Blue Ocean Strategy at Mcdonald - Case Study Example

Introduction Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. Instead of dividing up existing and often shrinking demand and benchmarking competitors, blue ocean strategy is about growing demand and breaking away from the competition (Kim and Mauborgne 156). To create a market space that is uncontested which in turn helps to create an extended value for the customers and even raise the irrelevant costs. Blue ocean strategy is incorporated by a company in the system often reduces the overall costs. In an industry that is well established like fast food industry there is a great deal of competition amongst all the companies so as to acquire every possible market share. In order to avoid such competition that is often costly; many firms expand or in such a scenario even innovate so as to identify the blue ocean. A blue ocean can be defined as a space where there are no such operations performed by any company and it gives an opportunity to the firm to expand more and create its own demand,as there is no competition in the market. The major elements of blue ocean strategy areidentifying the key elements that define a service or product offered by the company in the present scenario and identification of customer group that values only particular aspect of this product; then create value for the customers at the same time reducing costs and then incorporation of new features or adding new dimensions for the target group. Having said that, blue ocean strategy can be reached through new innovative products where there is no competition. On the contrary red ocean strategy can be defined as where there is great deal of competition and growth and profit rate is low. In this strategy there are defined industries so a company can easily enter while imitating others but there is a lot of difficulty in terms of survival. Company The company selected for this paper is McDonald’s. It is an US based company, whichwas founded in 1955 and Don Thompson is the Chief executive officer of the organization.Thehead quarter in Oak Brook, Illinoisand itis the worlds largest chain of fast food restaurants. The customer base is almost 68 millionand it has presence in 119 countries;also, it has around 35,000 outlets operated by 1,800,000employees.In 2013 the organization’s revenue was US$ 28.1057 Billion and its net income in 2013 was US$ 5.5859 billionwith total assets of US$ 36.6263 billion. Generally, McDonald’s restaurants are operated by franchiseesandsometimes an affiliate runs McDonald’s restaurants.The main source of revenues for the organization isroyalties, fees given by franchisees and rents.Almost 15% of total McDonalds restaurants are run and operated by the corporation directly and franchise or others operate the rest of the restaurants. There are lots of fast food itemsthatare offeredby the corporation such as hamburger, chicken sandwiches, soft drinks, breakfast, French fries, desserts, wraps, salads and vegetarian items;hence, the business mainly focuses on non vegetarian food but recently it has started focusing on vegetarian food items and it has involved itself in different charitable works. Furthermore,Maurice McDonald and Richard McDonald are the founders of the corporation.The corporation believes in extensive advertisements and marketing.It has different types of restaurants;some of which have counter service, drive-through servicesorindoor seating facilities while some of them have outdoor seating arrangements. Apart from only restaurantsit provides very pleasant atmosphere in some restaurants where playground is available for children. The company is listed in New York Stock Exchange and it is apublicly owned company and it has very strong financial condition.In last 25 years McDonald’shas increased its share holder’s dividend consistentlyandit is one of the aristocrats of Standard & Poor’s 500. The company is focusing heavily on the emerging markets like India, China, Brazil, and South Africa. It is planning to open more outlets into those countriesbecause people of these developing countriesstarting to have higher disposable income.Having said that, McDonald’s has its own university where each and every year different fresh talents gather lots of knowledge regarding fast foods. It is a revolutionary step taken by the company; hence, this step is providing huge competitive advantage to the organization (Nichols, Michael and Charalambos 111-113). Reasons for choice McDonald’s is a legendary brand as far as fast food is concerned. It is a globally reputed well-recognized and significantbrand name within the industry. Restaurant industry or fast food industry cannot be imagined without the name of McDonald’s.It has changed the landscape of the restaurant and fast food industry.The corporation has huge presence across the world and it is an unavoidable brand in the market. Apart from these brand values and presence the company is having huge resources in every aspect of the business.A brand like McDonald’s does have every aspect that is expected out of a modern and global brand.It maintains all management functionality very professionally and suitably.The company has very large global footprint, that lots of people from different cultures, background and races loves McDonald’s andit has become an unavoidable part of the society in some countries. The corporation has almost 70 million customers every day. Those customers are generally served from its 35,000 outlets across the world (Kincheloe 102-104).Time is changing and modern day businesses are full of competition.Different competitors of the organization are coming up with different innovative strategies.It is globally very successful and a famous brand but still the company faces competition from Burger King,KFC, Wendy’s and other fast food companies.It is very important for McDonald’s to come up with a blue ocean strategy to draw the highest market share fromthe competitors.Introducing a blue ocean strategy will help the company to kill the competition for certain period of time until the competitors follow up. The company has been chosen for its global presence and reputation and its continuous innovation and creativity is also a very important reason for choosing this organization.Its large-scale business operations are also another reason for choosing the company. Also, the business has adequate financial capacitiesas mentioned before,thatenables McDonald’s to invest large amount of money for creating a blue ocean strategy; hence,It is very well known for its