mcdonald's business strategy analysis
while there are no significant barriers to entry, still to grow into, McDonaldsâ brand image is one major competence that gives the brand extra leverage in terms of marketing as well as sales. It is the millennial generation that constitutes the largest section of the global population. Diversification strategies by McDonald’s in McDonald’s corporation analysis include the incorporation of internationalization. Legal factors are also just as important for successfully doing business in the 21st century. It is expected that. quick-service eating establishments, casual dining full-service restaurants, street stalls or kiosks, cafÃ©s,100% home delivery/takeaway providers, specialist coffee shops, self-service cafeterias and juice/smoothie bars was composed of 9 million outlets in 2016 and generated 1.2 trillion in sales. Managing a large and international business like McDonalds is not an easy task. About The Strategy Watch. Rising health consciousness and health related criticism: Globally, health consciousness is rising and people want healthier food. However, a possible strategic direction for McDonald’s continued growth is to establish more locations in developing economies and in countries where the firm has no market presence. however, the brand will have to focus on managing its quality there and better management of franchisees in these regions. However, it does work to manage its quality standards and enforces them with the help of quality teams. Managing a large and international business like McDonalds is not an easy task. Mcdonald's Pestle Analysis On Effective Business Expansion Strategies. Another report by Nation restaurant Association showed that the US restaurant industry had sales worth 799 Billion dollars in 2016. Sociocultural factors have an increasingly important role in the context of marketing and business strategy both. McDonalds is also subject to severe regulations, control and oversight by the government authorities. Internationalisation Strategy 15 Think Global Act Local Option 15 Revamping Business Model 15 Franchisee and Joint Ventures 16 4.1. Moreover the company returned 7.7 Billion dollars to the shareholders through share repurchases and dividends for the year. Operating across more than 100 countries, the brand serves locally relevant quality food and beverages at various price points. Overall the level of rivalry among the existing brands is very high. A VRIO/VRIN analysis and value chain analysis of McDonald’s Corporation, in the resource-based view, underscore the strategic significance of organizational resources and capabilities pertaining to process efficiency, operations management, and human resource management strategies to sustain the company’s value … Economic factors have a direct effect on the sales and profitability of businesses. Political factors have kept growing in importance in the 21st century. In 2017, a large number of McDonaldâs restaurants in New Delhi India were found to be serving low quality food and had to be shut down. McDonaldâs systemwide sales accounted for 3.5% of the entire restaurant industry sales while its outlets were only 0.2% of the total outlets. Apart from that it tests new products regularly to make its menu exciting. https://economictimes.indiatimes.com/industry/cons-products/food/why-mcdonalds-had-to-shutter-outlets-in-delhi/articleshow/59402309.cms, https://www.restaurant.org/News-Research/Research/Facts-at-a-Glance, https://corporate.mcdonalds.com/content/dam/gwscorp/investor-relations-content/annual-reports/McDonald%27s%202017%20Annual%20Report.pdf. Technological systems like point of sale, and other in store systems or platforms and technologies that support McDonaldâs digital and delivery solutions. Including more low cost items on the menu can also prove profitable for the brand and attract higher sales. McDonalds is also making heavy investment in technology for successful marketing and growth of its brand. McDonaldâs must design its menu as per the taste of the millennial regeneration and serve healthier products. Moreover, product and service standardization lies in the cornerstone of McDonalds business strategy. It is a global brand operating across more than 100 countries. McDonaldâs is primarily a franchisor with franchisees owning and operating more than 90% of its restaurants. The shape and condition of the US restaurant industry has continued to improve over the years and even during the recession, its performance was fine. Technology: A smart value chain is not possible in the 21st century without investing in technology. these small variations are made in order to suit the taste of the local customers. #Five Forces Analysis of McDonalds: Bargaining power of suppliers: The bargaining power of most of McDonalds suppliers is low which is because of their small size and being scattered globally. Such situations can affect restaurant businesses and bring their sales and profitability low. Legal compliance is now heavily important to find success in 21st century. contact: email@example.com, firstname.lastname@example.org, Strategic Analysis of McDonaldâs Corporation. McDonalds is increasingly relying on technologies for service and food delivery. while there are no significant barriers to entry, still to grow into major brand is not easy because there is still a large investment in marketing as well as having skilled human resources as well s having the other infrastructure required for growing into a large and global brand. â The focus of McDonalds must remain on both reputation management and menu innovation. It has quality centres around the world that help ensure good quality raw materials being sourced from its supply chain. This McDonald’s SWOT analysis reveals how the most successful fast-food chain company of all time uses its competitive advantages to continue dominating fast-food industry. As the US economy retrained in track , it eld to higher employment and higher spending by the consumers. In applying this growth strategy, McDonald’s develops new products over time, such as new McCafé products. The stronger the brand image of a brand, the higher are its sales and profits. Customers know what to expect when they walk into a McDonalds store. Operations strategies play a very important role in achieving organizational goals. these distribution centres distribute products and supplies to Mcdonalds restaurants globally. there are so many laws from health quality related laws that can affect fast food businesses. Competition in every industry has increased and only the brands that keep their customersâ taste and preferences in mind are being successful. As of year end 2017, McDonaldâs employed 235,000 employees. The number of franchisees in McDonalds system has continued to increase. The bargaining power of customers in the 21st century has grown very high. Not just this there are so many brands in the industry competing for market share. It is because the brand has been able to build very high level of trust among its customers. The total amount that it generated in sales equalled 2.4 trillion dollars. It has a strong brand image in the market that, Operations: McDonalds is operational in around 120 countries. