McDonalds Corporation - Essay Example

1. Introduction McDonald’s is arguably the leading fast food service business organization across the globe (Binpo, C, 2007). The company is one of the most respected and recognized brands with over 31,000 restaurants in over 120 countries spread across all the six continents of the world which serves an average of 48 million customers on daily basis (McDonald, 2008; Maccani, 2007; Binpo, 2007; Cummins et al., 2005). According to their Annual Report (2011), the company generates around 33 billion total assets (in terms of system wide sales) across all its franchising stores in the world. According to Brandz Top 100 Brand Ranking and Newsweek magazine, McDonalds indeed was the eight most famous and illustrious brand in the world with a brand value of $81,016 million. Also McDonald is already considered the market leader in the fast food industry in the world, with a total market share of nearly 34 percent followed by Burger King that has a total of 13 percent of the market share (Iqbal, 2011). This, therefore, suggests that McDonalds is and has been a very successful organisation. 2. Strategic Reasons for the Success of McDonalds The key reason for the success of McDonald’s success has always been the people or employees that work in all the various franchises of the business organization across the world (McDonald, 2012; Elbel et al., 2011; Holmes, 2010; Coombes, 2004; Boyle, 2004). This sums up the huge number of employees that McDonald employs on regular basis. The company‘s policy of employing only the local people of where it is located seeks to promote the company from within its own internal customers. This policy of employing local people is to have managers that understand the business and domestic cultures within which they are operating (Ritzer, 2007 ). The second factor that contributes to its success is the company’s products (McDonald, 2012, Mottram, 2011, Holmes, 2010, Adams, 2007). One of the cardinal objectives of McDonalds is to design and build a uniform set of items that are consistent in taste and quality across the globe. It also believes that adapting to changes, especially with respect to local condition is intrinsic to the success of the company. The differentiation of the company’s products and services also form the basis of McDonald’s competitive strategy (Adams, 2007). Indeed, to sustain growth and development, McDonald’s has differentiated its products by targeting children and the elderly as its core consumers. The company offers an assorted line of foods so as to attract customers across the various levels of society. Building credible brand equity through effective promotion, sustainable business practice and quality service has also been vital part of its success. McDonald’s promotional maxim of branding globally and advertising locally offers the company the opportunity to design promotional activities specific to each marketing environment. This is to focus on the building of trust and brand loyalty in the eyes of its numerous customers that are spread across the globe. McDonalds recently introduced mantra “I’m lovin’it” which the company is using to bring its products closer to families is an effective promotional strategy (Holmes, 2010). Most importantly, expanding globally through franchising and creating a strong network of business network and relationship has been a major element of its success. More than 80% of its business is run on the franchise basis. (McDonald annual report 2011) Under a McDonalds franchise, McDonald’s products, with same quality and taste are sold. McDonalds receives a monthly rent, which is calculated on a sliding scale based on the restaurants sales (McDonald, D.2008). Franchisees across the world follow the same standard vis-à-vis infrastructure, ambience, quality, taste and customer service. as such, the success of the company can usually be related to being able to become accustomed to a specific environment. (Holmes, 2010) 3. Strategic framework of competitive advantage Kanter (2001) has strongly asserted that success is multidimensional in its vision and continuously challenges the assumptions about customers, communication technique, managerial behaviour, employee relationship etc. and makes efforts to evolve new mechanism of creating value for its customers. Therefore, it becomes important for the firms to adopt dynamic strategies to cope with the environmental changes and competition (Montgomery, 2008). As such, McDonald’s has built up strategic capabilities that are designed to provide it with unique value proposition to give competitive advantage. The two key tactical frameworks of success are its resource based competencies and international strategy of expansion which would be evaluated and analyzed. 3.1 Resource based competencies Stalk, Evans and Shulman (2000) have described strategic capabilities as set of business processes that are understood and firms tend to manage them and invest in them for long term gain. McDonald’s has evolved as a value proposition for its various stakeholders mainly due to its unique resource based competencies that provide it with sustained competitive advantage. Hence, VRIO framework would be used to analyze McDonald’s success that facilitates in creating value for its various stakeholders. 3.1.1 Value McDonald’s human resource strategy is significant value proposition that aligns with its vision and mission. Its HR initiatives promote job satisfaction and create a highly motivated and effective workforce through its policy of diversity, training and development. The training and development equips the employees with right form of attitude to the job rather than the technical ability that helps them to provide exemplary customer service (Robinson et al., 2007). Indeed, McDonald’s corporate strategy chiefly depends on creating value through customer satisfaction. For this reason, McDonalds has collaborated with certain universities and professional training institutes operates various training and development programs that brings recruits to the understanding of the company’s culture that is focused on the satisfying the customer at all times (Vignali, Claudio. 2001) . They provide the customers with quality products at low prices and give value to the customers. Grant says that meeting the needs of the customer is critical issue within the broader framework of competitive business (2007). McDonald’s corporate vision is aligned to its customers’ changing demands and therefore despite its traditional products like hamburger, big Mac, French fries, it has also added salads and customized it products to suit their preferences. McDonald’s mainly caters to the needs of children, young adults and young executives with fast paced lifestyle. Thus, healthy food has increasingly become part of Mcdonald’s products. 