HND Business Strategy Assignment: McDonald's Hotel Industry Expansion

This report examines McDonald's strategic plan to enter the hotel industry. It begins with an introduction to business strategy and then applies Porter's Five Forces model to analyze the competitive landscape of the UK hospitality industry, assessing factors like competition, new entrants, substitutes, and supplier/customer power. The report then uses the Ansoff Matrix to evaluate market penetration, market development, product development, and diversification strategies, concluding that product development is the most suitable approach for McDonald's. Furthermore, the report identifies McDonald's strengths and vision, and then applies the Bowman Strategy Clock model to determine the best positioning for its hotel product, suggesting a hybrid strategy offering differentiated products at lower prices. The report concludes by emphasizing the importance of strategic planning for business success in a dynamic market.

BUSINESS
STRATEGY

Contents
INTRODUCTION...........................................................................................................................2
TASK1.............................................................................................................................................2
Porters five forces model and ans off matrix.’ .........................................................................2
TASK2.............................................................................................................................................5
Theories, concepts and models which helps in devising strategic decisions.........................5
CONCLUSION................................................................................................................................6
REFERENCE...................................................................................................................................8

INTRODUCTION
A business strategy is the set of different actions and frameworks which helps the business
organisations to achieve the desired set of goals and objectives effectively and efficiently (Shuen,
2018). Furthermore, the companies are able to gain the benefit of competitive advantage.
Organisation which is to be considered for this report is McDonald which has commenced its
business operation from the year 1940 and deals in fast food industry. This report will
concentrate on evaluating Porters five forces model and Ans off matrix. Apart from this, it will’
put emphasis on determining Bowman clockwise strategies that helps the business.
TASK1
Porters five forces model and ans off matrix.’
The model of Porters five forces was created and developed by Michael Porter in the year’
1979. It consist of five different forces which helps in evaluating the power of competition and
level of profitability for the business organisation. It is normally used to identify the structure of
an industry and which focuses on corporate strategy (Razak and et. al.,2016). So this model will
be applied to the Hospitality industry in the UK so that McDonald will know that where it is
weak and where it is strong. Furthermore, by evaluating this, the company can develop the more
suitable business strategies for the growth of the company in the market. Therefore, following
are the five different forces discussed below:
 Competition in the industry: This force is concerned with the quantity of competitors in
the same industry and their power to affect the operations and functioning of the
company. If there are large number of competitors then the company will have less power
and vice versa. The hospitality industry is the second largest industry in the UK in
generating income. Therefore, for opening hotel in UK is quiet risky because the
McDonald will need to invest higher amount of investment as there will be large number
of competitors. So the organisation will have weak power.
 Threat of new entrant: This force is related to the power of potential of new
organisations in the hospitality industry which can affect the existing one (Leonidou and
et. al., 2017). Well, UK has large base in hotel industries, so new entrant will have weak
power on already existing hotels. For new entrant, to effectively position itself and
compete with the existing hotels, they will need huge resources in terms of advertising,

finances, experts workforce, etc. Furthermore, in order to achieve success in the
hospitality industry of UK, the McDonald will put focus on bringing new and innovative
products and services so that it can gain the attention of customers. But in reality, the
company will have strong threat from the new entrant if it brings in exclusive products.
 Threat of substitute: This force is linked with determining the availability of substitute
products and services that can affect the operations of the company. They are the
combinations of those products which can be used by the customers in place of original
one. As UK has large number of hotels, there is strong threat of substitutes because if
customers finds better options in the another hotel then they will easily shift their base as
switching cost is very low or zero. For instance, if hotel of McDonald provides low cost
in their hotel chain then customer of burger king will easily switch their hotel.
 Bargaining power of suppliers: This power is related to determine the force or power
through which suppliers can maximises their cost of raw materials which they supply to
the organisation for producing products and services (Grayson and Hodges, 2017). This
is affected with the number of suppliers which the hospitality industry has, the
uniqueness which they contain in their materials and the switching cost which the
company contains. Therefore, the bargaining power of suppliers in hospitality industry of
UK is weak because there are large number of suppliers who can serve the similar
products at different prices.
 Bargaining power of customers: The power of customer is determined by taking into
account the level through which they can either increase the efficiency and quality of the
products or minimise the cost. In this, customers are benefitted because each and every
product which is produced by the organisation if for the customers only. So therefore,
customers have high bargaining power in hospitality industry as they have ample of
options available (Webster, 2014).
Ans off matrix
The ans off is a growth matrix which is developed by H. Igor Ansoff in the year 1957. This is
a strategic instrument through which organisation determines the present and future products of
the company which are being sold in the market. This matrix is highly effective for McDonald
which is bringing new hotel in UK market. It helps in deciding that which strategy will be best

