Analyzing McDonald's Innovation for Competitive Advantage - Report

This report provides an extensive analysis of McDonald's business operations, focusing on its innovation strategies and competitive advantages within the global fast-food industry. It begins with an executive summary highlighting the importance of innovation for business sustainability and growth, particularly in the face of increased market competition. The report then delves into McDonald's organizational background, tracing its history of innovation from its inception as a small hamburger shop to its current status as a global food chain with over 34,000 outlets. It examines the company's product development, consumer convenience strategies, and menu expansion, illustrating how these efforts have contributed to its market share and customer satisfaction. Furthermore, the report includes an innovation audit, assessing McDonald's business capabilities and future innovation requirements, considering both macro and competitive environmental factors. The report concludes that while McDonald's has successfully integrated innovation into its business model, continued adaptation to changing market trends is crucial for maintaining its competitive edge. The analysis incorporates industry overviews and competitive analysis, offering a comprehensive understanding of McDonald's strategic approach to maintaining its market leadership.

MANAGING
INNOVATION IN
BUSINESS

EXECUTIVE SUMMARY
Global business operations has enhanced market competition and complexities of
consumer demand for different business unit. Innovation has become the integral part of the
business unit. It help companies in creating sustainability in business growth and development.
The present report focused on analysing the business operations of McDonald's and analysing the
business strategies that the companies used to create competitive edge in the economy. It
developed an extensive study about the measures and practices that the company has adopted for
developing effective market position in the company. Moreover, the internal and external
analysis of the business operations helped in analysing the business strategies that has enhanced
innovation in the market.
The study reflected that McDonald's has developed wide market share in the current
competitive market. The business strategies and practices have been well structured and planned
to meet the needs and demands of the people. Effective customer care policies and quick food
service has helped the business in creating a unique market position in the economy. Unique
strategies, quality food products and valuable services of the company has helped in attaining
huge success in the economy. Innovation and development is the integral part of the business
activities.
The current study analysed the business capabilities in the present competitive market. It
evaluated that the business unit has adopted well structured business practice. The report
conducted an innovation audit of McDonald's to examine its innovation history. It helped in
analysing that innovation is the integral part of the business. Examining future innovation
requirements of the business. Considerations regarding wider macro and competitive
environment was considered for the study. In addition to this analysis regarding innovative
business capabilities and action plan of the business was also identified in the report. The overall
study helped in analysing that the company has adopted innovation as integral business part
however to cope up with changing market trends the company need to adopt high refined and
competitive means of business growth to develop a competitive market position in the economy.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Industry overview and organizational background.....................................................................1
Future of the industry..................................................................................................................6
Organisational innovation...........................................................................................................7
Innovation gap.............................................................................................................................8
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Technological development has enhanced the level of competition in the market widely.
Companies are adopting effective business practices for creating an edge in the economy.
Innovation and development is one of the major factor which contributes in the success of the
business unit (Drucker, 2014). Companies in the current era are innovating products, services,
practices, employees growth etc. for creating a competitive position in the market. In addition to
this the business practices and strategies are also coordinated by innovative business practices to
attain high success in the market (Jones, 2010).
The current study will analyse the business capabilities in the present competitive market.
For undertaking the research, business practices of McDonald's will be analysed. The report will
conduct an innovation audit of McDonald's to examine its innovation history. It will examine the
present level of innovation activities and future innovation requirements of the business (Kaplan
and Atkinson, 2015). Considerations regarding wider macro and competitive environment will
also be considered for the study. In addition to this analysis regarding innovative business
capabilities and action plan of the business will also be identified in the report. Different models
and tools will be applied to assess the innovation practices and business capabilities for the
business.
Industry overview and organizational background
McDonald's and history of innovation
McDonald's is a well established, global food chain which is effectively established in
different parts of the world. The company has effectively established 34000 outlets in more than
120 countries of the world. On an average, 1 in every 4 American eats in McDonald's. It has
effectively developed its menu for every person of the world (Kimes, 2011). The business
strategies and practices have been well structured and planned to meet the needs and demands of
the people. Effective customer care policies and quick food service has helped the business in
creating a unique market position in the economy. The organization has employed more than
85000 people around the world. McDonald's has developed effective policies to ascertain the
quality of products and services offered by the business unit.
