For many decades McDonald’s has been one of the most successful fast-food restaurant chains in the world. The chain was established in 1940, and, according to McDonald’s 2011 Annual Report, by 2011 it took the first position in the Dow stock with a shareholder return of 34.7 percent (1).
However, in 2012 the situation rapidly changed, as McDonald’s took only the thirtieth place in the stock. It was connected with the change of the business strategy initiated by the new CEO, Don Thompson. Thompson decided to change the ambience of the restaurants, making it more café-like. Besides, he was aiming to optimize the menu and to make the food more accessible to customers. It negatively affected the revenues and the popularity of the chain. Moreover, competition in the segments of coffee, sandwiches, and fast food has also made it difficult for the chain to gain high positions again. Thus, new strategies and tough competence have become the factors that affected the success of McDonald’s.
How McDonald’s creates value for its customers
The key principles developed by McDonald’s were value, cleanliness, service, and quality. The chain has developed special menu positions, such as Big Mac, that could be bought in any restaurant. Thus, the customers knew that what they could buy in any McDonald’s restaurant. As the expansion was growing, the chain has developed kosher menu for Israel, halal meals for Arab countries, and lamb patties for India, where it is forbidden to eat beef. In 2004, Jim Skinner developed a concept of 5 P’s: Place, Product, Price, Promotion, and People (Arthaud-Day and Rothaermel). A healthier food was introduced in the menu, and the restaurants started to look in a more modern way.
McDonald’s target audience
A typical customer of McDonalds is expected to get cheap and trendy food as fast as possible. According to McDonald’s website, the restaurant attempts to create a friendly environment for everyone, from children to workers. The wide range of menu positions proves it, as the chain has products aimed at different categories of people. Children enjoy Happy Meals, working adults like ready-to-go breakfasts, and so on.
The influence of organizational size on the industry
One of the McDonald’s key features is its rapid expansion both in domestic and foreign markets. By 1980, there were over 7500 stores in the world. According to statista.com, in 2020 the number of McDonald’s restaurants was 39,198. This growth has both positive and negative effects on the chain success. On the one hand, such expansion made the brand world-wide known, and the customers cherish not just the food they can buy there, but the brand itself. For example, for children of multiple countries it is interesting to buy famous McDonalds’ burgers. On the other hand, such strategy can lead to the situation when the market is oversaturated. The revenues of particular restaurants can decrease sue to this saturation, which can lead to the shutdowns.
The industry 5-forces for fast food restaurants
The Porter’s five forces of competence are as follows: threat of substitute products, threat of new market entrants, existing competitors. Besides, there are also such factors as bargaining suppliers’ and buyers’ power (Isabelle 28). As for existing industry rivalry, there are many successful competitors in the fast-food market. They are, for example, Wendy’s, Burger King, Subway, KFC. In the segment of coffee-making, Starbucks is a major competitor. As for substitute products, the threat is not really significant in the fast-food market, as customers prefer to go to the restaurants of the McDonalds franchise and buy the food there.
Thus, some companies can try to copy the brand, but it would be not really successful due to the customers’ brand awareness. As for the threat of new entrants, in the field of fast-food market there could occur some companies that would provide some other menu options, for example, a healthier food. However, as for the burger segment, it seems that McDonald’s and Burger King’s positions are quite stable. Quick operations, low costs, and popularity of the brand make McDonald’s one of the most successful fast-food chains.
Concerning the supplier power, McDonalds has involved its technological knowhows and vast capitals into its own internal supply network, including the farms. As for the buyer power, it depends on the customer concentration and size of the chain. Growing income of the customers increases the demands and expectations from the product. McDonalds meets the customer’s demands by redesigning the restaurants, increasing the nutritional quality of the menu positions and introducing new products.
Recommendations
Based on the advantages of McDonalds, such as affordability, quick service, and popular brand, some recommendations can be offered. First of all, McDonald’s chain could involve some new channels of information that would involve the young generation to the restaurants.
As long as the new generation is focused on their health and mindful consumption, McDonald’s could make some steps to including more healthy products and more products for vegans. Maybe it could be a totally new type of restaurants, additional to the old one. The old ones could serve the same menu, while the new ones could serve healthy food. Besides, the chain could concentrate more on breakfasts, as many people in big cities do not have time to have breakfast at home. Perhaps, McDonald’s could offer some options for such customers. As for the advantage points, the chain should strive to save them.
Works Cited
Isabelle, Diane, et al. “Is Porter’s Five Forces Framework Still Relevant? A Study of the Capital/Labour Intensity Continuum via Mining and IT Industries.” Technology Innovation Management Review, vol. 10, no. 6, 2020, pp. 28–41.
Arthaud-Day, Marne, Rothaermel, F., Collins, J. McDonald’s (in 2013): How to Win Again? McGraw Hill Education, 2014.
McDonald’s Corporation. 2011 Annual Report. 2012. Web.