MacDonalds Strategic Framework Formulation - Case Study Example

Student’s Name Professor’s Name Course Date MACDONALD’S STRATEGIC FRAMEWORK Founded in America in 1940, Macdonald’s has grown to become a global giant in the retail of fast-food with more than 30,000 outlets as per the turn of the century. The company started as a small joint pioneered by two people but the spontaneous growth it has experienced has put it at the center of interest especially in strategic framework formulation. SWOT ANALYSIS Strengths The management of MacDonald’s contributes majorly to the overall success of the company, the ability to formulate and implement market driven strategies has seen the top management at MacDonald’s to implement a robust market diversification strategy that for instance culminated in its entry and expansion of its Indian market. Through effective strategies like this one, the company has expanded and gained a larger market share over its competitors in the fast food industry over the years. As strength, the diversification strategy serves as a tool to increase presence and make the brand known by many current and potential customers (Pangarkar et al. 5). However, this strategy sometimes might fail to work depending on the demographics of the target market that might incapacitate the market to make meaningful purchases on the short-term to contribute to instant profitability. However, it is essential in brand building and development which is vital in long-term growth (Mujtaba 58). Macdonald’s also exhibits strength through its brand image that has grown since the company was formed. The Asian market entry had started as early as the 70s and as such the eventual entry into India was aided by the already available brand and reputation A localized menu that ensured customers was able to access the foods that suited their cultural, religious, and economic tastes. This was evident in the 2000 introduction of Chicken McGrill and the veg pizza McPuff (Pangarkar et al. 7). Aggressive marketing and advertising strategies as it was the case with the Happy Meal advert that was regularly aired on the Cartoon Network (Pangarkar et al. 7). This move was vital in tapping the young customers. Ability to offer low cost prices and still remain profitable for instance, selective reductions in prices of “economeals” to the tune of Rs 29. A robust supply chain network that was sourced as early as 1991 (Pangarkar et al. 6).By the time the company launched in India, it had developed an assured network of supplies of raw materials to help serve its customers adequately. Weaknesses The price cuts might not necessarily translate into increased visits by customers and have an impact on the overall sales. Macdonald’s single product line strategy is likely to be a major undoing. By purely specializing in fast-foods, there is a danger of the company experiencing a downward spiral as customers no longer fancy some of the products especially due to the growing health eating habits that culminate in reservations about junk food (Killing 21). Most of the undertakings such as price reduction and menu development were necessitated by the need to beat competition rather than a culmination of the company’s values. The inability to shake off its premium brand perception among low cadre customers over the years (Han and Jing 64-73). Opportunities The Indian market is large especially in the cities of Mumbai and Delhi. With a majority of the working class found here, there is a huge potential for growth. The opportunity to separate vegetarian and non-vegetarian menus and operations put the company in close proximity with the needs and tastes of multiple segments within a large market. With a population as large as that of India, an organization like MacDonald can curve a a substantial market share for its self through a thorough market segmentation. India’s social and economic diversity is an opportunity the company seeks to exploit through provision of a wide range of products thus reaching out to as many customers as possible (Pangarkar., et al, 7). With lifestyle diseases on the rise, there are major opportunities for macdonald in india like diversifying into more health-lifestyle designed foods like the fruit baked snacks (Pangarkar et al. 8). Major highways and petrol stations as well as airports and rail way stations offer MacDonald’s a chance to set up shops there and serve customers who are unable to enter into their stores and make purchases. Threats Operating in the perishables sector, there is a danger of falling standards if the supply chain is not maintained (Mishraand, Bhawna, and Dwivedi 69) Stiff competition from other entrants such as KFC that put more pressure on Macdonald’s to alter its initial strategy. Negative by competitors depicting it as premium brand thus scaring potential customers from considering MacDonald’s products INDUSTRY, COMPETITOR ANALYSIS S AND PROFITABILITY POTENTIAL The large population that harbored people of different religions and economic power backed the fast-food industry in India. MacDonald’s entry and latter performance portrayed an industry that was on an upward spiral owing to the fact that within the first 12 months, they had opened seven outlets (Pangarkar et al. 7). Despite the initial challenges, the company progressed and by 2000, the number of outlets had risen to 25. Demographically, the business attracted people of the middle age starting from adolescence upwards. Perhaps the most crucial factor that defines this industry is that a majority of the consumers are people of the working class and young people whose spending needs are guided by short-term satisfaction (Fraser et al. 2292) One of the key competitors of MacDonald’s in the Indian market were KFC and Wimpy’s. The two companies embraced