Business Strategy: McDonalds Healthy Menu - Case Study Example

Business Strategy: McDonald’s Healthy Menu Name Course Name and Code Date Table of Contents Task 1: Strategic Planning 3 1.1Business Analysis 3 1.1.1Mission Statement 3 1.1.2Strategic Vision 3 1.1.3Strategic Goals 3 1.1.4Strategic Objectives 3 1.1.5Core Competences 4 1.1.6Influence on Strategic Planning 4 1.2Factors Affecting Strategic Plans 4 1.3 Strategic Planning Techniques or Tools 5 Task 2: Formulating a New Strategy 5 2.1 Organizational Audit 5 2.2 Environmental Audit 6 2.2.1 PESTEL Analysis 6 2.2.2 Porters Five Forces 7 2.2.3 SWOT Analysis 7 2.3 Stakeholder Analysis 8 2.3.1 Internal stakeholders 8 2.3.2 External stakeholders 8 2.4 Presentation of a New Strategy for McDonald’s 9 Task 3: Approaches to Strategy Evaluation 9 3.1 Alternative Strategies 9 3.1.1 Market Entry 10 3.1.2 Substantive Growth 10 3.1.3 Limited Growth Strategies 11 3.1.4 Retrenchment Strategy 11 3.2 Justification of the Selected Strategy 12 Task 4: Implementation of the Strategy 12 4.1 Roles and Responsibilities of Personnel 12 4.2 Estimated Resource Requirements 14 4.3 SMART Objectives 15 References 15 Task 1: Strategic Planning 1.1 Business Analysis 1.1.1 Mission Statement The McDonald’s mission statement is to be the best quick service restaurant in the world (McDonald’s 2016). In being best identifies some aspects that include value, cleanliness, service, and quality to fulfill the requirements of every customer and ensure the customer smiles after leaving the restaurant. 1.1.2 Strategic Vision The McDonald’s strategic vision is to be the best and leading fast food provider across the world (McDonald’s 2016) 1.1.3 Strategic Goals The following are the strategic goals: The customer experience is important to the overall operations at the company McDonald’s is committed to its people Understand and advance the McDonald’s system (Loya 2011) Operating the business on ethical manner Give back to the community Improve business profitability 1.1.4 Strategic Objectives The following are the objectives: The customers are important to the survival and existence of McDonald’s and to fulfill their respective requirements, quality and cleanliness are integral to the entire operation of the business A strong human resource management and development through provision of opportunity and resources to achieve dreams (McDonald’s 2016) The foundation of McDonald’s is premised on operators, suppliers, and employees and balancing the requirements of these groups is important to the success of the organization Championing ethics and integrity in operating the business Champion corporate social responsibility through supporting the community Sustained growth is crucial for the success of the organization (McDonald’s 2016) 1.1.5 Core Competences McDonald’s core competencies are: High-quality products and services at affordable prices and taste Strong human resource Championing conveniences through introducing numerous branches 1.1.6 Influence on Strategic Planning Strategic planning requires direction and approaches to fulfill a specific requirement (van Wijngaarden, Scholten and van Wijk, 2012). The vision, mission, and other variables define the direction of McDonald’s and creates the understanding of the manner in which the goals and objectives can be achieved. Hence, it has a strong influence in fulfilling strategic requirements. 1.2 Factors Affecting Strategic Plans Numerous factors affect strategic plans (Lazonick, Hopkins, and Jacobson, 2015). The common factors include the availability of resources, having clearly defined goals, allocating duties and resources accordingly and embracing the requirements of different stakeholders (Loya 2011). Stakeholders define and determine the success of an organization and incorporating the views and expectations of stakeholders determines the success of strategic plans. 1.3 Strategic Planning Techniques or Tools Strategic planning is the process that enables development of direction or strategy and action plan aimed at achieving organizational goals and objectives. Numerous strategic planning tools exist, and some of the common ones are: SWOT analysis – addresses the strengths and weaknesses of an organization relative to the opportunities and threats (Loya 2011) Porter five forces analysis – analyzes the rivalry and attractiveness of the industry through analyzing the bargaining power of suppliers and buyers and the threat of new market entrants and substitute products Task 2: Formulating a New Strategy 2.1 Organizational Audit Perceptual maps are used to understand the positioning of various factors in supporting the requirements of the organization. The attributes for perceptual mapping used to analyze the McDonald’s include availability, sophistication, market share, popularity, pricing and customer satisfaction. 2.2 Environmental Audit 2.2.1 PESTEL Analysis Political Factors Pending tax reform Changing and evolving health policies Increase in number of international trade agreements Political stability and instability across the world that affects the business differently based on location of McDonald’s branch (McDonald’s 2016) Economic Factors Slowing Chinese economy The European economies are stable but risky The US economy is slow but stable Most consumers have access to disposable income Improvement payments and transactional infrastructure Social/Cultural Factors The wealth gap is widening Cultural diversity is improving (McDonald’s 2016) Concerns about health and healthy lifestyle trend Technological Factors Moderate research and development activity in the industry Increasing sales attributed to the use of mobile devices Increased business automation Presence of social media aiding in marketing and customer engagement Environmental Factors Concerns about climate change (McDonald’s 2016) Emphases on sustainability strategies are