VRIN/VRIO Analysis Of McDonalds
Posted by Matthew Harvey on Apr-08-2020
The VRIN/VRIO analysis is a strategic tool that is used for the assessing and evaluating the resources of a company, and determining its strategic advantage, and competitiveness. The strategic tool facilitates the identification of a long term competitive advantage for the company through evaluating the internal resources and capabilities of the company, and thus helping the business identify its core competencies to be able e develop a sustainable long term competitive advantage. The VRIN/VRIO analysis evaluates resources and competencies based on the characteristics of:
There is no difference as such between the VRIN and the VRIO analysis. The VRIO makes use of the characteristic of organization to assess if the company has the ability to exploit its resources for purposes of growth and competitiveness. This organization is closely linked to the non-substitutability –which was present in the earlier model of the business and elaborated on unique resources present to the company that gave it an edge over other players.
The McDonalds also makes use of the VRIN/VRIO analysis frequently for developing competitive strategies that are based on the company’s core strengths and resources to help it gain a competitive advantage over other players in the market.
Competencies that are valuable help the McDonalds in exploiting the opportunities available and in neutralizing the threats from the internal and external environment. These competencies allow a business to grow, develop, and expand further.
2.1.Brand image in terms of social responsibility
- The McDonalds has a defined corporate social responsibility function
- The McDonalds regularly engages in social responsibility actions, and makes them transparent
- All stakeholders are acknowledged about the company’s activities, and social responsibility actions through official documents including the annual report, and website
- Engagement in CSR activities allows McDonalds to build a non-substitutable competency- as engagement and strategies for CSR are integrated with the broader business goals and developed strategically.
- The McDonalds brand image is unique and contains high brand integrity
- The brand image has been developed over a long time, and through continuous effort and quality product offering by the McDonalds
- The brand image represents trust and honesty on part of the McDonalds\
- The brand image is a source of competency because it is unique to the McDonalds, and cannot be imitated by other players, r be substituted by them.
- The McDonalds brand enjoys high brand recognition
- This brand recognition is a direct result of high brand integrity and appositive brand equity
- The high brand recognition is important for not only sales but also for the company value
- The brand image is a result of long term brand investment, and cannot be substituted by other players in the industry
2.1.Relationship with suppliers
- The McDonalds is valued globally for its distribution system
- The company has also successfully provided products, and made them extremely accessible for countries where operating units do not exist
- This has been made possible through the highly efficient distribution system of the company that supplies products globally
- The company’s relation with dealers and suppliers is particularly string and based on strictly followed standards and criteria
- This is a valuable resource for the company that allows the McDonalds Company to exploit further opportunities in different regions and countries globally
2.2.Propensity for innovation
- The McDonalds is highly innovative in its product offerings d services
- The innovation also expands into other functional areas of the company such as marketing
- The innovation is helpful in making processes more effective for the company
- This allows the company to lower its operational costs, and achieve economies of scale
- As such, the propensity for innovation has been a valuable resource for the company that helps it navigate environmental threats effectively, and benefit from the opportunities presented in the environment
2.3.Ability to raise capital
- The McDonalds is large conglomerate.
- The company is able to raise equity through internal source
- The ability to raise capital internally is important for the company’s planned expansion and diversification
- This ability has also allowed the company to engage in mergers and acquisitions, and thereby reduce the market competition
- The McDonalds has also been able to gain increased market penetration and market access through its ability to raise capital
- The ability to raise capital is important for the company to be able to take advantage of potential opportunities in the market.
Competencies that are rare in nature are possessed and developed by only a handful of firms in the industry, and help in building competitive advantage for the McDonalds.
- The McDonalds has a global presence, and operates in multiple countries and regions
- The global presence has allowed the McDonalds to build an expanded consumer base and earn revenue through multiple regions
- This has given the company not only higher financial strength but also higher cultural exposure and international recognition
- The global heritage and experience is rare resource that has allowed McDonalds to enhance
3.2.Problem solving skills
- The McDonalds fosters an organizational culture of problem solving amongst its employees and management
- This allows higher teamwork, creativity and innovation in the company
- The innovation in turn leads to higher competitiveness, which leads to competitive advantage and benefit for the company in the market place in the short run and the long run
- This is thus a rare competency for the company that allows it to steer away from potential threats, and benefit from opportunities.
3.3.Risk taking characteristics
- The McDonalds shows high propensity towards taking calculated and guided risks
- This capability is important for a company to be able to grow and expand – especially in unknown regions and countries.
- The McDonalds’s risk assessment function is strong, and allows the company to identify potential opportunities and take guided actions and steps to benefit from.
- The ability to take risks is thus an important aspect and competency for business growth for the McDonalds.
- The McDonalds has global operations and a global presence
- As such, the company has high exposure to global cultures and different societal norms and values
- Being a global conglomerate and giant, the company has shown high adaptability to different cultures through engaging in localization activities, and marketing communication – as well as different managerial functions
- This localization is important for the company to gain penetration in different local markets
- The localization however, if often guided by a standardized global strategy to help different managerial functions perform optimally
- The ability of the McDonalds to adapt to different external environmental and regional cultures is a rare resource that has allowed the company higher penetration, improved accessibility, stronger brad recall, and greater visibility.
These inimitable competencies help in adding value to the competitive advantage, and long term sustainability for an organization. These resources and competencies are hard and costly to imitate by the competing players
4.1.Quality product offering
- The McDonalds offers high quality products to consumers that have been a source of the brand appeal
- The high and consistent quality leads to repeat purchases, and increases consumption of McDonalds’s products
- This is an inimitable resource for the company as the high quality, and specific of prediction are known internally to the top management of the company only.
