| Assessment Details and Submission Guidelines | |
| Trimester | T2 2020 |
| Unit Code | HI6006 |
| Unit Title | Competitive Strategy |
| Assessment Type | Group Assignment – maximum 4 persons per group Note: Groups must be formed by week 6. Once a group is formed, no changes are allowed. If you fail to form a group, your lecturer may allow you to submit individually. |
| Assessment Title | Report – Case Analysis and Application of Strategy Models |
| Purpose of tthe assessment | Students are required to explain in report format, with reference to a case of your choice, how any one of the following would be applied: Business Strategy, Competitive Dynamics, Corporate Strategy, Acquisitions and Structure, International Strategy. This is strictly required to be your own original work. Be sure to base your answer on the models studied in class and quote your academic sources. |
| Weight | 40%, comprising:Report (week 10) |
| Total Marks | 40 [note: the total assignment is graded out of 40] |
| Word limit | Report not more than 2500 words |
| Submission Guidelines |
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Purpose:
Assignment 2 Specifications
This assignment aims at ensuring that students have familiarised themselves with at least one significant case study (from any of those in the lectures or tutorials or our recommended textbook) and are able to apply the relevant foundational strategy development models that are applicable to the case.
Details
Select any case study and choose from the following aspects of competitive strategy to apply the theories of strategy development and implementation as relevant to the case study you choose:
In this report, the use of sub-headings is essential. Be sure to use paragraphing. Be sure to reference your sources in-text and provide a list of references at the end, all in Harvard style.
Topic: Business Strategy of McDonald’s
Executive summary
McDonald's is one of the world largest food chain as well as the renowned company for its burgers. One of the special items delivered by the company is beef burgers. Although this special item also impacted on the business of McDonald's in 2015. The scandals, replacement of chief officer, and failure in managing the brand reputation just destructed the company. The authorities of the organisation were unable to address issues as they did not face a single one in a single country. In Australia, US, UK, China as well as in India the company faced several hazardous situations that negatively affect the organisation. Concerning the facts in 2015, it can be argued that the authorities of McDonald's failed to recognise the main flaws privileged in the business that is why they were unable to mitigate the challenges. The company should aware of the potential opportunities to grasp them and to develop strategies by the help of which certain jerks could be mitigated. Lack of transparency, customer engagement also devastated the company's reputation. McDonald's authorities should ascertain that which country gives it a positive chance and which is not to manage the Supply chain accordingly. Simultaneous impacts can be prevented by analysing the risks in the case of which the company was failed. However, by utilising the customer demands, suppliers’ power as well as by advancing the technical aspects McDonald's can easily achieve and sustain the business growth.
1.Introduction
Competitive strategy can be defined as the process of developing an action plan by the help of which a company can gain competitive advantages over its rivals in the highly competitive market (Shevchenko et al. 2019, p.106). In regards to this, an organisation needs to aware of its strengths, weakness and future opportunities in order to sustain the business growth as well as to penetrate the market efficiently and effectively. It can be argued that the business growth and development of an organization is completely depending on the aspects of strategic formulation that need to be done by a company properly concerning its macro and microenvironments. McDonald's is a well-known American fast-food company that expands its arms into so many regions around the world. The forthcoming report is entirely based upon the strategic issues faced by McDonald's in 2015 and some relevant theories and frameworks are applied on the faced scenario of McDonald's in order to evaluate the business strategy of the company.
2. Summary of the case study
From the case study, several crucial factors are identified which are discussed in this section of the report briefly and concisely. The first major factor which is recognised is the brand recognition of McDonald's not only in Australia but also around the globe. In the year, 2015 68million of people daily visited the outlets of McDonald's in order to fulfil their needs regarding food. This factor represents that 1% of world population purchased foods from McDonald's that helps the company to generate a lot of revenue (DiChristopher 2015). Although the manor issue faced by McDonald's in 2015 is the declined market demand that impacted on the business growth of McDonald's significantly. Due to this, the company faced a lot of criticism by its stakeholders, professor of Yale management as well as from its customers. Concerning this fact, the organisation had taken a critical step that is the replacement of its chief (Monaghan 2015). Multiple business analysts argued that McDonald's authorities were unable to cope with that situation that hampered the business functioning of the company. In the UK and Australia, the company crucially respond to the situation and offered high-quality products at a cheaper rate to sustain the business. However, it was not able to overcome the situation. The major problem was privileged in China where the company operates 4600 outlets (DiChristopher 2015). 4.8% of sales were dropped in the country due to which the authorities move their focus on India as the potential of chicken and vegetarian options (DiChristopher 2015). Although it can be argued that McDonald's should develop an appropriate business strategy to mitigate the issue that impacted the company adversely which severity hamper the profitability of the organisation.