McDonald's established it business operations in the year 1940 in USA. The company
initiated the commercial activity from a single hamburger shop to global food. The vision of
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business and continuous innovation helped the company in attaining high growth and
development aspects (Vila, Enz and Costa, 2011). The changing tastes and preferences of
consumers motivated the business unit in regular product development at global as well as
national level. The history of innovation of the business can be analysed as follows: 1940: McDonald's established its first outlet in the year 1940 as a small hamburger shop
in USA. The company enhanced its business operations gradually and by the end of the
decade McDonald's was established as a food chain with multiple outlets. It developed
and its flagship Fries in the year 1950 (Su, 2011). 1960: The business unit expanded its business operations through gradual development
and growth. In the year 1967 the company expanded internationally. In 1968 the total
number of outlets reached to 1000. The product innovation regarding Big Mac, Golden
arches and apple pie was done in the year 1968. Th company also enhanced the physical
outlook of the outlets and introduced McDonald TV for consumers. 1970: The company focused on attaining the business objectives by developing effective
sales in the market. The concept of breakfast menu was developed in the year 1975.
Analysing the organizational development and growth menu for children was developed
in the year 1979 (Koutroumanis, 2011.). 1980: The increasing demand for chicken fast food and developing concept of unique
food, McDonald's developed chicken nuggets, a food which was inspired by popcorn.
The international growth was high and effective and overall outlets in the economy
reached to 10000. 2000: The company developed the catchy tag line 'I'm lovin it' in order to promote and
establish the product efficiently. The concept of healthy food products such as salad and
low fat burgers was introduced to attain the changing consumer needs. Also, concept of
wraps was introduced to enhance the menu of the business. 2010: The company enhanced its services and developed choices for consumers by
offering them wide range of smoothies, frappes and ice creams. The concept of free Wi-
Fi was developed for consumers to enhance competitiveness of the business.
Performance and capabilities of innovation for McDonald's
McDonald's have been performing successfully in the global market. The company has
developed highest market share in the food and beverage industry. Unique strategies, quality
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food products and valuable services of the company has helped in attaining huge success in the
economy. Innovation and development is the integral part of the business activities. It has created
an effective and well developed impact on business growth and competitiveness (Muller, 2010).
The hostile competition of fast food industry is well managed by the innovative policies of the
business. McDonald's is renowned for continuous innovation in product range and strategic
business development to create a significant impact on business growth. The business
management and operational efficiency has created wide scope for innovation and development
for the business. The company has adopted franchising policy as a successful measure for
international business expansion. This measures have helped the business in providing wide
scope for innovation and creation. Many ideas for new items on the menu come from the
franchisees responding to customer demand (Nicolau and Santa-María, 2013). Product development: McDonald's enhanced its business operations by initially focusing
on the product development and innovation in the market. It introduced products range
including big mac (1968), Egg muffin, Fish fries, Bagels, Desserts, beverages and ice-
creams. This helped the business unit in establishing its operations in different parts of
the world. The product development and innovation of the business is carried out on the
global as well as local level for the business. This helps the company in creating an
effective demand in the economy (Chang, Gong and Shum, 2011). In addition to this
measures has helped the business in developing wide choices for regional consumers. Consumer convenience: McDonald's is a pioneer in establishing fast food serving and
take away policies in the industry. The mission of the company was to provide premium
fast food services to its consumers in considerable price and by providing effective
environment. To attain the stated objective, it developed effective measure of outsourcing
order taking measures around the city or region. This enhances value for the food.
