McDonalds Case Solution
Posted by Adam Hudson on Dec-20-2017
1. INTRODUCTION OF McDonalds CASE SOLUTION
The Harvard business review has published the McDonalds Case Study. Like all HBR case studies, the McDonalds Case is designed and drafted in a manner to allow the reader to experience a real-world problem and solve it accordingly. The case study, like other HBR case studies, will help the reader and students develop a broader, and a clearer understanding of the business world and dynamics.
The McDonalds Case is based on a current managerial and strategic problem being faced by the organization, which must be solved tactfully to allow progression, as well as maintain a competitive position. This paper is written to facilitate the case solution for the McDonalds Case Study.
The case solution for the McDonalds Case Study first identifies the central issue that is elaborated on throughout the case. The case solution then analyses the case through relevant strategic models and tools including the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. This analysis is to help in the identification of a feasible strategy and solution for the McDonalds Case Study. Alternative solutions are also proposed in the case solution, primarily because alternative solutions often act as contingency plans.
2. PROBLEM IDENTIFICATION
2.1. Harvard business school case studies
All case studies published by the Harvard business review comprise of a central problem that is faced by the protagonist. This problem mostly holds implications for managerial and strategic directions of the company. For readers and students of HBR case studies, it is critical to identify the problem that the McDonalds faces. This problem is usually hinted towards in the introduction of the case and develops along the way.
2.2. Solving HBS case studies
As a result, for solving the McDonalds case, it is essential to read the case study thoroughly. The identification of the problem correctly is vital for undergoing the analysis rightly, and for developing relevant solutions for the McDonalds Case Study. It is also essential to identify all the appropriate parties that are being impacted by the problem as well as the decision. The correct problem identification will ensure that all the solutions developed during the case analysis of the McDonalds Case Study are applicable and pragmatic.
EXTERNAL ENVIRONMENT ANALYSIS
The external environment analysis is needed for the McDonalds Case Study to make sure that it actively, and proactively responds to the macro-environment. The macro environment or the external environment for the McDonalds Case includes those factors which are not in control of the business or the company directly. As a result:
- The McDonalds cannot influence these factors in its favour, and in contrast, these factors directly affect the operations and workings of the company.
- As a result, McDonalds must make sure to continually assess and review the external environment to make sure
that it responds to external factors, and take them into account, during strategic decisions, and strategy
Businesses like McDonalds make use of strategic model tools continually to make sure that they are aware of the external environment.
- These include tools like the pestle analysis and Porter’s five force model, as well as strategic group
analysis and pentagonal analysis, to name a few.
The external analysis for the McDonalds Case Study will assess and will apply the strategic models and tools to review the business environment for the company.PESTEL Analysis
Political factors and elements can have a direct and indirect impact on the business. This is seen through the McDonalds Case Study.
126.96.36.199. Policy Makings
- Policymakers for the McDonalds Case are in all likelihood to intervene in the business surroundings.
- Commercial restrictions and political stability are additionally integral factors that will determine the success or failure of McDonalds.
- Tax policy will influence the cost of doing business for McDonalds.
- An increase in organization taxation (on business profits) has a similar impact as an expansion in expenses.
- Organizations can pass a portion of this increase on to shoppers in more expensive rates, yet it will likewise influence the bottom line of the business.
188.8.131.52. Government Support
- The government helps organizations in two primary ways: monetary help and regulatory.
- McDonalds can use government assistance and grants for purposes of growing the business, advancement, exporting, and innovative work.
- McDonalds can also be impacted by when Governments modify regulations and laws.
184.108.40.206. Political Stability
- Lack of political stability in a country impacts business tasks. Political stability is particularly essential for the organizations which work globally, such as McDonalds.
- A forceful takeover could oust a legislature. The takeover could prompt mobs, plundering and general issue in nature. These disturb business tasks for McDonalds.
- Purchasing political risk insurance is a way for McDonalds to oversee political hazard. Organizations that have worldwide activities utilise such as insurance to lessen their risk presentation.
- The soundness of a political framework can influence the attractiveness of a specific nearby market for McDonalds.
The economic factors are one of the most important of PESTEL factors and can influence McDonalds in several ways.
- Economic components have the most evident effect on the profitability and overall appeal of McDonalds.
- Even though GDP per capita is a useful economic factor, GDP per capita gives just a fractional perspective on the economic factors that may influence McDonalds.
- Higher GDP leads to higher disposable income and hence higher sales for McDonalds.
- Higher inflation will disintegrate the purchasing power of the consumer and the shopper
- Higher inflation will also harm the costs of raw materials and other inputs that are utilised by McDonalds.
220.127.116.11. Interest Rates
- Fluctuations in interest rates may translate into higher or lower costs for the purchase or sale of items and administrations provided by McDonalds.
- Higher interest rates hurt the disposable cash of consumers.
18.104.22.168. Unemployment Rate
- A high unemployment rate is also unadvisable as it dissolves dispensable income of consumers, and will harm McDonalds ’s position.
- The high unemployment rate will lead to lower sales for McDonalds and impact its overall profitability and revenues.
22.214.171.124. How can the McDonalds decrease the risk of economic instability?
- McDonalds can work towards building economies of scale
- Maintaining business costs and controlling the final price of the product can also help McDonalds fight economic instability
- McDonalds can also work towards building a sustainably managed workforce
Social influences will stem from social components of the macro environment. Under the PESTEL Analysis, they can influence McDonalds in several ways:
126.96.36.199. Social patterns and consumer behaviour
- Social patterns affect work trends and patterns and are directly related to the behaviours of consumers.
- Social patterns also have a direct influence on buyer tastes and inclinations, and the specific kind, structure, and volume of interest for an item or service.
188.8.131.52. Social patterns and changing consumer needs
- The checking of social patterns will enable McDonalds to reposition its items or administrations to meet the changing desires and needs of consumers.
184.108.40.206. Social trends in education
- Social trends of higher education have allowed firms like McDonalds to have access to a pool of higher skilled talent – but at the same time, also face a more criticising consumer base.
- Higher education has also made consumers more aware of different product offerings by companies like McDonalds.
- consumers are also more educated and knowledgeable of different substitutes of a product, as well as become more readily available at different touchpoints.
220.127.116.11. Social patterns make companies more consumer-centric
- Companies like McDonalds are expected to become more consumer-centric than product-centric.
- Similarly, Market segmentation and consumer grouping are dynamically moving towards measures of psychographics and lifestyles to understand the consumer more.
18.104.22.168. How can McDonalds use social aspects for growth?
- Use consumer-centric means of segmentation and targeting.
- Use consumer-oriented and consumer-based marketing – which use emotional appeals to influence consumers.
- Make products more accessible at different touch points common to target consumers socially.
The technological factors can influence McDonalds in several ways:
- The quick pace of technological change at McDonalds may be driven through innovation.
- Business leadership at McDonalds tries to push the limits of present limitations.
22.214.171.124. The advent of the internet and online retailing
- The expansion of the Internet and online business has discarded many intermediaries. McDonalds can communicate and retail directly to the consumers now, or through modern intermediaries such as eBay as well, for example.
- McDonalds may also use current social networks to retail and use e-commerce to boost sales.
126.96.36.199. Social media and business growth
- McDonalds can make use of social media to interact and reach with consumers
- Social media can also be used to reach the target market audience more effectively
- Social media is cost-effective and strategically more influential for McDonalds
188.8.131.52. Improved value chain network
- For McDonalds, technological innovation can be utilised to build on competitive advantage through several different ways.
- McDonalds can incorporate less expensive production, improved access to clients, improved marketing, improvement in product quality, and increased levels of business intelligence than the competition.
184.108.40.206. Managing technology and the future for McDonalds
- To flourish in a business world that is quick paced and receptive to innovative change, McDonalds must stay cautious.
- It must be always be updated on any technological developments in the business and industry.
- McDonalds should weary of how the company are probably going to influence its future attractiveness and profitability.
For McDonalds, the environmental aspects of the PESTEL analysis may include:
220.127.116.11. Environmental stability and business standards
- McDonalds may be expected to incorporate maintainability standards into their business methodologies and to help resource allocation choices.
