Blue Ocean Strategy - McDonalds - Case Study Example

Develop a blue ocean strategy Introduction Blue ocean strategy can be defined as a strategy that is adopted by a company. To create a market space that is uncontested which in turn helps to create an extended value for the customers and even gives rise to irrelevant costs. Blue ocean strategy is incorporated by a company in the system often reduces the overall costs. In an industry that is well established there is a great deal of competition amongst all the companies so as to acquire every possible market share. In order to avoid such competition that is often costly; many firms expand or in such a scenario even innovate so as to identify the blue ocean. A blue ocean can be defined as a space where there are no such operations performed by any company and hence it gives an opportunity to the firm to expand more and create its own demand, as there is no competition in the market. The major elements of blue ocean strategy are to identify the key elements that define a service or product offered by the company in the present scenario. The next element is identification of customer group that values only particular aspect of this product; then create value for the customers at the same time reducing costs and then incorporation of new features or adding new dimensions for the target group. Having said that, blue ocean strategy can be defined as creating new industry through new innovative products where there is no competition. On the contrary red ocean strategy can be defined as where there is great deal of competition and growth and profit rate is low. In this strategy there are defined industries so a company can easily enter while imitating others but there is a lot of difficulty in terms of survival. Company The company selected for this paper is McDonald’s. It is an US based company, which was founded in 1955. The head quarter in Oak Brook, Illinois and it is the worlds largest chain of fast food restaurants. The customer base is almost 68 million and it has presence in 119 countries and has 35,000 outlets. The number of employees is 1,800,000. In 2013 the organization’s revenue was US$ 28.1057 Billion and its net income in 2013 was US$ 5.5859 billion with total assets of were US$ 36.6263 billion. Currently, Don Thompson is the Chief executive officer of the organization. The business of the association started in 1940. Generally McDonald’s restaurants are operated by franchisees and sometimes an affiliate runs McDonald’s restaurants. The main source of revenues for the organization is royalties, fees given by franchisees and rents. Almost 15% of total McDonalds restaurants are run and operated by the corporation directly and franchise or others operate the rest of the restaurants. There are lots of fast food varieties that are offered by the corporation such as hamburger, chicken sandwiches, soft drinks, breakfast, French fries, desserts, wraps, salads and vegetarian items; hence, the business mainly focuses on non vegetarian food but recently it started focusing towards vegetarian food items and it has involved itself in different charitable works. Furthermore, Maurice McDonald and Richard McDonald are the founders of the corporation. The corporation believes in extensive advertisements and marketing. It has different types of restaurants, some of the restaurants have counter service, drive-through services or indoor seating facilities while some of them have outdoor seating arrangements. Apart from only restaurants it provides very pleasant atmosphere in some restaurants where playground is available for children. The company is listed in New York Stock Exchange and it is a publicly owned company and it has very strong financial condition. In last 25 years McDonald’s has increased its share holder’s dividend consistently and it is one of the aristocrats of Standard & Poor’s 500. The company is focusing heavily on the emerging markets like India, China, Brazil, and South Africa. It is planning to open more and more outlets into those countries because people of these developing countries starting to have higher disposable income. Having said that, McDonald’s has its own university where each and every year different fresh talents gather lots of knowledge regarding fast foods. It is a revolutionary step taken by the company; hence, this step is providing huge competitive advantage to the organization (Nichols, Michael and Charalambos 111-113). Reasons for choice McDonald’s is a legendary brand as far as fast food is concerned. It is a globally reputed well-recognized and significant brand name within the industry. Restaurant industry or fast food industry cannot be imagined without the name of McDonald’s. It has changed the landscape of the restaurant and the fast food industry. The corporation has huge presence across the world and it is an unavoidable brand in the market. Apart from these brand values or presence the company is having huge resources in every aspects of business. A brand like McDonald’s does have every aspect that is expected out of a modern and global brand. It maintains all management functionality very professionally and suitably. The company has very large global footprint, that lots of people from different cultures, background and races loves McDonald’s and it has become an unavoidable part of the society in some countries. The corporation has almost 70 million customers every day. Those customers are generally served from its 35,000 outlets across the world (Kincheloe 102-104). Time is changing and modern day businesses are full of competition. Different competitors of the organization are coming up with different innovative strategies. It is globally very successful and a famous brand but still the company faces competition from Burger King, KFC, Wendy’s and other fast food companies. It is very important for McDonald’s to come up with a blue ocean strategy to draw the highest market share from the competitors. The blue ocean strategy will help the company to kill the competition for certain period of time until the competitors follow up. The company has