McDonald Rebirth Moderation - Case Study Example

McDonalds Rebirth Moderation

Introduction

The major issue surrounding McDonalds concerning rebirth via moderation revolves around the adoption of “becoming tough” approach in the area of the corporate administration toward franchisees irrespective of whether it angers some, versus making sure that they take a more active role in the company’s future directions. Generally, they should be adequately prepared to handle the challenge that comes with realizing satisfaction among customers in line with the prevailing standards (Sibley, 2012). For example, one group does not support the notion of franchisees developing a tough attitude, believing that it is the role of corporate management to ensure that franchisees take an active role in the company’s future directions while ensuring that they manage to keep up with the customers’ satisfaction levels (Hartley, 2009). Thus, the paper discusses the debate surrounding the rebirth of McDonalds through moderation of the diverse activities it undertakes in various parts globally.

McDonald’s Evidence

McDonald’s operates as among biggest chains in the fast food industry all over the world. For many years, not many businesses have managed to match McDonald’s sustainable growth globally. However, during the 1990s, the situation changed in the case of the company, mostly because McDonalds encountered challenges with regard to maintaining a sustainable strategy for growth. For instance, when one CEO embarked on opening new stores, older outlets were cannibalized. Other CEOs could focus on initiatives aimed at acquiring other establishments, although this intuitive ended up draining the profitability of the company (Hartley, 2009). A worse situation emerged when an unanticipated company’s expansion led to a reduction in the sales of the company while at the same time deteriorating franchisees’ relations (Kroc, 2016). Generally, the new policy driven by the urge for expansion laid notable emphasis on increasing McDonald’s market share irrespective of the influence it had on the established franchisees, leading to deterioration of operating relations. As such, an adversarial, as opposed to a supportive environment, emerged, which ultimately resulted to dissatisfaction among customers based on the products and services that the company offered (Laftley & Martin, 2013).

McDonald’s is considered as one of the initial companies to provide franchise. After 2011, McDonald’s franchise base was around 27,000 restaurants, even though those that the company operates directly are approximately 6,000. However, annual reports reveal that the presence of McDonald’s is approximately 0.5% in the situation of inform easting out (IEO) (Hartley, 2009). Therefore, in order for the company to administer its franchises effectively as well as sustain lasting relationships with customers, this would serve as one of the major forces of growth within the company. Nevertheless, the major force hindering the growth of the company revolves around the corporate headquarters of the company have toward particular standards, which end up limiting franchisees, thereby resulting to variations in terms of sales volumes in the case of particular outlets. Furthermore, the market, cost, and rivals also have a significant effect on franchisees. Therefore, it is not possible for the franchisees to be satisfied because of the influence that the headquarters of the company create (Dainty & Anderson, 2008). Thus, it is apparent that it is essential to ensure that franchisees take active roles concerning the company’s future directions. These would result to increased autonomy that would result in a rise in the number of satisfied clients. Hence, regarding the franchisees stance, it is vital to lay emphasis on three key areas, which facilitate in addressing the company’s present situation (Kroc, 2016).

Markets’ Inattentive Drive

One of the major areas of emphasis that the company should lay considerable emphasis on is taking note of reckless drive toward attainment of the market share. For instance, it is possible for a company to purchase a significant portion of the market, although some of the benefits that would be realized in this case would not meet the costs incurred. Pertaining to the case of McDonald’s, the initiative it took to increase its share of the market during the mid-1990s through the establishment of numerous restaurants resulted to the destruction of the relationship it had established with its franchisees (Laftley & Martin, 2013). Furthermore, the costs associated with the damaged relationships with the franchisees because of cannibalizing contributed to the emergence of lowered cooperation, morals, and festering antipathies (Dainty & Anderson, 2008).

Emphasis on Slow-Down Strategy

The emphasis that McDonalds had directed toward slowing down its strategy emerged as more powerful for the company. For example, when the company made a significant reduction in terms of the number of stores it opened, its level of profitability rose considerably. The between $4 and $5 billion, which the company spent to open new stores would facilitate in supporting other operations of the company, such as diversify its food offering, remodel the prevailing stores, refine operations, as well as ensure that the shareholders remained happy in terms of the rise in dividends (Laftley & Martin, 2013). Just as it would be the case with regard to saving on spending, the company managed to free time in the case of its executives, which was diluted by the initiatives directed toward searching for new sites to establish stores, overseeing new employee training, recruiting, and construction processes. Presently, the prevailing operations can be handled more effectively to assist the company when it comes to recovering the relationships it has with its franchisees (Dainty & Anderson, 2008).

