Competitive Strategy Essay - Tools and Techniques for Strategic Management

This essay analyzes and evaluates four critical strategy development tools for effective application in businesses, using McDonald's as a case example. The tools include PESTEL analysis, SWOT analysis, Five Force Analysis, and Ansoff matrix.

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competetive strategy
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Competitive strategy essay
Various strategy development tools, techniques and models are available that
support strategic management of firms and to assist them in decision making
processes. They are designed and developed for supporting managers in every
stages of strategic management procedure to achieve organisational gaols
( Qehaja , et al., 2017). To understand how these tools are effectively applied on
businesses, this essay will use a case example of McDonald’s operating in fast-food
industry. This essay will analyse and evaluate four critical strategy development tools
after identifying its uses as per current literature.
PESTEL analysis
PESTEL or macro environment analysis tool is used by business managers to
examine and evaluate external factors facing the firm which requires to be
considered for gaining competitive position in marketplace. Many of the firm uses
this tool while entering new marketplaces as it guides management in making
business plans that can suit new market external environment. Acronym PESTEL
typically stands for political, social, technological, environmental and legal factors of
business organisations that needs to evaluated at regular intervals to identify any
significant changes that may impact organisational performance (Ritson, 2011).
PESTEL analysis of McDonalds reveals external factors that affects the firm’s
performance while operating in an international business environment. Political
factors of McDonalds show that company responses to every governmental
regulation and policies along with showing effective CSR policies within its
management. Economic conditions though hampered company sales especially
during the times when US and European nations faced financial crises and recession
period. Alongside, since McDonalds operates in various countries, any significant
changes in country economics disrupts its overall operation strategies. Social factors
again seem challenging to the firm due to increased concern seen among
consumers against fast-food consumption. Technological factors, however can be
seen employed by the firm since it utilises advanced technical equipment’s and
innovative systems for food production, storing, and waste management areas.
Environmental factors also affect McDonald operations as any climatic change may
hamper the production of its major raw material i.e. food products. Lastly, legal
constraints like suppliers’ unethical practices, changing policies of outsourcing
countries and other food related standards critically affects McDonalds operations.
.

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SWOT analysis
SWOT is another strategy development tool that assists management while
preparing business plans after considering present strengths and weakness of the
firms along with future opportunities and threats that may affect organisational
development. This tool is considered very effective for existing businesses while
assessing their current business situation for determining a strategy that can move
organisation in positive direction. However, to keep SWOT analysis updated,
businesses must consider those factors that keeps changing and thus may require
reassessing strategies for realising operative performance (Helms & Nixon, 2010).
Strength analysis of McDonalds reveals that the firm is leading contender
within fast-food industry, holds a strong brand image and implements standardised
processes that shows its strong internal strategic factors contributing in bringing
organisational viability. Weaknesses can also be seen especially concerning the
market focus area and some of its products manufacturing processes. Along with it,
the firm shows very little flexibility in its business process along with following low
product diversification strategy to enter new markets. This further makes company
vulnerable to face Western market decline. Opportunities that lay in front of
McDonalds includes expansion scope in diversified countries due to strong brand
recognition along with market development opportunities in Middle East region
where it has not entered yet. Threats that can be associated with McDonalds
businesses as it has to face aggressive market competition, changing perspectives
of its consumers along with GMO trends and governmental regulations disrupting its
business operations (Greenspan, 2017).
Five Force Analysis
Five forces analysis developed by Porter is one of the most significant
development tools that helps management in analysing business competition related
forces present within the industry it performs in. This tool is majorly used for
determining market competition, intensity among rivals and how business
competitors behave to gain competitive position. Alongside, this tool also recognises
potential forces related to bargaining power of suppliers and buyers to analyse firm’s
competitive position in the market. By assessing forces behind threats from new
entrants and substitutes, firms can further build competitive strategies that can help
them build market position along with looking for ways that can transfer strong forces
into firms’ opportunities (Indiatsy, et al., 2014).
Since McDonalds work with large number of suppliers like Dr Pepper
Snapple, Coca Cola, International Paper Company, etc. bargaining power of
suppliers remains a weak force for the firm. However, rivalry seen among other
competitors remains a stronger force since the company has to face constant
competition from other rivalry companies like Pizza Hut, Subway sandwiches,
Starbucks, Burger King, etc. Threats of new entrant force remains moderate for the
company. On one hand, fast food restaurant can be opened with very little
investment and does not have many legal barriers, intense rivalry seen among

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present market players makes new entrances force rational for McDonalds.
Bargaining power of consumers, however remains strong force for the company due
to availability of various other fast-food brands available in marketplace. Threats
from substitutes like freshly cooked food also impacts company sales many times
reflecting it as a stronger force once again (Dudovskiy, 2016).
Ansoff matrix
Ansoff matrix is another significant strategy development tool that are used by
firm’s management for determining risk related factors pertaining business
operations. This tool is extensively used while formulating growth related strategies
as it describes potential growth-related opportunities that are available for
businesses as well as regarding new products or market prospects. According to
Ansoff theory, for every organisation there are four growth related possibilities which
includes product development and diversification along with market penetration and
development (Gianos, 2013).
McDonalds Ansoff matrix show that they supplement their main stream with
fast food products along with other new additives. Such market penetration strategy
allows the firm to enter new markets with ease along with gaining consumer loyalty
and market recognition. Product development strategy of McDonalds reveals that it
introduces healthy and nutritious food for launching its product in developed and
intensified market countries. Cost effective strategies are also implemented by the
firm by combining more than two continental food alongside local taste at affordable
prices. The market development strategy of McDonalds show that the company
enters more into developing and developed countries, offering more franchises in
fresh markets. The firm also follows promotions and advertisement approaches to
expand its businesses in new market (Ahmed, et al., 2016).

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References
Ahmed, R. R., Sheikh, D. M., Bhutto, M. T., Memon, S. A., Ahraz, S., Murtaza, G.,
Farkhanda, M., 2016. Strategic Marketing Plan for McDonald’s. [Online]
Available at:
https://www.researchgate.net/publication/301553341_Strategic_Marketing_Plan_for_
McDonald's_2016
[Accessed 23 04 2019].
Dudovskiy, J., 2016. McDonalds Porter’s Five Forces Analysis. [Online]
Available at: https://research-methodology.net/mcdonalds-porters-five-forces-
analysis/
[Accessed 23 04 2019].
Gianos, J. F., 2013. A Brief Introduction to Ansoffian Theory and the Optimal
Strategic Performance-positioning Matrix on Small Business (OSPP). Journal of
Management Research , 05(02), pp. 107-118.
Greenspan, R., 2017. McDonald’s SWOT Analysis & Recommendations. [Online]
Available at: http://panmore.com/mcdonalds-swot-analysis-recommendations
[Accessed 23 04 2019].
Helms , M. M. & Nixon, J., 2010. Exploring SWOT analysis – where are we now? : A
review of academic research from the last decade. Journal of Strategy and
Management, 03(03), pp. 215-251.
Indiatsy, C. M., Mwangi, M. S., Mandere, E. N., Bichanga, J. M., George, G. E.,
2014. The Application of Porter’s Five Forces Model on Organization Performance: A
Case of Cooperative Bank of Kenya Ltd. European Journal of Business and
Management , 6(16), pp. 75-85.
Ritson, N., 2011. Strategic Management. s.l.:Ventus Publishing.
Qehaja , A. . B., Kutllovci , E. & Pula , J. . S., 2017. Strategic Management Tools and
Techniques: A Comparative Analysis of Empirical Studies. Croatian Economic
Survey, 19(01), pp. 67-99.