Strategic Management Plan for McDonald's: A Detailed Examination

This report provides a detailed strategic management plan for McDonald's, encompassing a thorough internal and external analysis. The report begins with an overview of McDonald's, including its mission, vision, and objectives. Part A delves into external factors using PESTLE analysis, examining political, economic, social, technological, environmental, and legal influences. It then applies Porter's Five Forces model to assess competitive dynamics and utilizes the VRIO framework to evaluate internal resources and capabilities. Part B focuses on internal analysis, presenting a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. Furthermore, the report discusses Porter's Generic Strategies, Ansoff's product/market growth matrix, and potential mergers and acquisition options for McDonald's. The conclusion summarizes key findings and strategic recommendations.

STRATEGIC
MANAGEMENT PLAN

TABLE OF CONTENTS
TABLE OF CONTENTS.................................................................................................................2
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Overview of Organization............................................................................................................1
PESTLE Analysis........................................................................................................................2
Porter’s 5 force model..................................................................................................................3
VRIO framework.........................................................................................................................5
PART B............................................................................................................................................6
SWOT analysis............................................................................................................................6
Porter’s Generic Strategy.............................................................................................................7
Ansoff’s product/market growth matrix......................................................................................8
Evaluation different Mergers and Acquisition options available to the organisation..................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Strategic planning can be defined as an organizational process that helps in defining their
strategy, helps in decision making, setting direction, allocation of their resources by perusing a
common strategy (Ansoff and et.al., 2018). It also helps organization in setting and outlining
their measurable goals, bring required changes within the organization, evaluate their overall
progress whenever their move forward within their defined market. This assignment will lay
emphasis on internal and external analysis of McDonald's in order to provide a base for strategic
planning through PESTLE analysis, Stakeholder analysis, Porter’s 5 force model, VRIO
framework and discussion on strategic planning based on the environmental analysis and
findings of McDonald's through SWOT analysis, Porter’s Generic Strategy, Ansoff’s matrix and
different Mergers and Acquisition options available to McDonald's.
PART A
Overview of Organization
McDonald's is one of the largest fast food restaurant chain who serves more than 68
million customers daily with global presence in more than 120 countries with more than 37000
outlets. They have almost 1.7 million employees working for them in different countries. They
are mostly famous for their fries, cheeseburgers and hamburgers (Fozer and et.al., 2017). As per
a survey they are world's second largest private organization (first is Walmart) with almost 1.7
employees working under them. Their main source of royalty is sales of their product, rent,
royalty, fees paid by franchisees.
Mission: The main corporate mission statement of McDonald's is to be their customer's favourite
place and way to eat and drink.
Vision: Their main vision statement is to move with velocity in order to drift profitable growth
and becomes an even better McDonald's who focus on serving more delicious food to their
customers with the best service each and every day around the world.
Objectives: the main corporate objective of McDonald's is to be customer's first preferred place
to eat and drink, another objective of McDonald's is to serve good food in a friendly
environment, become a socially responsible company and provide good profitable returns to
their stakeholders.
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PESTLE Analysis
PESTLE is a kind of strategic analysis tool which is mainly used to show influence of
external factors that affects the business. PESTLE mainly stands for political, economical, social,
technological, environmental and legal factors that affects than organization in both positive and
negative way (Racz and et.al, 2018). PESTLE analysis will help in analysing all the external
factors that influences the business of McDonald's.
Political Factors: political factors mainly focuses on government's policies and actions that
affect the remote environment of a business as well as their economic development. Factors such
as trade control. Tax policies, government stability affect an organization in a drastic way.
McDonald's has an opportunity where they can expand their business through international trade
which will eventually enhance their supply chain globally. Every country have their own health
and diet guidelines and public health policies. McDonald's need to adhere all such guidelines and
policies if they want to enhance their business and gain stability. They need to focus on their
consumer's health and maintaining as well as increasing the overall quality of their products.
Economic Factors: this factors mainly focus on economic factors such as labour cost,
unemployment rate, inflation rate, interest rate etc. Slow and stable growth rate of developed
countries increases development opportunities for McDonald's to enhance and increase their
business (Wüstemeyer, Madlener and Bunn, 2015). Other than this rapid growth rate of
developing countries can also help McDonald's to boost their business.
