Strategic Management of McDonald's: Business Growth Strategies Report

This report provides a comprehensive analysis of McDonald's strategic management, encompassing its business environment, competitive landscape, and strategic development. The introduction outlines the significance of strategic management and its application to McDonald's, a global fast-food chain. The business analysis section examines McDonald's background, its internal environment through value chain analysis, and its external environment using PESTEL analysis. A competitive analysis, employing Porter's Five Forces, evaluates the company's market position. The strategic analysis delves into McDonald's global strategy, mission, and strategic capabilities, including a SWOT analysis and the BCG matrix to assess its product portfolio. Finally, the report explores strategic development, including strategies to defend core business practices and global branding. Overall, the report offers insights into McDonald's operations and provides recommendations for enhancing its competitive edge in the fast-food industry.

STRATEGIC
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
BUSINESS ANALYSIS .................................................................................................................1
Company background.................................................................................................................1
Business environment analysis...................................................................................................2
Competitive analysis...................................................................................................................5
STRATEGIC ANALYSIS...............................................................................................................7
Global strategy analysis..............................................................................................................7
Strategic capability analysis........................................................................................................7
Strategic performance in the economy......................................................................................10
STRATEGIC DEVELOPMENT FOR BUSINESS GROWTH....................................................12
Strategies to defend core business practices.............................................................................12
Global branding.........................................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
ILLUSTRATION INDEX
Illustration 1: Value chain analysis model.......................................................................................2
Illustration 2: Porter Five Force analysis.........................................................................................5
Illustration 3: BCG Growth Matrix..................................................................................................9
Illustration 4: Porter's generic forces ............................................................................................11
Illustration 5: Ansoff's Matrix........................................................................................................12

INTRODUCTION
Strategic management is the concept whereby companies develop and design competitive
business position within the market by effectively analysing their capabilities. These strategies
help the business units in attaining effective and well developed competitive edge within the
economy (Sharma, 2013). Present study will focus on undertaking an extensive research on
strategic management plan developed by McDonald's. The research will analyse the company's
operation in order to evaluate its business environment. Moreover, application of theoretical
models for competitive and strategic analysis will help in determining the present market
position and its impact on business operations. In addition to this, strategic capabilities and
performance of the business will be evaluated to investigate business issues and strategic
measures to overcome the same. Hence, the overall report will develop an in depth and clear
analysis of various business operations of the business and measures to enhance the same in the
current competitive economy.
BUSINESS ANALYSIS
Company background
McDonald's is a globally renowned fast food chain operating efficiently in more than 118
countries of the world. The company has developed as the largest chain of food services. It has
established about 36,000 outlets around the world and serves around 68 million consumers on
daily basis (Mcdonalds, 2015). The company was started in United States in the year 1940 as a
single outlet of hamburger which now has set the record for selling highest amount of burgers in
minimum time in the world. Global business operations of the entity are well managed and are
operating effectively. Strategic thinking and management resulted in turning a simple business
idea into massive business success for the management (Mcdonalds, 2015). Changing lifestyles
and preference of people has contributed in the success of the company. According to Watson,
2014, fast food industry is the fastest growing because of the concept and consumer convenience
factors. McDonald's focuses on effective market analysis and regular business development to
manage an edge within the economy. Rising global competition and awareness about health
issues within population has posed some futile challenges for business development. The
company however is focusing on maintaining competitive advantage in the market through
strategic management and business development.
1

Business environment analysis
Business environment is defined as the situations or surroundings in which organisations
operate for effectively managing the business activities. The core aim of environment is to
provide the companies with well developed foundation for operating internal and external
operations (Crouch, 2014). The environmental analysis of McDonald's will help in effectively
analysing the growth opportunities of the business and its impact on organisational development.
Internal environment analysis
Value chain analysis of McDonald's will help in reflecting a clear picture about internal
business environment of the company.
Illustration 1: Value chain analysis model
(Source:Strategic Management Journal. 2014 )
§
ACTIVITIES ANALYSIS
PRIMARY ACTIVITIES
Inbound logistics McDonald's has developed positive supplier relations at different
location to attain quality raw material on cost effective measures for
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business operations (Howard, 2010).
Operations The company has implemented robotic technology for product
development and e-logistic management which has helped in
developed a transparent means of working in time and cost effective
means.
Outbound logistics Product delivery for the business is quick. McDonald's provides the
quickest fast food services managing well developed environment
for its consumers to enhance market demand (Arnold, 2013).
Employees are trained and managed in an effective manner for the
same.
Marketing and sales The company has established more than 36,000 outlets around the
world and focuses on the strategic business policy “think global act
local” which has contributed widely in enhancing, marketing
measures and expanding company sales within the market.
Services Consumer services by McDonald's are well structured and effective.
Friendly environment, quality products, quick services, supportive
staff, effective communication and effective feedback system have
helped the business in enhancing value for the product (Zhou and
Wu, 2010).
SECONDARY ACTIVITIES
Infrastructure The business structure of McDonald's focuses on effective
leadership programs for proper management of business operations.
Moreover, uniform outlet designs and renowned locations help in
enhancing sales by attracting maximum consumers.
Human resource
management
Trained and qualified employees are recruited and trained to manage
business operations and deliver quality results.
Technology development McDonald's has adopted technologically advanced measures to
manage quality of product and deliver uniform taste all over the
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world (Wheelen and Hunger, 2011).
Procurement The company has developed the largest and strong distribution
measures and supply chain management for carrying out
unrestricted business operations.
External environment analysis
External environment of the business will be analysed using PESTEL analysis model.
POLITICAL SOCIAL ENVIRONMENTAL
The impact of government
regulation and policies is high
on food industry hence;
McDonald's focuses on
franchising for international
growth and development.
Market trends and consumer
preferences for food and health
awareness is changing vastly
in the market. The impact of
the same has been observed
through declining sales of
McDonald's (Tyler, 2012).
Environmental change has a
direct impact on agricultural
market which may affect the
availability of raw material for
the business. McDonald's has
adopted environmental
friendly measures to carry out
business operations.
ECONOMIC TECHNOLOGICAL LEGAL
Factors such as inflation,
population rate, growth rate,
employment, education rate
etc. has direct impact on
business prospects of food
industry (Teece, 2010).
McDonald's, thus, undertakes
effective market research for
enhancing business operations
Changing technology refines
business operations,
management and cost factors
of business in food industry.
McDonald's has adopted
advanced and well developed
technological factors to
manage and maintain the
business operations and
efficiency.
The impact of legal and
legislative frameworks is wide
on the business operations of
the company. The business
policy of McDonald's is
developed in accordance to
local regulations and
government policies (Akan
and et.al., 2010).
4

