Company Analysis-McDonald

Running head: Corporate Strategy 1

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Corporate Strategy 2

Introduction

McDonalds is considered the largest chain store offering food or restaurant services

globally, serving millions of customers every day in different countries. McDonalds has more

than 30, 000 local food outlets, which are spread in over 200 countries. Local businesspersons

own over 80 percent of the company’s food outlets worldwide. The company offers to the world

some of its unique foods such as Big Mac, Chicken McNuggets, Quarter Pounder and the most

popular French Fries. Three years ago McDonalds-operated sales increased by around 5.5

percent. Hence, the overall incomes of the company grew from around 24, 000 million dollars in

2010 to over 27,000 million in the next year. McDonald’s revenues appear to be increasing each

year since 2009(Bhasin 2011). Maybe, the main question is how the company has been able to

ensure growth in a highly volatile global economy. Several formulating strategies could be

utilized to analyze their continued success. Just like many companies, especially international

corporations, it is vital for McDonalds to utilize the most effective corporate strategy to succeed.

Mission Statement:

The vision of McDonalds is to become the best quick service food retailer globally, ensuring the

best customer experience. McDonald aim to achieve this by offering outstanding quality, value,

service, and cleanliness. McDonald offers high quality food, quick and at reasonable costto its

customers (Bhasin, 2011).

Objectives

 To provide clean and healthier foods

 To ensure clean and friendly environment for all its customers

 To be socially responsible firm

 To ensure its customers get good returns on their investment.

SWOT Analysis

SWOT analysis is extensive but summarizes the different elements of external and

internal conditions for companies. By use of SWOT analysis, firms can focus on actions and

resources in their strengths; hence, the firm will have clear strategy and more opportunities.

McDonald’s large market share and presence as the largest fast food and food service retailer

chain globally is supported by huge all-around growth evidence in the company. However, the

increasing health consciousness among the city dwellers, especially the middle class customers

has brought a great challenge to its operation in a saturated market. This aspect combined with

the increasing beef prices could disrupt profit margins for McDonald (Arnold, 2008).

Strengths

 Brand recognition- McDonald is a household name in many countries, especially in the

US.

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 It is a number one international fast food and quick service company

 McDonalds winning strategy is based on the 4Ps, focusing on products, price, place,

promotions and people or customers

 Offers specialized training and development for managers

 Financial strength

 Largest and strongest global presence among the fast-food outlets or retailers

 Large customer base (Kowitt, 2011).

Weaknesses

 McDonald is yet to capitalize and integrate organic foods in its menu

 McDonald have been experiencing high worker turnover including senior managers

 The company is insensitive to different cultures

 McDonald have been experiencing quality inconsistent, especially for franchised firms

 Low order accuracy compared to other fast-food retailers

 Declining company reputation

Opportunities

 Acquisition and diversification of local fast-food restaurants in the emerging markets

such China

 Low cost strategy to attract new market segments such as students

 Initial public offering in the emerging economies such as Africa and the East to increase

revenues

 Retail products likely to increase revenues

 Capitalize on healthy and cultural delicacies such as traditional and organic foods

Threats

 Growing health consciousness leading to shift from fast-foods to organic and traditional

food products in developing and developed nations

 Growing competition among rival firms through practices such as product innovation,

price wars, and expansion in overseas markets

 Unfavorable business cycle such as economic recession and natural calamities

 Projected future struggles as food retailers strive to meet the rapid changes in consumer

health needs and expectations(Kowitt, 2011).

Value Chain analysis

Porter’s Value China analysis denotes a model that aid to evaluate specific activities via

which a company can create competitive advantage and value. Porter argued that focusing on the

chain of a firm would increase value to the product and services than any added cost for such

activities (Porter, 2000). The value chin at McDonald comprises of a set of activities and

operations that the company utilizes to change inputs such as labor, buns, maize, and condiments

into finished food products that meets the expectations of the clients. Value at McDonald

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originate from the capabilities based in its value chain to distinguish its products and services

from that of its rivals, charge lower prices via efficient operations, and offer quick convenient

foods. McDonald’s value chain is highly competitive in the international fast-food market or

industry. For example, McDonald’s products such as the Big Mac and signature hamburger. The

price of Big Mac sells at a minimum of 2.8 dollars, which compares positively to other signature

products at other fast-food firms, including Wendy’s and Burger King. McDonald receives the

royalties from its various franchisees.

