Strategy Part 5

Strategy 3

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Executive summary

McDonald’s is one of the successful organizations in the world, and that has been made possible by its strategy. The paper will be looking at how McDonald’s has been able to stay relevant for a long time without being overtaken by the competitors. The paper will also be analyzing the strategies of the company and how they have helped the company stay successful. The external forces, which might affect the company, will also be looked into. It is important to understand how an organization presents its products and image to the customers and it is for this reason that the paper will be looking into how McDonald’s presents itself to the customers. To add on that, strategic issues which the company is going through will be analyzed, and recommendations of how to deal with the strategic issues will be provided.

Table of contents

Introduction to company…………………………………………………………….5

Value proposition…………………………………………..……………………….5

Set up………………………………………………………………………..5

Distinctive products…………………………………………………………5

Pricing and offering…………………………………………………………6

A broad range of products………………….……………………………….6

Consistent quality……………………………………………………………6

Fast and efficient services……….……..……………………………………7

Market position……………………………………….……………………………..7

Geographic………………..…………………………………………7

Demographic…..…………..………………………………………..8

Behavioral…………………,……………………………………….8

Psychographic…….…………..…………………………………….8

Competitive advantage…………..……………….………………..8

External environmental scan/five forces analysis…………….……………………9

Competitive rivalry………………………….…….……………………….9

Threat of new entrants………………………………..……………………9

Bargaining power of suppliers….…………………….……………………9

Bargaining power of buyers………..………………….…………………..9

1. Threats of substitutes……………………………………….……………..10

Current environment…………………………………………….…..…………….10

Strategic issues…………………………………………………..………………..10

Public Relation and Reputation……………………..….…………………10

Food safety…………………………….…………………………………..11

Complicated menu…………….……………………….………………….11

High price of burger………….………………………..………………….11

Losing customers to competitors…………………………………………12

Operational complexity…………………………………...………………12

The real estate problem……………………………………………………12

Summary/key findings and recommendations……………………………………12

References…………………………………………………………………………14

Introduction to company

McDonald’s company was found in 1940 as just a restaurant that served the people of San Bernardino, California. The company was found by Ray Kroc. Today, the company is one of the largest organizations in the food industry. The company believes in delivering quality services and food to all its customers. McDonald’s operates in one hundred and twenty countries, serves at least sixty-eight million customers in a day, has 36,899 restaurants in different parts of the world, and has employed more than 375,000 employees. The company has been able to reach such high levels of success because of its strategies as well as experience in its line of work.

Value proposition

McDonald’s is an organization that does not say too much about its products but rather presents them to the customers and leaves the customers to judge (Barney, 2014). The company has been able to attract more customers every day because of what it presents in the market. The value proposition of McDonald’s includes the following;

a) Set up

When it comes to hotels and restaurants, the setup of the premises might attract more customers or repel more customers (Barney, 2014). McDonald’s has designed seats which are attractive and comfortable and that attracts customers who love comfort.

b) Distinctive products

Customers are different, and there are those who would love to try something new time after time. McDonald’s comes up with distinct foods, which are not available in other restaurants. A good example can be seen in the case of the Big Mac (Barney, 2014). Introduction of foods, which are not popular in the market, puts the company ahead of its customers.

c) Pricing and offering

McDonald’s makes sure that customers are served in line with their financial ability. Sometimes, the company introduces attractive offers, which attract more customers to purchase (Barney, 2014). The prices at McDonald’s are not exaggerated, and that has played a significant role in attracting customers who cannot afford to buy in some of the bigger restaurants. When customers get products at a reasonable price, they are likely to be loyal to the company because it has demonstrated that it understands their needs and it is willing to meet the needs as well.

d) A broad range of products

An older adult and a young person can enter into any McDonald’s restaurant and have food of their choice (Barney, 2014). The reason behind it is because the company prepares a wide variety of dishes and that makes sure that there are no customers who are left behind. Accommodating all customers helps in increasing profits and customer loyalty.

