Overview of company
Disucss about the Strategic Management System of McDonald.
Strategic Management is the formulations and the implementation of the major goals and the initiatives taken by the company’s top management on the behalf of owners (Hill, Jones, & Schilling, 2014). The aim of the report is to analyze the external factors that can affect the working of the industry in the market of Australia. The analysis includes the market structure, segmentation, distribution channels, competitors and trends for the total market. Moreover, there is need to undertake an internal analysis of the selected company that is McDonald’s Australia (belongs to the Fast Food Restaurants in Australia). The internal analysis of the company includes determination of the core capabilities and competitive advantage of the company.
McDonald’s entered the market in the year 1971 and opened its first restaurant in Sydney. In the Australia market, there are approximately 900 McDonald’s outlets are available. The company provides the employment to approximately 90,000 people in the restaurants and management offices. The priority of the company is to maintain the trust and integrity through this the customers and employees can receive the respect (Macca, 2018).
The market size is the estimation of the potential of the market. On the other hand, market trends are the upward or downward movement of a market for a particular period of time. The fast-food industry in the Australian market is increasing which means the market value share of the McDonald’s will increase. In the terms of GBO, the company remained the leader in the fast food industry with the value of the share of 24% in the year 2016 with this including the company-owned and franchise McDonald’s chain (Euromonitor International, 2017). During the same year, the value share of the company increased because of the innovation throughout its network of restaurants that consist of menus and ingredients.
The company announced that they have approximately 955 Australian restaurants that generate approximately $5 billion in sales in the year despite of the fact that they faced strong competition in the market of Australia due to the presence of the other companies like Burger King, Grill’d, Hungry Jack and many other local fast food companies (Heffernan, 2016). These competitors make such strategies that can create the impact on the working of the company in Australia due to which they need to need to make changes in their strategies (Such as introduction of new product or services, and different combos in the market).
Market Size and Trends
In Australia, the company found the increase in the number of guest counts and the sales in the last 2 years. The company said they are on track in the market of Australia with $5 billion in sales in 2016 (Euromonitor International, 2017). In 2015, the company analyzed that 13% of stores are owned by the company rather than franchised through which the company distributes their products in the market (Heffernan, 2016). The company makes use of the intensive distribution. In this distribution strategy, the company makes use of all the channels to distribute their products in the market. The company distributes their products through outlets and customer can avail the service of taking away and online order. The company might face the issue in the franchised outlets due to the quality of the product. If the customers of the company don’t get satisfied with the quality of product at the franchised store then this will impact the goodwill of the company.
In the year 2016, the diversification in the menu was commonly seen across the fast food operators. Consumers are increasing and they are searching for the different alternatives due to which the operators like McDonald’s need to bring new and innovative products and service. According to the Bureau of Statistics, Spending on the takeaway food increased by 1.5% considering the seasonal adjust, compared it with approx. 1% growth in the spending on the restaurants, cafes, and catering. It has been observed that the McDonald’s is the king of Australia with $15.6 billion-plus fast food market which is a good aspect. Though, other companies said that they want to steal this market from McDonald’s.
Financial performance refers to as the subjective measure which reflects how the company makes use of their assets from its primary mode of the business that contributes in generating the revenue for the company (Baños-Caballero, García-Teruel & Martínez-Solano, 2014). The financial and the corporate performance of the company can be evaluated with the help of the sales and revenue generated by the company in Australia in the past few years. The increase in the sales and revenue of the company results in the effective financial and corporate performance of the company (McDonald’s, 2012).
