A Cross Border Strategy Report For Mc Donald’s

Firm Resources and Capabilities

The report has been authorized by <Kindly insert the name of the tutor, Course Coordinator of MGT704 Global Business Management, at the <Insert the name of the university, Country>.

The aim of the report is to undertake an opportunity and utilize it in order to analyze and identify with the help of a reference being made to the chosen company, Mc Donald’s that how amidst of the competition certain firms are able to perform under global pressures and the manner in which they respond to the different factors which exist in the external environment of the business. Moreover, it will also help in understanding the internal capabilities of the firm. By undertaking this task, the theory in the coursework will also be tested against the practical reference.

The limitations faced in lieu of completing the chosen assignment have been given below:

• The direct access to the firm could not be made and hence, the primary data in form of the perspectives of the different managers and stakeholders have been missing.
• The report is based on secondary data analysis.

As stated earlier, the main scope of the report named `A Cross border strategy report` is to understand and examine the manner in which the different companies tend to compete in the business environment under the different pressures as exerted on them by factors like technological, competition, legislative rules and others. For this reason, by secondary analysis and taking data from various books, articles, journals and textbooks the capabilities of the firm shall be re-examined and the highlights about the company will be discussed. This shall then be followed by the Resource based view model and be followed by analysis and recommendations on the same.

The methodologies as adopted for the report is as follows:

• The Resource based view model goes a long way in assisting the firm to understand the different capabilities, value chain, core competencies and undertake the VRIO Analysis as well.
• The Michael Porter`s five forces tools will be used in order to examine the industry based view of Mc Donald’s.
• Moreover, the institutional based view will also be analyzed using informal institutions, formal institutions, CAGE Framework and the Porters Diamond framework.
• Lastly, the generic strategy of the firm shall also be identified.

The Mc Donald’s is a fast food company with its roots in America. The restaurant was found in 1940 in the United Sates. The business began as a hamburger stand and since then the company has grown considerably and has now become one of the most profitable and popular firms around the globe. Recently, the firm has moved its global quarters to Chicago. The firm serves more than 70 million customers daily and has around 40000 outlets present (Mcdonalds.com.au. 2018). The store is known for its French fries, burgers, chicken products, soft drinks, wraps, milkshakes and desserts. Moreover, the organization also earns through royalties, rents and the fees they received. It has an employee strength of 2 million people. The firm has various outlets in Australia as well.

The given section will undertake the internal, industry as well as institution based analysis followed by the generic strategy of the organization.

Value Chain Analysis

 2.1.1 Firm`s Resources

The different resources of the organization are as follows:

Financial resources

The company earns in the form of royalties, franchises, rent and other related fees. Moreover, in the year 2017, the firm reported a net income of US$ 5.192 billion. The company is a private firm and has been performing considerably well irrespective of the backslash received.

Human resources

  The firm is believed to be the second largest private employer whereby employing more than 1.9 million people out of which more than 1.5 million people are employed in the franchisees of the organization (Slack 2015).

Technological resources

The company has an access to various technological advancements and networks. The company uses latest technology in the production of its goods and resources which makes it one of the most efficient organizations as present in the globe (Frynas & Mellahi 2015).

Intellectual Property rights

The company has various agreements and trade rights for dealing in various international organizations and it tends to use these rights to conduct business in various parts of the globe and this is the reason, why the company has stores in various parts of the world and in almost any country.

2.1.2 Firms Capabilities

The different capabilities of the organization are formed from its access to different resources and in the given section, the different capabilities as possessed by the firm have been given as follows:

Specialized in fast food services: The organization tends to be a specialist in the fast food services and its range of burgers, fries, snacks, breakfast menus and desserts tend to be considerably famous (Gereffi  & Fernandez-Stark 2016).

Contracts in different companies: The Company has various IP Rights, trade licenses and other related legal rights which allows it to function in various parts of the world and operate in more than 190 countries.

Global brand popularity: Mc Donald’s is a household name. There are very few people who have not had a meal at Mc Donald’s (Stead & Stead 2013). Thereby, for this reason, it is extremely popular as it tends to provide good quality food at reasonable prices.

Large number of stores: There are more than 37000 stores as present of Mc Donald’s and this large presence tends to act as a competitive advantage for the organization.

