Strategic Development and Expansion of McDonalds - Case Study Example

Strategic Development and Expansion of McDonalds Introduction Strategic management is a practice undertaken by numerous companies including McDonalds in ensuring that the company is run in the best way possible (Rao et al., 2008). Basically, strategic management entails analysing the main objectives that are adapted by the company in relation to resources and performance at both internal and external environmental levels. According to Wilson and Gilligan (1997), strategic management revolves around three elements of importance to comprise strategic analysis, strategic choice, and strategic implementation. Strategic analysis Uden, et al. (2013) argue that this element revolves around comprehending the strategic level of an organisation particularly in terms of environment and more so the impact of both internal and external environment in relation to the activities that the organisation involves itself in. For instance, McDonalds is a chain of fast foods restaurant in the U.K and other parts across the globe. Moreover, it gives an analysis on the resource strength of the organisation, associates of the organisation and their impact on the current and future position of the organisation. Tomlinson and Murdick (2000) say that the analysis acts as the main influences on the wellbeing of the organisation in both current and future endeavor. Of importance to note is that the influence brought about by this analysis is based on the environment, resources and expectations from diverse stake holders (Deephouse, 1999). First, it is indispensable to comprehend the main environment that an organisation operates within a given strategy as this plays a huge role in the overall management of the organisation (Tomlinson & Murdick, 2000). Essentially, the environment of any organisation is ranked within the aspects of social, economic, political and technological grounds. McGrath and Macmillan, (2005) argue that once these aspects are put into scrutiny, they tend to give the effects that are supposed to be interpreted by the organisation for proper strategic management. Secondly, it is crucial that the organisation does a self evaluation to determine its level of resource capabilities. Bruce (2008) argues that this could be achieved by going through its strengths and weaknesses to clearly establish its competitive advantage and / or disadvantages. In most cases, the understanding of organisation resources comprises of its strength or weakness in management, finance, and products (Stelzner, 2011). Thirdly, the organisation should be aware of the expectation of the stake holders (McGrath and Macmillan, 2005). Stake holders contribute in most of the decisions that are made by the management of a particular organisation, thus determining issues that are rated as acceptable in the strategic management. According to Piercy (2009), beliefs and assumptions that are part of an organisational culture also have a major impact in strategic analysis. Thus, it has often been argued that different managers in same or different organisation are likely to come up with different strategies for their organisation when faced by similar environment and resource aspects. Additionally, the direction and implication that emanate from current objectives should also play a role in determining the future strategic management plan for the organisation (Zajac et al., 2000). Strategic Choice Brian (2004) argues that strategic analysis act as the basis for strategic choice through the generation, evaluation and selection of strategic options. Firstly, the generation of strategic options comprise of having numerous positive actions that could assist in coming up with a strategic choice. At times, an organisation is faced with the decision of widening its market or increasing its chain of branches to become multinational. However, according to Bradley (2007), the organisation may later come up with other choices that are meant to improve its overall management such as, having a common trading basis for its external market. In a general sense, strategic choice gives a foundation for strategic options for the organisation (Ranchhod and Gurau, 2007). Secondly, once the strategic options have been generated, it is crucial that the evaluation process begins to give an assessment on the relative merits that they intend to give. Stelzner (2011) articulates that in most cases, the organisation has to make numerous enquiries to determine if the options have any impact on organisation’s future. Similarly, the feasibility study should ensure that it favours the interest of most stake holders. Finally, the organisation should allocate time for selecting the best options to be pursued by the organisation. Aaker and McLoughlin (2007) noted that the strategic options could be one or numerous in relation to what the organisation intends to pursue. Nevertheless, it is worth noting that these strategic options have both advantages and disadvantages (Kotler, Keller, Brady, Goodman and Torben, 2009). Of importance to understand is that selection of strategy options is not absolutely based on objectivity and logical act, but it is influenced by values of managers and other stake holders with the inclusion of power structure in the organisation (Ojha, 2012). Strategy Implementation In this phase, Lawrence (2002) pointed out the strategic options are put into implementation through actions such as planning and allocation of resources, organisation structure and design, and the management of strategic change. Initially, strategic implementation mostly comprise of resource planning and the logistics pertaining to logistics of implementation (Fifield, 2007). As such, the organisation must be conversant with the crucial tasks that need to be carried out and the changes that need to be executed need to be made with inclusion of who should be mandated to look at the changes. Tidd and Bessant (2011) articulate that strategic implementation entails minor or major changes within the organisation structure. In addition, it is necessary to become accustomed with systems that are mostly used in the general management of the organisation. This is inclusive of the responsibilities that different departments have been mandated to work on. The information systems require to monitor the progress of the strategy and the necessity to take the workforce through an advanced training in reference to what the organisation intends to have in their overall strategic management. Oriesek and Schwarz (2008) articulate that the implementation of strategy cannot be achievable without the management of strategic change. In this case, it is crucial that action is displayed in terms of how the change management process and mechanisms are clearly carried out. Mechanisms in this case comprise of organisational redesign, cultural aspects of the organisation and the general political barriers to change. Cunningham and Harney (2012) argue that that strategic management is diverse and as such, used by various organisations to improve their performance both internally and externally through following steps and implementing plans. Strategic Management at McDonald’s McDonalds is the largest chains of fast food restaurant across the globe. As such, it has evidently put into practice the use of strategic management in ensuring that its ever growing competitive market meets the necessary criteria for market advantage. In terms of strategic analysis, McDonalds has been able to keep its resources and expectations of diverse stake holders that facilitate the wellbeing of the company. In regard to strategic choice, McDonalds has ensured that formulation, evaluation and selection of strategic options has enabled it attain its