- McDonalds may also be subject to environmental laws – which will impact and guide its operations to become more environmentally friendly.
18.104.22.168. Environmental stability and budget allocation
- Leadership in the McDonalds must measure the connection between natural activities and budgetary execution.
- McDonalds also strategically decides and assesses if the organization have been estimating the monetary effect of natural and social activities.
22.214.171.124. Environmental sustainability
- McDonalds also distinguishes and differentiates explicit zones of concern and impediments to the coordination of environmental sustainability into corporate performance and strategy
- McDonalds also gives explicit direction concerning how organizations can push toward a superior reconciliation of ecological and social activities in their basic leadership procedures and tasks.
126.96.36.199. Environmental sustainability and business growth
- McDonalds may use environmental issues to adjust financial, natural and social performance.
- Concerns towards the environment will enhance the business image for McDonalds.
- Environmental sustainability within business goals and strategy will also reflect corporate responsibility on the part of McDonalds.
188.8.131.52. Environmental sustainability and improved consumer relations
- Consumers will be more inclined towards the use of environmentally sustainable products.
- Environmental sustainability in operations works towards improving the bottom line and overall profitability for the business of McDonalds.
- Improvement of cost management and operations will be observed in the business as well.
Legal components can influence McDonalds directly, and can likewise influence the instruments through which an organization buys its stock or connects with the client. The McDonalds should be mindful, for example, of the following legal aspects:
184.108.40.206. Labour law
- Labour law refers to the guidelines in regulations that set up minimum and benchmark conditions.
- These include identifying with the work of people.
- Labour laws include aspects of minimum working age, least time-based compensation, etc.
- McDonalds must be mindful of these laws in routine business tasks such as hiring, for example.
220.127.116.11. Discrimination law
- Under the discrimination law, McDonalds must ensure to avoid episodes of unequal or uncalled for treatment based on an individual's age, inability, sex, national source, race, religion, and sexual orientation.
- McDonalds should train its human resource management team in ensuring that there is no:
- Unequal hiring
- Discrimination in recruitment
- Internal discrimination in talent management
- Bias in training opportunities
- Unfair compensation systems
- Prejudiced promotions and succession management
18.104.22.168. Health and safety laws:
- Under this, McDonalds is required to give a protected work environment to their workers.
- Working environment security and wellbeing laws build up guidelines intended to dispense with individual wounds and injuries from happening in the work environment.
- all operations of McDonalds should be designed to physically and emotionally safeguard and protect the employees and the labour force employed
3.2. Porter’s five forces
- The five forces identified in Porter's model can effect McDonalds ’s ability to serve its clients and make a profit.
- A change in any of the five forces may regularly require a business unit from McDonalds to reassess the market place given the general change in industry data and dynamics. The general industry appeal and attractiveness.
- McDonalds should apply and centre their skills, plan of action or business models to accomplish profits above the business average. This may be done in multiple ways, each distinguished in their application to the forces individually as is elaborated below:
3.2.1. The threat of new entrants
22.214.171.124. Market and industry share
- New entrants to an industry bring new potential and a choice to increase the market share and overall share of the pie that puts pressure on price, costs, and the investment price essential to compete.
- For McDonalds, particularly while new entrants are diversifying from different markets into the chief industry, they will be able to leverage existing talents and cash flows to shake up the opposition.
126.96.36.199. Limitation on earning expectation and capability of firms in an industry
- The threat of entry in the industry, consequently, puts a cap at the earning capacity and profit capability for McDonalds.
- While the threat of new entreaty is high, McDonalds should maintain their prices or increase funding and investment to discourage new competition.
188.8.131.52. The risk to new entrants because of high entry barriers
- The risk of entry in an industry depends upon on the peak of entry barriers and limitations that are a blessing for players such as McDonalds and on the response that new entrants can count on from existing players.
- If entry barriers are low and novices count on little retaliation from the entrenched competition, the chance of entry is high, and profitability for McDonalds will be moderated.
- It is the danger of entry, not whether the entry of new players takes place that holds down profitability.
184.108.40.206. Some barriers to entry for new entrants in favour of McDonalds :
- Capital requirements: a strong barrier to entry as new entrants will require strong financial and resource cushioning for operations to take off and be sustained.
- Economies of scale: a strong barrier to entry as existing players in the industry operate with high economies of scale, which new entrants will take time to achieve.
- Product differentiation: the strong barrier of entry if products within the industry have high levels of differentiation on which they operate and approach customers.
- Access to distribution: a standard barrier to entry since new entrants will have equal access to the retailers and distributing agents within the industry.
- Customer loyalty to established brands: a strong barrier to entry since customer loyalties and perceptions are emotionally built and strongly enforced as long as the brand continues to deliver on its core promise and quality.
220.127.116.11. What can McDonalds do to face this challenge?
- Build and invest in marketing to distinctly establish a point of differentiation in customer perception as well as strengthen customer loyalty.
- Invest in research and development to make sure that it continues to have competitive differentiation from other players at all times.
- Focus on building economies of scale in production and sales.
3.2.2. The threat of substitute products or services
18.104.22.168. Substitute form
- There are always different alternatives or substitutes for various products that lead an industry.
- These substitutes may be direct or indirect– the direct substitutes are the same category products. produced by different players; indirect substitutes are the ones from different product categories that can replace the product for McDonalds.
22.214.171.124. Switching cost to substitutes for consumers
- Switching costs for direct substitutes is not very high for consumers.
- The per-unit-volume prices may be higher or lower.
- This makes the threat of substitute high.
126.96.36.199. Substitute and product benefit
- Alternatives to the product or substitutes may not be able to provide the same benefits
- May often lead to additional costs incurred.
- Switching costs towards alternatives becomes higher, and consumers may not switch to substitutes.
- This, in turn, will make the threat of substitutes low.
188.8.131.52. Substitutes and consumer behaviour
- From the point of view of the consumer, there are some differences between the ways different products of the same or similar category are used, but many consumption decisions are a matter of personal taste - this makes products vulnerable to the threat of other substitutes.
- Overall, the threat of substitutes is assessed to be moderately high.
184.108.40.206. How can McDonalds combat the threat from substitute products?
- Focus on delivering consistently high quality.
- Focus on maintaining strong consumer relationships.
- Integrate strategic marketing to form an emotional connection with the consumers and strengthen consumer loyalty.
- Invest in pop up stores owned by the company to stock the McDonalds brand exclusively, and integrate it with brand characteristics and personality to attract consumers.
3.2.3. Bargaining Power of Buyers
220.127.116.11. Who is the buyer?
- The buyer for McDonalds is not necessarily the group that consumes the product – but rather refers to the group of customers that purchases the product from McDonalds to either distribute further, retail it, or even consume it.
- Hypermarkets and supermarkets, as well as independent retailers and distribution agents to end consumers, are the core buyers for McDonalds that make up the market’s volume.
- Supermarkets and hypermarkets, along with many food chains that are concentrated, which increases the buyer power.
- Products are stocked with buyers and retailers by McDonalds based on consumer demand.
18.104.22.168. Buyer power and costs
- McDonalds will not experience switching costs for switching buyers.
- Multiple product offerings by buyers also increase buyer power.
22.214.171.124. Retail product differentiation
- Products offered by retailers are differentiated based on several characteristics – not only reliant upon product characteristics but also consumer segment characteristics. Because of this, retailers are expected to offer a wide range of the same product category. This works towards negating and weakening the overall buyer power.
- Buyer power is assessed to be moderate to high.
126.96.36.199. What can McDonalds do to ensure risks against high buyer power?
- McDonalds can focus on differentiating its product and increasing its demand with the end consumers through different marketing tactics, this will increase the demand of the product with different buyers, and will work towards moderating buyer power.
- McDonalds should employ economies of scale to manage costs of production. If it offers products at moderate prices to buyers, it will again be able to attract a large number of buyers for its product, and in this way, will be able to break off the high bargaining power.
3.2.4. Bargaining Power of Suppliers
188.8.131.52. Who is the supplier?
- Supplier power refers to the power that is held by the suppliers in terms of pricing of the raw materials and inputs used for the business.
