Strategic Management of McDonalds - Essay Example

Strategic Management Introduction McDonald’s is a commanding leading multinational fast food chain in global market. The company began their journeyby launching only seven outlets in the year 1955. Presently they are operating in 119 countries with more than 31,000 outlets globally. The organization has been selected for the purpose of the study. A strategic management analysis has been proposed to McDonald’s in order to achieve the objective of study. The paper will focus on McDonald’s business operation in India. McDonald’s is renowned for its Big Mac Burger, Fries, several soft drinks, various fast food items and happy price menu. The company believes in serving the food of ultimate quality with value added customer service. The business process of McDonald’s reflects in their mission and vision proclamation. They kept promises by serving worthy food products in order to satisfy customers. McDonald’s is not only the US market leader but they are successfully dominating the global fast food industry. SWOT Analysis Strengths Strong brand image and high reputation have increased the core competency of McDonald’s. It is a strong competitor for all restaurants due to its size, popularity and extensive amount of product diversification. Aggressive marketing strategy has helped the organization to achieve high market share. The enormous size of business has helped the organization to take an advantage of economies of scale. Implementation of advanced technology in business process. Weaknesses Economic slowdown of several countries may affect the business performance of McDonald’s. Unhealthy fast food image and several health issues like increase of weight, calorie level and children obesity may reduce the consumption rate of fast food products. High employee turnover rate may create several operational problems. Inadequate nutrition in food may decrease the customer base that has been created in global market. Opportunities High industry growth rate and increasing per capita income of people. The developing and developed countries are recovering from the effect that has been created due to global recession. Global economic, social, political and technological development may help the organization to grow in the global competitive market. Threats High competition within the industry. Children health crisis. Several environmental issues and economic recession. People are tending to consume healthy food rather than the consumption of fast food. External Analysis (General Environment) External environment analysis is important as it will determine the Demographic trends, economic conditions, political forces, Socio-Cultural conditions and Technological Changes. Socio-Cultural Conditions Social and cultural aspects have a key impact on the business performance of any company. McDonald’s is operating under liberal society in US where religion does not affect much on the fast food organizations. The culture of US influence McDonald’s to operate and offer fast food products. The society of India is versatile. India is the country where people of several religion backgrounds exist. The religion has a large impact on Indian culture and society. Various people from different religions choose different types of food products in India (Schaefer, 2006). In India, Hindus does not eat beef, Muslims only used to take Halal meat. Therefore, McDonald’s has to carefully prepare the menu in order to increase its brand image. The favorable social factor like change in life style of maximum Indians may influence the McDonald’s to operate smoothly. People of India are gradually adopting western culture. Now-a-days people like to hangover with relatives and friends in restaurants. These are few negative and positive cultural and social factors that may impact on the business performance of McDonald’s. Political Forces McDonald’s in US has got the advantage of the political stability of country. However, government of US has restricted the marketing activities of fast food companies in order to reduce the health related issues. The overture of several healthy food products like wraps, salads and milk shakes has again increased the brand awareness of McDonald’s in Consumer’s mind. Moreover, creating job opportunity, good relationship with government has eased the business operation of McDonald’s in US. India is one of the controversial countries in terms of politics. Different political views and ideologies are becoming the barrier for new foreign companies to do business diversification in Indian market. Bharatiya Janata Party (BJP) is one of the strongest political parties in India. They have opposed many international fast food chains to enter in Indian market. They are against fast food chains as the outlets offer non-vegetarian meal to people (Dash, 2007)). The changing trend towards fast food chain and the liking of young generation may influence McDonald’s to operate in Indian market. Economic conditions US are the strongest economy in the world. The higher GDP, increasing per capita income and high disposable income of people tends to them to consume fast food (Schor, 1998). In terms of India, the country has a stable economy. Slowly and gradually India is becoming one of the developed economies in the world. India have the sufficient availability of land, low tax rate, capital and skilled labors, booming economy, higher GDP, increasing per capita income, booming economy, higher GDP and higher disposable income of middle class people can pressure McDonald’s to operate in Indian market. Technological Changes McDonald’s look to expand in technologically developed countries as the business process of the organization required advanced technology. Moreover, better inventory control, effective logistic and supply chain and efficient billing required advanced technology in this industry. India is technologically developing country. Therefore, McDonald’s can avail every kind of technological goods and processes that is required. Demographic Trends The kids and young urban people love to consume the food products of McDonald’s. Happy Meal, Happy Price menu and several slogans of McDonald’s have attracted the young generation of India. Both men and women love to dine in the outlets of McDonald’s. busy office, college and school goers and people of upper middle and middle class are the major target audience of McDonald’s and more or less the people are satisfied enough by the products and services which are offered by McDonald’s. External Analysis (Competitive Environment) In order to conduct an external competitive environment analysis, Porter’s Five Force framework has been implemented. Industry Rivalry Indian fast food market is highly potential and competitive enough. Although McDonald’s is the leading fast food chain in Indian market, but several potential competitors like Subway, KFC and other domestic players are posing threats to the organization. McDonald’s need to improve their business practices regularly in order to increase the customer base in Indian market. Therefore, it is feasible that threat of industry rivalry is moderate for