McDonald's Business Strategy Analysis

This assignment requires a comprehensive analysis of McDonald's business strategy. Students are tasked with conducting a SWOT analysis to identify the company's strengths, weaknesses, opportunities, and threats. Furthermore, a STEEP (Social, Technological, Economic, Environmental, Political) analysis is required to understand the external factors influencing McDonald's operations. Finally, the assignment delves into how McDonald's has transformed its image through its 'forever young' theme and the influence this has on investment.

INTEGRATION OF
BUSINESS FUNCTIONS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Impact of leadership on McDonald's (2008-2018).................................................................1
Integration of organizational culture with business functions of McDonald's.......................2
Integration of organizational structure with business functions of McDonald's....................3
STEEP Analysis of McDonald's.............................................................................................5
SWOT Analysis of McDonald's.............................................................................................6
Porter's five forces model used to evaluate McDonald's business.........................................8
Role of business functions on McDonald's success. .............................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business functions refers to all managerial functions which are important to be
coordinated so as to achieve organizational objectives. The human resource department, finance
and accounting department, marketing and sales department functions integrate with each other
so as to carry out objectives uniformly.
McDonald's founded in the year 1940 is an American fast food chain selling hamburgers,
French fries, cheese burgers, shakes and desserts. McDonald's mostly makes revenue from
company operated outlets and franchises. The two founders cum siblings Maurice and Richard
McDonald started as a restaurant and now, owns more than 36000 outlets as of 2016.
Impact of leadership on McDonald's (2008-2018)
Evaluation of McDonald's structure due to strategic changes and its integration into
business functions has evolved leadership role impacting the company. The founders have
implemented a speedy service system so as to render fast offerings of food to people. It is
operated in the form of franchisee, corporation, affiliation or company outlet providing
hamburgers, French fries, cheese burgers, shakes and desserts. The impact of changes has
affected its operations and is also known as the highest employment provider generating profits
for stakeholders. The company has made many changes such as recruiting new CEO and changes
in menu has impacted its performance (Christopher, Payne and Ballantyne, 2013). Steve
Easterbrook has brought new reforms and thereby, assessing needs of customers with altering
menu and taste of food products.
Leadership plays a vital role in identifying the strategic goals and accomplishment of
organizational objectives with a mission and vision. The leaders are vital as they evaluate various
strategic plans and formulate tactics to fulfil them and thereby, balancing internal and external
factors. Leadership effectiveness influences strategic business functions and its performance by
modifying the culture of organization and decision making which brings in innovation. The
company undertakes both transactional and transformational leadership tactics to control
organizational activities (Schot and Geels, 2008). Over the last 10 years, the role of leaders has
evolved tremendously affecting operations of scale and expansion of production thereby
enhancing profitability margin.
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The organization focuses on strategic changes taking place either internally or externally
and respond to it through technological innovation. Company under the leadership of Jim has
integrated its functions of marketing, finance and human resources so as to achieve competitive
advantages. Jim follows a democratic style of leadership which influences employees and
workers to act productively (Prell, Hubacek, and Reed, 2009). The integration of call centres
and 24X7 delivery services has enhanced its overall performance. During this decade, the
organization has emphasized on customer’s needs and wants, their tastes and preferences, etc.
Thus, leadership is crucial when strategic changes are implemented in an organization
especially McDonald's which is a fast food joint. Integration of business functions helps to
achieve strategic objectives and thereby, regulating management activities. Moreover, leadership
helps employees provide a vision and McDonald's needs to adopt various leadership styles to
execute different strategies (Ndubisi, 2007).
Integration of organizational culture with business functions of McDonald's
Organizational culture of McDonald's help employees to bridge gap among themselves
and thereby, fulfilling objectives (Schot and Geels, 2008). It is based on a system of shared
values which attract employees and standardization of quality of products is used to maintain the
effectiveness. The culture of McDonald's encourages learning and efficiency of operations is
obtained which helps in achieving productivity. The company adopted practices such as learning,
people centricity, inclusion and diversity. It has shifted its focus on people during the current
decade and thereby making those products which are people oriented. It brought diversity and
inclusion which helped employees and others to work enthusiastically thereby enhancing their
own knowledge base.