position in the market. Moreover, McDonalds has gone through strategic implementation to get where it is today (Ketchen, 1996). In order to develop and maintain competitive advantage, McDonalds has been able to employ the knowledge of strategic management in different perspectives. Joan (2012) pointed out that for any organisation to maintain a competitive advantage, especially in a highly competitive market, it must be in a position to clearly understand the concept of strategic management. Strategies employed help the organisation to develop mechanisms and organisational culture that denotes what the brand stands for. In their study on what assists international organisations grow even in other countries, Djankov et al. (2006) found out that a study of the external factors affecting business operations were necessary since they pointed out on areas that needed improvement. Equally, the authors added that the study of the internal factors assists an organisation to develop an organisational culture that fosters strategic actions. Strategic management offers tools that organisations can use to build competitive advantage (Michael et al., 2010). One such tool is the study and evaluation of external environmental analysis that assists organisations to understand the market and the best tactics for overcoming their rivals (Hooley, Piercy and Nicoulaud, 2008). In employing the external environment analysis, McDonalds has been successful in focusing on the following porter 5-forces. The threat of new entrants For any business entering into the fast food industry, challenges such as economies of scale, government regulations and brand loyalty are eminent (Doyle, 2008). However, these challenges do not pose a huge threat to the already existing organisations. In light of this, McDonalds has not been threatened by the new entrants in the industry because it has already established itself and developed an organisational culture that enables it to understand the market and customer needs. In addition, McDonalds has already diversified its operations thus generating large volume of sales. Therefore, the issue of economies of scale does not put it at risk of being eliminated from the market by new entrants. On the same note, Michael (2008) argued that well established organisations that sell large volumes while maintaining high quality stand a chance of gaining loyal customers as opposed to new entrants who have to spend long time establishing themselves and customer base. In another dimension, new entrants have to first deal with establishing reputable and proficient management as opposed to the already existing and well established organisations (Capon, Capon and Mac Hulbert, 2009). McDonalds has a good management that enables it to produce top quality with a well customer service management. In addition, new entrants have to adhere to different government regulations especially meeting health, safety and hygiene policies. In such a situation, McDonalds has been in the industry and knows how to adhere with such provisions well than new entrants. In this regard, it is evident that by understanding the threat of new entrants, McDonalds has no fear of losing business to new entrants since it has improved on areas that new entrants would refer to as opportunity routes. The bargaining power of customers It is apparent that there are many substitute products in the fast food industry. However, McDonalds has been able to study and understand customer needs and demands thus, maintaining a base of loyal customers. Studies have documented that customers are rational in consumption (Sperber, 1993). They go for products that suit their needs and preferences. If the old companies do not improve or bring in new products that suits current demands and preferences of the customers, they tend to seek alternatives from other companies that may offer such products. For instance, today customers are enlightened and are keen on health matters especially in regard to contents of the fast food. In this regard, McDonalds has been able to study the customer needs and decided to provide customers with healthier foods such as salads and fruits. In addition, they have embarked on removing fatty acids from the oils they use to make their foods. However, with emergence of new cases of loyal customers filing lawsuits as a result of fast food related health issues, McDonalds has no option other than to design mechanisms of dealing with such challenges. For instance, finding solutions to health issues such as obesity can entail the organisation developing programs that can be utilised by its customers to reduce chances of developing obesity as a result of consuming its foods. Such programs may involve educative campaigns on how people can remain healthy even after consuming fast foods. This may include provision of brochures advising its customers to engage in exercises so as to reduce the likelihood of obesity and other related complications. In addition, labeling of nutrients content in their foods can help in reducing such cases. Proper guidance with the help of health professionals on the right amount of fats and other nutrients an individual should take can be used by the organisation. Such initiatives would not only help the organisation to reduce lawsuit cases, but also act as a concept of corporate social responsibility (Kim and Mauborgne, 2005). Ziesak (2009) pointed out that, in order to have a good reputation to the public, organisations must engage in corporate social responsibility. This makes customers develop trust with the organisation (Oriesek and Schwarz, 2008). The bargaining power of suppliers It is apparent that in fast food industry, an organisation that wants to continue being relevant in the market has to have a steady and stable raw material supply. This ensures that the organisation meets the demand for its customers always. (Kim and Mauborgne, 2005; Baker and Hart, 2008). Studies have indicated that customers tend to be loyal to companies that have steady supply of the products they want regularly (Dibb and Simkin, 2012). For instance, since the main products of McDonalds come from farmers, it is indispensable for the organisation to uphold a good relationship with them. However, after a critical review on the best way for ensuring steady, reliable and safe products, McDonalds decided to have most of its products produced by them. They are their own suppliers of products such as potatoes. Threat of substitute products and services In the fast food industry, threat of substitute products is commonly high. Due to improved technology, many organisations are able to venture into the fast food industry and change the taste in relation to customers’ preferences. In such a situation, McDonalds has continued market research that enlightens it on what the customers need. The intensity of rivalry among competitors Perhaps, this is the most powerful factor among the five forces. Competition in the fast food industry is on the higher side because of the competitiveness in price, taste and quality of services offered. For instance, McDonalds faces stiff competition from Burger King, Pizza hut among others. Therefore, McDonalds has to decide on the affordability of its products to its customers, improve product quality and improve customer services not forgetting the importance of building strong brand awareness in order to stay ahead of its competitors (Pride and Ferrell, 2010). Internal management In regard to its internal management, the organisation has been able to improve customer services by utilising technology (Aaker, 2011). For instance, McDonalds developed a touch activated screen where customers can make their orders without necessarily queuing. 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