SIM336: Strategic Management Assessment Answer

Executive Summary

McDonald's is a dominant brand in the quick-service restaurant market, but it confronts problems from changing consumer tastes, increased competition, and shifting industry trends. The report has identified important trends, opportunities, and threats affecting the organisation using an external study using the PESTLE and Porter's Five Forces frameworks and an internal analysis utilising the VRIO framework. To improve the company's competitive position and provide long-term value for stakeholders, a transformational strategy focusing on innovation, sustainability, and customer experience was advised. By executing this approach, McDonald's can remain a leading brand in the QSR business by adapting to shifting trends and consumer preferences.

Introduction

McDonald's is one of the biggest cheap food chains on the planet, working in more than 100 nations with a large number of areas. Since its inception in 1940, the business has grown into a globally recognised household name (Jian et al. 2021). This analysis will look at the situation that the company is in right now, do both internal and external analysis, find trends, opportunities, and threats, define issues and problems, and suggest ways to solve them. This report is expected to lead an essential examination and build key suggestions for the picked organisation McDonald's in the Quick Service Restaurant (QSR) area in light of current data.

Current Company Situation

Company Profile

In recent years, McDonald's has focused on enhancing its menu, customer service, and restaurant technology. The corporation has been growing its digital capabilities by launching mobile ordering and installing self-service kiosks in a number of locations. To increase delivery, the firm has also invested in technology and worked with third-party delivery services such as Uber Eats and DoorDash. McDonald's is a publicly traded corporation, recorded on the New York Stock Trade under the ticker image MCD (Singireddy et al. 2020). The company sells fast food like burgers, fries, chicken nuggets, salads, and breakfast items in the Quick Service Restaurant (QSR) industry. McDonald's was established in 1940 by Richard and Maurice McDonald in San Bernardino, California. The headquarters of the company is in Chicago, Illinois, in the United States.

Financials

According to McDonald's 2020 Annual Report, the corporation earned $19.2 billion in revenue and $4.7 billion in net profits (Tien et al. 2020). The corporation has $36.4 billion in total assets and $14.1 billion in total equity. As of May 2023, McDonald's has a market valuation of roughly $170 billion. [Referred to Appendix 2]

Manpower Strength

McDonald's has employed more than 200,000 individuals around the world, including both corporate and café employees (Tien et al. 2020). The organisation is focused on giving chances to its workers to develop and grow expertly, offering preparing projects, and professional improvement valuable open doors.

Turnover

McDonald's had $19.2 billion in revenue in 2020. The pandemic's impact on the restaurant industry is probably to blame for this decline in the company's revenue of $21.1 billion in 2019. Nonetheless, McDonald's remains one of the biggest and most productive QSR chains across the world, with a solid global presence and a reliable client base. [Referred to Appendix 1]

Country/countries of Operation

Over 100 nations are served by McDonald's, with a significant presence in North America, Europe, and Asia. The United States of America is the company's largest market, followed by China, Japan, and Canada.

Number of Divisions

There are now three divisions: The United States of America (38 percent of revenue in 2021), International Markets (53% of sales in 2021), and Developed International Licenced Markets (9% of sales in 2021). The United States of America group is made up of restaurants that are located in the United States (Jian et al. 2021). The remaining five fully owned international markets are represented by the IOM Business Unit, which is made up of the remaining fully owned international markets.

External Analysis

PESTLE Analysis

Trends

• Health consciousness

The growing emphasis on health and well-being is one of the most significant developments in the QSR market. The demand for healthier food options is changing as consumers become more health-conscious (Kee et al. 2021). In light of this pattern, McDonald's has presented servings of mixed greens, organic product cups, and other better menu things.

• Digitalisation

Digitalisation has emerged as a prominent trend in the quick-service restaurant (QSR) industry, with many establishments utilising digital technology to improve customer service (Anaf et al. 2017). McDonald's has been at the forefront of this trend with innovations like mobile ordering, self-service kiosks, and third-party delivery services.

