Strategic Business Planning and McDonald's - Case Study Example

Strategic Business Planning: McDonalds Name Course Name and Code Instructor’s Name Date Introduction McDonalds is one of the fast foods multinationals that are positioned to serve the global customers having a singular objective of increasing their market dominance coupled with increasing profitability. For decades, McDonalds has maintained its position as a market leader in the global fast food industry. The company operational strategies have favoured its tremendous growth enabling them to penetrate market segments that were regarded no go zones for American Companies (Erica, 2012). The company has strategies that position McDonald as a low-cost leader in the global fast food industry. Similarly, McDonald’s analyser strategy help the company to conduct extensive and vast market research activities thus allowing it to acquire market information that is extremely relevant for its continued growth. In accordance with this, the company has operational strategies that anchor the company overall strategy. Market analysts observed and concluded that the company was not immensely affected by the 2008 global recession; this was attributed to the company’s operational strategies. This paper discusses McDonald’s external environment, company operational strategies, the strategy making process, strategic future direction for the company, and how the strategy is monitored. Accordingly, the paper will discuss the opportunities that the company has together with the threats that they are faced with, company internal analysis and the Porter’s five forces will be discussed. External environment Analysis Political Factors: McDonald’s operations are under immense pressure of a policy of separate nation that is enforced by each government particularly in those nations that the company operates in. there are activist groups in Europe and US, which demand the acts of governmental power with regard to the medical value of meals of fast food industry (Hafford-Letchfield, 2011). Their arguments are based on harmful elements like cholesterol together with negative influences like fatness, are some of the issues associated with products of the fast food industry. The company on the other hand operates on a separate policy and instructions of operations (Erica, 2012). The McDonald’s markets across the globe concentrate on areas of anxiety including health, worker protection and environment. The corresponding states have the mentioned elements listed in the state control licensing of restaurant (Stephen, 2004). For example, the legal dispute in the privilege McDonald’s in India where there are infringement of rights and infringement of the religious laws concerning the maintenance of meals. Similarly, the menu is offensive to the Indian religion (Chorafas, 2006). Accordingly, some studies have established that there have been infringements of McDonald’s Stores with regard to the existing laws on employment in the target market. Economic Factors: like any other industry, companies within the fast food industry are not insulated from disputes and problems. The privileges and branches of McDonald’s always experience difficulties particularly if the economies of corresponding states are amazed by inflation together with changes in exchange rates. With regard to this, clients are confronted with stalemate through their separate budgets. In accordance with this, McDonalds import the biggest part of its raw materials particularly if the host countries lack enough delivery. The company is also called upon to take a big reason concerning their microenvironment. The firm’s international supply and the existing exchange rates is only a fraction of the overall components required to guarantee success for the overseas McDonalds (Erica, 2012). The tax demanded by the separate governments and the state of economic situations are other factors. For instance if the company works in an economically weak state, then it is automatic that their product prices will be higher as compared to the existing products in the market. Socio-Cultural Factors: the company’s article on its international strategy recommends that McDonalds should function in several areas in order to guarantee their profitability. In this regard, the company indulges consumers with certain types of persons to influence them to think positively about the company. The company has given certain markets like UK a choice concerning their lunch requirements (Bowhill, 2008). Traditionally, when McDonalds ventured in a new market, they valued a set of food products that offered a reliable degree of quality for the corresponding market. McDonald’s has established systems that are essential in determining the food requirements of the market. For instance, the company uses consumer individuality concept, product behaviour, and decision on purchase to its advantage. Technological Factors: the current continued technological developments have increases the marketing and promotional power for companies. The traditional marketing tool for McDonalds is through TV advertisement (Erica, 2012). However, in order to bring on board the younger population the company has an interactive marketing strategy that is consistently winning this market segment. Similarly, the company use technology in other elements like stock and management of the value chain of the company’s creation consider easy payments for the suppliers together with other sellers (Max, 2012). The integration of technology into the company’s operations tends to increase their product cost. Legal factors: the fast food industry has experienced massive controversies. This has compelled McDonalds closely monitor their corporate social responsibility (Karayan and Swenson, 2007). For instance, the company has developed a corporate social responsibility program that is positioned to generate a positive corporate reputation. Environmental Factors: the social responsibility of McDonald’s on the state influences its operations. The company should work to ensure that the environment is protected and conserved. For instance, civil groups in Hong Kong have brought to McDonald’s attention the harm that their packaging containers cause the environment. Company strategies The company’s strategies are influenced by the above explained external environment and the Porter’s five forces. McDonald’s strategies include: Differentiation and low-cost leadership – this is based on the Porter’s competitive strategies Strategy Typology – this defines McDonald’s as the prospector, defender, analyser, and creator strategy (Max, 2012). However, the current company’s strategy is the analyser strategy since the company always tries to maintain its businesses while at the same time innovating on the periphery. In this regard, McDonald’s business strategy is between the prospector and the defender strategies. Similarly, company products are targeted towards stable market environment where there are efficient strategies designed to maintain the current customers. Accordingly, the company also targets new and more dynamic environments where growth is possible. Strategy Formulation Process McDonald’s strategy formulation process is based on the above-discussed methods. The cost leadership strategy is McDonald’s global competitive strategy that is based on Porter’s competitive forces that focuses on operating efficiency, products, and procedure standardization. Similarly, the analyser strategy that the company