growing Corporate environmental programs are gaining interest (Lazonick, Hopkins, and Jacobson, 2015) Legal Factors Continuous regulations on animal welfare Local health regulations in schools and workplaces (McDonald’s 2016) Changing labor requirements across the world Different regulatory and legislative policies in different countries (Lazonick, Hopkins, and Jacobson, 2015) 2.2.2 Porters Five Forces Force Nature of force Analysis of force Competitive rivalry Strong Low switching costs High aggressiveness of organizations operating in the industry Numerous organizations operate in the industry Bargaining power of McDonald’s customers Strong Availability of substitutes is high The number of providers of services and products is high The costs of switching are low Bargaining power of McDonald’s suppliers Weak Overall supply is usually high The vertical integration costs are low Numbers number of suppliers are available Threat of substitute Strong The cost of switching is low Substitute products are available The performance to cost ratio is high Threat of new entrants Moderate The cost of brand development is high The capital cost is moderate The switching costs are also low 2.2.3 SWOT Analysis Strengths Community oriented Excellent and strategic locations Use of quality products Ranked high on numerous Fortune and related magazines Cultural diversity based on product and service offering Effective assembly lines operations Global operations and presences (van Wijngaarden, Scholten and van Wijk, 2012) Weaknesses McDonald’s was not successful in the pizza market and limiting competing capability High employee turnover resulting in high training costs Does not concentrate on organic foods Lack effective variation in terms of seasonal products Franchised operations raise quality concerns Focus on fried foods and burgers, which can be seen as unhealthy offerings Opportunities Participating in more joint ventures Incorporating healthier option Open products and incorporate allergen free ingredients (van Wijngaarden, Scholten and van Wijk, 2012) Expand the business in developing parts of the world Improving the marketing strategy through encouraging socially responsible manner of operations Advertising Wi-Fi services in the branches Threats The focus of customers is towards healthier dieting The downturn of the economy affects customer spending power Numerous competing firms are opening The contamination risks are high especially when it comes to e-coli containments (van Wijngaarden, Scholten and van Wijk, 2012) Numerous lawsuits associated with offering unhealthy food The marketing strategies are not customized based on the needs and preferences of the customers 2.3 Stakeholder Analysis The McDonalds’ customers are grouped into two: internal and external stakeholders 2.3.1 Internal stakeholders Employees – the employees provide the labor and experience important to the accomplishments of the requirements of McDonald’s (McDonald’s 2016) Management – the management develops and creates mechanisms for implementing strategic objectives. The management is also continuous to supervise the complication of different activities, which are important to the success of McDonald’s. Shareholders/Franchise owners – the owners and shareholders provide the finances and resources to create and improve the business framework (Loya 2011) 2.3.2 External stakeholders Government and government agencies – the government, formulates legislations and regulations and creates a mechanism to supervise and determine the effectiveness of the policies (McDonald’s 2016). The government also creates the business environment and management measures e.g. legal system to advance business obligations. Community – businesses are located in the community, and community influences the extent in which a business can succeed (Loya 2011). Customers – the customers purchase the products and receive the services translating in the generation of profits. Satisfied customer increases revenue generation through visiting the branches. Therefore, customers are important to the success of McDonald’s business model. Suppliers – the suppliers are required to supply the raw materials and ingredients to produce food. The suppliers should supply high-quality products at the right time and based on existing regulations and understand (Lazonick, Hopkins, and Jacobson, 2015). The quality of the supplies contributes to the quality of the final product. 2.4 Presentation of a New Strategy for McDonald’s The new strategy is the introduction of a healthy menu to address the requirements of healthy conscious customers (McDonald’s 2016). The McDonald’s customers have continued complaining because of product diversity, and the solution is introducing products to fill this requirement (van Wijngaarden, Scholten and van Wijk, 2012). The healthy food will also reflect the seasonality of seasons and the diverse requirements of consumers (Lazonick, Hopkins, and Jacobson, 2015). For example, a diverse food offering during religious periods will be provided to fulfill the theme of the period. The healthiness of dietary requirements would also incorporate the age and other variables reflecting the requirements of the consumers. Therefore, the new strategy is “McDonald’s Healthy Menu.” Task 3: Approaches to Strategy Evaluation 3.1 Alternative Strategies Alternative strategies exist including using heathly friendly oils and products to produce the fast food. For example, olive oil is healthy-friendly meaning it can be used to accomplish the requirements of the customers. However, the ideology and understanding that fast food is produced using oil still send away health conscious customers (Lazonick, Hopkins, and Jacobson, 2015). Another alternative is customizing the current services and products to reflect the needs of health conscious customers. However, the offerings are mostly fried food and burgers, which becomes difficult to convert into healthy preferences. Therefore, the solution is introducing an entire menu that reflects the requirements of healthy conscious customers. 