Strategic Management of McDonalds - Essay Example

? Topic: Strategic management of MC DONALD and how they maintain their succeses over the years of the of the Introduction One of the largest food company related to food services in the world is McDonalds. It happens to be one of the largest employers in the US. Roughly the company has over 30,000 locations which include sitting in restaurants, satellite sites and drive through windows. The success of the company is not expected to disappear in the nearby future. The continuous expansion of the company and its excellence in the food industry has always helped the company maintain its strong position in the market. There are few challenges and problems that the company faces which would be discussed in this study. The biggest challenge for McDonalds is to overcome the increase in competition, maintain its quality and keep a strict check and balance on the customer satisfaction as the company has more than half of the business depends on franchising. In the SWOT analysis of the company it has been found out that McDonalds occupies a very strong position in the market. Special attention paid to hiring potential staff has been a key to its success. As we know in the food and hospitality industry the major role is to be played by the internal customers (that are employees) as they will be the source of satisfaction for the external customers (the real customers). So keeping the internal customers satisfied and properly training them is what McDonalds has been doing. This has been a key success factor for the company. The concept of franchising has also been fruitful for the company as it generates 60 percent of its sales through franchising (Gallagher, 2008). McDonalds focuses on five main things that are its drivers for success namely people, product, price, place and promotion. PESTLE Analysis Following is the Pestle Framework application to McDonalds. PESTLE framework includes the political, economical, social, technological, environmental and legal factors that relate to McDonalds. Political Factors While McDonalds plans to expand its business it has to keep a lot of political factors in mind like the taxation and licensing issues (Ghemawat, 1991). During international expansion the analysis of the political situation of the other country happens to be of critical importance. Economical Factors Economic factors are of concern to McDonalds, because they are likely to influence demand, costs, prices and profits. Amongst the economic factors the high unemployment levels are one the most influential factors as it reduces the demand for a lot of goods and also the food industry. Inflation is one other thing that has impacted almost every business in the world and so is the case with the food industry. The economic factors mentioned above are mostly beyond the company’s control but at the same time their effects related to the marketing mix and performance can be reflective. Social Factors The awareness of the health issues is increasing amongst the consumers' day by day and the attitudes they hold towards food is continually changing. The quality that McDonalds has provided to its customers over these years has helped the company earn a good repute and thus a strong position in the society (Schlosser, 2008). Technological Factors New technologies profit company and the customers both. The adoption of the new technology by the company and always keeping everything updated has helped the company in attaining this strong market position (Vignali, 2001). Upgrading of its equipments and the machinery used have also served as a source of satisfaction for the internal and external customers both. Environmental Factors McDonalds has always focused on healthy and clean environment and this has helped the company in winning the trust of the customers. Legal Factors The policies of government in order to control monopoly and the reduction of power of buyers can lead to putting a limit to entry in this sector by putting controls such as license requirements and limitation to access the raw materials. McDonalds takes care of this also. Porters Five Forces Intensity of Rivalry among competitors This food industry is very competitive and McDonalds has been aware of this fact and need to keep on track in future as well. McDonalds also needs to keep a strong check and balance on the advertising capabilities of its competitors. The location of outlets of other food companies needs to be kept in mind. A lot of competitors are there in the market so McDonalds need to be alert and attentive all the time. Threat of New Entrance The threat of new entrants is high for McDonalds as regulation of limit, loss start up cost, easy market access etc. The example of subway market penetration is of high significance here. Threat of substitutes The third force is the threat of substitute, it includes things that there are a lot of substitutes available in the market that are also fast food industry companies and are also of high quality so the threat is always there for McDonalds. Suppliers Another very important thing is the supplied power. McDonalds can benefit from lower prices due to the economies of scale. As the size of McDonalds is too big so most of the power lies with McDonalds and lesser lies with the suppliers. McDonalds is a big customer for the supplier so the suppliers are very careful in this case and have lesser power because no one likes to lose a