Project objective
Taking businesses to global and successful platform, buying and selling of products and services involves various activities in international marketplace that poses many challenges. Through years, it has been witnessed that many multinational companies make hefty errors while attempting to perform business operations in global environment (Meyer, 2009). The errors can be explained by identifying the deficiency in understanding the concept of standardisation and adaptation in international market as well as issues in business standards while operating in foreign countries (Ritson, 2011). Similarly, McDonalds, a chain of fast food restaurant company has envisaged many challenges including adaptation to local environment, which is also an ongoing barrier for the company and might continue to grow while opening more restaurants worldwide. Among many, the biggest challenge faced by McDonalds was in 2001 when the company hit the lowest point, specifying the new trend of healthy eating among people. Although this affect was majorly seen in its home country i.e. USA, this trend continues to evolve in other nations also (Chib, 2012).
This research report has been prepared after examining issues and challenges faced by McDonalds while operating in global business environment. This report will make suggestions and guide the company to improve its business by undertaking effective and efficient business strategies as mentioned in literature. This forms the objective behind preparing this report in which research as well as present literature will find out ways through which McDonald’s business can get improved in fast food industry.
In regards to objectives behind preparing this report, the scope of this research report also constitutes in finding out ways through which business in McDonalds can get improved. This report will present ideas and suggestions after analysing present literature regarding how companies can get improved through application of improved business strategies and policies.
McDonald’s Corporation is one of the leading brands dealing in chain of restaurants and fast food business serving more than 47 million customers every day through more than 33,000 restaurants spread in 119 countries globally. The company sells food products like fast food, soft drinks, salads, ice-creams, and ready to eat products. McDonalds restaurants are managed and operated on franchise systems or by the corporations itself. The revenues gained from corporations comes from rent, fees collected from franchise owners and royalties. The company itself runs many self-operated restaurants. McDonalds restaurant business was formed in the year 1940 by Dick and Mac McDonald brothers in California. They were successful to introduce the “Speed-Service System” concept in 1948 by establishing principles of contemporary fast food restaurant. The present business dates its founding by opening of a restaurant by Ray Kroc in 1955 at Illinois (Gadsden, 2014). Kroc later purchased McDonald’s brothers’ equities and led the company expand worldwide until it became public listed in stock market in 1965. With expansion, McDonalds became symbol of globalisation and spreading American food and lifestyle. However, the prominence of the company also falls under debates and questions regarding obesity, consumer responsibility and corporate ethics. Nevertheless, with the vision to become leading and best fast food provider internationally as well as locally, McDonalds has been able manage its business operations in providing delicious food that meet consumers expectations (Mujtaba, 2007).
How market segmentation strategy of McDonald’s proved adverse for its business?
Like every multinational company, McDonalds also have to face many challenges and issues. McDonalds primary challenge lies in its menu where Greenburg even tried to minimise this problem by introducing whole new menu in US and UK kitchens to make food fierier and fresher. Nevertheless, the response made by customer for these initiations did not get improved and additionally the store sales reduced due to customers drift away from the stores of the company. McDonalds introduced segmentation of market to mange its diversified customers needs through identification of homogeneous market segment. According to Martin (2011), “The rationale behind marketing segmentation is to allow businesses to focus on their consumers’ behaviours and purchasing patterns”. Market segmentation, if done appropriately, allows companies to understand and improve consumers by tailoring market demands in proper manner. However, in McDonald’s case, the company failed to attempt this strategy effectively due to which the decline in its growth became attributable in shifting public opinion against eating fast food. Another reason for the decline in company’s product sales can be related to the reasons behind improper store management regarding store cleanliness, food quality and enhanced. It can be said that due to these reasons also McDonalds competitors like Subway and Dominoes were able to gain competitive edge and rule fast food industry over McDonalds (Mujtaba, 2007). As mentioned earlier in this report regarding the year 2001 case, McDonalds was recorded poorest performing enterprise dealing in fast food business were approximately 11% of its customers reported company products dissatisfying due to slow service, rude employees and dirty stores. This may be due to the CEO of the company did not considered Franchise rulebook and gave more power to its franchise owners for adopting their local menus (Kim, 2015).