been chosen for its global presence and reputation and its continuous innovation and creativity is also a very important reason for choosing this organization. Its large-scale business operations are also another reason for choosing the company. Also, the business has adequate financial capacities as mentioned before, that it can invest large amount of money for creating a blue ocean strategy. It is very well known for its strategic implementations (Love 199-201). Blue ocean strategy is not suitable for every brand and it needs some critical factors that are present in McDonald’s. Over the years the corporation has satisfied its global customers and it’s a significant achievement by any company to reach that level of satisfaction. The organization has done continuous innovation over the years that it created different benchmarks in terms of marketing and advertising their products. Superior marketing and advertising and Popularity of the company are also reasons for choosing this company (Kroc and Robert 192- 195). Strategy Weekly buffet can be a blue ocean strategy for McDonald’s. The company will arrange buffet lunch once in a week in selected outlets. This kind of weekly buffets will increase number of customers in outlets (Osterwalder and Yves 110-115). It will be a unique strategy for the company because no other fast food restaurant has this kind of strategy. Basically, the buffet lunch will be divided into three levels, pricing and items will be different for each level of buffets. Customers have to collect a coupon for the buffet where each coupon represents one customer and all different products will be available in the buffet. In this way the company can display different new items in front of their customers. This strategy will help the business to reduce its competitions in two ways. More customers will present themselves in outlets when the buffet is on course. Initially this strategy will take away some customers from the competitors. It will bring a very new concept in the industry. With the help of this strategy the company will be able to target people from all income groups of the society. This strategy will increase number of customers in very small period of time and it will be very effective for saving time as well (Sushil 82- 85). Since the corporation is having it’s own outlets, some of these outlets are very big in size. It will not require any extra investment from the side of organization which can be used for their own outlets for arranging this kind of lunch. This strategy might be difficult for the competitors to replicate since it would require much time and financial support before such actions can be undertaken. Customers will eagerly wait for that special day of weekly buffet and it will add more excitements in the mind of customers. In this way the strategy of weekly buffet will help the company to create a space, which is free from all competitions. This strategy will position the group very well in the mind of its customers. Customers always want something new from organizations like McDonald’s. This strategy will be a pleasant surprise for its customers, hence; it will help McDonald’s to attract huge customer base within very small time. Implementation Proper implementation is very important for any strategy. In this case also McDonald’s has to implement its strategy very professionally. It is the level of implementation, which will show whether the strategy will be successful or it will fail in future. The company will come up with one online and offline advertisement. The advertisement will inform customers about the date, timing and venue of weekly buffet. In that advertisement the details of the buffet will be. The organization will fix time duration within that time customers will have to collect their coupon for the purpose of the buffet (Huber117-121). The buffet will be divided into three levels. Name of those levels are standard, medium and premium level. Standard buffet will consist of all base items of McDonald’s. it will be the cheapest buffet among the three alternatives the medium buffet will offer few more items compared to the standard category while the cost of this buffet will be higher than standard buffet. In premium buffet or the highest priced one, all the best items of McDonald’s will be included. All the new items will be displayed in the buffet. Starting time of the weekly buffet lunch will be fixed which is 2 pm in the lunch will start. After 2 pm the door will be closed. Soothing music will be there in the room during the lunch. Payment for the buffet will be taken in advance during the distribution of coupons. It will help the company to get the idea of number of customers. At the end of the buffet each and every customer will provide their valuable feedback regarding different items. At the end of the buffet officials of McDonald’s will analyze all those valuable feedbacks and according to that the group will strengthen its highest chosen items and can improve upon their lowest chosen items. Large number of employees will be needed for arranging this kind of buffet. At first this kind of buffet will be arranged in USA market after that it will be arranged in foreign markets. Implementation of this strategy must be very smooth and simple it should not be complex and confusing at all. Everything related with the strategy implementation must be very systematic. This will help the organization to create database of customers. Four Actions Framework The eliminate-reduce-raise-create grid is a sound analysis tool that can be adopted by the management of the company so as to list the factors that can be reduced or eliminated by the company to sustain in the market place and what are the factors that needs to be raised and created so that it offers a more tough competition to the other players in the industry (Kim and Mauborgne 156). McDonald’s has been able to survive in the intense competition majorly because of its innovative product lines and strong association with all the cultures in which it operates. However the grid framework for the company given will illustrate more on