Free Essay on McDonald's: Policy and Strategy in Global Competition Case Study

Published: 2018-02-28
Free Essay on McDonald's: Policy and Strategy in Global Competition Case Study
Type of paper:  Essay
Categories:  Company Strategy Case study
Pages: 9
Wordcount: 2376 words
20 min read

As a consultant in accounting and finance, the management of McDonald’s Corporation has hired me as an adviser regarding its internal and external environment. To achieve this, I have analyzed the company’s philosophy in terms of objectives, mission and the vision of the company. Further, I have recommended a nine-component based new mission statement for the company as required by the management. The paper has analyzed all the internal and external factors as summarized in the SWOT analysis, internal and external evaluation matrices, and SWOT Bivariate analysis. Additionally, the paper has analyzed the financial ratios and statements of the firm. Finally, market mix strategy has been identified as crucial in ensuring that the company maintains a competitive edge in the market environment.

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Mission Statement of the Company

The current official mission statement of the company is stated as follows: “our mission is to be our customer's favorite place and way to eat and drink. We're dedicated to being a great place for our people to work; being a strong, positive presence in your community; and to delivering the quality, service, cleanliness, and value to our trusted customers” (Imhoff et al., 1991). In this mission statement, the company markets itself as the best place for people to eat and drink. It also portrays itself as the best employer regarding human resources. Also, the mission statement includes the aspect of corporate social responsibility where the company's image is to have a "positive presence in your community." The brand image of the company is also catered for in the statement to attract more customers and investors. However, the mission statement needs to be broader so that it addresses all crucial concerns.

Vision Statement

The following is the vision statement of McDonalds Corporation: “Our overall vision is to become a modern, progressive burger company delivering a contemporary customer experience" (Imhoff et al., 1991). In this vision the company uses the word ‘modern’ to mean delivering up-to-date services, thereby selling the brand name of the firm. To achieve this commitment, the company is involved in training the employees on the various ways to improve their operations.

Objectives of the Company

The main objective of the company is to offer the customers a favorite place for them to eat. This is achieved by the corporation by using the strategy of Plan to win (Imhoff et al., 1991). This objective by the company has seen it withstand the stiff competition in the industry. The firm strives to create an extraordinary customer service experience and brand protection. The company focuses on ensuring employees, suppliers and franchisees work together. Besides, it is the objective of the company to provide clean food in a welcoming environment (Krasnikov et al., 2009). The company strives to maintain a good relationship with the customers and the suppliers as well supporting the community through a sound corporate social responsibility program.

Strategy of the Company

The company uses the plan-to-win strategy in making sure that the objectives and the mission of the firm are met. The strategy focuses on people, products, prices, place and promotion (McDonald & Wilson, 2011). The company wins the support of the local communities as it provides a market for their raw materials, offers employment opportunities to the local community and also participates in charitable organizations. As an employer, the company strives to attain staff engagement, respect, and safety while undertaking their duties. It helps the employees achieve full potential by offering them in-service training courses and promotion. The company supports charitable organizations with The Ronald McDonald House that supports children, with those undergoing treatment being the main beneficiaries (Imhoff et al., 1991).

The New Mission Statement

The new mission statement will follow nine main components, and is geared towards ensuring that the company serves its stakeholders based on its philosophy and the organizational culture. It should unequivocally address the interests of its customers and the shareholders. The nine components should be addressed by McDonald’s Corporation in the following ways:

(1) Customers. McDonalds Corporation does not discriminate its clients regarding finance, religion, geographical and age. Although the company was started in California, it has grown to become an international company with various outlets in over 30 countries. The company offers different products to its clients depending on their financial ability, religious and cultural beliefs. However, the company has failed to open subsidiaries in Africa.

(2) Products. McDonald's Corporation offers high-quality food in America, Europe and other parts of the world. The company's main products include burgers, fries, and drinks where the emphasis is placed on the quality, health, and cleanliness of the food. Other products include French fries, hamburgers, salads, chicken, desserts, soft drinks, breakfast, coffee, and milkshakes.

(3) Geographical competition. The company has its headquarters in the USA but has various outlets in other parts of the world. The firm has been in competition for many years where real competition for clients heated up in the 1980s during the "burger wars" when Burger King and Wendy's companies tried to steal the market share of McDonald's company. The main competition was from the services provided hence the name burger wars. However, the company was able to succeed in the competition by introducing new products such as chicken McNuggets and salads. The company also used efficiency technological advances by using microwaves to gain a more competitive edge over its competitors.

(4) Concern for survival, growth, and profitability. The company’s operations have also increased to 144 outlets in 1998 making it difficult for the company to adopt especially in the Muslim countries. The firm had to make it relevant by offering Halal Menus in the Arab countries as well kosher menus in Israel. In doing this, the firm also had to avoid beef-eating in India (McDonald & Wilson, 2011). These strategies adopted by the company helped it immensely in dealing with competition from the local companies in the host nations.

(5) Technology. Regarding technology development, the company remains highly competitive as highlighted in the plan to win strategy. The new color theme of the company has been seen as a tool to attract more clients. The company has changed from using the steel chair to more comfortable leather seats. Facilities such as flat-screens, live plants, and free Wi-Fi are other technological developments that help the company to remain competitive in the industry. Finally, the use of microwaves and modern safety tools is another way in which the company remains technologically competitive.

