cost
situation. Interest and cost of goods sold are among
average in the industry however, they are located on the
low end of the spectrum. This again indicates areas of
improvement about cost management by the company.Â
Although many of the costs were, incur during
Greenberg's tenure as CEO Financials show cost control
improvement. Despite their below average ratings and
un- weighted trend of 0.4 and a weighted trend of 0.02
suggest that among all cost ratios McDonald's is on the
road to improvement.
How McDonald's business structure influences its strategy?The McDonald's business structure based upon a
geographic structure. When log on their website, you will
ask to choose the country that you are interested in.
Actually, McDonald has divided its operations into five
geographical divisions.
So each full functional geographic unit of McDonald's was
required to wholly response for producing and marketing
its products in that region. Through this regional structure,
McDonald's could not only satisfy the local consumers'
needs in different geographical areas but also pursuing
'maximum local development'. Actually, they produce and
market slightly different types of products in different
areas, and they even have different prices.
The consumers in different countries having different
foods requirements, McDonald's keep launching new
products for their regional consumers. In this, case China
and France can be very good examples.
Strategic Allies:A strategic ally is an organization working together with
one or more other organizations is a joint venture or a
similar arrangement.
McDonald's has formed a strategic alliance with Wal-Mart,
Chevron, Amoco, Disney and Coca-Cola.
Wal-Mart, which is a large shopping mall chain in the U.S.
and several neighboring countries, allied with McDonald's,
which offers great opportunities for both companies.
McDonald's has restaurants in each Wal-Mart, offering its
customers conveniences and excellent fast food at a low
cost ease of accessibility. McDonald's corporation
describes it best in this scenario: "Imagine a busy
shopping day at your local Wal-Mart and having the ability
to sit down with the kids and enjoy many of our
McDonald's favorites, like 'Big Mac' sandwiches, world
famous fries and kids favorite 'Happy Meal'. McDonald's
understands your busy lifestyles and the demands on your
time. That's why we are making it easier for you to do
more things in less time."
McDonald's is engaged in an alliance with two petrol
companies, Chevron and Amoco. This alliance represents
the ultimate in convenience. At these locations, one finds
a full-menu McDonald's restaurant with dining room
service. Nothing can be more convenient, because one
can fill up the car with gas and get a meal all in one stop.
Another important alliance that McDonald's has is with
Disney. Here McDonald's has the sole right to sell fast food
in Disney's theme parks around the U.S and other Disney
operations in the world. Under the terms of the
agreement, McDonald's will operate restaurants and
Disney will promote its films through McDonald's.
Alternate StrategiesStrategic PossibilitiesStay-on-the-offensive strategy: The main goal of the stay-
on-the-offensive strategy is to be a proactive market
leader. The principle of this strategy is to continually stay
one-step ahead of your competitors and force them to
play catch up. McDonald's is already the industry leader in
the fast-food industry with a market share of 33 percent
compared with the number two chain in the industry,
Burger King at 13 percent market share. They can stay out
front by implementing technological improvements in their
restaurants to enhance the production methods or to
improve the ordering process of the customer. In addition,
they can also introduce new or better product offerings to
satisfy the needs of their customers. The best approach
that McDonald's can take through this strategy is to
improve their customer service. McDonald's customer
service ranking was the lowest in the fast-food industry
and was even lower than the Internal Revenue Service. To
improve upon this substandard attribute, McDonald's
should revamp their training process for newly hired
employees and introduce new educational modules for
currently employed personnel.
Fortify-and-defend strategy: The purpose of this strategy
is to make it harder for challengers to gain ground and for
new firms to enter. A fortify-and-defend strategy works
well with firms that have already achieved industry
dominance. Since McDonald's is already the industry
leader in the fast-food market, they can opt for a number
of tactics using this strategy to maintain their industry
position. They can continue their expansion tactics by
continuing to open more stores around the world. This
expansion would help defend against and help to
discourage smaller companies from increasing their
market share. In addition, they can also elect to invest
capital in R&D to aid in developing new technologies for
their operations. These new technologies will help them
remain cost-competitive and technologically progressive.
Global Strategy: McDonald's already holds a strong
position in the global economy. Our recommendation is
that they decrease expansion in the almost saturated
domestic markets, and continue their expansion in foreign
countries, such as Asia, and the Pacific. Companies
generally expand into foreign markets in an attempt to
gain new customers and capitalize on core competencies.
McDonald's core competency is that they are able to
produce and sell quick and cheap food to a large number
of customers. With this concept, they have been able to
expand into other countries, and they currently are the
largest global fast-food chain in the world. Since they
already hold this lucrative position, they should continue
expansion in an effort to drive out competition. One strong
recommendation would be for McDonald is to expand into
emerging markets. Since they focus on low-priced food, it
is likely that many could afford their products, and
therefore, McDonald's could expand into a stronger
company.
Diversification: One strategy that McDonald's as well as
many of the other fast-food chains have embraced is that
of diversification. We feel that McDonald's should continue
this trend. With the large health-craze hitting the United
States, many restaurants have to change to healthier,
higher quality menu items. The fast-food industry is no
exception. Healthier burgers, low-fat salads are all
popping up on menus across the country. We feel
McDonald's should continue its diversification and
incorporate more healthy foods, including low-carb
burgers and fries. If McDonald's is able to stay ahead of
the competition in this aspect, they will have a strong
competitive advantage over such companies as Wendy's
and Burger King.