184.108.40.206. Sources of production for McDonalds
- The main sources for production are the following:
- Supplies from vendors – sourcing from independent suppliers.
- Own manufactured equipment and resources: this model is practised by companies that are well integrated backwards and forwards.
220.127.116.11. Independent suppliers
- For McDonalds, there are numerous independent suppliers within the industry, and all comprise of a few pretty small operations that lead to weakened overall supplier power.
- Independent sellers and suppliers, however, can locate different opportunities and invest in alternative markets – which can be a challenge for McDonalds.
18.104.22.168. Supply quality and business dynamics
- Suppliers can integrate forward into the decision making and business dynamics themselves as well.
- Also, to the buyers, the quality of the supplies and the raw materials is of utmost importance.
- However, in an industry with a high number of suppliers, McDonalds can switch to different suppliers at any time without experiencing any costs of the business.
- Overall bargaining power of suppliers is assessed to be moderate.
22.214.171.124. How can McDonalds deal with the challenge?
- Get contracts with multiple suppliers and get resources and raw materials from them accordingly.
- Invest in manufacturer controlled production facility to maintain consistency in quality.
3.2.5. Competitive Rivalry among Existing Firms.
126.96.36.199. Nature of fragmentation
- The market is highly fragmented, which makes it more competitive.
- The market is never too concentrated, and as a result, it has players of varying size of operation – from very small to big players.
188.8.131.52. Brand management
- Producers have begun to make use of brand management techniques and contemporary merchandising by launching bold brands, label designs and marketing campaigns to become more identifiable to the public.
- Purchasers and buyers have a wide range of products to choose from, with relatively low switching costs. These factors tend to intensify rivalry.
- Though players in the industry may off niche or premium products, they also continue to operate in the mass markets at large, which again leads to high competition.
184.108.40.206. High business costs
- The high fixed cost and the high bargaining power of the buyers, which can lead to the lowering of the prices from manufacturers add to the highly competitive nature of the industry.
- The overall rivalry is assessed to be high.
220.127.116.11. How can McDonalds combat rivalry and competitive forces of the industry?
- Focus on research and development to identify market niche as well as to be able to add differentiating factors t its products. This will increase its shield against influence from competitive forces and their actions.
- Build a strong and loyal consumer base by focusing on quality and marketing strategies.
- Focus on capturing new markets – in the same region as well as new regions to avoid saturation of resources in one market only.
3.3. Pentagonal analysis
3.3.1. The threat of new entrants
18.104.22.168. Restriction into industry
- The ease of entry into the industry is restricted.
- There are high barriers to entry.
- These are government policies, consumer loyalty, brand differentiation etc.
22.214.171.124. Switching costs for consumers
- The high number of direct and indirect alternatives available also make McDonalds vulnerable to the high threat of substitutes.
- Low to negligible switching costs experienced on the part of the consumers and buyers.
- New entrants are attracted to the industry because of high profitability.
- If there are high barriers to industry, the industry will continue to maintain high profitability
- Low barriers to entry will result in a lower average of industry profits.
- Lower entry barriers will also lead to higher operational costs because it will increase the intensity of competition within the industry.
3.3.2. The threat of substitute products/services
126.96.36.199. Increased competition
- High threat of substitutes.
- This is because of higher competition.
- The higher competition leads to imitation of products and systems.
- This imitation makes substitute products similar to each other – as much as possible.
188.8.131.52. The offering of similar benefits
- Consumers readily adopt alternative and substitute products.
- They offer similar benefits.
- They have similar functional benefits and features.
184.108.40.206. Low costs of switching
- Consumers often experience a low cost of switching between substitute products.
- Low switching costs are also developed because competition often produces at lower operational costs.
- Low switching cost results in lower overall product prices for the consumer.
- Industry players, therefore, also start competing on aspects of price.
3.3.3. Bargaining power of buyers
220.127.116.11. Market fragmentation
- The industry in which McDonalds operates is highly fragmented.
- It has numerous local and international players.
- It is not very likely for players in the industry to integrate forward into on-trade or retail businesses.
- This results in the players experiencing high bargaining power of the buyers from the market.
18.104.22.168. The concentration of retailing agents
- It also results in a high concentration of individual retailing agents.
- Retailing is also done through hypermarkets and supermarkets.
3.3.4. Bargaining power of suppliers
22.214.171.124. Backward integration by producers
- Backward integration from producers is more commonly observed and seen,
- Many players in the industry have their own production facilities for raw materials as well.
- The industry has seen a large number of players needing to outsource resources and raw materials.
126.96.36.199. Outsourcing raw materials
- This outsourcing is done by third-party manufacturers.
- A large number of suppliers present lowers the bargaining power of suppliers.
- Players in the industry have low switching costs between suppliers.
- Suppliers usually are contracted by producers.
- Producers may change suppliers frequently.
3.3.5. Industry rivalry
188.8.131.52. Intensity of competition
- There are strong competition and rivalry in the industry.
- There is a high number of players.
- All players provide similar products.
- Switching costs for consumers is low, which increases competition.
- Platers try to differentiate products on different aspects.
- Functional aspects and appeals for all products across the industry remain the same.
- Competitors and players use emotional appeals, and modern brand management techniques for differentiation.
- Industry players try to gain consumer loyalty by developing strong emotional bonds and ties.
Figure 1 Pentagonal analysis for McDonalds
3.4. Placement of the business along the industry life cycle
3.4.1. Identifying where McDonalds is on the Industry Life Cycle Curve
Identification of the place and placement on the industry lifecycle is important as it will help McDonalds make important decisions and strategies for the future.
184.108.40.206. Strategic decision making
- Expansionary plans and investment decisions.
- Decide on various marketing strategies and tactics for targeting different consumer segments to establish and establish the product.
- Selection of new geographic regions for expansion and exploration of new consumer bases.
220.127.116.11. Budget allocation
- Resources and alternative routes for future growth and establishment.
- Exploration of different diversification options.
Figure 2 PLC Placement along the Industry Lifecycle curve
3.4.2. Introductory stage
18.104.22.168. Firm strength
- The industry is in the infancy stage.
- Firms are generally small, entrepreneurial and compact during this stage.
- McDonalds will be focused on research and development during this phase.
22.214.171.124. Financial Position
- Looking for investment and funds for growth.
126.96.36.199. Nature of product
- Products offered during this stage re doubtful as success and life of the product is unproven and not known.
- McDonalds will use a focused strategy during this phase to emphasise the uniqueness of the product.
- The product or the brand will have a small market of consumers – known largely as early adopters
- Marketing strategies adopted by the company will focus on generating awareness of the product and therefore, will largely use a functional appeal.
3.4.3. Growth stage
188.8.131.52. Financial position
- McDonalds will require high capital during this stage.
- McDonalds will need investment and funds for launching strategic marketing campaigns.
- Funds will also be required for fuelling physical growth of the company in the form of investment in equipment and property to facilitate growth.
184.108.40.206. Growth factors
- Companies may increasingly encourage economies of scale because of standardisation experienced during this stage.
- Consumer feedback from the introductory phase will be incorporated, and research and development will be conducted to make appropriate changes in the product design and offering.
- Success in this stage for McDonalds will lead to growing demand, which in turn will fuel sales demand.
220.127.116.11. Nature of Product
- Products in this stage have high growth and high market share.
- There is also increasing competition and rivalry in the market – new entrants will enter and compete looking at the success of products during this stage.
3.4.4. Maturity stage
18.104.22.168. Sales and growth
- McDonalds will experience slowing growth during this stage of the industry life cycle.
- Sales will be expanding, and earning will be growing – however, the rate will be slower than the growth stage.
- Competition from late entrants will be present, and obvious during this stage – who will all try to fight for McDonalds ’s share of the market.
22.214.171.124. Strategic Marketing
- The marketing strategies must now focus on building loyalty.
- Marketing tactics must be strong and should focus on the uniqueness of the product. Increasingly emotional appeals may be used.
126.96.36.199. Firm size
- Firm size is generally larger and is more dominant over players if successful- compared to growth stage.
