A Strategic Analysis of Innovation and Transformation at McDonald's
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A Strategic Analysis of Innovation and Transformation at McDonald's
Introduction
For many years, McDonald's, the massive international fast-food chain, has been a major
force in the food service sector. According to Tian (2022), the company's continued success has
been largely attributed to its capacity for innovation and adaptation. This assignment explores
McDonald's journey of innovation and reinvention, with a particular emphasis on the time
leading up to, during, and following the COVID-19 epidemic. The theoretical frameworks
supporting McDonald's strategies will be examined, along with the strategic tools they use and
the evidence they present, in a mind map. Finally, we will draw conclusions about how
McDonald's has managed the opportunities and challenges brought about by the shifting food
industry landscape.
Analysis & Discussion
There are a number of theoretical frameworks that we can use to gain insight into
McDonald's strategic decision-making process in order to comprehend their innovation and
change. The Resource-Based View (RBV) and the Technology-Organization-Environment
(TOE) framework are two well-known theories that spring to mind.
Resource-Based View (RBV): According to the RBV hypothesis, businesses can obtain a
competitive edge by making use of their special assets and skills. McDonald's has adopted this
theory by emphasizing its fundamental skills. Prior to COVID-19, McDonald's focused on menu
innovation, customization, and online advertising and promotions. These strategies made use of
its existing resources, which included a strong supply chain, a well-established brand, and a vast
network of locations (Adams et al., 2016). The RBV strategy was demonstrated during the
pandemic by their quick implementation of self-service kiosks and digital ordering, highlighting
their technology prowess and helping them remain competitive in the shifting market. The RBV
viewpoint demonstrates how McDonald's successfully used its internal resources to adapt and
prosper throughout trying times.
Technology-Organization-Environment (TOE) Framework: The TOE framework looks at
how businesses use technology to adapt to changing environmental conditions. McDonald's used
technology in their operations more than ever during the pandemic. The introduction of
contactless ordering, self-service kiosks, and mobile apps was in line with the TOE framework,
which highlights the role that technology plays in adapting to outside forces like safety and
health issues. McDonald's willingness to adopt new technologies and innovations is shown in its
use of ghost kitchens and AI-driven tailored menu recommendations. The Technology-
Organizational Fit (TOE) concept emphasizes the need for enterprises to match their technology
initiatives to their organizational design and the dynamic external environment (Awa et al.,
2017).
Strategic Tools Employed
McDonald's has made use of a number of tactical instruments to support its innovation
and change, including:
SWOT: McDonald's regularly evaluates its Opportunities, Weaknesses, Threats, and Strengths.
With this tool, the business may take advantage of possibilities, strengthen its areas of strength,
and rectify shortcomings in the fast-food sector.
PESTEL Analysis: By analyzing the political, economic, sociocultural, technological,
environmental, and legal aspects of their corporate environment, McDonald's is better able to
comprehend the outside forces that are affecting its operations. Their strategic choices are
informed by this understanding.
Competitive Benchmarking: McDonald's continuously assesses how it performs in comparison
to rivals. Their efforts to keep a competitive edge in the market are guided by this tool.
Value Chain Analysis: To find opportunities to add value and cut expenses, McDonald's
examines its value chain. Their decisions about procedures, connections with suppliers, and
customer experiences are informed by this.
Synthesis and Evidence of the Mind Mapping
The innovation and transformation journey of McDonald's is summed up in the
previously mentioned mind map.
Before Covid-19:
Prior to the Covid-19 pandemic, McDonald's innovation strategy was focused on
improving customer experiences and reaching a wider audience. Online sales and promos are
designed to draw clients in with enticing incentives. Tasting platforms and menu advancements
allowed for customization, offering choices to accommodate a wide range of customer tastes.
Furthermore, packaging advances increased sustainability and convenience. Through these
initiatives, McDonald's was able to strengthen its market position and establish a strong brand
image.
During Covid-19:
Due to the disruptions caused by the Covid-19 outbreak to the food business, McDonald's
had to quickly adjust. In an effort to reduce in-person interaction, they made the switch to digital
ordering by implementing self-service kiosks and smartphone apps. Drive-thru upgrades were
necessary to keep their services operational during lockdowns. In an unprecedented period,
agility and improved digital experiences become critical for both customer safety and survival,
giving businesses a competitive advantage.
After Covid-19:
McDonald's kept concentrating on digital ordering and in-store eating as the pandemic
subsided. Their hybrid dining experience combines the comforts of digital technology with the
customs of a conventional restaurant. The "New Face of McDonald" represents a changed
strategy for interacting with consumers. The brand's ability to adapt during the epidemic served
as the basis for this ongoing approach, which has allowed them to stay competitive and flexible
in the fast-food industry while welcoming the return of in-store eating and sustaining a strong
online presence.
Merits and Challenges of Open Innovation:
Based on the article Pinarello et al., (2022), there are several merits to pursuing open innovation
for a firm:
Merits:
Access to external knowledge: Open innovation allows firms to tap into a wider pool of
knowledge and expertise, potentially leading to breakthrough innovations.
Cost-sharing and risk reduction: Collaborating with external partners can help share
the costs and risks associated with research and development.
Speed to market: Open innovation can accelerate the innovation process by leveraging
external resources and expertise.
Challenges:
Intellectual property concerns: Sharing knowledge with external partners may raise
concerns about intellectual property protection.
Cultural and organizational challenges: Collaboration with external partners can be
hindered by differences in organizational culture and practices.
Coordination and control issues: Managing multiple external partners can be complex
and challenging.
Conclusion
To sum up, McDonald's innovative and transformative path prior to, during, and during
COVID-19 is evidence of the company's strategic strength. To adapt, change, and prosper in a
dynamic environment, they have made use of theories like the Resource-Based View (RBV) and
the Technology-Organization-Environment (TOE) paradigm. Their decision-making processes
have benefited greatly from the use of strategic techniques like value chain analysis, competitive
benchmarking, PESTEL analysis, and SWOT analysis. A thorough summary of their journey is
given in the mind map that is provided, with emphasis on important strategic efforts and
advantages. McDonald's has become an industry leader by skillfully utilizing its resources,
adopting technology, and navigating a fast-paced corporate climate. This case study on
McDonald's transformation offers insightful guidance for businesses looking to grow and adapt
in a world that is changing quickly.
References
Awa, H.O., Ojiabo, O.U. and Orokor, L.E., 2017. Integrated technology-organization-
environment (TOE) taxonomies for technology adoption.AJournal of Enterprise
Information Management,A30(6), pp.893-921.
Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D. and Overy, P., 2016. Sustainability‐oriented
innovation: A systematic review.AInternational Journal of Management Reviews,A18(2),
pp.180-205.
Gobble, M.M., 2018. Digital strategy and digital transformation.AResearch-Technology
Management,A61(5), pp.66-71.
Pinarello, G., Trabucchi, D., Frattini, F. and Manfredi Latilla, V., 2022. How firms use inbound
Open Innovation practices over time: evidence from an exploratory multiple case study
analysis.AR&D Management,A52(3), pp.548-563.
Tian, H., 2022, December. Explore the Marketing Strategy of McDonald's After Digital
Transformation. InA2022 2nd International Conference on Economic Development and
Business Culture (ICEDBC 2022)A(pp. 447-451). Atlantis Press.
