Individual Project of McDonald’s
Individual Project of McDonald’s
Different organizations belong to different industries. One of the most distinct among them is the food and service industry. Thousands of organizations belong and operate within this industry. It is otherwise defined as catering industry, which provides prepared meals such as restaurants and fast food chains. Food service industry is important when it comes to sustaining the supply of food products in the market. Thus, food service companies are known to influence the people’s eating habits (United States Healthful Food Council, 2012). For many individuals, eating out became a necessity more than luxury. Due to fast-phase life, especially the working population, dining out would help them in obtaining their food needs and at the same time, saving more time that can be used for productivity.
One of the well-known organizations within the food service industry is the McDonald’s Corporation. McDonald’s is a fast food restaurant that has been in the food service industry for more than six decades now. It started as a self-service drive in restaurant that offers few products, such as hamburger, soft drinks, cheeseburger, and potato chips (aboutmcdonalds.com). McDonald’s was able to establish its brand and became the most successful, if not the one of the dominant companies within the food service industry.
Currently, the Mc Donald’s brand focuses on providing service on its more than sixty million daily customers around the world, making the company the largest fast food chain across 119 countries. McDonald’s was able to reach its current market status through application of different marketing and sales strategies that influenced millions of people’s eating habit, regardless of age and socio-economic status.
Many companies, such as the McDonald’s Corporation was able to achieve extra-ordinary success within the market they belong. On the other hand, some of the similar organizations in the industry were able to apply the same techniques, but failed to reach the level of success of their competitors. This is a question that can be answered by analyzing the effectiveness of the Golden Circle philosophy. The idea is to start the question with “why”. The concept of Golden Circle encompasses three questions, such as why, how, and what (Ratner, 2014). The first question aims to identify the business’ core belief, or why does the business exist in the first place. The second question aims to identify how a certain business achieves such core belief, while the third question aims to answer the “what” question, such as what does the company do in order to achieve its core belief.
These questions can be very simple, but according to Simon Sinek, most of the organizations are doing it backwards that they start with “what” (ted.com). By applying the Golden Circle philosophy, organization’s leader will be able to motivate everyone towards the company’s success. Relatively, McDonald’s was able to apply this strategy through value proposition. McDonald’s believe that providing quick and affordable products will help the company in achieving its goals. Therefore, McDonald’s does it by offering lower price without compromising the quality of their products. In return, the company is able to create a distinct fast food culture that combines both affordability and better service, which the people patronize.
Milestone #3 - Determine Sustainable Competitive Advantage
Competitive advantage is an important factor that enables a company to succeed in application of its business strategies (Ščeulovs & Gaile-Sarkane, n.d.). Michael Porter provided a set of activities that are common to most of the organizations. These activities are also known as the value chain, which is composed of five activities. Inbound logistics pertain to the company’s activities in relation to warehousing, receiving, and even their control of inventory (quickmba.com). Another part of the value chain is the operations, which pertain to the activities that create value through transforming inputs to become the business’ final product. Furthermore, outbound logistics are the activities that are applied in order to get the final products to its end-customers. On the other hand, two more activities are part of the value chain according Porter. These are marketing and sales and service. These are the activities that describe how the company is able to present eh product to their customers through advertising, pricing, and choosing the right channel to present the products. Thus, service is the activity that aims to maintain the product’s value, such as providing product support, repair, and other similar after-sales services.
In application, McDonald’s sustainable competitive advantage would be its pricing strategy. Although it offers products similar with its competitors, McDonald’s offer them on a lower price. The company strives to be one of the cost leaders in the industry by offering lower prices that other competitors are not able to offer. In addition, the outbound logistics activities of McDonald’s enable them to deliver their products to their customers through fast delivery service. Generally, the sustainable competitive advantage of McDonald’s is in line with its vision to provide a quick service on a lower price.
Milestone #4 – Value Creation Model
Value proposition is the definition of the value that the company creates for its customers. In order to find a distinct value proposition, there should be an involvement of market segmentation. In this way, the company would be able to who their customers are, along with their customers’ needs and wants for the product. If the value chain talks about the internal operations of the company, the value proposition is about the strategic elements that cater the customers’ needs. Based on Porter’s value proposition, the three legged model encompasses three ideas, such as what customers, which needs, and what relative price (Harvard Business School, n.d.).