- Innovations continue but are stable and not radical.
3.4.5. Decline stage
188.8.131.52. Industry changes
- New technological changes and upgrades may make an industry obsolete.
- Players within an industry may also fall back and lose on market share if they do not keep up with innovations, and investment in research and development.
184.108.40.206. Sales and Competition
- Sales during this phase are decreasing at a high rate.
- Competing players also exit the industry because of the changes and low demand.
220.127.116.11. Surviving in the decline cycle
- McDonalds may also experience mergers and acquisitions during this phase.
- Diversifications are also most common during this phase as a means of survival.
3.5. Strategic Group Analysis
3.5.1. McDonalds and strategic group formation
- The strategic group analysis will look at an industry’s players' situations in focused conditions and scenarios.
- It will assess different players competing with McDonalds through the basic strategic factors that will decide an organization's profitability, similar to how the profitability will also be impacted and influenced by the competitive nature of the industry.
- The strategic group analysis will describe the procedures of every single noteworthy competitor of McDonalds along different strategic dimensions.
- These dimensions of comparison differentiate players into strategic groupings and must be selected as the basis of comparison by taking into account industry structure, productivity factors, and the venture issues being tended to.
3.5.2. Different aspects of strategic grouping
Key strategic groupings of players within an industry can be made based on numerous different aspects, such as:
- Brand identification
- Push versus pull strategies
- Channel determination
- Product quality
- Technological position
- Vertical joining
- cost position
- Price strategy
- Financial or working influence
- Parent organization relationship
- Government relationship
Despite the various aspects available for comparison of competing players, it is often important to differentiate strategic groupings of players of aspects of how they compete with each other, and on aspects of where they compete as well
3.5.3. Procedure for strategic group analysis for McDonalds
- Collect results of the player’s analysis.
- Determine aspects of comparison for strategic groupings.
- Distinguish the players and pick the most important aspects that separate the players into strategic groups comparing to the issues being tended to.
- Dimensions may include price strategy and product quality.
- Group the players: position McDonalds and rivals along with the matrix.
- Evaluate group mobility and direction. Assess the key purpose of individual organizations competing with McDonalds, similar to assessing industry patterns and barriers to entry/exit to be able to decide potential developments inside and between groupings.
3.5.4. How will strategic group planning help McDonalds
For McDonalds, strategic group analysis is important because it will:
18.104.22.168. Strategic industry dynamics
- Help in reviewing the strategic dynamics and shifts in the industry.
- Identify the closest competition and competing players for the business; help in assessing the strategic direction of these competing players; and lastly, aid in developing strategies to stay ahead of the competition.
22.214.171.124. Assessment of market position
- The strategic group analysis is also important for McDonalds because it will assist in analysing the current market position of players, as well as help in assessing future strategic moves and directions of the competition in the market.
- Assists in evaluating and identifying different underlying factors that will influence the company’s profitability.
- Makes use of standard comparison aspects between different players in an industry to group them as per strategic directions as well as strategic dimensions.
126.96.36.199. Identification of barriers to entry in an industry
- Different strategic dimensions along the matrix of strategic groupings are often characterized by barriers to entry and exit along the strategic groups’ dimensions, as well as by mobility barriers.
- These barriers make it difficult for companies to move along, and in between different strategic dimensions – often forcing it to stay in place with the same competition.
3.6. Scenario planning
Scenario planning for McDonalds ’s strategic direction will take form through speculation and contingency form – methods used by the military for strategic planning and direction.
3.6.1. McDonalds ’s Utilization of Scenario planning
For McDonalds, scenario planning comprises of making suppositions of what's to come, of what will be and how the business condition will adapt, fluctuate, change, and respond to the future conditions, and changes in the futuristic strategic planning.
188.8.131.52.1. Identify the driving forces of the business:
- Changes in the macro environment
- Changes in technology
- Changes in the economic trade system
- Changes in production methods
- Changes in consumer demands and tastes
- changes in technology and economy
184.108.40.206.2. Identify basic vulnerabilities:
- After McDonalds has identified the possible uncertainties of the macro environment, McDonalds should decide
on any two only. These can be:
- Changes in technological advancements and developments. These changes can be in the form that the industry has progressed to install more modern and contemporary technological developments.
- Changes in consumer demands and needs.
- These two uncertainties of the future are those that will have the largest impact and influence on the business.
220.127.116.11.3. Develop a scope of conceivable situations:
- McDonalds will now be able to place these two uncertainties along a matrix.
- Depending on the intensity and direction of the uncertainties and vulnerabilities, the business will be able
to chalk out four possible scenarios as probable plans of action for the future. For McDonalds, these can be:
- Install new technology, or update current technology to be on par with new technology.
- Do market research.
- Engage in innovative marketing to influence consumers.
- Change vertical and backward integrated systems to ensure in-house or out-house production of technology to stay ahead of the competition.
18.104.22.168.4. Discuss the suggestions:
- Each scenario should be discussed in detail.
- Possible strategic direction and responses for each scenario should be developed.
- Realignment of business goals and direction, as well as a mission during each scenario, should also be done to ensure future resilience.
4. ANALYSIS OF RESOURCES AND COMPETENCES
- This inner analysis and assessment of McDonalds decide the centre skills based on the resource based view (RBV) of the premium company.
- Utilizing its core capabilities and capacities, McDonalds can maintain a competitive distinction, and leadership over other local as well as international players in the industry.
- In the VRIN analysis and assessment, McDonalds makes use of its core capacities to strengthen its worth and the to continue to deliver the promise of consistent quality and taste to consumers – as well as guarantee futuristic and long term gains in the industry.
The following section presents a brief analysis of the VRIN strategic tool as it is applied to McDonalds and its impact on the strategic direction.
4.1. VRIN analysis
22.214.171.124. International distribution network
The company has an international distribution system with agents and contracts in countries across the world. This helps the company in making sure that its products are widely available and easily accessible to all consumers.
126.96.36.199. Experience in expansion to other countries
The experience of expansion to other countries directly as well as indirectly has allowed the company to gain exposure and experience in international business, culture and trades.
188.8.131.52. Marketing skills
The company has a unique blend of marketing skills, which allows it to reach consumers directly through various channels, in a creative way. This is a valuable resource for the company as it allows the company to ward off potential competition.
184.108.40.206. Market research
The company invests in market research regularly, which allows it to stay updated with market trends, consumer needs, demands, as well as the changes that take place in different markets and consumer groups. This is also valuable as it then allows McDonalds to make changes in product and service offering accordingly.
220.127.116.11. Use of progressive technology
The company makes use of progressive technology and invests in new technology to help it make the business more effective and efficient. This is important for maintaining competitive differentiation. The technology used by the company also allows lower chances of human error and increases precision.
18.104.22.168. Use of progressive harvesting methods
The company makes use of modern as well as new and innovative means of cropping and harvesting as well. The means of production are important for a business to maintain cost efficiency. This allows lower levels of spoilt raw materials and enhances the quality as well as the feel of the final product. Also, it allows the company to maintain the product quality in-house, and maintain consistency in the raw material.
22.214.171.124. Efficient use of economies of scale in production
The company’s effective and efficient use of resources has allowed it to maintain economies of scale. The company uses economies of scale as a rare resource available to maintain costs, enhance production, and increase sales – all the while maintaining a high focus on premium quality and consistency of taste.
126.96.36.199. The uniqueness of product portfolio
The company has a unique and diversified portfolio. This has allowed it to penetrate different consumer groups. And maintain income from different streams. Into urn, that gives a strong financial cushioning to the business.
188.8.131.52. Human resource management
The company has taken part in exemplified human resource management in all its function – from recruitment to training of talent management. This has allowed the company to develop an inimitable resource that is aligned with the organizational goals, and mission, and which is synonymous to the organization itself.
184.108.40.206. R&d - new product development
The company’s continued investment in r&d allows it to generate ideas for new products, as well as test these new products in limited market settings. This allows the company to assess the viability of new ideas, as well as generate feedback for improvement where needed. This is an inimitable resource for the company because it has become part of the company’s system and culture.