According to Gichuru & Limiri (2017), there are many ways through which marketplace can be effectively segmented. Organisations need to utilise correct strategy that proves best for its service or products and best strategies often arises after using diversified strategies. This study was further supported by Dolnicar, et al. (2005) where the authors state that the perception of cultural difference present in global business environment can be the key for multinational organisations success. As a result, organisations can shape their business needs and operations according to the buying habits and market demands. After analysing McDonalds case, hiring and developing quality staff can be suggested who can prioritise customer value along with bringing harmony within organisation (Gadsden, 2014). Companies who does not determine and misses fundamental changes requires fresh and talented workforce to listen and maintain customers loyally ( Gichuru & Limiri, 2017). McDonalds must also work on gathering strategic information’s regarding its customers while keep on discovering their everchanging demands, thus creating loyalty and satisfied service programs. Along with it, adding value added service can also attract those customers even who are less loyal or restrains themselves from eating fast food. For McDonald’s, customer loyalty can prove a powerful tool that can be enhanced through making appropriate market segmentation strategy that can be followed by the company to build customer relationship. According to Meyer (2009), for fostering customer loyalty, organisation’s leaders should comprehend that satisfying customers only will not differentiate company from other competitors. Therefore, leaders or managers of McDonalds shall commit to deliver quality food along with enhanced customer services that exceeds expectations along with inspiring them to remain engage with its restaurants.
How can crowdsourcing prove beneficial to McDonald’s?
Another issue that needs to be tackled by McDonalds is regarding its menu especially in US market. As mentioned before, the company has faced severe drops many times due to failure in maintaining appropriate menu according to customers demands. This might be due to the reason that McDonalds must have failed in doing appropriate market research before entering new and fresh markets (Tanahashi, 2008). For this, the company needs to make a thorough research of customers they are going to serve along with understanding what are the reasons why old customers remains no longer interested in McDonald’s food and beverage. This issue can be undertaken by doing market survey, interviewing its loyal customers and focussing groups who are displeased with McDonalds products or service. In fact, McDonalds can use customer-oriented strategies to deepen customers involvement and expand its business simultaneously. Crowdsourcing is a technique that can possibly engage customers in effective manner that can even boost businesses (Li, 2016). Whitla (2009) defines crowdsourcing as “‘the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call”. Crowdsourcing helps in gathering and collecting online communities through solicitation of ideas and solutions. It has the potentiality in unlocking capabilities of mases. McDonalds can benefit from such tactics since it will be able to generate new and enhanced products ideas while creating emotional and directive connections with customers as well as franchise partners. It can even regulate its business operations by gaining market success rapidly and economically through verification of market trend, priorities and opportunities. According to Li (2016), when customers gets involved in business processes, it can lead to supplementary favourable response. Therefore, once products are developed due to crowdsourcing, McDonalds can examine them in few of its outlets and develop the same in others afterwards, if the results are positive. This can undoubtably prove advantageous for McDonalds in improving its business standards along with developing research tools that are required to be present in contemporary organisations. In addition to it, as customers will participate in crowdsourcing activities of McDonalds, it can help the company target desired customers which has also been one of the biggest challenges for the company presently (Whitla, 2009).
