Question One: Remote Environment
McDonald shares its stories of growth right from the moment when Ray Kroc began the franchising and leasing trademark in 1955 (Ruggless, 1998). The company having developed a loyal domestic reputation among the folks saw a quick growth in the industry through diversification in the foods they served. For instance, Ruggless (1998) notes that the divesting model of the company change from ordinary production of hamburgers to serving of other fast foods like salads, coffee, fruity juices, crisps and other foodstuffs that were in high demand from the consumer base. There was also the idea of collecting royalties of the members who were transacting business on behalf of the company (Sheehan, 2006). Reports indicate that up to 15% of McDonalds market hold is solely owned by the mother company. This is through the collection of fees, rent, commission-based pay from the franchisees all over the world. The company also has strong strategic plans and position in the market.
The company utilizes the positions occupied at gas stations, along highways to target long distance truck drivers and in estates (Sheehan, 2006). The company is also utilizing the model of drive ways and on home delivery for some of its clients. Recent research shows that the company has also embarked on radical campaigns and diversification in its production by changing needs and demands to match those of the consumers. For instance, the continued lifestyle changes have seen the company indulge in more healthy servings rather the usual fatty hamburgers and pizzas. This is a strategy that has kept the company in an upwards trend. With increased inflation and the recent 2008 economic recession, there have been significant impacts in the fast food industry. One of the key factors that have affected the fast food industry is the rising commodity prices in corn, and other vital commodities used in the fast food industry. Although critics think that the fast food industry was not affected with the recession to a large extent, the economic slump of the dollar and the global downturn of economies hurt the industry through inflated commodity prices, high production costs and internal factors of operations. Production was, therefore, expensive forcing some to exit the market amid increased competition in the industry.
Ruggless (1998) observes that, with increased unemployment in the world, the market has suffered the impact as most people do not have the required purchase power of the fast foods. However, the market for the working class has been stable since they are the targeted. The dwindling exchange rates also affect the level of financial muscles of various companies through the purchase and acquisition of commodities. This has increased the operation expenses, the employment spending and eventual reduction in the turn over that is made.
Question Two: Social-political factors affecting the fast food industry
There are a number of social factors that play a lot of influence in the growth of the fast food industry. Take for instance the increased media coverage of the unhealthy risks posted by eating fast foods. Johnson (2009) posits that the fast food industry has been shortlisted as a leading factor promoting obesity and other lifestyle conditions globally. This has hurt the industry as many people begin to shun fast foods. This has led to possible market crunch and increased low purchase power from the consumers. The working styles of most people have also changed a lot. Most of the working class work late into the night and with the incumbent 24hr economy, the fast food industry, is gaining more recognition among the working folks. Most of them prefer fast foods unlike the members who are always at home. Demographic information on fast food industry by Sheehan (2006) indicates that most young people between the ages 6 and 35 years are the most active consumers of the foodstuffs. This, therefore, means that with increased media coverage, which apparently is most followed by the same age difference may possibly lead to a further decline if the people embrace it to the latter. Most world economies are growing, and the political governments are setting higher minimum wages for their workers so as to improve their lifestyles (Sheehan, 2006). This trend is likely to increase the number of people who purchase the foods stuffs since the large majority will be able to afford. Therefore, with increased class mobility and economic empowerment the future of the industry may be plump. Increased technological growth through the social media networks has also had a positive impact in the industry. This is through marketing opportunities that can be utilized. However, bad reports by the media can also be spread through the new technologies leading to a negative impact on the industry.
QUESTION THREE: Fast food industry
Product cycle
The growth of the fast food industry is can be traced from the early 50s when most people began to embrace the idea. Although the business, targeted highway users like long distance truck drivers, the fast food industry, came to be embraced by many people with time. The growth matured in the 70s, and today the industry is a booming business in the whole world.