The innovation at McDonalds is an inimitable resource that allows the company to stay ahead of the competition as well as maintain high leadership in the industry by having the first mover advantage in its product portfolio continuously.
220.127.116.11. Organizational culture
The organizational culture at McDonalds is supportive and innovative. Employees share information freely. The organizational hierarchy is flatter, which makes leadership and follower relation smooth and easy. This organizational culture and its aspects cannot be imitated by competition.
18.104.22.168. Cost control
The company has employed progressive means of controlling costs and maintaining economies of scale. In this way, prices of the products are maintained and controlled, and very few cost increases are passed to the consumers. This allows the product to be easily affordable by the company’s target audience.
22.214.171.124. Brand recognition
The brand value and brand recognition enjoyed by McDonalds is a non-substitutable resource. The high brand recognition across different consumer group’s in different countries allows the brand to enjoy high consumer ship, high sales, and a unique bond with the consumers. This cannot be imitated at all by the competition as the brand recognition and resonance has been built over the years through hard work and quality deliverance.
126.96.36.199. Brand equity
The McDonalds enjoys high brand equity. This has been developed through the different stages presented by Keller in his model for brand equity. The high brand equity also reflects a high emotional appeal that McDonalds has for the consumers.
188.8.131.52. Emotional affiliation with consumers
This means that the brand fulfils not only functional but also emotional and psychological needs of the consumers. Again, this is an inimitable resource which the company has developed because of its honest and trusted relationship with the clients over some time.
4.2. VRIO ANALYSIS
4.2.1. Strong global presence
Having a strong worldwide presence is significantly valuable for an organization attempting to expand its size, deals, and piece of the overall industry. It is a competitive and sustainable method to acquire incomes from new and existing buyers.
McDonalds is one of the greatest company all inclusive. Even though there are other worldwide and international chains of competing companies, McDonalds has made a distinct name for its quality and offers.
For the time being, no competition of McDonalds could match such an enormous international presence in terms of quality and consistency. It would require critical investment and assets to achieve this.
184.108.40.206. Organized to exploit
McDonalds is effectively exploiting this capacity.
4.2.2. Claim to premium products
McDonalds offers numerous exceptional and fulfilling products that different contenders don't offer all the time. McDonalds additionally incorporates information and detailed ingredients for its products to interest an assortment of clients.
Other competition also offers different products that are offered by McDonalds, which means that it is not a rare resource for the company. This is because other players also have access to similar products and portfolios.
Considering other businesses and players are now using this capacity as a means of expansion and penetration, it can, therefore, be imitated.
220.127.116.11. Organized out to exploit
By offering an assortment of choices and ceaselessly changing the portfolio through active innovation and new product development, McDonalds is exploiting this resource. With plenty of alternatives, the vast majority can discover something they like, and individuals who like to attempt new products and services every now and again can undoubtedly do as such with McDonalds.
4.2.3. Upscale brand name
The McDonalds brand name enables clients to enjoy and feel a bond of association with the brand. This allows consumers to feel emotionally attached with the brand, and experience it as an extension of themselves as well. As such, this becomes a valuable asset for the company.
McDonalds is a contemporary brand name that has a premium touch to it and is upscale, modern and lively. Most other companies and competing brands don't have the quality and packaging to urge clients to engage in a way they do with McDonalds .
It would be generally simple for other companies to revamp their packaging and duplicate the plan of action of McDonalds. In this way, the upscale and comfortable promise of the offering by McDonalds could be imitated.
18.104.22.168. Organized out to exploit
McDonalds is effectively using this resource and enhancing the brand and the brand promise that numerous clients altogether appreciate. The organization is exploiting the stylish way of life that is right now present in numerous urban communities where the brand’s products are widely appreciated and consumed.
4.3. Porter’s value chain
4.3.1. McDonalds: drawing value from VRIN/VRIO
- The core competencies and strengths of McDonalds are organizational sources and capacities that enable the business to flourish regardless of substantial challenge and strategic difficulties in local and international markets.
- As the VRIO/VRIN analysis have shown and highlighted, the important core abilities depend on intellectual properties and related propriety data or related technological structures.
- Different resources and abilities appeared in the VRIN/VRIO analysis and review that are non-core, and non-central skills but that help the business and its value chain.
- McDonalds ’s core abilities are strong yet restricted.
- In the resource based view, this constraint presents key difficulties, as the organization wards off competing players from local and international markets.
- The core capabilities in the VRIN/VRIO analysis assume critical jobs in McDonalds ’s value chain. Considering the resource based view and Michael E. Doorman's value chain conceptualization, McDonalds ’s value chain gives reasonable and tasteful products to target buyers.
- The accompanying outline shows the value chain for McDonalds and its situation in the bigger value arrangement of the industry:
Figure 3 Value chain for McDonalds
4.3.2. Value framework
McDonalds ’s value chain is a segment of the business' value framework. The value framework is made out of different other value chains of the speciality units of all associations included, for example, the organization's producers and the remainder of the inventory network. In the value chain representation, McDonalds works directly, as well as through contracted third parties.
4.3.3. Example from value framework for McDonalds
- The organization has an internal transportation system of vehicles for making deliveries to other companies that are in business with stocking and serving McDonalds products – in the local markets.
- In this value chain and value framework, McDonalds ’s competitive advantage and abilities are distinguished through the VRIO/VRIN assessment are huge in how the organization's procedures offer some incentive and advantage to the consumers.
4.3.4. Value chain activities
Brief details of McDonalds ’s value chain are discussed in the next section:
22.214.171.124. Primary activities
126.96.36.199.1. Inbound logistics
The inbound logistics for McDonalds refers to producers in different designated and appointed locations by the company. Also, it also refers to selecting the finest quality raw materials from in-house production as well as from third-party contractors. These are transported to the storage sites after which the raw materials are used for producing different products by the company.
McDonalds operates internationally directly or indirectly. The company has owned offshore shops, as well as stocks its products with other shops across different countries.
188.8.131.52.3. Outbound logistics
The company has contracted agents in offshore countries and sites to manage product selling. However, a majority of the products are sold directly to licensed sellers and shops locally as well as internationally.
184.108.40.206.4. Marketing and sales
McDonalds produces and invests in high quality and premium products. It also invests in a high level of customer servicing and marketing. All its marketing activities, however, are based on strong market research and market data.
McDonalds invests in customer service to develop customer loyalty and build strong relations with its clients. The company invests in gaining and incorporating customer feedback and in solving customer queries effectively.
220.127.116.11. Support activities
This includes different departments like management, finance, legal, etc. which are required to keep the company’s business running.
18.104.22.168.2. Human resource management
The company’s committed and trained workforce is considered to be a valuable and an inimitable resource that has played a vital role in the success and growth of McDonalds the employees of the company are motivated, professional, trained, and work alongside the company’s mission and goals.
22.214.171.124.3. Technology development
McDonalds has been commended and celebrated for the use of effective technology not only production but also to make the overall system of production and sale, as well as in house production more effective and efficient. Also, the company also uses technology to communicate and connect with its consumers effectively.
This involves purchasing the raw material for the final product. The company has appointed agents that work for the company in different countries and regions to purchase consistently high quality raw material so that the company can produce the finest product qualities for delivering to the consumers.
126.96.36.199.5. Bottom line
The concept of the value chain for McDonalds helps in understanding how value is added in each process and stage of the value chain. It also helps to understand and separate useful activities from those that are not useful as such. This improves the overall bottom-line of the company and increases the profit margins for the company as well.
188.8.131.52. Virtual chain
- Renewed and enhanced way of engaging with consumers.
- Installation of sophisticated consumer data management systems.
- Made use of artificial intelligence to enhance the value chain.
184.108.40.206.2. Improved technological use
- Installed progressive technology for primary and support activities.
- The overall purpose is to provide a better experience to consumers.
- Allows the company to predict future market conditions, and prepare strategic contingencies accordingly.
- Allows understanding of consumer behaviour and market movements.
220.127.116.11. Generic strategies
- Managed to establish core competitive strategy in the market.
- Competes in the premium sector.
- Does not engage in competition with other cost groups.
- Worked towards improving the service of premium target groups.
