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This assignment is based on the strategic decisions made by McDonald’s McCafe, England. The assignment sheds light on the internal and external analysis of the organisation as it is one of the largest food companies. Within the completion of the analysis, the evaluation nd projection of the organisation as a whole has been provided. McDonald’s is one of the largest and first food companies in America. This was founded in the year of 1940. This food company was first operated. However, as the company expanded, the strategic and marketing decisions started impacting and had to put extra efforts on.
The golden logo of this company was first introduced in 1953. In the year 1955, a businessman whose name is Ray Kroc had joined the company as a location of this company in Phoenix. Ray Kroc was a businessman, joined the company as a franchise agent. McDonald brothers are purchasing the products. The private headquarters of McDonald’s had in Oak Brook, Illinois. But this headquarter was moved to Chicago in the year of 2018 June (Onu and Adegbola, 2018). The company faces fierce competition from different companies. In the light of this competition, comparison with different companies in its products have made sure to provide an in-depth insight on the recommendations that can be provided to the organisation.
Competitive Analysis
The competitive analysis mainly includes the marketing strengths, weaknesses, geography, culture, and customer reviews. The competitive analysis mainly defines the goals, collecting the data, the identification of the competition, and the periodic review those are mainly described in this part (Tafesse and Wien, 2018). On the other side this is also described, the product developments, price of the products and the quality of the products are described in this part.
Step-1: Identification
Porter’s Five Forces Analysis
Porter’s five forces analysis of McDonald’s creates the following intensities of the five forces are Competitive Rivalry, New Direct Entrants, Bargaining Powers of Suppliers, Bargaining Powers of Buyers, and the Threat of Substitutes. The five porter’s forces model helps to explain the various industry and the different levels of profitability.
Competitive Rivalry
McDonald’s faces competition because this is the first food restaurant in the market. The strong force at the high number of firms, high aggressiveness of the firms, low switching costs. On the other side, this factor heightens the intense competition that McDonald's faces. Furthermore, cheap cost of switching make it simple for customers to migrate to other eateries, for example, Wendy's, KFC and Burger King. This external source keeps adding to the competitive force that the organisation already faces (Cherukuri et al. 2020).
New Direct Entrants
The low switching cost, the high variable capital cost, and the high cost of brand development is the important points in this part. It is simple to transfer from McDonald’s to replacements due to the obvious cheap switching barriers. For example, switching from the firm to alternatives usually has trivial or minor drawbacks, such as marginally greater meal expenses in some circumstances or greater time spent on food production. Furthermore, replacements compete for consistency and consumer happiness (Morgan et al. 2019).
Bargaining Powers of Suppliers
Individual suppliers' impact on McDonald's Corporation is mitigated by the wide population of suppliers. This weakness stems in part from an absence of strong global and regional supplier alliances. In this regard, the majority of McDonald's contractors have not been integrated which means they have no control over the supply chain that transfers their goods to companies such as McDonald's (Gyenge et al. 2021). This mainly helps the business growth and the revenue. Furthermore, the wide availability of materials such as bread and animal fat reduces the effect of vendors on the corporation.
Bargaining Powers of Buyers
The low switching cost, a large number of providers of the products, and the high availability of the products. The delivery problems of McDonald’s are one of the important parts of this. As a result of market absorption, buyers could choose from variety of restaurants apart from McDonald's. This situation makes buyer power a powerful force in influencing the company's physical factors. Furthermore, in this external examination, the availability of replacements is important (Razumova, 2021). McDonald’s is now celebrating its 12 years of leadership for food services all over the world. There are 160 restaurants in this food company all over the world.
The Threat of Substitutes
The high substitute availability of this company and the low switching cost, and the lase one is a high performance-to-cost ratio of substitutes. This environmental force adds to the potency of the replacement threat in fast food business. Furthermore, due of the cheap price sensitivity, it is simple to migrate between McDonald's to replacements. For example, switching from the firm to alternatives usually has trivial or minor drawbacks, such as marginally greater meal expenses in some circumstances or greater time spent on food processing (Velychko et al. 2019.).
Competitive Dynamics:
This is the key model of this part, the nutrition of the products as of providing 80% nutritious food, innovation for food serving, hygiene, and quality, that is important for developing the food business. This is important because the quality of the products is very good when the customers are satisfied with these products and the company's business is day by day improved. One of the important parts is the products and services that are helpful for growing the business. McDonald’s products are high quality and the low prices are an important part of the food business. On the other side, this company has opened online stores. The market decomposition is a process that is separating the customer market into many other groups based on resemblant groups (Merendino et al. 2018). The policy of this company is opening up many mega stores, this customers segmentation policy is offering many products to the needs of the customers. Those policies are low management and maintenance cost, low rental cost for the small stores mean, and the profit consequently increase. Environment law food tasks are mainly a very important part of this market business. Those issues are very much affecting the food business.
