Implementing a successful business strategy for McDonalds

Introduction

The report is to identify the steps required to implement a successful business strategy for McDonalds. Every function of McDonalds will be explored including an overview of the organization. The business starts between two brothers. McDonald opened a small restaurant in 1940, east of Pasadena, California has become one of the most recognized and respected brands in the world. Richard & Ray Kroc is the founder of McDonald’s. McDonalds Sri Lanka is governed by the head office in USA who has total control on an all activities in Sri Lanka.

ABANS is the local franchisee of McDonald’s. Their main outlets in Sri Lanka are,

Kollupitiya

Nugegoda

Rajagiriya

Kandy

McDonald’s Vision

”McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value so that we make every customer in every restaurant smile”

McDonald’s Objectives

Sales – Total revenue of the business earned by selling food and service

Growth – Provides a better or greater service by increasing the market share

Profit – Provide good sustainable profitable growth for its shareholders.

Customer Satisfaction – Friendly and fun environment for customers.

Main facilities

Drive – thru

Wi-Fi system

Party room

Comfortable seating accommodation

Play land which kids can make free use of and have loads of fun.

prizes and surprises with selective meals

LCD TV systems

Vouchers, discounts etc…

Background of the firm

When the word McDonalds is mentioned, there are lot of impact of the growing teenagers and adults. McDonalds Corporation (MC) is the Sri Lanka’s 3rd largest chain of fast food restaurants, serving nearly 4000 customers daily. McDonalds primarily sells hamburgers, cheeseburgers, chicken products, French fries, breakfast items, soft drinks, milkshakes and desserts. More recently, it has begun to offer salads, wraps and fruit. Many McDonalds Restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more ‘natural’ style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables.

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External environmental analysis

PEST analysis is an analysis of the external macro environment in which a business operates. These are often factors which are beyond the control or influence of a business, however are important to be aware of when doing product development, business or strategy planning.

Political & Legal

The international operations of McDonalds are highly influenced by the individual state policies enforced by Sri Lankan government.

This would include environmental protection laws, tax laws, government subsidies, foreign trade regulations, stability of government etc.

Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation under the McDonalds’s administration that impacts employment, trade, product safety, transportation, health care, tax, privacy, or environmental issues could have an adverse impact on McDonald’s financial condition and results of operations.

The operations of McDonald’s are affected by the government policies on the regulations of fast food operation. Currently government are controlling the marketing of fast food restaurant because of high health concern such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments also control the license given for open the fast food restaurant and other business regulation need to follow such as for a franchise business. Good relationship with government in giving mutual benefits such as employment and tax is a must for the company to succeed in any markets. McDonalds should also protect its employees by ensuring all the hiring, compensation, training or repatriation is according to Sri Lankan Labor Law as stipulated.

Social

Working within many social groups.

Increase employments.

This involves lifestyle changes, career expectations, consumer activism, growth rate of population, age distributions, regional shift in population etc.

The changing lifestyles of Sri Lanka due to development of Sri Lankan economy should be also taking into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have quality in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want new technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. So far McDonalds has shown good efforts in localization of its menu to suit local customers but it should constantly survey and learn about local culture to better understand and design the best product for them.

Technological

Advanced technology development.

Quality standards.

This involves spending on research and development, patent protection, new developments in technology, productivity improvements etc.

For a fast food restaurant, mostly technology gives a very high impact on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors new innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can easily make the management more effective and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or promotional campaign discount which will benefits them from time to time.

Justifications

Strengths and weaknesses as well as the opportunities and threats facing the organizations. These give McDonalds an idea of where potential opportunities for expansion existing as well as it the company have the necessary resources in place to meet the changing organizations needs

Organizational capabilities- McDonalds will be able to address issues as the availability of resources needed for any new product development.

Environmental forces- by conducting a PESTLE analysis McDonalds will be able to identify the environmental forces influencing the company and they can therefore develop and implement strategies to meet these needs.

Competitive forces affecting the firm

mcdonald

THREAT OF NEW ENTRY

The barriers to entry are pretty high for new entrants, in fast food industry McDonald’s they have achieved high economies of scale and have better access to raw materials and distribution channels. so new entrants may find that a high cost of investment is required in securing plant and machinery. So these factors will be threats of new entries for new entrants. But in fast food industry is gaining and presenting an increase in sales at the mean time because of their affordable prices with credit crunch, it makes it attractive to new business.

BARGAINNG POWER OF BUYERS

In fast food industry McDonalds is maintain the quite low bargaining power of buyers. In this case perceived to be pretty low risk for McDonald’s as consumers have little control over the variations in the product offerings, price, and place of distribution. However, Mother company should always take place and any necessary adaptation made. The company should keep customers satisfied, as switching cost is quite low and the chances of switching to another brand in case of dissatisfaction is relatively low. But for that possibilities are very low because McDonald has created its image among the consumers through brand name, differentiation, quality, quantity, environment, customer care, promotions and uniqueness.

BARGAINING POWER OF SUPLIERS

In this case Supplier power is quite high in this fast food industry because there is lesser number of suppliers, and customers cannot switch to other brands because every brand has created its own image in the consumer’s mind, that’s why consumer cannot switch to other brands. On the other hand, McDonald has established long term relations with its suppliers and McDonalds has a great deal of influence over their suppliers, due to the fact that it supports them and trains them, the threats from suppliers are quite low. Due to the scale of McDonald’s operations, suppliers are keen to maintain their contracts with company. McDonald’s internationalization could also mean greater sales potential for suppliers.