e) Consistent quality

When it comes to consistency in quality, McDonald’s is one of the best organizations. The company has not opened its business in some countries, and this is because the market in the countries might affect the consistency of the company (Barney, 2014). A good example can be taken from the case of shelf life. Food at McDonald’s cannot be allowed to stay on shelves more than the stipulated time, and that means that the company does not compromise on its quality.

f) Fast and efficient services

Services at McDonald’s are always fast. The company has employees in place, which have been taught about the need to make sure that customers do not wait for long (Barney, 2014). The food industry is sensitive especially when it comes to delivering services at the restaurant. The strategy to make sure that services are fast has worked to the advantage of the company, and it has increased the number of customers.

Market position

McDonald’s presents itself as an organization that serves people from all walks of life. The market position at McDonald’s can be divided into four different parts;

a) Geographic

McDonald’s operates in more than 120 countries, and that makes the company an international company (Barney, 2014). The company targets people from the rural and urban areas.

b) Demographic

McDonald’s targets people who are from the age of eight years to the age of forty-five years. The company targets both males and females (Barney, 2014). At the same time, the company also targets people from all life cycle stages, and it does so by presenting products, which suit people from different age groups and social classes.

c) Behavioral

When it comes to the behavioral aspect, McDonald’s targets the switchers, careless, time efficient, regular customers, potential customers, and easy going (Barney, 2014). The company does so by making sure that the quality of services is always at its best.

d) Psychographic

McDonald’s targets lower class, working class, and middle class. The company does so by working on the menu and the products it presents to the market (Barney, 2014). At the same time, the prices of its products play a significant role in this aspect. In short, all consumers are covered at McDonald’s.

e) Competitive advantage

McDonald’s concentrates on two aspects to outshine the competitors, and they are price and expansion. The company sells its products at a reasonable price. Considering that McDonald’s is a renowned brand, people would expect that the company would sell its products at a higher price even though that is not the case. When customers realize that such a famous and classy company sells its products at a reasonable price, they choose to buy from the company (Barney, 2014). When it comes to expansion, McDonald’s is one of the organizations which are almost everywhere. Therefore, the company has a bigger market share compared to its customers, and that keeps it ahead of the competitors.

External environmental scan/five forces analysis

2. Competitive rivalry

The food industry is very competitive. There are many multinational organizations, which are venturing into the markets, and there are local restaurants venturing into the same market as well (Gregory, 2017). With this in mind, it is apparent that rivalry is strong and McDonald’s is given no other choice but to make sure that it holds its top position.

3. Threat of new entrants

The threat of new entrants in the market is weak. Establishing global outlets needs a lot of capital, and there are many organizations, which have tried but have failed (Dudovskiy, 2016). McDonald’s has its roots deep in the international markets and taking the company out is a big challenge.

4. Bargaining power of suppliers

The bargaining power of suppliers is weak. McDonald’s buys raw materials from different suppliers (Dudovskiy, 2016). The company is well known, and there are many raw material suppliers who would be willing to supply it if the current suppliers choose not to supply for the company.

5. Bargaining power of buyers

The buyers have a strong influence when it comes to bargaining. The company has different restaurants in the world; therefore, customers can protest against the prices of the products and that might influence the company to reduce its prices (Dudovskiy, 2016). Considering that the company has no middlemen, it is directly affected by the reactions of the customers.

6. Threats of substitutes

McDonald’s faces the threat of substitute meals from homes and other restaurants like KFC, Chicken Inn, and Pizza Inn (Dudovskiy, 2016). Switching to these products can be dictated by numerous aspects and cost might not be one of them. Sometimes people might just opt to eat at home. With this in mind, the threat of substitutes is strong.

Current environment

Currently, McDonald’s is doing well in the market, and it has clinched to the top position in the food industry. The company has been facing stiff competition from other local and international organizations, but it has managed to maintain the lead (Dudovskiy, 2016). Expansion to other nations is still one of its strategies, and the company has invested in research to identify the good markets that it has not yet explored.

