McDonald’s is the US firm in the food chain industry and has a very rich history of its operations since 1954. The firm has created an image of more than just a just fast food restaurant. It’s an ideal place for families and has more than 9500 operational restaurants in 45 countries. The company spends more than $ 800 million every year for their marketing strategies (Crawford, 2015). In 2012, the company recorded the first sales decline in over nine years. The drop in sales surprised many since they had managed consistent growth and performance (Crawford, 2015). The Chief Executive Officer Don Thompson has tried to monitor the prices of their products to ensure they remain affordable to everyone despite high commodity prices. McDonald’s experiences a rapidly growing market, and their customers are looking for healthier foods. The chain faces competition from Burger King and Wendy’s.
The company faces the dilemma in that it hopes to deal with an adverse image of the organization due to the high obesity levels in the USA. It’s a dilemma since they have continued to expand their menu for many years. They produce sandwiches, salads, fries and other food that may lead to obesity. Thompson also faces a dilemma when he is trying to monitor the prices of their commodities to ensure they are affordable to many people. The prices of the products are very high.
As a part of their strategy, the firm began selling most of their outlet shops they previously owned. Most of the outlets are now franchisees to help in the operations of the chain (Ghobadian & O’Regan, 2014). They also hope to rebrand their image in the world to ensure their outlet is appealing to customers. McDonald’s has a very high average cost of operations, which they share with their respective franchisees.
One of their business strategies is to remove their supersize French fries and soft drinks to help in the creation of a healthy image. They hope to phase them out in order to reduce their menu and to solve the various issues on obesity observed in the US. The company is also planning to change the menu to ensure profit maximization is achieved. In line with their strategies, they have stopped the sale of their Fruit and Yogurt replacing it with other smaller sized version of the same product (Paul, & Roy, 2014). The new menu will later be rolled out to the rest of the outlets.
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The chain has developed three primary strategies to help them achieve a competitive advantage. They include customer value, convenience and optimal business operations. Information technology helps the company to create new and innovative products. Customer value is the key to them, and they try to ensure customer loyalty and increased sales. They hope to locate their chain strategically close to their customers for convenience.
McDonald’s has adopted a strategy to ensure they meet their customer preferences, and they have introduced various items in their menu such as Angus beef burger and other premium chicken sandwiches. They plan a campaign to promote healthy food such as salads. As a result, they hope to increase their sales at the existing restaurants instead of creating new ones (Paul, & Roy, 2014). It has also added snacks and drinks on their menu to help increase the sales.
Thompson, the company Chief Executive Officer, has monitored the prices of their products to make them affordable. He thinks the company experienced reduced sales due to the Extra Value Menu that had various items priced more than a dollar. It has therefore shifted its primary focus to the Dollar Menu which increased their sales by 15% (Paul, & Roy, 2014). Thompson performed the above main strategic management which has increased profitability over the years.
Current Forces in the External Environment Affecting McDonald’s strategy
Political Factors: McDonald’s business operations are influenced by political factors. They are under the control of government laws and regulations, which must be observed. The government controls their standards, licenses as well as tax compliance.
Economic Factors: The firm faces challenges due to international currency fluctuation. The respective nations’ economic situation also affect their operations either in a positive or negative way.
Legal Factors: They must follow the set rules and procedures to ensure their business is in operations. Failure to comply may lead to court intervention.
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Options to solve the case
Effective promotions and advertising campaign were used to address the case in McDonald’s. They included the use of promotional offers on their various items. T-shirts and other internet cards help to advertise their products. They also teamed with other companies to design a number of programs for children in order to create a positive image of the company. They have built a fast food model where most of the families can enjoy and have fun.
McDonald’s is one of the best restaurant chains in the world, which has established a remarkable position in the minds of the customers. The brand image represents how the customers and other stakeholders view the organization. They were able to be consistent in their marketing skills to ensure increased market share.
The main strength for McDonald’s is the mix of a uniform menu in every outlet with much-localized food options available for the clients. The organization also has high-quality customer service. As a result, customers believe their products and services are safe and reliable. The place is very attractive with a fast service and very friendly employees.
McDonald’s has used both cost leadership and differentiation strategies to over the stiff competition they are facing in their life. Among the hospitality industry, they were among the first firm to have a low-cost smaller menu item in their production line under $ 1. Their competitive advantage is their primary differentiation strategy since their products are unique and well recognized in the market.
Despite the enormous success of McDonald’s, it is paramount to take into consideration the cultural background and the preferences of its market that continue to change every day. New market share will always emerge due to the perfect competition in the food chain industry. The firm should, therefore, implement new strategies to ensure they target their new markets. They need to study their consumer’s behavior, as this will allow them to be updated on the latest market trends. It will also help them identify new market segments. Therefore, the strategy will contribute to the increase in the organization’s market scope in the industry.
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McDonalds should conduct more advertising and promotion for the emerging markets. It can happen through integrated marketing approach to ensure their products are always known by the customers (Hadjimarcou et al., 2015). Beside from television commercials and other printed advertisements, the organization can also use the internet for advertising purposes. New customers want to know what the company can offer them, and they need to persuade them to purchase their products.
McDonald’s is situated in the United States but has a very great expansion plan in other towns abroad. Market development is the primary strategy they should conduct and implement. The company needs to prepare a plan that will mainly target major cities in the world. McDonald’s business is not operational in Japan and other major Asian cities. They, therefore, need to develop more market share in Asia and other regions to increase their sales and ensure their expansion plan is effective.
Their competitors are stronger in the market and regularly introduce new products. Therefore, as a result, the company should spend more money on product development and research. They need to introduce play places for the children to ensure the parents feel comfortable when they are eating in their restaurant as the children are playing (Hadjimarcou et al, 2015). Every customer loves excellent service thus if play place is introduced in major populated cities, customers will always come back.
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Lastly, the organization should conduct management and supervisory training for all concerned employees. They would then be required to train the rest of the employees in the customer service and sales skills. The management needs to introduce incentive schemes for their employees to ensure they are productive in the workplace. Employees are the main resource of an organization and should be treated with respect and high level of integrity. They also should focus their attention on creating a menu for the older generation.
McDonald Restaurant has been very successful in the operation in food service industry. It applies efficient and effective standards to ensure they acquire competitive advantage in the market. It has managed to enter various markets around the world and with their excellent customer service skills, they can offer customer satisfaction to all their clients. They have been successful due to the quality of services and excellent strategies adopted to increase the market share. Since its inception, the firm has undergone various changes hence expanding their business operations in the rest of the world. They have introduced product diversification to help overcome the stiff competition they are facing.