Man as Natural Being
LYCEUM OF THE PHILIPPINES UNIVERSITY BATANGASGraduate SchoolMBA
PROGRAM
case analysis
By:
Ma Chere Gracita Reyes-Bilog
strategic marketing management
Dr. Dante LubisJune 27, 2015
CASE ANALYSISMCDONALDS
VIEWPOINT Jim Skinner, Chief Executive OfficerTIME CONTEXT
2009PROBLEM STATEMENTHow can McDonalds increase its appeal to the
different segments of the market without alienating
others?STATEMENT OF THE OBJECTIVEIncrease same stores sales by 10%
by end of 2009.AREAS OF CONSIDERATIONA. Strengths1. Powerful brand
recognition. McDonalds is a leading global food service retailer
and has remained to be a household name throughout the world. Its
Golden Arches logo and Ronald McDonald character are well known
globally.2. Strong global presence. As of 2008, McDonalds has more
than 31,100 outlets scattered in major parts of the world,
including United States, Europe, Asia Pacific, Canada and Latin
America.3. Successful franchise business model. Approximately 80%
of McDonald's restaurant businesses world-wide are operated by
franchisees. Thus, McDonald's benefits from economies of scale.
Financially, with franchising, McDonalds has a regular and steady
source of income, in terms of rent and/or royalties.4. Well-planned
and executed turn-around strategy. Cantalupos Plan to Win Strategy
greatly helped McDonalds recover from the dire consequences of its
overexpansion. 5. Affordable menu. McDonalds has successfully
positioned itself as a fast-food outlet offering low-cost food and
drink without hurting the companys profit. 6. Financial stability.
In the midst of a global economic slowdown, McDonalds continued to
grow. Its same store sales even increased by 7.2% during the last
quarter of 2008 compared from the figures reported in 2007.B.
Weaknesses1. Negative image and publicity: McDonalds is perceived
have unhealthy food menu which can cause obesity and heart attack
for customers. 2. Product development problems. McDonalds was not
able to capitalize on the trend towards organic foods.C.
Opportunities1. Rapidly fragmenting market. The tastes of the
consumers are changing. McDonalds can capitalize on this by
developing products other than hamburgers and French fries.2.
Increasing demand for healthier food.As a demand for healthy food
increases significantly, McDonalds can produce healthier
alternatives to their menu.3. More people are on the go. People who
are on the go mean more people who prefer to consume fast food
products. 4. Increasing globalization. 5. Economic slowdown. The
desire of the people not to spend too much during the economic
slowdown is aligned with McDonalds strategy of offering affordable
menu without hurting the companys profit.D. Threats1. Fierce
competition: The competition in the fast food industry is very
fierce and developed countries are overcrowded by so many fast food
restaurant chains.2. New competitors. Due to the rapidly
fragmenting market, the competitors of McDonalds are not only those
in the fast food chain. Competition has been coming from quick
meals of all sorts that can be found in supermarkets, convenience
stores, and even vending machines.3. Health issue. People nowadays
are becoming more conscious of what they eat. 4. Lawsuits. With a
rising awareness of the high fat content of most of the products of
McDonalds, the company is beginning to face lawsuits even from its
loyal customers.
ASSUMPTIONSThe financial ratios of McDonalds are assumed better
than its competitors given the declaration of CEO Jim Skinner that
the company has continued to be recession-resistant. Two of its
closest competitors, KFC and Wendys, failed to cope with the
peoples spending downturn.ALTERNATIVE COURSES OF ACTION1.
International expansion through continued franchise
opportunities.2. Innovation of products through creation of an
organic and healthier menu3. A focused strategy should be developed
around the companys core business, burger, fries etc, looking to be
the best in the industry, and generating incremental sales volume
per store rather than diversify or innovate. 4. Enlarge menu by
adding non-traditional McDonalds food items.5. Make every McDonalds
a place to stay through the use of technology and having a play
area.ANALYSISACA1: International expansion through continued
franchise opportunitiesAdvantagesDisadvantages
McDonalds can capitalize on three of its principal strengths -
powerful brand recognition, strong global presence and successful
franchise business model and continue to aggressively expand in the
other parts of the world, with focus on emerging markets such as
China. McDonalds will thus have more stores and at the same time an
increase in its steady source of income.The market share of
McDonalds will continue to get bigger.In addition to growing
profits more rapidly, by expanding its sales volume through
international expansion, McDonalds can realize cost savings from
economies of scale, thereby boosting profitability.McDonalds has
the necessary experience in international expansion.Product
innovation. Part ofMcDonalds franchise model is letting its
franchisees have more autonomy in making menu decisions to fit the
particular tastes of its customers. This will contribute to an
increase in the menu of McDonalds.Limited control over the
activities of the franchise.Poor functioning, operations or
reputation of one franchise may damage the entire chains
reputation.There is a difficulty keeping and maintaining
intellectual property.
ACA2: Innovation of products through creation of an organic
and/or healthier menuAdvantagesDisadvantages
Product innovations can attract new customers as well as keep
existing customers.The organic and/or healthier menu can serve as
competitive advantage for McDonalds.This will improve the image of
McDonalds.If successful, this can lessen the potential lawsuits
against the company.This will delay the perceived decline of
McDonalds product life cycle.This will require extensive research
into the wants and varying tastes of McDonalds consumers for each
particular location or country.This will require huge capital
expenditure in terms of product research and development.A
successful reception of the organic and/or health menu in one area
does not equate into a successful product innovation in all
areas.