Strategic issues

1. Public Relation and Reputation

A company cannot be alienated from its reputation because its actions affect its reputation. McDonald’s is facing an internal problem where the staff complains to be underpaid. Considering that the organization has been doing well in global markets, it is unexpected to hear that the customers are complaining about payments (Monaghan, 2015). Having a good payment structure goes a long way in making sure that an organization does not enter into disagreements with the employees.

2. Food safety

In China, McDonald’s faced an issue with the safety of food. In China, McDonald’s was accused of falsifying the expiry date of meat and supplying meat that is already rotten. Such scandals have an effect not only on the outlets in China but also in all outlets (Monaghan, 2015). Food is sensitive and supplying food that is already rotten is an issue that must be addressed with all seriousness and urgency.

3. Complicated menu

The issue of the complicated menu is not new to customers of McDonald's. However, the problem is affecting the customers. Choosing what to eat should not be made a challenge (Sharma, 2015). The menu at McDonald’s is complicated, and this affects customers who seek the services of the restaurants for the first time. A simple menu, which is straightforward, is likely to work to the advantage of the company because it makes the decision-making process of the customers easier.

4. High price of burger

Though McDonald’s is known for its fair and lower prices, the company has not done enough to make sure that burger customers are taken good care of (Sharma, 2015). The company is losing some of the burger customers. Considering that some customers buy a burger, another product, losing burger customers affects the company, and that might lead to an increased number of customers who are leaving McDonald’s.

5. Losing customers to competitors

McDonald’s is losing its customers to the competitors. The company needs to go back to the drawing board and identify some of the reasons, which are forcing its customers out (Sharma, 2015). It is the responsibility of the management to come up with a strategy that makes sure that customers do not seek the services of the competitors.

6. Operational complexity

The issue of operational complexity has been carried forward from one year to another. Customers need to seek the services of an organization that is not complicated and hard to deal with (Sharma, 2015). McDonald’s has complicated services and operations, which could be made simpler to meet the expectations of the customers.

7. The real estate problem

McDonald’s has chosen to invest in the real estate business. The real estates and the McDonald’s restaurants operate as one entity, and some of the shareholders in the real estate have been pushing the company to run the real estate business as a separate entity (Sharma, 2015). The reason for stating so is associated with the fact that the real estate business is doing well but some restaurants are not performing well, and that means that the capital from the real estate is used to boost the under-performing restaurants.

Summary/key findings and recommendations

It is no doubt that McDonald’s has done a recommendable job by staying on top of the list of the global organizations performing well. However, the company must take some measures. The first measure is cleaning its house. The issues of rotten meat and low paid employees are a shame to a big organization like McDonald’s. The company must have an internal team in place, which is aimed at making sure that sanity at the organizational level is maintained. The team should also look into matters of complexity. There is no need to complicate operations and menu while something can be done about it. Making operations simple and reducing, the side of burger would go a long way in attracting more customers. In addition, the company should separate real estate and restaurants businesses and let each entity be independent. Doing so will make sure that the activist does not have something to complain about and it will give each entity an opportunity to grow.

References

Barney, J. B. (2014). Gaining and sustaining competitive advantage. New York: Pearson Higher Ed.

Dudovskiy, J. (2016). McDonalds Porter’s Five Forces Analysis. Retrieved from https://research-methodology.net/mcdonalds-porters-five-forces-analysis/

Gregory, L. (2017). McDonald’s Five Forces Analysis (Porter’s Model). Retrieved From http://panmore.com/mcdonalds-five-forces-analysis-porters-model

Monaghan, A. (2015). The 7 Biggest Challenges Facing the New McDonald's CEO. Retrieved from http://www.businessinsider.com/the-7-biggest-challenges-facing-the new-McDonalds-CEO-2015-1?IR=T

Sharma, R. (2015). 3 Big Problems Facing McDonald’s New Change Agent. Retrieved from https://www.cheatsheet.com/business/3-big-problems-facing-mcdonalds-new-change agent.html/?a=viewall.