Social Factors: This factor includes social environment of a country, living life style, growth
rate etc. that affect a business. Increasing disposable income of individuals is an opportunity for
them to increase their customer base as the lifestyle of people today are changing and consumers
like to buy food outside instead of cooking food at home. They can focus on introducing healthy
food products as well, as today many people are becoming health conscious.
Technological Factors: Due to advancement in technology, McDonald's can adopt advance
technology and automate their business operations which will help them to improve their overall
business operations and grow. They can invest more in research and development in order to
improve business efficiency and effectiveness.
Environmental Factors: these factors affect an organization in many ways by focusing on
climatic change, consumer's increasing awareness towards the environment. Changing climatic
condition within some regions can affect McDonald's and their diversity so they need to
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diversify their supply chain so that they can address changing climatic condition effect on their
business.
Legal Factors: it includes government laws ans regulations that affects a business in a drastic
way. Every country has their own employment and labour laws (Grant, 2016). McDonald's need
to focus on their work place health and employment regulation in all the countries they operate
because if they will not adhere such regulations then it might affect their overall business and
they might face legal actions. They also need to adhere minimum wedges regulation as per the
law of each countries.
Porter’s 5 force model
Porters five force model helps in analysing and identifying competitive forces that helps
organization to determine industries weakness and strength and based on this analysis build their
own strategies to shape their business.
 Competitive rivalry or competition: It is one of the strongest force as they face tough
competition. Competitors of McDonald's within this food industry are high. They need to
make continuous efforts and bring improvement and innovation within their products and
services in order to survive in this competitive market, increase their customer base and
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Illustration 1: Porters five force Analysis
Source: (porters five force analysis, 2017)

gain competitive advantage. It is a strong force because switching cost for consumers is
quite low in this industry.
 Bargaining power of buyers or customers: It is also a strong force and power of their
consumer can affect their overall business performance (Genoveva and Siam, 2017). This
force mainly focuses on influence and demand of customers and the way their decision
impact the overall business. For McDonald's this is quite a strong force because
switching cost for consumers is quite low and there are variety of service providers which
increases the availability of substitute products. So in order to increase their customer
base and loyalty for the brand within their consumers, McDonald's need to bring
improvement within their products and services and adopt their pricing strategy as per the
competitors.
 Bargaining power of suppliers: This is a weak force and does not affect McDonald's in
a major way. This is because McDonald's have large number of suppliers who provide
them with raw materials. Low forward vertical integration weakens the force for
suppliers and due to high availability of suppliers they can easily manage their high
overall supply.
 Threat of substitutes or substitution: it is a strong force that can impact the overall
business of McDonald's. This is because there are large number of substitute products are
available in the market like products from bakeries, local restaurant chain etc. Not only
this switching cost from their products to any other substitute products is quite low for
the consumers. Substitutes are competitive in nature because of their quality and
customer satisfaction level. In order to reduce the effect of this force McDonald's need to
improve quality of their products, make it affordable for their customers in order to
increase the satisfaction level of their customers.
 Threat of new entrants or new entry: This is a moderate force that can moderated
impact overall business of McDonald's. Low switching cost allows customers to move
from one restaurant to another which increases the chances for a new entrant to enter into
the competitive market (Liew, 2018). But, however there are few factors that work as a
hindrance for new entrant to enter into the market like requirement of high variable
capital cost in order to establish a restaurant and need of high brand development cost.
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Both the factors works as a hindrance for new entrants to enter into the market and
increase the competition.
VRIO framework
VIRO framework can be explained as a strategic analysis tool that helps the organizations
to protect and uncover internal capabilities and resources of an organization. This strategic
analysis gives organizations like McDonald's a competitive advantage over others. VIRO stands
for valuable, inimitable, rare and organized. These four components are approached in a style of
a decision tree like: valuable, rare, inimitable and organized. McDonald's uses their VRIN or
VIRO capabilities and framework in order to keep their business profitable (Obeidat and et.al.,
2016). For organizations like McDonald's it is extremely important to do VRION analysis to gain
competitive advantage against their competitors like KFC, Burger King, Subway, Starbucks etc.
