Documente Academic
Documente Profesional
Documente Cultură
st
January 2011
Number of words:
Contents
Introduction........................................................................................................3
The company.....................................................................................................3
Business Strategy..............................................................................................3
Three components of strategy...........................................................................3
The Business Strategy of McDonalds...............................................................4
SWOT Analysis..................................................................................................6
Strengths............................................................................................................6
Weaknesses......................................................................................................7
Opportunities......................................................................................................7
Threats...............................................................................................................8
Porter Five Forces Model..................................................................................8
PEST Analysis...................................................................................................8
Political factors...................................................................................................9
Sustainable Competitive Advantage................................................................10
McDonalds Sustainable Competitive Advantage............................................11
Entering new markets......................................................................................13
Mc Donalds New Market.................................................................................13
Research..........................................................................................................14
Advertising.......................................................................................................15
Success...........................................................................................................16
References.......................................................................................................16
Introduction
In this assignment we will examine and evaluate the business strategy of the
fast food chain Mc Donalds. We will look into all the key elements of their
business strategy and the methods they use to sustain their success. We will
also look into a new market they have entered and how successful they have
been.
The company
McDonald's is the leading global fast food retailer with more than 32,000 local
restaurants serving more than 60 million people in 117 countries each day.
More than 75% of McDonald's restaurants worldwide are owned and operated
by independently. Mc Donalds is well known to the world for serving, World
Famous Fries, Big Macs, Quarter Pounders, Chicken Mc Nuggets, Egg Mc
Muffins and many more. Mc Donalds constantly update and improve their
menus to ensure customer satisfaction. The strong foundation that was built
in the 1940s when the company was founded continues today with
McDonald's vision and the commitment of their talented executives to keep
the shine on McDonald's Arches for years to come.
Business Strategy
According to Chandler, Strategy is the determination of basic long-term goals
and objectives of an enterprise and the adoption of courses of action and the
allocation of resource necessary for carrying out these goals. (Chandler,
1962)
A vice-chairman of the company, Jim Skinner quoted, if you are looking for a
command centre with one push button that operates our restaurants in every
corner of the world you wont find it. What Skinner meant was that even
though McDonalds is a chain and promises to give the same quality of
service in every store around the world there is no fixed plan of how to work
as in each country the consumer needs vary therefore they adapt their
strategy to the countries. For example when McDonalds opened in China it
was not very successful as the food was not to the Chinese peoples taste. In
order to become successful and increase the demand in the region they
introduced more Chicken meals including Chinese spices.
The companys business strategy concludes that they must provide
customers in each country with the same standard of hygiene, service,
packaging, low prices and value for money, standard menu with additional
products in each region for example in Greece you can find the Greek Mac
which is not available in other regions.
One of the cleverest strategies McDonalds used was the introduction of the
happy meal. The happy meal is a meal that was introduced for children
with the meal the child receives a toy that changes according to trends. This
was a very clever way to start attracting small children and giving them the
motive to start collecting the toys. This was a very good way to market
McDonalds because the children tell each other about the meals word of
mouth.
SWOT Analysis
SWOT stands for strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal factors. Opportunities and threats are
external factors. It is the first stage of planning and helps marketers to focus
on key issues. By carrying out a SWOT analysis one can identify what they
are doing wrong but also what they are doing correctly. This is an easy way to
evaluate the companys success and to improve the companys strategy and
find solutions for any problems in the strategy.
Strengths
As a company McDonalds have many strengths, in fact they seem to have
more strengths than weaknesses. The fact that they have so many strengths
is a major advantage for the company. These strengths are:
Large Market share
They promote ethical products
Strong position and financial performance
Strong brand name, image and reputation
Availability of nutritional information on packaging
They plan to win focuses on People, Products, Place, Price and
Promotion otherwise known as the 5 Ps.
Strong performance and position in the global market
Specialized staff training to ensure high quality of service
Strong supply chain
Risk diversity
Although all these strengths are very important to the companys success
some are more important than others. For example the fact that the company
has a well respected image, brand name and reputation has a large impact
on the companys success. In the food market especially the companys
whole image, reputation is very important in order for a company to be
successful.