THREATS FROM SUBSTIUTE PRODUCTS ronald_mcdonald_jumping1-1

Substitutes product means, which can do the similar function as the original product can do. In this area It could be argued that the threat of substitutes to McDonald’s comes from pizza hut, KFC, Din more, burger’s king and other domestic fast food firms. However, most of the above firms do not have the same stranded of convenience that McDonald’s provide, and People going to McDonald’s for eating and entertainment. This makes the list of substitute products quite long specially ENTERTAINMENT & ADMOSFIER.

INDUSTRY FOR RIVALRY AMONG EXISTING COMPETITORS

Every firms looking for competitive advantage. It is the forces that holds their company above others in their business and gives them strength of survive in market. Among the every organization’s competition is based on the nature of business. The concentration of firms within the fast food business is low due to the established presence of McDonald’s, Burger King, Pizza Hut, Dine More and KFC. However, in certain markets, McDonald’s will face competition from established competitor fast food outlets. for example McDonald’s and KFC, and they provide equally attractive products and services, If buyers don’t get customer satisfaction from McDonald’s, they’ll go to KFC or somewhere else so they should to be continually satisfied and also they should be very innovative and unique in the products at regular intervals to attract and maintain the customers.

RELATIVE POWER OF OTHER STAKEHOLDERS

In every business firms or industry has stakeholders. It is very important that multinational companies highly consider and value their general public or stakeholders.

Stakeholder for McDonald’s Sri Lanka includes.

            Customers

            Franchise Holders

            Employee

Suppliers

Community groups

Share holders

Investors- since McDonalds is a public company, our shareholders are key stakeholders. Shareholders, it’s a one of the pretty broad category but not quite as broad. Shareholders can be individuals, companies, pension funds, mutual funds, etc. Every investor is managed on their own and with company support as well. McDonald’s guarantee the investors or shareholders an income that is better than what they could get it from any other place in fast food industry.

Employees- , McDonald’s employees rely on us for income and benefits ,The employees produce and sell the products and services to the external consumers. Basically, employees are selling a big part of their lives and must receive reasonable pay and especially Managers are assured a good salary if they can develop the firm and make it profitable. They regularly work for 50 to 60 hours in a week.

Community- McDonalds needs the community to survive in competitive market. Because the community builds path way, provides electricity, security, communication and technology and all. In turn, firm are obliged to keep the community’s environment clean and green.

Suppliers- if any firms that cannot survive without good suppliers. McDonald’s must work with their suppliers with good relationship and pay them a fair price for their products and services. And also already McDonald has established long term relations with its suppliers and McDonalds has a great deal of influence over their suppliers.

Customers- consumers are one of the important stakeholders, McDonalds should provide fast, efficient, good food and customer services on a consistent basis. Then only firm can successfully survive.

TOWS ANALYSIS

TOWS Analysis has been introduced to analyse the competition in the market.

SO Strategy

Strong brand recognition

McDonald’s has the great strength for strong brand recognition in Sri Lanka. Because everyone knows about the McDonald’s brand name. Also McDonald’s is increasing the number of outlets in Sri Lanka.

E.g.:- Very recently it has opened a new outlet in Colombo – 13.

Produce high perceived value

Compare to other fast food industry in Sri Lanka McDonald’s customers get the value for the price that they pay and prices are lower than other fast foods.

E.g.:- Their Happy meal & Breakfast menu

Different kind of foods available

In Sri Lankan fast food industry only McDonald’s open in the morning 7 am and they only have breakfast at this Compare to other fast food industry only McDonald’s has more variety of food items.

E.g.:- Fish Burger, Fish McRice, Salads, Mc Cafe, and Fruit Juices etc…..

Produce high quality products with nice packaging

In McDonald’s they give toys with every Happy Meal

WO Strategy

Launching new products

McDonald’s is introducing new products continuously. Also they increase efficiency in business process. But at the same time it can be weakness sometime, because if it does not work out.

Low cost menu

Low cost menu that will attract the customers. At the same time if it is low price people will think that it is low quality. So it will turn as weakness as well.

ST Strategy

Provide high value chain than competitors

McDonald’s staffs are very keen in their work very fast too. With that they create strong customer relationship.

E.g.:- Only on McDonald’s once we order, if they cannot serve us within 3 minutes we can get the refund.

Make moderate changes according to customer needs

Compare to other fast foods only McDonald’s open daily at 7 am and especially they provide breakfast and they have McCafe. And the new formats, having Wi-Fi facilities, children play-parks, and customers can get any time any amount according to their needs these straw, and tissue, because they have kept these in a separate place.

WT Strategy

Benchmark with strong competitors

McDonald’s check competitors menu and they take it as a benchmark.

Limited number of food items

McDonald’s does not have variety of foods in chicken. Because they use only one chicken fry piece for all products. They are McRice, Chicken Burger, and Crispy Chicken in Sri Lanka.

Strong competitors

McDonald’s has strong competition in Sri Lanka. Because before they start their business here KFC and Pizza hut have already started their business.

Focus by consumers on nutrition

Health professionals and consumer activists accuse McDonalds’ of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity. And people believe that.