Strategy and Innovation - Research Paper Example

Strategy and Innovation The McDonalds are seen to be the dominant players within this industry with the widest coverage of the world. According to past reports, the company has set an ever rising performance in the last nine years with her key operational pillars being founded on; people customers and employees, price, products, promotion and place. Their fundamental operation strategy has been “plan to win” all through. In order to have an organization create and maintain a competitive advantage in the business niche with the competitors, management decisions must be weighed and found sound. Constant actions and decisions are made after analysis. Thus the strategic management within an organization revolves around conducting an analysis, deciding on an appropriate course of action and finally taking the action. Analysis of strategic management entails the critical evaluation of internal as well as the external environments within which the firm operates. Along these lines, an organization analyzes her missions, visions, goals and objectives as against the other players within the industry. Among these decisions that the organization must make is with what other firms do they compete and through what ways should be competition be? Finally, actions are taken with the aim, of realizing the set goals and meeting the decisions made after the analysis (Dess, Gregory , Lumpkin and Marilyn, 2005, 1). The McDonald’s vision, mission as well as the objectives are strategic and focus people customers and employees, price, products, promotion and place. The corporation’s values are; offering quality customer services, commitment to people (both customers and employees), and balancebetween the interests of the owners, suppliers and employees, upholding ethics, community service and continued growth as well as improvements. Her vision revolves around becoming the world’s leading restaurant in quick service. This is through offering the best service, value and cleanliness with an aim of satisfying her customers. The corporation’s main aim or better still objective is along with serving food industry responsibly, to be responsible as regards the caring for a sustainable future for all (. These are aligned on community, employment, environmental care, food chain responsibility and ascertaining nutritional well being to all. By targeting the community, the corporation is engaged on community service and charitable organization. On the employment portfolio, the company aims at continuously expanding through which more opportunities for employment will be available, both locally as well as through online participation. By adopting energy friendly systems in her corporations, the McDonald’s seeks to maximize on energy usage for sustainability. It also upholds innovation and adoption of quality energy practices in sharing. On health and nutrition, the corporation aims at continuously designing and developing new food recipes which are healthy for her clients. It also aims at expanding advocacy on good nutrition habits through campaigns. Furthermore, in maintaining sustainable supply chains, the corporation ensures proper relations with the supply chain as well as the constituent parties (McDonald’s, 2009, 1-6). The annual report on investors for the year 2010 reveals a fabulous performance of the company despite the many challenges she faced just like all other firms and especially those in a like industry of the fast foods. By managing deeper insights for customers and proper alignment of McDonald’s business strategies, the CEO says that a 5% rise in comparable sales was realized, 9% growth in operating income and the company’s overall market share around the globe increased. By upholding proper prioritization for the relevance of the firm’s brand and focusing sharply on the customers, the firm managed to keep on top in the year. However, as the CEO puts it, it was the same focus that was to be employed for the following year, 2011. The basic working formula for the firm has been building on and holding onto the basics while at the same time modernize and differentiate their brand. As for the service delivery, the brand was committed to further her excellence by adopting onto favorable technologies, invest in training and adoption of other service enhancement mechanisms that are all aimed at maintaining or improving her performance in the year 2011. Repackaging as part of product differentiation and promotion was to be adopted more so through restaurant re-imaging (McDonald’s Corporation, 2010, 1-3). SWOT analysis In strategic organization of the corporation in the UK using the SWOT analysis model, we evaluate her strengths, weaknesses, opportunities as well as her threats (Orji, Bao, Zino and Philippis, 2005,7-9). Her strengths are basically in her competitive edge as compared to the competitors. McDonald’s Corporation enjoys the sole discretion of being the world’s leader in the fast food industry and thus covered against harmful competition by the other players. Records also show that the corporation enjoys vast real estate portfolio. In UK, the retail outlets of the corporation are strategically placed along transport corridors to enhance visibility and customer attraction. The brand identity also serves as an advantage to her operations. However, the corporation is weak on the slow product innovation in the sector. There is general need that the company diversifies her products through adopting