customer as big as McDonalds. Customers The buying power of the customer is very important. More important is also keeping the customer coming back as there is no switching cost for the customer. It is very important for McDonalds to keep its prices competitive and have a menu that is of great value to them. The menu needs to be changed with changing customer needs and tastes. Addition and subtraction of the ingredients according to the tastes of different countries is also one important thing. Internal environment Analysis Resources and capabilities McDonalds has enjoyed a large market share and a strong market position but it has also experienced a decline in its sales in late 90’s. Before this time period McDonalds enjoyed being the market leader within this fast food industry and was recognized worldwide for its quality and service. There was a time when McDonalds began to lose its focus that was to provide the quickest and fastest restaurants experience. So in order to enhance its performance in terms of satisfying the customer base and improving the financial position the company decided to emulate the competitors it had. The company started to use its resources like infrastructure, marketing capabilities, human capital and management team, product introductions etc. to build its reputation in the market. SWOT Analysis McDonalds is the one of the biggest companies in the food industry available in the market. It has a good hold overseas so it is also a strength the company has. McDonalds has a strong recruitment process and a very good team that does recruitment. The success of the company is highly dependent on this strength as it helps the company in hiring the best potential staff that help in satisfying the customers (Baldwin & Clark, 1991). A cooperative and satisfied work team is always a reason for success of any organization. One of the weaknesses that McDonalds has is that it needs to improve its performance management system. The procedure to evaluate the performance of its employees needs to be more productive and better. The company has a lot of opportunities in the global world as it has a strong brand name and people have always liked it all round the world. The strong financial position of the company has always allowed the company to expand itself in the world. The concept of franchising has also provided the company with a lot of opportunities to gain higher market shares all round the globe. The company also has a lot of threats like there is very high competition and there are a lot of substitutes available in the market for McDonalds. So McDonalds needs to keep a strict check on the quality of food and services that it provides to its customers. Strengths Strong Brand Name Operates globally Excellent locations Clean Environment Weaknesses High turnover High training costs Fast food is generally not taken to be healthy food Opportunities Expansion through joint ventures Being more responsive to social changes Expanding on advertising Threats People are more health conscious and aware now Strong competition already present Easy entrance for new competition Recommendations The demand for food industry is ever increasing and the competition is growing day by day. So in such a competitive environment it is very important for McDonalds to keep a strict check on what its competitors are up to and keep on introducing new technology to satisfy the customers to the maximum level possible. It is strongly recommended that the company keeps on spending on training its staff, their cleanliness, and their well being as they are the representatives of the company itself. The company has been sending a lot of the training and recognition programs of its employees which also has been a key to its success. The company while hiring new employees should keep a few qualities in mind that are the attitude of the employee, their appearance, their friendly nature, confidence, hygiene, willingness to work ethic as all these qualities will ultimately contribute towards his or her best performance. It is very important for McDonalds to treat their internal employees the way the company wants to treat their external employees that are the guests basically. Conclusion The performance of McDonalds has improved since its establishment. The company has focused critically on satisfying its internal and external employees. To serve this purpose the company has focused on developing a good recruitment and selection system, attractive compensation package, time to time training programs, development programs, fair appraisal processes, equal opportunity for every employee to get promoted etc. To gain competitive advantage, McDonalds has been operating its properties with a stress on delivering brilliant customer services. The hotel shows strong commitment towards recruiting, training, retaining well qualified, motivated employees who are likely to provide friendly and superior customer services. References Baldwin, C. & Clark, K. (1991). Capabilities and capital investment: New perspectives on capital budgeting, Harvard Business School. Gallagher, S. (2008). McDonald's Technology Trials, Pearson Prentice Hall. Ghemawat, P. (1991). Commitment: The Dynamics of Strategy. Free Press, New York. Schlosser, E. (2008). Why McDonald's fries taste so good, New York Times. Vignali, C. (2001). McDonald's: think global, act local – The Strategic Management, British Food Journal, 97, 231-265. Read More