Analysis of Business Strategy and Market Position of Mc Donald’s

This report analyzes the present business strategy and market position of Mc Donald’s, a leader in the fast food industry. It also examines the impact of environmental forces on their business and suggests strategies for improvement.

Business Strategic Plan

Running Head: Report
Executive Summary
In order to understand the future of any business and the direction in which it is steering itself
is decided by the strategies a company frames and follows. These strategies help to
understand the company’s position in the market. An effective business strategy helps to
identify the Strengths, weaknesses, opportunities and threats that a company is exposed to.
The present report aims at analysing the present business strategy of Mc Donald’s company,
a leader in fast food industry. It also aims at analysing the environmental forces viz a viz,
competitors, technological advances, legal issues that impact their business to a large extent.
Moreover, this report will try to suggest some strategies that can be applied to improve their
present performances and the leadership styles that Mc Donald’s need to adopt in order to
make the strategies successful and to achieve a long-term sustainable future for itself and its
stakeholders
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Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Analysis of present business strategy and market position of Mc Donald’s..............................3
Overview of the environmental forces and their impact on Mc Donald’s business..................5
Strategy recommendations to improve present performance.....................................................6
Leadership style and behaviours to enable the implementation proposed strategy...................8
References................................................................................................................................10
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Introduction
Mc Donald’s is a fast food company with its outlets spread over more than one hundred
countries across the globe. This company, based on successful business franchise pattern has
succeeded in segmenting its market by careful use of demographic, geographic and
psychological variables along with the understanding of customer’s changing tastes and
preferences (KVitasek & Kling, 2012). Moreover, its success has largely come from its quick
responsiveness to these variables viz-a-viz, demographics, tastes and preferences and
innovations in supply chain management. Mc Donald’s has succeeded in opening of around
thirty-six thousand outlets around the world. The present report is an analysis of the
management strategy of Mc Donald’s and the impact of various environmental forces on its
business. The report also aims at proposing new strategies to improve its current business in
terms of H.R practices, organisational culture, and business operations and suggest a
leadership style suitable for implementing the new business strategy (New, 2015).
Analysis of present business strategy and market position of Mc Donald’s
Since its inception, Mc Donald’s has evolved its positioning strategy from being product
oriented to value-based positioning. It has been using a differentiated target strategy to cater
to the varying customer needs since their buying behaviour and consumption patterns are
ever changing. Its strategy is also evident from its marketing mix which consists of various
core elements that help in achieving its marketing objectives (Heart of Codes, 2018).
The first and foremost element is the menu or the product portfolio. Mc Donald's is a leader
in the burgers arena and the reason behind its success is its ability to diversify its products as
per the country it is serving. Thus, the menu in the USA would be different than the menu in
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the UK, Asia or Australia. The formula is to give a customised menu as per the local taste.
For example, in India Mc Donald’s has diversified its range by keeping more vegetarian
products as most consumers in India are vegetarians. In Australia, it’s spicier than the US. A
similar strategy is applied in pricing its products too. Mc Donald's clearly understands the
psychological perception that the customers associate with a product. Positioning its product
at a low price can generate a feeling of the product being of inferior quality. Hence, Mc
Donald's strategy is to classify its products as per the customer's affordability. For instance, in
the US its $1 menu with any size coffee but the same deal is not applicable in Australia
(Rangnekar, 2014). In Australia, there are separate Cafes with the name MC Cafe, where
coffee is as pricey as the Starbucks. This strategy holds well in Australian markets where
people take their coffee very seriously. Moreover, Mc Donald’s uses above the line
marketing methods for promotions. It relies on various types of promotion strategies to get
people to try its products. For instance, its prime focus is to attract children so with its ‘happy
meals' which is specifically targeted at them, give small toys free with the meals. Moreover,
various schemes like lucky draws and scratch cards also help attract the customers. Mc
Donald's has also succeeded in becoming the world's most loved brand by using a happiest
brand mascot to greet its customers in well set up bright yellow interiors. It has always been a
consistent brand, with a strong focus on quality and focuses on managing its operations and
supply chains with efficiency. Another factor that has resulted in the growth and expansion of
Mc Donald's is the margins that it takes from the franchises. This also helps in maintaining
the brand and the product quality up to the mark, making the franchise concept a huge
success for the brand. Due to this franchising strategy, Mc Donald's finds its presence in 118
countries (Sani, Bustard, & McVicar , 2010).