McDonald's utilizes their capabilities and resources to compete against top multinational
companies and improve their positioning, gain stable long term survival for their restaurant and
their other chains globally.
 Valuable: McDonald's is valuable because of its Moderate uniqueness of their food
products based on their specific food recipes. They use new technology for order
processing in an efficient manner.
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Illustration 2: VIRO Analysis
Source: (VIRO Analysis, 2019)

 Rare: it is rare because of its employees of scale, expensive supply chain and size of
international trade operations and franchise network.
 Inimitable: It is immitable because it is a globally recognized and iconic brand with
Portfolio of popular trademark.
 Organized: McDonald is organized because they have gained competitive advantage by
developing a brand name and have skilled and trained employees who help in organizing
their business operations in a better manner.
PART B
SWOT analysis
SWOT analysis helps in evaluating an organization's strength's, weakness, threats and
opportunities. SWOT analysis of McDonald's helps in understanding the way they operate and
uses competitive advantage in order to dominate this fast food industry.
Strengths:
They operate as world's second largest networked restaurant who serves in more than 120
countries (Gurcaylilar-Yenidogan and Aksoy, 2018). Due to this their total earning and savings
are high and comes from diverse sources. It is one of the most recognizable brand in the
restaurant industry. Most of the people direct recognize their brand with the help of their golden
M. Another strength of McDonald's is that they strictly adhere food safety guidelines. They have
their outlets opened up in excellent locations such as theme parks, airports, travellers road etc.
Weaknesses:
Many people have a perception that McDonald's sales unhealthy food of fat, carbs, salt
and sugar. Due to this most of the people have set a perception that their products are unhealthy.
Other than this many people today are becoming health conscious which is not at all helping the
company. Employee turnover rate of McDonald's is quite high as they provide high wedges.
Most of the employees do not take their jobs seriously and within a short duration of time they
leave their job. Due to this high employee turnover rate training cost of McDonald's are
increased. Another weakness is their quality concerns i.e. due to franchised operations their food
quality is compromised.
Opportunities:
They can upgrade their menu and introduce healthy food products as well for health
conscious customers like fruit smoothies etc. They can try to expand their market by opening
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outlets in underdeveloped countries as well (Soltani-Fesaghandis and Pooya, 2018).
Underdeveloped countries will also help to increase their overall revenue and profitability. They
can become more responsive to social changes and to healthier options.
Threats:
One of the major threat that McDonald's faces is significant number of competitors
available in the fast food industry. The competition is mostly on the basis of price, food quality,
service, variety in menu. Another threat that is continuously increasing for McDonald's is
increase in health conscious customers. Today many consumers are becoming health conscious
and prefer fresh vegetables, fruits, low fat food products with quality. Downturn in economy
directly affect their business as consumers ability to eat outside is reduced.
SWOT Analysis Conclusion
Strength and opportunities: As they are the globally recognized brand they can easily
expand their business in underdeveloped countries. this will also help them to increase their
overall revenue and profitability.
Weakness and threats: One of their main weakness is that they sell unhealthy food due to which
health conscious customers try to avoid their food which is affecting their business.
VIRO analysis model and strengths of McDonald's can be used to overcome weakness and
threats in many ways as they can appoint their skilled employees in their new expanded business
to be opened in underdeveloped countries. this will help them to flourish their business in many
ways.
Porter’s Generic Strategy
Porter’s Generic Strategy helps in evaluating different strategic directions available to an
organizations in order to gain competitive advantage within the market they operate in. There are
mainly three types of strategies that can bifurcated into four strategies i.e. cost, differentiation
and focus. However, currently McDonald's only uses differentiation strategy but they can also
use other strategies to flourish their business such as:
 Cost leadership strategy: this strategy helps the companies to become the lowest cost
producers within their industry. This strategy helps the companies to product large scale
products in the lowest price possible by exploiting economies of scale. Organizations like
McDonald's can sell their products in the lowest possible selling price as per the average
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of the market. McDonald's can sell their products in the lowest price possible as per the
average price of their competitors (Agliardi, Amel-Zadeh and Koussis, 2016).
 Differentiation strategy: This strategy help organizations to bring differentiation within
their products and services completely different from their competitors. This strategy
mainly focus on charging premium price from customers by providing them with
differentiated product.
