Impact Of Innovation On McDonald's Profitability - Essay.

Problem Statement

Question:

Discuss about the Impact of Innovation on Profitability of McDonald`s.

This research proposal intends to analyze the impact of innovation on McDonald`s profitability. McDonald’s is a famous food chain around the world. However, the competition for McDonald`s is increasing day by day, as there are several food chains such as- KFC, Dominos, and Subway, which are giving a tough competition to McDonald’s. In order to entice the customers, it is important to provide such product or services which are different from the competitor brand. Innovation is one of the ways that can help in providing different product to the customers and gain competitive advantage.

The research proposal includes the problem statement which provides detail about the problem which insists to perform the research; aims and objectives of the research, conceptual framework, methodology for research, the budget for the research and organization of research.

Competition among the business organizations is increasing day by day. In order to entice the consumers and to enhance the sales and profitability, organizations are adopting innovative strategies and practices (Shukla, 2017). Through innovation, an organization can make changes in the business operations, modifications in products and strategies etc. Innovative products which have different attributes, such as- new taste (food product), new packaging, new design etc. The better innovative product is generally appraised by the customers.

The main problem that insists to carry put the research is to study the impact of innovation on McDonald`s profitability. It is important to analyze the impact of the innovation in the product of McDonald`s, to assess whether the innovation will enhance the profit volume or not. Hence to solve this problem, the research will be carried out.

Aim of the Research- “This research proposal`s aim is to study the impact of innovation on the profitability of the McDonald`s”

The objective of Research- The objective of the research is related to the research aim. When the objectives of the research will be accomplished, then it will support in reaching the aim of the research ( Bougie & Sekaran, 2016). The main objective of the research is as follows-

• Study the McDonald`s product menu.
• Analysing the impact of innovation on McDonald`s profitability.
• Evaluating the impact of adding a new product in the menu list of McDonald`s.

Research Questions- The research will intent to find the answer to the primary question i.e. - What is the importance of innovation in regards to the enhancement of profitability for McDonald’s?

The other important questions which are required to be answered through the research are-

• Will product innovation be helpful for the McDonald`s?
• Is there any requirement of product innovation

Justification of research for McDonald`s

Aim and Objectives of Research

Technology along with innovation has come up with extreme results for business organisation in terms of their business operation management. In order to manage business activities or operations, there are various innovative ideas or innovative technology has been adopted by business organisations. Therefore innovation in business organisation has become topic of interest for many researchers.

The research is important to be carried out as there are a number of benefits of applying innovation in the business. Innovation in perspective to the business organizations can be related to the adoption of the new technology system, strategic innovation, manufacturing innovation etc. This research has an objective to analyze the appliance of innovation and its benefit for McDonald's in terms of enhancing the profitability (Cuellar, 2015). Through this research, McDonald`s will be able to assess the importance of adopting innovation in the product list. Through the research, it can be evaluated that which type of product shall be manufactured by McDonald`s for its customers. As innovation in the product by considering the customer`s taste and preferences, will provide profit to the McDonalds. As effective innovation will help in enhancing the sales and enhancement of sales will lead to profit maximization. The research will also be beneficial for the McDonalds as through the research result, the areas related to the risk for business can also be identified (Kaufmann & Ruediger, 2014). Subsequently, strategies could be developed by McDonald's to mitigate those risks which can become a hurdle in adopting the innovation. In addition to this, the other benefits which can be availed through the McDonalds after completion of this research are- improved customer satisfaction, gaining competitive advantage, support and encourage diversity.

Potential output of research

The expected output of the research is as follows:

1. The benefits of innovation for McDonald`s
2. Risks associated with innovation, that may cause issues for business
3. Preferences of customers, as what innovation they want in the product
4. Overall impact of innovation on McDonald’s business

Innovation means adoption of new ideas, strategies for the better mental and for increasing output. It is a very complicated procedure which requires time and effective manpower. Innovation is mainly applied to increase the productivity of the company's product and also to increase the profit graph of the concerned. Under this importance is given to improve the quality of the product, goods used in manufacturing, effective use of management, achieving the set goals, customer satisfaction etc. Innovation is a time con process but it immensely helps in expansion of consumers in the market. It is an important aspect for the growth and production (Cuellar, 2015). Under this process, new technologies are undertaken to increase profit and also to satisfy the consumer.

Competition and Innovation

Innovation not only helps in the betterment of consumer's live with innovative ideas and effective management. Management's mainly focuses on the consumer. They use to take feedback regarding their products. By this, they come to know whether the existing product needs any change or quality improvement etc. Effective management plays an important role in quality improving the product. Management's main aim to make effective strategies for product modification (LOPEZ, 2015).

In context to social aspects, innovation supports in forming new methods for joint venturing alliance creation, flexible work hours, joint venturing, and creation purchasing power of buyers'.

The two broad classifications of innovation are- Evolutionary innovations is also regarded as dynamic or continuous or evolutionary innovation, which brings about through various upsurge advances in processes or technology. On the other hand, revolutionary innovations which are also known as discontinuous innovations; these are frequently disruptive and new (Wiech , 2013).

