Discussion
Discuss about the Final Recommended Strategy For The Mcdonalds.
Situational analysis is considered as the methods collection that are used by the managers of the company for the purpose of analyzing the internal and external environment of the organization for understanding the customers, abilities, and environment of the business. It is necessary to analyze the internal and external environment of the company on continuous basis. As environment witness number of changes and for dealing with these changes, organization required effective strategies which can be framed after analyzing the environment only. It is important for each and every company to maintain its strategies in effective manner because these strategies can help the company in achieving its future goal.
This Report is the based on the first situational analysis report of the McDonalds, and contains final strategic recommendations and specific steps which are important at business and corporate level for implementing these recommended strategies. This report also includes the strategies through which performance of the company is control and monitored. Lastly, this report is concluded and this conclusion defines the key points of this report.
As stated in the original report, McDonalds opened its 1st restaurant in the Sydney suburb of Yagoona, and presently almost 970 restaurants are operated in the Australia. This restaurant gives employment to almost 100,000 or more people. This report includes the strategic recommendation for different aspects, and all these aspects are stated below:
As stated in the first report, McDonals already holds the position of leaders in the fast food industry, and this can be witnessed through the 24% market share holding by McDonalds in 2016. In the same year, the value of the company share has increased because of the innovation done by the company in its menus and ingredients (McDonalds, 2018). For the purpose of maintaining this market share, company can use following strategy:
Market fortification: this is the strategy in which leaders of the market make efforts to prevent themselves from exploiting them. It is also considered as the multi branding strategy under which numbers of competing brands are introduced by the company for the purpose of tie up the rare space of the distribution and also for restricting some amount competition. For implementing this strategy, McDonalds can conduct below stated steps:
- Company can introduce new variety of drinks such as different types of coffee and other beverages for restricting their competitors such as Starbucks.
- Company can also introduce some other brands such as full dine options and other cuisines such as Chinese, Italian, etc (Educba, 2016).
Market Segmentation: McDonalds can also use this strategy for the purpose of increasing their market share in the business. As there are number of leading companies which only target the mass markets and neglect the small markets and this is the major mistake they made. In other words, leading companies does not consider the small portion of the markets and believe that these markets are too small that they cannot provide enough profits. This believe of the leading companies are completely wrong, because small markets have potential to provide enough profits to the companies (4Imprint, 2015). For implementing this strategy company can conduct following steps:
- Identification of the target market by the company, and in context of McDonalds they can identify the target market in different groups such as lower income, middle income, ad higher income.
- Next step is the identification of the expectations of the target audience in which company identify the expectations of the consumers in the target market.
- For ensuring the effective results, company can create subgroups in their target markets.
- Review the needs of the target audience.
- Market segment naming, and after that implementation of the market strategies (Tice, 2011).
As stated by the first report, McDonalds corporate and financial performance can be analyzed through the sales and revenue generated by the company. As per the analysis, last year double profit is enjoyed by the company that is $364 million and instead of this company enjoys the modest sales growth. Following are the financial and corporate performance strategies which can be used by the company for improving their performance:
Creating value for customers- creating values in the customers loves is considered as most effective and appropriate strategy for ensuring the growth and profitability in the business. In case, business fails to add value in the life’s of the customers then it is not possible for the business to survive in the market (Mayberry, 2014). Following are the steps through which company can create value for its customers:
- First company understand and identify the factors which driven the value for the customers and for this purpose McDonalds can conduct survey among the customers.
- Second step in this context includes the understanding of the value proposition, which means how much value is created by the product or service.
- Third step includes the identification of the customers and segments through which company can create more value in the life of the consumers in context of their competitors.
- Fourth step includes the creation of the win-win price in which company ensures that customers will receive their value and on similar side improves the financial performance of the company.
- Last step includes the focus of investments on the most valuable customers, which means company must allocate the sales team, marketing dollars, and R&D investments in disproportionate manner towards those customers to who company can serve in best manner and those who will provide best value to the customers (Start & Stewart, 2014).
Assess your asset allocation and ensue the style drift: McDonalds must conduct at least one annual analysis of the asset allocation, because changes can be occurred in the asset allocation due to the different reasons. Allocation of assets is considered as important decision and it directly affects the profitability of the company. Therefore, it is necessary for the company to identify the important areas and prioritize them in context of the asset allocation (Avallone, 2016).