3.1.1 Market Entry The market entry will be premised on a test pilot, which would later be reflected in the entire branches. The food offerings will be based on a customized menu and based on specific ingredients. The strategy is to create a healthy offering that does not repeat the normal offerings in the market (Lazonick, Hopkins, and Jacobson, 2015). The new products and services will be offered in the branches, and effective marketing campaign would be commissioned to engage the customers. Furthermore, when a customer enters the branches, clear information in terms of brochures and pictures on the walls will be used to create awareness on the healthy offering. Therefore, the current infrastructure will be used to engage and provide the food offering to the customers. 3.1.2 Substantive Growth The following are the strategies that McDonald’s aim to employ: Franchising – this is the appropriate strategy because the current agreements will be reviewed while other franchise agreements will be signed to integrate the new product offering. McDonald’s will continue growing without the need for significant initial investment. Horizontal integration – McDonald’s can merge or acquire an alternative business that operates in the same industry but concentrates on the healthy offering. Merging or acquisition of another company would involve the competitive power of McDonalds promoting substantive growth. In addition, the business will increase the “monopolistic” capability of the organization. Vertical integration – capitalizing on supplier through structures, such as Just-In-Time would contribute to the success of the organization (McDonald’s 2016). Vertical integration would improve the entire processes and also the quality of services provided. 3.1.3 Limited Growth Strategies The limited growth strategies are: Do nothing alternative – the strategy is allowing the business continue to operate with the current market share and products. McDonald’s would not create improvements to advance the operation regime Product development – it includes the introduction of the health menu to improve the products and widen the market. It would result in an increase in market share and improvement of the general business environment (McDonald’s 2016). Radical move – change the entire business enterprise through incorporating diverse strategies to reflect the requirements of the organization and customer (van Wijngaarden, Scholten and van Wijk, 2012). It is a two-way strategy that targets the requirements of the customers and also the requirements of the organization. 3.1.4 Retrenchment Strategy The retrenchment strategy is targeted towards altering the business operations to reflect the changing circumstances (van Wijngaarden, Scholten and van Wijk, 2012). The design of the branches will not be altered, but additional equipment will be sourced to produce the healthy offering. The equipment may also be used for normal operations meaning that if the healthy offering does not become viable, reverting to traditional offerings will be done (McDonald’s 2016). Furthermore, the current human resource will be used, and one or two additional chefs will be introduced to produce the healthy offerings. The contracts with these chefs are based on the success of the business and timelines integrated into the contracts (Loya 2011). The aim is to ensure the new strategy can be discontinued easily without incurring huge expenses. 3.2 Justification of the Selected Strategy Suitability – the strategy is suitable because McDonald’s would be able to increase the market share, address the current complaints on the healthiness of foods, and also improve the general revenue base of the organization (Loya 2011). Feasibility – the strategy is viable because most resources are available, and the continuous concerns of healthy food requirements would support the implementation of the strategy. Customers need healthy food especially due to healthy conscious requirements; therefore, the new strategy is feasible. Acceptability – customers appreciate health food and the customers would easily accept the food. The management would also accept the strategy because it improves the quality and diversity of the product offering resulting in an increase in both market share and revenues. Task 4: Implementation of the Strategy 4.1 Roles and Responsibilities of Personnel The effectiveness of the strategic directive is premised on the manner in which the personal operates (van Wijngaarden, Scholten and van Wijk, 2012). Without considering the roles and responsibilities of the personnel, the following are some of the measures required in ensuring the different personnel operates effectively towards achieving the goals and objectives: Effective coordination – teamwork and supporting each other is important in fulfilling the requirements of the organization and strategic initiative (van Wijngaarden, Scholten and van Wijk, 2012). The employees should understand the objectives of the strategy and understand the roles of each other in the achievement of the strategy. Encouraging the employees to work together and support each other is integral to the success of the organization. Effective communication – the employees, management, and the entire organization should encourage effective communication (Lazonick, Hopkins and Jacobson, 2015). The management should collect information from the employees while the employees should communicate with each other in addressing the requirements of the strategy. Effective communication is crucial in reducing or addressing conflicts and misunderstandings at the workplace. Therefore, effective communication is important in ensuring the employees targets