Aspects of Mcdonalds Business - Case Study Example

Answer McDonald’s is one of the largest fast food chain with more than 32,000 outlets across the world. The core values of the company are primarily people-centric and are important and sincere declaration of its objectives and aims. The success of McDonald’s can be contributed to the long term vision and strong belief of the founding members (case study). They have made it the best fast food centre through customer satisfaction and meeting their changing preferences. It provides quality customer service and high quality food at affordable prices that facilitates customer satisfaction at all levels of interaction, meeting their requirements and demands. The rapid decline of revenues and deteriorating market position of 1990s could be contributed to number of factors like highly competitive global business environment, tough market conditions, tough labour conditions, lowering of costs of products, lack of new products etc. But under the stewardship of James Cantalupo, who took charge in 2003, the firm started making a definite turnaround. Efficient exploitation of the internal resources of the firm was the major contributory element which helped it to regain its market. McDonald’s corporate strategy mainly relies on creating value through customer satisfaction. It has been able to gain effective leverage against its rivals by exploiting its internal resources which are: brand equity, quality products and exemplary service. It has evolved into the best fast food centre through customer satisfaction and meeting their changing preferences. The use of technology and uniformity in its products has been the hallmark of its fast food across the world. The unmatched efficiency in the delivery of its services and the uniform quality of its food has become the unique feature of all its outlets. They provide quality food at low prices and give ‘value’ to the customers. Indeed, McDonald is the first food chain that has truly become global in its operation and values. The managerial leadership realized the importance of identifying the changing eating habits and accordingly introduced changes within its products. The burgers have been its main products that it has maintained by customising it as per the preference of the customers. It has also introduced wide variety of salads and healthy food in its menu while at the same time, localizing the products by adding local flavour. They differentiated the products by customising it according to the demands of the customers. The use of technology and uniformity in its products has been the hallmark of its fast food across the world. The unmatched efficiency in the delivery of its services and the uniform quality of its food has become the unique feature of all its outlets. The training of its workforce is intrinsic part of organization’s culture that greatly facilitates delivery of its goals and objectives by creating best fast food centre through customer satisfaction and meeting their changing preferences. (468) Answer 2 Porter’s five forces model of industry competition are highly relevant for McDonalds also. The advancing technology has narrowed the knowledge frontier amongst the organizations, necessitating innovative approach that would provide their goods and services with differentiating elements to give them cutting edge leverage. Analysis and identification of the changing trends of the customer requirements are important ingredients to gain leverage against their rivals (Grant, 2007). In such a scenario, the five forces analysis of producer business becomes critical factors of competitive advantage which are: industry rivalry; bargaining power of suppliers; bargaining power of buyers; competition from substitute; and threat of entry. The industry rivalry amongst the fast food centres is important criteria for introducing cutting edge differentiating element in the products to gain leverage. McDonald’s strategy to customize its products as per the changing requirements of the people has been its major strategic win. Apart from this, the various franchisees and outlets of McDonald have also introduced local products to cater to the local demand. There is also uniformity in its quality of products and services across the various outlets. Thus it has become the first food chain that has adopted global values in its operation and values. This is one of the major motivating factors for McDonald to be highly innovative in its products and development processes. McDonald produces quality and customized products at relatively low cost and therefore it has been able to bargain with its customers. The quality and creative input within the product gives huge advantage to the suppliers and puts one in a bargaining position. The bargaining power of buyers is also reduced when there is short supply of quality goods which have great demand. In the case of McDonald, the buyers increasingly prefer them because of their quality products which are distinctly differentiated from their rival through variety, customization and uniformity of state of the art service. The technological advancements have brought forth an explosion of information that is easily accessible to public through the internet and other media like television, radio, mobile phones etc. The competition from substitute become highly likely and the company needs to adopt innovative approach to its marketing. McDonald has successfully met this aspect by evolving flexible strategies like customized products and introducing elements of surprise within the products as well within the marketing of the products and services. Last but not the least is the threat from new entrants of the business. The globalization has provided facilitating grounds for new entrants and therefore, the existing firms must ensure that speed and flexibility become intrinsic part of their strategy. They become extremely important ingredients for the products so that the organizations can timely and efficiently meet the fast changing preferences of the customers. McDonald has competently used the concept and at the same time, it has also revamped the ambience of McDonald’s outlets to promote its image of a lifestyle brand. Indeed, it continuously strives to meet the challenges of the changing preferences of the customers through new products and services. (502) Answer 3 The technology and rapid globalization has significantly altered the dynamics of business across the globe. The businesses across the regions have become highly competitive. The recent times have seen significant increase of low cost fast food that does threaten its market position. McDonalds specializes in exploiting local resources for its product and services. The company’s core competency lies in its production of burgers that has gained iconic position not only in the American market but also in other countries across the globe. Indeed, in an industry which has wide scope and opportunities, it is very important that the firm must strive to have a definite and advantageous position within the industry. In a fiercely competitive industry the firm gains that position by leveraging its strengths. According to Michael Porter, the firms’ strengths can be broadly categorized into cost advantage and differentiation. Three types of generic strategies emerge when these strengths are applied by the firm: cost leadership, focus and differentiation (Porter, 1980). But this strategy might not be advantageous in McDonalds case primarily because it could significantly have adverse impact on the quality of the products. Cost leadership strategy provides the particular industry or firm with distinct cost advantage against its rivals. The strategy revolves around selling price of the product or service in relation to that of other firms’ product costs. The market share is gained with lower price and is always targeted towards broader market segment. The fast food industry is hugely competitive and reducing cost strategy for McDonalds may adversely impact its market credibility and quality. Hence the firm needs to be innovative in its approach to gain leverage. While the cost leadership cuts across the fast food industry, they are known to offer cutting edge package which is focused and offers unique services that are highly sought after. In the business environment of globalization and need for optimal professional aptitude, it has become imperative that differentiation has features that are not only unique and add value to the product and services but they should also be competitively priced. The company’s policy of introducing new products which can be customized as per the changing requirements of the customers greatly facilitates its market strategy. The diversification of its core competency vis-à-vis burgers and other fast food items to include breakfast menu and kids corner would also help provide competitive edge against the rivals. The company’s promotional techniques are also vital ingredients of differentiation. It has revamped its interiors to keep up with the contemporary lifestyle. The fast changing requirements of the customers necessitate introduction of new products at the right time. Indeed, the success would also depend on its quality and the pricing, both of which are difficult to manage because the time and the quality would make the products slightly more expensive. McDonalds has included exigencies so that the three factors could be collectively approached to make the products appealing through customization. Hence, it can be concluded that cost leadership would not be the right strategy for McDonalds. (501). Reference Case Study Grant, Robert M. (2007). Contemporary Strategic Analysis. (6th edition). Blackwell. Porter, Michael, E.(June 1, 1980). Competitive Strategy: Techniques for analyzing industries and competitors. NY: Free Press 1998. Read More