Strategic Management Report: McDonald's Business Strategies Analysis

This report provides a comprehensive analysis of McDonald's strategic management, beginning with an introduction that defines strategic management and its application to the company. It then delves into McDonald's strategic direction, examining past strategies and their evolution. The report includes a detailed sector analysis using the PESTLE framework, assessing political, economic, social, technological, legal, and environmental factors. It explores strategic drift, competitive advantages, and strategies for defending its business. The report concludes with an evaluation of the resource implications of the firm's recommendations, providing insights into McDonald's strategic choices and their impact on the business. References are provided.

STRATEGIC
MANAGEMENT

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Strategic direction followed by company in past and various ways in which it has developed.
................................................................................................................................................1
TASK 2............................................................................................................................................3
Analysis of sector in which organisation operate...................................................................3
Task 3...............................................................................................................................................7
Strategic drift:.........................................................................................................................7
TASK 4............................................................................................................................................8
Strategies that a company could follow to defend its business..............................................8
Task 5...............................................................................................................................................9
Analysis and evaluation of resource implication of recommendation that firm has to address
................................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
In the field of management, strategic management involves the execution and formulation of the
essential goals and objectives that are taken by the top management of an organisation on the
behalf of owners. It is significantly based on the consideration of the resources and an analysis of
the micro as well as macro environment in which the enterprise operates its different business
operations. Strategic management is consist as an appropriate process of planning, analysis,
monitoring and assessment of all the relevant element which are necessary for an organisation to
meet its goals and objectives. In this report McDonald is the chosen organisation (Gamble,
Thompson and Peteraf, 2013). It is an American fast food company, which is established in the
year of 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino,
California, united states. The company has its original headquartered in Oak Brook, Illinois, but
moved its global headquarters to Chicago in the earlier of 2018. This report contents the study
about the strategic direction that the firm has followed, a description of the sector in which entity
operate, the use of appropriate internal analysis tools, strategic choice model which is effective in
sustaining a competitive position and the implications which are arises through the
implementation of business strategy.
TASK 1
Strategic direction followed by company in past and various ways in which it has developed.
Strategic direction is consist as a course of action which assist or help in achieve set goals
of company’s strategy. Strategic planning is a process to ensure that company will give a good
profit result and the company is able to maintain its output. A strategic direction involves the
fundamental forces which prompt the business toward its intended objectives or goals. The
organisational vision, mission, strategies, tactics and core values all contribute to the appropriate
establishment of a strategic direction (Barney, 2012). A successful business leader suggest to the
components of the key heading to create cooperative strength and positive resolve in an
association. A vital course is resolved as the most fundamental powers in an association. It
execute the structure for inside parts or duties which can be taken by the person in every office.
A reasonable vision enables every person to know the significant reason and destinations of the
firm. Strategies and tactics also allow each employee to analyse the part which are needs to be
plays in contributing to the attainment of the vision and objectives.
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Strategies of Mc Donald's:
In past years, the chain is struggling declining sales, relationship with franchisees and
damaged public perception that has hit all time low. Some of the strategies are defined below:
Competitive advantage:
In past, company paid less attention on concept of gaining competitive advantage due to
which sales of Mc Donald's fall down and firm face huge loss. But, in last some years, their
thinking is developed and they are now focusing more on customer satisfaction. They do so by
encouraging staff members to be friendly with customers and administer them “service with
smile”. They more emphasize on providing best value to consumers and always tries to be a
leader by dominating market when it comes to value (Berger and Berger, 2011).
Customer Satisfaction:
In past years, they are not focusing on aspect of customer satisfaction. Because of this,
firm was faced criticism from customers which results in declining sales and -profits of
company. But in last some years, company emphasizing on customer satisfaction. They provide
fast services to customers, clean environment, high quality products with affordable prices etc.
This will help company in gaining attention of large number of customers and at the same time,
enhance profitability of company in effective and efficient way.
More menu simplification:
Menu of Mc Donald's has grown 42.4% in past some years. The tumescent menu cause
issues in its kitchen & slow down customer service. The average drive thrust wait of chain is
now 3 minutes. The company has cut some items from menu in recent months. In order to drive
high sales, they simplify their menu and add Sirloin Burger in it.