3.1.2 Rare While use of technology cannot be defined as rare but the way it is used in its business processes, it definitely gives it an edge in the market. The sustainability of resources and raw materials hugely add value to the products as perceived by consumers. Hence, they become intrinsic part of the success of the firm. Hamel and Prahalad (1989: 581) emphasize that corporate challenges come from analyzing competitors as well as from the expected pattern of industry evolution. One of the important elements of success of McDonald’s its use of technology within its operations. Dennis et al., (2006) strongly believe that investing in new technology helps the firms to gain leverage and improves and improvises performance outcome. Consequently, information technology plays significant part in business processes of McDonald’s. From getting feedback from customers to standardizing its production processes, McDonald’s using technology to enhance its outcome, both, in terms of analyzing customers’ changing preferences and meeting its commitment to the community within which it works. 3.1.3 Inimitability Ritzer (2007:1) asserts that uniformity in its quality and products across borders is unique that has resulted in Mcdonaldization which he describes as ‘process by which the principles of the fast-food restaurant are coming to dominate more and more sectors of American society as well as of the rest of the world’. It has become popular because irrespective of location, people across geographical boundary can enjoy the same quality of fast food products from its outlets. It has huge competition from its rivals like Burger King, Subway etc. but its unique methodology of maintaining global quality while using local resources has provided it with rare and inimitable capability. Most pertinently, it also hugely facilitates economy of scale that is reflected by its increasing sale and revenue. Indeed, it has become a key ingredient of its success because in ‘Mcdonaldized system, quantity has become equivalent to quality; a lot of something, or the quick delivery of it, means it must be good’ (ibid: 13). 3.1.4 Organization McDonald’s organizational culture is organic in nature that adapts to the changing environment and provides it workforce with constant learning environment for personal and professional development. It also empowers its workers so that they are able to make decisions based on informed choices. This is to instil confidence, trust and commitment in its workforce. In spite of the functional and products based divisions at McDonalds, it encourages openness and participation from bottom up. The above industry incentives and motivational packages as well as personal equity ownership programs have helped create an outstanding labour force that follow best practices in customer services. In order to sustain this culture, they ensure that the satisfaction and contribution of the entire workforce will be only second to making sure that customers of the corporation are better served. Indeed, management’s attitude towards the organizations workforce encouraging and supportive. 3.2 International strategy McDonald’s has been visionary in its strategic goals and objectives. Its international strategy has been one of the most crucial elements of its success. It has distinct and well managed international strategy that relies on promoting global values while localizing its products to suit the taste of local population. Vignali (2001) says that McDonald’s has shrewdly applied the concept of ‘think globally and act locally’ in its corporate business strategy. In fact the concept underpins its strategy of growth and helps to exploit opportunities offered across the globe, especially, in the emerging new economies and European countries. The five Ps are the man drivers of growth which enhance customer experience and provide the firms with an enviable market credibility and higher profitability (McD-AR, 2011). The five Ps are: people, product, place, price and promotion. Its key drivers are also intrinsically linked to its network of franchisees across nations which incorporate the modules of corporate strategic goals and ensure strict compliance of its value in their operations. Kay (1995) claims that contract business relationship are the linkages that facilitate higher level of competence and organizational growth which could serve as major enabling element of competitive advantage over their rivals. McDonald’s core business strategy of growth relies on creating a sustainable network of franchisees and supply chain that would promote its values and help expand its business across globe. Hence, its five Ps hugely facilitate and aggressively support its growth strategy. Most importantly, it has maintained its high credibility amongst its customers from different nations because it is culturally sensitive and ensures that its products conform to the needs and requirements of the local people. Hence, while it does not use beef in its burgers in India, it also avoids pork in its products in countries like Singapore and Malaysia where religious compulsions play strong social roles. Hence, it adapts local taste and customizes its products to suit the requirements of local people. Cultural dimension in promotional techniques is also an intrinsic part of its market strategy that helps to connect with the local population. 4. Suggestions McDonald’s works within a market that can be broadly described as ‘pure competition’ where the competition within the industry makes it difficult for the company to increase the prices of its products. Hence, whenever, McDonald’s opens new outlets, within or outside the country, it studies its rival fast food joints so that it could come up with competitive price. Prices of Mcdonald’s products are not uniform across globe but are competitively prices as per the demands of local conditions. At places where it has low competition, its prices are much higher than other places. The company must therefore, ethically decide about the prices and conform to the broader interests of the customers. Moreover, it must try to gains leverage through creative inputs and expand its products by introducing local culinary delights. 4. Conclusion McDonalds has created a niche market position across the globe of its strategy to think globally and act locally which has translated into its major strategic win. Its success therefore, can be contributed to its long term vision and its inherent desire to ensure customer satisfaction. The analysis of its value chain and international strategy has provided it with strong organizational capabilities that can constantly meet the changing preferences of the people. They are also need driven and therefore can be termed as major compulsions of the time that must be incorporated within the core business processes for continued success. (words: 2097) Reference Adams, C. (2007). ‘Reframing the obesity debate: McDonalds role may surprise you, J Law Med Ethics, vol. 35, no. 1, pp. 154-7. Bateman, Thomas S., and Carl P. Zeithaml. 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