Introduction to Business: McDonald's, Porter's Model, & Ethical Issues

This presentation explores McDonald's business challenges and ethical dilemmas, applying Porter's Generic Strategies to propose solutions. It identifies issues such as a consistent menu, limited target market, price sensitivity, and rising competition. Ethical concerns include environmental impact, wage theft, and CSR issues. The presentation suggests implementing cost leadership, differentiation, cost focus, and differentiation focus strategies to address these problems, along with adopting the ICAEW framework to resolve ethical concerns. It also highlights the benefits and challenges of teamwork in achieving these objectives. The analysis concludes that Porter's model can effectively support McDonald's in navigating the competitive business environment.

Introduction to business
7/10/2018
McDonald’s

Introduction to business 1
Contents
Introduction......................................................................................................................................2
Overview of company..................................................................................................................2
Porter’s Generic strategies...............................................................................................................3
Business problems faced by McDonald’s........................................................................................3
Application of model.......................................................................................................................4
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

Introduction to business 2
Introduction
The aim of the report is to understand the internal and external environments along with the
ethical issues in business and management with the help management model. The model that will
be discussed in the report is Porter’s generic strategy which is an internal strategic model. The
company that has been selected for this assignment is McDonald’s. It is an American well-
known fast food company that came into existence in the year 1940s. The company perform their
operations in the competitive environment due to which they face tough competition across the
world. The porter’s generic strategies will help the company to resolve the issues which are faced
by the company in the competitive market.
Overview of company
The company is considered the world's largest restaurant chain in terms of the revenue because
they serve their products across the world with numerous numbers of outlets (McDonald’s,
2018). The company initiated in 1954 with the small restaurant and now it is one of the world
leading fast service brands with more than 36,000 restaurants in 100 countries or more
(McDonald’s, 2018).

Introduction to business 3
Porter’s Generic strategies
Porter’s generic strategies describe the ways through which the company pursues the competitive
advantage across its chosen market scope. The strategies that are included in the model are Cost
leadership, differentiation, cost focus and differentiation focus.
 Cost leadership: - In this strategy, the company sets the strategy to become the low-cost
producer within the industry. The low-cost producer must find and exploit all the
necessary sources of cost advantage (Tanwar, 2013).
 Differentiation strategy: - This strategy is used by most of the companies in the market
as they want to become unique in this industry. Along with this, they follow the premium
pricing strategy with differentiation.
 Cost focus: - Cost focus strategy majorly focuses on cost advantage in its target segment
(Teeratansirikool, et al 2013).
 Differentiation focus: - In this focus strategy, the company focus on the different types
of its target segments.
Business problems faced by McDonald’s
McDonald’s company faces numerous issues which impact their working within the market.
Some of the issues are discussed below: -
 Similar menu of McDonald's: - The menu of the company is one of the biggest and
major issues for the company. The research reflects that their menu remains the same
with no major changes according to the country and their culture. Along with this, the
menu of the company mainly includes burgers, wraps, fries, coke and ice-cream

Introduction to business 4
(McDonald’s, 2018). In addition, the menu includes some additional dishes but all these
reflect that there is consistency in the menu of the company. This means that the
company is not flexible with their menu. Though McDonald's has put in efforts to bring
the changes to their menu then also the company were not able to make the exact
changes.
 Limited target market: - Company mainly targets the young people and adult mainly
who belongs to the working class. Moreover, this target segment of the company falls
under the middle and higher income group. Considering the research it is found that the
target market limited customers due to which they are not able to meet their objectives
and goals that are to maximize the profit and to provide the customer satisfaction.
 Price sensitive: - Company raise the price of their products without driving any
customers. For example; this has been observed that there is a rise in the cost of beef and
cheese offered by the company. This is one of the major issues which lead to customer
dissatisfaction (The Star, 2014).
 Rise in competition: - McDonald’s company found the rise in the competition in the
current market from the companies like Burger King, KFC, Pizza Hut and many others.
Ethical issues faced by the company
McDonald’s company has been accused due to the negative impact on the environment because
the company is continued to use paper and plastic. Research reflects that the company was in
issues related to wage theft, poverty-level pat and mistreatment of pregnant workers
(McDonald’s, 2018). This shows that the company is not able to follow the set guidelines and
corporate governance. The company also find the issue related to CSR, one of the rising issues
revolves around the CSR of house charity. The charity done by the company lost their reputation

