McDonald's Corporate Stretgy
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Keywords: mcdonalds business strategy analysis, mcdonalds strategy
The report is going to analyse McDonald's corporate strategy and its financial performance. The team works together to get the available data and analyse the firm's performance. The report is going to analyse the internal structure of the company, its governance system, its internal strengths and weaknesses and the other external factors which might affect the company's performance. At the end of the report there are some recommendations for the company which may be useful for the strategic decisions. The financial data are available online and strategies will be analysed through academic literature.
McDonald's is the world's largest chain of quick service restaurants, serving tens of millions customers daily worldwide. McDonald's Restaurants UK Limited a wholly owned subsidiary of the US parent company opened its first UK store in Woolwich in 1974. There are now 1200 restaurant operating in the UK which, despite representing only 4% of the total number of McDonald's restaurant s worldwide, contribute 7% of global profit, making the UK a very important financial market for McDonald's shareholders. McDonalds Corporation truly began in 1954 when Ray Kroc decided that he would turn the successful Californian store owned by the McDonald brothers into a chain.
Every day in the UK, McDonald's serves over 2million customers. McDonald's is now one of the valuable brands globally, worth $25 billion. The golden arches and its mascot Ronald McDonalds have gained global recognition. Though, the company has roots in the US, McDonald today has become an accepted citizen of the world.
Â Armstrong (2006) stated A mission statement is a statement that defines the essence or purpose of a company - what it stands for i.e. what broad products or services it intends to offer customers.Â The Mission Statement should represent the broadest perspective of the enterprise's mission. The mission statement of the company is as follows
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
Objectives of the company:
Objectives are the end result of the planned activity. They state what is to be accomplished by when and should be quantified if possible. The achievement of corporate objectives should result in the fulfilment of a corporation's mission (Wheeelen & Hunger 2000). The objective should be SMART which means specific' measureable, achievable, realistic and time specific. The main objectives of the business are based in terms of sales. Growth, profit, customer satisfaction and return on investment (Bowie & Buttle 2004). McDonald's objectives are now
1 Due to the growing success of the Company, the intention is to increase the pace of acquisitions with a target of 30 new restaurant openings per year from 2010, which will create up to 1800 new job opportunities annually.
2 We are renowned for being the pioneers of the drive-thru restaurant concept and are the UK and world leader in this sector. This continues to be the key focus for our growth.
Mcdonald's embraced a strategy focused on restaurant operation and its cornerstones of quality, service, cleanliness and value. "Better not just bigger" become our mantra, and the customer centric plan to win become of our playbook quoted the CEO of the company. Enz (2010) define corporate strategy as ' approach to the future that involves envisioning a new effective role for the firm in a creative manner and aligning policies, practices and resources to realize that vision.
Like other big corporation McDonald's has policies and it recognises its responsibility to protect and preserved the environment for future generations to come. Restaurant Operations - focusing on restaurant processes to:
- improve energy efficiency;
- minimise impacts associated with odour, noise, effluent and emissions to the atmosphere;
- reduce the amount of solid waste;
- increase the value recovered from solid waste before its responsible disposal;
- maintain a litter free environment around our restaurants by conducting regular litter patrols
Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment ( Deming & Edwards 1982). McDonald's success is built on a foundation of personal and professional integrity. McDonald's Board believes that good governance is a journey, not a destination. The current board of directors
- Andrew J, McKenna Non Executive chairman
- Ralph Alvarez President and chief operating officer
- Jim Skinner Vice chairman & chief executive officer.
Every company has to consider the macro economic factors for its success. The company has no control over these factors, however, misinterpret of the factors or inability to tackle the changes of those factors can lead the business to be unsuccessful Glaesser (2006). The analysis of these factors is called pest analysis. The acronym stands for Political, economical, social and technological factors which may affect the business.
Political: The present UK political condition is very stable and friendly to operate business. Government has decreased VAT to cut spending of customer to combat the current recession.
Economical: The recent economic downturn is the worst after Second World War which leads the customers to spend less on their food. McDonald's took this opportunity to attract more customers to their cheap as a result sales increased by 6.9% despite the shrink of economy.
Social: people are more aware of healthy eating issues and sources of foods. McDonald's took issue seriously and keep changing on their menu to put more healthy food. The restaurant chain is using locally produced raw material to become a local restaurant of a global chain.
Technological: Recent technology clearly changed the food production operation. McDonald's adopt all the changes to make its service faster and more convenient. Every year the restaurant innovate the ideas and technologies.
Porter's five forces model:
Porter's Five Forces model can be used to good analytical effect alongside other models such as theÂ SWOTÂ andÂ PESTÂ analysis tools. Porter's Five Forces model provides suggested points under each main heading, by which the firm can develop a broad and sophisticated analysis of competitive position, as might be used when creating strategy, plans, or making investment decisions about a business or organization Knowles (1995). As the name suggests the Porters 5 Forces model focuses on 5 key factors affecting the environment in which a business operates. They are
1) Competitive rivalry: Other fast food chain like Burger King, KFC and Subway is trying push hardly to increase their market share by offering promotional offers and healthy food option.
