Strategic Management of McDonald's

This document provides an in-depth analysis of the strategic management of McDonald's in the fast food industry. It covers topics such as PESTEL analysis, Porter's Five Forces model, competitors, VRINE model, and recommendations for future business strategies.

Running Head McDonald’s 0
McDonald’s

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Contents
Introduction......................................................................................................................................2
PESTEL Analysis............................................................................................................................4
Porter Five forces model analysis....................................................................................................6
Competitors......................................................................................................................................7
VRINE Model..................................................................................................................................8
Conclusion and recommendation....................................................................................................9
Reference.......................................................................................................................................11

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Introduction
McDonalds is one of the successful businesses in fast food industry in the world which was
founded in 1940 by two brothers Richard and Maurice McDonald and they started it as a
restaurant. McDonald’s runs more than 35,000 restaurants in more than 100 countries and
serving almost 68 million customers daily. McDonald Corporation employs have more than 4
million people in the whole world. In many countries, they still do not have an existence and
their current plan is to focus on the marketplaces where they do not have their outlets and open
new outlets in new places. McDonald’s provides their franchise to operate with the right to
distribute its products, techniques, and trademarks by taking the royalty fee and some percentage
from the gross monthly sales. McDonald's have an identical menu which includes fries, burger,
wraps, salads, desserts, soft drinks and other beverages but the food which are served to the
customers in different countries have different taste according to the customers’ needs and
preferences. They offer the menu in the international market which is relevant and made
according to locals.
A mission of McDonalds Company is to be the best and a favorite destination of food service
and the vision is to move with quickness to drive cost-effective growth. Their vision helps them
to improve and achieve growth to become an even better McDonald’s. Mission and vision
directly impact on the innovative strategies adopted by the rivals in the fast food trade.
McDonald’s emphasize to become the favorite of target customers. The main target of the
company is to maximize sales by keeping the cost low and opening more outlets worldwide
(Ater and Rigbi, 2015). They want to make the restaurant a quick service provider by providing
the best quality, service, cleanliness, and value. There are different types of restaurants of
McDonald's all over the world like McDrive, McCafe, Create your taste restaurant and many
more. Globally, McDonald’s is one of the most valued restaurants whose net worth is more than
$40 Billion. Their strategic goal is to place the customer involvement at the core and their
objective is to provide high-grade food to customers and higher service in a clean and welcoming
environment (Abiodun, 2010). They want to operate the business ethically and also they believe
in the McDonalds systems which they are following. In the U.S, McDonald’s focus on breakfast,
chicken, beverages, and convenience and these are the essential areas in the U.S. In Europe

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market, they focus on the menu, which included the premium selection, classic menu, and
everyday affordable offerings to the customers.
The key objective of McDonald’s is to serve a high standard of food, value for money and fast
service to customers. To meet the aims of the company, McDonald’s set various objectives for
strategic management (Puzakova, 2105).

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PESTEL Analysis
PESTEL analysis is the analysis of political, economic, social, technological, environmental and
legal factors that has an impact on the business. PESTEL analysis helps the organization to
analyze the issues in the external environment as it supports strategic management. It helps in
recognizing the external factors which present the various opportunities and threats and they set
the strategies to maximize the benefits from the opportunities in its environment (Dey, 2016).
For effective strategic planning, it is vital to analyze the external factors for examining the
performance of the business.
Political Factors
Government policies and rules have major effects on McDonald’s business and economy. As it
operates in almost 100 countries and every country's government has its rules and regulations, so
the company has a political exposure of all. The government aim is to improve health and reduce
obesity and they prepare the guidelines for the diet and health of the customers (Yuksel, 2012).
The government allows for the opportunity by increasing the international trade of McDonald's
by expanding their business. The evolving public health policies bring opportunities for the
company. The political factors bring opportunities and threat to the company.
Economic factors
The economic conditions and trends change directly or indirectly influence the performance of
the business. The various global, regional and local economies have an impact on the McDonalds
industry environment (Makos, 2015). It is an opportunity for the company to have stable
economic growth in developed countries. McDonalds had also improved their performance with
the improved economic conditions.
Sociocultural factors
A sociocultural factor helps in analyzing the communal conditions that support the business of
McDonald’s or limit them. Social factors influence the behavior of customers and their effects on
the revenue of the business. The changes in customer’s tastes will impact the sales of the
company. It is an opportunity for the company to rising disposable incomes as external factors.
McDonald's has an opportunity as they have the flexibility to modify the products to meet the

