Organizational Analysis of McDonalds Corporation - Case Study Example

Type Here Module Here Here: Introduction: McDonald’s Corporation is the world’s largest fast food restaurant chains, serving nearly 50 million customers daily. McDonald’s Corporation is primarily engaged in selling hamburgers, cheeseburgers, French fries, chicken products, soft drinks, break fast items, milkshakes and desserts. This business was initiated as a family business by two siblings, Dick and Mac. Their family name was McDonalds, so they named it after their family name. They opened with a sole branch in San Bernardino, California. The business was an instant success and numbers of branches were increased. However, the fate of the business was turned with the introduction of “Speedee Service System” in 1948. This made McDonald’s the most modern restaurant at that time and it started becoming a very famous restaurant in the USA. This was a brief history of the restaurant. McDonald’s Corporation is a Public Corporation, with its headquarters located in Oak Brook, Illinois. This restaurant was converted to a Corporation by Ray Kroc. Since then the “M” of McDonald’s restaurants has become a global symbol, with 31000 branches of McDonald’s opened worldwide. (McDonald’s Official Website, 2009) If we look at the organization hierarchy of the company, we will find Mr. Andrew McKenna at the apex. He is the chairman of McDonald’s Corporation. He is report by Vice Chairman, an important post which is occupied by Mr. Jim Skinner. Jim Alvarez is the President of the Corporation and is considered as one of the most creative man in the top-level management. If we look at the financial data of the company, we will see that this Corporation earns humongous revenue of $22.7 Billion, which makes it one of the most successful Corporations working in the USA. According to an estimate, McDonald’s employs around 400,000 people, and is considered as one of the most socially responsible company in the world. (Rowley, 2004). McDonald’s Corporation is also known for their charitable activities. Ronald McDonald House is social organization that operates under McDonald’s Corporation. The purpose of this organization is to assist parents by providing them a night stay to a nearby hospital where their children are getting treatment. Ronald McDonald House charges very little or not cost for the services they provide and hence operate as a charitable organization funded by various donations given by public or large Corporations like McDonald’s itself. A good brand name: McDonald’s is a very well developed brand name through efficient management and marketing policies. Similarly, McDonald’s is operating in the market for more than 50 years now, this long presence of McDonald’s in the market has made it a very trusted and successful and trusted brand. Largest fast food Company: McDonald’s is the largest fast food retailing chain. According to factual information, the company operates in approximately 120 countries, having more than 30,000 retail outlets at its disposal. This extensive size of the organization enable McDonald’s Corporation to reap various benefits associated with size such as economies of scales and marketing cost reductions. McDonald is known as to be a socially responsible brand that elevates its prestige: McDonald’s charity programme, which is commonly known as “The Ronald McDonald House”, targeted towards helping children of all ages, has created awareness among people about the social responsibility, and the fact that such a big organization is rendering services to society, encourage more people to come and do something good for the society. This increases the goodwill for the company and McDonald’s reap advantage of this in the form of increased sales. McDonald’s is a diversified organization: The fact that all McDonald’s eggs are not in one basket saves the business from volatile economic conditions in the market. Other sources of revenue for McDonald’s include property investment and their huge business of franchising their prestigious brand name. A branded business: Most of the products produced by McDonald’s are branded, such as Big Mac, Happy meal, Fillet-O-Fish etc. This allows McDonald’s to create a unique personality for their products and in turn allows them to charge higher prices. This results in increased profits for the firms. Customer-Oriented Approach has increased the brand-loyalty: McDonald’s approach of focusing on one customer at a time has resulted in increased brand-loyalty and sales as customers feel important when they dine at McDonald’s. Current Economic global downturn: Although McDonald’s Corporation is protected against recession; however, the longer this recession goes on, the more negatively it is going to affect the business as it decreases the purchasing power of people. Increased health awareness and possible adverse effects of eating fast food: Increased cases of obesity in various countries and negative press by documentaries such as “SuperSize Me” by Morgan Spurlock, has resulted in people demand more healthy food such as salads and fruits. This has resulted in plummeting demand for various fast food companies including McDonald’s. Increased competition in the industry: This industry was known for its high profit margins in the past, but this has resulted in influx of more and more firm in the industry, leading to increased competition. This increased competition and fight for more and more market share has resulted in price wars. As a result of this, Profit Margins in the industry have been considerably reduced. Let’s now look at these various and apply them on McDonald’s Corporate to assess the market position of the corporation. Potential New Entrants: The threat of potential new entrant depends on the capital requirements, economies of scale and barriers of entry (patent, copyrights etc.). In the case of McDonald’s Corporation, this threat is really high because there are very little capital requirement and it is very easy start a business as there are very little legal complication in setting it up. From this we can conclude that McDonald’s corporation is not at all protected against competition. Bargaining power of the buyers: The bargaining power of the buyers is high, if there is a lot of competition in the industry, good information about the product and services and market condition is known to the buyers. In the case of McDonald’s Corporation, the bargaining power of competitors is really high because there is already a lot of competition in the market and consumer are well informed of the market conditions through advertising and growth of the mass media. Bargain Power of Suppliers: The availability of substitute suppliers and the concentration of suppliers determine the supplier power in the market. McDonald’s Corporation position in strong against the position of its supplier because there are infinite number of supplier available in the market and McDonald’s is a big buyer, so it could threaten to change its supplier if the supplier charges higher prices or do not supply high quality products. The position of McDonald’s corporation is very strong in this case. Threat of Substitute Products: The power of alternatives and substitutes of a company’s product may be affected by cost-changes or trends such as increased health consciousness they will deflect buyer loyalty to companies. There are a lot of substitutes available in the industry such as KFC, Subway and Pizza Hut. Therefore, McDonald’s position is weak and its demand may plummet in the future. Rivalry among companies: This is determined by product-differentiation, advertising, price-wars and cost leaderships. The more homogenous the products are, the greater the rivalry will be and there will be more price-wars. However, in the McDonald’s case we can easily see that McDonald’s pricing policy is independent of its competitors. Although there are some products which are priced cheaper in line with what competitors are charging, the extent of this rivalry is very limited because of the product differentiation and advertising policy of McDonald’s Corporation. Hence, we can safely conclude that there is very little rivalry among McDonald’s and its competitors. References About McDonald’s. (2009). Cause that counts. Retrieved June 30, 2009, from http://www.aboutmcdonalds.com/mcd/students/mcdonalds_does_good/cause_that_counts.html. Kotler, P. & Keller, K.L. (2006). Marketing management (12th Edition). Pearson: Prentice-Hall. McDonald’s.com. (2009). Retrieved June 29, 2009, from http://www.aboutmcdonalds.com/mcd/investors/corporate_governance.html. McDonald’s.com history. (2009). Retrieved June 29, 2009, from http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html. Rowley, J. (2004). Online branding: The case of McDonald’s, British Food Journal, Vol. 106, No. 3, (228 – 237). Retrieved June 30, 2009, from Emerald Full Text Article database. Vignali, C. (2001). McDonald’s: “think global, act local”—the marketing mix, British Food Journal, Vol. 103, No. 2,(97 – 111). Retrieved June 29, 2009, from Emerald Full Text Article database. Gareth Saloner. (2000). Strategic Management. Wiley Publishing. Harold Randall. (1996). Accounting 3rd Edition. Letts Educational. Stephen Ross. (2002). 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