Strategic options are considered as the creative alternative action oriented reply to the external circumstances from which organization deals. Strategic options mainly take the advantages of facts and actors, trends, opportunities and threat related to the external environment. it must be noted that, strategic option are identified after assessing the institution and for this assessment it is necessary to consider the basic objectives of the organization (MDF, n.d.). The tool related to strategic options help the McDonalds in identifying and making the initial picture of alternative strategic options or perspectives. Following are the available strategic options for the McDonalds:
Cost leadership: cost of the organization is the most important factor in context of the strategic importance, and this factor is reflected in number of the portfolio or matrix models. This Strategy mainly focuses on reducing the cost of the organization at each and every stage of the value chain. This strategy allowed the firm to earn more return on their investments. For attaining the cost leaderships, it is important for the company to ensure curve-driven reductions in cost at the early stage of the product life cycle. For ensuring the long term working of the cost leadership strategy, organizations must focus on the volume also, which means products introduced by the company must be introduced in the wider market (Lostlagoon, n.d.). In those industries, where scale economies are important, market share will considered as the key objective. In lieu of growth share matrix, Cost leadership is considered as the option for the Stars and Cash cows. In such industries, it is important to utilize the capacity up to its maximum extent. This can be understood through case law, McDonalds must cover the whole country for increasing the customer numbers, and increase in the customer numbers is very much important for the purpose of increasing the utilization and for bringing down the average costs. Cost leadership can only be achieved by single form in the industry, and this is little difficult but the best strategy for the McDonalds. However, fact related to the reduced return at the time when volume of the products offered by the organization reached at the certain level, and then it reduce the difference between the costs between the leaders of the industry. At the time when particular level has been reached organizations cannot get more cost advantage (Tanwar, 2013).
Financial and Corporate Performance
Differentiation strategy: Differentiation strategy is considered as that strategy which relied on the creation of the product or service which have some unique characteristics and that characteristics are not easily replicated by the competitors. It is possible to achieve the perceived differentiation such as with the help of branding. The most common tactic for differentiating the small suppliers from the big supplier is the high quality product. Similarly to the cost driven strategy, this strategy is also applied on all the stages of the value chain and also on the constant basis. However, a quality product can also fail in case company fails to ensure the proper delivery and installation, or if distribution of the product is done only through the stores which are located in the down market areas. For the purpose of creating the value, cost differentiation of the product must be less than the amount which is expected by the premium buyers to pay for the differentiated product. Differentiation is considered as the strategic option for the followers instead of the market leaders. This can be understood through example, if a product is considered as the problem child, the organization could invest to fastening up with the leader. This strategy is considered as the risky strategy than investing for the purpose of differentiating the product for two reasons. First reason deals with the cost advantage enjoyed by the market leader, and this will result in the more difficult things for the followers to meet the position of the leader. Second reason states that differentiation strategy does not result in the direct challenge to the market leader and therefore it decrease the chances of the damaging competitive response, such as cutting prices.
In the present case, McDonalds can opts cost leadership strategy because this is the most effective strategy which can be used by the leaders of the country. Cost leadership is concept which is introduced by the Michael porter, and this concept confirms and manages the competitive advantage. Cost leadership is considered as the lowest cost of the operation in the industry. Cost leadership is the content which deals with the company efficiency, size, scale, etc. This strategy mainly aims to utilize the scale of production of the organization, and this strategy has wider scope and focus on other economies such as good strategy related to the purchasing, producing the highly standardized products, and ensure the use of modern and current technologies. Recently, there are number of companies which chosen this strategic mix for the purpose of achieving the market leadership. These mixed patterns of the Cost leadership simultaneously consider its effects such as best services to the customers and product leadership (Economic Times, n.d.).
Strategic Options
Price leadership is considered as the different concept in comparison of the cost leadership. t is also possible that company may become the lowest cost producer in the industry, but still company is not the cost leader in the industry. It might be possible that company have more than average profitability in context of the price leadership. It must be noted that, cost leaders does not compete on the basis of price and they are very effective in competition, and own the low cost structure and management.