According to the analysis, this has been found that the fast-food giant McDonald’s doubled its profit last year to $364 million despite this the company declared the modest sales growth. The company oversees more than 800 franchised restaurants across the country and reported that there is 6% rise in the sales revenue to $898m during the 12 months (Urban, 2010). According to the company, this was possible because of the wide range of the premium and healthier menu choices which were introduced by the company considering the need of the customers. The company offers its products to the different segment customers with middle and high income, mainly with to the children (mainly age group of 5-12 years), teenagers (focus on 13-19 years), youth (20-30 years), and adults (30 years +). In addition, the company target bachelors, family, professionals and many other who like to prefer products of the company. Moreover, IBIS world has acknowledged that McDonald’s is the biggest fast-food company in Australia as it holds a 15.2% share of the nation’s $15.6 billion fast food service (Heffernan, 2015).
Financial and Corporate Performance
The major issue that is faced by the company in the market of Australia was economic conditions of the country. The fast-food industry of Australia was in boom due to which the McDonald’s found the Australian market suitable for them. Considering the revenue of the company, McDonald’s Australia invested approximately $169m in new equipment’s, plant, property last year and comparing with previous year there was $120m during the previous year.
The rise in the revenue of the company was a positive sign but the company faced the major issue that was a rise in the salaries of the employees working with McDonald. Salaries paid to approx. 7757 employees increased from $293m to $309m along with this the payment to the key management personnel were $4.8m total (Urban, 2010). Though the company was able to make the high profit along with that, they are also paying high expenditure in the form of expenses of the company. The rise in the salary of the personnel not only creates the impact on the company but also on the fast-food industry of Australia.
SWOT Analysis refers to as the strategic planning technique that helps the company to determine the strength, weakness, opportunities, and threats that are related to the business (Wheelen, et.al, 2017).
(Source: Wheelen, et.al, 2017)
- Highly recognized company: – McDonald’s is the highly recognized company with the wide presence in the market of Australia which is one of the strengths of the company.
- High market share: – In Australia, the company has holding which means largest market share in Australia comparing it with the other companies as the consumer like to consume the products offered by the brand (Bhasin, 2018).
- Locally adapted menus: – The food menu of the company remains updated in the market of Australia and along with this, the company change and update the menu considering the needs of the local customers. This is one of the effective ways through which the company can attract their customers as this is their competency.
- Easy availability: – The consumer of Australia easily finds the McDonald’s outlet across the city which states that the easy and convenient availability of the products and outlet facility in Australia. Moreover, this is the core capability of the company that they are able to manage the availability in Australia through their outlets.
- Unhealthy food menu: – The weakness of the company is that it includes the hamburgers that can be on the list of the top ten junk foods. The most of the people in Australia are health conscious and they pay attention towards their health due to which the people will stop consuming the hamburgers. This factor might create the impact on the sales and revenue of the company in the Australia market.
- Change in demands: – There are different kinds of customers are available in the market with different needs due to which most of the people share their feedback with the company (David, 2011). Though, the company is not able to cope up with the changing demands of customers.
- Changing habits of customers: – The changing habits of the customer in the country brought new opportunities for the company as they can add on the Macdonald’s coffee and tea, Macdonald’s express and many others considering the need of the customers (Oches, 2010). The company can present their capacities in the market with the help of introduction of product.
- Additional offers: – Company has the opportunity to offer additional offers to their customers in the form of combos and discount.
- Fusion menu: McDonald’s has the opportunity to introduce fusion menu for their customers who are interested in different dishes across the world.
- Competition in the market: – The competition in the market of Australia is one of the threats for the company as there are many companies who are offering fast food such as Burger King, Dominos and many others (Barney & Hesterly, 2010). Apart from the international companies, there are some local companies in Australia who are giving competition like Grill’d, Hungry Jacks and many others.
- Changing demands: – The demands of the customers in Australia fluctuate which is one of the threats to the company. If the consumer will shift towards the healthy products then the company’s working will get affected which is a threat.
The competitive advantage is defined as the advantage over the competitors gained by offering the greater value to the customers (Wheelen & Hunger, 2011). The competitive advantage of the company in the market of Australia includes nutrition, affordability, hygiene, innovation, quality, and value-added services. The company ensures that they are providing a hygienic product with nutrition to their customers. The innovation is brought by the company in their products as well as in the menu card that the company offer to its customers. The company ensures that they are offering delight services to their customers in the market through delivering orders on time, making them feel valued for the company, through considering their needs and taking feedbacks.