strategic implementations (Love 199-201).Blue ocean strategy is not suitable for every brandand it needs some critical factors that are present in McDonald’s.Over the years the corporation has satisfied its global customers and it’s a significant achievement by any company to reach that level of satisfaction. The organization has done continuous innovation over the years that it created different benchmarks in terms of marketing and advertising their products. Superior marketing and advertising and Popularity of the company are also reasons for choosing this company(Kroc and Robert 192- 195). Strategy Weekly buffet can be a blue ocean strategy for McDonald’s.The company will arrange buffet lunch once in a week in selected outlets. This kind of weekly buffets will increase number of customers in outlets (Osterwalder and Yves 110-115). It will be a unique strategy for the company because no other fast food restaurant such as Burger King or KFC has this kind of strategy.Basically, the buffet lunch will be divided into three levels, pricing and items will be different for each level of the buffet. Customers have to collect a coupon for the buffet where each customer has his/her own coupon and all different products will be availablein the buffet.In this way the company can display different new items in front of their customers, which enable the company to show some of the unique items that are only available in the weekly buffet. This strategy will help the business to reduce its competitions in two ways.First, more customers will come inwhen the buffet is on course.Initially this strategy will take away some customers from the competitors.It will bring a very new concept in the fast food industry.With the help of this strategy the company will be able to target people from all income groups of the society. This strategy will increase number of customers in very small period of time and itwillbe very effective for saving timeas well (Sushil 82- 85).Since the Corporation hasits own outlets, some of these outlets are very big in size which will not require any extra investment and with the help of McDonald’sfinancial position these outlets can be used to arrangethis kind of lunch.This strategy might be difficult for the competitors to replicate since it would require much time and financial support before such actions can be undertaken. Customers will eagerly wait for that special day of weekly buffet and it will add more excitements in the mind of customers. In this way the strategy of weekly buffet will help the company to create a space, which is free from all competitions; hence, the strategy will position the group very well in the mind of its customers. Customers always want something new from organizations like McDonald’s and that’s why McDonald’s is heavily investing on marketing and advertisement. This strategy will be a pleasant surprise for its customers, which will help McDonald’s to attract huge customer base within very small time. Implementation McDonald’s has to implement its strategy very professionally. It is the level of implementation, which willshow whether the strategy will be successful or it will fail in the future. The company will come up with one online and offline advertisement. The advertisement will inform customers about the date, time and venue of weekly buffet in different parts of the country. In that advertisement the new items will be shown and in which level of the buffet. The organization will fix the time duration within that time customers will have to collect their coupon which will allow them to eat in the buffet (Huber117-121). The buffet will be divided into three levels which are standard, medium and premium level. Standard buffet willconsist of all basic items of McDonald’s, andit will be the cheapest buffet among the three alternatives. The medium buffet will offer few more items compared to the standard category while the cost of this buffet will be higher thanstandard buffet. However,in premium buffet or the highest priced one, all the best items of McDonald’s will be included.All the new items were shown or not in the advertisement will be displayed in the buffet mainly in the medium or premium levels. Starting time ofthe weekly buffet lunch will be fixed which12 p.m. to capture the lunch period.After 3 pm the door will be closed for the buffet and the outlet would go back to the normal menu; and soothing music will be there in the room during the lunch time.Payment for the buffet will be taken in advance during the distribution of coupons. It will help the company to get the idea of number of customers which will be served. At the end of the buffet each customer will be handed a card to provide their valuable feedback and impression regarding different items. At the end of the buffet officials of McDonald’swill analyze all those valuable feedbacks and according to that the groupwill strengthen its highest chosen items and can improve upon their lowest chosen items.Large number of employees will be needed for arranging this kind of buffet.At first this kind of buffetwill be arranged in USA market after that it will be arranged in foreign markets. Implementation of this strategy must be very smooth and simple and it should take its time to observe the market and the acceptance taking into consideration continues improvement. Everything related with the strategy implementation must be very systematic. This will help the organization to create a larger database of customers. Four Actions Framework The eliminate-reduce-raise-create grid is a sound analysis tool that was introduced by Dr. W. Chan Kimand Dr. Renée Mauborgnecan be used to break the trade-off between differentiation and low cost and to create a new value curve for the buyer value and it can be adopted by the management of the company.As to list the factors that can be reduced or eliminated by the company to sustain in the market place and what are the factors that need to be raised and created so that it offers a more tough competition to the other players in the industry (Kim and Mauborgne 156). McDonald’s has been able to survive in the intense competition majorly because of its innovative product lines and strong association with all the cultures in which it operates. However the grid framework for the company given will illustrate more on the factors that need to be eliminated, reduced, raised and created for future growth and success in the industry. Eliminate-Reduce-Raise-Create grid Eliminate Celebrity advertisements Special offers & discounts Above the