Eliminating Stringent Controls

The elimination of stringent controls in the case of the company would play an essential role in terms of allowing the company to realize undisputed successes in the marketplace. For instance, with stringent controls, the company would lack for any special opportunities or circumstances. Here, the climate would appear as that characterized by a single player as opposed to a team whereby the two parties would cooperate to realize mutual benefits. In the case of McDonalds’s therefore, it should exercise autonomy through the 4Ps, which includes place, price, promotion, and product (Sibley, 2012).

Pricing

The franchisees of McDonalds would gain additional power in case they are capable of deciding on price. When franchisees have the capacity to decide the prices for various market’s regions, or groups of customers, it becomes possible for them to realize optimal benefits. Irrespective of the cost savings that companies face with regard to differentiation. Success normally comes when a firm manages to adapt to a unique market (Kroc, 2016). This is particularly the case with regard to pricing strategy implementation, which is affiliated with localization as opposed to the case of globalization. Given that various consumption levels are apparent in unique regions, it would be possible for franchisees to decide the ideal level of pricing based on the level of consumption among consumers (Hartley, 2009).

The other benefit associated with providing franchisees with the power of deciding the ideal prices to charge is one whereby franchisees realize it is possible to charge prices they deem suitable in the marketing arena as well as ensure they remain competitive compared to prevailing rivals (Dainty & Anderson, 2008). It is possible for rivals to have a unique strategy of pricing, which they manage to match with the prevailing situation for every store rather than unifying prices for the entire region or country. With adequate as well as independent pricing rights, McDonald’s would manage to compete effectively with rivals, since lowering prices would imply that its franchisees would suffer while trying to sustain profitability (Laftley & Martin, 2013).

Place

In terms of place, McDonald’s should refrain from opening numerous restaurants in one place as this could have a notable impact on its operating costs as well as profitability. McDonald’s strategy of establishing new stores has not served the company well, especially with regard to competing effectively with other rivals in the marketplace. Furthermore, when the company has many restaurants situated close to each other, customers have many options. The stores offer services in a particular region while targeting similar customers, thus having drastic influence on the company’s performance (Hartley, 2009).

Concerning the franchised stores, they lack sufficient rights of deciding the ideal areas of opening new stores mostly because they fear that a new store would establish close to them. Here, it is ideal for the management staff of franchised stores to request for additional rights in certain locations as well as the capacity to participate in the process of making decisions, particularly those related to the establishment of new stores in new locations (Sibley, 2012).

Product

About products, each franchisee should be accorded sufficient power when it comes to training its staff. Countries have unique cultures meaning that the mode of service delivery, which is accepted in one country, may be viewed as rude in a different environment. Here, in case the company’s headquarters trans its staff to act tough, the staff might encounter challenges with regard to realizing the rules set for offering services, making them lose passion and loyalty to the company (Laftley & Martin, 2013). By contrast, the owner of a franchisee might establish a close and better relationship with staff members, resulting to improved efficiency and loyalty. Here, in case the training by headquarters targets uniformity, it would result to uncertainties, which would be possible to avoid through formation of a consensus. Thus, it would be essential to devise a plan that would ensure franchisees are capable of making unique decisions concerning the prices they should offer, since they have sufficient understanding concerning the needs of their clients as opposed to company’s headquarters (Dainty & Anderson, 2008).

Promotion

McDonald’s regularly employs unique and flexible strategies of advertising in distinct countries, although it abandons the idea that countries are characterized by different cultures. As such, it is appropriate for McDonalds to consider allowing franchises to adopt flexible strategies for promoting products and services. (Kroc, 2016) For instance, in case a rival implements a certain promotion strategy, the franchises are forced to wait for a decision or approval from the headquarters on the ideal strategy to implement. This hinders the franchises from utilizing a flexible strategy, which has significant impact on sales and profitability. Thus, it is apparent that it is imperative for McDonalds to grant franchises rights for adopting their unique promotion strategy, which would play a key role with respect to improving the level of satisfaction among customers (Hartley, 2009).

Conclusion

In conclusion, it is apparent that considering the notable sales decline that McDonalds witnessed during the past decades, the franchisees and headquarters of the company encounter challenges with respect to realizing mutual benefits through utilizing unified and inflexible management standards. Here, the ideal solution would be to invigorate the prevailing stores while focusing on attaining share of the market in line with ensuring that franchisees gain extra autonomy to address the specific needs of their clients. Franchisees have sufficient understanding of their unique operations as well as clients unlike the case of the headquarters. Hence, by making adjustments in the prevailing market situations, it would be possible for the entire company to emerge successful, while ensuring that the franchisees activities benefit the entire organization.