Improve customer experience by strong digital capabilities:
Over the last some years, company struggled to revive its declining sales. The traffic to
restaurant was decreasing every year up until 2017 at the time when it improved only slightly.
Consumers are move to new brands which provide both, better services and high quality food
(Sirmon and et. al., 2011). In order to encounter that, firm announced new plan which emphasize
on enhancing customer experience by providing digital experience to them.
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TASK 2
Analysis of sector in which organisation operate
Environmental assessment is considered as the most essential strategic tool which works
as a process to analysing all the external as well as internal elements that largely affect the
performance and operations of firm. Strategic management is the most essential element of each
business enterprise which needs to be attained by organisations as to conducting its operations in
more effective and efficient manner. An appropriate strategic planning helps an organisation in
providing a significant direction to execute all business operations in effective manner as to
reaching at potential heights (Slack, 2015). The company conduct its business operations either
as a franchise or by the McDonald's corporation itself in the country of United kingdom.
Organisations is widely concern on applying the tools of PESTLE analysis in respect to
analysing its external business environmental factors that affect the operations and growth of
firm. The elements of PESTLE is described as below:
Political Factor: This can be considered as the fundamental aspect of PESTLE model and it has
a direct influence on the operations of the firm. Political factors involves the political policies,
regulations and laws of a country which impact on the working of an organisation within the
nation. McDonald is significantly influenced by the political setup of a nation that it's the place it
has constituted or actualized its outlet. The laws identifying with tax, well-being and food safety,
laws relating with specialists and so on are likewise influences its inside workplace. For
example: Singapore being a bureaucratic and furthermore a vote based country, its political setup
is totally affected by the choices which is made by the administration which are routed to general
society of country (Li and Liu, 2014). Since the food items serve by McDonald impact on health
that’s why it is necessary for firm to follow all rules and regulation in order to operate in
effective manner. McDonald's has the opportunity to expand its business operations that are
depend on the developed international trade, that can be improved global supply chains.
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(Source: PESTLE Analysis, 2017)
Economical Factor: The essential components that are attempted in this approach is that interest
rates, exchange rates and cost of inventories which impact working of an organisation in an
effective way. The McDonald's have been known to give right emphasis to the financial
conditions. To counter the moderate economic development, government have significantly
reduced the taxes with the goal that services industry can work freely in the market. Therefore an
effective strategic position can be maintained by the organisation through implementing right
strategy. For example: Singapore is consist to have a large economic independence, which is
highly stable and powerful in nature. McDonald is a large food industry, which is growing at an
active pace in the economy of Singapore (Weerawardena and Mavondo, 2011). The city being
popular for tourism, its hospitality industry is fetching benefits of it and therefore food and
services industry are also taking advantage of it by gaining attention of more customers towards
their products and services.
Social Culture Factor: The social condition alongside qualities and beliefs of an individuals in
the objective market is emphasized. The comprehension of their needs and wants ensures that
they are satisfied with the offered products and services of the firm. The examination conduct on
such grounds states that there is a necessities to incorporate items and services which give
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Illustration 1: PESTLE Analysis

potential health oriented practices, for example the McDonald's is offering natural or organic
food products. The appropriate financial condition of an organisation helps in attaining higher
competitive edge within the market place.
Technological Factor: This element centres around the advancement and development which
are done in field of innovation and technology. The advancement of mobile technology gives an
association to various opportunities which could play most essential role in promoting the
products and services of the firm. The major aim of McDonald's is to providing high quality
products through implementing a systematic production technique in respect to providing high
quality products all around the globe. The company use different technologies
Legal Factor: Legal factor can be defines as a set of principles and compliance which are needs
to be followed by an organisation as to carry out its all business operations in most effective
manner. legislation which has been shaped by the authorities of government tend to impact
working of an association. The different laws which are to be undertaken by a firm are business,
trade regulation, consumer laws, safety practices and employment. It is significant for enterprise
to follow after the guidelines gave with the goal that lawful inconvenience could be kept away
from the firm or its operations.
