Introduction
McDonalds is one of the largest fast food chains in the world and in the world. The company was founded in 1940 in San Bernardino, California by Maurice and Richard McDonald. The company which served about 68 million people daily, was renamed McDonald Corporation when it changed ownership to Ray Croc in 1955. McDonalds runs approximately 32,000 restaurants in 117 countries and has 1.5 million employees many of whom work for the franchisees (Downie, 2015). 75% of the restaurants are run by franchisees and besides obtaining revenues from sales, the company obtains massive profits from royalties, rents and fees paid by its many franchisees and affiliates (Downie, 2015). This report presents a SWOT analysis and a generic strategy analysis in order to offer a strategic discussion and analysis with the aim of finding out areas of strategic alignment and misalignment. Overall, the aim is to provide recommendations for McDonald to grow and develop.
SWOT ANALYSIS
GENERIC STRATEGY
McDonalds is the largest fast food chain in the world uses its intensive growth strategies to support continued expansion and development. Having establishments in 117 countries, the multinational has tested and tried almost any market in the world and it has vast experience in establishing more restaurants and affiliations in each of the counties and regions where it operates.
McDonalds uses the broad differentiation strategy because at any McDonalds restaurant, there are many services and products on offer although it depends on the location of the restaurant and the owner. One can find a drive through, breakfast menu, lunch menu, and a lobby. In addition, there are some drinks such as the McCafe coffee drinks. The restaurants have Wi-Fi and staff who are multilingual to offer services to people from different cultures. In addition, McDonalds has captured the family unit through products such as “Happy meal” meant for kids. Overall, McDonalds charges higher for its products to help offset the differentiation costs. It incorporates features that continuously appeal to buyers. In addition, the organization pursues a differentiation strategy where its research and development team carefully studies values, needs, behaviors and willingness to buy as it develops unique products and services.
McDonald’s broad differentiation also brings about synergies in that some products can be priced at premiums while many others are lowly priced to attract new customers. The distinctiveness of McDonalds’s products brings about massive customer loyalty who are now presented with a wide array of fast foods and beverages from which to select.
McDonalds also uses vertical integration to ease its cost-leadership generic strategies. The company owns facilities that produce standardized mixtures of some ingredients. Cost minimization followed by continuous innovation supports McDonald’s broad differentiation generic strategy. Product development is a tertiary strategy that has been working well for McDonalds besides the market penetration and market development which are the primary and secondary strategies respectively (Ireland, Hoskisson & Hitt, 2008).
McDonalds overall five generic competitive strategies is cost-leadership a strategy that entails minimizing costs in order to sell at low and affordable prices. A broad section of buyers whon it approches using a low-cost provider. McDonalds is a cost concious culture and it has established a culture of affordable burgers and other fast foods. Employees take part in the efforts to control costs and it maintains an ongoing effort to benchmark the costs in order to avoid and beat the competition from other fast food chains (Ireland, Hoskisson & Hitt, 2008). The company benefits from economies of scale due to mass production and high product differentiaiton which lowers the costs significntly helping the corporation make high profits. The finance department at McDonalds scrutinizes the budget intensively to ensure frugality in that the costs of production are kept within the range, the customers afford products and that the organization maitains profitability regardless of the prevailing conditions.
McDonalds has adopted great differentiation strategies and maintained them for many years because it has mastered how to keep the cost of differentiation low. It has also made it hard for competitors to match up differentiation by making products and services that hard to imitate. In essence it has become relatively easy for market entrants to make burgers similar to McDonalds but the company has over the years created a niche for itself and its products have an aura and uniqueness that can be found nowhere else. Although the burgers from McDonalds may taste the same with those of other companies, McDonalds advertising campaigns influence the consumers to rate McDonalds products as better quality and authentic.
McDonalds has a sustainable competitive advantage over its competitors in that it incorporates some attractive features at a lower cost than its rivals. The company is also able to offer better quality products in comparison to its competitors. In addition, McDonalds is capable of delivering great customer service at a sustainable cost.
DISCUSSION & RECOMMENDATIONS
McDonalds management ought to work on maintaining the many strengths and core competencies that help it to maintain its strong financial position. It has secured for itself massive freedom and high profitability by using a franchise model. In addition, the company has high brand recognition because of aggressive marketing and the fact that it has maintained its position as the global leader in fast food businesses. The company has developed strengths in unique areas such as capabilities to customize the menus to the local culture. As an internal strategy, the organization needs to address quality concerns that emanate from franchising. In this regard the organization ought to invest more in training employees and franchisees. Standardization is also critical to increase customer loyalty. The organization also needs to concentrate more on organic foods which show concern to the environment. Externally, McDonalds needs to be aware of the opportunities that loom as well as the threats that stand in the way. Continuations of a broad differentiation strategy in accordance with the cost leadership strategy are critical in helping the organization address the threats posed by numerous market entrants. They also need to evaluate their stand on healthy foods through simple act such as adding favorite family beverages such soft drinks to many menus.
In the past McDonalds has pursued some unique intensive growth strategies. Market penetration has been working for McDonalds and the company should prioritize this strategy. The company targets to reach more customers in places where it has established some operations. In this regard the company needs to seek more joint ventures, corporate ownerships and franchising as avenues to inject new ideas of customer acquisition and retention. The low costs and low prices are a strong pillar to help the organization get new customer easily in emerging markets and this ought to be a great avenue for the organization to beat competition from market entrants (Downie, 2015).
McDonalds also needs to pursue market development. In the early days the company used market development in which it established restaurants in many parts of the world such as Europe and North America. However, the company needs to develop new markets because in the last two decades many countries in Asia, Africa, South Americas as well as Middle East and Arabia have developed their economies and there is a huge middle class that portends to be reliable target market. As such, the company needs to roll out a massive plan to establish ay two or three restaurants in major cities in developing countries. Since McDonalds is already a global brand, acquisition of market shares in those countries should come at minimal investment in advertising and marketing. The educated and skilled human capital, aggressive businessmen and youthful population are all great factors that McDonalds needs to take advantage of in developing countries.
References
Downie, R. (2015). Who Are McDonald’s Main Competitors? | Investopedia. Investopedia. Retrieved 21 May 2016, from http://www.investopedia.com/articles/markets/102815/who-are-mcdonalds-main- competitors.asp
Ireland, D., Hoskisson, R., & Hitt, M. (2008). Understanding Business Strategy: Concepts and Cases (2nd ed.). Cengage Learning.
Ahlstrom, D., & Bruton, G. D. (2009). International Management: Strategy and Culture in the Emerging World. Cengage Learning.
Love, J. F. (2008). Mcdonald's: Behind the Arches. Paw Prints.
