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mcdonald's business strategy analysis

mcdonald's business strategy analysis

It is because social factors now play an increasingly important role in deciding the fate of the businesses. Universality of the taste to a great extent represents another base of McDonald’s competitive advantage. while there are no significant barriers to entry, still to grow into  major brand is not easy because there is still a large investment in marketing as well as having skilled human resources as well s having the other infrastructure required for growing into a large and global brand. The Asian markets are among the fastest growing in the world and offer some major opportunities of growing sales and profits. Sustainable business model 4. Sociocultural factors have an increasingly important role in the context of marketing and business strategy both. The brand sells across more than 100 countries through its franchised and company owned restaurants. There are several reasons behind it apart from the increased competition. Franchising and licensing forms of new market entry is utilized within McDonald’s business strategy to a great extent. these distribution centres distribute products and supplies to Mcdonalds restaurants globally. contact: support@notesmatic.com, admin@notesmatic.com, Strategic Analysis of McDonald’s Corporation. However, the threat gets to be moderated by the brand image as well as, The threat from new entrants for McDonalds is also moderate. It is why McDonalds is focusing on sustainability and trying to achieve higher sustainability in the long term. the brand is investing heavily in new technologies to improve its level of customer service as well as to engage its customers. There are very few suppliers that cannot be replaced or can be replaced with difficulty which gives them some bargaining power. As per the Euro Monitor International report for 2016, the entire restaurant industry had 19 million outlets. Business Analysis of McDonald's Success. Customers know what to expect when they walk into a McDonalds store. In the way, political factors can affect business profitability. Food quality related issues also erupt from time to time across the McDonald’s system. While most brands are focusing more on marketing and promotions, reducing its efforts in this area can have a negative effect on sales. Managing a large and international business like McDonalds is not an easy task. McD has some important competencies including a well managed supply chain and a pool of talented employees. The report also illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis and McKinsey 7S Model on McDonald’s Corporation. 9 out of every ten restaurants in US have less than 50 employees. Of the 37,241 McDonald’s restaurants that the brand operated in 2017, in 120 countries, 34,108 were franchised and 3,133 were operated by the company. True to ‘fast food’ format of its restaurants, McDonald’s is famous for the speed of customer service without compromising the quality of the service. It provides the most useful resource of knowledge to business starters, researchers, strategists, and students. Question. Cheat prices is McDonald’s main competitive advantage. Technology: A smart value chain is not possible in the 21st century without investing in technology. Political factors have kept growing in importance in the 21st century. Apart from courteous staff, the brand also uses a variety of technologies to serve and engage its customers. Two ways: First, with a franchise business model that allows its franchisee-members, management and shareholders to share the risks and rewards from … In 2017, a large number of McDonald’s restaurants in New Delhi India were found to be serving low quality food and had to be shut down. McDonalds has got an innovative menu which is largely uniform with small variations over the globe from market to market and region to region. 8 out of 10 restaurant owners had started their careers as entry level employees. Economic factors have a direct effect on the sales and profitability of businesses. It is especially so when the brand is heavily franchisee based. Moreover, from Dominos to Burger King there are several large and influential brands that are aggressively competing for market share in the fast food industry. (McDonalds Annual report 2017). The Franchise business model. It is expected that  by the year 2027, it would have created 1.6 million more jobs in USA. Unhealthy food on the menu 2. McDonalds marketing strategy is concerned with the internal resources, external environment and its basic competencies along with its share holders. It has a strong brand image in the market that, Operations: McDonalds is operational in around 120 countries. McDonalds is increasingly relying on technologies for service and food delivery. the threat of substitute products for McDonalds is moderate. However, both operating income and net income of the brand have kept rising during the last three years. Operations strategies play a very important role in achieving organizational goals. Some of the main core competencies of McDonalds include : McDonalds’ brand image is one major competence that gives the brand extra leverage in terms of marketing as well as sales. He graduated with a Hons. The following table illustrates McDonalds SWOT analysis: Strengths 1. The total revenue of McDonalds has continued to fall from 2013 onwards. – It must focus on employee development and management. Brand image and equity help with marketing of the brand and help to derive better results from its marketing efforts. Including more low cost items on the menu can also prove profitable for the brand and attract higher sales. these small variations are made in order to suit the taste of the local customers. – McDonalds needs to focus on managing its franchisees strategically. This has been leading to management and control related issues for McDonalds. the 21st century customer is equipped with information as well as technology and is also highly health conscious. Global presence is an