for the growth of the company in terms of bringing products and services. There are four
different types of strategies and they are discussed below:
 Market penetration: Under this strategy, the McDonald will give focus on selling
present products to the present market only, in order to achieve the growth and
development. For instance, it sells burger in the UK market and continue with the same
(Pisano, 2015).
 Market development: Under this strategy, the company puts focus on selling present
products to the new market. For instance, the McDonald will sell the burgers to the new
market like Nepal where it is not currently operating in order to achieve the success and
growth.
 Product development: Under this strategy, the company plans to bring new products
into the already existing market in order to gain success and improve growth. For
instance, McDonald is already established well in the market of UK and can bring new
product because it has achieved the market share and goodwill which will have
favourable impact on bringing new product as customers are already aware of the brand
(Woerner and Wixom, 2015).
 Diversification: Under this, the company aims to bring new product in entirely new
market. For instance, McDonald plans to bring new product other than the fast food
restaurant to the geographic location where it is not operating currently.
Therefore, from the above discussed four different strategies, the product development will
fir best for the McDonald because it is focussed towards bringing hotel in the market of UK
where the company is also famous for its burgers and other products. It has a positive image and
have favourable impact in minds of customers (Klettner, Clarke and Boersma, 2014).
TASK2
Theories, concepts and models which helps in devising strategic decisions.
After selecting the suitable location for bringing new product of the McDonald that is hotel
in UK, its now time to determine the strength and visions of the company which will help in
achieving the success and growth in the long run.
Vision: The vision of the McDonalds is to be provider of largest hotel chain in the future“
just like it has the largest chain of fast food in the market of UK.”

Strength: The McDonald has wider set of strengths which will helps them in bringing new
products to the market of UK effectively and efficiently. The following are the strength
discussed below:
 It is the second largest producer of fast food restaurant chain by feeding its customers in
more than 120 countries which depicts its strong global presence (Akter and et. al., 2016).
 It is the most recognised brand because it has cheap pricing strategy where it is famous
for providing good taste to the customers at minimum prices.
 The company has strong market share which determines its strong financial position.
 The organisation has low employment turnover rate which means that it has good
employee relation where employees are encouraged and motivated towards the business
objectives and works hard in attainment of the same.
Bowman strategy clock model
Bowman strategy is the clock where it depicts the position of the organisations products
which have two dimensions namely, price and perceived value (Thompson, Strickland and
Gamble, 2015). This model has eight different strategies which are positioned in a clockwise.
The following are the strategies discussed below:
 Position1: Low price and low value added: This type of strategy provides low cost
products and services which have low or zero value in the market.
 Position2: Low prices: Under this, the prices of the products are kept lower and are
produced in large number of quantities. It is because large number of products helps in
gaining larger profit margins and improving level of profits.
 Position3: Hybrid: Under this strategy, the company is focussed towards making use of
product differentiation where products will be sold with uniqueness at lower prices and
higher value will be given to such products.
 Position4: Differentiation: Under this strategy, the organisation provides the best quality
products with exclusive features at an average price which have higher level of value and
provides satisfaction to the customers (Johnson, 2016).
 Position5: Focussed differentiation: Under this strategy, the organisation puts more focus
on luxury and branded products which are sold at higher prices and have higher value in
the market.

 Position6: Risky high margins: Under this strategy, organisations charges higher prices of
the products which the customer considers average. This is highly risky because it will
affect negatively in long run to the company (Bowman Strategy Clock, 2019.).
 Position7: Monopoly pricing: Under this strategy, the company offers only those products
which are not offered by any other company in the market.
 Position8: Loss of market share: As per this strategy, the organisation is failed to offer
such products which is given value by the customers and generates negative profits.
Therefore, the hotel which is to be brought in by McDonald is able to stand on Bowman
clock model where it suggests that hybrid strategy is best where differentiated products are
offered at lower prices.
Furthermore, in terms of services the hotel provides accommodation, lodging, recreation,
food and restaurants, etc. facilities to the customers. The list of cuisine options involve, Chinese,
Italian, Mexican and mix of Indian dishes (Scholes, 2015). The pricing strategy adopted is hybrid
where it helps in gaining competitive advantage in the market. The location is just opposite to the
Thames river bank in London, UK which is prominent attraction area of majority of the people.
CONCLUSION
From the above file, it has been concluded that it is very important for the organisations to
have a definite set of strategies which will help in attaining the success and growth for the
company. This is because the present business world is highly dynamic and constant changes
requires modifications and innovations in the existing organisations as well in order to stay
competitive in the market.

REFERENCE
Books and Journals
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Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
Akter, S., Wamba, S.F., Gunasekaran, A., Dubey, R. and Childe, S.J., 2016. How to improve
firm performance using big data analytics capability and business strategy
alignment?. International Journal of Production Economics. 182. pp.113-131.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Woerner, S.L. and Wixom, B.H., 2015. Big data: extending the business strategy
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Pisano, G.P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-54.
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Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
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Leonidou, L.C., Christodoulides, P., Kyrgidou, L.P. and Palihawadana, D., 2017. Internal drivers
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Online
Bowman Strategy Clock. 2019. [Online]. Available Through:
<https://www.toolshero.com/strategy/bowman-strategy-clock/>.