Individual Situation Analysis for MacDonalds - Case Study Example

Individual Situation Analysis for MacDonald’s Student’s Name Course Tutor Date Introduction A situation in terms of business may refer to the general context that a business organisation is operating. A situation analysis therefore defines and illustrates the general environmental state of a business. As mentioned by Armstrong (1996), critical knowledge and context foe planning is provided by the situational analysis as it describes the financial and operating condition, competitive position of an organisation as well as the prevailing conditions of the internal and external factors. The main component of situational analysis often involves conduction of SWOT analysis. SWOT is standardised acronym referring to strengths, weaknesses, opportunities and threats of a business organisation. Essence of SWOT analysis in a business establishment In a business planning context, the full awareness of situation analysis is vital for managers to conduct and evaluate courses of sound effective decision-making to have good planning. Situation analysis therefore calls for comprehensive identification of the elements in the business environment, the understanding of their meaning as well as the projection of their worth into the current and future growth of the business. Situation analysis may therefore be defined as a critical business process that examines its situation, elements and their relations that are intended to provide excellent situation awareness for a business organisation management. It develops business hypotheses in regard to business events and entities, estimates the business organisational intentions and structures of threat entities by assessing the potential dangers and the risk levels posed by various threats (Munk, 1998). According to Hill and Westbrook (1997), SWOT analysis is a method of carrying out strategic planning as it helps in the evaluation of related Strengths, Weaknesses, Opportunities, and Threats (SWOT) in a business or a project that is being undertaken. It involves stipulation of the business objectives and complete identification of the factors both internally and externally that are either favour or does no favour business operations and growth (Menon, et al., 1999). Company analysis The Macdonald business started operations way back in 1940. It involved two brothers conceiving the idea of opening a restaurant. Thus Richard and Maurice McDonald opened their first restaurant in San Bernardino, California. The two brothers introduced in 1948 the concept of fast service which was known then as "Speedee Service System”. They continued with the concept of fast-food restaurant perhaps borrowing from the business principles of White Castle hamburger chain that had practiced the system for over twenty years. According to Love (1987), the company has over the years spread its business tentacles to so many nations to tap in to the growing demand of fast-foods internationally. The company’s global presence has been viewed as a symbol of Americanisation and globalization. Its prominence and customer base has prompted it to a subject of frequent public debates in relation to lifestyle diseases such as about obesity, consumer responsibility and corporate ethics (Armstrong, 2006). Consumer and Market Analysis The business model of McDonal is multi-faceted. As mentioned by Michelle (1998), it gets its revenue as a restaurant franchiser and operator, and a principal investor in properties. It is estimated that about a quarter of McDonald's restaurants are primarily operated and owned by the company itself, while the rests are operated by other company’s through numerous and diverse joint ventures and franchise agreements. The business model of McDonald's Corporation is therefore a bit different when compared to the models adopted by other competing fast-food chains. In addition to marketing fees and ordinary franchise charges that are calculated based on the volume of sales, the company may also be involved in rent collection, which is also subjected to a calculation based on sales volume. Pegged on franchise agreements that generally vary by country, age, contract and location, the company may lease or own the properties on which its franchises are situated. In most of the business agreements, the franchisee is not the principal owner of the restaurant location. According to a 1997 sales data of the company, 11, 4009 million sales was recorded, which represented a 5.6% growth in sales from the previous year (McDonalds Annual Report, 2008). Stiff competitors of MacDonald’s The company does not find it easy in making business both in the US and countries where it is operating under franchise agreements. This has been brought about by competition from other industry players such as Burger King Holdings, Doctor’s Associates and YUM! Brands as well as other small companies and outlets serving prepared foods or meals that include convenience stores, grocery stores and others. It should also be noted that established restaurants are also in competition with home-based cooking. As a strategy to beat the competition, the company ensures that it products are of very high quality besides strict adherence to health and environmental regulations in areas of operations. The company also undertakes a thorough study of market trends in terms of competition to evaluate the factors that makes such companies to provide demand and sales pressure on its establishments (Hoovers, 2008). SWOT analysis of the company Strengths This refers to the characteristics of the business organization that offers