The value proposition model can be used in order to build business strategy. The first leg of the model aims to define the customers that the company will be serving, while the second one aims to identify the customers’ needs that the company is going to meet. Thus, the third one is about the pricing strategy that will give acceptable value for the company’s customers, while ensuring the profitability of the business. Therefore, it is the overall in terms of perceived value.
Relatively, McDonald’s holds various factors that make it different from its competitors, which is also a representation of Porter’s value proposition. These factors include locations that are convenient for most of its target market, comfortable in-store facilities, such as the seats and wash rooms, efficient and fast service, consistency in the menu items, the distinctiveness of the products, such as Big Mac, better pricing and value offering, and wide range of product choices that are suitable across different age groups. Overall, the service package that the company offers also meets the three legged value proposition model. Thus, these factors are the main focus of the company in building their business strategy.
Milestone #5 – Applying Porter’s Five Forces Model
Porter’s Five Forces model is a tool that that can be used to understand the strength of the business when it comes to identifying the company’s competitive advantage. This model includes supplier power, buyer power, competitive rivalry, threat of substitution, and the threat of new entry (mindtools.com). Below is the brief explanation using diagram.
Porter’s Five Forces (mindtools.com)
The competitive rivalry in the food service industry suggests that McDonald’s is facing a tough competition due to high saturation of fast food market. The competitive rivalry is about the impact of competing firms within the food service industry. As for McDonald’s case, this element’s strong force is based on various external factors, such as high number of companies and the aggressiveness of different firms. Fast food industry has many companies of various sizes. Also, some large and medium companies are marketing their products in an aggressive manner. Therefore, the competitive rivalry is considered the most significant force of the business.
On the other hand, the bargaining power of the customers is another strong force out of the Porter’s five forces. The company must address the important power of its customers. Thus, this element is about the demands and influence of the customers. In terms of McDonald’s case, there are various factors that enable the customers’ bargaining power to become a strong force. Due to ease of switching from McDonald’s to another restaurant, customers may impose various demands on the company. Relatively, the high saturation in the market, customer may choose other restaurants apart from McDonald’s, thus, many substitutes can be chosen by the customers. Based on the customer’s bargaining power, McDonald’s must create strategies that will enable them to keep the loyalty of their customers. However, the company was able to develop customer-focused strategies that keep most of their customers to purchase their products constantly.
Furthermore, the bargaining power of the company’s suppliers is considered a weak force out of Porter’s five forces. Although this element serves as a weak force, it still influences McDonald’s formulation of business strategy. In relation to McDonald’s case, the suppliers’ bargaining power is based upon various external factors, such as the enormous number of supplier and the high availability of overall supply. The large number of suppliers declines the individual suppliers’ power. Relatively, most of the company’s suppliers are not in control of the distribution network, which is connected to the company’s facilities. Thus, the abundance of supplies, such as the meat and flour reduces the suppliers’ impact on McDonald’s. Therefore, it shows that this element is a minor issue when it comes to the company’s formulation of business strategies.
Another strong force is the threat of the substitution, which is one of McDonald’s significant concerns because of its potential effects in terms of the company’s continuous growth. There are many retail food companies that can substitute McDonald’s, such as local bakeries or artisanal food manufacturers. Thus, the company’s consumers may opt to cook their foods at home. As previously mentioned, it is also easy to switch from one fast food restaurant to another. Additionally, McDonald’s competitors are also striving to achieve their competitiveness in relation to quality, price, and customer satisfaction. Therefore, this element serves as one of the major issues that the company should address by improving their product quality. It is also critical that the threat of substitution must be constantly used by McDonald’s to sustain their competitive advantage over its competitors.
The fifth element of Porter’s five forces is the threat from new players in the industry. This can be considered as moderate force as McDonald’s is already an established global company. However, these new firms may impact the company’s market share. New option for the customers may lead them to either temporarily switch or totally switch from McDonald’s to new restaurant depending on the customers’ first experience with the new competitor. This element is a moderate force due to expensive amount that is involve in building a strong brand, which could match what McDonald’s had created.
