McDonald's Strategic Management - Case Study Example

Running Head: essay Strategic Analysis- McDonald’s of the of the of the Executive summary Strategic management encompasses planning and devising strategies that optimize the competencies and resources of an organization. In this regard, McDonald’s is one of those organizations which have achieved this feat. This paper attempts to discuss the issues and challenges faced by McDonald’s in its domestic and global operations. With critical look on its implemented strategies and efficiency of its strategic management and planning function, the paper concludes with suggestion of some alternate strategies which could bring back the company in its real form. McDonald’s Overview McDonald’s holds the leadership position in global food service retailing industry. Its rich experience of 50 years, value prices menu and operations in almost 120 countries makes it an organization worth analysis and studies. McDonald’s global operations are spread across Europe, Canada, Middle East and Africa. Global sales contribute to almost three fourths of its total sales. In order to succeed in its international operations, McDonald’s follows a “think global, act local” philosophy whereby it caters to the local tastes and preferences of countries in which it operates. Not only the menu, but also the names of products as well as interiors and physical set up of restaurants and outlets are also changed (Mead 1994). McDonald’s recently faced criticisms on a range of issues which led to a revamping of its strategies and business practices. However, responsiveness and global image are what that have saved McDonald’s from turbulent tides. Issues faced globally While operating through cross borders, there are several issues that have to be faced. Some of these have already impacted the company while some are on their move. Franchising Franchising is the primary entry and operating mode used by McDonalds. While some nations allow full control over its franchises, some nations inflict stringent rules and regulations and demand control of local authorities on its global operations. This limits McDonald’s flexibility to operate and earn in so many of international markets without proper control. Tariff barriers Tariff barriers are challenging in the way that they do not facilitate the organization in maintaining cost efficiency. Closed markets impose greater restrictions and taxes on imports of raw materials, poultry and other food items, thereby increasing the costs. Human resources Human resources is the function of the organization in which human resources of the company are managed and other sub functions namely the recruitment, staffing, performance and compensation management and others are accounted for. In the case of global companies, expatriate management, cultural studies and managing labor under different labor, economic and political conditions form the basis of Human resource management. However, McDonald’s has recently been criticized of exploiting its workforce. Not only is this, even defying the local labor laws and wage systems also said to be not adhered by the company. This has placed questions on the ethical conduct of the organization in global marketplace. Due to high employee turnover rate, direct repercussion of this occurrence can be seen on the speed, accuracy and quality of its customer service which has been deteriorating (Restaurant Management n.d). Health Concept McDonald’s value priced menu is also questioned for its nutritional values and promoting fast food culture adding to the obesity and non-healthy diet culture adopted by western nations. This initiated the emergence of adding lighter food menus and adhering to food standards and nutritional facts. Key success factors of McDonald’s business model Amidst chaos and challenges, McDonald’s has presented a sustainable business model because of its strategic planning and development module. It has continued its stride by responding to the market changes within time and reaping in benefits from its core philosophies. A discussion of those key success factors follows below: Franchising model Though franchising model presents challenges for the company in different international markets, yet it is the biggest success factor for its sustenance and global growth. Its franchises earn income and profits for it in two ways: Rent income which is taken from the landlords and owners of the franchises. Service fee taken from the owners as a percentage of total monthly sales. Plan to Win strategy McDonald’s has placed its impetus on five pillars of business and their successful implementation to reduce the uncertainties and risk factors. Those five factors are product, price, place, promotion and people (Kerin, Berkowitz, Hartley & Rudelius 2003). As such, it has invented strategies to improve upon all these five aspects. With hospitality training and better reward management for employees, introduction of salads and lighter menus for customers, increasing restaurant appeals and cleanliness to enhance place attributes, pricing the products to improve the value of offerings and promoting the brand as a loyal and healthy proposition, the organization has combined all the strategic moves to come up with a Win-Win Strategy. Analysis of McDonald’s planning module and strategy The efficiency and effectiveness of planning and management at McDonald’s is obvious from its range of functions and operations held and managed. To provide a 360 degree view of management, its planning function spans across quality management, forecasting and scheduling, operations, supply chain and the like. McDonald’s has always focused on speed, health and price of its products and keeping these factors in mind, it has developed strategies which match its planning genius and implementation rigor. McDonald’s boasts of its flexible supply chain, coupled with qualitative forecasting system and electronic servicing network. By making the information available to customers, suppliers and restaurants, McDonald’s reduces wastage and avoids demand-supply mismatches. To better the customer service and experience, Total Quality management is also put in place which aims to reduce the Total Time Line (TTL) of customer waiting in queues. Initiatives in this regard are different colored packaging of its products for easy identification and differentiation, maintenance of a safety Guidebook containing all the information about temperature, ingredients and expiry of food items and use of kiosks and touch screens at production and processing counters to facilitate order delivery by employees (Chase, Jacobs & Aquilano 2004). Thus, from the effects that the external environment poses on McDonald’s and set of strategies invented and developed by it demonstrate clear understanding of customer needs and market impulse by the company. It has immediately responded to the market pressures by incorporating changes required. Planning success depends on the ability to be flexible in attitude and changing plans as per changing demands, without comprising with the original set objectives and other efficiencies. This planning dimension is well exhibited in McDonald’s strategic management approach. Despite health and human resources criticisms, the company is still heading the competitive battle and is ahead of its stark rivals, be it variety of offerings, price, quality, health promotion, service experience or any other attribute. This is all the more important and required in today’s complex business environment where changes cannot be anticipated in advance at the time when major planning is done. Most of the organizations fail here only when they do not succeed in incorporating dynamic changes in their business practices and policies, thereby limiting the scope of their innovation and creative business model creation. Recommendations/Alternate Strategies Taking idea from the above analysis and competencies of McDonald’s, it is still a bit lagging in its customer service enhancement. In rest of the business features, it is ahead of competition. As such, it is recommended that it should adopt an aggressive strategy to improve upon the service delivery features and making loyal customers. On the other hand, a defensive strategy against challengers and rivals can be adopted by being proactive and including technological innovations to improve the interiors and infrastructure of its global outlets. Investment in research and development and technological expertise will limit the birth of small rivals and fast food outlets. Its globalization spree should now concentrate on developing and health conscious markets with lighter, healthier and nutritional menu. With low priced and quality food items in small economies and addressing the health frenzy of people, McDonald’s can reap in the benefits of its brand image and trust. Training of employees and introduction of incentives, educational modules and reward programs will further propel the proposition of better customer service and rich experience creation. Thriving on its key success factors and core competencies will maintain its Numero Uno status in the global market. References Chase, R., Jacobs, F., Aquilano, N 2004. Operations Management for Competitive Advantage (10th Edition). McGraw-Hill Irwin; Boston. Kerin, R., Berkowitz, E., Hartley, S., Rudelius, W 2003. Marketing (7th Edition). McGraw-Hill Irwin; Boston. Mead, R. (1994). International Management: Cross Cultural Dimensions, Oxford: Blackwell “Restaurant Management”. McDonald’s Restaurant Management Careers. Accessed online on Nov 19, 2010 at: http://www.mcdonalds.com/usa/work/manage.html. Read More