line promotions Raise Retail store environment Low price menu Attitude and communication skills of the workforce Reduce Prices of some products Time between service and order placing Low level of attention towards the customers Create Ease of food item selection Special menu for diabetic patients Fun and artistic music Refined environment It may also offer some new products like shawamah and falafel These factors as mentioned in the grid define the blue ocean strategy for the company which can create a market space and a new curve for McDonald’s in the market where there will be no such tough competition for the company (Nair 76). The first grid is toeliminate. The factors which are included in this portion must be eliminated totally for the creation of blue ocean strategy.McDonald’s should stop celebrity advertisements as all other players in the market are doing same thing.Offering special discounts should be eliminated partially. This is also a very common idea followed by other players and some of the products are main item in McDonald’s menu such as “Big Mac”, and the companymust reduce complexity in product range.Simple product range will be very effective for creating ablue ocean strategy for the organization and to concentrate more on the main and new items (Jha 72-75).McDonald’s must reduce waiting time between placing order and serving the meals because low waiting timeis very important for customer satisfaction. MacDonald’s can lend little more effort to serve the customers efficiently and answer to each and every query of them; hence, they ignore that sometimes. It is very important to attend each and every customer in a serious way with full attention; taking into considerationit is very important for the corporation to promote a unique environment that will create a unique feeling in the mind of customers to create that emotional linkwith McDonald’s so they would see, feel and live the difference when they will visit any company outlets. The company must come up with lower price items to keep the attractionof young people and students intact.It will provide McDonald’s uncontested market space.Also, communication skills and attitude of the work force must be raised because they are the front lines of the business and they are the first impression of the organization.Their attitudes and communication abilities are very critical for the corporation to stay ahead of all competitions (Maxey131-134). The association has to be very much creative and innovative in terms of their menu selection. The company has to be more creative and versatile in terms of their items.The menu must be selected for all age groups and it has to be very much flexible in terms of customer’s taste and preferences. The corporation has to be creative in terms of the environment of the outlet whichwill help in refreshing customer’s mind. Having said that, its well-known that McDonald’sis very creative in terms of grapping customer’s loyalty towards the brand. It is the customer loyalty at the end of the day which will help the organization to get anuncontested market space.(Gondek 153-155). Conclusion It’s a known fact that modern business is changing in rapid bases. Change is the only constant thing in the world and if the corporation didn’t start that change some other corporation will do so. It is good for the company to change according to the situation. It has to be more active and socially involved. Focusing on the vegetarian items in the US and some other markets was a smart move.I think that McDonald’s must review its each and every strategy after regular interval of time. McDonald’s must keep the creativity and innovation alive for the achievement of uncontested market space. There is no short cut for the corporation. At the same time the company must be very much aware with all social aspects and legalities.It is very important for McDonald’sto be ahead of all competitions because this will lead to higher amount of investments from theinvestors and it will attract more customers. Recommendations McDonald’s must maintain its high level of research and development. It must be very flexible in terms of customer services. In the case of international business the companyis more local centric as every country has its own different cultures which can be crossed between cultures andthey can alter their food varieties or product varieties accordingly. The corporation must stick to its basics and main items like “Big Mac” and in course of innovation it should not forget its root.In my opinion, McDonald’s has to be very much transparent in their business practices and must contribute towards the society more. It will help the organization to create an emotional attachment with its customers around the world.Finally,it must focus towards customer loyalty. Loyal customers are very precious assets for any organization especially for McDonald’s because theyact as advocates of the brand. Works Cited Gondek, Christian. Blue Ocean Strategy - An Insight Into the Future of Customer Relationship Management. London: GRIN Verlag. 2013. Print. Huber, Adele. Effective Strategy Implementation: Conceptualizing Firms Strategy Implementation Capabilities and Assessing Their Impact on Firm Performance (Google eBook). Zurich: Springer. 2011. Print. Jha, Jaya. Summary of Blue Ocean Strategy By W. Chan Kim & Renee Mauborgne. New Delhi: Summary Town. 2012. Print. Kim, Chan, and Renee, Mauborgne. Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant. UK: Harvard Business Press. 2013. Print. Kincheloe, Joe. The Sign of the Burger: McDonalds and the Culture of Power. New York: Temple University Press. 2002. Print. Kroc, Ray. and Robert Anderson. Grinding It Out: The Making Of McDonalds. New York: St. Martins Press. 1992. Print. Love, John. McDonalds: Behind the Arches. New York: Bantam Books. 1999. Print. Maxey, Emma. The Most Intimate Revelations about Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Moscow. Kniga po Trebovaniyu. 2013. Print. Nair, Mohan. Strategic Business Transformation. New Jersey: John Wiley & Sons. 2011. Print. Nichols, Wilmer. Michael ORourke and Charalambos Vlachopoulos.McDonalds Blood Flow in Arteries, Sixth Edition: Theoretical, Experimental and Clinical Principles. London: CRC Press. 2011. Print. Osterwalder , Alexander. andYves Pigneur. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (Google eBook). London: John Wiley & Sons. 2010. Print. Sushil, Sushil. Flowing Stream Strategy: Leveraging Strategic Change with Continuity (Google eBook). Berlin: Springer. 2012. Print. Read More