McDonald's Future Policies and Strategies

Introduction

In this assignment we will discuss the business, its environment, factors affecting the environment, current market conditions and the affect of the current market on the the business. Identify the stakeholders of the company, strategy, policies used by the business that helps them to gain competitive edge over its customers.

Strategic Review

Strategic review helps to analyse and review the strategies used by the business for survival and sustainability. It helps us to understand the decisions taken by the management to increase the sales, market share and hence maximising profit.

The Company I have chosen for this assignment is McDonald’s which market leader in fast food industry is. In this assignment we will discuss McDonald’s stakeholder and their current market position of McDonald’s. We will also discuss the environment, strengths and the weaknesses along with the strategies used by McDonald’s which affected the position of McDonald’s either to increase market share or maximising profit.

Task 1.1

Identify the importance of environmental factors affecting the organization or sector.

We will discuss the factors affecting McDonald’s. I have chosen Mcdonald’s as a company having worked for McDonald’s for about Four years make me understand the culture, structure and the environmental factors that affect the organisation directly and indirectly.Mcdonlad’s follow the “plan to Win ” and being the Market Leader in the fast food industry with having restaurant in more than 119 countries with more than 31,000 restaurants in operation. The factors that affect the organisation are the political, social, economic, technological and legal .Apart from those Factors like Globalisation, Diversity and Ethics affect the organisation.

Globalisation: Globalisation helps in developing a closer contact between different parts of the world, and have increased the possibility of personal exchange, mutual understanding and friendship among world citizens. Corporations are expanding their businesses to world market. Corporations go global for the Survival and sustainabilty.Mcdonald’s are operating in more than 119 countries with over 31,000 restaurants in operation.

Diversity : McDonalds’ s follow diversity by employing local people and having local suppliers for the restaurants. It also have the different menu for different countries and follow the culture of the countries. Like not serving beef products in India and having different Entries for ladies in Arab Countries respecting the cultural and religious beliefs of people.

Global marketing decisions are no different than those made domestically but the decisions are unique to each country (Sister & Sister, 2005). McDonald’s realises diversity as an asset that enhances in the profitability of organisation. Diversity directly reflects the interpersonal relationships.

Ethics: McDonald’s Promote the RMHC(Ronald McDonald House Charity ) which provide room and board, food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. McDonald’s sponsor Olympic athletes. Ronald McDonalds Houses are located in more than 259 communities worldwide and support Mobile care programs which offer cost effective medical,dental and educational services to children.In addition to their community involvement, McDonald’s has a long-standing commitment to environmental protection. Restaurants around the world have innovative programs for recycling, resource conservation, and waste reduction. Mcdonald’s also help the African farmers by buying fairtrade coffee beans and also the Rainforest Alliances.

Task 1.2 Analyze the needs and expectations of all stakeholders involved.

“McDonald’s is a people business”-Ray Kroc

Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies. (Businessdictionary, 2010)

Customers: McDonald’s provide it’s customer with the nutritional value of the food and tend to innovate new food for its customers and have loyalty options of drink to retain its customers .It also provide healthy food options like salads, water,delli roll and fruits .

Franchise holders (franchisees) Franchisees are crucial to McDonald’s success; they deliver its brand promise straight to the customer. Nationwide, approximately 85percent of their restaurants are franchised. The sites for the restaurants and either own or leases the land and buildings. The franchisee then, in turn, leases the building from McDonald’s by paying a percentage of sales. The franchisee also purchases the cooking equipment, furniture, play land and signage to complete the fit out of the restaurant. Shared investment and shared risk helps to achieve sustainable growth.

Employees: Employees are the internal stakeholders and directly affect the working of organisation. McDonald’s provide national qualification to its employees and helps to gain work experience. Mcdonald’s follow equal opportunities for its employees.

Suppliers: McDonald’s supply chain benefits the countries economy. As Mcdonald’s lay emphasize on the local suppliers. But the suppliers have to maintain the promise of quality for the customer, the ation, including rigorous quality control in all areas of operations-including animal welfare, health and safety, handling procedures and cleanliness. By providing local supplies Mcdonald’s generate employment in the countries and supporting economies of thes to be company. This also enhances the growth perspectives of the countries as New Zealand exports beef to United States for beef patties.

Community groups: RMHC(Ronald McDonald House Charity ) which provide room and board, food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. McDonald’s sponsor Olympic athletes. Ronald McDonald Houses are located in more than 259 communities worldwide and support Mobile care programs which offer cost effective medical, dental and educational services to children. In addition to their community involvement, McDonald’s has a long-standing commitment to environmental protection. Restaurants around the world have innovative programs for recycling, resource conservation, and waste reduction. Mcdonald’s also help the African farmers by buying fair-trade coffee beans and also the rainforest alliances. It also is promoting the national Olympics in 2012 .