• Sustainability

Another important development in the QSR industry is the growing emphasis on sustainability. Clients are ending up being even more normally conscious, and they are looking at conservative things and practices (Anaf et al. 2017). As a response to this trend, McDonald's has set ambitious sustainability goals, such as procuring palm oil, coffee, and all of its fish from sustainable sources. [Referred to Appendix 3]

Opportunities

• McDonald's has a chance to expand into emerging markets like Africa, India, and Southeast Asia. The company has significant room for expansion in these markets, which are home to an expanding middle class.
• McDonald's has the chance to keep improving its menu to stay aware of changing customer tastes and inclinations (Tian, 2022). This includes the creation of new deals and promotions, the addition of new food items, and the expansion of its coffee and dessert offerings.
• With the advent of third-party delivery services such as Uber Eats and DoorDash, McDonald's has a chance to increase its delivery capabilities and reach a larger consumer base (Wu and Ma, 2021). McDonald's can attract consumers who would not have visited a restaurant otherwise by providing the convenience of delivery.

Threats

• There are a lot of companies competing for market share in the QSR sector. This includes both QSR chains like Wendy's and Burger King and non-QSR chains like Panera Bread and Starbucks.
• The quick-service restaurant (QSR) industry is very sensitive to the economy, and bad times can cause consumers to spend less and McDonald's to sell less food.
• While McDonald's has responded to the trend of health consciousness, the health risks associated with fast food consumption remain a concern. detrimental media attention, such as films and research linking fast food to obesity and other health concerns, can have a detrimental influence on McDonald's public reputation and sales (Wu and Ma, 2021).
• Concerns about the QSR industry's labour practices have grown in recent years. This incorporates issues like low wages, the absence of advantages, and temperamental plans for getting work done (Tian, 2022). In several nations, including the United States and the United Kingdom, fast food workers have protested and gone on strike as a result of these worries.
• Changes in guidelines connected with food handling, well-being, and business practices can fundamentally affect McDonald's and the QSR business all in all (Soegoto et al. 2021). For instance, new guidelines requiring calorie marking on menus can influence buyer conduct and interest in specific menu things.

Internal Analysis

VRIO Analysis

Capabilities and Competencies

McDonald's has achieved success in the fast-food industry thanks to several core competencies. These skills are upheld by unambiguous capacities that make an incentive for the organisation.

• Operational efficiency

McDonald's is well-known for its lean and efficient operations, which allow it to serve millions of customers every day (Rajawat et al. 2020). Strong supply chain management, standardised processes, and technology-enabled ordering and payment systems all contribute to this competence.

• Brand recognition and reputation

McDonald's is perhaps the most perceived brand on the planet, standing for quality and consistency. Strong marketing and advertising campaigns, as well as a focus on customer experience and satisfaction, support this capability.

• Menu innovation and customisation

McDonald's menu is constantly evolving to match changing consumer preferences and interests (McDonald, 2016). Research and development, customer data, and cooperation with suppliers and franchisees all contribute to this expertise.

• Franchise model and partnerships

McDonald's operates on a franchise model, which enables it to rapidly expand with minimal capital expenditure (Comino and Ferretti, 2016). Strong relationships with franchisees and strategic partnerships with suppliers and other stakeholders support this capability.

• Financial management and profitability

With steady revenue growth and high margins, McDonald's has a strong track record of financial management and profitability (Soegoto et al. 2021). Effective cost management and pricing strategies, in addition to rigorous financial analysis and planning, support this capability.

Because they are based on the company's established systems and processes, many of the capabilities underlying McDonald's core competencies are likely to endure into the future. However, there are a number of challenges and opportunities that may have an impact on the company's ability to maintain its competitive edge.

Issue/Problem Definition

Issues identified

McDonald's may need to modify its menu and supply chain to remain relevant as consumers become more health-conscious and demand food options that are more environmentally friendly and ethical. The organisation has previously put forth a few attempts toward this path, for example, presenting plant-based menu things and obtaining more economical fixings, however, it should proceed to improve and put resources into these areas to meet developing shopper assumptions (Rajawat et al. 2020). McDonald's will need to stay ahead of the curve in terms of digital innovation and customer experience as technology continues to transform the fast-food industry (Ge et al. 2020). Personalising the customer experience and increasing sales can be accomplished by utilising data analytics and artificial intelligence, as well as investing in new technology platforms like mobile ordering and delivery.

