Analysis of the Competitive Environment for McDonald’s with Porter's Force Analysis
Write a Report About a Business Of Your Choice, Analyse Its Internal And External Business Environment And Assess The Role Of Information Technology (It) In Enabling The Organisation To Gain a Competitive Advantage.
A management information system or MIS can be referred to as the computerized system, which consisted of hardware and software and serves as the subsequent backbone for the organizational operations (Fountas et al. 2015). This particular system gathers following data from several online systems, analyses the information and even reports relevant data for aiding in the management decision-making process. It is useful for better coordination, analysis, visualization and control of information. The following objective of this management information system is to increment the profits and value of the business. Several distinct and popular organizations have implemented this type of IT for gaining maximum competitive advantages, and one of such significant organizations is McDonald's Corporation (McDonald’s. 2020). It is a great American fast food organization, which was founded in the year 1940 as a restaurant by Richard and Maurice McDonald.
The headquarters of this particular organization is in Chicago, Illinois, in the United States of America, and presently, there are more than 38000 restaurants in the entire world. The founders have rechristened their respective business as the stand of hamburgers and then turned the organization into a specific franchisee with the logo for Golden Arches that was initiated in the year of 1953 at the location in Arizona (McDonald’s. 2020). During 1955, one of the most famous businessmen, namely Ray Kroc, joined McDonald's as the franchise agent and then proceeded for purchasing the chain from these brothers. Currently, this particular organization is the largest restaurant chain by revenue, and they have been serving more than 69 million customers in the entire world within 100 countries. The major products of this specific organization include hamburger, chicken, milkshakes, French fries, salad, soft drink, breakfast items, wrap, coffee and dessert.
The total number of employees working in McDonald's is around 210000, and they have ensured maximum competitive advantages in the business without any type of complexity. Although the organization is the best known for their hamburgers, French fries and cheeseburgers, they are also featuring chicken items and desserts (McDonald’s. 2020). After consideration of feedback from their customers, they have also added salads, fruits, smoothies and fish to their respective menu. The main revenues of the organizations come from the royalties, fees as well as rent paid by the franchises and even from the sales within the organization operated restaurants.
As per two distinct reports, published, McDonald’s is referred to as the 2nd largest private employer that comprises of around 1.7 million staff after Walmart. One of the major and the most important strategies of this organization is that they utilize updated technology in their business for ensuring that maximum effectiveness and efficiency is being gained without any issue or complexity. Moreover, they have been enjoying their top position for several years and have been using strategies for employee satisfaction to a high level (McDonald’s. 2020). McDonald’s is performing well and has been competing with popular fast-food organizations, such as KFC, Starbucks, Burger King and several others. This report will be outlining a detailed discussion of the competitive environment of McDonald's with the following details.
The environmental analysis could be referred to as a strategic tool, and it is the procedure to identify every internal and external elements that could impact the organizational performances. This type of analysis can entail a subsequent assessment of the opportunity or threat level, presented by different factors (Laudon and Laudon 2015). Such evaluations are required to be translated into the procedure of decision making, and it even helps in alignment of the strategies with the environment of the firm. The environment is inclining the business, and every situational factor helps in the determination of regular circumstances affecting the organization.
Hence, these businesses should continuously analyze the trade environment as well as the market (Shiau, Chen and Tsai 2015). Several tools of strategic analysis are present, which can provide knowledge about the organizational environment. All possible opportunities and threats are being identified in the process, so that the business activities are updated and the business gains subsequent competitive advantages. The organization of McDonald’s Corporation requires to consider their external and internal environments, so that they are able to gain maximum effectiveness without much complexity. Various factors are considered for understanding the current position of the organization in the existing market place to gain high success (Mathooko and Ogutu 2015). A proper analysis of this competitive environment of the organization of McDonald’s with Porter’s 5 forces is being provided in the following paragraphs:
Competitive Rivalry: The first as well as the foremost force of the Porter’s Five Forces analysis for the organization of McDonald’s Corporation is competitive rivalry. This particular force is strong since the organization is one of the most competitive businesses in present situation (Kanakulya and Jinzhao 2017). With several local and multinational restaurants in the world that comprise of the same menu. This distinct competition is eventually becoming powerful with every player within the industry that is striving for the market shares. A specific level of saturation is also being developed in the organization. There are several competitors of this organization of McDonald’s Corporation in all over the world, which include Burger King, KFC, Johnny Rockets, Starbucks and several others. Each and every player is eventually spending on marketing, so that they are able to innovate majorly and also open new franchises for the core purpose of incrementing their subsequent accessibility to the new potential clients. This type of increment in the total number of participants has substantially made this competitive rivalry a stronger force for McDonald’s.