the objectives and goals of the organization. The following section discusses the roles and responsibilities of some of the personnel required to implement the new strategy: Personnel Role and responsibilities Human resource manager The human resource manager is required to define the roles and responsibilities of each of the employees. The manager should also define the recruitment process, employee compensation and training and development of the employees (van Wijngaarden, Scholten and van Wijk, 2012). Through factoring into consideration the regulations and legislative, the human resource manager should ensure the employees operate based on the legal directive. Finance manager and accountant The new strategy requires allocation of funds and resources and the financial manager is responsible for managing the financial component of the organization (Lazonick, Hopkins, and Jacobson, 2015). The financial manager is supposed to provide the financial resources to support the requirements of the organization. The financial manager should also monitor the financials of the new strategy and determine whether it is profitable and generate additional revenues for the organization (McDonald’s 2016). Procurement Manager The procurement manager should source for the new ingredients and provide supplies to support the new strategy. The procurement individual should also acquire new equipment and resources based on directives from other members of the organizational team. Supervisors The supervisors control the general operation at the hotel. The supervisor ensures the food is prepared accordingly while the customers are served based on their respective orders (Lazonick, Hopkins, and Jacobson, 2015). The supervisor ensures the customers are served in a timely manner and general requirements of the customers and employees are considered during the process. Therefore, the supervisor is the intermediary between the management and the employees. Chef The chef is supposed to have the skills and experience to allow effective preparation of the healthy food (van Wijngaarden, Scholten and van Wijk, 2012). The chef should be able to prepare different food offering to address the diverse requirements of the customers. The employment of chef and respective management incorporation of numerous variables is important to the success of the organization. Waiters (low-level employees) The role and responsibilities of the waiters are to ensure the customers are served according. The orders from the customers should be recorded well while the communication with the customers should be effective (van Wijngaarden, Scholten and van Wijk, 2012). Understanding of patience and having experience are integral to the success of the organization (Lazonick, Hopkins, and Jacobson, 2015). Hence, the waiters should contribute to the effectiveness of the entire organization through championing their respective roles and responsibilities. General maintenance (support) employee The support staff including cleaners and entire personnel is required to uphold integrity and ethical factors. Encouraging ethical requirements to ensure the organization continues to operate effectively while targeting the objectives and goals of the organization (Loya 2011). The employee should also provide appropriate support towards advancing the requirements of the organization. 4.2 Estimated Resource Requirements The success of implementation of any strategy requires allocation of resources. McDonald’s requires different types of resources to achieve its strategic objectives: Financial resources – the implementation of the strategy requires financial resources. The financial resources will be used to acquire the equipment, the ingredients, recruiting new chefs and ensuring the business operates effectively (McDonald’s 2016). Therefore, the financial resources support the entire activity within the organization ensuring the strategy is implemented accordingly (van Wijngaarden, Scholten and van Wijk, 2012). Human resources – human expertise, skills and labor is required for the strategy implementation (Loya 2011). The healthy food industry requires different levels of experience and skills. Employing and improving the human resource contributes to effectiveness in implementing the strategy. Physical resources – the physical resources include the building and other physical components supporting the implementation of the strategy (McDonald’s 2016). It includes the equipment for cooking, kitchen utensils and other supporting equipment. The appropriate physical resources should be availed to accomplish the requirements of the strategy implementation (Lazonick, Hopkins, and Jacobson, 2015). 4.3 SMART Objectives The new strategy is to improve revenue generation and also to increase the market share. The following are some of the SMART objectives based on the effective implementation of the new strategy: Objective 1 – Within the first six months, the revenues generated from the healthy food menu should account for 10% of revenues for each of the outlets Objective 2 – Within the first six months, the market share should increase by 4% based on the current estimates of market share References Lazonick, W., Hopkins, M., and Jacobson, K. (May 14, 2015). McDonald’s has to Do More than Manipulate Its Stock Price. Harvard Business Review. Retrieved from https://hbr.org/2015/05/mcdonalds-has-to-do-more-than-manipulate-its-stock-price Loya, A., 2011. Marketing audit-an important tool to determine strengths and weaknesses of the companies. Marketing, 1(2), pp.92-108. McDonald’s. (2016). Homepage. Retrieved from http://www.mcdonalds.com/us/en/home.html van Wijngaarden, J.D., Scholten, G.R. and van Wijk, K.P., 2012. Strategic analysis for health care organizations: the suitability of the SWOT‐analysis. The International journal of health planning and management, 27(1), pp.34-49. Read More