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Industry firms:
Industry definition: KFC, Jack in box and Wendy are main rivals in same industry.
McDonalds corporation is an American fast food company
founded in 1948. KFC, Jack in box and Wendy are in fast food Does McDonalds outperform or underperform
industry. the industry average:
McDonalds is outperforming the industry average and
Is this firm being good or bad industry: McDonald the business strategy for the company is to make food
The French fries' industry’s figures shows that numbers is higher fast available to its customers at a very low competitive price but to
than average economy that means industry itself is positive and get profit as well by reducing the cost of the product and
McDonalds’s influence is much higher than industry profitability. expanding the business worldwide.
Potential
Entry
Substitutes
1-3. Advanced 5 Forces Analysis (II)
Potential
Bargaining power of suppliers (Low) Entry
There are many suppliers in small size and they supply raw materials to
McDonalds. Among those many suppliers, McDonalds carefully choose
their suppliers as they care quality of their products. It makes their
power weak
Customer
Accessible Deals and Digital Technology
experience
Location Promotions Campaign Advancement
Oriented service
Employee
Main product of
Competitive Experience Growth of Young generation
Sandwich, burger,
Price Oriented Natural Food diet option
French fries
employment
2-2. Firm-Level Analysis (II)
Broad
Market
Narrow
Market
2-2. Firm-Level Analysis (II)
1. The key drivers of WTP and Cost Mcdonalds industry
• Firm Reputation
: Mcdonald is market leader in fast food restaurant industry. It has the most number of customer either in the US or the world.
It already possess customer’s trust.
• Suppliers
: McDonald has its own suppliers for every type of raw material in order to maintain the product quality and the supplier cost.
• Employment Strategy
Hiring and training inexperienced employees to lower the wages expense. In addition, McDonald only hired small amount of
trained managers and trained chef. McDonald provide training for inexperienced employees.
over 2 million
Nutritional custom-made adults ranging from
different sandwich Casual fast
content sandwiches ages 18 to 34
options
2-2. Firm-Level Analysis (II)
Broad
Market
Narrow
Market
2-2. Firm-Level Analysis (II)
Chicken
Strong ties with
Secret Strong Brand Package Products
suppliers and
recipe Image menus (Vegan, non-
partners
vegan)
Technology
Crowd funding
Nutritional Regional Advancements Targets adults and
on Indiegogo;
content variations (voice-activated young audience
Innovation
training test)
2-2. Firm-Level Analysis (II)
Broad
Market
Narrow
Market
2-2. Firm-Level Analysis (II)
• There are many other fast food companies such as Subway that are perceived to be much
healthier than Mcdonalds.
Analysis of Corporate Strategy
Horizontal Scope
Mcdonalds is more horizontally diversified than the average firm in the industry.
Increasing WTP/
Reason
Decrease Cost
Economies of Scope:
Mcdonalds have a diversified 1) This allows the company to spread its fixed costs
product line that offers a across the different product lines, enjoying higher
range of products such as Decrease Cost profit margins.
burgers, fries, shakes and 2) It also has a diversified revenue streams in the
salads. form of fast food, McCafe outlets and real estate
business (lower rental expense variable cost)
3-1. Issues in Corporate Strategy
Horizontal Scope
Overall, is the horizontal scope of the firm sensible?
• Do you think that the current horizontal scope of the firm helps provide the firm with advantages relative to
its rivals Why or why not?
• It provides the firm with advantages relative to its rivals in the form of having an alternate revenue stream
real estate business.
• This lowers cost in the form of variable rental cost for its Mcdonalds outlet as opposed to leasing the land.
3-2. Implications from Corporate Strategy Analysis
Horizontal Scope
What do you think are the key horizontal scope issues facing your firm?
• If Mcdonalds would like to better promote its healthier choice options in order to compete with firms in
the recent healthy eating trends, it should work on coming up with better cooking methods or healthier
recipes to encourage the health-conscious public to consume it.
• Since Mcdonalds do not produce its own food products and purchase their from suppliers,
it may be difficult to control the quality of food provided by the suppliers
• Mcdonalds have ongoing programs to educate employees about food safety practices
• Mcdonalds closely with suppliers to encourage innovation and drive continuous improvement
• Although Mcdonalds are doing the above, there is still risk from suppliers
• Example in China Market, supplier scandal in 2014: Provided expired meat to Mcdonalds
Advanced Strategy analysis
4-2. Key Issues in Technology Strategy
• S-Curves
– Nowadays many fast food restaurant are changing their system like McDonalds considering
digital order system and drive-thru altogether
– McDonalds has been a leader of in this industry because they have introduced systemed
franchising trend giving customers more convenient methods to order and eat.
4-2. Key Issues in Technology Strategy
• Complementary Assets
– Are complementary assets important for capturing profits from innovation in your firm’s
industry?
: To capture value and be in a good bargaining position Complimentary assets are important to
our business.
– Do you think that your firm is in a position to capture the profits associated with
innovations in its industry?
: It has exclusive suppliers with good negotiation and ensures for franchisee be in a good
position with media companies and advertisement agencies.
4-3. Corporate Social Responsibility
- McDonalds tripled the mount it pays for college tuition for employees
- McDonalds is investing $150 million over 5 years in its “Archways to Opportunity” programme
- Since 2015 eligible employees could get $700 per year for tuition.
- Now managers can get up to 3000$ while crew members 2,500$
- To qualify for this programme employees needed to work 20 hours per week for 9 months
consistently now it is decreased to 90 days and 15 hours per week
- This programme also offer online high school and college advisory service for family members
- This plan stated in May 1, 2018 and it could assistance to 400.000 employees
4-3. Corporate Social Responsibility
Communities Investors
4-4. Implications from Advanced Strategy Analyses
• What are the key issues that arise in the Technology Strategy analysis?
– Kiosk ordering: McDonalds is focusing on this new technology for boosting their sales making their services
more fast. So eaters at any McDonalds are not needed to wait unbearable long line anymore.
– 24/7 on-line ordering by smart phones : This technical issue is one of their advantage to serve their meals to
customers even in late night, so customers can enjoy McDonalds whenever they want by easy way.
Issue identification
5-1 . Issues
Customer Employee
• Unhealthy meals • Sexual harassment from manager
• Changing diet preference of • Physical violence from customer
Youth generation
Recommendations
5-2. Recommendation
• “McDonald's Has One Supersized Challenge to Overcome in America.” Yahoo! Finance. Yahoo!, February 6, 2019.
https://finance.yahoo.com/news/mc-donalds-has-one-supersized-challenge-to-overcome-in-america-
175625959.html.
• Miner, Karen. “The Untold Truth of McDonald's Salads.” Mashed.com. Mashed, August 24, 2018.
https://www.mashed.com/131996/the-untold-truth-of-mcdonalds-salads/.
• Page, Vanessa. “What Consumers Want From McDonald's.” Investopedia. Investopedia, December 4, 2019.
https://www.investopedia.com/articles/investing/102715/what-consumers-want-mcdonalds.asp.
• Rigby, Mark. “McDonald's Faces Significant Challenges in Bid to Serve AI with Fries.” Phys.org. Phys.org, April 4,
2019. https://phys.org/news/2019-04-mcdonald-significant-ai-fries.html.
• Tietz, Matthias A., Matthias A. Tietz, View Bio, Simon C. Parker, Full Bio, Richard Ivey School of Business, and
University of Western Ontario. Ivey Business Journal. Accessed December 6, 2019.
https://iveybusinessjournal.com/publication/how-do-you-capture-value-from-an-innovation/.
Thank you!