3. Identified strategic issues of McDonald's
According to the case study of McDonald's it can be argued that the major strategic issue faced by the company is Brand recognition-oriented problem. In regards to this, other issues were also privileged in the business due to which the organisation replaced their CEO to anticipate the challenges tactically.
The strategic issues incorporated within the business of McDonald's are segregated into some categories concerning the business markets of McDonald's.
In the US the main issue faced by the organisation is about the lack of anticipating power with shifts of dining habits of people. The authorities were unable to hold its loyal customers as the rivals capitalised the customer demands by providing natural and healthier foods (Financial Times 2015). Whereas McDonald's faced problem with fries' thickness and over providence of pickles on a sandwich. This factor drastically changed the brand image of McDonald's.
Apart from that, food safety concerns of Chinese people also impacted the brand value of McDonald's. The company suffered from a major scandal when an undercover agent of television revealed that the supplier of McDonald's used expired meat (Financial Times 2015). This scandal affected the brand image due to which 4.8 per cent of sales volume was decreased in China (DiChristopher 2015).
In the case of the Indian market, McDonald's authorities suffered from the legal dispute and Hindu-Muslim religion problem. The main food item offered by the company was the beef burger due to which the market was divided into two religion that impacts on the sales volume of McDonald's. The authorities of McDonald's fought with Vikram Bakshi who was the entrepreneur of Connaught plaza restaurant. The company tried to control the plaza due to which a legal dispute was raised by Mr Bakshi against McDonald's. The High court of India delivered stay order to McDonald's due to which international business chain of McDonald's also disrupted that provoke McDonald's to obey the law and order in managing the joint venture agreement with Mr Bakshi (Financial Times 2015). Mr Bakshi played a game that provided a leading position to the rivals of McDonald's due to which Jubilant Foodworks surpassed McDonald's revenue.
4. Application of relevant theories to anticipate the challenges
It is essential to apply some relevant theories on the business operations by an organisation to recognise the flaws in operation and develop strategies to overcome the issues (Bichler et al. 2016, p. 292). Also, theories in this business market are utmost significant to align the business objectives with the operations conducted by the authorities of a company.
4.1. SWOT analysis
Concerning the strategic issues of McDonald’s, a SWOT analysis is encountered in this section of the report that can help the authorities of McDonald's to formulate some tactics by the help of which the future issues can be addressed and the company could mitigate the issue it faced in 2015. By the help of SWOT analysis, a company can easily seek an in-depth view in its external as well as internal factors that can lead the organisation to solve business operations related issues (Teoli & An 2019).