Stakeholder mapping

A stakeholder mapping

A stakeholder is a party or a group who has interest in the operation of a firm or

enterprise. Usually, stakeholders have interests in the success or favorable operation of the

business hence this excludes the competitors. Competitors usually have negative interests in the

business but not likely, in its success thus they are excluded. Apart from the shareholders,

McDonald’s employees and management are second obvious stakeholders. Management strives

to provide marketable product at the most reasonable price possible. On the other hand, workers

will want to be compensated at the highest possible amount for their work. Because of the

increasing negative implications of trans-fat meals or food-products, many nations are

illegalizing its use. This threatens and has immediate effects on McDonald’s image and

profitability. The company must make a strategic decision of whether they want to remain and

conduct business in such countries, or walk away and leave the market for their health conscious

competitors. Health care practitioners, particularly nutritionists, could be regarded the

stakeholders since their analysis of trans-fat food composition affects McDonald’s image and

reputation. Also, determines whether the company will sell all its products in a given market,

and could even disrupt the sales. McDonald’s customers might be concerned about the weight of

the issue and its effect on their local community.

Business strategies

For over a decade since 2003 McDonald has been pursuing two key corporate strategies.

To keep abreast with the dramatically shifting consumer tastes, spending patterns and

demographics, the company has introduced new products such as Angus Beef Burger and

Premium chicken sandwiches and initiatives to offer healthy foods or premium salads. This

strategy reflects the philosophy that novelty, rather than loyalty to cultural or traditional foods, is

the core determinant of market shares in the fast food markets. McDonald’s is has also

concentrated on expanding profit margins in the current restaurants rather than opening new

restaurants(Bhasin, 2011). To achieve this, McDonald has redesigned most of its restaurants,

extended their operation time, and increased menu list.

Corporate social responsibility (CSR) and Ethics

Social responsibility may be a delicate ground to operate on, considering McDonald’s

objectives of increasing shareholder’s value and profit maximization. However, McDonald also

has a responsibility towards other stakeholders, particularly its customers. Among the values

shown by McDonald’s in its CSR strategies are to improve customer experience, upholding

ethical behavior it its operations, portraying huge commitment to people, integrity and honesty in

its dealings and giving back to the local communities, which support the corporation. These just

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are a few of the principles and values that McDonalds claim to upheld. McDonald does not only

show their commitment towards the community in their CSR statements or sustainability report.

In 2004, the Foundation for CSR recognized McDonald’s commitment towards good CSR and

continues to argue that the principle or CSR is still upheld by the company today. The CSR

report continues to state that McDonald and its franchise activities support local institutions of

learning, both the youth and the elderly(Kowitt, 2011). This covers those in athletic teams and

group of senior citizens, perform literacy initiatives, promote safety awareness, environmental

programs and support fundraising initiatives in local communities towards overall societal gains.

McDonald’s sustainability initiative is viewed to focus on wellbeing and nutrition, improving

employee’s experience, assuming environmental responsibility, ensuring a sustainable

distribution chain and supporting the locals in their daily lives and even during calamities via

sponsorships, donations, direct involvement and in offering disaster relief, as highlighted in their

annual sustainability report.

Current expansion strategies and options

Offering more menu options or more food varieties to reach more segments

McDonald is not only expanding desserts and snack foods but also other whole meal

varieties. The food retailer is targeting more market segments to increase its offering by

diversifying its non-traditional menu foods, while still maintaining its fries and burgers consumer

base. Most of the new menu foods aid eliminate or reduce McDonald’s growing negative

reputation due to its trans-fat snacks and fries. For example, McDonald has added oatmeal in its

servings as an alternative for high-caloric sandwiches served in during breakfast. More types of

salads have also been effective, for the health conscious segments. Five years ago, McDonald

began selling McCafe to some of its outlets, where people can buy cappuccinos and espressos.

Such shots that are priced in between two and four dollars represent McDonald’s entry into the

high-end caffeinated drinks segments, which is currently dominated by firms such as

Starbucks(Bhasin, 2011). McDonald anticipates to eventually increasing its annual sale by a

billion dollar through the sales of caffeine related items. Currently, revenues from sales of

caffeine beverages account for about 5 percent of its net sales.

Short menu/ product cycle

McDonald is also shortening its product life cycle. A popular example is the McRib,

having an unparalleled second local appearance in 2012. The product took center and front this

year and was highly successful, bringing an over 4 percent increase in similar outlet sales.

McFlurries, which are a special edition, have also been in and out of national menus, together

with short time smoothies(Juan & Dan, 2014). Such type of menu cycle is a strategy toward a

more European-like business model, which creates new menu products after every 6 to 8 weeks

Extending McDonald’s dollar menu to breakfast

The company started the dollar menu breakfast back in 2010 in order to adapt to the

economic downturns, which supplemented its traditional dollar menu for its original fare. This

Corporate Strategy 6

strategy has been performing well by capitalizing on the US’s attraction to the lowly prices

products during financial crisis. However, even before this strategy, its early morning business

was booming, only at a lower rate than after this move(Bhasin, 2011). Rival firms such as

Dunkin’ Donuts and Burger King created their own forms of dollar menu; however, none of

them has experienced a global success as McDonalds have.