The types of innovation can be differentiated on the basis of 10 categories, which are:

• Profit model – How the price of the service or product is set by the company in an innovative manner to gain profit. For instance, innovation done by Gillette with razor and blades model.
• Structure –Innovation in the structure of the company. For instance, innovation is done in organization`s structure, such as improvement in the formal structure of the organization to make it flexible( Bougie & Sekaran, 2016).
• Network – Innovation can be done by the organization in regards to external relationships and partnerships. For instance, a collaboration of Toshiba with UPS for repairmen of Toshiba laptops.
• Product performance – Developing a new product that comprehends new features. For instance, transparent vacuum cleaner launched by Dyson without any bag.
• Process – Innovation in the process to carry out things in a different manner. For instance, the process of car hire was completely changed by Zip car(Baer, 2017).
• Product system – Innovation in the product system is one of the methods of innovation. It is related with how the product of an organization connects. For instance, a group of independent developers was being used by Mozilla to create its plug-ins and Firefox.
• Service – Innovation related with services, such as value added services or additional support to the clients or customers. For instance, free delivery of products to the customers.
• Channel – This type of innovation is related to the way an organization grasps the market. For instance, Amazon provides a service to users for ordering and downloading Kindle book in less than two minutes.
• Brand – Innovation in context to the brand is related to the promise made by the company. For instance, many companies make a promise that their customers will not be disappointed with the product or services(Beard, 2014).
• Customer Engagement – Another innovation is related to the engagement of customers. For instance, the experience of clients is used to be valued and the emphasis is given on providing a pleasant experience to the clients with innovative manner.

It is confirmed that an organization can pursue innovation in every single structural function – for e.g. in HR, Marketing, Sales, and Operations. As a result, each and every department might have distinct innovation metrics and objectives. In short, everything can be innovated; however, it needs a creative idea and some resources.

Conceivably it is more supportive to state that innovation is of two type – successful and unsuccessful. Innovations related to successfulness facilitates in improvising value for the business in addition to the customers. Unsuccessful innovation does not provide value to the customers and to the business.  Successful or unsuccessful innovation differs by industry, on the other hand, in general, the launch of new products majorly fails to come across their objectives.

Innovation is almost placing an approach or idea into action. Innovation can be generally described as ' effective exploitation of ideas in a commercially way'. Positive innovation mainly concerns about forming or adding value. Innovation can be done through: improvising existing products, services or processes or (process innovation), or by producing new products, developing services or processes of value, which has not been in existence earlier (product innovation).

Refining or changing business processes in order to upturn competence and efficiency, or to empower the business to prolong the range of existing products or services. Manufacturing a new product or developing a service may facilitate the business in meeting the requirements or demands of the consumers. Beside this, it may also facilitate in creating value to for existing services or products. Innovation also helps the business organization to compete with the competitors; as by offering an innovative product or services organization may gain competitive advantage (LOPEZ, 2015).

Justification of Research for McDonald's

In whatever manner innovation is carried out, it intends to a creative process. The concepts or idea for innovation can come from several ways, such as-

• Inside the business – for e.g. from sales staff, in-house designers, employees etc.
• Outside the business- for e.g. media reports, customers, market research insights, suppliers, or from contacts at research organizations

The successful idea for innovation derives from purifying those several ideas, classifying those ideas in such a manner that the business will lay emphasis on and smearing funds and assets to exploit them.

Benefits of innovation- Innovation offers a large number of benefits for the business organizations, such as:

• Increase in profit margin
• Product differentiation
• Satisfying needs of consumer
• Markets development
• Personalized services
• Product expansion
• Retaining or upturn in market quota
• Securing a market strategic position
• New business prospects
• Rise in competitive advantage
• Use of economies of scale.

Besides the benefits, innovation also brings risk for the business, such as-

• Product may not be accepted by the market;
• Innovation requires high investments, which may be not paid back for the duration of the product lifecycle(Cuellar, 2015).
• While innovating a product or service, it requires excessive deliberation of resources. In case, attention is not paid to the resources then while the innovation process, then wastage of resources may occur; which is a risk for the business.
• When the innovation is carried out in a partnership, then there is the possibility of transfer of risk to a certain partner.
• Company becomes dependent particularly on the new product

Innovation is not at all times what is required by the world. Many innovations are not being valued by the customers, and this resulted as insolvency of business organizations. The organizations which failed due to innovation are not recognized by the individuals, however, the successful innovations bring positive impact on business (Kaufmann & Ruediger, 2014).

The scarcity of innovative ideas in the business organizations is not there. As employees working in an organization have new ideas that may bring success in a particular or whole area of business. However, it is up to the management, whether to accept the innovative idea or not. Stick on an old concept in perspective to the business is not always good. As consumers need some change in the product or services, and this need of consumer can be fulfilled by offering them a new product or service (Beard, 2014). Employee`s ideas or concepts shall be considered as a suggestion, as it may help the business organization to gain success. Management shall determine a collaborative approach to make decisions regarding innovation and to move ahead from one phase to the next phase of the innovation process. This could be done by involving employees from different departments of the organization, as well as concerning the consumers. Involvement of employees are important as an innovation can also impact on the employee’s performance and other aspects (Baer, 2017). Therefore, in order to persist, business organizations must develop, and must innovate its processes. The role of management in context to supporting innovation should be:

1. Providing suggestions to employees regarding innovations and helping them to assess the areas which require innovation.
2. Hiring applicants who are creative and have potential to actually innovate(LOPEZ, 2015).
3. Displaying flexibility in context to the allocation of resources for innovation.
4. Showering reward to employees, who have given a best innovative idea.

