The Key Strategic Decision of McDonalds - Essay Example

?Case study - MacDonald's and its Critics Table of Contents Introduction 3 Establishment of Competitive Advantages 4 Sustainable Growth 5 Rapid Growth of McDonald’s 6 Profitability through History 8 Conclusion 9 References 10 Introduction McDonald’s is one of the leading fast food restaurant chains in the world. It was founded by Ray Kroc in 1940s. The company presently serves more than 64 million customers on a daily basis. The head quarter of the company is situated in US. The company altered its expansion strategies which is related with quality production, new product invention and cost consumption. The company implemented various promotional planning in order to increase competency of the company (McDonald’s Restaurants Limited, 2008). The company is also known as the “Penny Cost” business. It usually means to control cost and on the other side, to increase sales. McDonald’s implementation of penny cost in their marketing strategies helped increasing the sales and profitability of the company. Presently, the company is dealing with 30,000 restaurants all over the world (McDonald’s, 2011). The main aim of this paper is to recognize the competitive advantages attained by McDonald’s through the implementation of effectives strategies related to marketing, human resource as well as other organizational aspects. The discussion of the paper further emphasize on the evaluation of sustainable growth, profitability and the rapid growth achieved by the company through its performance over the past years. The Key Strategic Decision of McDonald’s Establishment of Competitive Advantages To gain competitive advantages, McDonald’s has implemented various strategic decisions into practice. Competitive advantages are known as the reward gained over the competitors by contributing towards customer values and perceptions along with other fundamental aspects of business management. Competitive advantages tend to mark the performance level of a firm in a highly competitive market that can be gained through the generic strategies as proposed by Michael Porter, i.e. cost leadership, differentiation and focus (Porter, 1998). McDonald’s adopted the theory of expansion to offer customers with highly efficient services. Their main target was to attain customer satisfaction and also attain competency through expansion. McDonald’s executed various strategies in order to expand the business and attain sustainable growth through competitive advantages. In 1940s Ray Kroc started the business with milk shakes and few other items. In 1968, when Mr. Turner was the president of the company, he implemented changes in its organizational structure. Regional offices were established, in different countries and market regions. At that time quality control was not quite significant in the fast food industry, but McDonald’s implemented the quality control strategies which assist to improve the company’s brand image (Bartone & Wells, 2009). McDonald’s provided high quality services to its customers and planned the business structure in a systematic order and attractive manner. McDonald’s implemented strategic alliances which majorly intended differentiating the products, increasing the sales along with the profit. McDonald’s also introduced “happy meal” chart, which included new recipes. The execution of this procedure attracted new customers. The company also focused on increasing its sales with an addition of 1,200 restaurants in its worldwide chain (Bartone & Wells, 2009). All these factors, such as expansion of target market area, customer base and increase in the customer satisfaction along with increased sales rewarded the company with greater competitive advantages. Sustainable Growth McDonald’s implemented strategic plan such as differentiation, and quality control. This assisted the company to gain competency and long term profitability in the market. McDonald’s executed differentiation of the products, as these strategies were expected to help gaining higher profit along with increasing consumer satisfaction (McDonald's Corporation, 2011). Increase in profit and customer satisfaction is likely to influence the sustainable growth attained by the company. McDonald’s management system was based on a few aspects such as inter-personal relationship of the organization with its employees. This in turn contributed to the goodwill of the company in terms of better productivity of the workforce and brand recognition. It is in this context that McDonald’s marketing strategies and operational strategies were mostly concerned with the enhancement of workforce productivity which in turn played a crucial role in deriving customer satisfaction (McDonald’s Restaurants Limited, 2008). These factors all together contributed to the company’s sustainable growth. The organizational structure of McDonald’s was quite effective in rewarding the company with operational efficiency. For instance, there was particular Human Resource (HR) department, Marketing department, Production department along with other departments to perform specific responsibilities related to the overall organizational operations. This developed the operational process in the organization to be systematic and comprehensive, rewarding it with better efficiency in organizational management approaches (McDonald’s Corporation, 2008). In its marketing strategies as well, the company focused on market segmentation based on the criterion of customer age group and their purchasing power. This also enhanced the effectiveness of its marketing strategies that in turn provided with greater customer satisfaction (McDonald’s Corporation, 2008). These factors on the whole rewarded the company with accelerated sustainable growth. Rapid Growth of McDonald’s In the case of McDonald’s, the implementation of various strategies related to marketing, HR, and production were observed to be quite effective, rewarding it with rapid growth. The main target of the company was to identify and enhance the customer satisfaction level. Along with this, the company’s intention was to accelerate employee productivity and thus gain competitive advantage. In 1992, McDonald’s served with almost 40% of its total production to children rendering the other 60% of the production to young and middle aged customers. This facilitated the figure of sales to a record hike of around 33% in 1995 from its sales figure of the previous year. Notably, the increased sales also boosted the market share of the company accelerating its overall growth (Allen & Rao, 2000). McDonald’s performed various shows to attract the customer, especially from the children and teenage groups and gain sustainability in the market through greater customer satisfaction. According to the survey of American School Children (1996), 96% of the children in America could recognize Ronald McDonald’s (Allen & Rao, 2000). During the reign of Mr. Turner in the McDonald’s, various regional offices were established. In 1967-1975 authority of regional managers were expanded along with this and the annual share of the company almost doubled. The total number of McDonald’s outlets also tripled. In 1997 McDonald’s foreign sales revenue amounted to 18.2% of the company’s total income and the corresponding figure for the domestic sales was 5.6% during the year. The company was already serving 109 countries in 1998. According to the company’s spoke person McDonald’s though served less than 1% of the world’s population but there was future expectation for the company’s growth (McDonald’s Restaurants Limited, 2008). Profitability through History McDonald’s gained long term profitability which was incurred through effective customer loyalty and customer satisfaction along with accelerated employee productivity. For improving the customer services, the company conducted face-to-face orientation with the customers. It also concentrated on recruiting efficient and productive professionals in the HRM department so as to gain enhanced productivity through motivated and satisfied employees. Complaints tracking system were also implemented in the company that assisted the management to analyze customer satisfaction level (McDonald's Corporation, 2011). In the similar context, it can be stated that McDonald’s not only concentrated to the customer satisfaction level but also provided training facilities for its employees so as to derive employee satisfaction as well. This enhanced the company’s performance to an extent increasing its competency in the market. It is quite apparent that these factors contributed to the profitability of the company though out its history. However, in 2002 the stock price of McDonald’s fell by 2.2%, as the company disclosed in its third quarter results in December 2002. In addition, there was no improvement in the sales during the fiscal year. Conversely, in 2009 McDonald’s stores used to be opened for 24 hours in the US that again rewarded higher customer satisfaction and brand loyalty to the company in its targeted market (McDonald's Corporation, 2011). Thus, the profitability of McDonald’s in its history was slightly fluctuating, although was quite effective. Conclusion Mc Donald’s is one of the leading beverages companies in the world. Various strategic decisions were considered by the company such as brand reorganization, product segmentation, analyzing the customer’s satisfaction level and implementation of new management procedures. The main target of the company was to attract customers from the groups of children and teenagers. Different promotional planning was also executed by the company that assisted to attain higher customer satisfaction level. References Allen, D. R. & Rao, T. R., 2000. Analysis of Customer Satisfaction Data. ASQ Quality Press. Bartone, P. T. & Wells II, L., 2009. 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[Online] Available at: http://www.mcdonalds.co.uk/about-us/a-closer-look/a-closer-look.shtml [Accessed on September 23, 2011]. Porter, M., 1998. Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster. Read More