Moreover, the company has managed an effective balance in cost management and value
development for the employees and consumers as well. Hence, overall business
operations of the business are developed as per changing needs and demands of the
buyers or prospective buyers in the economy. Expanding menu: To attain the needs and demands of the consumers on local and
national level. A continuous innovation in menu helped the company in developing an
effective business position in the market. A regular action to enhance menu in terms of
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attractiveness, usability and effectiveness has been adopted. The company is regularly
expanding its menu as per the local demands of the people to create a significant impact
of overall business sales (Antonsson, Engström and Verbus, 2011). For example
American menu reflects vast options of beef and meat products while Indian menu of the
business offer balanced products of vegetarian and non vegetarian products. Happy meal
for kids is yet another effective example for the same. Adding value: McDonald's focuses on developing effective and comfortable services for
the buyers and consumers of the business. The company has developed the services and
environment of the company as per latest trends and technological growth. Establishing
international McCafe in 2008, developing free Wi-Fi service facilities for consumers
around the world are the examples for the same. Moreover, managing a team of trained
and developed employees in the business has also helped the business unit in creating
high growth prospects (Nieves and Segarra-Ciprés, 2015).
 Strategic enhancement: The company focuses on developing effective and unique
business strategies for creating high value for consumers and employees. Innovative
training and employment policies has helped the business in attaining highly qualified
team of employees. In addition to this innovative strategic practices such as emotional
advertisement, sales promotion in local market etc. has also helped the business to
expand in the market and develop competitive edge on global prospect (Battisti and
Stoneman, 2010).
Hence, the overall analysis of the business operations helps in analysing that the operations of
McDonald's has adopted innovation in every aspect. This strategy has helped the company in
surviving fierce market competition by adopting effective means of dealing with changing
market needs and demands. Consumers provide feedback throughout the process, increasing the
odds that McDonald’s launches winning products.
Industry analysis
In the present era of hyper competition and globalisation, it becomes mandatory for every
organisation to lay their considerable concern over analysing the industries in a significant and
appropriate manner (Peattie and Belz, 2010). Doing this would help the companies to examine
and evaluate its strategic position in the vast international and vital economy. With regard to this
context, McDonald's lays its concern over conducting effective industry analysis in a structured
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and systematic way. It focuses on conducting customer analysis, staff analysis and competitor's
analysis in order to examine its position in the tough trading business environment.
Customer Analysis- The company lays its attention on effectively analysing the needs and
demands of its customers in order to gain the highest level of customers satisfaction and
enjoyment (Chandon and Wansink, 2012). Nowadays customers posses health conscious attitude
and lays their concern over using healthy and hygienic foods. With regard to this situation,
McDonald's provides its audience with organic meat and food. Doing this helps the company to
gain customers trust, loyalty and commitment towards its brand. Also the concerned fast food
entity segments its market on the basis of demographic conditions like lifestyle and age. It
therefore, targets teenagers, seniors and adults, but the most crucial target customers of
McDonald's is children (Lovelock, 2011.).
Staff Analysis- McDonald's treats its employees as an asset for the company rather than cost.
This is because employees plays a significant role in bringing innovations in the food services.
Their services towards core customers helps the company to build a strong customer relationship
which in turn benefits McDonald's to gain immense market share in the vital business
environment.
Competitor's Analysis- The most competitive industry across the world is the fast food
industry. This industry is showing a rapid increase in its overall growth and development in the
recent times. McDonald's core competitors includes Taco Bell, Burger King, Panera Bread,
Subway and KFC. Amongst all KFC is its major competitor which operates around 11000
restaurants in over 80 countries across the globe. In the present situations, people are now
becoming more health conscious and are demanding organic and hygienic food (Diamond and
Barham, 2012). Fast food such as fries, hamburger etc. posses high- calorie and are considered as
rubbish food. Considering this fact, McDonald's lays all of its attention on introducing healthy
and hygienic food items in its menu.
With respect to the above discussed fact, McDonald's uses porter's five forces model to
effectively conduct its competitor's analysis. The following are the crucial findings of the
strategic and competitive position of the said company based on the Porter's five forces-
Forces Scale Impact
Threat of competition High  Fierce competition from KFC and Burger
King.
