McDonald’s is known as one of the largest chains in the fast food sector. The company has more than thirty thousand restaurants globally. The company focuses on enhancing the satisfaction level of the customers by offering quality food and services. McDonald’s was established in 1940 as a restaurant and the activities are owned and operated by Richard and Maurice McDonald, in San Bernardino, California, USA. The main purpose of this report is to conduct a strategic analysis which will be based on McDonald’s.
The first phase of the report will discuss the mission and vision of the company and also the macro environment by using Pestle analysis will be conducted. In the next phase of the report, the discussion will be made on the industry analysis by taking into consideration porter five forces and also the capability analysis by considering value chain analysis. In the last phase of the report, the main focus will be given on generic strategies and also the proposed strategy using SAF.
The vision of the company is to be the greatest and good service restaurant. The company offers best quality, service and value so that the customer satisfaction can be increased. The satisfaction level of the customer can only be enhanced when the employees are motivated towards the activities of the organization. McDonald’s also gives emphasis on motivating the employees, so that efficiency can be increased in a proper manner.
The mission of the company is to be the best place for the customers so that they can eat and drink in a proper manner. Plan to win operations are aligned in a proper manner. The company focuses on customer experiences like people, place, price, promotion, and products. McDonald’s presented the products and services in a clear manner so that the customers get attracted to purchase the products. It is analyzed that the organization can only enhance the activities when there is proper management and also the customer feel comfortable to avail the services.
The macro environment analysis consists of the Pestle analysis. So pestle analysis of McDonald’s will be discussed.
McDonald’s conduct the activities in over 100 countries so that the political interference is more. McDonald’s has to take into consideration the government regulations that are related to health and hygiene. It is seen that there are government policies that are related to the issue of trade and public health that increase the costs and also give direct effect on the activities of the company. Trade agreements can make it simple for the organization to consider the activities in specific areas. The political attitude also gives negative impact on the overall activities of the organization. The government imposes various rules related to taxes and it is important to consider by every organization.
McDonald’s also consider the regulations but the negative impact is seen on the overall profitability of the company (Breck, et al., 2014). It is seen that the food industry is targeted by the government initiatives that gives focus on enhancing the health and reducing the problems related to obesity. McDonald’s is giving focus on maintaining proper foreign relations so that the goals and objectives can be accomplished (Kirzner, 2015).
It is evaluated that the economic recession was giving impact on many firms. The revenue and profits are reduced by the McDonald’s. The economic factor gives impact on international, national and local conditions due to a large brand. The success of the business is dependent on the low rates of unemployment. Fall in sales is due to the changing taste and also enhancement in the competition level. The rate related to exchange also gives direct impact on McDonald’s and the weaker US dollar allows a better exchange rate. McDonald’ has a threat due to increase in the taxes and it is seen that the company closed many outlets just because of the increase in the tax rates (Wang et al., 2016).
In McDonald’s the economic external factors are slow but growth is stable in the US economy it is one of the opportunity that the company should consider in a proper manner. The threat of the company is that the external economic factors are stable but has risky European economies. McDonald’s also has threat just because of the slowdown analyzed in the Chinese economy. The slowdown in the Chinese economy threatens the growth in Asia. The organization has the opportunity to enhance the American economy. It is evaluated that the economic condition in Europe can give negative impact on the growth of the company in the region.
The changing taste of customers gives direct impact on McDonald’s sales. The progress of the coffee industry has developed a McCafe menu to offer an alternative product as Starbucks. The changing taste of the customer’s increased emphasis on health (Wang and Chang, 2016). Changing consumer demographics means that the company meets the changing demands. To sustain in the market and to enhance the sales it is seen that McDonald’s should consider menu choices according to low-fat choices. The concern related to obesity has seen that McDonald’s offer healthier choices for the customers and particularly children (Galician, 2013).