Despite the fact that McDonald's continues to be one of the most important players in the fast-food industry, it faces fierce rivalry from other international chains as well as local and regional players. Additionally, there is a possibility that certain markets will become saturated, which will limit the opportunities for the business to expand (Sari et al. 2021). McDonald's will need to expand into new markets and channels while maintaining its market position by continuing to differentiate itself through its brand, menu, and customer experience. The global fast-food industry can be impacted by economic downturns, trade disputes, and political instability, and McDonald's is not immune to these dangers (Ramadhan and Sofiyah, 2013). To mitigate these risks, the company will need to carefully manage its operations and supply chain, as well as invest in new markets and partnerships to diversify its revenue streams.

Goals and objectives

• Foster a more enhanced and inventive menu to engage changing shopper inclinations, while keeping up with quality and consistency across all items
• Improve the manageability of McDonald's inventory network and activities to diminish the ecological effect and fulfil purchaser needs for more capable strategic policies
• Improve the utilisation of innovation to upgrade the client experience, including digital ordering, conveyance, and reliability programs
• Improve profitability in mature markets while expanding McDonald's presence in key growth markets, particularly Asia and other emerging markets
• Reinforce the organisation's image picture by showcasing efforts that local area commitment, and social obligation
• Improve McDonald's franchise model's quality and effectiveness by supporting franchisees in their efforts to boost profitability and adhere to company standards
• Maintain a diverse and welcoming work environment that values and encourages employee growth and well-being

Recommended strategy

The proposed plan, based on a review of McDonald's external and internal environments, is a transformational approach focused on improving the company's customer experience, sustainability, technology, and brand image, while also optimising profitability and growth (Dilip et al. 2021). By carrying out this approach, McDonald's can improve its serious situation in the QSR business, and address the difficulties it faces in a manner that lines up with changing buyer inclinations, industry patterns, and partner assumptions.

1. Expand vegetarian and vegan options, introduce healthier new menu items, and improve the quality and customization of existing menu items
2. Set ambitious goals for sustainability, such as reducing greenhouse gas emissions by 36% by 2030 and sourcing 100% of fish, palm oil, and coffee from sustainable sources and executing maintainable bundling and waste decrease drives, and advancing local area commitment and social obligation (Jian et al. 2021)
3. Utilise data and analytics to personalise offerings, improve operational efficiency, integrate technology into the customer experience, and expand digital ordering and delivery capabilities
4. Improve profitability and market share in mature markets while prioritising growth in high-potential markets like China, India, and other emerging markets (Kwinta et al. 2018)
5. Establish a workplace culture that is diverse and welcoming, one that values and encourages employee growth and well-being, and that also supports diversity, equity, and inclusion initiatives (Kwinta et al. 2018)
6. Utilising digital and social media channels to increase brand awareness and customer engagement, launch marketing campaigns that promote transparency, community engagement, and social responsibility

Conclusion

McDonald's is confronting various difficulties in the QSR area, including changing customer inclinations, expanding rivalry, and advancing industry patterns. A transformational strategy has also been developed after a comprehensive external and internal analysis identified the company's key trends, opportunities, and threats. By focusing on menu broadening and advancement, manageability and obligation, digital transformation, global extension, brand image and showcasing, franchise model streamlining, and employee commitment and improvement, McDonald's can upgrade its serious position and make a maintainable incentive for its partners.

References

Anaf, J., Baum, F.E., Fisher, M., Harris, E. and Friel, S., 2017. Assessing the health impact of transnational corporations: a case study on McDonald’s Australia. Globalization and Health, 13(1), pp.1-16.

Azim, P. and Azim, S., 2012. Impact of constructive marketing strategies on return (revenue & profitability): A case study of McDonald’s. Journal of Asian Business Strategy, 2(7), pp.153-169.

Comino, E. and Ferretti, V., 2016. Indicators-based spatial SWOT analysis: Supporting the strategic planning and management of complex territorial systems. Ecological Indicators, 60, pp.1104-1117.

