The Business Model of McDonald's - Research Paper Example

? McDonald’s Corporation at a Glance McDonald’s Corporation at a Glance Introduction Organizations exist for different needs and purposes. Both profit and not-for profit organizations have missions, goals and objectives for which they are set to accomplish. The realization of short term, medium term as well as long term objectives calls for a management team that is well versed in strategic management. Strategic management entails a systematic analysis of the aspects related to the internal and external environment of an organization (Michael, Cook & Sutton, 2005). The results of the analysis provide an organization’s management team with the basics of maintaining optimum management practices. Strategic management helps the management attain better alignment of corporate policies and strategic priorities (George & Bock, 2011). This discussion is an examination of the McDonald’s corporation organizational analysis, environmental analysis as well strategic issues and recommendations how to build the organization’s competitive advantages. Organizational Analysis McDonald’s is a fast food corporation that operates in the restaurant industry. The corporation is among the oldest fast food outlet in America with a global presence. McDonald’s corporation was established in 1937 by Patrick McDonald in California. Strengths Technology. McDonald’s corporation is technology sensitive. The corporation is at the forefront of modern technology among fast food retailers (Pearson Education, Inc, 2011). For illustration, the corporation has put in place a cellular technology to allow customers to place their orders online. The corporation has also installed Internet access terminals and Wi-Fi to enhance customers to order online and eventually lessen the lag time involved between ordering time and pick up time. Experienced Market Leaders. In terms of global reach and biggest player, McDonald’s is always conquering markets from its competitors. Due to its immense presence, McDonald’s corporation is able to operate at economies of scale (Mohammed, 2009). The corporation sells its products at relatively low prices attracting more customers due to its cost leadership. In addition to being the largest fast food retailer, the corporation is experienced and understands the market fairly well. Strong Brand Name, Image and Reputation. McDonald’s has strong brand equity, and its image is globally renowned. The corporation image is among the top ten most powerful brand names in the globe. This has a positive impact on the corporation’s sales and share price (Mohammed, 2009). The brand equity is valued around $40 million, and this reputation makes McDonald’s a household name. Special Training for the Managerial Staff. McDonald’s corporation has a training program for its managerial and other employees in a bid to reduce turnover rates and enhance quality. The Hamburger University is an in-house program for specifically training McDonald’s managerial staff (Mohammed, 2009). The trained managers help to run the company towards its growth objectives. Positive and Influential CSR. McDonald’s corporation operates Ronald McDonald’s houses that offer accommodation, food, and child support for needy families requiring extensive hospital care. This corporate philanthropy enhances the corporation’s image further. The corporation also has a golden archway logo and Ronald McDonald clown that is globally acknowledgeable (McDonald’s Corporation, 2012). Weaknesses Unhealthy Food Image. Although McDonald’s corporation is globally renowned, the corporation has several weaknesses. One of the weaknesses that the corporation grapples with is the aspect of unhealthy food image (Pearson Education, Inc, 2011). The verity that McDonald’s offers fast food has resulted in uproar that the foods are responsible for increased obesity rates among children in the United States. High Employee Turnover/Training Costs. McDonald’s corporation also faces high employee turnover rates. The corporation is cited as paying its employees relatively low wages which is attributable to the high employee turnover (Pearson Education, Inc, 2011). As a result, the corporation incurs training costs to recruit, select, and train new workers. Quality Concerns. McDonald’s corporation also grapples with the aspect of offering unbalanced meals. Most of the McDonald’s foods contain grilled and fried chicken, beef, bacon, eggs which are attributed to weight gain and obesity. In spite of incorporating various salad dishes, the menu is largely made of unhealthy foods and drinks (McDonald’s Corporation, 2012). This has attracted criticism from organizations fighting obesity. Failing Pizza Test. The corporation has failed its pizza test. The corporation does not offer pizza in its menu. As a result, McDonald’s loses its competition to fast food retailers and other pizza outlets. The corporation has all it needs to make pizza, yet it loses the opportunity to its competitors. Franchise Quality Compromise. The corporation runs most of its operations in a franchise system. Frequently, there are quality concerns noticed in some franchise. It is not easy to have quality control on all chain operations as the restaurants are owned by the franchisees. Similar to other businesses franchise model, if one franchisee has a quality issue, the matter reflects on other franchisee locations (Leung et al, 2005). Environmental Analysis Threats Competition. McDonald’s corporation operates in a saturated fast food industry. The industry has many players such as the Wendy’s company, Starbucks, Burger King, and Jack- in- the-Box who present a stiff competition to McDonald’s. The competitors present a fierce battle for McDonald’s market share and customers (McDonald’s Corporation, 2012). McDonald’s in turn resorts to lowering prices in a bid to retain and attract more clients to cope with the competition (McDonald, 2011). This reduces the amount of earnings and profits available for investors. Changes in Socio-Cultural Behaviors. There is a changing trend towards the need for eating healthy foods. This follows increased concerns and statistics in obesity cases due to unhealthy eating habits. Governments and health stakeholders have put up spirited fight against obesity and other unhealthy foods. As such, people are increasingly moving from taking ready fast foods into salads and other vegetable healthy meals. Lack of Uniform Exchange Rate. Since McDonald’s operates in many countries