Competitive analysis
Illustration 2: Porter Five Force analysis
(Source: Kim, 2011)
The competitive analysis of the business helps the company in analysing the competitive
position of the business within the market. It is one of the most significant tools for analysing
business growth and developed within the market (Larsen, Tonge and Lewis, 2011). Companies
undertake competitive analysis in order to analyse the competitive business position and develop
strategic planning to manage competitive edge. The competitive analysis for McDonald's is as
follows:
AXIS IMPACT ANALYSIS
5

Supplier's power Low Raw material needed for the production of
products are agricultural based and easily
available.
Buyer's power Moderate McDonald's has developed unique demand
and brand recognition within the market.
Consumer loyalty is high for business and
price sensitivity is low (Akan and et.al.,
2010). However, buyers have moderate
bargaining power in the market.
Threat of new entry Moderate Food industry is growing widely and
individual cafes and food trucks have
developed highly within the market. These
new entrants have subsided with the
business operations substantially for the
company in different parts of the world.
Threat of substitutes High Companies such as Burger king, KFC,
Burger king, Subway, Pizza Hut etc. has
posed high challenges for the business
development and growth (Aljukhadar and
Senecal, 2011). Consumers have
subsequent option to shift to different
business units in absence of McDonald's.
Industry rivalry High Food industry is expanding vastly and
frequently within the economy.
Developing health consciousness within
the economy has posed wide market threat
for the company. Companies such as
Subway, Retail giants as Tesco, M&S etc.
are posing threats to McDonald's directly.
6

STRATEGIC ANALYSIS
Global strategy analysis
The strategic analysis of the business plays a significant role in determining the
competitive positioning and growth opportunities within the market. McDonald's has developed
well developed brand recognition within the market. The growth measures of the company are
high and well measured (Matzler and et.al., 2013). The mission of the business is to become
consumer's favourite place to eat and drink while aligning the global operations towards
developing good environment for people to work and creating positive presence in the
community. It focuses on delivering quality, services and value to consumers by developing a
symbol of trust.
The stated mission statement of the business reflects its focus on attaining the expectation
of every stakeholder of the business including employees, consumers and community. The
strategic policies of business is to maintain quality and deliver value to the consumer (Cameron
and Green, 2012). It has been effectively examined that the business operations of McDonald's
are aligned with its internal business policy. It strategic mantra 'think global act local' has helped
the business unit in attaining high growth and development prospects. Moreover, well structured
means of control, communication and expansion has helped the company in creating flagship for
its products and services.
Strategic capability analysis
The internal and external business analysis of McDonald's has helped in effectively
analysing the business operations and growth measures for the company. The capability of the
business may be evaluated by summarizing the business operations and its strategic position.
SWOT analysis will be carried out to analyse he same.
STRENGTH WEAKNESSES
 Renowned brand image globally
 Strong financial position
 Well managed supply chain in the
international market
 Cost effective business operations
 Innovation and creating integral
 Low market valuation (valuation of
burger king higher that McDonald's)
 Declining brand reputation due to
unhealthy products
 Limited product variety
 Cost of maintenance high
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business parts (Diefenbach, 2011)
 Well structured business management
 Strong employee policies and measures
 Competitive business policy
OPPORTUNITIES THREATS
 Product development product line
expansion
 Promotional gaps in the market
 Menu development for healthy food
services
 Rising competition in the market
 Changing consumer perception for
unhealthy products
 Rising health conciousness in the
market
 Declining market sales (Mcdonalds,
2015)
 Negative promotion in the market
8

From the SWT analysis of the business it can be effectively determined that the business
operations and management of McDonald's has developed effective impact on the growth of the
business however issues related to changing consumer perception and rising conciousness for
healthy products has created an ineffective impact on business development. The BCG growth
matrix will thus analyse the product line and strategies that the company has implemented in
order to analyse the capability of the business.
Different quadrant of the BCG Matrix reflects link between market growth and market
share of the business unit. McDonald's presently falls in the Cash Cow quadrant as it has
developed vast market share globally but growth opportunity of the business has become limited
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Illustration 3: BCG Growth Matrix
(Source: Strategic Management - Meaning and Important Concept. 2015)