STEP 2- DESCRIPTION
McDonald’s McCafe: strength and vulnerabilities
McCafe is a coffee-house-style food and beverage chain, they are the most recognized and branded company. They successfully run their business for over 75 years, they started their journey in America in 1940. When they started their business then they were well established for BBQ in San Bernardino, California, after that they offered all the Americans great burgers. According to the 2021 analysis, their market cap is about $178.97 billion (Tangkuman et al. 2018).
The strength of the company is their targeted approaches to the penetration of market and product development breadth. The company ranks tenth in the world’s most valuable brand. They expanded their business to 120 countries and their more than 31000 restaurants of fast food operated all over the world (Heymann, 2020). They are less concerned about the venue work on a daily basis because McDonald's franchisees own about 90% of their locations. The corporation market share in recent times is around 19%, brand Yum! Account for only 9% and Wendy’s and Burger King shared only 2%.
It is the world's most valuable brand of fast food and their brand value is about $126.04 billion as of 2018, no other brand came close to this brand. Starbucks is the second most popular company. They reported about $19.2 billion revenue at the end of 2020. Their brand value was approximately $44.5 which is far higher than McDonald’s. As of July 30, 2021, the company market capital was around $181 billion and about $243 for each share. Their share is about 2 million for average volume of trading (Sari et al. 2021).
Product Comparison:
The fast-food experts claimed that McDonal’s French fries is the best in taste and can easily beat any other company. McDonald's ensures their consistency and high quality of food through the good collaborations of both the vendors of domestic and international level. Their competitors Wendy’s and Burger king lose their market but their company continues to grow. They face competition with some other QRS brands such as Taco Bell, KFC, Burger King, Wendy’s and Subway.
Burger King and Wendy’s focus on fries, different classical American foods, and burgers, but their tastes are not beat the taste of McDonald’s fries and burgers. McDonald sells various types of chicken items like chicken sandwiches, breakfast items, soft drinks, hamburgers and also varieties of desserts (Besson et al. 2020). According to the location they also serve items for vegetarians, salads etc. and they also offer the customers for tasting different types of International Items.
Technological Infrastructure
People are more comfortable with digital platforms, so digital technologies help the company to be more effective, more efficient and make them more comfortable for serving the people. The company uses AI technologies and big data to improve their large supply chains, they recently announced their personal software which is dynamic and technology is Israel based (West, 2019). They want to build a strong connection between their suppliers and customers, they use technology to serve their customers. They included different categories as per customers' demands and the customers placed their order online as they wanted. AI and Data both technology help the company to bring together both demand and supply. With the help of their personalized recommendations for it, fast food and supply chain network can manage and it also promotes key and inventory products.
Current Strategies
In terms of size and global reach, the company is now in a leading position. They are the largest quick-service restaurants (QRS) chain in the US. As per Statista in 2018, their transaction was top-listed with $38.52 billion. They are known for their high stand of quality food (Wu, 2020). The company never compromises with safety; they strictly monitor the quality of ingredients and safety of the food. Ronald McDonald is the iconic face and is well known to the world for extraordinary marketing strategies with management. The strategy that makes them different from others is to make availability of food fast at a reasonable competitive price but get profit through the reduction of product cost and expanded business throughout the world.
Step 3: Evaluation
The company is the world's most successful market driver and they offer varieties of menus and they increase their brand value with young adults and the population age group above thirty. They always use a control mechanism which means they utilize this control mechanism for the quality of the products, sales and all other operative parts of the business (Gheribi et al. 2018). The relationship between corporations and individual outlets of McDonald’s is so cool, so they individually can make decisions to do different work. The idea of the Big Mac, Ronald McDonald, Egg McMuffin are not adopted from the headquarters, this decision was taken by the franchised owners. Their communication system is very good. All the franchise owners get the freedom to run their store as they wish but they all maintain the guidelines of the quality of the products. The method used to evaluate the quality of the products throughout their franchise chain is ‘mystery shoppers’, where they give their feedback. They also offer promotions and fulfil orders with a host of other things, this program is implemented for customer greetings.
This program is arranged by all other fast-food companies but the result of McDonald's is higher than any other company. Their control theory is very much effective to maintain the relationship with other franchises and helping to run their business successfully.