Major players
There are key players in the fast food industry. Sheehan (2006) notes that the McDonalds is one of the biggest fast food companies in the world. There are other members like the Mc cafe, the Yum brads (Yum), Starbucks, Happy Meal, Wendys, and Burger King. According to Johnson (2009) the McDonalds is the leading fast food giant in the US with a 50% market share. With increased market opportunities in the international market, there have been numerous competitions to enter the market. However, the similarity in product service does not give the new entrants to market a competitive advantage. This means that the same pre-established industries make more than the new entrants due to the trust and confidence from consumers. This makes the entry into the business more difficult and unpredictable (Ruggless, 1998). The industry continues to face challenges like the negative media reports on the effects on health that have harmed its business. Although most of the brands have incorporated healthy eating foodstuffs, most people now tend to avoid the fast foods. There is also the challenge of commodity prices and saturation of the market by different industry players. This leads to serious competition in the industry and hence less profit margins.
Question THREE: The McDonalds
The company’s success under Turner is attributed to the various strategic readjustments that Turner introduced in the company. Sheehan (2006) observes that he introduced the new manuals of cooking, the staffing policy and introduced the right optimal shits required for essential production. The manager is also accredited with the revolution of McDonald advertisement when he brought in the Ronald McDonald fictional character (Ruggless, 1998). Reports have indicated that nearly 96% of children in America identify with the character apart from the Santa Claus. The reception by the customer base had a lot of good on the progress of the company as the sales and expansion grew exponentially during Turners period.
Under Greenberg’s reign, the company exhibited trading lows of close to 7% of the previous selling. The manager introduced a new menu of production which was the only company centred leaving out the customer needs (Sheehan, 2006). This was the beginning of the downward trend. There was also a widespread accusation of McDonald by health reports as the principle causer of obesity in children, in America. Greenberg did not counter the suppurating reports and hence the company’s sales declined further. Critics of Greenberg hint that he failed to manage the work staff and consistency and vision of the company as held by the successor. The return of McDonald in the business industry has been marked by various strategic positions. For instance, Johnson (2009) points out that Skinner re-evaluated the principles and values upheld by Turner and Kroc. Skinner also adopts the healthy eating option to counter the media reports about McDonald’s cause of obesity and lifestyle diseases. There is also the use of organic expansion, as opposed to the purchase of established businesses (Johnson, 2009). Skinner started with the test of the Mc Cafe in Evansville inn, which has proved a success. Major reforms in the working policy have also seen the company realign itself in the future of the business.
McDonalds should focus onto the future by putting emphasis on the lifestyle changes in the world demographics. This should be by adopting healthy products and services and perhaps diversify into unexploited markets. The investment in the espresso coffee drinks posts market risks as the drinks have yet to gain popularity among people. There is also intense competition in the market with already established brands. This presents risk hence casting an unpredictable outcome.
Conclusion
The McDonalds case study reveals more than just an investment giant in the fast food industry. While there are mistakes that have been noted in the previous management, there are fresh insights advanced by Skinner in achieving a return to the winning policy of the company. Countering media reports and adopting healthy foodstuffs forms the crucial re-adjustment of the company. This coupled with better management under Skinner have seen the company revamp its trade margins by wide margins. The company is also able the competition from other fast food industries through media coverage and owing to the brand awareness and establishment in consumers.
Johnson, F. (2009). McDonalds building new Utah locations, remodelling others. The Enterprise, 38(34), 5-5. http://search.proquest.com/docview/229165185?accountid=45049
McDonalds case study. Anti Essays. Retrieved May 24, 2012, from the World Wide Web: http://www.antiessays.com/free-essays/18080.html
Ruggless, R. (1998). Arizona fast foods. Nations Restaurant News, 32(4), 26-27. http://search.proquest.com/docview/229300738?accountid=45049
Sheehan, M. (2006). McDonalds in crisis: A comparative analysis in a national organizational context. Competition Forum, 4(1), 221-227. http://search.proquest.com/docview/214858871?accountid=45049