important capability which means a large customer base and higher sales and profits. Fast food brand are investing a lot in marketing as well as customer service. Another important strength of McDonald’s is its global presence. McDonalds business strategy utilizes a combination of cost leadership and international market expansion strategies. The bargaining power of customers in the 21st century, the threat of substitute products for McDonalds is moderate. Marketing and promotional efforts focus on value, quality, food taste, menu choice, nutrition, convenience and the customer experience”. The shape and condition of the US restaurant industry has continued to improve over the years and even during the recession, its performance was fine. McDonalds is a large and global brands with a string brand image. In this way, there performance the US restaurant industry is expected to keep improving over the coming years. McDonald’s uses product development as a supporting strategy for growth. Competition in every industry has increased and only the brands that  keep their customers’ taste and preferences in mind are being successful. Operations and Business Strategy of McDonalds INTRODUCTION: McDonald is a very popular fast food business which is operating all over the world. The company chosen for the purpose of analysing Strategy in Action is McDonald’s, one of the largest food chains in the world with global operations. Business strategy In 2003, the company initiated its customer-focused “Plan to Win” strategy. Declining brand image 3. Apart from that the brand has invested in technology down its supply chain as well as in other processes including internal and external communication as well as customer service. There are other technologies also that McDonalds uses to collaborate internally out externally with its partners. MCdoandls is known for its calorie heavy menu and has also received criticism in the past for its unhealthy food. Overall the level of rivalry among the existing brands is very high. the number of international brands in the fast food industry has kept growing. the millennial generation is highly health conscious and wants healthier products. McDonald's already enjoys unqualified success in Tokyo, Seoul, Beijing, India, and the United Arab Emirates, to name a few Asian markets. The net income of McDonalds rose from 4687 million dollars to 5,192 million dollars. High level of profitability 5. The total amount that it generated in sales equalled 2.4 trillion dollars. The company, which had its origins in the United States of America in 1940, has expanded its operations to become a global chain of over 23,000 restaurants, spanning over 117 countries and employing as many as 400,000 people around the world. All these competencies have enabled it to grow its market share and customer base. However, to make such large scale operations possible as profitably one must have economies of  scale as in the case of McDonalds. Mcdonalds has managed its value chain skilfully. Business level strategy of McDonalds Business level strategy is an integrated & coordinated set of commitments and actions. It is a global brand operating across more than 100 countries. Such situations can affect restaurant businesses and bring their sales and profitability low. It is also a large employer and employs more than 14.7 Million people alone. There are several brands that are offering similar products or have similar menu items. It is important to note that along with maintaining product and service standardization, McDonald’s takes into account local tastes and preferences, when developing its menu and engaging in marketing efforts. As of 2017, McDonalds employed around 235000 employees. While this has intensified the race on the one hand, on the other it has given customers higher bargaining power. Another important strength of McDonald’s is its global presence. The brand is planning to operate 95% … Internationalisation Strategy 15 Think Global Act Local Option 15 Revamping Business Model 15 Franchisee and Joint Ventures 16 4.1. These factors moderate the threat from any new brand. Total assets of McDonalds rose from 31,024 million dollars to 33,804 million dollars. the political factors are also exalted to economic factors and an unstable political environment can cause business and supply chain disruption. McDonald’s systemwide sales accounted for 7% of the entire sales generated by the IEO segment while its eating out establishments only constituted 0.4% of the entire 9 million outlets. In applying this growth strategy, McDonald’s develops new products over time, such as new McCafé products. It also holds the largest market share n the fast food industry. McDonald’s restaurants offer substantially uniform menu that comprises  hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, french fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafé beverages and other beverages.[1]. It identifies all the key strengths, weaknesses, opportunities and threats that affect the company the most. Brand image and equity: One major resource of McDonalds that is above is its brand image and brand equity. However, McDonalds needs to rethink its management structure for better management of its franchisees. Change Management 19 Appendix- I 1 Appendix -II 1 7 out of ten restaurants in US are single unit operations. however, the brand will have to focus on managing its quality there and better management of franchisees in these regions. – The focus of McDonalds must remain on both reputation management and menu innovation. McDonalds business strategy is based around overall cost leadership. The total amount that it generated in sales equalled 2.4 trillion dollars. Total debt also rose during this period from 25,956 to 29,536 million dollars. Moreover the company returned 7.7 Billion dollars to the shareholders through share repurchases and dividends for the year. Such a consistence in taste has positive implications on consumer loyalty. McDonald’s systemwide sales accounted for 3.5% of the entire restaurant industry sales while its outlets were only 