Step 4: Projection
McDonald’s stock rose by 55% in the last five months and it was only 9% at the beginning of the year. This pandemic causes a fall in their earnings and revenue, but their stock is not expensive because they consider it to grow 30% by 2023 with their steady rate of net income margin. The estimation of revenue in 2023 will be approximately $24 billion representing a growth rate of 7% per year and the number of restaurants will be 49 thousand by 2023 which was 39 thousand.
Their EPS is expected to grow because of their re-frenching and reduction in the cost of operation for better practices of operations. Their expected margins were shrunk due to the coronavirus by 25%, but they make a plan for their growth as the situation is changed they reach up to 33% by 2023 and the projection of revenue will be $24 billion in next the three years they take their market cap above $200 billion.
They make a strategy that is based upon three-D, Digital, Drive and Delivery. The company will accelerate an innovative technology that helps its around 65 million customers to get benefits of their fast and easy delivery system and their 25000 growing through their drive-thru McDelivery. And the percentage is 65 uses their features drive-thru and they increase the no of percentage in future (Wu et al. 2019). They also announced McPlant, the new innovative menu that is the plant-based burger. They believe in the strategy that a business can run successfully and sustain for a long time with customer satisfaction, so they always offer their customers high-quality products and services.
Step 5: Management
Operation management in McDonald’s is the top management system, McDonald’s Corporation’s operation Management maintains the position of the company, they plan to coordinate for their optimal performances and productivity. They are the world’s largest so they need OM like strategic HRM and development in their supply chain. They also need to address their competitors like Subway, KFC and Wendy’s and their impact on them. They need to make a more productive design that means that the size of the products is minimized to make the product more affordable. They use production line methods for their quality consistency, this consistency helps to satisfy the customers (Rajawat et al. 2020).
Their process and capacity design is based on the efficiency for cost minimization which always supports the strategies of the company. They need to increase their capacity and focus on the efficiency process to fulfil the demand of the market. The company production line is good; it maximizes the capacity and efficiency of production.
Location management is also very important as they expanded their business all over the world, the location establishment is very important for maximum reach of the market (Tien, 2019). The company uses restaurants, their own websites, kiosks and mobile apps for venues. These venues help to reach the customers by traditional as well as online methods.
They need to focus on the maximum utilization of space in their restaurants rather than the other part that is comfort and spaciousness. Their supply chain is a very important part, as they expand their business they need to develop a diversified supply chain and it reduces the risk of involvement of suppliers from different regions (Wu and Ma, 2021).
They are well-known companies and run very successfully, the company needs to innovate their products as per customer demands and innovation is very important because the customers are always excited to try something new and different. So productive innovation of products always gives positive results.
Recommendation
McDonald’s offers various types of products for the customers. This is a popular food company and this brand mainly brings the products from the local farm and they also create a good relationship between the local farmers. The technology is day by day update for this why the online marketing is very important for developing the food business. That is why this company the culture of innovation is one of the important parts of digital-ready culture and should follow the theory of Generative Interaction. This is very important for growing the business (Webb and Orr, 2021). Fresh ideas and good talking help to improve a company. In the organization control system is very important, this mainly gives a better idea of the flow of the food through the restaurants, and on the other side, this is also to control the cash flow and the team plan that is very important for the organization.
Communication is important in restaurants because it helps teamwork and this mainly helps to understand the reason for what is mainly going on in restaurants by adopting cognitive processes and developing skills and positive engagement of the employees. The various social media services companies and those company’s pros and cons are very helpful in collaboration with the employee and the team leader. For the urgent decision for the company’s business purposes. In this business case, most of the medium and the larger firms are aggressively marketing their products (Karray and Martín-Herrán, 2019). On the other side, the main cus on the breakfast, and also pay the companies employees a living wage, and the products development is also important for growing the company’s business.
Conclusion
It is very effective for McDonald’s restaurants because the organization's actual defects are not the identity, the time that is very much affected for the organization. . This company has working and a good relationship with some of biggest commercial contractors. The number of total employees is 1.7 million. In the year 2020 McDonald's has the ninth-highest world brand valuation. The many restaurants in this company are McDrive, McCafe, Create your test. The basic environment is competition for the health. This food company mainly offers healthier food and different types of fast food which is an important part of the McDonald’s competition. competitiveness business strategy is mainly utilized for cost leadership and the other side international market expansion strategies (Weberova and Lizbetinova, 2020.). The Cheat Price of McDonald's is the main competitive advantage. On the advantaged, this company is mainly engaged in an extensive utilization of the economies, that achieves the cost advantages.
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