| Strengths | Weaknesses |
| Position of the brand: McDonald's is the tenth most valuable world in terms of food business around the world (Business Strategy Hub 2019). This incredible brand value helps the company to sustain its growth in this highly competitive market regardless of the fierce competition level in the market. Advancements of technology: Revolutionary initiatives of McDonald's concerning the technology advancements represent the approach of the company in fulfilling the dream of millennials (Business Strategy Hub 2019). Acquisition of technology: The acquisition of Dynamic Yield by the McDonald's authorities is utmost significant that helps the authorities of McDonald's to boost up the customer's experience by providing customisation offer in food items (Business Strategy Hub 2019). Health protocols: McDonald's authorities restrict the use of Human antibiotics in food items that helps the authorities to align the entire business with the health standards regarding food. This approach impacts positively on the business growth of the company due to which in 2018, the company gain $126.04 billion (Business Strategy Hub 2019). | Animal cruelty issue: A huge number of chickens daily slaughtered by the chefs of McDonald's that represents the cruelty of McDonald's (Enochs 2018). The New York time square revealed this issue that hampered the brand image of McDonald's. Limited range of vegetarian food: Due to the deficiency of veg foods in India the company faced Hindu Muslim religion issue in 2015 that impacted the sales volume of the company. Unhealthy food: From the case study it is found that in China the company failed to manage good quality food items due to which the Chinese people stopped their purchasing nature from McDonald's that negatively impacted on the business growth of McDonald's. |
| Threats | Opportunities |
| Competitors threat: One of the potential and major threats that drastically impact on the business of McDonald's is the threats of its rivals. Various food selling companies nowadays penetrated the markets and not only the domestic market is penetrated but also the international markets are also captured by companies like KFC, Burger King and others. Change of customer behaviour: The authorities of McDonald's tactically categorised the food items concerning the regional likelihood of people. However, oftentimes it got jerk from the change in customer behaviour as the approach of customers towards the local food items is more rather than the international items (Sankaraan 2016). | Innovative products: The authorities of McDonald's entirely concerned about the development of innovative products. Due to this, the company offered the customisation offer to its prospective buyers in the outlets. Value meals: For gaining competitive advantage from the market the marketers of McDonald's launched its $1, $3 and $2 menu in 2018 (Business Strategy Hub 2019). This tactic helps the company to attract Value conscious customers by the help of which it increases the sales volume. Rebuilding of the brand image: In the struggling scenario of fast-food companies, an aggressive initiative of McDonald's helps the authorities to rebuild its brand image. In the long run, partnership with uber eats and Door dash can help the company to penetrate the domestic as well as international market. |
Table 1: SWOT analysis of McDonald's
Source: (Developed by the author)
Figure 1: Brand value of McDonald’s
Source: (Lock 2020)
Porter's five forces analysis is utmost crucial and effective to analyse the external business environment of a company (Bruijl 2018). By the help of this analysis, an organisation can easily devise strategies that assist it to capture its brand image and value in the highly competitive market. The below analysis represents the external environment of business in regards to McDonald's.
Figure 2: Porter’s Five Forces model
Source: (Visual Paradigm 2020)
| Potential of competitive rivalry (High) | The fast-food business is one of the most challenging business in the world as customers' demand change day by day and also the potential entry of newcomers disrupts the business environment of a company. Therefore, an organisation needs to focus on the development of business strategies by the help of which the potential of rivalry can be anticipated. Burger King, KFC, Wendy’s are some major competitors of McDonald's that impact on the sales volume of the company (Porter analysis 2017). The aggressive marketing strategies of those organisations prevent McDonald's to attract potential customers towards the company. Henceforth, McDonald's need to focus on its branding and marketing strategies to beat its rivals. |
| The new entrants-oriented threats (Moderate) | The batteries to entry in the market of newcomers are not too difficult but it is quite tough to attract people from a well-known and popular brand which already saturated its business through its brand value and image. In the case of McDonald's, it is no different as new entrants oftentimes feel lack of confidence to beat a giant fast-food company like McDonald's (Porter analysis 2017). Therefore, considering this factor it can be argued that McDonald's need to focus on retaining its loyal consumers by the help of which it can prevent new business operators to push their business in the market. |
| Potential of Suppliers' bargaining power (Low) | The number of suppliers in the USA, UK, China as well as in India is so massive that lowered the potential of suppliers bargaining power. Not the only US but also in the other counties the existence of the same situation help McDonald's a lot to gain a competitive advantage in the market (Slideshare 2016). The major suppliers of McDonald's are the suppliers of raw materials, coke products, builders as well as designers of the restaurant. McDonald's should manage a good relationship with every supplier in order to address the challenges of its rivals. |
| Potential of Buyers' bargaining power (High) | The purchasing nature of customers changes day by day according to which a company need to innovate it's the product line and also manage trustworthy bonding with them in order to retain them. As per the case study, numerous buyers of McDonald's switched their preferences from McDonald's to other companies after the allegation of unhealthy food (Gregory 2018). Therefore, McDonald's' authorities need to focus on this factor and manage healthy standards of food to aware of the customer about its approach towards the hygiene of foods. High availability of the alternative product in the market makes the bargaining power of customers a strong force. |
| The threat of substitute products (High) | As stated, prior in this section the existence of multiple rivals in the food business represents the presence of an alternative product that showcases the force as a strong one. McDonald's should consider this force and develop new products to attract numerous consumers to the company (Pratap 2017). If buyers feel that the authorities of McDonald's unable to fulfil their needs them, they will easily move to another company that negatively impacts on the business growth and profitability of McDonald's. |
Table 2: Porter's Five Forces Analysis of McDonald's
Source: (Developed by the author)
This model is entirely significant and vital to cluster the competition level in a market concerning logistics and supply chain management (Chung 2016). The below analysis is conducted in order to analyse the combativeness of McDonald's in the markets of US, UK, China and India.