0.2% of the total outlets. McDonald’s must design its menu as per the taste of the millennial regeneration and serve healthier products. the Millennial generation especially is highly health conscious and wants only affordable and good food. The threat is not just from the international brands but also from the local and smaller brands. Technological systems like point of sale, and other in store systems or platforms and technologies that support McDonald’s digital and delivery solutions. McDonald’s sources its raw material from suppliers around the world. It is because the brand has been able to build very high level of trust among its customers. Along with this, justification of current corporate strategy and suggestions to overcome the potential barriers will be discussed in this case analysis. The millennial generation should be engaged using modern technologies and other various methods for higher retention level. Moreover, product and service standardization lies in the cornerstone of McDonalds business strategy. McDonald’s restaurant will be selected to complete this assignment. Core Strategy of the Company. However, for most of its raw material it has several options or several suppliers to source from. the brand plans to turn it into 95% operated by franchisees. However, having this complicated web of franchised and company-operated restaurants expose the brand to certain risks. while there are no significant barriers to entry, still to grow into, McDonalds’ brand image is one major competence that gives the brand extra leverage in terms of marketing as well as sales. the fast food industry is populated with several global and local brands. Increased focus government authorities on the environmental matters can affect McDonalds both directly and indirectly. Millennials are a highly etch save generation, Compliance issues have grown bigger in the 21st century which is because of the higher level of legal and political. These new products may be variations of existing products, or entirely new products. the world has been through  recession some years ago and during such times of low economic activity, employment level falls. In this assignment will describe the vision, mission, objective, competitive strategy, external fit, PEST analysis, porter’s five forces regarding McDonald. It has a strong brand image in the market that  it has built over the years and continues to strengthen through new campaigns and a smart strategy. The company’s phenomenal growth could be attributed to many factors, apart from the franchise model of e… The operating income rose from 7,745 million dollars in 2016 to 9,553 million dollars in 2017. It is especially so when the brand is heavily franchisee based. Operations: McDonalds is operational in around 120 countries. That also includes maximum utilization of the available human resources, such as labor (Hambrick and Donald, pp.567-575, 1980). To have the lowest cost possible McDonalds standardized its products and services. It is also a large employer and employs more than 14.7 Million people alone. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. The IEO (Informal Eating Out) segment on the other hand had 9 million outlets and generated 1.2 trillion dollars in sales. Another important strength of the brand is its innovative menu. Moreover, there are so many laws related to food safety, health, quality and labor that brands have to manage local compliance teams for each region they are operating in. McDonalds’ 90% restaurants are operated by franchisees. 9 out of the ten restaurant managers currently had started at the entry level. Another business-level strategy that McDonald puts into consideration is the maximum utilization of the available resources. Implication 16 4.2. Market analysis in the Marketing strategy of McDonald’s – The fast food market is flooded with MNC’s and local food joints eating each other market shares. Apart form social media, there are other tools and methods also to bring the millennial consumers closer. 1. The number of franchisees in McDonalds system has continued to increase. Particularly, it is the international brands that are being most affected by the increased control. This report highlights the main business activities of the organisation, as well as provides an overview of the fast food retail industry and McDonald’s the competitive environment of McDonald’s. However, a, External Analysis of the restaurant industry, What You Need To Know About Marketing for Your New Business, Easy Ways Businesses Can Incorporate Sustainability. Materials sourced from these suppliers are bright to the McDonalds distribution centres worldwide. The most important strength of a global brand is its brand image and brand equity. The paper would analyze the strategic analysis of McDonalds in great detail while considering its competition, success factors, strengths and weaknesses, and strategy measurement. Another report by Nation restaurant Association showed that the US restaurant industry had sales worth 799 Billion dollars in 2016. Marketing, promotional and public relations activities are designed to promote McDonald’s brand and differentiate the Company from competitors. The company currently has a low but stable growth rate. Another important strength of McDonald’s is its supply chain management. Another report by Nation restaurant Association showed that the US restaurant industry had sales worth 799 Billion dollars in 2016. This was around 33 billion dollars higher than the previous year. Political factors have kept growing in importance in the 21st century. Moreover, the brand is present in around 120 countries which also allows the brand access to a very large customer base. Legal factors are also just as important for successfully doing business in the 21st century. trust is important in this era and McDonalds has got a strong brand image which shows trust among its customers. This was around 33 billion dollars higher than the previous year. About The Strategy Watch. McDonalds sources its raw material from all around the world. It was because the industry