The impact of culture based on values and ethics has helped employees relate to work
more efficiently and improved quality of products through people centricity and diversity is
achieved. The culture adopted at McDonald's has helped transformed its image by designing its
stores based on forever young theme which influences people to invest. Various strategic
changes in designing and menu has earned organization competitive advantage thereby meeting
recent trends and current developments. Under the democratic leadership style of Jim Skinner,
McDonald's achieved success by implementing various strategic changes and integration of
business functions which has evolved its brand image (Christopher, Payne and Ballantyne,
2013).
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The company by implementing learning practices has transformed the image of
organisation as well as provided employees various training and development programs to
evolve with the changes. The culture of McDonald's has brought new technological innovation
which helps in manufacturing quality products by maintaining environmental and societal
standards. McDonald's has achieved success while changing tastes and preferences according to
customers over competitors (Reed and et.al., 2009). Company also emphasizes on the diversity
as an important factor which improves culture and helps strengthen peoples bonding. The human
resource department needs to incorporate strategies to handle diver’s cultural group working
towards achievement of common objective.
Thus, culture of organisation plays a crucial function while motivating employees from
divers group towards attainment of one specific goal. The strategic cultural changes and
integration of functions at McDonald's has provided a strategic position in the market during this
decade which needs to be improves with time. Thus, McDonald’s needs to emphasize on high
excellence and superior quality product in its organizational culture.
(Source: Management Technology Policy, 2016.)
Integration of organizational structure with business functions of McDonald's.
McDonald's have a corporate structure which integrates various functional areas so as to achieve
efficiency of operations. The company has around 30,000 joints serving world wide with same
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Illustration 1: Overview of McDonald's

standard product and quality features (Birk, 2008). It operates through franchisees and
corporations selling hamburgers, French fries, cheese burgers, shakes and desserts.
McDonald's has a functional and performance based structure which helps in integration
of various operations so as to achieve objectives efficiently and effectively. Such a structure
helps achieve competitive advantage for the company as changes are easily incorporated.
Delegation of responsibilities has improved performance of the company as every franchisee,
human resource management and supply chain group perform meeting standards.
The structure of McDonald's is bifurcated into divisions and sub-sections so as to carry
out work efficiently (Veloutsou, Saren and Tzokas, 2012). This kind of structural performance
help organization achieve its goals thereby providing flexibility and autonomy of operations. It
has a global hierarchy which implies every function is integrated with each other all over the
world thereby controlling activities globally. Every key decision is passed from CEO to
managers then to personnel to carry out operations effectively. Such a hierarchical structure
helps accomplish major goals efficiently.
Another form of structure followed in McDonald's is division based on performances and
different functions. The performance based structure came into existence in the year 2015 which
divided the stores operating globally into four different divisions. These are U.S., International
markets, foundational markets and high growth efficiency markets and corporate. All these
divisions help McDonald's achieve better results and revenue turnover across globe. The
functional basis of organizational structure divides various areas such as human resource, supply
chain, finance and legal group separately which enable them to function appropriately without
much disturbances (Huang, 2009).
Stakeholders:
The stakeholders refers to all members who are related to the company in some form or
the other and includes business partners, customers, shareholders, employees and workers and
leaders and experts who provides opinion from time to time (Birk, 2008). The strategic changes
has impacted stakeholders of McDonald's as well with organizational culture and structure. The
changes in menu, enhancement of quality as well as improvement of customer services has
enhanced stakeholders position and share in the company. Thus, stakeholders are vital source of
McDonald's encompassing its image and enhancing market share globally (Reed and et.al.,
2009).
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STEEP Analysis of McDonald's.
(Source: Management Technology Policy, 2016.)
Social:
McDonald's has brought changes in the lifestyle and behaviour of people by rendering
excellent services and improved quality products (Birk, 2008). The people though have become
self-conscious about their health and safety and thus forces food chin companies to render best
quality products. The company should focus on production of those products which is easily
acceptable by society for it to earn revenue for longer period. The social factors implies age
group targeted by McDonald's being a food joint and manufacture goods keeping in mind their
tastes and preferences thereby meeting society paradigms (James. and Jorgensen, 2009).
Technological:
Changes in technology is inevitable and has to be adopted by everyone responsible for
providing goods and services at McDonald's. Evolvement of technology has given rise to
changes in consumer preferences and behaviour making them aware and active of various
reforms coming up in the market (Gummesson, 2011). The excessive use of internet has made
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Illustration 2: STEEP Analysis of McDonald's

the general public cognizant about diet planning and importance of health which should not be
compromised. Advancement of technology helps McDonald's achieve greater market by
improving quality of products and enhancement of services using better production techniques.