The structure and strategy of the company including rivalry
From the above discussion, it can be argued that McDonald's faces a crucial challenge from its existing rivals that impact on the business growth of the company crucially. The domestic, as well as the international competition level, is very high in the food business that provokes McDonald's to implement some measures by the help of which it can seek competitive advantages. It is found from the case study that McDonald's got an adverse effect in the Chinese market due to the scandal of unhealthy products. This led KFC to beat McDonald's by offering good quality hygienic foods. With more than 5000 outlets in China KFC drastically prevent McDonald's to gain a competitive advantage in the Chinese market (Ping 2017). Therefore, it can be said that the organisation should focus on the quality of its products in order to retain its consumer base that can help to gain a competitive advantage.
Figure 3: Porter’s Diamond Model
Source: (Claessens 2016)
Factor conditions
Every country has its capability in terms of Human Resource, natural resources and so on. For seeking competitive advantages McDonald's need to analyse the aspects of the specific country in terms of availability of resources. In India the availability of vegetables is numerous on the other hand the SCM is quite robust in the Chinese market. This two-business environment can help the giant of the food business to penetrate the market and also to gain competitive advantages.
Demand condition
This factor plays a crucial role in the business growth of a company. The existence of sophisticated demands for food items pushes the company to achieve business growth. The food consumption expenditure in Australia was $165 in 2016 and 2017 that represents the increment of 1.8% food demand in the country (Hogan 2018). Apart from that, 55% of food items are imported in the UK that also represents the customer demands for food items (Department for Environment Food & Rural Affairs 2020). Therefore, the authorities of McDonald's need to consider these countries where the food consumption rate is high in order to seek competitive advantages.
Supporting industry
The existence of supporting industry is utmost beneficial to penetrate the market easily. In the case of McDonald's, it impacted negatively in 2015 due to the lack of food quality, and deficiency in SCM aspects. Therefore, the presence of supporting industry can help the company to anticipate the challenges easily and tactically to innovate the business operations, the introduction of new products and so on.
Figure 4: Food habits in US
Source: (Health 2020)
Government
The government support in the US, UK is very beneficial for achieving business growth in the intense market. The investment of federal agencies in the US can help businesses to launch new items to attract global customers (SelectUSA 2020). However, in China, it is entirely different as the Chinese government is not at all supportive in the case of a business that prevents companies to open or launch new products (TMF Group 2019).
Chance
In regards to the above discussion, it can be argued that the local business network and regulatory requirements prevent McDonald's to reach the threshold position of the business in China. However, this case is opposite to the scenario present in US, UK, Australia and India. Overseas firms also face crucial challenges in expanding their business in China. Henceforth, the authorities of McDonald's need to consider this aspect and take some measures by keeping this factor in mind.
5. Conclusion
According to the above discussion, it can be concluded that 2015 is one of the bad financial years crossed by the authorities of McDonald's as so many potential challenges drastically changed the entire business. The organisation also changed its chief but unable to respond with the situation properly. In regards to this, the company could consider some business strategies such as comply with the law of health safety, focus on marketing and introduction of new and innovative services in order to address the issue. However, McDonald's was failed to manage the threats impacted on the business due to which some crucial rivals such as KFC, Burger King like giants surpassed the company. The above discussion is very helpful to recognise the area of flaws by addressing which McDonald's can achieve business growth as well as able to revive its brand reputation.
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