The technological environment plays a significant part in the fast food industry. Technology assists the organization to increase their management and productivity so that the wastage can be reduced in a proper manner. McDonald’s takes into consideration proper scheduling so that the sales and foot traffic can be maintained. Technology can also be considered to advertise and also to compute the device to satisfy the customers. The company addresses the external factors like moderate R&D activity in the industry as it is the opportunity for the organization. Also, the opportunity is that the company has is related to the increase in the business. McDonald’s also has the chance to enhance the sales through the mobile devices. The company gives focus on enhancing the research and development investments to increase business effectiveness. McDonald’s can consider more automation to increase productivity based on enhancing the business automation. The company can also increase the mobile services so that customers can be attracted.
Regulations are one of the biggest concerns to the organization. The organization should consider the legal requirements like labor and employment law. The important legal external factors for McDonald’s are legal minimum wage levels in the U.S, local health rules in the workstations regulations. McDonald’s looks the threat of higher minimum wages that lead to high cots and prices. The health regulations give impact on food services in the workstations and it could decrease the revenue of the business from various areas. McDonald’s also speaks animal welfare regulatory effects on its supply chain (Stephen and Yakov, 2015).
This factor gives effect on McDonald’s consumer’s end and also on the performance of the company. In the company, there are various ecological external factors like rise in the corporate environmental programs, enhancement in the sustainable strategies of business, change in climate. McDonald’s can enhance its strategies related to corporate responsibility to attain good performance in considering the environmental worries. The climate change is a threat because of the supply chain of the company. The ecological external factors focus corporate social responsibility so that the diversification can take place in the supply chain (Sachdeva, 2015).
Porter’s five forces will be discussed in the industry analysis. In this McDonald’s experiences the direct impact on the external factors by varying intensities. The organization should take into consideration the strategies so that external factors can reduce the negative effect. The five forces are:
McDonald’s faces tough competition because it is seen that there is saturation in restaurant market. The competitive rivalry is grounded on the factors like a sum of the firms, high aggressiveness of company, low switching costs. It is evaluated that the fast food business has various companies of many sizes. The medium and large firms market their products by taking into consideration the requirement of the customers. The company consumers experience low switching cost. The company faces a huge competition and the competitors of the company are burger king, Wendy’s (Percy, 2014).
The company should take into consideration the power of the customers. McDonald’s has the external factors that contribute to the strong bargaining power of the buyers. The factors are related to low switching costs, a large number of providers and also the high availability of the substitutes (De Vogli, 2014). With the change in one restaurant to another, the consumers can easily consider their demands. It is seen that due to the market saturation the consumers can consider many other restaurants. There are also various substitutes for the company like McDonald’s. These substitutes consist of the food outlets. The company should give focus on enhancing the strategies so that customer loyalty can be increased (Boyland et al., 2015).
Suppliers also influence the activities of the company. The weak bargaining power of the suppliers gives emphasis on the following external factors like a large number of suppliers, low forward vertical integration, and high overall supply. A large number of populations of the suppliers weaken the overall effect of the individual suppliers on the company. This is due to the lack of regional alliances among the suppliers. It is evaluated that most of the company suppliers are not integrated vertically. This also refers to the lack of control on the distribution network link to the facilities offered by the company. Also, the materials like flour and meat diminish the supplier’s impact on the organization (Armstrong et al., 2014).
Substitutes play an important concern for McDonald’s. There are many external factors that are related to the threat of substitution a strong force like high substitute availability, low switching cost, and high performance to cost ratio. There are various substitutes for the company products like local bakeries items. It is simple to shift company to the low switching costs. The substitutes are modest by taking into consideration the quality and customer satisfaction. It is one of the major issues that consider the methods like improvement in the product quality (De Mooij, 2013).
The new entrants give direct impact on the share of the market of the company. This is related to the effects of new players on the existing firms. In McDonald’s the moderate threats of the new entry is centered on the factors like low switching costs, moderate capital cost and a high cost of brand development. Due to the low switching cost, the customers can switch the activities from company towards the fast food restaurant. The moderate capital costs of creating a new restaurant make it simple for small and medium-sized firms that affect the company. It is difficult to create a good brand that compares the products of the brand. Thus, it is evaluated that the new entrants are one of the major issues for the company (Salar et al., 2014).
Porter’s Value chain analysis will be considered by taking into consideration McDonald’s.
The value chain is related to a group of operations that the company takes into consideration so that the valuable products can be delivered in a proper manner.