uses is based on Miles and Snow’s ‘strategy typology. Strategic Future direction The company’s strategic future direction is the focus on children; McDonald’s is currently paying attention to children in all countries that it operates in. For instance, they want to build a ‘happy land’ for them by offering fantastic meals together with novelty toys. Accordingly, the company-launched computers with games to inspire the children’s imagination while at the same time mould their personal characteristics (Erica, 2012). McDonald’s reasons to focus on children are: children represent the biggest percentage of its consumers, focusing on children can build stable current and future business, and building brand loyalty with the children the company is more likely to succeed today and in the future. Monitoring the Strategy In order to maintain McDonald’s business strategies the company has operational strategies that anchor the overall strategy. For instance, the company continuously focuses on the emerging markets, offering a wide variety of food products to attract more segments, and delivering food to customers in places that they demand it. In addition, it make its stores more attractive to capture new customers, increasing its offering of snack items, shortening its menu cycle, importing more of its successful niche products internationally, expanding its dollar menu to breakfast, and the company has never feared competition. Porter’s Five Forces Any business is obliged to know the dynamics of its industry and markets in order to compete effectively and intensively in the marketplace. Forces that derive competition and attractiveness of a market; the competitive environment is created by these five different forces that have direct impact on the business (Max, 2012). In addition to rivalry among different players in the industry together with the threat of new entrants, supplier bargaining power, consumer bargaining power and the threat of substitute products also have immense influence on the company’s business. These forces are interconnected and affect the company’s ability to serve its customers and make profits. Any change in these forces generally demand for the company to reassess its competitive strategies. Competitive rivalry If entry into any market is simple and easy, then rivalry in this particular market is likely to be high. With regard to McDonald’s competitive rivalry, there is massive competition I fast food industry where small fast food companies intensively rival among themselves in order to improve their customer base. McDonald’s experience stiff competition from Burger King, Taco Bell, KFC, and Wendy’s, however due to its exceptional business strategies, it has maintained its position as the leader in the industry. Threats of new entrants The fast food industry is susceptible for new entrants since there are no legal barriers. The economies of scale and access of the distribution are the main barriers that company face in this industry. Accordingly, companies spend a lot capital in advertising and marketing in order t6o enjoy successful existence in the long run (Max, 2012). In this regard, large established fast food companies that have strong brand names like McDonald’s have made it difficult for new entrants since they are faced with stiff pricing competition from the existing chain restaurants. Supplier bargaining power The bargaining power of suppliers of McDonald’s is extremely high because all McDonald’s restaurants use the same products from the same suppliers regardless of the location. Supplying of these products to McDonald’s across the world is a singular business for the supplier (McDonalds, 2013). Following this revelation, if McDonalds change or lose one their suppliers they will have to change one or more of their product lines or even the whole menu. McDonald’s suppliers have higher bargaining power. Buyer Bargaining Power The bargaining power of Macdonald’s customers is very low due to low customer switching costs; it has established that one-fifth of US citizens eat in first food restaurants daily. In this regard, the fast food industry does not worry about customers’ loyalty (Michael and Jude, 2005). Differentiation in the first food industry is high due to advertisement and market promotion because there is extensive competition among fast food firms (Max, 2012). For this matter, product differentiation is significantly important in this industry. Similarly, product and service quality is very important because customers have knowledge of what they are buying or consuming. Similarly, if the fast food industry does not match buyer demands and general consumer trends then consumers will choose not to buy their products as well as convince others to do the same. Threats of Substitutes Several factors determine the threat of substitute products in the market in the first food industry including consumer switching costs, the price of the substitute product, and the quality of the substitute product. Firms in the fast food industry with low switching costs, wide variety of similar products, and healthier alternatives pose a high threat McDonalds. Opportunities and threats The opportunities that McDonald’s include: New market segments identification New technology adoption Internal energy improvement Provide allergen free food items Brand development Threats that the company faces are: Competition from other fast food chains like Burger King, Subways, Starbucks, Wendy’s KFC and mid-range sit-down restaurants Human health Deterioration Franchising its reputation Positioning for the Future It is important to note that the company’s understanding of its external environment is key in aiding it to come up with operational strategies that will ensure its continued growth. Similarly, if the company fails to recognize competition, shifting of consumer interests coupled with their consumer social trends it will automatically not succeed in holding onto its current and prospective customers (Max, 2012). The company operates in various market segments across the globe; these segments have dissimilar operational environments with different business dynamics. In this regard to this, the company must come up with operational strategies specific to each segment that anchors the overall company strategy. For instance, the focus on children in each market will ensure continued customer loyalty and growth. Similarly, the company should further venture into new market segments to increase its dominance on a global arena. References Bowhill, B. 2008. Business Planning and Control: Integrating Accounting, Strategy, and People. New York: John Wiley & Sons Chorafas, D. 2006. Strategic Business Planning for Accountants: Methods, Tools and Case Studies. London: Elsevier Erica, O. 2012. Strategic Planning Kit for Dummies, 2nd Edition. John Wiley & Sons, Inc. Hafford-Letchfield, T. 2011. Social Care Management, Strategy and Business Planning. London: Jessica Kingsley Publishers Karayan, J., and Swenson, C. 2007. Strategic Business Tax Planning, 2nd Ed. New York: John Wiley & Sons Max, M. 2012. The Strategy Book. New York: FT Prentice Hall. McDonalds. 2013. Home. Retrieved from http://www.mcdonalds.com/us/en/home.html Michael, A., and Jude K. 2005. Strategic Planning for Nonprofit Organizations, 2nd Ed. London: John Wiley and Sons. Stephen, G. 2004. ABCs of strategic management: an executive briefing and plan-to-plan day on strategic management in the 21st century. London: John Wiley and Sons Read More