Economical:
UK economic imbalances has affected many multinationals and food chain companies.
The people now have become price sensitive and buys only necessary items as purchasing power
of public has decreased due to recession (Reed and et.al., 2009). All these economic factors has
impacted organizational profit margins. Thus company needs to adopt new trends and
developments so as to be in competition with others. Company needs to check economic
regulations and reforms on a continuous basis so as to evolve its scale of operations.
Environmental:
Every organization uses natural products and needs to sustain environmental resources
for coming generations (Schot and Geels, 2008). McDonald's faces stringent competition from
KFC, Subway, Burger king while maintaining environmental standards. McDonald's emphasizes
on producing eco-friendly packaging of products and discarding and reusing plastics so as to
maintain ecological balance.
Political:
The company follows certain regulation imposed by government in terms of quality
provided to general public. Certain rules and regulations are levied by government of various
countries as it is a global organization (Gummesson, 2011). The company has repositioned itself
during the last 10 years according to the norms of UK government thereby meeting health
standards and safety requirements. Protection of consumers is vital and necessary factor that
McDonald's needs to consider while performing business activities in any part of the world.
SWOT Analysis of McDonald's.
The SWOT analysis of McDonald's comprises of evaluation of strengths weaknesses
opportunities and threats hampering its operations.
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(Source: Management Technology Policy, 2016)
Strengths:
It is amongst the best fast food joints which acts as its USP in providing quality services
to customers and rendering excellent food products in form of hamburgers, cheese burgers,
breakfast items, soft drinks, chicken products milkshakes and desserts. collaborating with Coco
Cola has provided the company strength over others. McDonald's has also integrated its services
with various environmental welfare programs and social practices which has improved its overall
brand image (James and Jorgensen, 2009). The HR policies of rewards and recognition to its
employees is another strength which signifies its success. The company needs to strengthen its
position through bringing product innovation.
Weaknesses:
The company lacks innovative product range which is a weak point in its success. The
company emphasizes on western culture tastes and not on health and safety which is another
weakness of the fast food joint (Schot and Geels, 2008). The issues related to health and security
of consumers has degraded the image of McDonald's which caused severe diseases to people
associated with the company. Another weak factor is turnover of employee in huge numbers due
to lack of incentives and recognition factor has affected company's revenue generation.
Opportunities:
The global structure of company has various opportunities in form of expansion of scale
of operations and services. McDonald's standard quality of products has helped achieve
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Illustration 3: SWOT Analysis

competitive advantage over competitors. Innovation and expansion of menu is another
opportunity with McDonald's to enhance its activities (James and Jorgensen, 2009). It can also
increase its production unit by manufacturing organic products for diet sensitive consumers. It
can offer discounts and combos to attract people and children. It should also incorporates
hygiene atmosphere in stores. The company should promote its products through various
channels by encompassing varied discounts.
Threats:
The major competition faced by McDonald's is from KFC, Subway and Burger King
which acts as a threat to the company. The economic imbalances also affects its operations
thereby hindering its performances as recession decreases purchasing power and capacity of
people. The organic food is a major threat faced by McDonald's as the majority of people have
become diet conscious and health sensitive. Many customers now feel that the junk food served
by McDonald's is affecting their health and thus should be discarded posing threat for the
company.
Porter's five forces model used to evaluate McDonald's business.
Threats of New Entrants:
The threat of new ventures has a moderate impact on McDonald's as there are a number
of entry barriers. To compete with McDonald's, the entrant needs to have a huge capital
investment, massive resources, high scale of marketing to create awareness and global
worthiness to acquire fast delivery of raw materials (Schot and Geels, 2008). Though the impact
of new firms into industry is difficult and there is moderate threat but the increasing concern for
healthy food products and organic materials has provided many firms a clear space to enter into
market.
Threats of Substitutes:
There are many substitutes of meals of McDonald's which are continuously causing
threats for smooth functioning and therefore increasing the cost factor. Another important factor
is health which has forced many consumers to choose other brands over McDonald's. Thus,
company needs to evolve its scale of operations so as to overcome the high threat of substitutes
from rivalries (Veloutsou, Saren and Tzokas, 2012).