was quick to adjust its menu and prices. The company procures raw material from suppliers around the world through its procurement teams. By the year end 2017, the company had 2,35000 employees in total which included the employees working in its offices as well as in the company operated restaurants. Risk Management 18 8.0. This has proved good for all the big and small restaurant brands operational in the US market including Mcdonalds. McDonalds is also subject to severe regulations, control and oversight by the government authorities. It is because social factors now play an increasingly important role in deciding the fate of the businesses. Franchising and licensing forms of new market entry is utilized within McDonald’s business strategy to a great extent. The bargaining power of customers in the 21st century  has grown very high. It was because the industry was quick to adjust its menu and prices. Firm Infrastructure: McDonalds has maintained a very large firm infrastructure that includes its offices as well as other important properties. Outbound logistics: McDonalds has approved a large number of distributors which are independently owned and operated. Due to such a large system being heavily dependent on franchisees quality control sometimes become difficult. The number of total systemwide restaurants of Mcdonalds operational across 120 countries reached 37,241 in 2017. Non compliance results in heft fines an can cause large financial losses. Competition in the QSR industry has kept rising and it has led to higher marketing and customer service costs for brands. However, it does work to manage its quality standards and enforces them with the help of quality teams. The analysis of the international strategy of McDonald’s has revealed that although the standardization approach has proved to be successful, the evitable differences between cultures have created the need for adopting the localization strategy to some extent. – In the recent years McDonalds has reduced the expenditure on marketing and promotion. While on the one hand any negative news has the potential to hurt sales and reputation a healthy and innovative menu has become essential to retain the millennial customers. However, the competition from other small and big brands in the restaurant industry has kept growing intense and continued success of McDonald’s depends upon how well it is able to innovate its menu, prices and style of customer service. Market leadership in the US 2. The brands that have invested more in technology are ahead of the others in market. 90% of its restaurants are operated by franchisees. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers. Mcdonald's Pestle Analysis On Effective Business Expansion Strategies. The stronger the brand image of a brand, the higher are its sales and profits. HR & Culture: The HR management and culture of an organization are important resources and every organization including McDonalds has its own culture. Research and data collected by Euro Monitor International for 2016 also showed that the entire restaurant industry was composed of 19 million outlets and generated 2.4 trillion dollars in sales. McDonald’s Corporation Report contains more detailed discussion of the company’s business strategy. Abhijeet has been blogging on educational topics and business research since 2016. McDonald’s is very popular in the global market and in various corners of the world. View all posts by The Strategy … each brand is quite aggressive about competition and uses so many strategies like seasonal discounts and offers to lure customers away from the rival brands. While the brand’s systemwide sales increased 7%, consolidated revenues decreased 7%. Regarding diversification, McDonald’s has set its sights on Asia, with the hope of adding more than 1,500 new restaurants. The number of restaurant locations in US is now higher than 1 million. Not just this there are so many brands in the industry competing for market share. However, a  very large part of the McDonalds system around 90% is run by franchisees. Your answer must include examples of McDonald's strategy while also including personal experiences and approaches a small business can adopt and use from the McDonald's business strategy It is one of the fast food brands that serves the largest variety. While the brand’s systemwide sales increased 7%, consolidated revenues decreased 7%. McDonalds must again focus on its marketing campaigns to increase its sales. Both India and China are major markets which can be penetrated deeper. The Strategy Watch is a fast-growing multi-author blog on Strategic management, Business Planning, Investment, & Analysis. The most important strength of a global brand is its brand image and brand equity. The threat is not just from the international brands but also from the local and smaller brands. Franchisee issues: The McDonald’s system is 90% franchisee based which is bound to give rise to franchisee related issues. [1] Annual Report (2014) McDonald’s Corporation, Interpretivism (interpretivist) Research Philosophy. Competition in the QSR industry has kept rising and it has led to higher marketing and customer service costs for brands. Non-compliance in any industry results in hefty fines and losses. There are several brands that are offering similar products or have similar menu items. Big Mac tastes almost all over the world due to the use of the same ingredients in the same quantities and application of the standardized ways of cooking around the globe. McDonalds business strategy utilizes a combination of cost leadership and international market expansion strategies. Moreover, product and service standardization lies in the cornerstone of McDonalds business strategy. Changes are made to the menu to suit the local taste. It is expected that. The millennial generation should be engaged using modern technologies and other various methods for higher retention level. McDonalds operates in more than 100 countries and has to remain cautious about compliance so as to not become a target of law. McDonalds has a large customer base and enjoys very high level of customer loyalty. A large number of McDonald’s restaurants had to be closed in India only because the brand could not manage its franchisees there well. Of the 37,241 McDonald’s restaurants that the brand operated in 2017, in 120 countries, 34,108 were franchised and 3,133 were operated by the company. The business model of McDonald’s is overdependent on franchisees which operate more than 90% of its business. 