and designing new menus to serve the ever dynamic market. Another challenge that faces the corporation in UK is the strong competition that she faces from the upcoming companies in the industry. By moving at a rather higher pace in the industry, the competitors pose a threat to the overall dominance of the corporation in the market. Nevertheless, the corporation is on the right track f adopting innovation as is in her objectives to diversify the products for the sake of her clients. The major opportunity that the corporation enjoys is the slow expansion with focus on changing the image of the already existing outlets through refurbishing. Equally the adoption of better innovation and recipe modification would be seen as an opportunity. Moreover, expansion to the adjacent territories within UK adds up to an opportunity to the corporation. Among her threat, the corporation faces a global threat by the changes in the world markets. It is more exposed to economic pressure in the event of economic crises owing to her widely spread network within the region. The fluctuation in the foreign currency is equally a threat to her performance. Moreover, a major threat to the corporation’s performance in UK is the unfavorable publicity created by media. The media often portray the industry as directly contributing to higher rates of obesity and other health related complications. Porter's Five Forces In a better analysis and understanding of the prevailing market forces that shape the operation of a firm in any business environment, Porter developed a model that studies the influence of five forces that exert influence to the firm. These forces are rivalry, substitute threats, power by the supplier as well as the buyer and barriers/hindrances to market entry (Porter, 2008, 79-80). As concerns rivalry to McDonald’s Corporation, the competition ration is relatively low as the corporation has well established network which enjoys the leadership role. With the low rate of competition ration, we interpret it to be disciplined. Her overall advantages arise from her relatively low operation costs, higher profit margins and the dominance in the industry. However, the threat from product substitute is dominant. The corporation faces constant challenge by dynamics in the food industry. Many other companies are cropping into the market and this comes with the threat of introduction of substitutes to her fast foods. Pricing is key factor which influences the pressure exerted by the substitute product. If the product introduced is low in price, this threatens the shift of customer attention from the corporation’s product to the substitute. The buyer power is understood in the influence of a buyer’s decision to the performance of the entire industry. In a food industry as the corporation serves, empowered buyers influences the pricing of the products on sale. On the other hand, supplier power describes the impact that the provision of raw materials by the supplier to the corporation has on the mutual relationship. When the supplier commands power, he should influence the production and pricing of the commodities through which he controls a firm’s profitability. In our analysis, by McDonald’s Corporation enjoying the benefits of being a dominant figure within this industry in UK, she plays a critical role in regulation the entrance and exit of new firms in the market. The corporation in particular enjoys internal organizational economies of scale against new entrants in the industry. Through this, the corporation enjoys influence in pricing mechanism as well as profit margins of other players (Anon, nd, 1-9 of 11). Ansoff matrix This model is designed, unlike the case with other models of evaluation, to focus on the options available to firms in an industry to grow. Most of the other evaluation models focus on a firm’s profitability. However, according to the Ansoff’s Matrix (Anon, 2008, 1), there exists four business growth options namely; market development, market diversification, market penetration and product development. Market development option involves expanding within already existing goods or services only to markets that are new. Diversification here implies expanding via new goods into completely fresh markets. For the market penetration, already existing products gets access to already existing markets. Product development on the other hand means moving into already existing markets through products or services, which are new. Therefore, if we take the case study of McDonald’s Corporation in the fast food industry, the four alternative growth options would apply in the UK market. In her case, expansion would equally adopt either or all of the above options. With market development, the business would seek to explore new markets with the already existing food recipes. With market diversification, the business would take in new innovations and move through exploring new markets within the UK region. On the other hand, the corporation would employ market penetration via spreading to already existing markets with equally already existing food recipes. Finally, the firm would adopt the option of product development by inventing new recipes but targeting already existing markets. However, by assessing the impacts over risks, benefits, opportunities and costs, then the corporation is better if it adopts penetration. Market penetration for the corporation would be most appropriate as the risk involved is less because the company would still be selling