Shareholders: According to the Annual report 2010 Mcdonald’s have increased it growth 3.8% and the earning per share of the shareholders have increased by 9% and also the total dividend distributed to shareholders between 2007 -2009 amounted to 16.6 million dollars.

Task 1.3

Conclude the major changes taking place in the environment that will affect the strategy.

Economy is going through the downturn .It is very tough for companies to survive and sustain in the market. Every organisation follow the internal and external environment to plan any strategy .Profit Maximisation is the main aim of the organisation apart from organisations do plan for the environmental and the social factors that help in achieving the objectives and goals of the organisation.

PESTLE Analysis:

Political factors: Company is controlled by the policies and regulation of operations .Specific market focus on different areas of concern such as health, worker protection, and environment .McDonald’s while operating in India will follow the rules and regulations of India relating to the tax, trade laws and the rights. For example selling of the meat is said to be offensive relating to Hindu community particularly that of beef.

Economic factors:- Economic factors are those factors where in the economy of the business is affected it has a major impact on the business these factors such as interest rate , exchange rates could have a devastating effect on the business special when it a multinational business. McDonalds will have to charge customer in the local currency than the standard currency and the price should be within the purchasing power of individual.

Social Factors: Social factors are factors originated generally due to the internal stakeholders in the organization, their health and safety. The culture in the organization can have varied effects on the output of the business and the cost of the company is lot more affected due social factors.

Technological factors: McDonald’s use television advert for the for the marketing purpose. Celebrities and animated depictions are used as an endorsement for “I m loving it” campaign. McDonalds use inventory system and the management of the value chain allow the easy payment foe their suppliers and other vendor which an individual stores in respective markets deal with.

Legal Factors: McDonald’s is proving nutritional information of the food on the packaging and the website of McDonalds. McDonalds is using fruits, oatmeal, salad, water and orange juice to promote healthy food habits and fight the obesity. In the Muslim countries McDonald’s is using the concept of Halal Food for the target Customers.

Other legal concepts like tax obligations, employment standards, and quality requirements are only a few of important elements on which the company has to take into consideration. Otherwise, smooth operations shall be hard to achieve.

Environment: McDonald’s is using the” bin it” logo to promote clean society so that the rubbish packaging should not be dumped by the roadside. It is also promoting going green to save energy and reducing wastage to save the environment and showing their responsibilities towards society.

“Through careful planning and working with The carbon rust we ensure that we use the most efficient equipment for our restaurants according to the technology available”(Katie Saunders ,Environmental Manager, McDonalds UK)

Mcdonald’s is also using contributing in the environmental impact by reducing the energy consumption in restaurants, miniming the use of water in restaurants like using waterless urinals in the restaurants.

Mcdonald’s is trying to save the environment by reducing waste and reducing the size of the trayliners by 10cm which results in 84 tonnes of paper saving. It is also recycling the used cooking oil for the bio diesel. (McDonalds, 2010)

Balance Scorecard Approach: The Balance Scorecard method was given by Kaplan and Norton .It is a strategic approach and the performance management system that enables organisations to translate company’s vision and strategy into implementation and take into consideration four perspectives:

Financial Perspectives: From the Financial Perspectives Mcdonald’s like to focus on the Profitability and sales. For Increasing the sales employees are trained to sell large meals. For the Profitability emphases is laid on the waste reduction and drive thru which is having trained staff to do the job properly. Hand held are used to less the queues on the drive thru as it lessen customer order processing times.

Customer Perspectives: Mcdonald’s relate to Quality ,Service and value to customers. It target to serve front counter customer in 90 secs and the drive thru customers in 180 sec.Speed and quality is of utmost important to customers. Therefore, customers, like to friendly,fast and quality service every time.New Product like snack wrap, tasty and Great Taste of America is been brought to menu after sometime to retain the customers.

Business Process Perspective: From the Business processes Mcdonald’s is getting to expand its business by getting global. Also Mcdonald’s is adding new product line to its business by opening McCaffe’s to expand its business.

Learning and Growth Perspective: Employee Commitment is very important in the fast food industry. Employee turnover affect the business as retaining the employees is cost effective as recruiting and training is costly. McDonald’s provide qualification to its managers from the hamburger university.(maxipedia,2010)

Value chain Analysis:

Firm Infrastructure: Brand Recognition: Mcdonald’s is globally recognised brand.

No.1 in Retail food industry. McDonald’s is the market leader and exists at number no. 1 in fast food industry.

Franchising: About 85% of the restaurants are franchised.

Company Image: Company hold a strong image in the community because of the fresh and universal taste.

Financial strength: Inspite of the economic downturn Mcdonald’s annual sales increased by 3.8 % in 2009.

Human Resources:

Job Applications: Mcdonald’s follow the online application system for recruitment.

