Business-Level and Corporate-Level Strategies - Case Study Example

BUSINESS-LEVEL AND CORPORATE-LEVEL STRATEGIES Table of Contents Table of Contents 2 Introduction 3 Business level strategies 3 Corporate level strategies 4 Competitor analysis 5 Conclusion 7 References 8 Introduction This study entails about the various business level and corporate level strategies followed by McDonalds Corporation. McDonalds operates its business activities in the restaurant industry worldwide. It mainly performs its operational activities through the company owned and franchised stores located in different parts of the world. The company is headquartered at Oak Brook, Illinois, United States and was founded in the year 1940. A wide range of products are offered through the McDonalds stores like food items, coffee, soft drinks and other types of beverages (Yahoo Finance, 2012a). The analysis of the competitive business environment of McDonalds would also be discussed in this study. These strategies that are taken up by McDonalds at different levels would be compared and contrasted to help in the overall strategic analysis. Business level strategies A business level strategy can be defined as an action plan that is developed by a business organization which gives a description about the various means through which it would compete in a given industrial or market segment (Ireland, Hoskisson, and Hitt, 2008, p. 88). The primary objective of a business level strategy formulated by any organization is to create increased value for its customers in a consistent manner. There can be five different types of business level strategies that can be employed by an organization. They are: a) Cost leadership, b) Focused cost leadership, c) Differentiation, d) Focused differentiation, and e) Integrated differentiation or cost leadership (Ireland, Hoskisson, and Hitt, 2008, p. 88). The business level strategies employed by McDonalds Corporation have been discussed in this section. McDonalds’ business level strategy can be categorized as integrated cost leadership or differentiation strategy employed by them. The company planned its strategies to become one of the market leaders in the global fast food industry by providing its customers with greater number of options of offering better service to them through healthy meals and at cheaper prices. The business strategy employed by McDonalds is competitive in nature in a number of different categories like quality, price, employee training and management. McDonalds serves its customers globally who are of different ages and comprises of various demographics as well. The companys strategy is to satisfy the needs of its target customers by providing them with good quality food products that are less expensive and in quick time. The company offers different variety of food items to its customers through its restaurants located in different parts of the world. McDonalds operates its business in nearly 119 nations of the world and its strategy is to provide different kinds of products in accordance with the specific needs and wants of people staying in different countries. This type of knowledge base and flexibility of McDonalds helps it to achieve its global objectives and targets and sustain the existing competition in the market. According to Hin (2008), the business structure of McDonalds has a significant impact on its business strategies. Corporate level strategies In corporate level strategy companies can adopt three types of models. a) Directional Strategy (focusing on growth of the business, managing market share of the company to a stable platform, b) Portfolio Strategy (analyzing market in terms of strength, opportunities, weakness, threats), c) Parenting Strategy (companies transfer resources and maintain workforce in the foreign country). Corporate level strategy is a strategy which is aimed at the long term position of a business. McDonalds operates its business in the global fast food industry. The company has its presence in nearly 119 nations of the world (McDonalds Corporation, 2012). The corporate level strategies of McDonalds are similar to other global organizations and are designed achieve its corporate goals in a cost effective manner. McDonalds is found to have their focus mainly on one task which is operating in the global food retail industry. This results in the company’s business to concentrate on a single industrial sector, increasing its market share and ultimately enhancing the level of consumer loyalty. However this is a risky business strategy employed by McDonalds because in case it fails to meet the exact needs and requirements of its customers, it can lead to decrease in its profitability. McDonalds diversifies its business operations in a number of ways. The company produces similar products in the form of burgers and salads but the customers are offered variety of choices related to each kind of products produced by them. Moreover the company operates its business in different geographical areas but still involved in performing similar tasks. This type of diversification strategy proves to be advantageous for the company in a numerous ways. Firstly, if more than one McDonalds’ restaurants are present in the same city