 Cost Focus strategy: Using this strategy organizations can take low cost advantage but
within a small segment. The product produced by the organization will be a basic version
of high priced similar products but will be sufficient enough to be acceptable by the
customers. McDonald's can use this strategy but only for one or two of their products.
They can use this strategic on a large scale but only for few products.
 Differentiation focus strategy: Using this strategy organizations can aim to differentiate
one of small target market segment. This strategy helps the organization to differentiate
either few of their products or small target customer segment different from their
customers. McDonald's can use this strategy and differentiate few of their products from
small target market segment different from their competitors. This will help them to
attract more customers and increase their customer base.
McDonald's can use differentiation strategy by differentiating their products from their
competitors and selling them at a premium price
Ansoff’s product/market growth matrix
Ansoff matrix is a strategic planning tool that helps the organizations to develop growth
strategies for their future development and growth of an organization. There are four types of
growth strategies that can be used by McDonald's for the future growth of their organization.
 Market Penetration: This strategy is used when an organization enters a market with
their current products (Lebedev and et.al., 2015). McDonald's can use this strategy to
reach more number of customers with their existing operations. For example: they can
open new outlets in new countries with their same existing products.
 Product development: this strategy is used by the organization when they try to develop
new products for the same market segment. McDonald's can use this strategy as their
main intensive strategy to attract customers by introducing new product like Cheesy
Bacon fries or service to the customers in the existing market.
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 Market development: this strategy is used when an established product is targeted to a
different market segment like they can introduce their star products to new market
segment or to new branches opened in different countries. It is one of the most common
strategy used by organization in order to earn more revenue for the organisation.
McDonald's can use this strategy to establish themselves within a market segment with
the help of the already established star product.
 Diversification: this strategy is used by organization when they try to offer new products
within a new market segment. It is one of the most risky growth strategy that can be
adopted by McDonald's i.e. to introduce new products to a new target market.
Best growth strategy that can used by McDonald's is a combination of two strategies i.e.
market penetration and market development because if they want to enter into a new market then
they can use market development strategy and if they want to attract their existing customers
then they can use market penetration strategy.
Evaluation different Mergers and Acquisition options available to the organisation
There are various kinds of merger and acquisition options available for organizations like
McDonald's which help them to grow and diversify their business. Organizations like
McDonald's need to do detailed study of these options before choosing one of them as many
times these mergers or acquisitions do not turn out as planned. There are mainly four types of
mergers and acquisitions, such as:
 Horizontal Merger / Acquisition: In this two organizations with same products and
services come together. Most of the times companies does this to expand their product
range not necessary to anything new (Protalinskiy and et.al., 2018). This type of merger
and acquisition can help McDonald's to increase their range of products that they offer to
their consumer.
 Vertical Merger / Acquisition: In this two organization that exist within the same
industry join forces but they are present at different points of supply chain. This can help
organisations to bring improvement within their logistics as well as also help in reducing
market time for product. McDonald's can use this to increase their logistics, raw material
supply.
 Conglomerate Merger / Acquisition: Tow organizations from different industries join
forces in order to increase their range of products and services and broaden their
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categories products. This also helps organisations to reduce the risk of operating in
different range of industries. This type of merger and acquisition can help McDonald's to
broaden their categories of products and services with less risk of failure.
 Concentric Merger / Acquisition: This happens when two companies merges together
and sell their products and services to the same customers. Even though both the
companies sell different range of products but they become indirect competitors.
McDonald's can use vertical merger and acquisition to expand their business as this will help
them to increase their logistics.
CONCLUSION
From the above assignment it has been summarized that there are various external factors
that affects an organization and their business in both positive and negative manner. It has been
analysed that McDonald's have four main types of stakeholders and interest of each one of them
is completely different. There are various forces explained through Porter's 5 force model that
can affect organizations like McDonald's in various way if they are not analysed and correct
decision is taken. It has also been analysed that in order to device a strategic plan it is important
to do SWOT analysis of an organization as it helps in identifying their strength, weakness,
opportunity and threats. There are various strategies explained through Porter’s Generic Strategy
that helped in providing a strategic direction to the organization. There are other strategies such
as Ansoff matrix that helps companies like McDonald's to decide a strategy in order to enter into
a new market.
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