Recommended Strategy:
Stay-on-the-offensive strategy: The main goal of the stay-
on-the-offensive strategy is to be a proactive market
leader. The principle of this strategy is to continually stay
one-step ahead of your competitors and force them to
play catch up. McDonald's is already the industry leader in
the fast-food industry with a market share of 33 percent
compared with the number two chain in the industry,
Burger King at 13 percent market share. They can stay out
front by implementing technological improvements in their
restaurants to enhance the production methods or to
improve the ordering process of the customer. In addition,
they can also introduce new or better product offerings to
satisfy the needs of their customers. The best approach
that McDonald's can take through this strategy is to
improve their customer service. McDonald's customer
service ranking was the lowest in the fast-food industry
and was even lower than the Internal Revenue Service. To
improve upon this substandard attribute, McDonald's
should revamp their training process for newly hired
employees and introduce new educational modules for
currently employed personnel.
Executing the strategy and controlMcDonalds has, already made a presence in the market
and had made itself a household name. It is already the
largest hamburger chain in the world. Therefore, it needs
to continue onward with its successes while being a head
every time with new product innovation, marketing
schemes, technology development, customer service,
employee training. By improving the standards and raising
the bar a little higher for employee, expectations will
result in success stories from stores worldwide. The "Plan
to Win" strategy is important in the offensive strategy
because it is about being innovative and challenging to
the competitors. It proves that McDonalds is not just about
profit only, they have made great leaps to show
appreciation for their employees. Happy employees will
result in better performance and give the reputation a
whole new look on top of its current one. One of
McDonald's key success factors has been its implantation
of its Plan to Win. The plan focuses on five key drivers of
success; people, product, place, price, and promotion. The
first factor is McDonald's people or employees. McDonald's
is striving to do a better job of staffing during busy periods
as not to overwhelm and to reward outstanding
employees for exception work. It is also putting more
emphasis on its hospitality training to ensure a friendlier
and customer focused support staff.
Differentiation:
When a company differentiates its products, it is often
able to charge a premium price for its products or services
in the market. Some universal examples of differentiation
comprise better service levels to customers, better
product performance etc. in judgment with the existing
competitors. Porter (1980) has argued that for a company
employing a differentiation strategy, there would be extra
costs that the company would have to invite. Such extra
costs may include high promotion spending to promote a
differentiated brand image for the product, which in fact
can consider as a charge and an investment. McDonalds,
for instance, is differentiating by its especially brand
surname and brand images of Big Mac and Ronald
McDonald.
Differentiation has many advantages for the firm, which
makes use of the strategy. Some problematic areas
include the difficulty on part of the firm to approximation if
the extra costs entailed in differentiation can actually
improved from the customer through superiority pricing.
Moreover, successful differentiation strategy of a rigid
may be a magnet for competitors to enter the company's
market segment and copy the differentiated product.
ConclusionMcDonalds has seen many changes, good and bad during
its creation and duration of the business. As long as the
core competencies are recognized and never forgotten,
then this business will continue to thrive. With every issue
and challenge the corporation faces, it has the opportunity
to improve itself and prove itself to the public,
shareholders, and stakeholders. With every battle
conquered, another one rises and with a secure mission
and vision in mind, the corporation should never stray too
far from the roots and success of the company. The
recommended strategy will strengthen this plan because it
is doing what McDonalds does best and more so. Despite
the downturn the company has seen, the general
impression we receive from McDonald's financial situation
is that the company is slowly climbing out of a low period
and making a turnaround. We must never forget the key
success factors of the business, which really makes the
business for what it is today, including franchises that
offer quick, efficient service in a clean friendly
environment.
Appendix ASWOT AnalysisStrengths
Owns one of the world's best known brand names
Real estate operations bring in large revenues and allow
McDonald's to open more stores
Countless new innovations- breakfast, playpens, etc.
Specialized training for managers- Hamburger University
Reinstitute the restaurant review operation (QSC)
Large market share
Strongest international presence among fast-food chains
Strong leader in Jim Cantaloupe
McDonald's does not need to act as finance business to
franchises
McDonalds Plan to Win- focuses on people, foodstuffs,
place, price and promotion
Weaknesses
Customer service ranking is the lowest among fast-food
chains
Many stores beginning to look dated
Quality becoming inconsistent
Order accuracy is low compared to other chains
Opportunities
Diversification and achievement of other quick-service
restaurants
Low-cost menu to attract different customers
Initial public offerings in other countries could raise
revenues
Retail merchandise potentially used to raise revenues
Threats
Increased competition among rival sellers, including price
wars, product innovation, and growth
Health conscious consumers demanding better quality,
healthier menu items
All fast-food chains expected to struggle to meet new
consumer health expectations
Overall weaker economy
A Concept Tour on the Market StructureMarket structure
Imperfect competition
Perfect competition
Monopolistic competition
OligopolyMonopolyIt is a perfectly competitive marketIt isn't a perfectly competitive marketThere are a large number of buyers and sellers in the
stock market.
Shares of the same company are homogeneous.
It is easy to enter or exit the stock market. E.g. by ringing
up a broker, one can buy or sell shares.
Investors can get information about the stock from its
annual reports, newspapers, magazines, brokers or
friends.
Some big investors, such as fund managers, can influence
the prices of certain shares through their buying and
selling decisions.
Stock analysts, company directors and institutional
investors have access to more information about the
company than individual investors. Hence, information is
not equally distributed in the stock market.
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