Introduction
Nowadays, there is an increase in globalization around the world, which provides an additional driving force for business development. It is formulated by the fact that information is disseminated quickly and efficiently due to globalization, which makes it possible to spread the data. In addition, transport links also contribute to developing both national and international business. It also applies to McDonald’s, as it has grown from local restaurants into a developed international business that brings significant profit. The purpose of the work is to analyze business-level strategies, corporate-level strategies, the competitive environment of the corporation, and the choice of specific techniques.
Strategies of McDonald’s
McDonald’s is one of the most recognizable chains worldwide, having established itself as a fast and tasty food location. The network prices also affect popularity, being affordable for most social layers of the population. However, for the successful existence and development of any business, it is necessary to make the right decisions related to business-level strategies. It formulates the choice of the appropriate vectors of development, depending on the surrounding factors. One of the business-level strategies of McDonald’s is Cost Leadership, which implies a competitive advantage by reducing expenditures for commodities, services, and production processes. It may be supported by a company’s index of a quarterly cash dividend of $1,38 per share for 2021 (U.S. Securities and Exchange Commission (SEC), 2022). Thereby, despite the external factors such as lockdown due to the COVID-19 pandemic, the company still generated profit.
Thus, it formulates the chosen business-level strategy, namely Cost Leadership. When restaurants and other public places began to close, there was no way to make a profit. However, McDonald’s has reformatted deliveries and reduced operating costs to recover the ratio of profits and costs. It constitutes the ability to adapt to external factors and maintain financial balance. Further, the company uses efficient but low-cost production technologies, which argues for the simplicity of the process and the increase in profits. However, it is worth mentioning that it does not affect the quality of products, which is critical for the organization’s corporate reputation.
The next business-level strategy of McDonald’s corporation is differentiation. It focuses on developing unique products and promoting them to generate greater profits. An example is the exceptional items on the McDonald’s menu and the variety of ingredients. Customers have the opportunity to order food with both meat and fish, which covers a wide range of customer desires. Moreover, there is a popular kids’ menu, which contains not only food but also toys and various entertainment items. It formulates the attraction of a new customer base, such as families, as the children enjoy the food and spend time in the establishment.
In my opinion, these two strategies outlined above are critical for the company’s long-term development. It is especially urgent for fast foods, namely McDonald’s Corporation, since this area is characterized by certain features. The Cost Leadership strategy formulates a competitive advantage in financial terms and the ability to form financial cushions for unforeseen circumstances. Moreover, it shows how the company successfully adapts to the environmental factors that affect its performance. Differentiation strategy is important for the long-term development of McDonald’s as it contributes to the strengthening of the existing customer base. It is justified by the satisfaction of a large number of requests from customers and the possibility of accumulating new consumers due to meeting their wishes in food aspect.
In addition to business-level strategies, it is also essential for a company to define a corporate-level strategy. It includes the corporate vectors of the organization’s development, which are essential in the management field. The main corporate strategy of McDonald’s is the expansion strategy, which has an impact on the profit of the organization. It may be noticed when analyzing the operating income growth index, which is 41 % for the entire 2021 year (McDonald’s Reports Fourth Quarter, 2022). Moreover, it is well known that the company was born in the form of several local restaurants. Today, approximately 40 thousand restaurants operate under the McDonald’s trademark, and it is one of the most popular in the world.
Even though his strategy is effective for the development of the corporation, it is challenging to implement. For effective expansion, one should maintain a balance between costs and benefits. Moreover, it is necessary to identify all the risks associated with expansion and develop strategies to mitigate them. If there are inaccuracies in financial calculations, it can lead to significant losses. In addition, one should analyze the potential of the company and the location for the implementation of a new object. It includes geographic, demographic, political, religious, and economic features. Thus, for a successful expansion, all of the above factors must be taken into account. It is also worth noting that in the case of McDonald’s corporation, one talks about thousands of restaurants, which is difficult to analyze and track.
In order to maintain the expansion strategy successfully and operate a significant number of spots, one needs to apply existing methods of managing. One of such options is a corporate franchising strategy, which was effectively applied by McDonald’s corporation. It helps to maintain the necessary balance between the number of facilities and effective management and control. Due to this, one has the opportunity to use a product’s brand, raw materials, and preparation technology to conduct business and pay a percentage of the profits. Thus, most McDonald’s establishments around the world operate on the basis of franchising.