Weaknesses
The company just like every company has some weaknesses. Although there
are not many weaknesses they do have to be taken into consideration and
must not be underestimated. One of the biggest weaknesses the company
faces is the unhealthy food image. As McDonalds is a fast food Chain
stereotypically and traditionally fast food places are seen as unhealthy. They
employ a large amount of staff that means there are high costs in the staff
turnover department. Another main weakness is the one that most companies
face in any industry fierce competition. There are many other services that
compete with McDonalds such as Burger king and KFC.
Opportunities
McDonalds also many opportunities as a company. These opportunities are:
Consolidation with retailers likely to have better locations for
franchises.
They respond to social changes that take place e.g. healthy eating
range.
Strengthening its value proposition
The new services McDonalds offer the introduction of Mc Cafe,
availability of free WIFI internet, play parks for children and focusing on
healthy food range.
International expansion into parts of Africa and Asia
Growth of the fast food industry
Low cost menu that attracts customers
Threats
The threats the company faces are similar to all threats international
companies today face. One of the main threats is the global recession that is
taking place. Health experts accusing McDonalds of contributing to health
problems such as diabetes, cholesterol and blood pressure. Another main
threat is the fact that McDonalds are an American company and there is a lot
of racism towards the Americans.
Strength of Supplier
Competition
Strength of Buyer
Substitutes
Ease of Entry
All of these five points are very important in maintaining a businesss success.
The restaurant industry is a very competitive industry. Fast food industry is
becoming more and more competitive as there are many small companies in
the industry as well as the large ones. In order to limit the competition Mc
Donalds tries to differentiate their products. To try and enter the food industry
it is difficult and especially to gain a good reputation and brand name. In the
industry there are many substitutes as there are many products that can be
chosen to be substituted. The suppliers in the fast food industry do not have
much power as many of the products are ready made. The buyer has a lot of
strength as they are what keep the company alive.
PEST Analysis
PEST analysis stands for political, economical, social and technological
factors of a company. The PEST analysis method is used vey often in looking
at business strategy and Success.
Political factors
All international operations of McDonalds are tough controlled by the
government because of health problems, like cholesterol, obesity and
cardiovascular concern. McDonalds Company has to give mutual benefits as
tax. Also company should to protect the employees by full hiring,
compensations, training etc.
Economic factors
McDonalds as an international company have to be alert on the global supply
and currencies exchange. Because not all local markets have an abundant of
products, McDonalds have to import the largest part of its raw material like
potatoes and beef to gather the demand of its product. Any change in the
rates of currencies and especially dollar influence on its cost of purchase.
McDonalds must follow the regulation of each country, where exits the
difference in scales and tax between them. The company has to pay both tax
on profit and entertainment and restaurants service tax. Stores must to shell
out the percentage of the profits to a mother company in the USA. Also, the
countrys economic conditions affect on incomes of the company.
Social and cultural factors
McDonalds pay a huge attention to its customers, their preferences and
needs, because of variety of countries and its cultures. So, McDonalds
launched new different menu for each country where stores located. For
example, McDonalds should the changes in the menu in such countries like
India, where people dont eat beef, in Muslim countries where prohibited to
eat the pork. To attract German clients should be offered a good quality beer,
for Finnish menu with accent on fish, for Americans big-sized menu etc. Also
to attract teens and business class clients, company introduce such facilities
as relaxing and comfortable place, wireless internet, credit card payment etc.
Technology factors
McDonalds must to improve itself all the time in sphere of technology and
innovation, like in inventory system, provide chain management system to
supervise its supply, easy payment and ordering systems for its.
McDonalds and the last promotion campaign loving it had a huge success in
the market. McDonalds bring in new technologies like wireless internet, play
spots, computers with the games, happy meals.
Legal factors
McDonalds have to protect clients confidence and its honour by ensuring all
materials and process as its claimed by the law. Another law issues that
company must followed are working hours, business registration, tax
requirement, labour and employment laws and quality and environment
certification.
sustainable, and difficult for other companies to repeat and must be useful for
any kind of situations.
These advantages can be the product, brand, customer care dynamic, the
cost structure or its patterns. From all the benefits the more sustainable of
them should be owned or distinctive to be considered (Prahald and Hamel,
1990).
There are some general strategies that are needed in order for SCA to be
successful they are as followed:
Overall cost leadership for example low-cost position, management of
the relationships throughout the entire value Chain.