4.2.Location of the stores/ placement in stores
- The McDonalds operates through multiple stores in different countries and regions
- All the places where the McDonalds stocks its products are easily accessible, and provide higher visibility to the band
- Consumers can easily purchase the McDonalds’s offerings and products in all the countries and regions it operates
- The McDonalds has made use of marketing communications strategically to induce higher consumption
- The strategic focus of the business sis enveloped by the organizational culture, and the business vision under the strategic leadership – which in turn is inimitable
- The marketing communications for the company are thus an inimitable resource that have allowed the brand to maintain long term competitive advantage internationally.
- The McDonalds has efficient production capacities that operate at economies of scale
- The company has controlled operational costs that have been achieved through expansion, and a consistent demand
- The company has also integrated technology to minimize costs, and improve processes and operational internally
- This cost saving function allows McDonalds to continuously maintain competitive pricing in comparison to competitors
- This is an inimitable resource for the McDonalds
- The McDonalds provides a unique customer experience to the customers
- The company offers customers high brand engagement with the experience that is memorable, and relevant for the target groups
- The company engages with the customers at multiple touchpoints, and offers a holistic experience that leads to customers wanting repeat purchases
- The engagement and brand experience for customers for the McDonalds has also expanded beyond the basic product offering, and evolved into offering and engaging consumers with relevant content generation that allows the brand to increase its equity.
- This is thus a non-substitutable advantage enjoyed by the McDonalds
These resources are uniquely developed for the McDonalds, and cannot be used by competing players in the industry. These resources have no substitutes, and thus cannot be employed by companies other than the McDonalds, and as such allow the company to exploit opportunities and make use of resources effectively for business growth
- McDonalds enjoys substantial financial strength in addition to its brand strength
- The financial strength supports the company in exploring opportunities for new product developments and launches
- The financial strength is also important in allowing the company to evaluate potential mergers and acquisitions for gaining competitive advantage
- The financial strength has also been a source of value for the company in helping it focus on innovation in product offerings, and maintaining consistent quality thought out different countries where it operates
- The financial strength is also valuable because of the support it offers to the company’s vast and well managed distribution system
- The financial strength is particularly important for the McDonalds in enabling it to realize possibilities and opportunities –internally as well as externally
5.2.Technological integration and advancement
- The technological advancements and integration at the McDonalds are also an important resource for developing competitive advantage
- The technological advancement allows the McDonalds to maintain effectivity and efficiency in its various business processes and operations
- The technological advancement and integration also allows a smooth management of global operations for the company which is important to maintain effective logistic management
- The technological advancements and systematic integration is a competency that allows the McDonalds to build long term competitive advantage over competition.
- The company provides in house trainings specific for different job roles and job designs to its employees which helps them in achieving their desired job responsibilities
- The training provided by the company refines individuals not only for their job roles and professional growth, but also towards personal growth and development
- The training and investment by the company in individuals leads to strong organizational commitment, and is a valuable competency in allowing the McDonalds to benefit through a strong and committed workforce.
5.4.Investment in research and development
- The McDonalds makes substantial investments in research and development
- The research and development function at McDonalds enables it to stay abreast of market trends and consumer behavior
- With knowledge of changing consumer tastes and preferences, McDonalds Company is able to make use of its research and development function to develop offerings that meet the changing tastes and demands
- Investment in articulate and focused R&D is a resource for the Coca Cola Company that has allowed the business to maintain competitive focus and exploit other resources effectively.
- One of the greatest strengths and resources enjoyed by the McDonalds Company is its control over, and development of distribution channels
- The company’s distribution system, and the supply chain comprises of a number of different distribution channels – that re agent and dealer based, and also owned and controlled by the company
- The mix of distribution channels allows the McDonalds to have access to, and penetrate different markets, and increase the number of sales and consumption of its products
- The articulate and intricately designed distribution network has proven to be an inimitable resource for the company that has developed with time through strong relations with suppliers and distributors.
5.6.Corporate leadership and vision
- The corporate leadership and vision are also non substitutable, and cannot be applied to other firms in the industry
- The leadership provides unique strategic vision and direction to the company
- The leadership also plays an important part in motivating employees and settings business goals and targets to be achieved
- The McDonalds’s expansion and growth is directly related to the leadership it has.
- The McDonalds has high production capacities.
- The brand supplies products globally at different location, in over a hundred countries
- The streamlined production process that employs effective and efficient operational costs and inventory management systems provides a unique edge and competitiveness to the McDonalds Company
- This in turn becomes a non-substitutable advantage for the company that allows it to explore new regions efficiently as well.
- The McDonalds invests substantially in its human resources.
- The human resource function of the brand is important in building the competitive advantage for the company by providing it with improved talent
- The human resource function at the McDonalds is responsible for all employee related activities – from recruiting to compensation management to succession planning and training
- The human resource function is also important for maintaining the supportive organizational culture at the McDonalds
- The human resource function is important for the McDonalds to grow and develop further, and exploit other resources with smoothness.
- The McDonalds enjoys a supportive and innovative organizational culture
- The organizational culture at the company allows growth and development of not only the business at large, but also of individual employees
- The organizational culture is free sharing in information, and supports team work and synergy
- This is an important competency and resource for the McDonalds which allows it to grow internationally, and support various diversifications as well.
- The McDonalds has a broad standardized strategic focus for its marketing strategy and communications
- This broader strategy is localized at different regional levels and customized for countries based on different target groups and populations
- This customization has allowed the McDonalds to increase its visibility, and create higher brand awareness
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