then it can build up synergy through coordinated efforts between them while performing various activities like advertising, supply chain management, etc. Secondly, the company does not depend on offering a particular product, so it is not that vulnerable to economic or competitive threats. Finally, it helps the organization to utilize expertise or technology that has been developed in one market to make entry into a new market segment more easily and cheaply. However it is associated with one minor disadvantage related to incurring costs associated with coordinating operational activities between related business divisions (McDonalds Corporation, 2012). Competitor analysis As mentioned earlier, McDonalds operates its business in the global fast food industry. Some of the business segments in this industry are concentrated in nature like the burger segment is mainly dominated by McDonalds and Burger King. However, in the overall context the industry is fairly fragmented in nature with a number of independent organizations operating in the market. The rivalry or competition between the market players is to some extent mitigated because of low exit costs for the companies and the ease with which their capacity can be increased. Large food chains can easily expand its market by opening up many outlets in different geographical locations. Since most of the major players in the market like McDonalds, Burger King Corporation, Yum! Brands, Inc. and Wendys/Arbys Group, Inc. are primarily focused on fast food, the profitability of the organizations are mainly dependent on low margin and high turnover operations (Yahoo Finance, 2012b). Hence, price competition amongst the major market players is intense in the market. However, the brand power is observed to create greatest competition in the market and companies like McDonalds spends a large amount of money on global advertising activities. If we compare the business level strategies of McDonalds with its major competitors like Burger King it can be observed that it is mainly concentrated on cost leadership strategies. They do not have diversified products like McDonalds which is a major disadvantage for them. With respect to the corporate level strategies employed by the major competitors of McDonalds it can be observed that most of them are concerned on their growth strategies and finding means to increase their market share. However if we compare this with the corporate level strategies employed by McDonalds it can be concluded that it is in an advantageous position because it includes diversification strategy as well which has helped the company to gain competitive advantage and outperform its rivals in the global fast food industry. The success of McDonalds is not dependent on the pace of the market, whether it is a fast-cycle or slow cycle market. It is so because the company has already established a large customer base for itself and has expanded its business globally to a large extent. Moreover, the brand image of the company is also very good and has been successful in implementing all its business strategies to be a market leader in the fast food industry. Conclusion McDonalds Corporation has been able to successful to carry on its business activities in the global fast food market and has managed its available resources quite effectively and efficiently. It is considered to be a market leader and has its presence in different nations of the world. The business level strategies employed by McDonalds are mainly concentrated on integrated cost leadership or differentiation strategy. The company has been able to offer a wide variety of products and at a lower cost. The company has acquired a good brand image in the global market and is highly valued by its customers worldwide. The corporate level strategies employed by McDonalds have been found to be mainly concentrated on growth strategy and in a cost effective manner. Hence business growth through expansion into various geographical regions is the key corporate strategy of the company. The competitive environment analysis of McDonalds and its operating industry suggest that there is an intense rivalry amongst the major market players like Burger King, Yum Brands and McDonalds. However the strong brand image of McDonalds and their effective business level as well as corporate level strategies have helped it to outperform its competitors and gain competitive advantage in the market. Hence, it is expected that McDonalds would experience a sustainable growth and development in future. References Hin, J. (2008). The Business Strategy of Mcdonald’s. International Journal of Business and Management, 3(11), pp. 72-74. Ireland, R. D., Hoskisson, R. E., and Hitt, M. A. (2008). Understanding Business Strategy: Concepts and Cases. (2nd ed.). Connecticut: Cengage Learning. McDonalds Corporation. (2012). Form-10K: Annual Report 2011. Retrieved from http://www.sec.gov/Archives/edgar/data/63908/000119312512077317/d260574d10k.htm#toc260574_1 Yahoo Finance. (2012). McDonalds Corp. (MCD): Profile. Retrieved from http://finance.yahoo.com/q/pr?s=MCD+Profile Yahoo Finance. (2012b). McDonalds Corp. (MCD): Competitors. Retrieved from http://finance.yahoo.com/q/co?s=MCD+Competitors Read More