- Consumers understand and perceive the brand as a high quality and premium.
- The brand is appreciated for its focused strategy and standing.
- The brand is appreciated and engaged in for its offerings.
5. INTERNAL ENVIRONMENT ANALYSIS
5.1. Porter’s Strategic Options
- Leading organizations such as McDonalds have obtained sustainable competitive advantage and have had the option to achieve the strategic position.
- There can be different sources of sustainable competitive advantage for McDonalds. A firm can depend on innovation to decrease its overall production costs and would then be able to pass this advantage on to its clients.
- McDonalds can also concentrate on making a differentiated item or administration to increase its overall share of the pie.
- McDonalds can generate considerable sustainable competitive advantage utilizing these systems. This is done through means of traditional as well as modern procedures embraced by McDonalds to competitive advantage hand and increase its share of the pie.
5.1.1. Differentiation strategy
18.104.22.168. Organizational Leadership
McDonalds has made use of the differentiation factor to maintain higher leadership and differentiation from industry competition. Differentiation of effective leadership may be achieved through different forms and basis.
22.214.171.124. Broad product portfolio
126.96.36.199.1. Product Quality
Moreover, this differentiation can fluctuate from item to item, market to market and industry to industry. Generally, the essential bases of differentiation are quality, durability, usefulness and in a few consumer loyalty, and brand image. McDonalds has differentiated its items and products dependent on the quality and set a completely different, and engaging consumer experience. Brand image
188.8.131.52.2. Brand Image
Aside from these things, it has developed a distinct and distinguished brand image which is additionally a premise of differentiation and encourages McDonalds to advertise, promote and market its products and brand better than the competing players in the local and international markets.
5.1.2. Focus strategy
184.108.40.206. Overall Quality of product and service
The essential premise of differentiation for McDonalds is quality and premium taste. It serves just premium quality products, which enables it to charge a top notch and a premium cost. It has embraced the most astounding measures as far as the nature of its raw materials used for producing its products. At each progression, McDonalds puts forth an admirable attempt to guarantee that its product fulfils the most noteworthy quality guidelines.
220.127.116.11. Value addition at each step of the value chain
However, the account of value does not finish at getting incredible quality of raw materials. It goes more remote from that point. A great deal of contrast originates from the readiness. McDonalds prepares its product diligently to draw out the quality.
18.104.22.168. Human resource management
Rest of the credit goes to the human resource and employees at McDonalds. The brand carefully picks its raw materials - just when they in ideal condition. Products are tested from each cluster in any event thrice before endorsement. This is how McDonalds makes the quality that each client looks forward to, and is excited about.
5.1.3. Leadership and differentiation through cost
Porter’s traditional methodologies are methods for increasing and developing a sustainable competitive advantage for McDonalds - as it was, building up the "edge" that will get the company the ideal position and differentiates it from the industry rivals. There are two primary methods for accomplishing this inside a cost leadership methodology:
- Increasing profits by decreasing expenses, while charging industry-average prices and costs from consumers
- Increasing share of the overall industry by charging lower costs, while at the same time making a sensible profit on every trade since McDonalds has controlled and reduced expenses.
The cost-based strategy and system are that – it includes McDonalds being the pioneer regarding cost in the industry and market where it operates. Just being among the most minimal cost producers isn't adequate, as the company leaves itself wide open to aggressive attacks by other producers and players in the industry. These players may undermine McDonalds ’s costs and in this way hinder the company’s endeavours towards the expansion of its share of the overall market pie.
22.214.171.124. Achieving cost differentiation
Based on this, McDonalds should be sure that it can accomplish and keep up the leading position before deciding on choosing the cost leadership strategy. McDonalds will be able to become effective in accomplishing cost differentiation by having:
- Access to the capital expected to put resources into innovation that will cut expenses down.
- Very proficient coordination’s.
- A minimal effort base (work, materials, offices), and a method for economically cutting expenses beneath those of different competing players.
126.96.36.199. Achieving cost leadership
However, McDonalds should ensure contingency for imitation by competition, as well as be prepared for competing payers to imitate its cost-effectiveness strategy to decrease and control their costs, and increase the overall share of the pie for their products as well. It is therefore important that McDonalds does not only settle for one means of cost leadership but continually improves. This can be done through several different methods:
- Engaging and applying the Japanese technique of kaizen
- High efficiency
- High limit use
- Use of dealing capacity to arrange the least costs for generation inputs
- Lean production techniques (for example JIT)
- Effective creation process
- Effective dissemination channels
188.8.131.52.1. Overall Cost Effectiveness through Cost Leadership and Cost Differentiation
- Cost differentiation and leadership strategy for McDonalds will be based on the nitty-gritty.
- Cost initiative endeavours towards slicing expenses to a base to give clients lower costs and in this manner will help the company of McDonalds to reserve funds.
- Cost leadership strategy requirements regularly identify with high specialized abilities and access to capital
- The company should also resource into innovation and guarantee economies of scale.
5.2. SWOT Analysis
- McDonalds maintains its competitiveness as one of the best and the most premium locally and internationally through inventive systems that use business strengths in overcoming the weaknesses present in the business inherently.
- Also, they make use of these internal strengths and weaknesses to make use of opportunities and ward off potential threats, for example, the dangers in the business condition and market.
- These factors can be distinguished, assessed, and analysed through the strategic SWOT tool.
- The SWOT analysis and review for McDonalds talk about the strengths and weaknesses (internal core strategic components) intrinsic in tasks in the business, and for the McDonalds organization.
- The assessment and analysis of SWOT likewise look at the opportunities and threats (external key variables) identified with the nature of competitiveness in the market and industry, which is mostly founded based on the level and intensity of competition and rivalry – as may be gauged through Porter's Five Forces analysis of McDonalds.
5.2.1. The need for SWOT because of expanded operations of McDonalds
- McDonalds is present and operational in different markets, and each of the markets poses unique yet various difficulties in developing the business.
- McDonalds and its portfolio in these many markets have expanded over time and as the organization grows, more items are added to its portfolio in addition to its pioneer product.
- With regards to the SWOT analysis model, these circumstances of multiple operations and multiple presences in various markets make a difficult business situation where the organization needs to utilize various arrangements of skills that match different markets.
- Core elements of different nature – both internal and external to the organization, can help increment McDonalds ’s accomplishment in contending with different companies and other businesses – both locally and internationally.
- The SWOT analysis for McDonalds is presented below:
5.2.2. McDonalds Strengths (Internal Strategic Factors)
This section of the SWOT analysis model works with the inner variables that the organization can use as competencies and strengths to address shortcomings and ensure the business against rivalry. For this situation, McDonalds ‘primary qualities are:
184.108.40.206. Strong brand image
- McDonalds is one of the world's most premium, well known and most famous brands.
- The organization has a developing populace of steadfast clients, which adds to the soundness of the business.
220.127.116.11. International distribution network
- In the SWOT analysis model, the global distribution network through directly owned subsidiaries, or contracts with third-party agents further strengths McDonalds by supporting activities.
- For instance, the organization has a worldwide system of providers that are deliberately chosen dependent on criteria relating to quality, for example, of raw materials as has been discussed in the value chain - primary and supporting activities.
18.104.22.168. Strong investment in research and development, and high focus on innovation
- The focus on innovation not only keeps the company apart but also facilitates its industry leadership.
- The internal core strengths and competent variables recognized in this section of the SWOT analysis of McDonalds demonstrates that the business has qualities that advance strength through expansion and a worldwide production network.
22.214.171.124. Focus on market research
- Additionally, the organization steadily expands its business
- This is done through contracts with offshore agents and licenses. Also, the company continues to broaden its portfolio by adding new products based on market research and consumer data.
5.2.3. McDonalds Weaknesses (Internal Strategic Factors)
Business weaknesses or shortcomings are recognized in this part of the SWOT analysis. Shortcomings are inward factors that diminish or cut off business capabilities and strengths. McDonalds shortcomings are as per the following:
126.96.36.199. Premium prices for most portfolio products
- McDonalds has a premium brand image attached, and thus all its products in the portfolio are priced highly
- This expands overall revenues yet decrease the affordability of its items.