Another issue recognised in McDonalds is its strategic management policies and procedures that hampers its business operations. The company needs to develop set of new guidelines that can be implemented in the organisation internally. Cleanliness, quality and service are the few factors that had made McDonalds fall under suspicion of unhealthy management within organisation (Loukakou, 2012). The unhappiness among customers as well as franchise partners is an important aspect that needs to be studied as well as improved. Indeed, according to Harris & Chernatony (2001), customers perceptions and expectations are crucial that means if bad perception remains a general trend, then the customers will start shopping somewhere else. The author further adds that in an era where corporate branding is moving ahead of line branding, there is a great necessity to appreciate management approach that can enhance corporate branding. This requires managing contrarily from line branding, focussing more upon organisational environment (Groenendijk, 2003). Even the trend and composition of brand management are changing that requires coordination of business activities ( Carpenter, et al., 2012). One of the consequences realised here is that business marketing not only necessitates planning perspectives addressing external opportunities along with core competencies, but considers integration of internal organisational activities also to ensure consistency in work delivery ( Harris & Chernatony, 2001). In McDonald’s case, the company must be firmer towards its franchise partner stores regarding services, cleanliness and food quality. McDonalds can even introduce guidelines and new regulations along with making regular inspections to monitor its franchise stores. In fact, these must be based on surprise visits so that correct information regarding everyday activity can be collected. If franchise partners do not comply with company rules, a penalty or even shutting it down must be applied that can help McDonalds gain reputation in the market (Vitasek, 2014). This will also bring notion among public that McDonalds under no circumstances will allow bad quality products as it cares for its customers health and priorities.
One of the key issues identified in fast food business is increased competition and McDonalds also faces the same. Burger King is presently the second largest hamburger fast food company globally and also the strongest competitor of McDonalds. Wendy, third largest fasts food chain also gives tough competition to McDonalds along with Hardee’s and Jack in Box. These quick service sandwich companies have been constant pressure for McDonald’s among many other industry forces (Tanahashi, 2008). For example, Wendy implemented 99 cent value meals to gain customers looking for value priced quality meals. Again, Burger King took a self-protective approach by instituting value-added meals in all its stores that helped the company in retaining its loyal customers. Addition to it, the intense competition from rivalry companies in similar industry has become key issue due to entrance of variety of substitutes that are readily available to consumers (Han, 2008). Customers tend to look forward any new product launched both in terms of value as well as quality (Soliman, 2011). Growing concern regarding health consciousness have also impacted sales in McDonalds as majority of consumers have started viewing fast food as unhealthy and fat content food. Although McDonalds changed its strategies many times by introducing healthier meals, its new menu also failed to please its existing customers who expected better from the company (Rathi, 2013). Since McDonalds is already into fast food business with a share of 33% as compared to other two leading companies, McDonalds can remain ahead of the business by implementing technology and innovative improvements in its business operations. Additionally, the company can introduce better or even fresh food to satisfy its customer needs who are more health conscious and against fast food consumption (Brusseau, 2012). To improve standardisation and product quality, McDonalds must revamp its training process for new as well as old employees by introducing training programs along with adaptation of healthy work environment (Team, 2017).
The above report has been prepared after identifying major issues in McDonald’s business and identifying current business trends present in literature. Although this report has presented various ideas and suggestions that can minimise issues within the company, making further analysis of company like internal and external analysis along with other strategies used by the company, can help in formulating business strategies that can improve McDonald’s business more effectively. Along with it, the gap identified can also be seen in areas like identification of outsourcing strategies of McDonalds as the company faces lot of issues in its franchise stores.
Conclusion
The above report has been prepared after identifying major issues in McDonald’s business policies that needs to be improved so that the company remains sustainable in future years. The expansion strategy made by the company without making enhanced market research and improper planning of market segmentation has reduced its sales significantly in-home country as well as in international market. Concerning its menu, McDonalds have tried making lot of changes but have remained unsuccessful. It can be noted here there that McDonalds must pay more attention to market research, as mentioned earlier along with following crowdsourcing techniques. This will help the company in understanding market trend and opportunities that can lead to more favourable customer response. In regards to competition faced by McDonald’s, the company can develop new set of guidelines that can control cleanliness, quality and service in McDonald’s franchises to remain ahead of the game. In conclusion it can be said that McDonalds faces many business-related issues that have impacted the company sales in past few years severely. The strategies and improved business policies have been mentioned in the above report after identifying and evaluating present literature related to contemporary business management. The ideas and suggestions discussed in the report can not only improve McDonald’s business, but also help the company remain ahead of its competitors along with forming a strong base for future growth in sustainable manner.
References
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