Franchising and expansion strategies are critical corporate strategies for the long-term development of McDonald’s Corporation. It is formulated by the characteristics of a large fast-food company, which has certain privileges and challenges. As already indicated, the main difficulty is controlling, without which a successful business is impossible. Thus, franchising is a suitable solution to this issue, formulating a balance between the number of objects and the possibility of control. In addition, business stagnation can become a possible challenge, which is also urgent for fast foods. In this regard, the expansion strategy will allow one to occupy new geographic and demographic niches, which contributes to long-term preservation and development.
Further, for effective activation and development of business, it is necessary to take into account the competitive environment. It includes an analysis of the main competitors and their strategies at the business and corporate levels. It is essential to maintain a position in a niche and to avoid stagnation and displacement from the market. Analyzing competitors can also be helpful in case of unexpected circumstances and difficulties. Based on the effective strategies of competitors, one has the opportunity to develop one’s own methodologies and improve them. To do this, it is necessary to analyze not only the strategies used by competitors but also their performance indicators.
Among the main competitors of McDonald’s are Burger King, KFC, Starbucks, Subway, and Yum Brands. These companies have a similar operating principle and competitive advantages. Moreover, they are among the most recognizable in the world, which formulates competitiveness in terms of informing. In addition, companies use similar strategies of management and development. For example, among the main methods of Burger King are Differentiation and Cost Leadership, similarly to McDonald’s. However, there are some differences in the principle of using these models. Thus, Burger King emphasizes geographic differentiation in order to increase profits and avoid insufficient client flow. It is stated by the fact that Burger King does not have open restaurants in some territories where McDonald’s does.
Despite several efficient practices of the above companies, in my opinion, McDonald’s will be successful in the long run. It is due to greater recognition of the chain and the scale of the corporation. Moreover, some of the company’s indicators available in open sources show that, despite various external factors, there is a positive trend. Thereby, in the 2021 fiscal year, the company reported revenues of $ 23 222.9 million, which formulated a 20.9 % increase over the fiscal year 2020 (Market Line, 2022). It may be connected with the peculiarity of the application of geographic strategies, namely the greater coverage of the territory. Thus, the company has the opportunity to cover a more significant number of customer groups, which contributes to more income.
There are two types of the market with their own characteristics, the fast cycle market and the slow cycle market. The main difference is the degree of effectiveness of the competitive privileges in these markets. In a slow cycle market, the competitive advantage of the companies is immune from the influence of imitation and will be valid for a long time. It is due to slow intra-market processes and the lack of dynamics in the main market indicators. Imitation is the process by which a company copies the strategic and corporate features of another company in order to achieve one’s goals. In a fast cycle market, the competitive advantage of companies falls under the influence of imitation, which makes them unsustainable. Such market conditions are volatile, unpredictable, and complex, making it difficult for an organization to grow or maintain a leading position.
Thus, the company that was chosen to be more successful in the long run, namely McDonald’s, has fewer chances of success in the fast cycle market. As already indicated, the major benefits are not stable on a fast cycle. Thus, they do not allow the company to maintain a leading position for a long time and make it susceptible to the impact of imitation. That is, another company can copy some strategic decisions and take a leading position. These can be formulated by demographic or financial strategies, which will give a certain advantage to the competitor due to the dynamic principles of the fast cycle operation.
Conclusion
To conclude, McDonald’s is a prime example of successfully managing and developing a business. The main business-level strategy is cost leadership, which allows the organization to earn more by reducing maintenance costs. In addition, differentiation allows one to cover a large number of customer groups and their wishes. The primary corporate strategy of McDonald’s is expansion, due to which there are tens of thousands of objects around the world. Finally, the organization successfully controls the entire spectrum of business through a franchising strategy.
References
Market Line. (2022). Mcdonald’s corp SWOT analysis. Strayer University. Web.
McDonald’s reports fourth quarter. (2022). Web.
U.S. Securities and Exchange Commission (SEC). (2022).