Differentiation, creating a product or services that are unique in
comparison to others and are valued.
Focus strategy, narrow product lines, buyer segments or targeted
geographic markets and to attain advantages wither through
differentiation or leadership cost.
recognize and put into practice these assets in the direction towards the
improvement of the company is all that is required. Since 2003 the company
has made it its priority to concentrate on its greatest advantages.
The companys greatest advantage is the vision or the dream that they
started. The ability to sustain this dream over a large period of time is any
companies' greatest advantage. McDonalds originally began in order to help
people who had little time to cook or were busy and could not afford to dine at
a proper restaurant. The vision was to provide cheap quick service, with
quality satisfaction. Over the years the company have tried as hard possible
to stick to this vision and to make it successful.
In simple words and to sum the term up sustainable competitive advantage
means putting into practice the best value based strategy using all the unique
advantages to the company that cannot be copied or replicated by any other
competitors. The importance of the sustainable competitive advantage can
be obvious by what investment guru Warren Buffet gave as an answer when
asked about how he evaluates his investment portfolio. He simply answered
'sustainable competitive advantage'. Based on the dynamic integrated and
intelligent human resources can always be the only dependable and
sustainable SCA.
Today everything is outsourced from employee appointment to finance and
customer care. In many cases no organisation is one of the best ways in
which to handle many different types of work. Sometimes concentrating on
every detail is not possible especially with companies such as McDonalds.
Great care however must be taken in order for them not to outsource the
companys core competence. The main advantages of outsourcing
competitors are to provide cheap service, knowledge of markets offshore,
flexible resources, speedy operations, .expansion in supplier relationship and
so on. One of the ways McDonalds decided to use in order to ensure they
offer an efficient service is the drive through. The drive through means
customers wanting takeout meals can do that from their car, this means that
cues in the store will be reduced and customers in a rush do not have to
waste time getting out of their car.
Although now McDonalds is now one of the most successful fast food
services globally when it first began it had many competitors and it was very
difficult for them to succeed in the market. Today it is the biggest and most
well known fast food service globally and this is mainly due to its good
reputation and high standard of service. When the business first began there
was no guarantee that they would succeed. However they managed to not
only succeed but become one of the biggest companies worldwide, this is
mainly due to their clever strategy and their high standard of service.
McDonalds made marketing a big part of their strategy. They spent a lot of
time and money in order to market all their products new and old in the correct
way. They used many methods to carry this out and made sure they were
becoming a big part of peoples everyday lives no matter the age group.
Research
We carried out a research in a few Mc Donalds restaurants in London asking
customers how theyre view of Mc Donalds changed with the healthy food
range. From this survey we wanted to see how successful Mc Donalds were
with their new market. We decided that the most effective way to gather this
information was to ask the customers themselves. We decided to visit the
restaurant located in Londons Oxford Street. The reason behind this decision
is because the restaurant is located in the centre of London and in one of the
busiest streets in the whole of the country. Another reason why we selected
this store is because there is a wide variety of customers that belong to both
different age groups, different careers groups. Due to this wide variety we
thought that it
would be a good
way to create a
more accurate
view.
We asked 100
people at random
50 of them being
25 and under and
the other 50 were
25-55. We decided
to split them into two categories because usually the under 25s are either
Advertising
Mc Donalds needed a very effective way to advertise their new food range.
The most effective way of course was television advertisements. The target
age group they were aiming to attract was 20-40. They decided to play
advertisements after 7 oclock pm when more adults watch television. They
also advertised by putting posters up on bill boards inviting people to come in
and try the new range. Another way they thought would be very effective was
radio commercials. They reason why they used these marketing methods
was because they believed that they were three ways that were incorporated
in peoples everyday lives whether they are at home, out or at work. It is also
the most attractive of attracting people to any product even more so a food
product.
Conclusion
The conclusion we came to from our conversations with both the staff and the
customers and also from our observations is that although the healthy food
range has given Mc Donalds a whole new healthier and more respected
image it is not the most popular product they are selling. They have managed
to attract a new target audience but their larger portion of customers are the
same as they were before and they usually chose to eat from the traditional
menu. Even though the new healthy range has not contributed a large
amount to Mc Donalds success it has made some changes at it has proved
very good for the company.
References