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Overview of the environmental forces and their impact on Mc Donald’s business
Mc Donald's has to carry out its operations in an extremely complex environment as it is a
global company and faces intense competition from various firms in the industry. Its
environment consists of various elements that are internal as well external to it, like
employees, competitors, technological changes, legal factors etc. Mc Donald's has several
competitors, which also seek a greater share of its market. Some of which are the burger king,
Wendy's, KFC and Subway even Dunkin Donuts, Pizza Hut or Taco Bell. These competitors
are constantly working on their quality and services to attract customers which have
hampered its growth in the last two decades (Han, 2008). Moreover, Mc Donald’s is
extensively dependent on its employees for preparation and maintaining quality services.
Each outlet has about fifty employees; most of whom are part-time employees and Mc
Donald’s has faced a lot of employee related trouble in the past especially as it came into
limelight for paying low wages to employees .Moreover, it has a highest turnover of its
restaurant employees which mostly comprised of, teenagers, students and working mothers. It
had to constantly work upon its H.R strategies to motivate their staffs with various rewards
and incentive schemes which have made it an organisation that recognises the wishes and
needs of its employees. Technologically also, Mc Donald's supports the use of advancements
which enhance its operations. It uses technology for food storage and preparation,
management of supply chain and finances and business reporting. The biggest challenge
however is the efficient linking and communication between the vast chain of restaurants
spread throughout the world (Rathi, 2018). Operating in different countries also exposes Mc
Donald's to different political issues. Thus, it has to respond to various political hurdles in
order to meet its business goals. One of the potential pressures is coming from the health
associated issues, as most of the people are considering fast food bad for health and some
countries are even the laws against the issuance of licences for franchisees. Throughout the
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world it is seen that the demand for cheaper food products is inelastic and is always high
regardless of economic changes. The company uses this trend to safeguard its profits margins
by balancing its low priced menus with high priced products. Moreover, as a leading food
retailing company, it also has to face various social, cultural and global issues with sensitivity
to overcome strong resistance. The company also has been facing various legal issues
because of its operations in different countries. Issues related to employment, customer
services, and relations with shareholders, impact the day to day business and hence the image
of Mc Donald's (McCoy, 2018).
Strategy recommendations to improve present performance
Mc Donald’s has a strong presence in the market with branded menu, and the world's most
recognised logos. It has a strong customer base comprising of children and young people, but
it has lacked in developing a reputation of a health and nutrition conscious brand for the
people who are more concerned about their health. Thus the firm should very clearly divert
its resources for increasing its customer base and the nutrition value of its products. It can
also focus on developing healthier menus that can be targeted at elderly people who were
considered as market for Mc Donald’s. Thus, it needs to shed its unhealthy image to stay in
competition among other companies who are continuously reshaping their menus as per the
costumer's tastes (Crawford, 2015).
Additionally, Mc Donald’s should also be responsive to the unemployment rates of countries
they are in. Thus having a high turnover rate and considering that they constantly hire people,
they can be a hope for regions with high rates of unemployment (Sengco, 2016).Moreover,
with such a large workforce, Mc Donald’s needs to maintain its strategic focus to improve
employee potential with key strategies like developing long-term goals, adopting cost
effective and innovative methods of operations. These can be obtained through commitment,
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quality and flexibility, whereas the employee motivation and cooperation or involvement can
be attained through a healthy organisational set up. With these outcomes, Mc Donald’s will
be able to achieve and increase employee performance outcomes, viz-a viz increased
productivity, reduced turnover, low absenteeism and workplace conflicts. Thus, Mc Donald’s
values include focus on employee recognition and maintaining a positive work culture. This
is also reflected in their style of leadership also.
In order to shed its negative brand image across the world, the firm can focus on specific
advertising to enforce its image as a health conscious brand, thus ensuring its commitment to
health, fitness and sports. It can achieve this by sponsoring sports and health programmes
across schools, college and universities to enhance its brand image by being a health-
conscious fast-food company. Technologically also, Mc Donald's needs to upgrade its
employee productivity, communication and serve food quickly as their customers expect
(Thompson, 2017). They can use the internet to reach their customers by allowing the
ordering of food online without waiting in queues. Although, Mc Donald's is such a well-
known brand but it has to capitalize on social media and make more presence on Facebook
and twitter or Instagram in order to nab their customer’s attention. From our analysis, it is
clear that Mc Donald's strategy of cost leadership has helped it to sustain in the market as a
leader. Its product differentiation strategy has also helped it to grab a considerable market
share, but in order to achieve a continuous growth it has to establish more locations in the in
the countries where it has little or no presence. This can be done by developing intensive
market penetration strategies (Gregory, 2017).