2nd largest U.S employer

Technology: Just in time order

Delivery: Mcdonald’s use the refrigerated trucks for delivery as the temperature of the frozen meat patties should not be less than -18 to -22 degrees to be served when cooking.

Procurement: Sustainable packaging: Mcdonald’s have reduced the size of tray liner and also use the packaging that can be recycled in their concern to protect environment.

Renewable resources: 82% of the packing material is from renewable resources.

Oil recycling for the bio diesel.

Quality Control: For delivery freight truck inspections are inspected and random audits take place for quality control.

Inbound Logistics:

Operations: Corp. Guidelines for franchisees.

Outbound Logistics: Distributor agreement

Marketing and Sales: Product:

Health and wellness campaign and product offering

Price: Providing value to customer e.g. Pound menu, party pack for kids.

Promotion: Coca cola endorsement

Sponsor of Olympics and “feeding the athletes” .Mcdonald’s is sponsoring Olympics 2012 along with coca cola and Cadbury.

Service : Friendly customer service.

Clean Environment for customers.

Fast food service target to serve front counter customer in 90 sec and drive thru customer in 180 seconds.

{ Adopted from Harbott.com,2010}

Task 2.2

Summarize the position of the organization in its current market.

According to “The Times ” In spite of the economy downturn McDonald’s is still pushing ahead with the discounting menu. Figures shown by “The Times “state that McDonald position in the current market is unaffected by the economy downturn .It is following the strategy of the discounting £or $ 1 menu making it to increase its profit. It has reported the increased sale as 4.2% of the global rise McDonald’s share rose from.38 % in early trading of 1950 to £70.61 in 2010.Mcdonald’s is following a low prices strategies on fries,burgers.drinks and the sale of McCafe drinks.(Frean,2010)

Mcdonald’s is holding strong position in market as it holds more than 32,000 restaurant in operation in more than 117 countries and it has also added to the new product line McCaffe’s in 2008 providing cappuccino’s and frappacino’s. And other drinks. Working towards the environments and Children welfare and the organic food and also “feeding the Olympics “allows them to fulfil their responibilty towards society.

Mcdonald’s have planned to open around 1,000 more store in 2010 and invest in $2.4 billion to enhance the brand. Mcdonald’s have planned to “Reimage ” the exterior and interior of the existing stores to improve seating, lighting and décor and by doubling drive thru stations to improve speed and convenience.(Yousuf,2009)

Task 2.3

Evaluate the competitive strengths and weaknesses of the organization’s current strategies.

Strengths

Weaknesses

Opportunity

Threats

1) Glo Globalization: 32,000 restaurants serving in more than 117 countr117 countries.

1) Advertisement techniques that target children

1) Innovation: Continued adaptation such as adding on new menu such as snack wrap and great taste of Amaerica to retain the existing customers.

1) Current world economic standing: the company’s revenue streams are diversified, but depending on the the length of this “recession”, they will inevitably be negatively impacted by the trickle down effect.

2) Active Childrens Charity: The Ronald McDonald House helping families with children in hospital.

2) Consumers use disposable income to purchase fast food meals so when the budget it treatened, consumers redirect these funds

2) Conservation: Researching green energies and green packaging solutions Recycling of the waste oil to form Biodiesel.. Using Water less urinals in store to save water consumption.

2) More Casual Dining Restaurants increasing their “burger” offering and decreasing the price.

3) Adjusted Ingredients and product offerings to comply with upgraded health standards deemed necessary by the USDA:Mcdonalds provide the universal taste in its menu.

3) Public perception: McDonalds has been impacted by negative press like the documentary “Supersize Me” by Morgan Spurlock in which he contributed our societies obesity to McDonalds and other fast food chains.

3) Exploration: Create new product offerings. Continue to use technology to influence revenue strategy: possibly use text messages to deliver specials offers to individuals who sign up for such services.

3) Public Health Crisis.: people are more foccussed on the dietry needs.

4) Earns revenue not merely by fast food sales, but also as a property investor, a franchiser of restaurants.: More than 85% of the restaurants are franchised throughout the world.

Mcdonald’s using low price strategy Or the £1 menu which led t increase in sales by 4.2 % globally in 2010.

Task 3.1

Use a range of tools and models to develop strategic options.

Turnaround Strategy: Turn around Strategy is used by underperforming companies to normal in terms of acceptance levels of profitability, solvency, liquidity and cash flow. Therefore turnaround strategy is used to manage, stabilise, fund and fix the underperforming and distressed companies.

The components of the Turnaround strategies are:

Managing the turnaround: Managing in terms of leadership, stakeholder management.

Stabilising by ensuring the short term future of the business through cash management.

Funding and Recaptilising the company.

Fixing the company in strategic, operational and organisational term.