Importing strategy

McDonald is importing most of its successful products to new foreign markets. The

company has an incredible broad range of segment or culture-based food products across the

globe, and majority of which would not succeed internationally. However, some of these

products have succeeded, and McDonalds has begun to test them in other emerging

markets(Bhasin, 2011). For example, Australia’s Chicken McBites is among them that are

currently being tested in Michigan. In addition, there are full-size wraps, mostly used in Europe

that is being tested in emerging markets in the United Kingdom.

Will the above strategies create or destroy value?

The new expansion strategies and moves by McDonald, particularly shifting towards the

beverage market may not create large value in the short term, especially for a household brand

that is popular for burgers and fries. As modern consumer behaviors increasingly shift towards

traditional and cultural foods, McDonald’s reputation is increasingly declining. Some of these

strategies are even translating into lawsuits or negative media portrayals such as the “Super Size

ad”, which perceives McDonald as stakeholder in encouraging and triggering the growing

obesity cases. More so, since there are many emerging alternative firms selling healthier fast

foods such as street salad kiosks and convenience stores, the sales at McDonalds may be fall.

However, any corporation that wants to succeed in the emerging markets must create and

implement strategies that are in line with industry and global market trends or otherwise face the

crisis of falling sales. McDonald is not likely to cease serving fries and burgers, however,

because of the increasing call for healthy foods and health conscious consumers, McDonalds

have to fit organic foods, especially salads into their products. Just recently, the retailer

introduced a test menu item in some of its market such as San Diego. Consumer trends that shift

towards natural and organic foods may continue to reduce the sales at McDonalds, if the existing

strategies are not changed(Kowitt, 2011). Luckily, McDonald seem to be introducing counter

strategies such as the introduction of public nutritional initiatives and salads seems to be adding

value to the company as it adapt to the new market trends.

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Strategic recommendation

Fortify and defend strategy- This expansion strategy focuses on increasing the

competitive edge of the company and preventing competitors to thrive in the existing market

while hindering the entry of new firms in the market. This strategy is appropriate for businesses

Corporate Strategy 8

that have already acquired huge market share or leadership position in the market. McDonald

being a market leader and pioneer in the fast-food industry should adopt this strategy in order to

conquer and maintain new market segments. McDonald should concentrate on establishing new

outlets in the emerging markets and this strategy will enable it to defend the existing and

emerging territories(Bhasin, 2011). McDonalds should also put more money on Research and

Development for it to establish new and advanced technologies and to use them in its routine

practices to boost efficiency. That way the company can continue to add value and remain ahead

of rival firms.

R&D/ Market Research

The current market trends in various markets are likely to shift. Not ignoring the growing

competition within the convenient food industry, McDonald should therefore adopt new

strategies in order to expand to new markets smoothly. Maybe, among the most essential

strategy for McDonald is to conduct regular market or consumer studies(Light et al., 2012). Via

such corporate strategy, the company can remain updated on new and emerging consumer trends

and identify viable consumer segments. Shifts in food tastes can be determined via consumer

research. In addition, this strategy can greatly aid in increasing McDonald’s market shares in

different countries.

Conclusion

The current corporate strategies have been successful in adding value to the company.

McDonald has successfully conquered and overcome shifts and challenges via quality standards

and efficient corporate strategies that have given them high competitive advantage. Evidence

from McDonald’s international market growth, the company is already been gaining value

through increased sales even in the markets that are perceived challenging and rigid. Through its

great sense of customer satisfaction and quality service, the company is able to sell its products

in places such as China and Britain. McDonald brands its product and services to match

customers’ tastes and needs, offer relatively low prices, and use effective promotional strategies.

Therefore, despite the emerging controversies about McDonald’s foods, the company through its

public nutrition campaigns and use of salads has managed to retain its profitability.

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References

Arnold, David (2008). Strategies for Entering and Developing International Markets. In Mirage

of Global Markets, The: How Globalizing Companies Can Succeed as Markets Localize.

Financial Time Prentice Hall, 2008.

Bhasin, K. (2011). This Is How McDonald's Plans To Take Over The World. Business Insider.

Retrieved 19 August 2014, from http://www.businessinsider.com/mcdonalds-strategies-

success-2011-12

Juan, L., & Dan, C. (2013). Supersize The Franchise: McDonald's New China Strategy.

Worldcrunch.com. Retrieved 19 August 2013, from http://www.worldcrunch.com/business-

finance/supersize-the-franchise-mcdonald-039-s-new-china-strategy/kfc-fast-food-rivalry-

catering-restaurant-franchisee/c2s15258/#.U_My5GPY2Io

Kowitt, B. (2011). Why McDonald’s wins in any economy. Fortune. Retrieved 19 August 2014,

from http://fortune.com/2011/08/23/why-mcdonalds-wins-in-any-economy/

Light, L., Kiddon, J., Till, B., Heckler, D., Mathews, R., &Wacker, W. et al. (2012).Branding

strategies for success (1st ed.). [Upper Saddle River, NJ]: FT Press.

Porter, M. E (2000), Competitive Strategy: Techniques for Analyzing Industries and

Competitors.

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