Milestone #6 – Develop a Metric Plan
The development of metric plan can help the organization in achieving it goals. McDonald’s was able to create strategic plans that combines the organizational belief and convert it into action plans. The metric plan will be divided into three sub-plans, such as (1) Good Leadership, (2) Good Strategic Plan, and (3) Sustainable Plans. One of the metrics should encompass a good and competitive leadership, which will align the organization’s core values with how the staff can help the company in achieving the goals. Good and effective leaders must hold various characteristics, which are important when it comes to forming and executing the business strategy. Good leadership will enable more ideas coming from the staff themselves so as to form a collaborative approach from both the management and the staff. Additionally, leaders must be capable of expressing the vision and must be committed to business progress. This metric will also enable the facilitation and encouragement of the other employees’ success. The second metric is the good strategic plan, from which it includes gauging the progress towards the achievement of defined goals. Moreover, the strategic plan metric must encompass the intellectual framework of the organization, the sense of priorities, realizable and clear goals, and the practical and coherent steps for execution of the strategy. The third metric would be the sustainable plans. This part of the metric plan will be focused on the sustainable actions of the company, such as focusing on the company’s competitive advantages. In McDonald’s case, the company’s sustainable plans are evidently effective due to its continuous expansion and growth on a global basis. Mc Donald’s is able to sustain its competitive advantage by maintaining the lower price for its products and ensuring that services will be done in the quickest way possible, including its delivery service. Therefore, it is clear that the formulated strategies by McDonald’s were executed accordingly, while focusing on the customers’ needs and wants.
There is no doubt that McDonald's is one of the leading fast food restaurant on a global basis. The company was able to employ the strategies that enables the execution of its competitive advantages in the food service industry. However, there are some factors that the company must constantly include in their formulation of future strategies in order to sustain their lead in the market.
McDonald's penetration in the market may have been successful due to its distinct branding. Although there are numerous competitors, McDonald's was able to influence its customers through application of both internal and external business strategies. One of the techniques is the application of Golden Circle model, which emphasizes the company's core belief that providing quick and affordable service will be one of the significant actions that will enable the company's growth. Thus, this has also been part of McDonald's competitive advantage.
Sustaining the competitive advantage may not be an easy task. Using Porter's Value Chain, the company was able to provide a competitive pricing to their customers. However, the company must also address the potential challenges that may require an increase of their products, so as to sustain their profitability as well.
Relatively, the value proposition of the company, which makes it distinct from the competitors, is another advantage of the company. As the company continues to grow, they must understand that establishing a new branch may require several factors, such as the suitability of the location. It is not enough that in-store facilities are comfortable if the location itself is not accessible for most of its target customers because such idea may influence the customers' decision to switch to another fast food restaurant, as stated in the Porter's five forces model.
The company must meet both the customers' needs and wants, more than just what they can offer on their menu items. The five forces presented by Porter suggests that the company must have a complete package that can be offered to the customers in order to keep their loyalty. As for the McDonald's strategic planning, they must ensure to keep their strengths against the strong forces of competition, especially the competitive rivalry, customers' bargaining power, and the threat of substitute. In this way, the company will be able to use their strengths to cope with these strong forces of competition.
Ensuring the effectiveness of strategic plans consists various factors that McDonald's must consider. It is not enough that the company's competitive advantages are well-sustained, but there must also some additional approaches that will improve the strategies in relation to internal planning. Therefore, the strategic plan must start with the company's core belief. This will be followed by the execution of the strategies along with the cooperation of the staff towards providing an exceptional service to the customers. The strategic plan must start within the company's core values out to its end-customers.
References
Harvard Business School. (n.d.). Unique Value Proposition - Institute for Strategy and Competitiveness. Retrieved from http://www.isc.hbs.edu/strategy/creating-a-successful-strategy/pages/unique-value-proposition.aspx
History of McDonald's: AboutMcDonalds.com. (n.d.). Retrieved from http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds-history.html
Porter's Five Forces - Strategy Tools from MindTools.com. (n.d.). Retrieved from https://www.mindtools.com/pages/article/newTMC_08.htm
Ratner, B. (2014, May 14). 3 Key Marketing Takeaways from Simon Sinek's "Start With Why". Retrieved from http://blog.hubspot.com/customers/3-takeaways-from-start-with-why
Ted.com. (n.d.). Simon Sinek: How great leaders inspire action | TED Talk | TED.com [Video file]. Retrieved from http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?language=en
United States Healthful Food Council (USHFC). (2012, April 16). The Importance of Food Service Providers. Retrieved from http://ushfc.org/2012/04/the-importance-of-food-service-providers/#fancy-form-delay
The Value Chain. (n.d.). Retrieved from http://www.quickmba.com/strategy/value-chain/
Ščeulovs, D., & Gaile-Sarkane, E. (2012). CLASSIFICATION OF MICRO AND SMALL ENTERPRISES. The 7th International Scientific Conference "Business and Management 2012". Selected papers. doi:10.3846/bm.2012.158
