The paper 'It’ s Time for a Product Recall' example of a Business Case Study. McDonald's a food company with several outlets globally and recently has been faced with the decreased sales for the last few years with its competitors gaining more competitive advantage. This memo shows an analysis of the company recommendation and implementations of the favorable option. According to SWOT analysis of the company was criticized by using poor quality products than competitors, in PESTEL there was high competition, according to five porters model it was evident that the major people affecting the performance of the organization were the buyers and competitors and according to financial analysis, the company was financially stable and could be able to fund expansion programs.
From the above analysis, there are three options possible for McDonald's to have a competitive advantage which expanded market share and product menus, focus on product differentiation and the last option is to hire new personnel and train existing on market characteristics. Expanding customer markets and product menus was a viable option given the company has a good trade name and potential financial capacity.
The option is to be implemented and good management put in place by incorporating technology to be able to monitor customer satisfaction. Following shows a table of analysis Analysis Implications Options SWOT This analysis shows our company has been criticized on unhealthy products but has a good brand value covering large market share This suggests that our company can expand its market share by having new product menus and entering new markets PESTEL The company has strong competition threats by competitors who have won some market segment I recommend the company do focus on the customer by product differentiation of existing products Porter Five Forces Model This analysis shows that competitors and buyers are major forces affecting the company The company can hire new employees and train them on the market characteristics in order to increase the innovativeness of products Financial Analysis This analysis shows our company has good financial capability in meeting new investment and pay expenses and shareholders The company can move into a new market and produce new products to make more sales. Problem Statement McDonald's is a food production company facing a lot of competition resulting in a declining performance for the past 3 years.
What should the company do to improve its performance and ability to be a competitive advantage? SWOT Analysis Strengths Weaknesses Largest food market share in the world over 8% 40 billion brand value which is well established Local and culture adapted food menus due to innovation and diversification Best brands partnership and management adaptability to changing market More than half Independent owned franchise Improved child targeting and marketing A negative image on public Unhealthy food menu Mac job and high employee turnover There low product differentiation Opportunities Threats Increase healthy food demand in most families After-sale services and home delivery for products Full change and adaption of management practices. New untapped market segment and changing customer demand increased applications of franchising is a long-run asset Saturated fast food markets A new trend on the preference of natural and healthy foods New developing competitors with chain store in each market Change and unstable currency rates Many lawsuits against the company The campaign against by some independent companies STRATEGIC IMPLICATION Conclusion: This analysis shows our company has been criticized for its unhealthy products but has a good brand value covering a large market share. Possible New Strategy: This suggests that our company can expand its market share by having new product menus and entering new markets. Rationale: Our company should enter new markets in by having new products and market in order to improve the market and order to improve them and have more sales and have a competitive advantage PESTEL analysis Political factors For any organization state policies enforced by the government affect the operations of the business likewise to McDonald's.
In Europe, some groups have protested on effects on health caused by consuming their fast food in which they blame diseases such as obesity are caused by elements such as cholesterol in fast food.
Each franchise and branch are affected by factors such as tax, employment acts, and other trade regulations. All these affect the growth and cost involved in running the business. Some restrictions influence the operations of the business and go so deep and also may restrain the contents of food and how they are prepared (Yuece 2012). Economic factors McDonald's is present globally and are affected by economic conditions such as inflation and dollar exchange rates. For the company to be successful it has to adapt to issues present in the economic environment this include simple demand and supply of materials necessary to produce food.
Some of the other issues that affect the economic condition of McDonald's include living costs, cost of wages, and inflation levels. The company is present in many countries has to take into consideration the economic conditions. Socio-cultural factors McDonald's has several international market entry strategies that have to be considered to succeed in international markets. The company's main aim is to show a positive environment depending on customers’ social and cultural backgrounds.
McDonald's has understood the customer characteristics and incorporated them and produced goods that fit and match their characteristics e. g. producing Halal menu in Arabic countries and Kosher menu in Israel. Technology factors The company has taken advantage of technology in marketing and using them in the production of foods in the company. These include incorporating the supply chain and management systems that have assisted McDonald's to go global and assist in proper management. The company has included microwaves and robots in food production giving them a competitive advantage. In the advertisement, it has used means such as Facebook and television to reach its potential customers. This has been possible by the use of the internet at low cost and high impact. Environmental factors For the success of company social responsibility is a prime objective and McDonald's has not been an exception to this.
Social responsibility entails damages done on the environment and McDonalds have been charged with various claims in which they are suspected of using nonenvironmental friendly goods such as glasses, lot of methane and Styrofoam coffers which has an effect on its image on maintaining a green country but it has established many corporate social responsibilities such as changing packaging and caring of animals. Legal factors These include being a good citizen in meeting all required obligations e. g.
tax, employment, and quality standards as per government policies. These violations vary with countries e. g. minimum wages and working hours. McDonald's has adhered to these laws even in countries with fewer requirements and obligations. STRATEGIC IMPLICATION Conclusion: The company has strong competition threats by competitors who have won some market segment Possible New Strategy: I recommend the company do focus on the customer by product differentiation of existing products Rationale: The company should differentiate product to meet all customer needs and stand out among its competitors Porter five forces model Threat of entry New entrant’ s impact on market share in which in the food industry there are moderate new entries due to low switching cost, moderate-high capital cost to set up in the market and a moderate-high cost to develop a brand on this market.