it an upper hand in comparison to other industry players. Foe Macdonald’s this include: The company has over the years built up very huge brand equity. Undoubtedly, it’s the top most fast-food company in terms of sales. It is estimated that over 30,000 company’s restaurants serve fries and burgers in over 100 countries spread across the globe. Good product development and innovation. This is continuously being carried out by the company so as to retain customers and attract new ones. The brands offered by McDonalds give customers a wide choice, great service and reasonable at competitive pricing. The company pumps a lot of money in upgrading its franchises so as to beat market competition. For example, the company invests large amounts of money in supporting the franchising network as about two-thirds of the restaurants are franchises. Loyal, highly ethical staff and strong team of management. Weaknesses These are characteristics that potentially place a business organization in an awkward situation in relation to its competitors. Even though the company commands a large market share of fast foods, over the past decade, it has not been spared of impacts of completion and other regulatory measures, thus; The company’s main product line is under pressure is gradually falling out of favour with many health conscious consumers. This is in line with the modern trend of maintaining healthier lifestyles for children, teenagers and adults. The company’s product line laid a principal focus on burgers and hot food. Seasonality in business makes the company to experience dwindling profits during low business seasons A lot of issues have emerged over the restaurant chain not keen on the energy provision in its foods, thus uproars have been pouring from all quotas that its fast foods are a health risk to consumers. Opportunities Opportunities refer to the external chances that may make a business organisation to scale up its sales volumes and profit base in the given business environment. The opportunities of the company include; Creation of joint ventures with other retailers such as supermarkets (Mason, 1993). Since the company is well established, it has no problem in pumping money to invest in good markets globally. The company has the capacity to consolidate retailers thus in the due process achieves excellent franchise locations. Since healthy eating has had a psychological response from the once loyal consumers to fast-food, the company can wedge a good response to social dynamics by ensuring that it achieves innovation with its foods to be in line with healthier lifestyle. Currently, the company’s move to make products considered healthier such as healthier snacks and hot baguettes are supporting the new initiative. It can make more accurate use of CRM, database marketing to its American and international target groups of consumers. The company management could embark on the process of potential customer identification, which is founded on modelling as well as shoppers profiling. In the due course, the company should strive to minimize brand switching. Strengthening its offering and value proposition so as to lure customers who visit other places such hot beverage shops to develop appetite for McDonalds. In the modern era of technology, the company should not be left out in serving its clients globally with access to internet. The restaurants should be equipped with Wifi internet links to attract different segments of customers. Installation of a play park for children as well as a comprehensive focus consumer health and fitness education should be adopted. The company should focus more on corporate social responsibility to have a global presence in supporting critical areas of developing world economies such as girl child education. The company should encourage more community linkages and make its operations and business practices to be environmental friendly (Steingraber, 1997). Owing to its huge financial endowment, the company should consider franchises in international emerging markets such China and other Asian economies. Threats Threats refer to external elements in a business environment that may lead to trouble in terms of business operations and profitability. The imminent threats for Macdonald’s include; The rise of social changes being championed by the government and lobby groups rallying for balanced meals as opposed to junk food offered by restaurants. Principal focus by health experts for the need of healthier lifestyles in regard to nutrition. Pressures due to competition as new entrants make colourful entries with more product range, higher value and healthier products. Economic recession have had effects on the restaurant’s operations as sales nose dive due to tightening of household budgets as people scale down spending as well as visitors. Many lawsuits in relation to environmental degradation have been filed by pressure groups (Jobber, 2006). Conclusion Despite the challenges faced by McDonald's, it has continued to maintain the lead in offering quality fast-food. The company should therefore invest heavily in terms of innovation to change with time as new entrants in the industry come with complete awareness and product packaging to suit the emerging social trends in fast-food consumption. References Armstrong, M (1996). Management Processes and Functions, 1996, London Armstrong. M. (2006). A handbook of Human Resource Management Practice, Kogan Page, London. Hill, T. & R. Westbrook (1997). "SWOT Analysis: It’s Time for a Product Recall". Long Range Planning 30 (1): 46–52. Hoovers (2008), Retrieved on 3 October 2011 from Read More