(6) Self-concept. The company’s financial position is sound as witnessed by the increased supply of costs. The firm prides itself on supplying healthier menu items which make it attractive to many costumers even as the prices of beef skyrocket from 2012 due to the severe drought in Texas. The effect of the drought is an increase in the cost of production of the due to increasing in agricultural products. This has caused an increase in the cost of raw materials which means that the huge profits the company was enjoying have dropped since 2012. The company is very conscious of its survival in the current market dynamics due to competition. To achieve this, the company has been flexible in the services and products offered (Carroll, 2010).

(7) Philosophy. The philosophy of McDonald’s Corporation is in its mission statement. The company exists to serve the interests of all stakeholders and more so those of the employees, suppliers, customers, and the community. The company prides itself on offering the "best" environment for workers to grow (Ball, 2001). The company respects its workers and gives an opportunity for them to grow professionally through promotion, in-services courses, and better remuneration. The company also respects community by sponsoring community-based programs in its corporate social responsibility program (McDonald & Wilson, 2011). Finally, the company values its customers and the suppliers where it offers an exceptional customer experience.

(8) Concern for public image. The company has concern for the brand image as seen in the objective statement of the company. The support of community-based programs is one of the manifests that the firm values the community as it aims in giving back to the society (Ball, 2001). Another way in which the company is seen to value the community is by offering employment opportunities to the local community and also serves as a market for the raw materials. The company also values the employees as seen in the 5Ps strategy. "People" is the first P, of Plan to win strategy which shows how the company treats its employees in a friendly manner (David et al., 1993).

(9) Concern for employees. The company values its employees as purported by the company in the new mission statement. There have been negative accusations towards the company in terms of staff turnover and experience of its workers. This has led to the company to change its remuneration program and also to offer in-service training to the employees.

Analysis of the Existing Business Model

A business model is a tool that explains where a firm obtains its revenue, the customer base, the main suppliers and the details of financing. The existing business model of McDonald’s Corporation dates back to 1954 when investor Ray Kroc joined the company after being encouraged by the success of McDonald's brothers where the corporation had placed a large order of eight multi-mixers. The family continued to enjoy most of the shares in the company until the year 1965 when the corporation was offered as public firm at the stock exchange. The company was managed using the strategy of a three-legged stool philosophy where one leg represented the parent corporation, the second leg the quality of the products offered, and the third leg the suppliers.

The company continued to grow and in 1967, it opened international subsidiaries in Canada and Puerto Rico. Soon, the company opened branches in Japan and Europe in 1971. The company has now opened its branches in over 30 countries in the world. However, the company faced stiff competition in the 1980s during the period of "burger wars." Despite this competition, the company has continued to post exemplary financial performance, as portrayed by its financial reports.

SWOT Analysis.

This section is going to analyze some of the strengths, weaknesses, opportunities and threats of the company.

i) Strengths

Strong global brand. The company's success is built on the strong brand name as it is one of the most recognizable brands in the world. Most of the clients in the United States and Europe recognize the company's "Golden Arches" which they associate the company. The company also has consistency in the products and services throughout their restaurants whether in New York or Israel (Carroll, 2010). The company also provides diversity in products offered based on the cultural and religious beliefs of the local clients. The company is one of the biggest food chains in the world meaning it has financial capabilities to fight competition.

Diversified income. As already seen, the company has subsidiaries in over 120 countries in the world. Depending on the sales of each country, then the company’s financial health remains stable. If the business environment in one country is not very stable, then the losses can be offset by sales from other geographic locations. This diversity ensures that the company has a regular cash flow and consistent profitability thereby ensuring operations of the company are not halted.

ii) Weaknesses

Negative publicity. There has been a widespread belief that the products offered by McDonald’s restaurants are not healthy. The complaint is that their foods are loaded with carbs, salts, and sugars. The company has also defended itself that this has always been a rumor from competition although research has shown that most of the items in its standard menu relatively unhealthy. The company has therefore been accused of promoting unhealthy eating habit which makes the clients add some pounds as supported in “Super Size Me” documentary in 2004. This campaign has seen the company lose most of its customers despite the efforts by the company to dispel the rumor.

High employee turnover. Although the company's mission statement acknowledges the importance of the employees in the company, the truth is that they are lowly paid since most of the jobs are low-skilled (Borde, 1998). Most of the workers do not take their tasks seriously as they are work for a short period hence lowering performance.

iii) Opportunities

Upgraded Menu. The CEO Easterbrook has very big plans for the company as he attempts to turn it around. The company has since introduced artisan chicken burgers in most of its outlets in the US. The company has also managed to keep its prices competitive as it looks for ways to fight the stiff competition from SBUX and McCafe corporations (Love & Miller, 1995).

Expansion plans. Although the market in North America and Europe is relatively saturated, McDonald's Corporation can look for areas to expand its market share, especially in the developing nations. The company has also announced its plan to franchise over 3,500 restaurants by the end 2018. The implementation of this plan will allow time for streamlining operations, lowering the cost of doing business and stabilizing the organizations.

iv) Threats

Competition. The company faces stiff competition from local, international, regional and national retailers of food products. These firms compete regarding prices, quality, and a variety of goods and services. While the company has the upper hand in winning most of the clients, the issue of quality remains a major concern that needs to be addressed by the management (Borde, 1998). The company primarily competes with Burger King, Wendy's, and Subway.

Health issues. The rise in organic foods such as fruits and vegetables and also the use of natural ingredients poses a great threat to the survival of the firm (Borde, 1998). The concerns about the change of taste by younger consumers should also be a concern for the company.

The BCG Model

A BCG model is used to show how the company can place itself in becoming more competitive in the market. This can be done using the firm so as to increase its capital share, market growth rate and critical evaluation of the company's finances. Similarly, McDonald's Corporation can apply the model to test its position in the industry.

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