Marketing capabilities: The firm makes use of extensive marketing and promotional techniques whereby it engages in different advertisements means and country customization techniques in order earn higher revenues (Hubbard,  Rice & Galvin 2014).

VRIO Analysis

The value chain of the organization helps in understanding the different activity procedures which the firm undertakes (Wheelen et al. 2017). The value chain is primarily divided into primary as well as secondary activities.

Support activities
Firm’s infrastructure: The firm has a large number of physical stores around the globe and the firm is divided into specific departments with each department being responsible of managerial, legal and financial resources.
Human Resource Management: The Mc Donald’s has employed more than 1.9 million employees who belong to different cultures and backgrounds.
Technology Development: The firm being one of the most successful organizations has an access to a wide range of resources and the firm utilizes these resources effectively to advertise its products and provide better quality services to the different consumers.
Procurement: The company has various local suppliers and purchases goods from a large number of vendors.
Inbound logistics: The inbound logistics in the given scenario is the raw materials of food with which the company makes the meals.	Operations: The company hires various experts and chefs who prepare the meal. Moreover, the staff present in the various outlets are provided with adequate training.	Outbound logistics: The outbound logistics takes place in the different stores itself and moreover, the products are provided to the different customers directly.	Sales and Marketing: The products are sold directly at the outlets and even home delivered to the different consumers when they order online.	Service and support: The company has a dedicated customer service which provides assistance to the different people.
Primary activities

The VRIO framework is a useful framework which is popularly used in order to understand the capability of the different resources and capabilities as possessed by the organization and the manner in which these can become a competitive advantage or not (Jarzabkowski & Kaplan 2015). The VRIO Analysis of the Mc Donald’s has been done in the given section:

2.1.4.1. Value: This means that the resources and capabilities are valuable.

 2.1.4.2. Rarity: This states that the resources shall be rare.

2.1.4.3. Inimitability: This means that they should be difficult to imitate (Rothaermel 2015).

2.1.4.4. Organization: This means whether they are being exploited adequately.

Resource or capability	Valuable	Rare	Imitable or Non-substitutable	Organized to Exploit	Competitive Implication
Popular brand name	Yes	Yes	No	Yes	Sustained competitive advantage
Large presence	Yes	No	No	Yes	competitive advantage
Strong HR Presence	Yes	No	Yes	No	Parity
Marketing	Yes	Yes	No	Yes	Sustained competitive advantage
Financial success	Yes	Yes	No	No	Temporary competitive advantage

 

In the previous section, the internal capabilities and resources of the company was analyzed. In the given section, the industry focus will be used whereby information on how the firm operates in the industry, which means Mc Donald’s will operate in the food industry and how the forces as present will have an impact on the organization (Hubbard, Rice & Galvin 2014).

2.2.1 Porters Five Forces

The Michael Ports Five Forces analysis is a useful industry analysis tool which can be used to understand different forces which prevail in the industry environment of food industry in Australia.

2.2.1.1. Competitive Rivalry- HIGH

The competition in the Australian food industry is quite high because the fast food market in Australia is already quite saturated in nature.  There exists high number of firms who are quite aggressive in nature and moreover, the switching costs of the different customers is quite low. Hence, the competition tends to act as a major component (Williamson et al. 2013).

2.2.1.2. Supplier Power- LOW

The suppliers also tend to have an influence on Mc Donald’s, however, their influence on the company is quite week in nature and moreover, there exists large number of suppliers so Mc Donald’s can shift easily, there exists low vertical integration and the supply is high. Hence, the power is low.

2.2.1.3. Buyer Power- HIGH

The different buyers tend to exert a significant influence on the company as they have a large number of options to choose from.  Moreover, as the switching costs of these buyers are considerably low, this acts as a relevant aspect. Moreover, there exists a high range of substitutes as present which impacts the relationship.

Industry Analysis

2.2.1.4. Threat of Substitution-HIGH

The threat of substitution is also very strong as there are various healthier options available as a substitute of Mc Donald’s and the low switching costs tend to act as a major force (Harrison & John 2013). Hence, the threat of substitution is considerably high.

2.2.1.5. The threat of New Entry-MODERATE

As stated earlier, the food market in Australia is very saturated in nature and as there exists a presence of very strong companies which will deviate the new firms from investing in this sector (Ginter, Duncan & Swayne 2018).