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 Existence of substitute food products.
 Increasing competitions advertising
strategies.
Threat of new entrance Moderate  The companies can easily enter in the fast
food market as it requires very low set up
cost.
Threat of substitutes Moderate  Irreplaceable brand image.
 Substitute food products.
Power of suppliers Low  McDonald's posses high bargaining power
over its large number of suppliers in terms
of volume.
 Suppliers have low power because of rising
competitive price and low cost of raw
materials.
Power of buyers Low  Since the company have a strong brand
recognition, therefore customers posses
less tendency to switch to other brand.
Future of the industry
McDonald's is putting all its efforts towards laying a sustainable and CSR (Corporate
Social Responsibility) framework in 2020. Currently, the company released its framework which
focuses on developing a sustainable and CSR activities within the organisational structure.
The company's 2020 Sustainability and CSR Framework objectives includes the
following-
 To support sustainable beef production by developing global principles.
 To purchase a portion of beef through proven and supportive sustainable sources in 2016.
 To source 100% of palm oil, coffee and fish that are verified in supporting sustainable
production.
 To procure 100% of fibre based packaging from recycled or certified sources.
 To serve 100% more vegetables, fruit, whole grains and low fat-diary in its top markets.
 Growing in-restaurant recycling by 50%.
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 Minimizing the overall level of waste production.
 To increase the energy efficiency by 20% in its company-owned restaurants.
In the CSR & Sustainability framework, McDonald's lays its prior concern over the areas
that are vital to its business and can create a significant difference. With this fact, the company is
collaborating its efforts to provide sustainable beef in a very effective manner. It is also planning
to continue its work with key stakeholders in order to draw practical solutions to raise the
concept of recycling in its restaurants chains and across the industry as a whole (Verma, 2010). It
also continues to meet the choices and demands of its core customers and maintains a suitable
and appropriate balance in its overall menu option by including fresh, healthy and hygienic fruits
and vegetables.
Apart from this, McDonald's commits its collaboration with Alliance to provide nutritious
choices to its huge crowd of consumers.
Organisational innovation
The industry analysis of the business clearly reflects that the growth and development
aspects of the company are limited and it is creating a unique measures of development in the
market. The current position of the company however reveals the situation of jeopardy for
McDonald's as sales of the business are falling and consumers are widely turning towards
healthy food choices (Guest, 2011). This has created vast challenges for the organisation. The
core focus of the business unit is to enhance sales in the market by creating a significant impact
on market condition. In order to attain a competitive market position the company need to adopt
innovative policies and strategies for business growth. For future innovation requirements of the
business the company need to develop effective business policies and strategies as well.
In order to effectively adopt the process of innovation and development in the business
the following measures may help the company: Developing organisational structure: This aspect is significant for managing the
business operation of the company as it helps the company in developing and defining the
means of control and management. High control creates a negative business environment
for the company which results in suppressing innovative skills f the employees.
McDonald's has adopted flat organizational structure (Storey, 2014). The international
growth policy of the business is franchising. This helps the company in distributing
control in different parts of the world and enhance market sales. However, the local
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innovation cannot be adopted by the business effectively as the control with the
employees is limited Defining process: The company has adopted a rigid innovation process. The company
has effectively invested in R&D department. Also, feedbacks of consumers are
considered valuable by the business unit which helps it in creating effective products and
services for the buyers (Bamberger, Biron and Meshoulam, 2014). However, the
communication process of the business unit is not effective for involving overall
employee vision in organizational development. Staff involvement: in order to attain high business result for the organization,
involvement of staff is significant. It helps the company in attaining valuable business
results and help the company in creating an effective brand image in the market. Along
with this the effective staff involvement helps the food industry in closely determining
the process flaws and the ways in which those could be developed to attain effective
growth in the market. Supply chain management:This measure helps a business unit in controlling cost and
enhancing the business process for the company. This helps the company in creating a
wide and effective business impact on organizational growth. McDonald's has built a
strategic partnership with its suppliers for enhancing well developed business operations.