around the globe, it is immensely affected by fluctuations in the rate of exchange. The reason is that there is no uniform exchange rate, and the rates of fluctuations affect earnings and profits. The financial upheavals and downturns in foreign branches also affect McDonald’s earnings (The New York Times, 2013) .This impacts investor relations in the corporations. Environmental Concerns. McDonald’s faces the threat of environmental lawsuits resulting from various governments. Recently, there are environmental concerns on the need to ensure that every business is environmentally sustainable. The corporation uses hydroflorocarbon to make polystyrene bags for packing foods (Han, 2008). The HCFC is attributed to ozone depletion, and this makes governments stricter on the need to prevent dumping. Lawsuits. McDonald’s has been facing various court cases on aspects of trademarks and quality issues. Lawsuits are expensive for a corporation, and they attract negative publicity. Oppotunities Expansion to Developing Eeconomies. Most of the McDonald’s retail outlets and franchises are concentrated in developed economies. McDonald’s has an immense opportunity to venture into developing economies especially in Africa and Asia (Han, 2008). Making Socially-Cultural Foods. Although the corporation offers unhealthy foods and bacon products, the corporation has an opportunity to shift its food offering and offer low calorie foods. In addition, McDonald’s has an opportunity to tap into the Muslim market by preparing burgers that do not contain bacon as Muslims do not consume bacon (McDonald’s Corporation, 2012). Research to Offer More Varieties. McDonald’s corporation has a well versed research and development team, which is capable of carrying out research and development. The research and development team can help in exploring ways of introducing healthy foods, pizza, and other varieties to attract existing and new customer base (Hill & Jones, 2009). The research will help in assessing changing consumer needs and trends, and thereby, recommend on sustainable measures to implement its findings. Diversification of Beverages. Since McDonald’s is an experienced global leader, the corporation can utilize its economies of scale to expand its products and offer beverage varieties like milk and coffee in a bid to cope with competition. McDonald’s can also use its market power to venture into restaurant categories and capture different market segments like Internet cafe surfers and business executives. Environmental Conservation. McDonald’s has an opportunity to research on green energies and environmentally sustainable packaging solutions. This can be incorporated into the corporations marketing strategies, as well as making McDonald’s a globally responsible corporation (Zuniga, Fuente & Suarez, 2005). Strategic Issues and Recommendations The most strategic issue the corporation is facing has to do with quality of the dishes offered by the corporation. McDonald’s attracts criticism of unhealthy foods and unbalanced diets, which results in lawsuits and a decrease in the consumption of fast food products. McDonald’s corporation has to grapple with the quality issue in a bid to deal with the changing consumption pattern. Additionally, the awareness of the need for healthy eating habits has led some stakeholders to take legal action against food joints selling unhealthy fast foods. The core recommendation is for the management and the research and development team to research and revise on ingredients used for preparing foods. This will help with making foods that are in line with the changing consumer needs for healthy foods. Another strategic issue affecting McDonald’s concerns is the expansion to other regions outside America. America is already saturated with fast food restaurants like KFC, Sonic, and Subway among others. This makes the corporation opt to lower its prices to attract existing and new customers. The corporation should utilize its market experience and economies of scale to enlarge outlets in Asia, Africa, and European nations. Another strategic issue faced by McDonald’s is that of compliance with the various legislations in different countries. McDonald’s global presence implies that the corporation is faced with diverse legislation and requirements. Environmental concern and environmental laws result in lawsuits and other costs. As such, McDonald’s should ensure it complies with the global environmental rules on sustainability. The research and development team and the CSR team should work together to ensure that all environmental needs are observed and popularized. This will enhance McDonald’s corporation’s image as a responsible global citizen. References George, G. & Bock, A.J. (2011).The business model in practice and its implications for entrepreneurship research. Entrepreneurship Theory and Practice, 35 (1), 83-111. Han, J. (2008). The business strategy of McDonald’s. International Journal of Business and Management, 3(11), 72-74. Hill, C. & Jones, G. (2009). Strategic management theory: An integrated approach. Mason, OH: Cengage Learning. Leung, K. et al. (2005). Culture and international business: Recent advances and their implications for future research. Journal of International Business Studies, 36, 357-378. McDonald, M. (2011). Marketing accountability: A new metrics model to measure marketing effectiveness. London: Kogan Page Publishers Press. McDonald’s Corporation. (2012). McDonald’s corporation 2012 annual report. Retrieved from http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investor%202 013/2012%20Annual%20Report%20Final.pdf Michael, U., Cook, J. & Sutton, L. (2005). Developing leaders for decision making under stress: Wildland firefighters in the South Canyon Fire and its aftermath. Academy of Management Learning & Education, 4 (4), 481-485. Mohammed, S.A. (2009). McDonald’s. Retrieved from http://www.scribd.com/doc/16050821/McDonalds-Case-Study Pearson Education, Inc (2011). Strategic management concepts and cases. Retrieved http://buduson.files.wordpress.com/2012/02/strategic-management.pdf The New York Times. (2013, April 19). McDonald’s profit rises, but year-over-year sales fall. Retrieved from http://www.nytimes.com/2013/04/20/business/mcdonalds-profit-rises-but-year-over-year-sales-fall.html?_r=0 Zuniga, V.J., Fuente, S. & Suarez, G.I. (2005). Dynamics of the strategic group membership- performance linkage in rapidly changing environments. Journal of Business Research, 57 (12), 1378-1390. Read More