B7840 Strategy Formulation, Implementation, and Evaluation Week 6.1

Global Strategy Analysis—The International/Global Operations and Their Key Markets and Potential Competitors

B7840 Strategy Formulation, Implementation, and Evaluation

Argosy University

Christopher Walters

January 31, 2018

Introduction

Two brothers, Richard and Maurice McDonald started McDonald’s in 1940, initially as a drive-in fast food outlet. The Restaurant is based in San Bernardino California. The builder and Founder Raymond Kroc of the MacDonald's corporation was a salesman dealing in milkshake machines before meeting the Tow brothers in 1954. The company has sold about 100 million hamburgers by the year 1958. The company is operated either as an affiliate, a franchise or a corporation. The company obtains its revenue from royalties, rent, and fees paid by the franchisees as well as the sales in its operated restaurants (Salva, 1995).

Mission and vision statement

Vision

To be the leading and best fast food company around the world summarized in initials Q.S.C.V meaning quality, service, cleanliness, and value. This has been the driving and guiding force behind the services it offers to customers. The food products have been cited to be of the best value in the food industry, which makes the customers happy (Hartel, 2012).

Mission

To be the best company for workers around the world in every community, the company delivers services that have superior systems of operation for its customers in each and every one of its branches. The company seeks to grow and progress in a favorable direction as a brand, yet keeping up with the operational systems through technology and innovation

Core activities and Value chain analysis

Inbound logistics

The company coordinates the supply of materials and food to outlets through approved third party operators of the logistics systems. The company engages in production in big plants exclusively to have a control of the packaging and distribution systems.

Operations

The company is keen on following specific guidelines in the preparation and sales of food products. The company employs a computerized system of tracking orders and uses technology that ensures efficiency in food and service production.

Outbound logistics

The company has integrated efficient crew who distribute and store goods from the warehouse in the needed time in the distribution centers in its logistics making it are efficient in inventory management. The firm believes in breaking down its long-term goals into manageable and measurable targets that are used as accomplishment benchmarks of milestones. The firm gives its franchises the autonomy in making marketing decisions (Hartel, 2012).

General administration

The firm applies strategic planning and management concepts to ensure that its competitive strategy of client service is maintained to sustain their growth. They carry have a hotline for customer care services and they carry out frequent surveys to help them know the needs of their clients.

Technological development

The company has a research and development department that carries out research, which it applies in quality development in collaboration with the suppliers of goods. The firm is engaged in forwarding integration where is forms strategic alliances with the franchisees with control over menu items and store presentations (Hartel, 2012). The human resource management consistently offers training to the workers with regard to customer relations and hospitality. The company conducts a training session every time their products have been designed. The training is meant to enhance employee development so they can improve service delivery.

Procurement

The company allows its suppliers to decrease or increase the amount of goods supplied without being brought down to a benchmark.

Porter’s five forces analysis

Threat of competitors

Vey high: there are firms, which offer similar products in the fast food industry. Outlets are closely located and there is high advertising capabilities form competitors.

Threat of new entrants

Easy to enter (moderate): there is low set up cost and it is easy to enter the fast food industry.

Threat of substitutes

Moderate: the food is substitutable with an irreplaceable image.

Bargaining power of suppliers

Low: the company is the largest restaurant chain in the world in sales and therefore most of the suppliers owe their existence to the company. This makes the cost of raw materials to be low.

Bargaining power of buyers

Low: there are not many chances of switching; the company has a strong brand image that is uniquely differentiated.

Global marketing strategies (with reference to East Africa)

MacDonald's is the largest chain hamburger restaurant that serves about sixty-eight million customers on a daily basis across 36,525 outlets in 119 countries. The company has sought to go global because of the vast opportunities that the global market has promised (Hartel, 2012).The key to the successful and rapid international expansion of the company is the franchise strategy that is has pioneered over the years.

Expanding into Africa (East Africa)

The company seeks to expand its operations into East Africa since prospects for growth are high in this part of Africa. The company will be internationalizing all its operations through franchises with control over the menu items and dishes. The potential for growth in Kenya prompts the company to fully internationalize so it can reap the maximum economic benefits from the move (Alekseyenko et a., 2008). The fast-food industry in East Africa has become a significant part of globalization campaign since many people spend most of their time working and the demand for fast food has grown significantly. Huge household consumption that has grown from 3.9 percent in the last five years in Africa, which has translated to about $1.4 trillion, is a symbol of an emerging market In Africa (Block et al., 2004). According to a recent study by Mckinsey, the African consumption growth is the second fastest after Asia. According to the report, prospects are that household consumption will go up with a percentage growth of 3, 8 to reach about $2.1 trillion in the period to 2025.Half of this growth is expected to come from East Africa, Nigeria, and Egypt. The big business opportunity is kept afloat by the growing number of the middle class, which has a higher disposable income. The share of the consumption of the region is expected to be higher in East Africa rising from 12% in 2005 to about 15% in 2025. The expected number of the middle class is on the rise while their disposable income is expected to go up which makes Kenya a viable market for mass consumption of fast foods from global firms.