Mcdonald’s adopted the turnaround strategy in 2003 when the sales declined, ,Measures for the service and quality of the chain continued to fall behind its rivals.To fight back the Company started to follow a turnaround from the corporate level by bringing back the James R Cantalupo former vice president under who the company bloomed from 1990 to 2000 and gained 32,000 franchisees.

With the coming back of Cantalupo he started the redesigning by emphasizing more on the quality , friendliness and speedy service of staff and laid emphasis on the increased sales and expanding the more on business. The Mexican Grill and The Boston which was acquired by the Mcdonald’s were let out .McDonald’s set out new Product line to its Menu By opening McCaffe’s around the world as expansion in 2003. Breakfast new menu was added as pancakes with the combination of bacon, sausage and egg which was a great success along with the breakfast coffee drinks. It also added healthy food as salads, drinks. Company also added new logo ” I m loving it” in the TV Adverts using Justin Timberlake to target teenagers instead of the kids to endorse Mcdonald’s which turnaround a great success for the company and company started to increase its sales following the strategy.(scribd,2010)

The changes in the external environment of the business can also be determined by the Porter five force model which exactly shows the real picture of the competition in the market.

The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.

Competition: Since the time Mcdonald’s started in 1940 it is providing excellence service to its customer. Market is tough and tight

for fast food industry. Opening up of cafe to the product line and serving breakfast has provided tight competition with Starbuck and other breakfast serving restaurant. Burger king and KFC are the two great competitors for Mcdonald’s.

Ease of entry: it is hard for new entrants to enter the market because of the high cost of entry and research and development cost. Established brand names like Mcdonald’s make it even harder and new entrants have to face price competition.

Substitutes: there are many products available in the market for substites.People can go to Burger King And KFC and Starbucks looking for substitutes.

Power of suppliers: products are not readily available from suppliers so the power of suppliers is relatively low.

Power of Buyers :Power of buyer is low.

{Adopted from: marketing teacher,2010}

Task 3.2

Develop a comparative understanding of activity from organizations in the market.

Mcdonald’s is the market leader in the fast food industry .Fast food business fluctuates with the economy rise and doom, customer taste, cultural differences, climatic conditions and the buying behaviour of customers. Mcdonald’s is a customer oriented business focuses on the service, quality, processes and the accuracy of the service delivered to customer. McDonalds tends to provide universal taste of food to customers despite of their regional differences. It promotes diversity among its employees and believes in equal opportunities to its employees. Regular Training and development of the staff at the operational and management level gives it a stand out position in the market. Innovation and the TV Endorsement and its target market and motto ” I m Loving it ” makes it a standalone brand among the customers. To retain Customers Mcdonald’s is regularly adding new menu its list and to adapt to cultural differences it follows the culture of the country Like having separate entrances for ladies in the Muslim Countries., to respect religious beliefs of the people it is adapting religious beliefs of the community as serving Halal food in the Arab Countries and Not serving Beef in India. To reduce Carbon Emission promoting Recycling, to save water use recycled water in toilets, to save trees reduce the packaging paper and tray liners and also recycle paper for packaging. For survival and sustainability it follows the local wage rate, local suppliers, local legal and taxation system, and local ethics.

Task 3.3.

Create a range of feasible options as the basis of future organizational strategy.

Mcdonald’s strategy is about the fresh and quality food to customer with friendly service. Mcdonald’s “plan to win” and target customer with the universal taste respecting the religious and cultural beliefs. With the environmental issues Mcdonald’s is helping to promote cleaner streets by sponsoring bins in conjunction with the council and also initiating people to get the Rubbish in Bin By Using “Bin it ” motto. McDonald’s is also getting in recycling revolution by using the waste oil to get bio diesel .In its motive to Save energy and water it is getting waterless urinals in the washrooms to save water and are trying to use the recycled water. For the packaging of the food it is using more than 82% of the recyclable material and trying to cut the 10 cm of the trayliners used to serve customer which eventually is saving about 84 tonnes of paper every year. McDonald’s is also working for the animal welfare so that that animals are given the free field to roam around and is using free range egg for it’s breakfast menu. ,it is also using the organic food to promote healthy food and also using fair trade coffee beans to help the farmers of Africa.Last but not the least Mcdonald’s is sponsoring the london 2010 along with the coca cola and cadb ury.

Mcdonald’s will still follow the strategy of plan to win and keep on improving its quality, service , speed and accuracy .along with the training and development of employees .

Conclusion :In the above assignment discussion has been made over Mcdonald’s and its policies and strategies over the future which will them to sustain in the future. Though it is a market leader but by showing its concern over the carbon emissions and the work ethics it is showing the great deal of responsibility towards to society . The moral duty is fulfilled by employing diversity and proper training and development. It believes in the equal oppurtunities to everybody And require great commitment from its people to maintain the standards of service ,quality and friendliness so that people can say “I m loving it”!!!!!!!!!