Evaluate the performance of their current (or past) strategy by identifying their vision, mission, values, objectives and strategy. Examine the external and internal fit. Assess potential impact of external and internal fit on performance against their objectives. Recommend changes to improve their performance.
McDonald’s strategies are developed on the basis of gaining competitive advantage in the international fast food industry. McDonald’s is known as the biggest fast food restaurant chain in the international fast food industry. In order to maintain its acquired position in the target market, organization has adopted intensive growth strategies. These strategies are also useful in the development of business and expansion in the global market (McDonald’s, 2018). Strategic objectives of McDonald’s dictate their operational activities which are directly linked with enhancing organizational performance in the target market along with meeting with the dynamic needs of its target and potential audience. In this report, McDonald’s current strategies will be discussed along with their mission, vision and objectives. Apart from this, their strategies will also be compared with their primary competitors i.e. KFC and Hungry Jack. Further, report will focus over the evaluation of external and internal environmental forces’ impact over the McDonald’s performance and over their strategies. The last part will discuss the strategies through which the organization could improvise its performance in order to gain desired goals and objectives.
McDonald’s have adopted generic and intensive strategies for accomplishing their tasks and for developing an effective position in the international fast food industry. McDonald’s is engaged in continuous improvement process in relation with improving their policies and the strategies to meet up with the market trends and customer requirements (Aaker, 2010).
McDonald’s generic strategy relates with the cost leadership strategy. This strategy is one of the effective models of Porter’s model. Under this strategy, prices of the final products are reduced by reducing the profit margins or by minimising the cost of production. In relevance to this, McDonald’s delivers their products and services at cheaper rates as compared to its primary competitors i.e. KFC and Hungry Jack. Though, McDonald’s also uses product differentiation as supportive of alterative generic strategy. This strategy is useful for making one company’s products distinct from its primary competitors’. Apart from this, product differentiation strategy is effective enough to enhance organizational performance along with gaining competitive advantage in the target market. For example: McDonald’s McPuff, McVeggie, etc. are its unique products and with this, organization has developed its unique image in the competitive business environment. Vertical integration is another generic adopted by McDonald’s to strengthen its strategies and this strategy is linked with the cost-leadership generic strategy (Akaka, Vargo & Lusch, 2013).
Intensive strategy adopted by McDonald’s is also known as intensive growth strategy. Following are certain crucial growth strategies which makes McDonald’s biggest fast food restaurant in international market:
- Market Penetration: This is the primary strategy of intensive growth strategies utilised by McDonald’s. With the help of this strategy, organization increases its customer base in the existing market by launching new and innovative products for other customer segments. The primary objective of adaptation of this strategy is global expansion. McDonald’s generic strategy supports this growth strategy because low costs and low prices sanction the firm to easily penetrate markets.
- Market development: When McDonald’s entered the fast food industry initially, market development was their primary strategy in terms of intensive growth strategy. But now things have been changed because now McDonald’s is present is every part of the globe except Mongolia, some parts of Middle East, west Asia, and African Countries and now market development is used as the secondary strategy in terms of intensive growth strategy. The main motive of this intensive growth strategy is to establish organizational image in the new locations such as expansion of McDonald’s in African and West Asian countries (Angeloska-Dichovska & Mirchevska, 2017).
- Product Development: This strategy has been used by McDonald’s to support their intensive growth strategies. In order to execute this strategy, McDonald’s needs to produce new and innovative products time to time such as McCafé. This strategy is also used as the defensive strategy so as to maintain the acquired position in the market as well as to uplift its position in the same market by producing unique and innovative products (Armstrong, et. al., 2015).
McDonald’s Vision, mission, values and objectives
McDonald's Brand vision is "To be the best quick service restaurant experience". In relation to being the best means providing high quality, service, cleanliness, and value, so that every customer in every restaurant smiles.
Apart from the vision, organization mission is "Is to be our customer's first choice, when it comes to, top quality products, outstanding service / cleanness and great value for money " (McDonald’s, 2018).
MacDonald’s objective list includes serving delicious and qualitative food items quickly so that customer could experience friendly environment. Apart from this, organization has also expanded and diversified their product offering in relevance with targeting new customers. For this, they have concentrated over producing healthy food items such as healthy burger in the name of McVeggie. Customisation has also been adopted by the organization so that consumers could consume what they prefer to. Their all new range in breakfast is another attractive option for their target audience which has helped the organization to gain success and growth related objectives (Oana-Luminiþa, Eugenia & Camelia, 2011).
Values of the organization also relates with the customer’s satisfaction and their choices. As customers are crucial factor for the organization to attain success and growth, thus, it is essential for them to fulfil their needs by providing quality along with their choices (Cornelissen & Cornelissen, 2017).
These strategies, goals and aims of the McDonald’s differs it from its competitors i.e. KFC and Hungry Jack. Whereas KFC and Hungry Jack fulfils its target audience’s needs but the prices of their products are quite high as compared with the McDonald’s (Czepiel & Kerin, 2012).
External fit is the alignment between external environmental conditions with the organizational strategies and practices. McDonald’s HR strategies are designed in such a manner so that external environmental conditions could not affect organizational performance and making strategies of an organization as external conditions is known as external fit. External fit for McDonald’s are quite similar with other companies of fast food industry. Using qualitative raw materials, consideration of consumer’s choices, preferences and needs, other external factors are adopted by McDonald’s to make their strategies effective and efficient to gain positive outcomes. Though, McDonald’s strategies and policies make him stand separate from its primary competitors because they have adopted cost leadership strategy and this is the major reason for them to enhance their customer base (Fischer, et. al., 2011).