Innovation by the business organizations shall also be done by considering the needs and demands of the customers. As business organizations have an objective i.e. satisfying the needs of customers. For instance, by satisfying customer`s demand and needs, sales can be escalated and this in ten will facilitate in an upsurge of profit for the company. Hence while developing an innovative product or service, it is important for the business organizations to analyze the needs, preferences, and demands of the customers. The product shall be developed accordingly (Jajaee, 2012). 

Potential Output of Research

In order to deliver value, it is important for innovators that they should consider that all new ideas or concept are not certainly good. It shall be acknowledged by the management that their clientele may be superior judges of the subsequent best thing (i.e. innovative product). For each and every organization, the meaning of innovation is different.  As for an instance, the organizations which have a profit-based motive, consider innovation as a magic wand; which intensifies profitability for the business.

The nature of research is qualitative. Hence, the qualitative research methodology will be followed for collection of data and analyzing the data.

Universe- The universe for the research from which the sample will be taken is customers of McDonald's in Australia.

Sample- Sampling is the process in which total population is divided into some manageable numbers and on which data collection technique will be applied. The number of samples for the research will be 500 customers of the McDonalds in Australia. Individuals who use to visit McDonald`s on a regular basis will be approached for the research, this will help in gathering relevant data for research.

Sampling technique- There are many sampling technique that can be used to divide total population and then select sample from the same. There are simple random sampling, stratified simple sampling and many other many other. In this research, in this number of samples is going to be selected or taken by using simple random sampling technique. Regular customers of the McDonald`s will be selected on the random basis ( Bougie & Sekaran, 2016). Approaching this sampling technique will be supportable for the research; a number of respondents can be selected randomly without any biases.

Data collection- The data will be collected through primary methods of data collection. There are a number of methods that can be approached in order to collect the data but in this research we will be using collected from survey or questionnaire. The collected data is used to be analyzed in order to reach the conclusion. Survey technique will be used to collect the data (Olsen, 2011). In the survey, a questionnaire will be prepared to gather the data from the respondent samples. The questions will be linked with the research question, so that objective of the research could be accomplished. The data collected through the survey will be asserted in order to get relevant information which can be analyzed through data analysis procedure. In questionnaire, both closed ended and open ended questions will be asked in questionnaire.

Types and Categories of Innovation

Data analysis- Collected data will be analyzed through statistical measures. The data will be collected in descriptive form; however, there will be some figures that could be analyzed through applying statistical techniques ( Wetcher, 2011). This technique will be approached, as statistical analysis provides better results when a number of sample respondents are more.

Organisation of study

The research will be organized in the manner stated below-

• The chapter first- It is related to the introduction of research.
• Chapter second- It will provide a detail information about the research problem.
• Chapter third- It figures out the objectives, aims and the questions of the research.
• Chapter fourth- It includes the justification for the research, besides the potential outcomes of research.
• Chapter fifth- It includes the conceptual framework for research i.e. literature review
• Chapter seventh- It comprehends research methodology which includes sampling technique, data collection method, and data analysis.

In this section of undertaken research on McDonalds, cost estimates will be made. In every research activity there is some cost or expenses are involved and all of these cost or expenses come under the ambit of project budget.

The cost which will incur on the research is stated below:

S. No.	Activities	Cost (AUS$)	Expenses Justification
1	Conceptual framework	$ 500	Expenses will incur on finding literature relevant for the research.
2	Preparation of Questionnaire for survey	$ 800	To gather data, questionnaire will be prepared with the help of an expert. An amount of $800 will be incurred on paying the fees to the expert for his or her service retendered in designing questionnaire.
3	Analysis of data	$ 1600	The collected data will be analyzed through the statistical measure, and this analysis will be made by a statistical expert. In order to get the services of the statistical expert, $1600 will be incurred.
	Total budget for the research	$ 2900	The total cost for the research is an estimation which may vary from the cost that will incur in real to complete the research.

Overall cost that is required to be incurred on the research is $ 2900.

Activities	Initial date of Activity	Activity will be competed on	Total duration for achievement of activities
Detailed Problem Statement	09/01/2017	09/04/ 2017	4 days
Research aim, objective and question	5 September 2017	7 September 2017	3 days
Project Justification	8 September 2017	9 September 2017	2 days
Potential outcome of research	10 September, 2017	14 September, 2017	5 days
Conceptual Framework/Literature review	15 September 2017	22 September 2017	8 days
Research Methodology	23 September 2017	26 September 2017	4 days
Total days took to complete the activities	-	-	26 days

Gantt chart

References

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