McDonald’s. Threat of New Entrants Threat of new entrants for McDonald’s is moderate. The new players had to face limited legal barriers in order to enter in the competitive market place. However, strong global brand image and large establishment of McDonald’s may make it more difficult for the new comers to compete in the market. McDonald’s can easily take away the market share by effective price competition and promotions of products. Threat of Substitutes Quite a few factors determine a threat of substitute products. If switching cost is low, then people can easily opt for the substitute products. Moreover, if the people find that the substitute product is of better quality than the particular product can be replaced by the substitute products. In India, threat of substitute for McDonald’s is high due to the availability of local traditional fast food products like Samosa, Pakoda and many more. Buyer’s Power McDonald’s has to face high buyer power as the Indians are very much price sensitive. They look to consume better quality of products in low price. Several low priced substitute and competitor’s product has created huge challenge for McDonald’s in India. Keeping the factors in mind McDonald’s has also started to cut down their product price in order to attract more number of customers. Supplier’s Power In India, McDonald’s has to face high bargaining power of suppliers. McDonald’s use similar products and services whether they operate in US or in India or in China. Therefore, supplying the raw materials and several products are the potential business of the suppliers of McDonald’s. Moreover, McDonald’s does not want to disclose the business process in public. Therefore, they rely on limited source of suppliers. It gives a high bargaining power to the supplier of McDonald’s. Internal Environment Analysis The internal environment analysis will highlight the resources and firm capability of McDonald’s. Resource-Based view Organizations are different. Major of the organizations have the ability to accept challenge and risks of quick changes. The resource-based view approach of McDonald’s has helped the organization to have excelled resources. Moreover, McDonald’s has the capability to use the effective resources like skilled employees, effective supply chain, unique business process and availability of high quality raw materials have increased the level of competitive advantages within the industry. Moreover, the capability of McDonald’s lies within the outlets or infrastructure that reflects both routines and human resources most of the time (Grant, 2005). Therefore it is difficult to replicate the processes by its competitors. Firm Capabilities as Routine McDonald’s have implemented an essential step in operating practices and translating directions into capabilities (Cohen, 2005). The idea of routine like operating manuals in each and every McDonald’s outlet provides accurate direction for the accomplishment of every activity. The consistent practice has helped the organization to carry out daily practice of operating manuals. It allows McDonald’s to offer quality food products with adequate customer services. Moreover, McDonald’s have pioneered the transformation process through systematic business operation. McDonald’s has developed its operation manual by doing and learning. They should more effectively implement the firm capabilities in all global outlets. This typical systematization idea assumes that the organization can more effectively articulate the process basis on its capabilities. With apprehension of knowledge management, the outlets of McDonald’s are implementing their own McDonald’s system. The spirit of this knowledge systematization is systematically followed by every McDonald’s outlets. Therefore, the business operation practices became a part of every individual employee. Conclusion Strong brand image and high reputation have increased the core competency of McDonald’s. The organization is one of the leading fast food chains in global market. The kids and young urban people love to consume the food products of McDonald’s. Happy Meal, Happy Price menu and several slogans of McDonald’s have attracted the young generation of India. In India McDonald’s may face several political and environmental issues, but adequate business practice, maintain a standard quality of product with effective customer service should help the organization to become one of the leading players in Indian market as they already have earned that much of high reputation through their business in global market place. Recommendations Customers are the base of effective business level strategies. McDonald’s should target people of different ages in global market. Moreover, they should provide delicious, quick and non-expensive food. They need to provide a variety of lunch, dinner and breakfast meals. The organization is already operating in 119 countries. Different needs of different nations due to diet, religion and culture have forced McDonald’s to offer different foods for different countries. McDonald’s need to gain more knowledge and flexibility in order to achieve global business objectives in a competitive environment. McDonald’s have effectively implemented the Cost Leadership and Differentiation strategy basis on the generic strategy. For an example, the organization is offering various types of product in reasonable price level. They need to cut down the operational cost more effectively in order to maximize their business profits (Lardbucket, 2012). McDonald’s need to plan strategically to create a benchmark within the global fast food industry. Corporate level strategies are implemented to facilitate market and product diversification. Franchisee business is an effective example of corporate level strategy. McDonald’s is operating franchisee basis in the global competitive market (Hitt, Ireland & Hoskisson, 2008). The organizations in terms of global business have to take lesser burden. As the franchisee owners are the pillars of this business process they should be constantly motivated by McDonald’s. Several motivation policies and profit sharing strategies will help McDonald’s to achieve more number of market shares within the global fast food industry. References Cohen, W. (2005). The Marketing Plan (4th ed.). New Jersey: Wiley. Dash, K. (2007). McDonald’s in India. Challenges Ahead, 13-15. Retrieved from https://www.sidweb.espol.edu.ec/public/download/doDownload?attachment=553175&websiteId=1296&folderId=17&docId=45902&websiteType=1. Grant, R. (2005). Contemporary Strategy analysis (5th ed.). New Jersey: John Wiley & Sons. Hitt, M., Ireland, R., & Hoskisson, R. (2008). Strategic Management: Competitiveness and Globalization (8th ed.). Stamford: Cengage Learning. Lardbucket. (2012). Selecting Business-Level Strategies. The Nature of Cost Leadership Strategy, 9-11. Retrieved from http://flatworldknowledge.lardbucket.org/books/mastering-strategic-management/section_09.html. Schaefer, R. (2006). Sociology. New Delhi: Tata McGraw-Hill Education. Schor, J. (1998). The overspent American: Upscaling, Downshifting, and the New Consumer. New York: Basic Books. Read More