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. 7709 words (31 pages) Dissertation. However, the threat gets to be moderated by the brand image as well as, The threat from new entrants for McDonalds is also moderate. 4.4. Another important strength of the brand is its innovative menu. (Annual report, 2017). After analysing Porter’s Five Forces regarding McDonald’s competitive position, it can be concluded that in order to stay competitive, McDonald’s strategy can be seen most appropriately as a Cost Leadership strategy– minimizing costs to deliver products at low price.. With many other direct competitors also providing value menus, McDonald’s … 9 out of every ten restaurants in US have less than 50 employees. Millennials are a highly etch save generation who want affordable products and good customer service. The role of IT and digital technologies has kept growing in the McDonalds system. There are other technologies also that McDonalds uses to collaborate internally out externally with its partners. McDonald's product value is also its greatest strengths. The shape and condition of the US restaurant industry has continued to improve over the years and even during the recession, its performance was fine. Even McDonald has built in America but in recently, to describe McDonald’s restaurant, it is … The signage of a McDonald’s fast-food restaurant in Madrid, Spain. However, for most of its raw material it has several options or several suppliers to source from. It is one of the fast food brands that serves the largest variety. Unhealthy food on the menu 2. Supply chain and technology: McDonalds has a well managed supply chain which is among one of its major strengths. There are several reasons behind it apart from the increased competition. Inbound logistics: McDonalds has managed a large supply chain from which it sources raw materials. As per the Euro Monitor International report for 2016, the entire restaurant industry had 19 million outlets. It is especially so when the brand is heavily franchisee based. The Franchise business model. 8 out of 10 restaurant owners had started their careers as entry level employees. It provides the most useful resource of knowledge to business starters, researchers, strategists, and students. McDonalds is also making heavy investment in technology for successful marketing and growth of its brand. McDonalds is also subject to severe regulations, control and oversight by the government authorities. The recommended strategic goal is to fuel business growth through a combination of the market penetration and market development intensive strategies. The company’s phenomenal growth could be attributed to many factors, apart from the franchise model of e… As of 2017, McDonalds employed around 235000 employees. The interests of these stakeholders include profitability and growing revenues. Task: Identify main factors influencing your business operation by performing a McDonald's Pestle Analysis case study. The brand sells across more than 100 countries through its franchised and company owned restaurants. trust is important in this era and McDonalds has got a strong brand image which shows trust among its customers. Franchisee issues: The McDonaldâs system is 90% franchisee based which is bound to give rise to franchisee related issues. While on the one hand any negative news has the potential to hurt sales and reputation a healthy and innovative menu has become essential to retain the millennial customers. SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. Moreover, product and service standardization lies in the cornerstone of McDonalds business strategy. Millennials are a highly etch save generation, Compliance issues have grown bigger in the 21st century which is because of the higher level of legal and political. In case of McDonaldâs it is well known as the leading fast food brand of the world. The brands that have invested more in technology are ahead of the others in market. Global comparable sales of McDonaldâs increased by 5.3% and guest count increased by 1.9%. The paper would analyze the strategic analysis of McDonalds in great detail while considering its competition, success factors, strengths and weaknesses, and strategy measurement. Competitive rivalry among the existing brands: The level of competitive rivalry among the existing brands in the fast food industry is very high. Total debt also rose during this period from 25,956 to 29,536 million dollars. Although its menu differs across geographies based on local taste and preferences, the brand still serves a substantially uniform menu. Abhijeet has been blogging on educational topics and business research since 2016. In this way, there performance the US restaurant industry is expected to keep improving over the coming years. It is also a large employer and employs more than 14.7 Million people alone. Another important strength of McDonaldâs is its supply chain management. While most brands are focusing more on marketing and promotions, reducing its efforts in this area can have a negative effect on sales. Firm Infrastructure: McDonalds has maintained a very large firm infrastructure that includes its offices as well as other important properties. the overall threat from substitute products and brands remains moderate. Description of winning strategy 18 7.0. However, McDonalds remains the most popular brand due to its quality and variety of food and extensive presence globally. Materials sourced from these suppliers are bright to the McDonalds distribution centres worldwide. It is why McDonalds is focusing on sustainability and trying to achieve higher sustainability in the long term. The report also illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porterâs Five Forces, Value Chain analysis and McKinsey 7S Model on McDonaldâs Corporation. Big Mac tastes almost all over the world due to the use of the same ingredients in the same quantities and application of the standardized ways of cooking around the globe. This has led to higher marketing and promotion costs as well as research and development costs for international brands like McDonalds. Moreover, there are so many laws related to food safety, health, quality and labor that brands have to manage local compliance teams for each region they are operating in. Future Strategy 16 5.0. Competition in the QSR industry has kept rising and it has led to higher marketing and customer service costs for brands. Political factors have kept growing in importance in the 21st century. 