The Kenyan and the Ugandan market appear to be diverse and full of multicultural traits as shown by both the older and younger generations. Older generations prefer healthy options, which in many cases are presented, by traditional dishes while the younger generations focus on fast foods. The younger generations appear to be highly impressionable something that makes their association with brands that are high-level ranking hence making them popular and command respect within their social groups.

Global brands are associated with modernity, progress, and consumerism. Peer influence plays a critical role, as the young people are always eager to try out the things their peers are consuming across many sectors including the fast food industry. This, therefore, has an impact in contributing to the huge loyalty the fast food industry receives from the younger Kenyans. With a strong international brand like MacDonald's, prospects are that the company will create a huge impact in this market segment.

Summary of Economic Analysis of African countries

(Worldbank, 2018)

Monthly labor cost per worker of Africa and other parts of the world

Tax rates in Africa compared to other parts of the world

(Worldbank, 2018)

The cost of taxation in Africa compared to other parts of the world

(Worldbank, 2018)

Intense activity is already visible with American brands wanting to invest In East Africa (Kenya and Uganda). Italian Pepinos made an announcement of the opening of different new food outlets serving sumptuous fresh meals like pizza, sandwiches, and burgers in Kenya. Nandos, which is renowned for its Portuguese flame-grilled chicken has come up with a new menu to up its game adding, char grilled greens to its dish. Some persistent American brands that deal with similar products as MacDonald's and which have established their presence in East Africa include the KFC, Burger Hut and Pizza and Urban Gourmet Burger. The level of satisfaction with regard to fast food outlets has increased in the last few years; this is according to the American customer satisfaction index.

Companies in Kenya are registered and regulated under the Companies act cap 486 of the Kenyan law. The law recognizes four types of companies: representative (foreign companies), companies limited by shares, unlimited companies, and companies limited by guarantee. The legal environment in East Africa is not that strict to businesses and there are not many legal liabilities filed against companies by the citizens of the two countries.

The tax rate is currently 30 percent for local firms and 37.5 percent for foreign firms in Kenya and 30 percent in Uganda both for local and foreign companies

Competitor analysis

Burger King

Started in 1954, with its headquarters in Florida and Miami, Burger King has over 14,000 outlets spread in over 100 countries in the world. The company boasts of roughly 11 million visitors every day. Its menu includes dinner, lunch, and breakfasts items (Levine & Trachtman, 1985). The company offers chicken, Hamburger, chicken tenders, sandwiches, beverages, and french-fries. The company already has an establishment in East Africa specifically Kenya and seeks to expand its operations to other East African countries, the company has already secured a customer base and may offer a stiff competition to MacDonald's as it establishes in the country. This offers the company a competitive advantage

Subway

The company is the largest chain restaurant globally boasting about 46,000 in 110 countries. The company has all of its locations under franchises. It menu consist of salads and sandwiches. The company was founded in 1965 and has an outlet already functioning in Kenya.

KFC

The company has a prominent presence in Kenya with 15 outlets spread across different locations in the country with outlets in Uganda as well. The company seeks to open more outlets targeting the cities and major towns in the country (Alekseyenko et a., 2008)... The company is likely to pose the greatest competition to MacDonald’s since it has already established a strong presence in the region

Conclusion

By expanding its operations into the global market, the company stands to reap maximum economic benefits as the analysis has justified. The company should, therefore, consider establishing outlets in Africa.

References

(2018). Siteresources.worldbank.org. Retrieved 26 January 2018, from http://siteresources.worldbank.org/EXTAFRSUMAFTPS/Resources/chapter4.pdf

Alekseyenko, T., Skrynnikov, V., Poperechna, N. V., & Pilova, K. (2008). MCDONALD’S MARKETING STRATEGY.

Block, J. P., Scribner, R. A., & DeSalvo, K. B. (2004). Fast food, race/ethnicity, and income: a geographic analysis. American journal of preventive medicine, 27(3), 211-217.

Härtel, M. (2012). McDonald’s Supply Chain Management.

Levine, M., & Trachtman, R. (1985). In honor of excellence: Burger King Corporation/NASSP/CCSSO symposium for outstanding teachers and principals, Captiva Island, Florida, November 1985. Burger King Corporation.

Salva-Ramirez, M. A. (1995). McDonalds: A prime example of corporate culture. Public Relations Quarterly, 40(4), 30.

Taylor, R. McDonald’s Case McDonald’s has established itself as a leader in the highly competitive food service industry. Many methods can be used to prove this point, including. SPRING TERM 2008 EDITED BY, 17.