The Threat of New Entrants
The Threat of New Entrants: The second important and significant force of the Porter’s Five Forces analysis for the organization of McDonald’s Corporation would be the threat of new entrant (Koc and Bozdag 2017). This particular force is weak on an international level for McDonald’s, since there exists several distinct entry barriers. For becoming a successful competitor of the organization, this particular entrant will require to make a larger number of outlets in the world that needs a huge capital investment as well as time. Moreover, the respective organization would also have to invest time for quick establishment of economies of scale for becoming profitable and then gain accessibility to the respective suppliers for meat and any other raw material, so that it becomes easier to carry out subsequent marketing and create awareness within the customers. It makes it quite challenging for the new entrants to get into and then provide high competition for the businesses like McDonald’s. However, the similar threat is quite high over a local scale, in which the investments are not high, around two to three outlets are adequate and the economies of scale are being recognized successfully (Kehoe and Mateer 2015). The local outlets could also provide competition and hence this force is moderate for McDonald’s.
Bargaining Power of Suppliers: The third distinct and noteworthy force for Porter’s Five Forces analysis for the organization of McDonald’s Corporation is the bargaining power of suppliers. Different raw materials like potatoes and chicken that are being utilized by the organization on a regular basis are accessible from the larger number of suppliers and different orders of the organization are huge on a regular basis (Simatupang, Piboonrungroj and Williams 2017). Several suppliers are present in the local environment and hence they do not have a chance to giveaway with the organization or even try to force it for increment of its respective prices. Moreover, they can effortlessly and promptly switch the suppliers with lower switching costs. Hence, this particular is weak for the organization.
Bargaining Power of Buyers: Another distinct and important force of the Porter’s Five Forces analysis for the organization of McDonald’s Corporation is bargaining power of buyers. This particular force is strong for the organization. Different buyers of McDonald’s comprise of several subsequent options that are available in the market and hence they might be a in a negotiation position. The buyers could easily switch from any 1 restaurant to the next without any type of switching costs as soon as they are referred to as unconvinced (Prajogo, Oke and Olhager 2016). The customer loyalty towards such fast-food organization is reduced regularly with several competitors. Moreover, the buyers can also protests against any price increment and hence the organization might face turmoil in their business and customer retention.
Bargaining Power of Suppliers
The Threat of Substitutes: The final force is the threat of substitutes. There are several substitutes of food from McDonald’s, such as KFC or Domino’s Pizza. The bakery items are also considered as substitutes of the products of McDonald’s; hence the organization might face high competition while retaining the customers. Maximum of such substitutes are highly competitive in respect to the consumer satisfaction as well as quality and also switching to the substitutes would not comprise of any type of related switching costs (Indris and Primiana 2015). Several health concerns are also raised against such distinct products of the organizations and the customers can complain against their products for not considering maximum health benefits under any circumstance. As a result, it can be referred to the fact the force against the organization of McDonald’s Corporation is stronger.
It is required to include technology in the business for ensuring that maximum effectiveness and efficiency is gained without much complexity. An organization is able to obtain few of the most important and noteworthy benefits from successful implementation of technology in the respective business. Various business applications involve distinct databases, such as SQL servers, few transactional systems like the real-time order entries, electronic mail server such as Exchange and several others. The organization would be able to involve different technology after analysis of their inbound and outbound logistics (Shtal et al. 2018). Proper analysis of Porter’s value chain for McDonald’s is provided below.
The primary activities of this value chain of McDonald’s are directly included in production as well as sale of the respective products for the targeted consumers. Proper analyses of the primary value chain activities could improvise the performances of McDonald are provided below:
Inbound Logistics: It would be extremely vital to improve a stronger relationship with the suppliers as their supports is required for receiving, storing as well as distributing the product (Ansah and Sorooshian 2017). Without proper analyses of these inbound logistics, the company could also face several experiments within the stages for product development. It also emphasizes on all the features of transformation from various raw materials into the finished products. The major examples of these inbound logistics involve retrieving raw materials, storage of input and finally distributing the raw material for initiation of production.
Operations: The overall significance to analyze these operational activities would raise as soon as the raw materials attain and the organization of McDonald’s is ready for processing the raw materials into several end products for launching it within the market. The major examples of these operational activities include machining, testing, accumulating and packing. The proper maintenance and repairing of the equipment also falls under the category (Kraja and Osmani 2015). It also involves both service and manufacturing operations; hence maximization of efficiency as well as improvement of productivity. It even attain reliable economic development and also set for competitive advantages.
Threat of Substitutes
Outbound Logistics: These logistics involve different activities, which deliver the product to the clients through passing from various mediators. Few different activities are warehousing, order processing, delivering, material handling and scheduling (Hueske and Guenther 2015). They could also analyze and optimize the logistics for exploring competitive advantages for better execution of business growth objectives.