Introduction to business 5
in the market because of child exploitation issues. The company is criticised in the market due to
the ingredients in their products.
Application of model
McDonald’s should apply the internal analysis model that is Porter's generic strategies to resolve
the issues that are faced by the company in the market. The company should apply these
strategies so that the issues can be eliminated. If the company apply this model then they need to
ensure that every member of the company should work likes a team. The implementation is
discussed below: -
 Cost leadership: - This strategy will help the company to become the lower producer in
the market. This resolves the issue of price sensitivity which is usually faced by
customers. When the company will keep low prices for a product then it will meet the
needs of customers because the other competitors offer the products at a high price.
Along with this, if the company bring the slight rise in prices then also it hardly impacts
the customers of the company.
 Differentiation: - The applicability of this strategy supports the company to bring
something different within the market (Flouris and Oswald, 2016). For example, the
company took the decision to brought new dishes or recipes on the menu with combos
that show the applicability of the differentiation strategy. The company should apply this
differentiation strategy with the help of which they can understand the needs of
customers and accordingly bring the changes in their product and service offerings. This
will resolve the menu issues and company will also allow McDonald’s company to deal
with the competitors.

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 Cost focus: - The implementation of this strategy will help the company in offering the
cost advantage in its target segment. The target market will not get affected if the
company will offer the products at the affordable price range. The products of company
at the affordable price provide the advantage to the target segment. This strategy will
reduce the issue related to the price and leads to customer satisfaction.
 Differentiation focus: - The implementation of this strategy will help the company to
focus on a different target segment instead of one particular segment (Flouris and
Oswald, 2016). McDonald’s company can target the wide range of customer by offering
attractive and differentiate products. This will resolve one the major issue of the
company.
The solution for ethical issues
The company should increase the moral conscience level and should ensure that they should not
harm the environment for their harms. McDonald’s food was wasted which shows the waste of
products that directly affect the employee's wage. The company should make use of the ICAEW
framework that helps the company to resolve the ethical problems (ICAEW, 2018). The
framework includes: -
 Gather the facts and information for identifying the problems
 Determining the affected parties
 Considering the involvement of ethical issues
 Determining which fundamental principles are affected
 Refer to employing organisation’s internal procedures
 Evaluating the alternative course of actions
 Implementing and monitoring the actions

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Challenges and benefits of working as a team
While working as the team it has been observed that there are different benefits and challenges.
Some of the benefits are: -
 I took the ownership and guided the other team members
 Improvement in the communication and teamwork skills
 Increase in understanding
 Easy distribution of work in teamwork
Some of the challenges are: -
 The team has unequal participation
 The limited creativity of the ideas and thoughts
 I found it is difficult to analyse the needs of customers

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Conclusion
In the end, it can be concluded that most of the companies in the current competitive world make
use of this model so that they can solve the problems which are faced by business. McDonald’s
company face numerous issues while operating the business in the dynamic environment. The
model that has been implemented to resolve the issues is Porter's generic strategies. The
strategies will support the company to resolve the issues within the market. This will allow the
company to deal with the business effectively.

Introduction to business 9
References
Flouris, T.G. and Oswald, S.L., 2016. Designing and executing strategy in aviation management.
New York: Routledge.
ICAEW (2018) Framework for resolving ethical problems [Online]. Available from:
https://www.icaew.com/en/technical/ethics/framework-for-resolving-ethical-problems [Accessed
on 10th July 2018]
McDonald’s (2018) About Us [Online]. Available from:
https://www.mcdonalds.com/us/en-us/about-us.html [Accessed on 10th July 2018]
McDonald’s (2018) Ethics of McDonald's [Online]. Available from:
https://mcdonaldsethics.weebly.com/mcdonalds-ethical-issues.html [Accessed on 10th July 2018]
McDonald’s (2018) Our History [Online]. Available from: https://www.mcdonalds.com/us/en-
us/about-us/our-history.html [Accessed on 10th July 2018]
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.
Teeratansirikool, L., Siengthai, S., Badir, Y. and Charoenngam, C., 2013. Competitive strategies
and firm performance: the mediating role of performance measurement. International Journal of
Productivity and Performance Management, 62(2), pp.168-184.
The Star (2014) 5 problems facing McDonald’s [Online]. Available from:
https://www.thestar.com/business/2014/10/22/5_problems_facing_mcdonalds.html [Accessed on
10th July 2018]