a low-pricing strategy that was incomparable with that of Macdonald’s (Mishraand, Bhawna, and Dwivedi 66-68). KFC specialized in combining meals and then selling them at lower prices in a bid to attract more customers like the chicken, rice, gravy meal that was going at Rs 39 Pangarkar et al. 6).The competition was rife, and KFC was regarded as the pacesetter owing to their specialization in cheap and quality foods. They fronted their products on a wholesome platform and this worked well in terms of drawing a larger segment of the market based on the affordability (Harris and Sowell 23). The fast-food business in India had flourished and there was more attention to strategies that could stimulate further growth. By the end of 2000, Macdonald’s recorded a sales growth rate of 70%.However, analysts argued that this was not sustainable and that it would take another few years for the market to hit its peak (Pangarkar., et al 5). Consequently, Macdonald’s majored in identifying niches and opening more outlets at strategic locations such as airports and railway stations. Going forward, the performance of the company was influenced by the growing need for local foods and by the end of 2000, 50% of the overall proceeds came from vegetable food items (Han and Jing 88). Unlike its operations in other countries, operating on a beefless menu poses a huge challenge to MacDonald’s since Indians have a strict social stratification system and religious beliefs (Mehta, Gurinderjit and Mehta 17). If it does not appeal to middle class earners then the ability to lose the market to more aggressive competitor like, KFC. Maintaining its strong brand image and competing effectively is a major challenge having that in some cities the real estate prices are relatively high and thus they are likely to affect its pricing strategy (Chaturvedi and Preeti n.p). INTERNATIONAL STRATEGY Macdonald’s acknowledges the need for market diversification to reach out to as many customers as possible. Central to this approach is a robust international strategy that aids the company in gaining an entry in foreign markets (Han and Jing 74). The international strategy of the company was founded on the need to segment the market in terms of need and satisfaction. As such, the company utilizes a multi-faced international strategy perhaps in the realization that flexibility is key in keeping in touch with the changing dynamics of the industry (Freeman, n.p). The international strategy defines the operations of the company and its mooted collaborations with any other players to foster reception and performance in the long-term Fundamentally, the company employed a single subsidiary strategy, as it was the case in their entry to India in 1995. This strategy sought to sell the company as a strong entity with the ability to satisfy the market (Pangarkar., et al, 4). However, when this approach backfired, they reverted to strategic alliance with Connaught Plaza Restaurants to boost their chances of successful entry and sustained marketing. The strategic alliances approach was key for the company’s expansion in terms of products because they became more recognizable in a large country with millions of people of different lingual and cultural tastes (Chaturvedi and Preeti n.p). In the same scale, the company valued strategic partnerships to spur their growth and this was cited when they teamed up with Delhi Development Authority and Indian Railways to open more outlets at strategic locations. CONCLUSION Macdonald’s, just like any other modern business cannot afford to rely totally on the local market regardless of its potential. As such, diversification is necessary. However, this can only be successful in the presence of an international strategy that eases entry and interaction with customers for future exchanges. The dynamic international strategy of Macdonald’s is an upgrade of the single-faced models that have proved defunct at times. Their strategy is behind the steady success the company enjoyed from the period of 2000 upwards. This strategy enabled the company to reduce resistance to entry and building on partnerships with several corporations to ease their entry into new markets (Harris and Sowell 23). Additionally, the strategy was highly successful in identifying the challenges and formulating counter-strategies that included price reduction, community partnership, and aggressive marketing. In a market where there was stiff competition and huge potential, going it alone would not have been ideal. Works Cited Bahaudin G. Mujtaba. McDonald's Success Strategy And Global Expansion Through Customer And Brand Loyalty. Journal of Business Case Studies · 2007. Chaturvedi, Preeti. "How McDonald’s evolved its marketing in India." (2008). Fraser, Lorna K., et al. "The geography of fast food outlets: a review."International journal of environmental research and public health 7.5 (2010): 2290-2308. Freeman, R. Edward. Strategic management: A stakeholder approach. Cambridge University Press, 2010. Han, Jing. "The business strategy of Mcdonald’s." International Journal of Business and Management 3.11 (2009): 72. Harris, Patricia Sowell. None of us is as good as all of us: how McDonald's prospers by embracing inclusion and diversity. John Wiley & Sons, 2009. Killing, Peter. Strategies for joint venture success (RLE international business). Vol. 22. Routledge, 2012 Mehta, Gurinderjit B., and Sanjay S. Mehta. "an observational field study of consumer behavior at mcdonald’s." BUSINESS STUDIES JOURNAL (2013): 19. Mishraand, Bhawna, and Subodh Dwivedi. "success story of mc. d in india: story of it’s struggle in indian market." Asian Journal of Science and Technology 4.07 (2013): 066-070. Pangarkar, Nitin, and Saroja Subrahmanyan. "Beefing up the beefless Mac."2001 Read More