- This internal key factor is a shortcoming since it confines the organization's share of the overall industry, particularly in territories with generally lower disposable earnings
188.8.131.52. Standard and benchmarked regulations and business procedures for all portfolio items
- Likewise, this SWOT analysis highlights that generalized standards for all portfolio products may be a weakness because it restrains the adaptability of these products and items in the business.
- What's more, numerous McDonalds items are imitable.
- Several items in the portfolio have been imitated by completion, and are also being provided by them at different price points.
- Though the quality is unique to McDonalds, the competing players have also developed close enough, and acceptable products.
- This business condition engages competition, as has been highlighted already.
184.108.40.206. Fighting the challenge of imitation
- The internal factors in this section of the SWOT analysis of McDonalds demonstrate that the business must create qualities to diminish the unfavourable impacts of impersonation and the impact of high value focuses on the organization's share of the overall industry in the international and local business.
5.2.4. Opportunities for McDonalds(External Strategic Factors)
This section of the SWOT analysis and strategic model focuses on external components that opportunities for business development and advancement. For this situation, the key opportunities accessible to McDonalds are:
220.127.116.11. Green business products
- With an increased focus and awareness of health and wellness lifestyles by consumers, it is important that McDonalds recognizes this as a viable business opportunity.
- Increased numbers of consumers are shifting to the green lifestyle of consuming environmentally friendly and organic products.
- McDonalds should focus on the expansion of the product portfolio: inclusion of green products and environmentally sustainable services are suggested.
18.104.22.168. Expansion in emerging markets
- McDonalds can expand its income streams through expansion and developing presence in emerging markets – such as Brazil, China and India.
- This opportunity draws consideration far from the U.S. region, where the majority of the organization's incomes are created.
22.214.171.124. Business enhancement
- Likewise noteworthy in this SWOT analysis of opportunities is the opportunity of business enhancement and further business development.
- This can help improve the long term position of McDonalds.
- For instance, through higher diversification of the portfolio and the overall business, the McDonalds organization can diminish its reliance on its present enterprises, and along these lines work towards improving its general income development.
126.96.36.199. Partnerships with different firms
188.8.131.52.1. Diversification through Partnerships
- Diversification is right now a minor strategy as can be observed from McDonalds ’s competitive strategy and its overall directive strategy as well.
- The business environments likewise display the chance to enhance the organization's competencies and strengths
- This will also increase its share of the overall industry through the association’s s with different firms. For example, a partnership with real retailers improves dispersion.
184.108.40.206.2. Development of corporate clientele
- The company can also formulate new B2B relations and contracts with other companies and corporate entities.
- The external key factors in this section of the SWOT analysis demonstrate that McDonalds can improve its industry position by building up its activities to make use of the opportunities in the international business markets.
5.2.5. Threats facing McDonalds(External Strategic Factors)
Threats against the McDonalds business are distinguished in this piece of the SWOT analysis. Threats are external components that decrease or breaking point of business execution. In this case of McDonalds, the following section looks at, and assesses threats that apply to the organization in question:
220.127.116.11. Price wars by competition
- McDonalds competes with a wide assortment of firms in the local as well as the international market.
- For instance, the organization competes against significant premium companies as well as against cheaper companies that offer cheap priced items and products.
- This external but important factor in the SWOT assessment undermines McDonalds because such competing players can lessen the organization's share of the overall industry by competing based on low prices and overall low costs of production.
18.104.22.168. Increased competition
- Additionally, this SWOT assessment also analyses increased competition as a noteworthy threat against the business.
- In light of the organization's shortcomings, the risk of imitation includes firms that attempt to duplicate the taste, look and feel of McDonalds items.
- Saturated market place and industry can also lower sales of the organization and shrink its share of the overall pie
- Increased competition can also lead to the increased cost of doing business for the organization if they bring innovative processes, and implement novice systems to control costs
22.214.171.124. Independent players
- The industry environment and profitability are liable to invite independent developments, and small-scale players.
- These players may not have high levels of integration and may be retailers and marketers for items produced during backward integration.
- Strategic marketing techniques and promotional communications are expected to neutralize the impacts of these patterns.
- This section of the SWOT analysis of McDonaldsrecognizes external key factors that force difficulties to international expansion and growth of the company as well as highlight market infiltration.
5.3. TOWS Matrix
TOWS analysis will allow McDonalds to identify and understand the strategic choices and future strategic options and directions available to the company. The TOWS matrix and analysis will help McDonalds to look at various possible future and long term situations, and ill force McDonalds to look at these options by questioning strategic directives such as:
- How will McDonalds make the most of its strengths and core competencies?
- How will McDonalds Circumvent its weaknesses and shortcomings?
- How will McDonalds capitalize on the various opportunities present in the business environment?
- How will McDonalds ward off, and manage the threats that are present in the external business environment?
The analysis of the SWOT and the subsequent assessment and development of the TOWS matrix will allow the McDonalds to be able to identify the following answers:
- Strengths and Opportunities (SO) – How would McDonalds be able to utilize on its strengths to exploit the opportunities?
- Strengths and Threats (ST) – How would McDonalds be able to exploit its strengths and core competencies to keep away from genuine and potential threats?
- Weaknesses and Opportunities (WO) – How would McDonalds be able to capitalize on its opportunities to overcome the weaknesses that McDonalds is encountering?
- Weaknesses and Threats (WT) – How would McDonalds be able to limit its weaknesses and evade threats?
5.3.1. TWOS matrix visual presentation
Table 1 TWOS matrix for McDonalds
- The TOWS Matrix is a moderately basic strategic tool used by McDonalds for producing key alternatives and identifying key strategic alternatives that may be pursued by McDonalds.
- By utilizing it, McDonalds can take a look towards understanding that it can best exploit the opportunities present, while at the same time also limit the effect of shortcomings and ensure itself against threats.
5.4. ANSOFF Matrix
- McDonalds has viably utilized this instrument to develop a procedure for accomplishing competitive advantage in the industry and various markets it operates in.
- Recently, McDonalds has made use of the four strategies of Ansoff matric to maintain competitive advantage
and leadership position. These strategies are
- Market development
- Market penetration
- Product development
- Product penetration
The following section highlights the various strategies that may be used through the Ansoff matrix. These strategies have been highlighted and identified through vigorous research methodologies, as well as through expert analyst data and opinion.
5.4.1. Market development strategies
126.96.36.199. Advertising and promotion of products
- One of the most popular means of developing a market is to use marketing strategically.
- By making use of advertising and marketing communications, the company will be able to disseminate information about its product, and the various benefits of consumption to its target market easily.
- Also, the use of social media for marketing will, at the same time allow the company to communicate directly with the consumers, and answer their queries.
188.8.131.52. Education about product consumption.
- The company can make use of widespread marketing campaigns using traditional means as well as means of social media to increase awareness of their product amongst the target market.
- This task of educating the markets will give the company a first-mover advantage, as well as develop important functional appeals for the product.
5.4.2. Market penetration strategies
184.108.40.206. Geographical expansion
- The company can expand into other markets through its previous experience, as well as through partnerships and contracts with other agents and parties.
- The company can also develop subsidiaries, as well as offer its products through franchising as well as licensing.
- The geographical expansion is suggested into emerging economies because of the favourable income levels of the consumers, as well as the growing infrastructure.
220.127.116.11. Increased number of retail outlets and retail presence
- The company can penetrate existing markets by offering more shops or making its product more widely available.
- This may be done through increasing the accessibility of the product at places where the target consumers are expected to purchase from, as well as improving the interaction of the product with consumers at different touchpoints.
18.104.22.168. Online retailing
- Another means of improving market penetration is through online retailing. McDonalds can stock its products on online retailing sites locally and internationally.
- This would help the company improve sales, accessibility, as well as reach higher levels of target consumers. All of this, in turn, would increase market penetration.
- Besides, it would also help the company maintain and control costs for McDonalds, and thereby help it achieve cost leadership in the industry
5.4.3. Product development strategies
22.214.171.124. Research and development
- To be able to develop new products, the company should have a focused interest and budget sending allocated to new product research and development.