2.3.1 Formal Institutions

The different formal institutions which Mc Donald’s has to abide by are the institutions like legislative bodies, food authorities and other aspects (Moutinho & Vargas-Sanchez 2018).

2.3.2. Informal Institutions

The different informal institutions which the firm has to consider is the tastes if the audience, their behavioral pattern, their food habits and their health aspects as well (Wright, Paroutis & Blettner 2013).

2.3.3. CAGE Distance Framework

Figure 1: The CAGE Framework

(Source: As made by the Author).

2.3.4 Porters Diamond Model

The Porters Diamond model assists an enterprise to understand the different competitive advantage which a firm like Mc Donald’s possess whereby certain factors are available to them or due to the lack of it.

Figure 2: The Porters Diamond Model

(Source: As made by the author)

2.4.1 Porters Generic Strategy

Cost Leadership and Differentiation strategies

Every firm follows a specific set of generic strategies which it tends to follow as a long term strategy and goal achievement. The generic strategy which is followed by the McDonalds is the cost leadership strategy whereby by making use of the resources, the organization tends to become a cost leader in the market (Lasserre 2017). Moreover, as a secondary strategic strategy, the company follows a differentiation strategy by providing adequate customized products in the different markets.

Hence, from the three different types of analysis as undertaken in the previous section based on the resource based view, industry based view and the institution based view, it can be thereby stated that Mc Donald’s has been performing well in the last few years, however, it has received a certain extent of back slash as well for providing unhealthy food to the different consumers (Hahn 2013). However, from the resource based view analysis, it can be understood that the internal resources as possessed by the company are very capable in nature and assist the firm to a great extent in combating against the different forces (Zott & Amit 2013). However, it needs to understand the extent of competition as present in the industry is very large in nature and hence, for his purpose, the organization needs to form sustainable strategies which will assist it in achieving a competitive advantage and success (Johnson 2016). Lastly, as the strategy followed by the company is primarily a cost leadership strategy and the secondary strategy is the differentiation strategy, Mc Donald’s needs to take considerably measures to ensure that it is able to maintain its position in the market.

Hence, the following recommendations could be made to Mc Donald’s:

1. Alter its offerings: As the company has often received a backslash for its offerings which are deemed to be unhealthy in nature, the organization can thereby strategize adequately and try to come up with a healthier menu options which can be priced higher than its economical meals but includes high nutrient meals and healthy drinks.
2. Provide value for many: The Mc. Donald’s needs to ensure that it maintains its brand name for providing good quality products at reasonable prices.
3. Maintain its core competency: The core competency of the firm of providing good quality products at reasonable prices needs to be maintained adequately.

Conclusion 

Therefore, from the given analysis it can be stated that the organization Mc Donald’s has been performing considerably well and that through consistent strategies and smart planning it has been successfully able to create a brand image for itself.  The report highlighted the analysis of the company in three different domains and through this it can be stated that the internal resources of the company are good but it has been facing problems with respect to the external competition and related forces. Hence, the firm needs to alter its strategy adequately and ensure that it is able to update its offerings and gain its position in the long run. The Australian food industry is highly saturated and hence only sound strategies will help it to gain a sustainable position and advantage.

References

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Gereffi, G. & Fernandez-Stark, K., 2016. Global value chain analysis: a primer.

Ginter, P.M., Duncan, J. & Swayne, L.E., 2018. The Strategic Management of Healthcare Organizations. John Wiley & Sons.

Hahn, R., 2013. ISO 26000 and the standardization of strategic management processes for sustainability and corporate social responsibility. Business Strategy and the Environment, 22(7), pp.442-455.

Harrison, J.S. & John, C.H.S., 2013. Foundations in strategic management. Cengage Learning.

Hubbard, G., Rice, J. & Galvin, P., 2014. Strategic management. Pearson Australia.

Jarzabkowski, P. & Kaplan, S., 2015. Strategy tools?in?use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558.

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Lasserre, P., 2017. Global strategic management. Palgrave.

Mcdonalds.com.au., 2018. McDonald`s Australia. [online]. Retrieved from:  https://mcdonalds.com.au/ (28 August. 2018)

Moutinho, L. & Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI Tourism Texts. Cabi.

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Wright, R.P., Paroutis, S.E. & Blettner, D.P., 2013. How useful are the strategic tools we teach in business schools? Journal of Management Studies, 50(1), pp.92-125.

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