Environmental Factor: These variables attempt impact of encompassing condition in setting of
an association. Both micro and macro environment have an impact on working of enterprise. The
environment involves the imposition of regulations and restrictions and also the subsidies offer
by government. The environmental components are likewise the conduct and propensities for the
clients and their inclinations. McDonald's give administrations and sustenance in light of the
decision and inclinations of the clients in regard to fulfilling the in successful and productive
way (Wheelen and Hunger, 2011). It is said to have a variety of menu for each and every country
that it supply its services to, based upon the taste and preferences of the buyers.
McDonald's is the most leading food chain company, the company mainly serving over
69 million consumers in over 100 countries at regular basis. The major focused area of every
small and large organisation in order to achieve high growth and success in market by offer
various type o services with high quality to its customers. As a large business organisation it is
essential for McDonald's to analyse its internal as well as external environmental factors in
respect to determining its significant position within the market (Jardon, and Susana Martos,
2012). The company has around 35000 McDonald's stores, which are operating over 119
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countries and they are collectively serve around 68 million consumers in a year. As a large
business enterprises McDonald's has various competitors such as Starbucks, Burger King,
Wendy's etc. Today, almost every business enterprise implements the strategy of product
differentiation in order to attract more customers and to generate more number of profits. In the
modern market competition is so high and organisations are widely concern on applying the
strategy of product differentiation as it is the most appropriate strategy to attaining competitive
edge within the market place. The major focused area of McDonald's is to selling high quality
products with high quality ingredients, which make the firm attractive rather than its competitors.
The major focused area of McDonald's is to selling high quality products with high quality
ingredients, which make the firm attractive rather than its competitors.
Food industry is having intense business competition in which McDonald company is facing
these issues. In order to address various kinds of issues in this segment, cited organization would
require to make an efficient business strategy which would help out to gain the sustainable
development over the competitors. Now, this also can be said that the management of the cited
organization will need to implement risk assessment in order to assess certain strategic decisions
like major plan investment or an emerge an advance business development drive (Leonidou and
et. al., 2013). This would effectively assess the market conditions and then make strategy of the
organization. Porter five forces strategy can be opted in order to compete in the market and know
their competitors efficiently and then formulate the strategy. By way of using market risk
assessment, step by step approach would be used to determine the main conditions like market
growth rate, changes in regulatory climate, technological development. These issues would
require to face the challenges as per the market requirement.
Here are some of the problems which are facing in this industry.
Bad Food image: To defend the image of its food. McDonald Restaurant have launched a social
media campaign in order to invite the consumers to ask questions about ingredients.
Inappropriate services: McDonald executives have rightly said that they introduced various
items too quickly past year, like McWraps and option to substitute egg whites for breakfast
sandwiches (Ahiauzu and Ntayi, 2011)
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Task 3
Strategic drift:
Strategic drift defines as the concept related with strategic administration that refers to
response of firm when going through dynamic environment. In case of Mc Donald's, it
successfully expanded into many markets. The company has already expanded successfully in
international markets. But, some restaurants of Mc Donald's close down because of change in
attitudes of customers in some parts of nations. Customers want more items to choose from and
company sometimes not able to deliver what they want. They add beef in their hamburgers,
which are not accepted by people of India. Due to this reason, all the outlets of company was
closed and Mc Donald's face high loss. But, after that they observed that Indian people more
likes to eat potato and then they change their overall product (McGrath, 2013 ). They come up
with new idea and replace beef burger with new one – which are called by name - “ Mc Aloo
Tikki Burger ”. This product of company proves to be very successful in terms of increasing its
sales and profits. It helps Mc Donald's in winning Indian market again and creating large
customer base by satisfying them.
Interrelation Mission and Vision statement to demand of marketplace:
Vision statement of company is “To become a progressive burger firm delivering
contemporary customer experience”. In order to fulfil this commitment, company is emphasized
on delivering high quality food with great taste to customers and provide them world class
experience which makes them feel valued and welcome.