more of what is used to. Moving into new markets and introducing new products into a market or both as is the case of the other options poses greater risks (Anon, 2008, 1-3). Johnson & Scholes Strategy test In the dynamics of business environments, firms and business organization get tasked with responsibility of evaluating their internal organizational structures as opposed to the prevailing business environment organization. From the findings, firms then take strategic decisions in order to reorganize their performance for the sake of the future. The Corporation’s future strategies revolve around adopting expansionary strategies to serve a larger market segment. Moreover, the firm aims to increasinglyinnovate new recipes in accordance to the prevailing competition. The strategy test by John son and Scholes entails evaluation through imposing three tests; feasibility, acceptability as well as the suitability test. In acceptability evaluation, a firm analyzes the choices available and tests whether they are compatible with prevailing and expected business environment. A firm should adopt the strategy that most suitably helps it exploit more efficiently her strengths and opportunities at the same time avoiding the environmental threats posed. It should also be aligned to her internal vision and the broad environmental social political setup. Among other tools employed for this analysis is the porter's five forces model. Feasibility test on the other hand evaluates the availability of resources for the firm to use in order to realize the adopted strategies. Therefore the test is an internal analysis. We normally employ the 6M model in testing feasibility. The model evaluates money, man power, machinery, make up, markets and materials. Acceptability focuses on the stakeholder’s aspect as well as the financial aspect of the strategy (Wu, 2010, 17-20). We can apply the feasibility, acceptability as well as the suitability test future strategies in recipe change and engaging in intensive research. Among the 2012’sannual report recommendations is the adoption of technological innovations to aid in service delivery besides product differentiation. However the competition within the fast food industry is gradually taking shape with other firms like the “Burger King Corporation” intensifying their efforts in targeting the baby boomers generation. Nevertheless, more of the concentration in the industry is shifting from prices to more quality products thou with innovation at hand. However, the corporation is facing some critical threats which I would propose a quick intervention in order to save her reputation and performance. A SWOT analysis for the year 2013 indicates four major weaknesses of the corporation; publicity which is negative, unhealthy and improper food menus, notable turnover for the employees and poor product differentiation (Anon, 2013, Para 3). As argued above, I strongly believe that competition has gone a notch higher and thus the need for the world leader in this industry to raise her standard. Innovations in suitable publicity in maintaining the corporation’s legacy is paramount. Proper and healthy food menus are necessary despite the price. A concurrent recommendation in extensive research for newer products would hold and more importantly is many efforts should be put in personnel welfare as opposed to profit maximization while the employee’s turnover declines. Therefore it is the finding of this paper that The McDonald’s corporation has continuously taken the lead in the fast food industry globally in the past. However, many competing corporations have continuously joined the industry thus threatening the monopoly status of the corporation. Strategic management for the corporation over the years has been seen to bear fruits. Lying up of strategies, deciding on the lawful ways to act and taking the action simply describes the practice of strategic management. From our recommendation, it would be more beneficial for the corporation to put more effort in managing her weakness in this year than adopting other strategies.The corporation is weak on the slow product innovation in the sector. There is general need that the company diversifies her products through adopting and designing new menus to serve the ever dynamic market. This is the greatest weakness that is easily noticeable. Other forms entering the industry are engaging in intensive research through which they make up new recipes and menus. McDonalds Corporation stands a better position in competition within the entire industry in that it has a selling brand logo, and it receives higher acceptability in the market than her competitors. By adopting the innovation strategy, the corporation stands a better position due to her resource endowment, strategic position as the leading firm in the industry and her long time experience. Much of her implementation and strategies for monitoring are at the disposal of the regional management. Despite the UK region being just but a part of the whole global organization of the corporation, implementation of her project proposal is at her sole discretion. The lifecycle of these strategies would undertake cycles which involve initiation, planning, implementation and closure. These stages imply that the conceived strategy must be initiated, planned and implemented. The aftermath of implementation stage, the management evaluates the results and closes the cycle (Hussein, 2007, 2). 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