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Leadership style and behaviours to enable the implementation proposed strategy
Strategic management and leadership are interrelated as both of them together are necessary
to achieve the organisational goals. The leaders are required to apply various leadership
abilities to manage business resources strategically (Vitasek, 2014). It has been observed that
Mc Donald's market share has been reducing due to saturation in most markets and
emergence of competitors like KFC, Burger King, etc. Some of the strategies adopted by
McDonald’s are:
 Targeting emerging markets
 Product innovation and differentiation
 Image repositioning
 Maintaining a positive organisational culture.
The leadership styles that are required to carry out these strategies have to suit the different
situations within the company. The leaders of Mc Donald's should be persuasive,
Participative and situational. Presently, Mc Donald's has a democratic type of leadership as is
evident from its open culture that has helped it to maintain flexible operations and effective
communication between the management and the employees. But in order to achieve the
objective of strategic global expansion and to innovate its product line, Mc Donald's require a
combination of innovative and persuasive leadership style (Ritchie, 2010). For attaining
success in emerging markets, Mc Donald's needs global leadership strategy, hence a mix of
global and charismatic leadership style, wherein leader possess a good forecasting ability,
flexibility and sensitivity to the cultural diversity will be fruitful. Participative type of
leadership will help maintain an open culture and facilitate communications between the
retail food stores and will also make the employees feel inclusive. Moreover, in order to
coordinate the operations of all the franchisees on a global basis, Mc Donald’s needs to focus
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on centralisation strategy and to make it a success a transformational leadership style is
required, wherein the leader works with the teams to facilitate the change, creating a vision to
steer the organisation through the change by inspiring and directing (McCorkle, 2017).
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References
Crawford, R. (2015). McDonald’s Restaurants puts motivation and reward at heart of
business strategy. Retrieved from https://www.employeebenefits.co.uk/issues/june-
2015/mcdonalds-restaurants-puts-motivation-and-reward-at-heart-of-business-
strategy/
Gregory, L. (2017). McDonald’s Generic Strategy & Intensive Growth Strategies. Retrieved
from http://panmore.com/mcdonalds-generic-strategy-intensive-growth-strategies
Han, J. (2008). The Business Strategy of Mcdonald’s . International journal of business and
management, 3(11), 1-3. Retrieved from
https://pdfs.semanticscholar.org/917f/23b1025e5950528faa2a60e7991daaa475ae.pdf
Heart of Codes. (2018). Positioning of McDonald’s | STP Analysis of McDonald’s. Retrieved
from http://heartofcodes.com/positioning-of-mcdonalds/
KVitasek, & Kling, J. (2012). McDonald’s Secret Sauce for Supply Chain Success. Retrieved
from http://www.vestedway.com/wp-content/uploads/2012/09/McDonalds-Case-
Study.pdf
McCorkle, K. (2017). McDonald’s All Day Breakfast Launch: The Strategic Value of
McDonald’s Supply Chain. Retrieved from
http://agribusiness.purdue.edu/files/resources/1-mcdonald-s-case-study-cs6-2.pdf
McCoy, R. (2018). The relationship of employee reward systems and motivation levels with
special emphasis on franchising the relationship of employee reward systems and
motivation levels with special emphasis on franchising. Retrieved from
https://www.researchgate.net/publication/329922324_The_Relationship_of_Employe
e_Reward_Systems_and_Motivation_Levels_with_Special_Emphasis_on_Franchisin
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g_THE_RELATIONSHIP_OF_EMPLOYEE_REWARD_SYSTEMS_AND_MOTIV
ATION_LEVELS_WITH_SPECIAL_EMPHASIS_ON_FRANCH
New, S. (2015). McDonald’s and the Challenges of a Modern Supply Chain. Retrieved from
https://hbr.org/2015/02/mcdonalds-and-the-challenges-of-a-modern-supply-chain
Rangnekar, A. (2014). McDonald's India Entry Strategy. Retrieved from
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egy
Rathi, G. (2018). Global Strategy of McDonald and How It Reached All corners of World.
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Ritchie, P. (2010). McDonald′s: A Winner through Logistics. International Journal of
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Sani, M., Bustard, S., & McVicar , M. (2010). A Cultural Analysis of McDonalds. Retrieved
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Sengco, C. (2016). McDonald’s Five Forces Analysis- (PORTER’S MODEL). Retrieved
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_MODEL
Thompson, A. (2017). McDonald’s Organizational Culture Analysis. Retrieved from
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Vitasek, K. (2014). Trust and Collaboration: McDonald’s Supply Chain Strategy . Retrieved
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