The analysis reflects that there are many challenges or issues that might be faced by the company in the market Australia after knowing the fact that these issues affect the working of the company. Considering the same, the possible strategies that the company should adopt includes: –
- Differentiation: – Differentiation in the products that the company is offering is essential in the current market after considering the fact that the needs of the customers are changing in the current market (Boehe & Cruz, 2010). Therefore, the company should add some new products to their menu to satisfy the needs of the customers.
- Making a standard for franchised outlets: – Company should make the proper standards for the franchised outlets related to the quality and the services that they offer to the customer because this can create an impact on the image of the company.
The analysis reflects that there is a need for the improvement at some places. Though, the company is performing really well in the market of Australia. It is recommended to the company to add healthy burger in their menu that is made up of brown bread or wheat bread with green veggies and soya Tikki as this is burger can attract the customers who are looking for healthy dishes. Another major issue was a rise in the salary, this is the fact that the company is affected due to this factor but the whole fast food industry is affected because of this. Therefore, it is recommended to the company to provide high salaries or they can hire employees from overseas countries.
Conclusion
In the end, it can be concluded that the company is performing well in the market of Australia which is clear from the analysis that has been conducted. The analysis related to the market size and trends reflect that the company has a vast opportunity in the market of Australia and this is clear from the sales and revenue generated by the company in Australia despite the economic conditions of the country. Moreover, there are opportunities that can help the company in generating more profit and market share in Australia. In the end, some of the possible strategies are recommended to the company.
References
Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research, 67(3), 332-338.
Barney, J. B., & Hesterly, W. S. (2010). Strategic management and competitive advantage: Concepts. Englewood Cliffs, NJ: Prentice hall.
Bhasin, H. (2018) SWOT analysis of McDonalds – McDonalds swot analysis. Retrieved from: https://www.marketing91.com/swot-mcdonalds/
Boehe, D. M., & Cruz, L. B. (2010). Corporate social responsibility, product differentiation strategy and export performance. Journal of Business ethics, 91(2), 325-346.
David, F. R. (2011). Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Euromonitor International. (2017). Fast Food in Australia. Retrieved from: https://www.euromonitor.com/fast-food-in-australia/report
Heffernan, M. (2015). McDonald’s sales reach $4b in Australia. Retrieved from: https://www.smh.com.au/business/companies/mcdonalds-sales-reach-4b-in-australia-20150313-143gru.html
Heffernan, M. (2016). McDonald’s Australian sales to hit $5b. Retrieved from: https://www.smh.com.au/business/companies/mcdonalds-australian-sales-to-hit-5bn-20161023-gs8i13.html
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Canada: Cengage Learning.
Macca. (2018). Macca’s Story. Retrieved from: https://mcdonalds.com.au/about-maccas/maccas-story
McDonald’s. (2012). McDonald’s Corporate Responsibility and Sustainability Report. Retrieved from: https://mcdonalds.com.au/sites/mcdonalds.com.au/files/MCD_CRS_Complete.pdf
Oches, S. (2010). McDonald’s Down Under. Retrieved from: https://www.qsrmagazine.com/denise-lee-yohn-qsrs-marketing-guru/down-under
Urban, R. (2010). Australia a star of McDonald’s empire: fastfood. Retrieved from: https://www.theaustralian.com.au/business/australia-a-star-of-mcdonalds-empire-fastfood/news-story/bfb2a6ad0ce36d944aa793ec1ec771bc?sv=3b6e66752aac245736df9268ae19f190
Wheelen, T. L., & Hunger, J. D. (2011). Concepts in strategic management and business policy. India: Pearson Education.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. India: Pearson.
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