the factors that need to be eliminated, reduced, raised and created for future growth and success in the industry. Eliminate Celebrity advertisements Special offers & discounts Above the line promotions Raise Retail store environment Low price menu Attitude and communication skills of the workforce Reduce Prices of some products Time between service and order placing Low level of attention towards the customers Create Ease of food item selection Special menu for diabetic patients Fun and artistic music Refined environment These factors as mentioned in the grid define the blue ocean strategy for the company which can create a market space in the industry where there will be no such tough competition for the company (Nair 76). The first grid is to eliminate. The factors which are included in this portion are must be eliminated totally for the creation of blue ocean strategy. McDonald’s should stop celebrity advertisements as all other players in the market are doing same thing. Offering special discounts should be eliminated totally. This is also a very common idea followed by other players.. The company must reduce complexity in product range. Simple product range will be very effective for creating a blue ocean strategy for the organization (Jha 72-75). McDonald’s must reduce waiting hours in the queue. Low waiting hours are very important for customer satisfaction. MacDonald’s can lend little more effort to serve the customers efficiently and answer to each and every query of them. It is very important to attend each and every customer in a serious way with full attention. It is very important for the corporation to raise the store environment that will create a unique feeling in the mind of customers when they will visit any company outlets. The company must come up with more and more low price items to keep the attraction of young people and students intact. It will provide McDonald’s uncontested market space. Communication skills and attitude of the work force must be raised because they are the front lines of the business. Their attitudes and communication abilities are very critical for the group to stay ahead of all competitions (Maxey 131-134). The association has to be very much creative and innovative in terms of their menu selection. The company has to be more creative and versatile in terms of their items. It must select its menu for all age group people and it has to be very much flexible in terms of customer’s taste and preferences. The corporation has to be creative in terms out let environment that will refresh customer’s mind. It must be very creative in terms of customer’s loyalty towards the brand. It is the customer loyalty at the end of the day will help the organization to get an uncontested market space. The organization can think of including music’s and different activities for having fun in their out lets (Gondek 153-155). Conclusion Modern business is ever changing. Change is the only constant thing in the world. It is good for the company to change according to the situation. It has to be more and more pro active in nature. It must review its each and every strategy after regular interval of time. McDonald’s must be very creative and innovative for the achievement of uncontested market space. There is no short cut for the corporation. At the same time the company must be very much aware with all social aspects and legalities. It is very important for McDonald’s to be ahead of all competitions. This will lead to higher amount of investments from the business. But those investments will be very effective and helpful for the organization in future. Only the blue ocean strategy will help the organization to get uncontested market space. Recommendations McDonald’s must maintain its high level of research and development. It must be very flexible in terms of customer services. In the case of international business the company has to be more local centric as every country has its own different cultures. They can alter their food varieties or product varieties accordingly. The corporation must stick to its basics. In course of innovation it should not forget its root. McDonald’s has to be very much transparent in their business practices and must contribute towards the society. It will help the organization to create an emotional attachment with its customers around the world. It must focus towards customer loyalty. Loyal customers are very precious assets for any organization. They act as advocates of the brand. Works Cited Gondek, Christian. Blue Ocean Strategy - An Insight Into the Future of Customer Relationship Management. London: GRIN Verlag. 2013. Print. Huber, Adele. Effective Strategy Implementation: Conceptualizing Firms Strategy Implementation Capabilities and Assessing Their Impact on Firm Performance (Google eBook). Zurich: Springer. 2011. Print. Jha, Jaya. Summary of Blue Ocean Strategy By W. Chan Kim & Renee Mauborgne. New Delhi: Summary Town. 2012. Print. Kim, Chan, and Renee, Mauborgne. Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant. UK: Harvard Business Press. 2013. Print. Kincheloe, Joe. The Sign of the Burger: McDonalds and the Culture of Power. New York: Temple University Press. 2002. Print. Kroc, Ray. and Robert Anderson. Grinding It Out: The Making Of McDonalds. New York: St. Martins Press. 1992. Print. Love, John. McDonalds: Behind the Arches. New York: Bantam Books. 1999. Print. Maxey, Emma. The Most Intimate Revelations about Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Moscow. Kniga po Trebovaniyu. 2013. Print. Nair, Mohan. Strategic Business Transformation. New Jersey: John Wiley & Sons. 2011. Print. Nichols, Wilmer. Michael ORourke and Charalambos Vlachopoulos. McDonalds Blood Flow in Arteries, Sixth Edition: Theoretical, Experimental and Clinical Principles. London: CRC Press. 2011. Print. Osterwalder , Alexander. andYves Pigneur. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (Google eBook). London: John Wiley & Sons. 2010. Print. Sushil, Sushil. Flowing Stream Strategy: Leveraging Strategic Change with Continuity (Google eBook). Berlin: Springer. 2012. Print. Read More