The assignment is aimed at enhancing your ability to integrate the material learned during this course and to apply the material to a contemporary business issue in the business context. It is important that you clearly demonstrate your understanding of core concepts and analytical tools by explicitly explaining and applying course concepts and tools in your assignment report.
You work as an analyst/consultant for the Hong Kong branch of Infinity and Company, Inc. The company is an international management consultancy that specializes in helping companies to realize their strategic objectives.
You have been given the task of analyzing and evaluating the strategic management process of a new customer (you can use your own company or one that you are familiar with). The company is experiencing strategic �drift�. Strategic drift is the term used when strategies progressively fail to address the strategic position of the organisation – this is frequently followed by transformational change and demise.
Thus the company has not been performing well for the past four years. Unless they make some drastic changes to the way they operate, especially regarding strategic management, they are in danger of going out of business within the next two years.
You will need to analyse the company�s strategic management process, diagnose what they are doing wrong, and make appropriate recommendations that should bring them back to eventual profitability, focus, competitiveness and long-term survival.
You will need to write your assignment in the form of a preliminary report for your manager�s approval before it is presented to the customer. Your report must synthesize your observations, diagnose the problems and arrive at a final set of recommendations. In other words, you must identify the root causes, not the symptoms, of the company�s problems and make realistic recommendations for the company�s unique competitive situation.
Macdonald in The US Market Strategic Management Process
Introduction
In the recent years, it has been recorded that McDonald in the U.S. (United States) market has experienced strategic drift. In 2012, to be specific, the industry experienced an economic decline of 15%. Notably, the company has been performing poorly lately. Crawford, Humprises & Geddy (2015, p.12) argues that there is needed radical changes at the enterprise to vindicate it from collapsing. The company has to remain strategically placed to enable it fight its rival firms. Its strategic management process has to be revived and amended to become effective. Bernhardt, Wilking, Gilbert-Diamond, Emond & Sargent (2015, p.13) give that effective strategic management process allows a firm amalgamate productive ways of operations. In return, effective running of operations guarantees accelerated sales and profits. Therefore, the following discussion indulges in discussing the strategic management process of MacDonald in the U.S. market, its problems, and the appropriate recommendations that need to be installed for the company to rise again.
- Company Background
From 1954, Macdonald’s has been giving the U.S. people a reason to smile due to the quality food products it has been providing to them. McDonald has been able to survive through varied marketing strategies that have been introduced to assist the company to become one of the best-known fast-food brands. In 2008, the management of the company reviewed its trademark design and named it as Ronald MacDonald (Crawford, Humprises & Geddy 2015, p.14). Creativity has been a base for the company’s strategic management process. For instance, the company innovated Big-Mac attracts children because there are toys given after purchasing those products. In other areas, the company establishes its marketing strategies’ on the internet by constantly advertising and promoting their products. McDonald has been thinking of providing coffee in the move to attract British clients. The company has observed uniformity such that all restaurants open during breakfast hours to give a complete or restricted breakfast menu. On revenue perceptive, from 2003 to 2012, the company was making excellent profits. However, the trend has reversed by 2015, and the company is regretfully making losses (Bernhardt, Wilking, Gilbert-Diamond, Emond & Sargent 2015, p.14). The young and the children are most targeted customers by the enterprise. The company has been providing McKids items that comprise of casual wear, video, and toys. Demographic concerns have affected the company to release worldwide in the call to address the increasing levels of obesity among the Americans.
- Vision, Mission, and Strategic Objectives
It is paramount to any organization to have missions, vision, and strategic objectives for it to have an effective strategic management process. The vision of McDonald in the U.S. market is to provide goods that are of high quality as well as giving customer products worth their money (Crawford, Humprises & Geddy 2015, p.17). The mission of the McDonald has been the energy behind accomplishment of its purpose. The purpose, in this case, is fulfilling the vision. Therefore, one of the missions of the MacDonald is to become the best boss to its workers. The other indispensable mission is to give operational superiority. Accomplishing targeted profits is another mission, which is reinforced by the mission of intensifying the brand name through multifaceted technology and systematic innovation (Dabija, Christian & Postelnicu 2015, p.206). On the other hand, its strategic objectives comprise of meeting the social and ethical responsibilities in the U.S. To accomplish its mission, the company targets to provide quality food to their clients. The third strategic objective of the company is to deliver quality food to customers in an enjoyable and friendly environment.
- Industry’s analysis
McDonald has been surviving in the U.S. market besides heavy criticism against it. One of the success factors behind the excellence is that person-in-charge normally executes business-related strategies. This factor has enabled the company to amend those areas that are raised by customers (Dabija, Christian & Postelnicu 2015, p.209). The company has good marketing strategies that comprehensively satisfy both children and adults. One of the success factors that make the company establish a strong competitive advantage is that it possesses a strong brand name, character, and name. The brand equity of the enterprise is tremendous, as it is the number one fast food business operating many restaurants in the U.S. (Hock, Su, Chin, Hooi & Migin 2014, p.1074). Another distinguishable success factor that distinguishes the company from competitors such as Burger King and Wendy is the possession of distinguished training for its managers. Managers at this respective company receive a serious type of training through an installed training program referred by Bernhardt, Wilking, Gilbert-Diamond, Emond & Sargent (2015, p.17) as Hamburger University. Therefore, the company is able to meet its development projects with ease with the assistance of the trained personnel.
