McDonalds and Wal-Marts Growth Strategies - Case Study Example

Strategic Management - Comparison between McDonald’s and Wal-Mart’s Growth Strategies - Introduction In order to maintain McDonald’s competitiveness in the global markets, the company has decided to re-define its growth strategies. In line with this matter, McDonald’s decided to expand its business based on its existing store locations rather than applying the usual horizontal expansion growth strategies. For this study, the student will discuss about the growth strategy made by McDonald’s using the SWOT analysis. As soon as a comparison has been made on the growth strategies used by McDonald’s and Wal-Mart, the student will identify the advantages and disadvantages of McDonald’s chosen growth strategy. Growth Strategy of McDonald’s A SWOT Analysis can be used in determining the strength, weakness, opportunities, and threats of McDonald’s growth strategies. Strength Aside from having a strong global market networks (Arndt, 2007), one of the strengths of McDonald’s is that the company has successfully established a good reputation within the domestic and international market in terms of producing high quality products and efficient delivery of services at a competitive price. Aiming to maintain the efficiency of its staff’s services, McDonald’s managers spends 2,000 hours on training and development during the last four years to ensure that its employees store, handle and prepare fresh food just-in-time to meet the service satisfaction of its customers. (Liyi, 2007) With regards to increasing the company’s profitability, McDonald’s has implemented a list of growth strategies such as extending its business operation 24/7 a day, establishing franchised outlets and McCafe’, offer Wi-Fi access and delivery services to customers, and improving its food products in menu. (McCafe, 2008; Arndt, 2007; Arndt & Ghobrial, 2007; Gogoi, Arndt, & Moiduddlin, 2006; Rowley & Tashiro, 2006) Weaknesses Contrary to the strength of McDonald’s, the weakness of the company is very much related to its advertising and promotional activities. Despite the success of McDonald’s in relation to its global performance, the company’s marketing plan on McCafè is still weak. Since McDonald’s is known to serve burgers and fries instead of coffee, top executives of McDonald’s could effectively increase the public awareness of the global consumers with regards to McCafè and it’s growth strategies like extending its services 24/7 a day through its advertising campaign. Opportunities Among the growth strategies that contributes to McDonald’s increase in profitability includes: (1) implementing 24/7 operations; (2) establish franchise outlets; (3) introduction of McCafe’; (4) offer services like delivery and Wi-Fi access; and (5) improving its existing menu. One of the major growth strategy used by McDonald’s is to open its store 24/7 a day. As of 2002, only 40% of US-based McDonald’s store outlets have decided to go 24/7. (Arndt, 2007; Rowley & Tashiro, 2006) This only means that the company has not yet fully maximize the company’s potential profit. Extending the business hours allow McDonald’s to grab business opportunities coming from a large population of party goers and people who are working late at night. Aside from having establised 13,700 store outlets and its McCafe’s, the company was able to open as much as 2,400 stores through McDonald’s franchise options in U.S. market alone. (Arndt, 2007) Having established many store outlets enable the company to reach out to its target consumers. Through franchising options, the company is able to easily reach millions of customers each day. Likewise, offering Wi-Fi access and delivery service to its customers also increases McDonald’s profitability. (Arndt & Ghobrial, 2007; Gogoi, Arndt, & Moiduddlin, 2006) Threat Among the possible threat that could affect the growth strategies of McDonald’s include the possibility that its competitors like Burger King, Dunkin’ Donuts, Wendy’s, and Starbucks would decide to operate on 24/7 basis. (Arndt, 2007) When this happens, McDonald’s will have to share its potential profitability and market share with its competitors. Aside from the increasing number of McDonald’s competitors, there is also a possibility that publicity like unhealthy foods could negatively affect the company’s sales and revenue. (See Appendix I – Summary of SWOT Analysis on McDonald’s Growth Strategy on page ) Comparison between McDonald’s and Wal-Mart’s Growth Strategies One of the major growth strategies used by Wal-Mart is to continuously expand the number of its retail store outlets throughout the United States combined with offering low prices on a wide-range of products like food, electronic gadgets and clothing among others. (Bianco, 2007) On the contrary, McDonald’s has decided to slow down the process of expanding the number of its existing retail store outlets. In the process, McDonald’s has decided to re-define its growth