Whole industry’s value chain and internal approaches matches with each other because all are key players of the international fast food industry. Whereas, McDonald’s has adopted quality assurance with customisation option in their product range to stand out from the competition as well as to make a separate position in the target market. This has also helped the organization to develop appropriate image in the customer’s mind-set. Apart from this, organizational approaches towards its suppliers and distributors are also unique from KFC and Hungry Jack. McDonald’s pays faster as per their competitors to its suppliers which have helped them to develop appropriate relations with the suppliers. Organizational internal communication system and approach to analyse customer feedbacks are another crucial factor through which organization proves that they are the deserving candidate for being on the top on the international fast food industry. As per this approach, customer’s feedbacks and complaints are taken seriously and quick resolutions are also being provided to them in order to maintain effective customer relationship (Greer & Ferguson, 2011).
Porter’s five forces
McDonald’s have acquired the position of global leader in terms of international fast food industry. With the help of Porter’s five forces analysis, organization will be able to determine its market image and position as compared to its competitors. With the help of outcomes, organization will be able to determine the lope holes available in their strategies and quick steps could be taken in relevance with resolving them as soon as possible so that organizational performance could not be impacted (Gregor & Hevner, 2013).
Due to saturation of the fast food market, McDonald’s faces aggressive competition from KFC and Hungry Jack. With the help of this force, organization could determine how its competitors are affecting organizational performance and image in the marketplace. The major factors due to which McDonald’s needs to face intense industry rivalry are:
- Large number of firms in fast food industry (Helms & Nixon, 2010).
- Aggressive competitive strategies used by them
- Low switching costs
Bargaining power of buyers
In order to gain success and growth in the fast food industry, it is necessary to address the buyer’s needs and their barging power. This is because large number of firms is available in the markets who are dealing in almost same type of products. Following are the elements through which buyers have strong bargaining power:
- Low switching costs
- Large number of firms in the market
- Huge substitutes (Johnston & Bate, 2013).
- Large number of suppliers
- High overall supply
Suppliers have a huge involvement in the success and growth of a business. In relation with McDonald’s scenario, supplier’s bargaining power does not much affect organizational performance because they purchase only raw materials from suppliers, rest secret formulas are their only through which they produce delicious and qualitative fast food items (Dobbs, 2014).
Threat of substitutes
Substitutes have a great impact over organizational performance and this is due to large number of firms involved in the fast food industry. High substitute availability and low switching costs are certain factors involved in the threat of substitutes for McDonald’s (Rothaermel, 2015).
Threat of new entrants
New entrants in this industry would impact over the organizational market share. This is because, every new organization will offer diversified products at low rates for setting up their position in the market which will create negative impact over the existing companies. In order to avoid this type of issues, organization needs to adopt certain strategies through which their acquired position does not get affected.
Political: International trade agreements, taxation policies, changes in the regulations by the government, etc. factors should be considered while developing strategies because organization is engaged in the international market, thus, consideration of all governmental rules and regulations is necessary (Kim & Hyun, 2011).
Economic: Economic factors such as inflation rate, economic growth, purchasing power of consumers, etc. Impact of these factors over organizational performance is huge, thus, it is required to be considered before developing or modifying current business strategies of the organization
Social: Social factors such as customers demand, tastes, preferences, etc. carries huge weightage in fast food industries. Thus, McDonald’s needs to consider these aspects in order to develop appropriate relationships with the customers along with gaining desired goals and objectives.
Technological: Moderate technological developments, business automation are several aspects related with the technological factor which needs to be adopted by the organization so that the desired goals could be attained (Chemat & Khan, 2011).
Environmental: McDonald’s needs to contribute their earning towards environmental programs, adaptation of sustainable business strategies and over protection of environmental conditions. This will create better image of the organization in front of the society as well as the chances for sustainable growth and development will increases for the organization (Mohammed, Rashid & Tahir, 2014).
Legal: Legal factors such as legal considerations in relation with the labour employment, minimum wage law, health regulations, and animal welfare regulations must be considered so that appropriate strategies could be developed. This will help the organization to develop its effective image in the target market along with avoiding various types of glitches which could arise due to non-fulfilment of the above discussed external environmental factors (Johnston & Bate, 2013).
Comparison between KFC, McDonald’s and Hungry Jack
All of these are prominent fast food chains valued by various parts of the globe. Every outlet has their own speciality i.e. if one will search for burgers, he will prefer McDonald’s over all available options whereas in case of fried chicken and related products, one will choose KFC instead of choosing any other option. Whereas Hungry Jack is also giving strong competition to McDonald’s by providing similar types of burgers and other fast food items to its target audience. Hungry Jack’s and McDonald’s target audiences are quite similar because their product and service offerings quite match with each other (Habib, Abu Dardak & Zakaria, 2011).
It has been recommended the McDonald’s to improve their strategies and expansion in their product offerings. The major reason behind this is the similar product offering by Hungry Jack. Following are certain recommendations through which organization could improve its performance:
- Service differentiation: With the help of service differentiation strategy, organization will be able to provide superior services to its target customers. This will help the organization to make a distinct position in the target market along with making better customer relations (Helms & Nixon, 2010).
- Personnel differentiation: In order to deliver high quality services to the target audience, well-trained and qualified staff members are also required. Hence, investment in training and development program is necessary for attaining its desired goals (Mohammed, Rashid & Tahir, 2014).
From the aforesaid information, it can be concluded that McDonald’s business strategies are effective enough through which desired objectives and the goals could be attained. In relevance with the performance, evaluation of their current strategies has been done in this report. McDonald’s is situated in almost all parts of the globe except in some of the African, West Asia and Middle Eastern countries. IN order to expand their business in those parts, product development and certain other generic and intensive growth strategies have been discussed in this report. External and internal fit, porter’s five forces and the PESTLE analysis has also been evaluated so that the organizational policies and standards could be made up as per the external environmental factors.
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