This strategy is the important part of marketing strategy, and this strategy is very effective for increasing the share in market and also attracts the consumers. In this company’s management team constantly make efforts for decreasing the cost I lieu of not only of the one product, but the complete bunch of the products. It does not mean that the goods are produced by the company at the inferior quality at cheap rates as compared to their competitors. If such practice is followed by the company than it definitely result in the failure of the strategy. For the efficient result of this strategy, company has to produce goods which are of acceptable quality and particular to a set of customers at such price which is lower or competitive in nature as compared to other companies which are producing the same product.
Implementation of the final strategy is easy in case of McDonalds, because industry of café and restaurants in Australia operates on the higher margin, and because of this it is easy for the McDonalds to choose cost leadership marketing strategy. McDonalds is the restaurant which is offering the basic food at the low price, and they ensure such structure of labor through which they can recruit and train fresher’s instead of the trained cooks. This chain of restaurant based on few members only because cost saving in different processes allowed the company to offer the food at bargain prices (Gregory, 2017).
There are number of strategies which can be adopted by the McDonalds for the purpose of controlling and monitoring the future performance of the company:
Review of Plans: the most important technique and strategy through which performance of the future can be managed and controlled is the review of plan on continuous basis. In other words, management reviews their plans and makes flexible changes in the plan if required. This process must be done on continuous basis (McQuerrey, n.d.).
Resource availability: for reviewing the process it is necessary for the company to arrange the resources and analyze the market on continuous basis because make changes as per the result of the analyzing.
Conclusion:
After considering the above facts, it is clear that cost leadership is the most effective and efficient strategy for the McDonalds and it is the only strategy through which company can gain more market share. This strategy allowed the firm to earn more return on their investments. For attaining the cost leaderships, it is important for the company to ensure curve-driven reductions in cost at the early stage of the product life cycle. For ensuring the long term working of the cost leadership strategy, organizations must focus on the volume also, which means products introduced by the company must be introduced in the wider market.
References:
Educba, (2016). 4 Amazing Rules to Increase Market Share of a Product (Easy). Retrieved on 9th June 2018 from: https://www.educba.com/how-to-increase-market-share-of-a-product/.
Tice, M. (2011). Five Ways Your Business Can Grab Market Share Today. Retrieved on 9th June 2018 from: https://www.entrepreneur.com/article/220670.
Avallone, M. (2016). 4 Financial Strategies to Consider Before Year End. Retrieved on 9th June 2018 from: https://www.forbes.com/sites/markavallone/2016/10/01/4-financial-strategies-to-consider-before-year-end/#67b3a13348db.
Mayberry, M. (2014). 4 Simple Strategies to Improve Your Business Success Rate. Retrieved on 9th June 2018 from: https://www.entrepreneur.com/article/239706.
Start, K. & Stewart, B. (2018). 5 Steps to Creating More Customer Value. Retrieved on 9th June 2018 from: https://www.inc.com/karl-and-bill/5-steps-to-creating-more-customer-value-.html.
Tanwar, R. (2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management (IOSR-JBM), Vol. 15(1), PP 11-17.
Economic Times. Definition of ‘Cost Leadership’. Retrieved on 9th June 2018 from: https://economictimes.indiatimes.com/definition/cost-leadership.
Gregory, L. (2017). McDonald’s Generic Strategy & Intensive Growth Strategies. Retrieved on 9th June 2018 from: https://panmore.com/mcdonalds-generic-strategy-intensive-growth-strategies.
McQuerrey, L. How to Monitor & Control Your Business Plan. Retrieved on 9th June 2018 from: https://smallbusiness.chron.com/monitor-control-business-plan-41401.html.
McDonalds, (2018), Our Story. Retrieved on 9th June 2018 from: https://mcdonalds.com.au/about-maccas/maccas-story.
4Imprint, (2015). Market Segmentation. Retrieved on 9th June 2018 from: https://info.4imprint.com/wp-content/uploads/1P-06-0315-Market-Segmentation-BP1.pdf.
MDF. Strategic Options. Retrieved on 9th June 2018 from: https://www.sportanddev.org/sites/default/files/downloads/strategic_options.pdf.
Lostlagoon. Generating strategic options. Retrieved on 9th June 2018 from: https://lostlagoon.info/Planning/10.pdf.
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