strategies. In line with this matter, McDonald’s decided to expand its business based on its existing store locations rather than applying the usual horizontal expansion growth strategies. Advantages and Disadvantages of McDonald’s Preferred Growth Strategy McDonald’s strategic decision to extend the business hours from the usual 6 a.m. – 11 p.m. to 24/7 store hours open a much bigger business opportunity since there is not much restaurants that serves the ‘night-time’ market. For this reason, McDonald’s is able to increase its annual expected profitability. The problem with this type of growth strategy is the fact that the company may experience profit loss associated with having to pay the fixed operational costs on extending its operations more than the regular business hours in case the company fails to capture enough customers to meet the break-even cost making the business operate 24 hours a day. Conclusion McDonald’s strategic growth is better than the one adapted by Wal-Mart. Since Wal-Mart focused so much on saturating the domestic market, the company is now experiencing stagnant growth in the retail industry. Extending the business operations of McDonald’s 24/7 a day makes the company able to increase the profitability of the company without having the need to investing so much money on establishing more store outlets throughout the United States. By utilizing its existing resources, the company’s total sales and revenue is more likely to increase. Appendix I – Summary of SWOT Analysis on McDonald’s Growth Strategy Strength Opportunities McDonald’s has established 13,700 stores for domestic market aside from its international market networks. (Arndt, 2007) McDonald’s – a company that has established a good reputation in the marketplace in terms of brand name, high quality food products, competitive price, and timely delivery. McDonald’s is maximizing the profitability of its resources by extending some of its store hours 24/7 a day. McDonald’s implements Customer-Centric Initiative (CCI) as part of maintaining excellent services to its customers. (Liyi, 2007) Only 40% of US-based McDonald’s store outlets have decided to go 24/7 as of 2002. (Arndt, 2007; Rowley & Tashiro, 2006) Established 2,400 franchised outlets. (Arndt, 2007) Refurbish and remodel old store outlets. (Arndt, 2007; Gogoi, Arndt, & Moiduddlin, 2006) Established McCafe’. (McCafe, 2008) Offers Wi-Fi access to customers. (Gogoi, Arndt, & Moiduddlin, 2006) Add new food items like salad and Asian chicken on the U.S. menu (Gogoi, Arndt, & Moiduddlin, 2006) and Ebi Filet-O in Japan (Rowley & Tashiro, 2006). Offers delivery service to customers. (Arndt & Ghobrial, 2007) Weaknesses Threat Despite the success McDonald’s global performance, there is still much more work to be done in order to increase the public awareness on McCafè and its 24/7 operations. There is a need to innovate a marketing plan that will give emphasis on the brand identity of McCafè since the company is known to serve burgers and fries instead of coffee and its 24/7 operations. Competitors like Burger King, Dunkin’ Donuts, Wendy’s, and Starbucks would decide to operate on 24/7 basis. (Arndt, 2007) McDonald’s will be under attack by external sources such as boycotts or media with regards to serving unhealthy food products. References: Arndt, M. (2007, February 5). BusinessWeek. Retrieved August 25, 2008, from McDonalds 24/7: By focusing on the hours between traditional mealtimes, the fast-food giant is sizzling: http://www.businessweek.com/magazine/content/07_06/b4020001.htm?campaign_id=nws_insdr_jan26&link_position=link1 Arndt, M., & Ghobrial, C. (2007, July 23). BusinessWeek. Retrieved August 25, 2008, from Knock Knock, Its Your Big Mac: From São Paulo to Shanghai, McDonalds is boosting growth with speedy delivery: http://www.businessweek.com/magazine/content/07_30/b4043062.htm Bianco, A. (2007, April 30). BusinessWeek. Retrieved August 26, 2008, from Wal-Marts Midlife Crisis: Declining growth, increasing competition, and not an easy fix in sight: http://www.businessweek.com/magazine/content/07_18/b4032001.htm Gogoi, P., Arndt, M., & Moiduddlin, A. (2006, May 15). BusinessWeek. Retrieved August 25, 2008, from Mickey Ds McMakeover: The heavy plastic look is history. A clean, simple design is on the way in : http://www.businessweek.com/magazine/content/06_20/b3984065.htm Liyi, G. (2007, November/December). Enterprise Today. Retrieved August 25, 2008, from McDonalds Unveils its Winning Formula for Success: Staying Ahead in Service: http://www.spring.gov.sg/et/pdf/2007_11_index14.pdf McCafe. (2008). Retrieved August 25, 2008, from McCafe: Just Like Your Barista Used to Make: http://www.wakeuptowhatsnew.com/ Rowley, I., & Tashiro, H. (2006, September 11). BusinessWeek. Retrieved August 25, 2008, from Shrimp Burgers To The Rescue: CEO Harada has halted falling sales at McDonalds Japan. Now for some profits : http://www.businessweek.com/magazine/content/06_37/b4000063.htm Read More