This has helped the business unit in managing the cost of production as well (Loader and
Mercea, 2012). However, developing standardised supply chain strategies for the
business unit may help the company in attaining effective business position.
 Competitive analysis: This is one of the most significant and crucial part of business
operations and management. The competitive position of McDonald's has fallen
relatively in recent past. This has affected the business profitability and sales as well. In
order to enhance organisational innovation and development the business unit must
effectively undertake the competitive analysis (Peattie and Belz, 2010). This will help the
company in determining the competitor's moves and strategies thus develop similar
strategies accordingly.
Innovation gap
The overall analysis of the business operations of McDonald's has helped in analysing
that the business growth and development for the company has been attaining through effective
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and well managed operations (Loader and Mercea, 2012). The company has created an effective
impact in the global market. However, the recent economic position and sales of the business has
fallen effectively. This has created a vast thereat for the sustainability of the business. The
innovation gap of the business may be analysed by undertaking a comparative business analysis
of the company. The road map for innovation for McDonald's may be developed as below:
Factors Present status Future impact Overall analysis
Employees Highly skilled, trained and
committed team of
employees
The brand name and
business policy will help
the company in attaining
talented employees and
train them for business
objectives (Howard,
2009)
The employees of
the business are
trained and skilled
and will help the
business in providing
valuable services
Management and
control
The organisation has
adopted flat structure
which has helped in
managing the operations
of the company
The company will have
to define the structure to
adopt innovation in day
to day practice
Development in
management and
control may help
business in attaining
high success
Consumer needs Consumer needs are
changing widely
Consumers will prefer
healthy and quality food
products
Need to enhance
healthy and quality
food choices for the
consumers (Pinedo,
2013)
Market trends Economy is developing
demand for calorie
concious, organic food
The need for healthy and
low fat food will be
demanded with
convenient delivery
measures to match the
fast pace of life
Innovative menu
with new product
range is needed by
the food lovers
Supply chain The company has adopted Cost effective and fast The standardised
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effective supply chain by
developing positive
supplier relations around
the world.
supply chain will be
demanded to manage
competitive edge in the
market (Watson, 2006)
supply chain may
help business unit in
attaining uniformity
in taste and quality
of food.
Services Company provides
effective consumer
services to develop high
value for money
Technologically
advanced and digital
services will be
demanded in the market
to enhance sales
Technological
development in
services is demanded
by the company.
Hence, the overall analysis of the above analysis of the business operations reflect the
following issues that are demanded by the business unit to be considered for effective business
growth:
 Demand for healthy range of products and services
 Enhancing ad quality and nutritional value of the food products
 Developing supply chain of the company to enhance food standards and cost
management
 Enhance digital services for consumers to develop competitive market position.
The above organizational gap of the business can be effectively managed by the business unit by
adopting and analysing the following model of business innovation:
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The above model of business innovation focuses on analysing different and useful business
strategies for enhancing overall growth and development of the business operations in this highly
competitive market. The application of above model will help McDonald's in analysing effective
means of strategies that company may adapt to offer innovative business strategies of services to
the consumers. Different aspects of the models are: Building new value proposition: The overall analysis of the study reflects that
McDonald's has developed high business position in the current market. However,
changing market trends have created a significant impact on the business needs and
development (McDonald's doubled the price of a popular promotion and many customers
are devastated, 2016). Developing new value preposition by the company will help it in
creating a valuable impact on business growth and competitive position. The company
may offer table services, digital infrastructure for the company, online ordering services
etc. ll these Strategies will help the company in creating a unique and effective impact ion
consumer preferences. In addition to this developing the menu by offering healthy food
choices will also be an effective means of innovative service for the company which will
help the business unit in attaining high market demand and brand loyalty as well. In
addition to this the proposed measure will be effective for attaining set business
objectives (McDonald's is testing a ton of new ingredients including chorizo and Greek
yogurt, 2016 ). Clarity over accountability: This strategy focuses on developing an effective and well
developed measure where the internal management system of the company is so
developed that innovation is effectively accepted by every organizational individual.