This however with low switching cost enables the customer to switch between companies, moderate capital cost enabled medium companies to enter the market and a strong brand has made McDonald's stay on top. Industry rivalry This industry has companies of different sizes and offers different products in which each market its products vigorously.
With low switching costs, the customers can move away or towards the company to the competitors. Threat of substitutes There are many substitutes available in markets from local industries, with low switching cost between brands is a threat to McDonald's products and in the food market, there is the high performance to cost ratios in which the competitors are also willing and able to take into consideration. Supplier bargaining power In the food industry, their many suppliers have been global it’ s hard to form alliances, and suppliers for general supplies are available.
McDonald's suppliers are not vertically integrated hence no control distribution network. With many suppliers in the market, it poses no problem for the company. Buyer bargaining power Due to the easy change between brand customers and market saturation of related companies, both local and international make customers have more power as they can easily demand want they want. McDonald's must ensure that they find a way to increase customer loyalty. STRATEGIC IMPLICATION Conclusion: This analysis shows that competitors and buyers are major forces affecting the company Possible New Strategy: The company can hire new employees and train them on the market in order to increase the innovativeness of products. Rationale: New workers will allow the company to venture into market segments and able to meet global and diversified customer needs and wants. Financial analysis The figure below shows the financial analysis of the company( Medill Reports Chicago, 2012) item 2012 2013 Margin percentage of the sale 38.75 38.10 Asset turnover 0.81 0.78 Return on equity 36.82 35.09 Current ratio 145% 159% equity 0.89 0.88 STRATEGIC IMPLICATION Conclusion: This analysis shows our companies have the good financial capability in meeting new investment and pay expenses and shareholders' returns. Possible New Strategy: The company can move into a new market and produce new products to make more sales. Rationale: Our company with the good financial position it's viable to venture in a new market without straining its finances Summary of financial income and projected future income extracted from McDonald’ s Investors (2013). Option #1: hiring and training employees on the market characteristics in order to increase the innovativeness of products Pros Cons New experts introduce new ideas on market segmentation Employees are resistance to change Equip employees on skills e. g.
communication Previous strategies become obsolete Outsource experienced employees on different issues experienced employees reduced the culture of the organization Option #2: expansion of market share by new menus and new markets Pros Cons increased competition in the market expensive Expand in untapped markets Decreased product image Distributed risks Reduced customer contact Option #3: product differentiation of existing products Pros Cons Variety of products costly creativity and meet lost customer changing consumer tastes Hinder market entry Time-consuming Recommendation We recommend that McDonald's follow option #2 to be able to have a competitive advantage in the market increase growth. We recommend this option has as it achieves two objectives at the same time.
It increases sales to existing customers and gaining more markets not fully exploited. This project would also compliment the plan of “ plan to win” discussed in the article. New menus such as healthy and natural meals and fast food and full meals would make customers prefer McDonald's. This will be also effective backing on the known brand name of the company (Interbrand2013). Its best option as the first option is expensive and change of employees will result in more harm than advantages as employees are resistant to change.
McDonald's aim is to improve its market share hence the use of the first method will take time before the objective is achieved. The third method focuses on an existing product in which customers already know and either improving it or having more options will bring no difference but introducing new menus would change the perception of the customer as they will wishing to taste new product (Hill 1997) Assumptions for success Enough resources to meet expenses and do marketing. Market study of favorable markets and menus Adoption of new strategies by the management and employees Ability to understand markets and customers and producing goods to meet their needs This project will be faced by issues such as follow up strategies by rival competitors.
By the fact that customers’ needs change each day, it will make it hard to make a clear judgment. Implementation Implementing this requires the management to have a market analysis team in which analyzes the market and take a survey on customer needs. These markets must have potential and not highly crowded e. g. in 3rd-world countries. This involves targeting all the markets word wide.
With a good financial position the company has it can be able to meet this expansion as it is costly but comparing the advantages it will derive its worth investing in. New markets increase the chances of success as they have untapped potential. This will affect the management style and should be managed well. The management should incorporate technology this includes customers who can order online and also comment on poor or good feedback for the company to gauge the level of satisfaction before it’ s too late.
• Hill, T., & Westbrook, R. (1997). SWOT analysis: it’s time for a product recall. Long Range Planning, 30(1), 46-52.
“McDonald’s shifting expansion plan to Asia: Analysts mixed in outlooks,” Medill Reports Chicago, June 6, 2012, http://bit.ly/MoQmwJ.
McDonald’s Investors (2013).Company profile. Available at: http://www.aboutmcdonalds.com/mcd/investors/company_profile.htm
Interbrand (2013). Best Global Brands 2012. Available at: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012.aspx
Yuece, Ilhan. SWOT Analysis of McDonald's and Derivation of Appropriate Strategies. 1. Auflage ed. München: GRIN Verlag GmbH, 2012. Print.