Two suitable and important support activities within the Porter’s value chain for McDonald’s Corporation are as follows:
Firm Infrastructure: The first and the foremost support activity within Porter’s value chain for McDonald’s Corporation is firm infrastructure. It eventually denotes a range of different activities such as management of quality, legal matter handling, accounting, and planning and even management of strategies (Zinovieva et al. 2016). The most efficient infrastructure management could enable the organization in optimizing the overall values of the total value chain. The organization of McDonald’s Corporation can also manage the respective activities of infrastructure for the core purpose of strengthening the competitive positioning in the market. As a result, the company will have the capability to gain maximum effectiveness and efficiency without any type of complexity.
Technology Development: The 2ndvital and important support activity within Porter’s value chain for McDonald’s Corporation is technology development. Several distinct activities of the technology are majorly dependent over the subsequent technological support (Bartusková and Kresta 2015). Such technological incorporation within production, marketing, human resource activities and distribution needs the organization in proper realization of the significance of overall technological development. It could be eventually divided into the process and product technological development activities. Few distinct activities of the technology development in McDonald’s Corporation include automation of software, research of product designing, data analytics and technology-supported customer services. The respective R&D department is being categorized in the category of technology development for this specific organization of McDonald’s (Gilbert 2015). Moreover, they can include their major effectiveness and efficiency in procurement activities.
The value-adding activities are those significant activities, which eventually add the values to different customers and the execute three distinct and important steps, which include the step transforming the item towards completion, step to be completed after the first time and finally the customer care for the first step to be done eventually (Zheng and Manoharan 2015). The major value-added activities involve working that the customer would be willing to pay for, working that physically transformation of the product and finally working in such a manner that it is being done apart from the first time. The organization of McDonald’s would be able to deal with different types of issues and complexities after inclusion of different major value-adding activities. These activities would be ensuring that the business would be getting following competitive advantages or benefits.
Bargaining Power of Buyers
The first and foremost principle value-adding activity for the organization of McDonald's would be the successful elimination of wastes. It is required to eliminate wastes from their products so that maximum hygiene is maintained in the food particles and all the customers are highly satisfied in the process. It can be done after implementation of different advanced technologies. Moreover, the respective complexities would be resolved (Bae 2017). They would be able to reduce the waiting time to a high level, and processing of wastes can take place to ensure that the business becomes successful under every circumstance. The defects would also be avoided successfully, and the staff would become highly trained as well as motivated at the same time. It would also simplify the process and then ensure a high percentage of success. The other essential and significant principal value-adding activity for the organization of McDonald's would be the implementation of lean methodology in their business. It would be helpful for them to ensure that they are performing well, and the organization would be following all types of success criteria and ensure customer satisfaction to a high level.
Conclusion and Recommendations
Therefore, a conclusion can be drawn that IT is the significant usage of different systems for the core purpose to store, retrieve and manipulate the confidential information and data. This type of technology includes all kinds of peripheral equipment, software and hardware and are being operated by the limited number of users. As a result, the respective organization is capable of dealing with different kinds of issues and demanding situations efficiently and promptly. The commercial utilization of this information technology can easily encompass telephony and computerized technology. The information technology involves different layers of the physical equipment such as hardware, operating systems, software applications, virtualization and many more.
Several distinct applications execute the programmed instructions for manipulations, consolidations, dispersing and even impacting the datum for following business purposes. The computerized servers are responsible for running the business application, and different servers interrelate with the clients as well as any other server for more business networks. These technologies are also responsible for providing maximum advantages to the business and reduce the issues to a high level. McDonald’s is one of the most significant organizations in the fast-food chain in the world. They have been enjoying some of the most vital and noteworthy competitive advantages in their organization. They hence have been focusing on the innovation and new creativity in the business processes.
Assessing the Role of Information Technology at McDonald's
After analyzing the organization with Porter's value chain as well as Porter's five forces, it is being observed that they should bring out innovation in their products with low costs for better customer retention and maintenance of their position in the market place. They have used information technology for gaining the capability for viewing different changes within global markets, faster than the usual requirement. McDonald’s have been working much more effectively and efficiently for maximizing productivity and hence have obtained fast communication and subsequent protection of records to a high level. The above-provided report has properly outlined the detailed analyses of the McDonald’s competitive environment with various details, like Porter’s five forces and Porter’s value chain.
Suitable recommendations for the organization of McDonald’s for the process of business deploying IT to improve their business processes and enhancement of competitive positioning are provided below:
Streamlining of Processes: The first, as well as the foremost suitable and useful recommendation for the organization of McDonald's to improve their business procedures, would be proper streamlining of the processes and activities. It would ensure that the organizational efficiency is increased after simplification of tasks and also bypassing the unnecessary steps or cutting or waste with distinct modelling techniques.
Reduction of Delivery Lead Time by Process Improvement: Another suitable and essential recommendation for the organization of McDonald's to enhance their competitive positioning is the proper reduction of delivery lead time with the process improvement. After reducing delivery lead time, it would be easier for the organization to make sure that the business processes would be automated and customer relationship systems would be upgraded. Hence, the existing issues would be resolved related to their business.
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