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customer’s preferences in the diverse market (Parcel and Sickmeier, 2008). It creates an
opportunity for them to increase the healthfulness of their menu as people prefer to have a
healthy lifestyle. Socio-cultural factors create major opportunities for the development of
business.
Technological Factors
Technologies impact on business growth and development. For maximizing the technological
benefits, it is significant to adopt recent technology. It creates an option for McDonald's to
increase its research investments by improving the effectiveness and efficiency in business (Issa,
et al, 2010). The change in technology not only allows McDonald’s to improve its business
process but it also helps in developing a good connection with customers.
Environmental factors
Environmental factors impact on business performance and its brand. By refining its
sustainability McDonald's strengthens its position in the marketplace. Environmental external
factor helps in creating opportunities as it maintains business stability and growth. They also
focus on framing the policies which are more environmental friendly.
Legal Factors
The rules and regulations have a major impact on the success of businesses. It acts as a threat to
McDonald's and on its revenue. McDonald's corporation faces an issue with the higher minimum
wages as it leads to greater costs and prices of products. Legal factors have a limited influence on
the business of McDonald’s. There are many employment laws which are considered in market-
related to the maximum working hours of an employee's daily. McDonald's tends to follow all
the legal standards in all the markets as it helps in earning profits and deliver the services on
time.

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Porter Five forces model analysis
Porter Five forces impact the profitability of the firm. It is a strategy for the company to make an
effective decision for analyzing the present competition in the market.
Threats of new entrants
Nowadays, the Fast food industry is one of the most competitive businesses in the market. New
entrants bring new innovation for attracting the customers by doing new things and it puts
pressure on McDonald's for reducing the prices and lowering price strategy (Vrontis and Pavlou,
2008). McDonald’s tackles new competitors by bringing new and innovative products and
services. For lowering the fixed costs per unit McDonalds build the economies of scale. They
spend money on the research and development department for analyzing the market condition.
Bargaining power of suppliers
All the fast food industries buy raw material from the number of suppliers. The suppliers of
McDonald's have less control over the prices and the suppliers have low and weak bargaining
power because of the huge number of providers. McDonald's can purchase raw materials from its
suppliers at low costs. They can easily switch their suppliers as the switching cost is low. During
the supply chain, they can have a number of suppliers of raw material.
Power of customers
Power of buyers or customers has a weaker force in McDonald’s industry as customers have
many firms to choose from the suppliers. Within the industry, product differentiation is high, so
the buyers are able to find an alternative to the particular product. It is important for the company
to report the control of the consumers on the performance of the business. The various factors
that contribute to the strong bargaining power of buyers are because of the low substituting cost
and large numbers of suppliers are available in the market. The availability of alternatives is very
high in the market. Consumers have more options to choose from other fast food restaurants than
to choose McDonald's. The external factors create the bargaining power of buyer’s a strong
force.
Threats of substitutes

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Substitutes have an impact on McDonald's sales and profitability. The very few substitutes are
available of high qualities but they are more expensive. The threat of substitution is strong in the
market because there is a high availability of a substitute. In the fast food industry, the external
factors contribute to the threat of substitutes for the company (Anaf, et al, 2017). High
availability of substitute makes it easy for consumers to move from McDonald's to another
substitute because of the low switching costs. The various substitutes in the market are
economical in terms of quality and customer satisfaction. The various external factors are an
issue for the company and it requires the improvement in product quality.
Competitive Rivalry
In the market, fast food restaurants are saturated and McDonald's have to face tough competition
with them. Fast food restaurants are having many firms of different sizes and it builds up the
force of rivalry in the industry. There are many fast food restaurants in international as well as in
the local market that have almost the same menu which McDonald’s has on their menu
(Schroder and McEachern, 2005). There are several contenders of the company like Burger
King, Wendy's, and many more. The increasing competitors have made competitive rivalry as a
strong force for the McDonald's.
Competitors
The topmost competitors of McDonald's are KFC, Subway, Wendy's and Burger King as they
deal with almost the same products. In the Fast food industry, McDonald's has become a leader
as they had focused on customer services, used updated marketing techniques and responding to
competitors. McDonald's is a more popular brand than the other competitors and they offer more
varieties of products to customers. They offer the drive in services for customers as it is very
convenient for customers (Thomadsen, 2007). McDonald's sells a different menu in different
countries where competitors offer the same menu and do not change with the change of location.
McDonald's has more geographic coverage as compare to KFC and Wendy's. McDonald's prices
are competitive and delivery is fast as compare to other rivals.

