Global Strategy McDonalds Essay
There are several recognized brands that are embedded in the minds of the consumers and have gained rand loyalty all over the world. This is just the result of going global by adopting sensible organizational strategies, developing standardized vision, mission, and values, and devising certain strategies that not only let them overcome the competition but also let them stay on the track that leads to optimum success. The paper would analyze the strategic analysis of McDonalds in great detail while considering its competition, success factors, strengths and weaknesses, and strategy measurement.
Overview of the Business McDonald’s is the biggest fast-food restaurant of the world that offers several meals to its customers such as, burgers, hot dogs, chicken nuggets, ice cream, coffee, etc. The most popular product of McDonald’s is Big Mac. The company has expanded to a great extent and operates in more than 30,500 restaurants in more than 115 countries around the world (Kspain, 2008). Vision – The vision of McDonalds is to be remain the world’s largest fast-food restaurant, gain more customer loyalty and market share, and contribute to making this world a greener and better place.
Values – McDonalds, from the inception, is following certain rules, policies, and procedures
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Purpose of the Business By understanding the vision and values that are adopted by McDonalds, it is quite clear that what purpose they have in their mind, what they want to achieved, and where do they want themselves to see in the future. Let’s have a look at the Mission Statement of McDonalds to have a clearer idea about their goals. Mission – “McDonald’s mission is to be our customers’ favorite place and way to eat with inspired people who delight each customer with unmatched quality, service, cleanliness and value every time …
we invite you to be the part of this winning team and give yourself an opportunity to grow with the family of people striving to create smiles on the faces of millions of people every day” (McDonalds, 2010). Stakeholders A Stakeholder is anyone who has some interest or contribution towards the success of the business; or they can be those who do care about the business and are affected either in a positive or negative way when the results for the company fluctuate (Bized, 2010).
As far as the stakeholders of McDonalds are concerned, they include suppliers, customers, work force, owners or shareholders, communities, franchisees, management, creditors, and health care professionals who scrutinize the safety and quality of the food. McDonalds strive to effectively balance their interests by following certain rules and policies that lead the business to fulfill the requirements of all these stakeholders.
Starting from the customers, McDonalds ensures that the food that it would offer to the customers must be healthy, safe, and of good quality so that the customers like it and keep on visiting them in the future. Communities are taken care of by following certain methods of Supply Chain Management and environmental laws that lead to minimum waste and keeping the environment clean and healthy. Franchisees and creditors are ensured that the business would abide by all the necessary rules and regulations of the country and repayment of loan would be done within the allotted time.
Workforce is ensured its interest by providing them with good working conditions along with other incentives; and the interests of shareholders are also protected by providing them with maximum returns on their investment and acting on the policies voted by them that usually are directed towards making customers and communities contented. STRATEGIC ANALYSIS Domestic and Global Strategies McDonalds is now operating in more than 115 countries and that was the result of expanding business from domestic boundaries to other countries or going global.
Of course, there were certain strategies adopted by the organization in both of the scenarios, but let’s first talk about the domestic ones. While operating domestically, McDonalds used to target almost the same type of people that lived in the United States and did not have too many cultural differences. Therefore, the organizational strategy was to open a number of outlets or restaurants within the country that would use same currency, work under same economic conditions, use same language (English), use same marketing strategies and as well as media, and almost the same set of suppliers. Read about McDonald’s quality assurance.
Nevertheless, when it comes to Global strategies, McDonalds expanded its business through one of the most common diversification strategy that is ‘Franchising’. The organization conducted extensive research in countries where potential customers are there and market is prolific, then it went after franchising strategy where it decided to open its outlets in certain cities of those countries. Later on, it expanded multi-domestically where more franchises or outlets were opened in foreign countries. Opening franchises in other countries was the result of both the company’s purchasing and taking help from investors or franchisees.
The strategies adopted by McDonalds in dealing with other customers included operating in culturally acceptable way, abiding religious requirements such as, Halaal food in Islamic countries, using respective currencies, languages, labor, economic conditions, and marketing strategies and media. To retain and maintain the quality and success of the business, McDonalds started offering the same products such as, Big Mac with different variants. It means that they used the customized approach for the products for different countries.
For example, using pork in some countries while not in others; using cultural food variants or flavors such as, Chicken Tikka in some countries while Chicken Tuna in others.
Organizations are not only affected by the internal factors existing within the organization; in fact, there are many other external factors that influence the business in either favorable or unfavorable ways. Talking about McDonalds, let’s highlight its STEEP Analysis that are – Social, Technological, Economic, Ecological, and Political/Legal factors (Mbaboost, 2010).
Social Factors – The social factors for McDonalds in various countries are manifold that McDonalds overcome by adopting strategies that are in line with the demographic, lifestyles, cultural values and norms, religious values, population segments, income of people, their ages, employment, interests, etc. For instance, McDonalds cannot use the meat of animals that are prohibited to eat in some countries such as, Pork. Moreover, it cannot use meat of animals that are not slaughtered in a way recommended by the religion or culture.
Also, McDonalds open its restaurants or outlets based on the geographic and demographic elements where the market potential is more. It does not open its outlets in rural areas where the clean drinking water is considered to be a blessing for people.
Technological Factors– McDonalds is dependent upon the technological developments of a certain country, where it can either develop new ways of performing business using new technologies or simply use the traditional methods where the emphasis are not on technological advancement.