Operations: The Company operates company-owned and franchised restaurants. It is seen that the restaurants of the company are owned and operated by the franchisees. The company has one of the following formats like conventional franchise and development license (Kotler et al., 2013).
Conventional franchising consists of franchisees that pay rent and royalties according to the percentage of sales along with the payment of the fees at the time of conducting the activities of new restaurants. In this, the company owns the land and also secures the location of the restaurants (Puzakova et al., 2015).
Developmental license consists the licenses that offer capital for the overall business and it also involves real estate interest. It is evaluated that royalty is paid by license on the overall sales (Brentari et al., 2016).
An affiliate is a form of franchising that is related to a limited number of the foreign affiliated markets.
McDonald’s conduct the activities in the format of sitting restaurants, service from counter outlet in the food court. The process of availing the meals in sitting restaurant format is a process through which the customers can easily dine in restaurants. It is evaluated that the company does not offer home delivery services (Meyer, 2015).
McDonald’s take into consideration print and media advertising so that it can be easy to communicate the marketing message to the target audience. The public relations and also sales promotions are taken into consideration by the company. There are many discounts and offers also given to the customers so that the customers are attracted towards the products. The sale of the company is also enhanced when the company gives quality products and also the products are according to need and demand of the customers (Chari et al., 2014).
The company gives focus on giving effective services to the customers so that the satisfaction level can be enhanced in a proper manner. The high speed of the provision of customer service is considered as the competitive advantage. The company offers excellent customer services so that the wages paid to the employees can be minimized (Grün and Dolnicar, 2016).
Infrastructure: The Company gives focus on maintaining proper franchise and also infrastructure so that the customers can avail the services in a proper way. It is evaluated that the format and presentation of the company are same at every outlet. The same color of chairs, tables, and walls are presented in front of the customers so that the customers feel good to avail the products and services of the company (Keiningham et al., 2014).
Research and development: The Company offer variety of product by analyzing the demand for the products in the market.
Human resource management: The Company gives emphasis on the human resource management by offering same wear to the employees (Aaker and Biel, 2013).
Procurement: The Company takes into consideration the raw materials so that the activities can be conducted properly. The quality of the products should be good so that the company can easily attain goals and objectives.
|
Primary Activities |
Valuable? |
Inimitable? |
Rare? |
Non-substitutable? |
Suitable competitive advantage? |
|
Inbound Logistics |
YES |
YES |
NO |
YES |
YES |
|
Operations |
YES |
YES |
NO |
YES |
YES |
|
Outbound logistic |
YES |
YES |
YES |
NO |
YES |
|
Marketing and sales |
YES |
YES |
NO |
YES |
YES |
|
Services |
YES |
YES |
YES |
YES |
YES |
|
Supporting activities |
|||||
|
Infra structure |
YES |
YES |
NO |
YES |
YES |
|
R&D |
YES |
YES |
YES |
YES |
YES |
|
HRM |
YES |
YES |
YES |
NO |
YES |
|
Procurement |
YES |
YES |
YES |
YES |
YES |
Proposed strategies
|
Strengths 1. Economies of scale 2. Market power of suppliers 3. Huge audience 4. good quality |
Weakness 1. Weak product development 2. Slowed revenue 3. reduce in income growth 4. decline in the market share |
|
|
Opportunities 1. International expansion 2. Growing dining out market 3. innovation 4. good environment 5. competition |
Differentiation 1.) Offer specialized menu 2.) Health conscious items 3.) Local flavours 4.) Product adaption |
Differentiation 5.) Effective promotion techniques 6.) Campaigns 7.) Lottery for winning its products |
|
Threats 1. Overstored industry 2. Changing demographics 3. Fluctuation of foreign rates 4. health conscious consumers |
Cost leadership 1.) Low cost leadership strategy 2.) Increases sales 3.) Increase profits |
Focus differentiation 1.) Focus on target segment 2.) Offer good quality |
The company takes into consideration low-cost leadership strategy so that the growth and sales can be increased. Overall profits can be increased if the company gives focus on giving products at low cost to the consumers. The company keeps the price low by a proper division of the labor that helps to hire and train experienced employees (Samnani, 2014).