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VRINE Model
McDonald's has generated a very high position in the business of fast food. It is important for the
company to focus on resources and capabilities. The various resources are the assets of the
company. The VRINE model helps in analyzing the resources and capabilities of McDonald's.
The company holds a very high value in maintaining its brand image and utilization of the
various available resources had helped them in growing their business successfully (Noe, et al,
2017). McDonald’s had given its franchise to others but the franchiser has to follow the rules and
USP strictly to run the franchise. The full control and management of the business remain with
the top authorities (Lin, et al, 2012). It’s very difficult to achieve the functionality of the
company. McDonald’s products are non-substitutable as competitors cannot achieve the success
and benefits by using the different combinations of resources and capabilities.
McDonald's became successful in last 3 year by performing well and franchising of restaurants in
various regions of different countries. They set the goal to have 95% of McDonald's restaurants
and its franchises in different regions of the world and at the end of 2018; they made it to 92.5%.
Their comparable sales also increased by 4.5% year on year.

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Conclusion and recommendation
McDonald's has adopted the diamond strategy which includes the five elements arenas, Vehicles,
economic logic, staging, and differentiators. Arenas include the geographic coverage of the
business, McDonald's deals with the business globally by having franchises all around the world.
The target segments of McDonald's are young, adult, kids, teenager, and family also. They have
a different menu for different age groups. The products in which McDonald’s deals are burgers,
fries, salad, McCafe beverages. The differentiator is how they will win with competitors, as they
had created their brand image globally and adopted the fast delivery services to customers and
also adopted a local culture and taste for the customers.
McDonald's adopted an economic logic strategy where they set affordable prices by measuring
the advantages and also introduce new products with more ingredients to increase sales in the
market (Andreni, et al, 2012). The vehicle includes how to get success by way of internal
development, experimentation, or acquisitions. McDonald's has franchise mostly outside of U.S
and also divest with the non-burger acquisition. Staging includes that what be the speed of the
firm to expand and take the initiative. McDonald’s believe in organic growth where they cut
back the expansion and majorly focus on the existing outlets to maintain. McDonald’s are selling
out the outlets owned by the corporation.
To conclude the report, McDonald's has a strategic management plan to lead in the industry of
fast food. They made the strategy to focus on the customer's needs and taste and differentiate
their products according to the age group. For the future business level strategy, McDonald's
should develop a more healthy choice for the customers. It is important to use local food sources
as it increases the sales of goods in the local market. McDonald's can use the local raw material
to increase efficiency as it decreases the time to market and helps in decreasing the fuel cost for
transporting (Swinburn, et al, 2015). McDonald's can try to improve their strategies for
attracting the customer by adopting new ideas and innovative products. They can improve the
customer services to attract new customers and by satisfying them and also the intention to visit
again. To increase sales and profits, McDonald’s could improve and fasten its home delivery
services. McDonald's can make their outlets more attractive as the customer get attracted to the
place and ambiance when they are more friendly and quiet with some innovative theme.
McDonald's can develop a process to support communication between them and their suppliers

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for improving the supply chain management (New, 2015). The company can design a campaign
for customers to guide them for taking the initiative to dispose of the waste. For lowering the
operational costs McDonald’s can invest in technology advancement through self-serve kiosks
and they can also increase consumer loyalty through the affluence of access and convenience.
Localizing in the supply chain will help in expanding the business and local delivery services
will help in reaching the emerging market by incentivizing in local businesses and resources.

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