For example, it cannot conduct renewable energy programs or recycling activities in a country where there are no opportunities related to it due to poor infrastructure or management.
Economic Factors– These conditions are related to fluctuation in the economic and financial situations of the country and consumers, which affect the purchasing power and attitudes of consumers towards the products. McDonalds keep an eye on such factors and introduce certain deals and offers that would still entice the consumers to come and purchase even if they are not so well financially.
This is done to remain competitive in the market, even if the profit level declines slightly. Ecological Factors – McDonalds does consider the ecological and environmental conditions of countries that need the business to reshape their strategies and activities and bring them in line with the environment for better results.
Political/Legal Factors– Of course, the political and legal requirements including the rules, laws, regulations, and policies of different countries vary from each other; therefore, McDonalds ensures that it properly understands such requirements and abide by them so that it cannot be fined or penalized for any violations.
Competitive Analysis (Porter’s Five Forces)
In order to understand the competitive position of McDonalds, let’s discuss in under the light of Porter’s 5 forces – bargaining power of suppliers, bargaining power of customers, threat of new entrants, rivalry among competitors, and threat of substitutes. Bargaining power of Suppliers – It is usually high for McDonalds especially in the countries that have stiff rules and regulations with which it has to abide by. Nevertheless, supplies for potatoes are normally provided from the parent company that has its special type of potatoes formed in special shapes. Whereas, meet comes from local suppliers that has high bargaining power for suppliers.
Bargaining power of Customers – It depends on the level of alternatives or substitutes available for the customers in their vicinity. It varies from country to country depending on the level of competition. Threat of new entrants – It does affect the competitiveness of McDonalds but not to a great extent, since it has a brand recognition, more popularity, reliability, and customers than the upcoming entrants.
Rivalry among competitors – Like McDonalds, other organizations have gone global too that causes McDonalds to face tough competition from fast-food chains such as, KFC, Burger King, Mr. Burger, Hardees, etc. So, the rivalry among them is high. Threat of substitutes – There are not much substitutes of the products offered by McDonalds at a branded level. Even if there are, they are from local restaurants that usually offer more products than McDonalds but they are local, and not multinational branded restaurant. Key Success Factors There is always some reason behind the success of any business, and in case of McDonalds, there are several.
First, the growing trend of having fast-food is increasing all over the world, since people are getting busier and do not feel like making meals at home. Innovation is another factor that lets the restaurants to introduce new meals that were never introduced before, which are usually the blend of certain recipes. Customization is a major success factor for McDonalds, where it offers the products in a customized fashion depending on the food trends and dishes of a particular country. Talking about promotion, the use of effective Marketing tools also proves to be a critical success factor for McDonald.
It is because it has standardized its marketing campaigns all over the world to create a single brand image by promoting the slogan ‘I’m Lovin’ it’.
Secondly, the Golden arches has embedded in the minds of the customers, which reminds them of delicious food whenever they see it. It is because of Classical Conditioning.
Strengths – McDonalds enjoys its strengths such as, being there in more than 115 countries, having large portfolio of real estate, large market share in fast-food sector, and strong image of its brand.
Weaknesses – Though it does have some weaknesses such as, lower response to changing needs and requirements, less innovative than before, ineffective management, and complaints from customers regarding taste.
Opportunities – Some opportunities do lie due to globalization effect, increasing growth and popularity in fast-food industry, and more inclination of people towards eating fast food.
Threats – Fluctuations in the economies of different countries, high competition (local and international), pricing wars, and diet preferences and other distinguished demands of people (Typepad, 2009).
Since McDonalds is facing some threats related to its market share in many countries due to the presence of other competitors such as, KFC that provides better taste than McDonalds according to many customers. Therefore, McDonalds should emphasize more on introducing variants of products that are in line with the culture and traditions of the country that would not only fulfill the demands of customers but also create customer intimacy with them.
Secondly, market research surveys should be conducted to have an idea about the changing needs and wants of customers, and also take their feedback as a ladder to success. Another strategy should be to strengthen the overall value chain by recruiting labor or employees that are skillful and understand the local environment deeply, emphasizing on R&D efforts to identify new technologies and methods of conducting business, implementing effective supply chain techniques to minimize costs, marketing the products by considering the overall cultural, social, and religious values, beliefs, norms, and do’s and don’ts.
Not only this, McDonalds can regain its lost market share by implementing cost-leadership strategies that would reduce its redundant costs and allow it to implement Price-leadership strategy too, where the customers would be offered meals at lower rates that certainly would entice them to come and have fun. And finally, it must adopt a Proactive strategy rather than Reactive strategy, since the market conditions along with customer needs are too dynamic these days. Read about McDonalds Ansoff Matrix
Once the strategies are developed, goals, targets, and their outcomes should be forecasted for a certain period of time and the results must be compared to those forecasts and targets in order to identify whether the strategy has worked out or not. Certain incentives to the stakeholders must be given so that they act in ways that are favorable to the organization in terms of achieving its goals.
Services of consultants, change agents, quality specialists, and health care professionals must be taken to keep check on the changing demands of the customers and market, devise and implement the strategies accordingly, measure them effectively, and recommend the solutions for improvement. Balanced scorecards should be made and used not only within the organizational boundaries, but also at the market level to ascertain the changes led by the strategies.