Mission statement of company is “To be customer's favourite place & way to drink and
eat. To being a great place for people to work and create positive, strong presence in community
and deliver service, cleanliness, quality and value to customers”. Mc Donald's mission covers its
CSR position in market. The strategic objective of company is to strengthen ability of firm to
attract more customers by providing them goods and services as per their requirements.
It can be said that vision and mission statement of company are interrelated to demand of
market. They develop contemporary customer experience by making alterations in their menu.
By providing high quality products to customers, firm provides value to them (Zhang, Shen and
Wu, 2011).
Strategic capabilities of company:
Some core competencies of Mc Donald's are define below:
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Secret recipe:
The company has got distinct and unique recipe that can not be imitated easily by its
rivals. Only some people knows the secret recipe of the company. Firm has signed strict
confidential contracts while handling secret data or information to concerned people. It refers to
be one of the core competency of company.
Product line enhancements:
The company has exhibit long product variety range and on the basis of demographics,
segmentation is done. Recipe of country vary form nation to nation or country to country on the
basis of social and cultural factors (Hitt, 2011). This is one of the main source which provides
competitive advantage to company.
TASK 4
Strategies that a company could follow to defend its business
In today’s complex business environment, effective strategies are offer by enterprises in
order to achieve set goal and objective. Various strategies which are used by McDonald's as to
defend its core business, some are described as below:
McDonald's Generic Strategy: This consist to be the most essential strategy which is used by
McDonald's as to attaining higher competitive edge within the market place. McDonald’s
fundamental generic strategy is cost leadership. In Porter’s model, this generic strategy includes
reducing the extra costs to offer products and services at lower prices in respect to sustaining
customers for long time (Meyer, Neck and Meeks, 2017). As a low-cost provider, McDonald’s
offers products that are significantly cheaper as compared to its rivals like Burger King,
Starbucks etc. In any case, the organization additionally applies wide separation as an auxiliary
or supporting non specific technique. This optional bland methodology incorporates building up
the business and its things to make them particular from their adversaries. For instance, through
McCafé items, McDonald's applies the wide separation non specific procedure.
Vertical integration is a strategic aim which is connected to McDonald’s cost-leadership
generic strategy. An example of this is the services offer by McDonald’s that are produce with
quality ingredients. Cost minimisation is another strategic objective and this one is based on the
strategy of cost leadership. Product differentiation is related with differentiation strategy (Jardon
and Susana Martos, 2012).
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McDonald’s Intensive Strategies: This is also an another strategy which is effective in attaining
higher competitive edge within the market place. Market development – McDonald’s acquire this strategy to explore its market share over
the world. As the firm is already outlets in developed countries and now it is trying to
open markets in developing countries as well in order to gain high competitive advantage
and market growth as well. Market penetration – It is known as primary intensive strategy for getting growth and
viability by rendering existing products in current markets. In order to promote itself the
firm uses effective advertising and promotional tools as many people can know about it
(López-Nicolás and Meroño-Cerdán, 2011)
 Product development – By applying this tactics, McDonald’s enter in markets with new
products and services, i.e. new McCafé products. Product development strategy entails
with McDonald’s broad differentiation generic approach in which firm will generate new
products thus to distinct itself over the world.
Task 5
Analysis and evaluation of resource implication of recommendation that firm has to address
From the above 1-4 tasks, it can be recommended that McDonald's still needs to
improvise on their current business strategies. With the availability of other strong competitors
like Burger King, Subway, Wendy's etc. company's customer-base gets adversely affected. Over
past few years, McDonald is constantly dealing with many issues like bad perception in the mind
of customer, decreasing sales, bad relationship with franchisees etc. All these needs to be taken
into consideration while formulating effective business strategies for the future (Clarke, 2012.)
One of the major challenge that presently McDonald's is facing is software and hardware
problem that is not keeping their data or information up-to date. Although the cost for embedding
new version of software and hardware is high but still company needs to invest on this for
smooth running of business operation and other activities. Earlier, company is not paying
attention to what its rivalry are selling such as Burger King, Wendy etc. By knowing how
competitors are formulating strategies for attracting vast customers, McDonald's can design their
policies accordingly. Being adaptable & doing what others rivalries do can assist McDonald in
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