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Illustration 1: Business model innovation

Developing clarity over accountability will help the company in enhancing integral
process of the company thus developing effective results. In addition to this it will
enhance the rate of innovation and adaptation of innovative services in the market. Changing cost structure: The cost structure of the business constitutes as a well
developed part of the business operations. It helps the company in creating an effective
and well developed impact on profitability and growth of the business. An effective and
well developed cost structure of the business will help in attaining high business results.
In addition to this it will help the business unit in enhancing the financial stability and
growth in the market (Mcdonalds, 2015.). However, to attain the same, McDonald's will
need to develop its supply chain strategy within the economy which will be an effective
part of the business.
 Changing key relationship: Developing positive business relations helps company in
creating an effective impact on the organizational performance and resources
development foe the business. The major issue of the-business unit is to deal with
changing market trends of the economy (Watson, 2006). Developing positive relations
with the consumers and suppliers to initiate trust and dependence ion the firm. In addition
to this, it will also result in analysing the needs and demands effectively thus developing
products and services as per the prescribed market demand. McDonald's is quite
successful in fast food industry with efficient strategies and quality standard products and
because of it has enabled to gain competitive advantage (Howard, 2009). Moreover,
development of positive employee relation is also a significant business concept as in the
present conceptual era employees are the assets of the business. They help in attaining
business objectives while managing organizational activities.
CONCLUSION
Managing innovation in business unit is one of the significant part of business grow and
development. It helps the companies in analysing the effective means in which a business can
grow and develop a unique market image in the market. The operations of McDonald's have
developed an effective growth aspect in the economy. It has helped the company in creating a
renowned market position in the global world. The business policies and innovative operations
are effective and well defined in creating high market demand for its products and services. It
has helped the company in attaining competitive market advantage. However, the overall
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analysis of the business operations helped in determining that changing tastes and preferences of
the consumers have created an insignificant impact on the organizational demand. This has
adversely affected the sales of the business. The above analysis reflects that issues regarding the
internal and external business environment can be managed in the company in able to adopt and
enhance innovation as the part of business growth. Global strategies for innovative practices will
help the company in developing high market sales in different parts of the world thus creating a
significant impact of brand image of the company.
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REFERENCES
Books and journals
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implementation, and impact. Routledge.
Battisti, G. and Stoneman, P., 2010. How innovative are UK firms? Evidence from the fourth
UK community innovation survey on synergies between technological and organizational
innovations. British Journal of Management. 21(1). pp.187-206.
Chandon, P. and Wansink, B., 2012. Does food marketing need to make us fat? A review and
solutions. Nutrition reviews. 70(10). pp.571-593.
Chang, S., Gong, Y. and Shum, C., 2011. Promoting innovation in hospitality companies through
human resource management practices. International Journal of Hospitality Management.
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Diamond, A. and Barham, J., 2012. Moving food along the value chain: Innovations in regional
food distribution. International Journal of Hospitality Management .32(1). pp.71-79.
Drucker, P., 2014. Innovation and entrepreneurship. Routledge.
Guest, D. E., 2011. Human resource management and performance: still searching for some
answers. Human Resource Management Journal. 21(1). pp.3-13.
Howard, T., 2009. The Over-Arching Strategy-McDonald’s Global Brand Strategy Task Force.
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Jones, G. R., 2010. Organizational theory, design, and change. Upper Saddle River: Pearson.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Kimes, S. E., 2011. The future of distribution management in the restaurant industry. Journal of
Revenue & Pricing Management. 10(2). pp.189-194.
Koutroumanis, D. A., 2011. Technology's Effect on Hotels and Restaurants: Building a Strategic
Competitive Advantage. The Journal of Applied Business and Economics. 12(1). pp.72-80.
Loader, B. D. and Mercea, D. eds., 2012. Social media and democracy: Innovations in
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Lovelock, C., 2011. Services Marketing, 7/e. Pearson Education India.
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