Crawford, A., Humphries, S.A. and Geddy, M.M., 2015. McDonald's: A Case Study in Glocalization. Journal of Global Business Issues, 9(1).

Dilip, D., Sinha, R., Wei, O.L., Kee, D.M.H., Leei, O.J., Shuang, P.K., En, T.J., Permatasari, V.N., Sin, L.G., Boadu, E. and Saifi, J., 2021. Effective/Differentiating Marketing Strategies of McDonald’s in Malaysia And Indonesia. Journal of the Community Development in Asia (JCDA), 4(1), pp.16-33.

Ge, L., 2020. Report on Critical Analysis of Operation Management for McDonald's. International Core Journal of Engineering, 6(11), pp.386-392.

Jian, O.Z., Utama, A.G.S., Musa, W.N.A.B.W., Hasly, W.B., Al-Rifae, R.F.B., Hussa, N.S.A.B.M. and Andriawan, N., 2021. Effective Marketing Strategies of McDonald’s in Malaysia and Indonesia. International Journal of Applied Business and International Management (IJABIM), 6(2), pp.33-46.

Kee, D.M.H., Ho, S.L., Ho, Y.S., Lee, T.W., Ma, H. and Yin, Y., 2021. Critical success factors in the fast food industry: A case of McDonald's. International Journal of Tourism and Hospitality in Asia Pacific (IJTHAP), 4(2), pp.124-143.

Kwinta, Z.C., 2018. Analysis and evaluation of the strategic management process at McDonald's (Doctoral dissertation, Katedra Systemów Zarządzania).

McDONALD, M.A.L.C.O.L.M., 2016. Strategic marketing planning: theory and practice. In The marketing book (pp. 108-142). Routledge.

McDonald, T.J., 2016. INCITE: A model to help Voluntary Organisations use ICT effectively. The Journal of Community Informatics, 12(1).

Rajawat, A., Kee, D.M.H., Malik, M.Z.B.A., Yassin, M.A.Q.B.M., Shaffie, M.S.I.B.A., Fuaat, M.H.B., AlDosari, N. and Santoso, M.E.J., 2020. Factors: Responsible for McDonald's performance. Journal of the Community Development in Asia (JCDA), 3(2), pp.11-17.

Ramadhan, A. and Sofiyah, F.R., 2013. Analisis SWOT Sebagai Landasan Dalam Menentukan Strategi Pemasaran (Studi Kasus McDonald’S Ring Road). Jurnal media informasi manajemen, 1(4).

Sari, A.N., Pangestu, S., Erisya, Y. and Putri, A.M., 2021. Analisis Strategic Management Pada Restoran Cepat Saji McDonald’s. Jurnal Pendidikan Tambusai, 5(2), pp.2917-2927.

Singireddy, M., 2020. Mcdonald's: Global Marketing. International Journal of Health and Economic Development, 6(2), pp.16-27.

Soegoto, F.A., 2021. Product development using SWOT analysis. International Journal of Entrepreneurship & Technopreneur (INJETECH), 1, pp.1-10.

Tian, H., 2022, December. Explore the Marketing Strategy of McDonald's After Digital Transformation. In 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022) (pp. 447-451). Atlantis Press.

Tien, N.H., Dana, L.P., Jose, R.J.S., Van Dat, N. and Duc, P.M., 2020. Analysis of Mcdonald's' entry strategy into the Vietnam market. International journal of advanced research and development, 5(3), pp.23-29.

Wu, S. and Ma, J., 2021, December. Analysis of McDonald’s Marketing Strategy in China. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 3073-3076). Atlantis Press.

Appendices

Appendix 1: Long-term outperformance of McDonald's

(Source: https://ei.marketwatch.com)

Appendix 2: McDonald’s revenue

(Source: https://businessmodelanalyst.com)

Appendix 3: Sustainability highlights of McDonald’s

(Source: https://i.pinimg.com)

You Might Also Like:

Strategic Marketing Management Assignment Help

HI6006: Competitive Strategy Essay Assessment Answers

Strategic Marketing Management 1 Assignment Sample

Looking For Complete Assignment Sample Get It On WhatsApp