2) Power of suppliers: The power of suppliers is a big factor to success of a company. Just in time delivery, quality control and cheaper options are main strength of a supplier. McDonald's made a very strong and long relationship with its local suppliers of beef, milk etc.
3) Power of buyers: The customer has the power to reduce the prices by not accepting the price and change the brand. Therefore, McDonalds always listen to its customers to fulfil all the customer requirements to gain the customer attentions and retention.
4) Threat of substitute: Other supermarket chain's cheap meal deal and packet microwaveable food is a real threat to the fast food industry.
5) Threat on new market entrants: New entrants are always a threat to existing companies however, new entrants need huge capital and brand is not strong at the first stage. Strong brand name and consistent delivery of service always keep McDonalds above of its new entrant rivals.
Internal environment :
Structure: McDonalds is led by chief operating officer and its operation is closely observed by a strong board of Directors. The company has director for each operating wing such as Marketing, Finance, HR, R&D. This is the central system however; each country has got their own directors of the operating department who are responsible for the entire operations of the specific country. Furthermore, the operations managers then area managers, store managers, assistant managers, team leaders, shift managers and crew members.
Culture: McDonald's culture has a strong approach to grow itself through the development of local community. As well as McDonalds helps to support environmental charities, helps local council to keep area clean, recycle its used cooking oil to biodiesel, using paper based packaging rather than plastic and saves energy through educate its staff. Therefore, it's all about recycling, reducing and reusing the resources to keep the company as green as possible.
Marketing: Marketing involves identifying customer needs and requirements and meeting these needs in a better way than competitors. In this way a company creates loyal customers (Bowie & Buttle 2004). McDonalds identified its four major segments of customers such as
- A parent with two children
- A business customer
McDonalds follows the 4Ps of marketing mix properly to achieve its marketing goal. It innovates its product regularly to get maximum revenue from PLC, uses various promotional activities to reach every customers, in addition price of the food always give value for money. McDonalds not only choose the strategic location but also communicate the whole process through different distribution channel.
Finance: During this gloomy economic outlook McDonalds showed better result compare to its competitors in the stock market. US$5.8 Billion returned to its shre holders through dividends last year. Please see appendices 2 for details financial results.
R&D : McDonald's committed to research and develop the menu, the process, in order to gain competitive advantages. It has spent US$ 1.2 on R&D over the last five years to introduce new environmental friendly equipments.
Logistics: McDonalds faces challenges on a daily basis, one of the major challenges facing McDonald's is managing stock. Stock management involves creating a balance between meeting customers' needs whilst at the same time minimising waste. In 2004, McDonald's introduced a specialist central stock management function known as the Restaurant Supply Planning Department. This team communicates with restaurant managers on a regular basis to find out about local events.
HRM: People are most important assets of any hospitality based company. One of the unique characteristics of McDonalds HR policy is they introduce training courses for the employee where the employee get formal GCSE qualification. It always encourage and nurture its hourly paid employees to take shift management role.
- Strong brand
- Good corporate Governance
- Bargaining power with suppliers
- Menu lacks healthy options
- Innovation needs to keep PLC
- 85% restaurant operated by franchisee.
- Current economic downturn increases more demand for fast food
- Demand increases because of busy life style
- New competitors
- Changing eating habits
Strategic alternatives: Since its journey begins McDonalds strategy is to grow. Still McDonalds is working to find suitable partner to build new franchise store. Internationally it keeps a close eye to expand in high growth potential market like china & India.
According to the research and literature it can be concluded Mcdonalds restaurants are growing at a fast rate. But because of the current economic situation it will be wise to go into a period of consolidation.
Evolution & control:
In response to the threat of competitors and the recent credit crunch ,McDonalds can keep the prices at a lower rate while providing the same quality of service to attract more customers. Additionally offer different packages for the meals which can bring for new customer segments ,thus expanding the market share.
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MacDonald's Home Page, Available from www.mcdonaldsindia.com/ourfood/nonveg/index.html Accessed on 22/10/10
Muhlbacher H., Leihs H & Dahringer L. (2006) International Marketing, 3rd edition London: Thomson Learning
McDonald's Home Page, Available from http://www.mcdonald.co.uk/about_us/marketing.asp Accessed on 02/11/10
McDonalds Home Page, Available from http://www.mcdonald.com/about/default.asp Accessed on 30/10/10
McDonald's Home Page, Available from http://www.mcdonald.co.in/history.asp
Accessed on 24/10/10
McDonald Home Page, Available from http://www.mcdonald.co.uk/pdf/student_information.pdf Accessed on 2/11/10
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