The company also gives focus on achieving the objectives and goals of the specified target audience. The company gives focus mainly on the teenagers and on children so that the development can be achieved. It is also evaluated that the differentiation helps to enhance the market share of the company in an effective manner.
Conclusion
So, by evaluating the report it is concluded that the company should give focus on maintaining proper relations with the customers so that goals and objectives can be achieved. The emphasis of the organization should be on enhancing the overall satisfaction level of the customers.
References
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Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of marketing. Pearson Australia.
Bernhardt, A. M., Wilking, C., Gilbert-Diamond, D., Emond, J. A., & Sargent, J. D. (2015). Children’s Recall of Fast Food Television Advertising—Testing the Adequacy of Food Marketing Regulation. PloS one, 10(3), e0119300.
Boyland, E. J., Kavanagh-Safran, M., & Halford, J. C. (2015). Exposure to ‘healthy’fast food meal bundles in television advertisements promotes liking for fast food but not healthier choices in children. British Journal of Nutrition, 113(6), 1012-1018.
Breck, A., Cantor, J., Martinez, O., & Elbel, B. (2014). Who reports noticing and using calorie information posted on fast food restaurant menus?. Appetite, 81, 30-36.
Brentari, E., Dancelli, L., & Manisera, M. (2016). Clustering ranking data in market segmentation: a case study on the Italian McDonald’s customers’ preferences. Journal of Applied Statistics, 43(11), 1959-1976.
Chari, S., Katsikeas, C. S., Balabanis, G., & Robson, M. J. (2014). Emergent marketing strategies and performance: The effects of market uncertainty and strategic feedback systems. British Journal of Management, 25(2), 145-165.
De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. Sage Publications.
De Vogli, R., Kouvonen, A., & Gimeno, D. (2014). The influence of market deregulation on fast food consumption and body mass index: a cross-national time series analysis. Bulletin of the World Health Organization, 92(2), 99-107A.
Galician, M. L. (2013). Handbook of product placement in the mass media: New strategies in marketing theory, practice, trends, and ethics. Routledge.
Grün, B., & Dolnicar, S. (2016). Response style corrected market segmentation for ordinal data. Marketing Letters, 27(4), 729-741.
Keiningham, T., Gupta, S., Aksoy, L., & Buoye, A. (2014). The high price of customer satisfaction. MIT Sloan Management Review, 55(3), 37.
Kirzner, I. M. (2015). Competition and entrepreneurship. University of Chicago press.
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Percy, L. (2014). Strategic integrated marketing communications. Routledge.
Puzakova, M., Kwak, H., & Bell, M. (2015). Beyond seeing mcdonald’s fiesta menu: The role of accent in brand sincerity of ethnic products and brands. Journal of Advertising, 44(3), 219-231.
Rummo, P. E., Meyer, K. A., Howard, A. G., Shikany, J. M., Guilkey, D. K., & Gordon-Larsen, P. (2015). Fast food price, diet behavior, and cardiometabolic health: Differential associations by neighborhood SES and neighborhood fast food restaurant availability in the CARDIA study. Health & place, 35, 128-135.
Sachdeva, A. (2015). Evaluation and selection of differentiation as a strategy for McDonald’s.
Salar, M., & Salar, O. (2014). Determining pros and cons of franchising by using SWOT analysis. Procedia-Social and Behavioral Sciences, 122, 515-519.
Samnani, A. (2014). Macro-Environmental Factors Effecting Fast Food Industry. Food Science and Quality Management, 31, 2225-0557.
Stephen, A. T., & Yakov, B. (2015). Social Media Marketing: Principles and Strategies.
Wang, F. F., & Chang, T. M. (2016). Causal Effect Analysis of Visual Management on Customer Satisfaction and Repurchase Intention Using McDonald’s as an Example. In Proceedings of the 6th International Asia Conference on Industrial Engineering and Management Innovation (pp. 1123-1134). Atlantis Press, Paris.
Wang, W. C., Silva, M. M. S., & Moutinho, L. (2016). Modelling Consumer Responses to Advertising Slogans through Artificial Neural Networks. International Journal of Business and Economics, 15(2), 89.
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