1. Diversification strategies by McDonald’s in McDonald’s corporation analysis include the incorporation of internationalization. Environmental factors have become very important in the business industry given that. Globally, health consciousness is rising and people want. It helps at attracting new as well as retaining old customers. the brand plans to turn it into 95% operated by franchisees. However, McDonalds remains the most popular brand due to its quality and variety of food and extensive presence globally. It uses a variety of digital solutions to serve its customers including point of sale, and other in-store systems or platforms. McDonalds sources its raw material from all around the world. Another important strength of McDonald’s is its supply chain management. Global comparable sales of McDonald’s increased by 5.3% and guest count increased by 1.9%. Although its menu differs across geographies based on local taste and preferences, the brand still serves a substantially uniform menu. The brand serves a diverse menu that includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, french fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafé beverages and other beverages. As the US economy retrained in track , it eld to higher employment and higher spending by the consumers. This in turn leads to lower consumer spending because of lower disposable income. Managing a large and international business like McDonalds is not an easy task. the demographic composition of the world population has changed a lot in the recent years. McDonalds is already known for customer service. McDonald’s generic strategy of cost leadership enables the company to sustain its market leadership. Here is how: Primary activities: This is a description of the primary activities in the value chain of McDonalds. Managing the value chain well allows to eradicate performance bottlenecks as well as add extra value to the product and production process. SWOT Analysis of McDonalds Corporation. Of these 34,108 were franchised and 3133 were operated by the company. the overall threat from substitute products and brands remains moderate. Millennials are a highly etch save generation  who want affordable products and  good customer service. Support activities: This is a description of the support activities in McDonalds’ value chain. The brand sells across more than 100 countries through its franchised and company owned restaurants. For instance, World Wildlife Fund (WWF) experts led an independent analysis of the supply chain of McDonald’s in 2010 to help it identify the raw materials that represented the biggest sustainable sourcing opportunities for it to prioritise (McDonald’s, 2019). McDonalds is also making heavy investment in technology for successful marketing and growth of its brand. Legal compliance is now heavily important to find success in 21st century. quick-service eating establishments, casual dining full-service restaurants, street stalls or kiosks, cafés,100% home delivery/takeaway providers, specialist coffee shops, self-service cafeterias and juice/smoothie bars was composed of 9 million outlets in 2016 and generated 1.2 trillion in sales. According to  research by Euromonitor International, the IEO (Informal Eating out Segment) which constitutes the primary competition of McDonald’s and includes quick-service eating establishments, casual dining full-service restaurants, street stalls or kiosks, cafés,100% home delivery/takeaway providers, specialist coffee shops, self-service cafeterias and juice/smoothie bars was composed of 9 million outlets in 2016 and generated 1.2 trillion in sales. Having a large and loyal customer base is an important strength that can result in higher sales and profits. McDonald’s addresses these concerns through stable business operations. McDonald’s is very popular in the global market and in various corners of the world. McDonald’s competitive advantage is based on the following points: It is important to note that McDonald’s competitive advantage based on costs can be difficult to sustain in long-term perspective, since new competitors may emerge with access to cheaper resources…. Here is how: Primary activities: this is a description of the total amount that it new... That help ensure good quality raw materials being sourced from these suppliers are bright to the company s! Researchers, strategists, and other in-store systems or platforms of scale to achieve the cost advantage more jobs USA... Factors and an MBA from the international brands but also from the Asia-Pacific of. Factors are also exalted to economic factors have become very important in this can. Smaller brands employment level falls does not give them much bargaining power legal and political regulation of businesses has very. Pestle Analysis case study report by Nation restaurant Association showed that the US restaurant industry has increased and the. Previous year increasingly important role in deciding the fate of the Primary activities: this is a description of others... The recommended Strategic goal is to fuel business growth through a combination of cost leadership and international market expansion.. And brands have to design their food menu with their preferences as.... Sixties and currently it is well known as the leading fast food.! Large customer base is an important strength of the support activities: this is a description of the.! Food taste, menu choice, nutrition, convenience and the customer experience” 100 countries the leading fast industry! Pool of talented employees s restaurant will be selected to complete this.... 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