Bargaining Power of Buyers:
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In today's competitive environment the buyers are the king of the market. They possesses
strong influencing factor which affects organization to perform better so as to stay in
competition. The customers today are more educated and demand quality products and valuable
services and cannot compromise with their health (James and Jorgensen, 2009). They can easily
switch from one brand to another without incurring any switching cost and demanding price
sensitive products. Thus, McDonald's faces a strong bargaining power from its customers.
Bargaining Power of Suppliers:
The high brand image and scale of operations has provided monopoly to McDonald's the
power to bargain with suppliers so as to procure raw materials at suitable prices. The impact of
globalization has also provided opportunity for company to obtain products from other countries
and at a lower price (Veloutsou, Saren and Tzokas, 2012). The major raw materials used in
McDonald's product is widely available from different suppliers. Also the quantum of raw
materials required is usually high in routine basis. There are many suppliers who are ready to
supply raw materials at an industry quoted price. Thus, the bargaining power of suppliers is
weak.
Competitive Rivalry:
McDonald's being one of the most competitive business today faces a strong competition
from big multinationals and local restaurants serving the same or identical products (Huang,
2009). The biggest competitors of McDonald's could be lined as Wendy's, Burger King, Taco
Bell etc. The increasing number of competitors has made competitive rivalry a strong force for
McDonald's.
Role of business functions on McDonald's success.
During the last 10 years, McDonald's policies, strategies, culture and structure has
changed tremendously giving importance to customer protection and healthy products. The
business functions has evolved giving importance to performance and recognition of employees
which motivates them to work enthusiastically (Prell, Hubacek. and Reed, 2009). The marketing,
sales, human resource, accounting and financial services has developed in last 10 years.
The company's marketing strategy is now focusing on increasing brand awareness and
satisfaction of customer by providing valuable services and positioning the products correctly in
the target market. The company should adopt various advertising and promotion techniques such
as print media, television, hoardings and articles in food magazines attracting customers to buy
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their products (Gummesson, 2011). The company has also focussing on providing training and
development as well as organizational learning which builds their knowledge base and help
achieves organizational goals and objectives (Huang, 2009). The impact of culture based on
values and ethics has helped employees relate to work more efficiently and improved quality of
products through people centricity and diversity is achieved. The culture adopted at McDonald's
has helped transformed its image by designing its stores based on forever young theme which
influences people to invest.
The company now uses 360 degree feedback method to evaluate performances of
employees and provides rewards and recognitions as well. The company provided flexible timing
facility and devised motivational programs for them so as to learn new techniques in a better way
so as to perform better (Ndubisi, 2007). The impact of changes has affected its operations and is
also known as the highest employment provider generating profits for its stakeholders. The
integration of business functions is very crucial as it helps achieve effectiveness thereby attaining
organisational goals which is essential for an organization. McDonald's has over the period of
last 10 years evolved its business functions and collaborated them with each other so as to meet
production requirement as well as provide quality services to customers (Bonney and Editor,
2012).
CONCLUSION
The above report concludes the changes taken place over the last 10 years in McDonald's
and its operations. The global services and food products providing company has affected by
many factors and has evolved as well thereby incorporating organic foods. Various strategic
changes in structure, culture and environment has impacted McDonald's to modify its
performances and traditional practices so as to keep up with the changing environment. The
company adopted various new techniques and manufacturing plans so as to produce those
products which are preferred by consumers. The integration of business functions has also helped
company achieve competitive advantage as every functional area is performing better with
proper knowledge and effectiveness. The impact of culture based on values and ethics has helped
employees relate to work more efficiently and improved quality of products through people
centricity and diversity is achieved. The culture adopted at McDonald's has helped transformed
its image by designing its stores based on forever young theme which influences people to
invest.
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REFERENCES
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Christopher, M., Payne, A. and Ballantyne, D., 2013. Relationship marketing. Taylor & Francis.
Gummesson, E., 2011. Total relationship marketing. Routledge.
Huang, H. C., 2009. Designing a knowledge-based system for strategic planning: A balanced
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James, T. E. and Jorgensen, P. D., 2009. Policy knowledge, policy formulation, and change:
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Ndubisi, N., 2007. Relationship marketing and customer loyalty. Marketing intelligence &
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Online
Management Technology Policy. 2016. [Online]. Available through:
<https://www.ifm.eng.cam.ac.uk>.
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