- This research would take a basis in the consumer market and the overall market trends, to identify the gap in consumer demands, and market availability of different products.
- The new product would then generally be aimed towards fulfilling this gap.
126.96.36.199. New product development labs
- The company should have dedicate incubation labs for the development of new products.
- This means that this development should be a focused and separate entity that should focus on the company’s innovation.
- The company should also hire the right talent for business development and innovation to be able to achieve targets and goals accordingly.
188.8.131.52. Market testing
- New products should follow PD cycles for testing before launching in a market.
- This will ensure that the company can fix any loopholes present in the product, as well as incorporate positive feedback.
184.108.40.206. Strategic Marketing
- The company should also have a focused and strategic budget for marketing and communications allocated for new product development.
- This is because the company will need to increase the appeal, as well as develop functional and emotional appeals and characteristics of the new product.
- Communicate with the consumers to enhance sales as well as increase likeability and rate of consumption and trial.
5.4.4. Product penetration strategies
220.127.116.11. Acquiring personally owned retail to strengthen its presence.
- One way of increasing product penetration is that the company directly manages and controls sales operation through owned retail.
- This will give the campy leverage over communication, as well as product stocking and placement.
18.104.22.168. Diversification of portfolio
- The company can further expand its portfolio as a means of product penetration.
- The expansion of the portfolio will allow the company to reach a different and diverse target group, thereby increasing the overall share of the pie for the company
- This will also increase McDonalds ’s products’ accessibility to different consumers.
5.5. SAF criteria
5.5.1. How McDonalds can strengthen its strategic position using SAf criteria
- When McDonalds is deciding upon a certain strategic direction for the future, it will face challenges.
- Choosing the right strategy at the right time can be a daunting task for managers.
- It is therefore important that managers look at the strategy from aspects of its value and viability.
- The principal thing the managers of McDonalds will have to do is settle on a foundation by which to evaluate the different strategic alternatives.
- They will also need to choose a viable methodology is to assess the different strategies independently.
- Strategies can be evaluated and assessed using criteria of suitability, acceptability and feasibility (SAF).
- The following section weighs different strategies and possible future directives for McDonalds based on the SAF criteria.
5.5.2. Creation of a menu for high-income groups
22.214.171.124.1. New market development
- This strategy is suitable because it will allow McDonalds to develop new markets by tapping into new consumer groups.
- At the same time, it will allow the company to penetrate higher into existing markets.
- Both these possibilities can be realized because McDonalds invests in consumer research and has a strong financial standing.
126.96.36.199.1. Alignment with organizational goals
- The strategy is acceptable because it is in line with the company’s goals and mission.
- Also, it is also in line with the internal marketing and culture of the organization.
188.8.131.52.2. Financial risk
- As such, the strategy does not pose any risk – financially and otherwise and is also palatable for stakeholder reactions.
- Lastly, the strategy promises to give high returns. Overall, the strategy appears to be highly acceptable.
184.108.40.206.1. Market research and financial cushioning
- This strategy is highly feasible.
- This is because the company already operates along with this mission, and has high levels of market research and information regarding high-income groups.
- This information could be utilized for creating a suitable menu for high-income groups.
- At the same time, the company also has the financial power to introduce premium menu items for the higher class – to expand its menu accordingly.
5.5.3. Creation of a healthy menu for existing target consumer groups
220.127.116.11.1. Diversification of product portfolio
- This strategy would require a high diversification of the product portfolio.
- This is suitable because the company has the resources and the information to make strategic decisions about diversification.
- Moreover, the company also innovates regularly, which can be an added benefit for the suitability of the strategy.
18.104.22.168.1. Risk of financial investment
- This strategy appears to be moderately acceptable.
- This is because it poses a risk through diversification with high levels of finances invested, the company can never be too sure of the consumer reactions.
22.214.171.124.2. Risk of new product development
- Therefore, the risk of new product development and consumer reaction would be there.
- Also, the acceptability is also low because of stakeholder reaction – who might not all agree with the expansion of the portfolio horizontally – i.e. The broadening of the portfolio away from the core offerings.
- Lastly, if the strategy works, it promises high returns, which make sit low to moderately acceptable.
126.96.36.199.1. Market research and financial cushioning
- This strategy is also feasible for the company.
- This is because of the company’s strong financial position, as well as its ability to researching into different market trends and patterns.
- The identification of these trends and patterns is important for being able to decide which market and industry to diversify into for the company.
5.5.4. Increasing existing advertising expenditure
188.8.131.52.1. Focused budgeting
- This strategy is suitable because the company has high and focused budgeting for marketing and communications.
- This would also allow McDonalds to withdraw from failing markets or markets that have a weak share, and gain access to rising markets.
184.108.40.206.2. Strategic marketing
- The company will be able to exploit its research and development for strategic marketing
- McDonalds will also make use of existing systems and products to reach new consumer groups through marketing.
220.127.116.11.1. Return on investment
- The strategy is acceptable because it poses a low risk in terms of investment in strategic marketing.
- Also, it promises high returns on investment in marketing through the promise of increased awareness, increased penetration, increased brand recall and brand recognition – all of which will translate into higher sales.
- Lastly, stakeholders will also not frown upon this strategy, which makes it more acceptable to implement.
18.104.22.168.1. Market research and financial cushioning
- The strategy is highly feasible because the company has a strong financial standing.
- This means that the company can afford to increases budget for marketing purposes.
- However, for the stagey to be successful, it is important that the company aces sure that all promotional campaigns developed are in sync with consumer needs, demands and behaviour.
- This is again possible for the company because of its investment in research and development.
6. FINAL RECOMMENDATIONS
Based on the overall internal and external analysis done for McDonalds, this section will offer recommendations which will help the company take on strategic directions that will enhance its core competencies and capabilities, as well as reduce its chances for risks and threats? The following recommendations are thus made for McDonalds:
6.1. Strengthen distribution network
This is an important strategic recommendation as it will allow higher control to the company over its products in different markets. The company will be able to control where its products are placed, and thereby, will also be able to enhance the accessibility and easy availability of its products.
6.1.2. Stronger relation with consumers
At the same time, the strengthening of the distribution network will allow the company to work more closely with end consumers by being able to reach them with the same high quality of products across different markets.
6.2. Develop unique marketing tactics
6.2.1. Higher penetration
This strategic recommendation will help the company reach a higher number of consumers and penetrate deeper into target consumer groups. Also, this strategy will allow the company to increase trial and consumption and sales of its products.
6.2.2. Forming a partnership with consumers
Unique marketing tactics will involve new and informed strategic means of communicating with the consumers and engaging them with the brand. One way that this can be done is by making consumer co-producers for the brand. Another way that McDonaldscan do this is through co-branding with other similar, yet dissimilar brands and companies to enjoy higher market visibility amongst target consumers.
6.3. Adapt to different cultural aspects of different markets
6.3.1. Identify different consumer group characteristics
Each market and target group has distinct characteristics. This recommendation is suggested so that the company can connect better with different target groups in different markets.
6.3.2. Adapt to and respond to characteristics
By adapting to different cultural and regional characteristics, the company will be able to present itself better to target consumers – who would then feel a greater affinity, and more likeliness of consuming the product and the service.
6.4. Expand into new regions
6.4.1. Market expansion
Another strategic recommendation for McDonaldsis to expand into newer regions and markets. This can be done by expanding into new markets, firstly. This expansion will give the company exposure to new consumer groups. Increase the overall consumption rate, as well as diversify income streams. Also, it will give the company related expansion exposure regionally as well as internationally.
6.4.2. Product diversification
Another means of expansion is through product diversification. By adding new products, the company will be Abe to penetrate deeper into existing markets bye exploring new consumer groups, and new target consumer groups. This will also diversify income streams for the company, and increase its overalls hare of the market.
6.5. Strengthen value network
By strengthening the value network further, and by adding quality and enhanced elements at different stages, the company will be able to maintain competitive advantage, as well as put off new players from the industry by increasing barriers to entry. This will allow the company to maintain sustainable competitiveness over other players, as well as maintain a possible leadership position in the local and international markets and industry.
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