ACA3: A focused strategy should be developed around the companys
core business burger and fries at affordable prices gearing towards
being the best in the industry, and generating incremental sales
volume per store rather than diversify or innovate. McDonalds
should just improve the tastes of its core products and heavily
advertise to counter the negative
publicity.AdvantagesDisadvantages
McDonalds is already globally well-known to serve burger and
fries, not salads nor gourmet coffee blends nor baked muffins, at
affordable prices. This will keep its loyal customers.This does not
require huge capital expenditure for research and development.This
requires big expenses on advertising.This will not attract the
healthy-eaters, thus effectively alienating them.
ACA 4: Enlarge menu by adding non-traditional McDonalds food
items.AdvantagesDisadvantages
Product innovations can attract new customers as well as keep
existing customers.This will lengthen the companys and/or its
product life cycle.The introduction of non-traditional food items
can serve as competitive advantage for McDonalds.This can help
combat the negative image of McDonalds.This will require extensive
research into the wants and varying tastes of McDonalds consumers
for each particular location or country.This will require huge
capital expenditure in terms of product research and development.A
successful reception of new food items in one area does not equate
into a successful product innovation in all areas.
ACA 5: Make every McDonalds a place to stay through the use of
technology and having a play area.AdvantagesDisadvantages
This will attract employees and teenagers who always seem to
want to connect to the internet.This will also provide a place for
parents to allow their children a safe place to play.Additional
market segment being served will increase profitability.This will
require renovation of existing restaurants and may require capital
expenditure.
CONCLUSIONIn determining the best alternative, the following
criteria will be used, with the corresponding percentage or weight
for each criterion:1. Cost-efficiency. Ability to successfully
implement the course of action at minimal costs. (30%)2.
Sustainability of the course of action. Capacity to endure and
support the fulfillment of the identified objective. (40%)3.
Timeliness of expected result. How fast this ACA can get its
objective. (30%)ACACost EfficiencySustainabilityTimelinessTOTAL
International Expansion30351580
Product Innovation10351570
Core Product Improvement2010030
Non-Traditional Food Items10351570
Place to Stay20202060
Given the above Decision Matrix, the first alternative course of
action, international expansion through continued franchise
opportunities, received the highest score. It is more cost
efficient to undertake international expansion rather than product
innovation or core product improvement because McDonalds will adopt
its tried and tested franchise model. Thus, the costs associated
with its international expansion are minimal especially when
compared to the license fees and royalties it will receive. It is
also I important to note that through international expansion,
McDonalds can simultaneously address the need to develop new
products including healthier products. This is because the
franchise model of McDonalds allows the franchisee to create new
menu to fit the tastes and preferences of its customers, usually in
accordance with the specific countrys culture. There will thus be
simultaneous product development and innovation at little or no
expense to McDonalds. In its international expansion, McDonalds can
focus on emerging markets such as China which is heavily populated.
Thus, through international expansion, McDonalds will be able to
meet its objective of increased same stores sales by 10% by the end
of 2009.PLAN OF ACTIONActivityPerson ResponsibleTime Frame
Set a Board Meeting to discuss the strategyPresident of the
Board of DirectorsJanuary 2009
Activate the Franchising Team to review all pending franchise
applications worldwide, scout for possible lucrative franchise
locations, including interview of prospective applicants and
recommend for approval applications for franchise.Finance Manager,
Franchising CommitteeFour (4) to twelve (12) weeks
Approval of Franchise ApplicationCEO Jim Skinner and/or
area/region managerOne (1) week from recommendation
Drafting and signing franchise agreementLegal Department Two (2)
weeks from approval
Training of staffHuman Resources assigned to the area/regionOne
(1) to six (6) months, depending on time of franchise
Construction. Refurbishing or renovation of building Operations;
real estate division of McDonaldss assigned to the area/regionTwo
(2) to four (4) months from approval
Opening of new McDonalds restaurantFranchisee; McDonalds
representativeOne (1) week from occupancy of restaurant
Strategy Evaluation; Adjustments on the strategy that needs
improvement and disseminateCEO Jim Skinner Every end of the
month
Performance review. Monitor market reactions to any new
products; monitor performance of franchiseCEO Jim Skinner;
area/regional head; Every quarter
Assessment of financial returnsFinance Department; area/regional
headEvery quarter
RECOMMENDATIONSMcDonalds is a well-known brand in all the major
regions of the world. However, the market is rapidly being
fragmented and the tastes of its consumers have been changing over
the years. Coupled with this is the negative image that McDonalds
has become associated with. McDonalds must be able to adapt to the
new environment, increasing number of competitors in an industry
that almost over-saturated and nearing the decline
stage.ReferencesHill, C. and Jain, A. (2012). International
Business (6th Edition). McGraw Hill Companies.How Has McDonald's
Been So Successful for So Long? (accessed on June 22, 2015;
http://www.franchisedirect.com/information/markettrendsfactsaboutfranchising/thesuccessofmcdonalds/8/1111/)Johnson,
G., Scholes, K. and Whittington, R. (2005) Exploring Corporate
Strategy: Text and Cases. Pearson Education Limited, Essex,
U.K.Global Strategy of McDonald and How it Reached all Corners of
the World.
https://www.academia.edu/6465022/Global_Strategy_of_McDonald_and_How_It_Reached_All_corners_of_World
(accessed on June 24, 2015).
MBA: Strategic Marketing Management 2