- Corporate governance, social, and ethical responsibilities
To maintain its social responsibility, the company has been working with various charities and communities to sustain their reputation. For instance, the company has worked together with other NGOs (non-governmental organizations) in the U.S. to assist the aged people in the home for the elderly. The company has considered paying their employees reasonable remunerations so that they can appear as if they are helping back the society. Nevertheless, its ethical responsibility has been questioned against the amid fast-food protests workers such as in Japan attesting that employees are exploited economically. Important decisions made at MacDonald are made by owners (Talpau 2011, p. 54). However, its corporate governance has been criticized lately for statements that it lacks validity. This is apparent because of the current scenario where a McDonald’s suppliers repacked expired meet. This caused a drop in revenue by 7.3% in the U.S.
- Internal scanning
SWOT analysis is used to conduct an internal analysis of McDonald in the U.S. One of the strengths is that the company has Plan to Win Initiative. This initiative encompasses place, people, products, price, and promotion (Xu 2014, p.1009). The initiative enables the company enhance restaurant familiarity to increase sales and profits. However, the company has weakness in actions correlated with environmental issues. The company typically uses HCFC-22, which is used to make polystyrene that depletes the ozone layer (Gerhardt, Hazen & Lewis 2014). Unhealthy food representation is another weakness affecting the industry such that its customers are correlating the company with the high number of obese people in U.S. The company has an opportunity to the appearance of freebies and discounts. The recent trend is that customers are developing the habit of liking freebies and discounts, even in circumstances when they do not require or use them after (Hock, Su, Chin, Hooi & Migin 2014, p.1076). The major threat that is making the company’s strategic management process fail is the public health disaster. The U.S. population still remembers how fast foods such as Supersized Meal and slim salad selection are causing heart attacks among its people.
IFAS analysis of the McDonald’s
| Strength Has Plan to Win Initiative | Threat The public health disaster |
| Weaknesses Environmental issues eg. Use of HCFC-22Unhealthy food representation | Opportunity The appearance of freebies and discounts |
Table 1- the IFAS analysis of the McDonald’s
| Internal factors | Weight | Rating | Weighted score | Comment |
| strength | ||||
| Brand equity | 0.9 | 5 | 4.5 | Excellent |
| Consistency of food | 0.7 | 4 | 2.8 | Fair |
| Balance sheet position | 0.4 | 2 | 0.8 | Poor |
| Successful items | 0.5 | 3 | 1.5 | Poor |
| weaknesses | ||||
| Weak product development | 0.8 | 5 | 4 | Poor |
| Slowed growth | 0.7 | 3 | 2.1 | Poor |
| Disgruntled franchises | 0.3 | 2 | 0.6 | Poor |
| Totals=16.3 |
Table 2- EFAS scanning of the McDonald’s
- External scanning
Politically, the McDonald’s is subjected to government-related regulations in matters pertaining to obesity. However, through lobbies, the McDonald’s are able to maintain their U.S. profit margins. Economically, the McDonald’s has been greatly affected by the recent recession. The recession caused a drop in consumer demand for services and products from the firm. However, the McDonalds were able to weather the storm by focusing on its extroverted standard menu options. Sociologically, the McDonalds has been able to dodge legal and political issues in the United States. However, they have not been able to deal with the negative perceptive of the public about their products. Notably, the Americans have been complaining that the McDonald’s have been the reason behind the escalating level of obesity cases in the country. The McDonald’s has responded to this challenge by phasing out a super-size alternative for all meals in the country. Their food menu has options for salads, milk, and vegetables. In addition, the McDonald’s has unleashed a number of marketing strategies that aim at telling the new variety of healthy alternatives. Technologically, the McDonald’s has been using technological advancements to increase its market penetration. For instance, the firm as a ground for its customers to post their questions uses ‘Ask McDonald’s YouTube’. However, the use of internet has made the company to receive many criticisms from the public. Therefore, the company has to mitigate between the negative effects of internet marketing. Environmentally, the firm has been heavily criticized due to the releases of HCFC-22 to the environment. Severally, the firm has been condemned to contribute to the global warming. However, the company has developed a CSR policy aimed at decreasing impact of the business. On legal matters, Food and Drug Administration relentlessly supervises the firm. The firm smoothen its operations by adhering to the stringent rules from the body.