7 out of ten restaurants in US are single unit operations. Another important strength of McDonaldâs is its supply chain management. In McDonald the business strategy for the company is to make food fast available to its customers at a very low competitive price but to get profit as well by reducing the cost of the product and expanding the business world wide. However, having this complicated web of franchised and company-operated restaurants expose the brand to certain risks. Brand image and equity help with marketing of the brand and help to derive better results from its marketing efforts. It both owns and leases properties primarily related to the company owed and operated restaurants. Mcdonalds has managed its value chain skilfully. Around the world the government oversight and regulation of businesses has grown. the US restaurant industry has seen every fast growth once the recession passed. The restaurant workforce of USA constitutes 10% of its entire workforce. Cheat prices is McDonaldâs main competitive advantage. Implication 16 4.2. It is also a large employer and employs more than 14.7 Million people alone. McDonalds business strategy utilizes a combination of cost leadership and international market expansion strategies. Brand value and brand awareness 3. However, the competition from other small and big brands in the restaurant industry has kept growing intense and continued success of McDonaldâs depends upon how well it is able to innovate its menu, prices and style of customer service. McDonalds has got an innovative menu which is largely uniform with small variations over the globe from market to market and region to region. For instance, World Wildlife Fund (WWF) experts led an independent analysis of the supply chain of McDonald’s in 2010 to help it identify the raw materials that represented the biggest sustainable sourcing opportunities for it to prioritise (McDonald’s, 2019). McDonaldâs is very popular in the global market and in various corners of the world. In this assignment will focus on the business strategy. The threat is not just from the international brands but also from the local and smaller brands. Brands have to design their food menu with their preferences as priority. Moreover, the brand is present in around 120 countries which also allows the brand access to a very large customer base. Its goal is to become 95% franchised over the longer term. It also holds the largest market share n the fast food industry. Moreover, from Dominos to Burger King there are several large and influential brands that are aggressively competing for market share in the fast food industry. Managing the value chain well allows to eradicate performance bottlenecks as well as add extra value to the product and production process. Of the 37,241 McDonaldâs restaurants that the brand operated in 2017, in 120 countries, 34,108 were franchised and 3,133 were operated by the company. Brand image and equity: One major resource of McDonalds that is above is its brand image and brand equity. McDonaldâs sources its raw material from suppliers around the world. The company is engaged in an extensive utilization of economies of scale to achieve the cost advantage. Here is how: Primary activities: This is a description of the primary activities in the value chain of McDonalds. Franchising and licensing forms of new market entry is utilized within McDonald’s business strategy to a great extent. The Asian markets are among the fastest growing in the world and offer some major opportunities of growing sales and profits. Global comparable sales of McDonaldâs increased by 5.3% and guest count increased by 1.9%. The analysis of the international strategy of McDonald’s has revealed that although the standardization approach has proved to be successful, the evitable differences between cultures have created the need for adopting the localization strategy to some extent. the brand plans to turn it into 95% operated by franchisees. By the year end 2017, the company had 2,35000 employees in total which included the employees working in its offices as well as in the company operated restaurants. Risk Management 18 8.0. McDonalds is already known for customer service. Apart from courteous staff, the brand also uses a variety of technologies to serve and engage its customers. McD has some important competencies including a well managed supply chain and a pool of talented employees. each brand is quite aggressive about competition and uses so many strategies like seasonal discounts and offers to lure customers away from the rival brands. The company procures raw material from suppliers around the world through its procurement teams. Declining brand image 3. It is important to note that along with maintaining product and service standardization, McDonaldâs takes into account local tastes and preferences, when developing its menu and engaging in marketing efforts. This shows the growing role of technology in the success of the fast food industry. MCdoandls is known for its calorie heavy menu and has also received criticism in the past for its unhealthy food. Environmental factors have become very important in the business industry given that. The bargaining power of most of McDonalds suppliers is low which is because of their small size and being scattered globally. This also leads to higher costs and issues. This was around 33 billion dollars higher than the previous year. It is because social factors now play an increasingly important role in deciding the fate of the businesses. McDonald’s addresses these concerns through stable business operations. Market analysis in the Marketing strategy of McDonald’s – The fast food market is flooded with MNC’s and local food joints eating each other market shares. 1. This report highlights the main business activities of the organisation, as well as provides an overview of the fast food retail industry and McDonald’s the competitive environment of McDonald’s. McDonaldsâ 90% restaurants are operated by franchisees. Having a large and loyal customer base is an important strength that can result in higher sales and profits. 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