| Weight | Rating | Weighted score | Comment | |||||
| Opportunities | ||||||||
| Growing dining-out market | 0.9 | 5 | 4.5 | Excellent | ||||
| Respond to social changes | 0.7 | 4 | 0.8 | Poor | ||||
| Consolidation of retailers | 0.4 | 2 | 2.8 | Fair | ||||
| Continued CSR | 0.5 | 3 | 1.5 | Poor | ||||
| Threats | ||||||||
| Changing demographics | 0.8 | 5 | 3.5 | Poor | ||||
| More health-conscious consumers | 0.7 | 3 | 2.0 | Poor | ||||
| High strength of competition | 0.3 | 2 | 0.5 | Poor | ||||
| Totals=15.6 |
- Distinctive Strategic Competencies
One of the core competencies of McDonald is that it has a strong brand name that makes it have a greater market size in the share in U.S. markets. Another core competence is that the company has effective advertising and promotional strategies (Xu 2014, p.1017). The company has been using internet cards, caps, T-shirts, and concert tickets to attract and maintain its customers. The company has been using cost leadership strategy to increase its profit margins. This enables the company to keep its prices while cutting down its operational and production costs. Differentiation has been another core competence enjoyed by the corporation in making unique products that are hard to imitate (Hock, Su, Chin, Hooi & Migin 2014, p.1079). This includes such product as McDonald ice cream, which is distinct on its own and cannot be found in any other fast food chain. However, these competitive advantages have not been fully executed for maximum production and satisfaction.
- Strategy formulation
The situational analysis will be first used to carry out SWOT analysis and Porter’s Five Forces Analysis of McDonald. Strategy formulation will also encompass reviewing the vision, missions, and strategic objectives. After situational analysis, setting long-term goals comes next. McDonalds uses this step by involving employees in setting the goals (Xu 2014, p.1024). After setting the long-term goals, the remaining step remaining is to choose and appraise suitable strategies to be used by McDonald to meet the set long-term objectives.
- Strategy implementation
Strategy implementation follows strategy formulation whereby tasks are shifted to lower and middle level of management (Tschoegl 2009, p.16). Employees are involved in the implementation because they have a clearer observation of the techniques strategized, and they would consequently implement those methods with ease. Using TQM (Total Quality Management) tool, the McDonald’s will be able to provide quality services to its employees, customers, and suppliers.
- Strategy evaluation and control
This phase follows strategy implementation whereby the progress of the change is evaluated. This process is endless, and it goes until strategic aims are accomplished. At McDonald, strategic objectives are continuous, for instance, provision of quality services to clients (Gerhardt, Hazen & Lewis 2014, p.104). Evaluation, in this case, will seek to see if customers appreciate the services given. It is at this process that settings are controlled to ensure that the strategy follows the designated route. The evaluation will also constitute how the company reconstructs its brand image.
- Overall evaluation of the company
From the internal and external scanning of McDonald, it can be said that internal and external issues affect the strategic management process of McDonald. This comprehensively includes the vision of the company, financial issues, market competition, and technological alterations (Tschoegl 2009, p.18). McDonald has to go alongside technological advancement for it to maintain its competitive advantage. On the matters of the market condition, McDonald’s strategic plan needs to be flexible to meet the altering market conditions. McDonald has established that its strategic management process has to undergo effective formulation, implementation, and control. The shortcomings from the above three steps can be gotten rid off by carrying out a market research of the internal and external factors that affects the firm (Hock, Su, Chin, Hooi & Migin 2014, p.1081). In conclusion, it can be said that McDonald engages in cost leadership and differentiation that enables it to be unique in the market.
- Strategic Recommendations
One of the recommendations is that although McDonald has saturated markets in the U.S., it still needs to have market development in its strategic management process. Market development will enable McDonald develop the capacity to attract and retain many customers than its rivals. Having a strong brand does not necessarily means that competition is killed (Gerhardt, Hazen & Lewis 2014, p.111). Rather, it should exploit its resources of food and drinks in the hotel together with service expertise of employees. Another recommendation is that McDonald should appraise flexibility in its strategic management process. The fact that it trains its managers to effective management levels does not mean that clients are satisfied to the maximum (Tschoegl 2009, p.19). Recently, more customers are lamenting that they have been standing in queues for long hours than required. This is because there has been the shortage of employees to serve them. In some instances, the employees are rude to the customers making them go to nearest competitors. Therefore, McDonald should increase the number of its employees to divide the work pressures (Talpau 2011, p.58). Observably, McDonalds focus on inorganic products that are facing criticisms from many Americans. To reverse this trend, McDonald ought to introduce organic foodstuffs. This will permit the company to preserve its market share globally.
In addition, the McDonald’s should increase the number of restaurants to increase its scope of service. Many restaurants will increase the number of customers making the firm more competitive advantageous. Furthermore, the firm needs to maximize profits and sales at the existing restaurants. This goal can only be accomplished through reinvestment and product refinement. Maximization of profits will also be realized through effective marketing strategies topped up with reduction in operation costs. The suppliers and franchises have been the backbone behind the company. Therefore, the more the supporters make profit, the more the firm will also make profit.
Summary
In conclusion, McDonald’s strategic management process has been affected by internal and external factors. To prevent drift in the strategic management process, McDonald needs to emphasis cost leadership and differentiation. In addition, the company needs to carry our extensive market research to innovate new ideas to those of its rivals. The net result will be that the company will maintain its competitive advantage for maximum profits and sales. However, it can be said that McDonald’s strategic management process has been successful so far because of the loyalty it has established with its customers. To maintain this commitment, there is need for an alteration in its strategy to deal with emerging problems.
Reference list
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