Strategic Planning Process in McDonald’s Company

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Introduction

McDonald’s company is the world’s largest fast-food organization which operates the best food-producing restaurants in the United Kingdom and other parts of the world. The organization operates about 30,000 food outlets in several countries; in the United Kingdom alone, it has close to two hundred outlets. The history of McDonald’s can be traced back to the early 1940s and 1950s. During these years Ray Kroc, an old man aged 52, became one of the distributors to this company. This man is thought to have brought the idea of expanding the company to several other countries apart from concentrating in the United Kingdom alone. The first of its restaurants to diversify was in Des Plaines, Illinois in 1955 and this gave room for the development of several other restaurants across the world.

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McDonald’s utilizes several strategies to achieve a competitive advantage in the market. One of the strategies is setting high marks for itself which have to be met at the end of the day, month or year. This goal, however, is often not met because of the differences in the perception of outsiders about this organization. Through their successful branding campaigns, McDonald’s Ltd has a target of minimizing the cost of their products yet meeting their goals and objectives.

Strategic planning process

Due to the high competition in the market, budget-oriented planning in MacDonald Company or even forecast-based planning has proved to be inadequate for the company to maintain its competitive advantage in the market. The management of the company has therefore resolved to strategic planning to improve their performance in the highly competitive market environment. This method works effectively because it defines some key issues such as the objectives of MacDonald Company and the internal and external situation in the company (Schlosser, 2007). Furthermore, the method, strategic planning, is used to implement and evaluate the progress in the company. It also assists in making the necessary adjustment in the company so that it can enable the company to maintain its positive image and also improve the quality of food they provide to the market segment they served in the market.

Mission and Objectives

A mission statement is very important to any organization because it explains the purpose of the company and the visionary goals that direct the company on how to achieve its goals. The company’s vision helps the management of the company to achieve its financial objectives and strategic objectives. The financial objective of McDonald’s is to increase the number of sales made in a day and also increase the number of customers served per day. On the other hand, target objectives help the company to meet its market position, for example, a market leader, and improve its image (Williams, 2006). This can also embrace some important factors such as positioning of the company in the market and reputation of the company.

The Strategic Planning Process

Environmental Scan

This will comprise various issues affecting the company. Environmental scan entails the analysis of the internal factors affecting the company and the external microenvironment which is commonly known as PEST analysis. Internal analysis is generally carried out to identify the strength and weaknesses of the company while external analysis helps the company’s management to identify its opportunities and strength. This analysis can be done effectively by using SWOT analysis. Other psychologists such as Michael Porter developed a framework that can be used for industry analysis.

SWOT Analysis

A SWOT analysis is an integral component of the strategic planning process of any company and is used to study the strengths, weaknesses, opportunities, and threats of that particular organization. The central theme for the SWOT analysis of McDonald’s Company is to identify the strengths that the company has and how it utilizes these strengths to compete effectively in the market (Hill et al, 2008). By identifying its strengths, the organization will be able to rate the performance of its product in the market.

The following SWOT analysis shows MacDonald’s current position in the marketplace, its core competencies, and possible improvements which can be utilized to advance the strategies of the business.

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Strengths

  • The first strength is that the company has a recognized brand name. Since the company has been in place for a long time, many people have come across their products and therefore they can identify with them.
  • Their global-local presence is also a strength in that it serves many countries and therefore has gained a competitive advantage over many regions.
  • It utilizes a strong advertising and promotional campaign which has been made possible by the recent developments in the use of the internet. This has made sure that the product can be viewed over the internet making it possible for a greater percentage of individuals to be reached at.
  • The company offers a variety of products and varied features of the product, therefore, appealing to a diverse group of people.
  • The Similarity and uniformity of quality across geographical locations make the company experience a greater market share.
  • The company offers convenience and timeless services thus making sure that their customers enjoy them to the fullest.
  • The affiliation with other bodies like heart to heart foundation and Coca-Cola Corporation has also enabled the organization to gain an upper hand with its customers.

Opportunities

  • Further investment in charities such as Ronald McDonald’s house has made it possible for the company to expand its operations and made its brand name well known.
  • Creativity and innovation within the product development and variety of choices in the store has made the company design new and more personalized products.
  • New greener policies and conversation with regard to the disposal of wastes and packaging of products has necessitated the company to influence a greater market.
  • The current trends in technology have proved to be an opportunity since in trying to be in a brace with technology, many have been forced to purchase the new products of this company.

Weaknesses

  • The company has over the years experienced a negative public perception that its products are of low nutritional value.
  • Because of lower disposal income, people have resorted to spending less on fast food.
  • The affiliation of McDonald’s with the American obesity epidemic gave a negative picture for the company.
  • Social changes and lifestyles of people have made the company less flexible.
  • Because of the affiliation of McDonald’s with the American obesity epidemic, the sales have been so low over the past years.

Threats

  • There has been a shift from fast food to healthier operations in the world today thus posing a threat to products of this company.
  • The products that MacDonald’s company offers are highly substitutable products thus a threat in terms of its products not obtaining an upper hand.
  • The highly competitive and mature marketplace today is also a threat to the company.
  • The continued inventions and innovations are a threat to this product since new and appealing features are being introduced, a scenario which may mean substituting this product.

Strategy Formulation

This is normally done after a careful environmental scan. The company should therefore maximize strength and opportunities and develop strategies of handling threats and weaknesses in the company.

Macdonald has attained superior profitability due to the quality of the food they provide to its customers in the market, in addition, the company has implemented various competitive strategies to develop a competitive advantage over the competitors in the market. The main strategies which McDonald’s Company has been using are differentiation strategy and the use of cost. This has left the customers with no other option since they get the best in McDonald Company, others find it so expensive to leave the company for competitors.

Strategy Implementation

The most effective strategies which have been selected are put into practice using programs, budgets, and procedures. The implementation in McDonald’s has been done through the use of resources and motivation of the employees in the organization so that they can offer quality food and other services such as accommodation.

The effectiveness of the plans and strategies which has been adopted depends on the way they have been implemented. For example, McDonald’s is an international company, and therefore, the people implementing the proposed strategies are different from those who are formulating them. Due to this, the implementations must be communicated to obtain enough reason for the implementation of such a program. Communication is very important because it allows everyone who will participate in implementation to be aware of what is to be done. Furthermore, it will enable all the managers especially the line managers to understand what is to be done in the company.

Evaluation & Control

For the implementation process to succeed in every company the management should appoint some people who will be monitoring the whole process to ensure that implementation is done as per the initial plan. MacDonald can ensure the effective implementation of the selected strategies by following the procedures. The first step is defining the parameters to be measured in the company and this should be followed by defining the target values of the implemented parameters. The third step is performing the measurements which have been adopted in the previous stages. Lastly, the actual result should be compared with the planned or expected results so that effective strategies are identified and those strategies which do not work are eliminated. The managers should exercise enough care to ensure that the company is maintaining only the effective strategies in the company.

Marketing Research

The marketing department of McDonald’s carried out researched and obtained various results. Some of the results they obtained include the high demands for certain products in the market. The researchers found out that sweeter breakfast foods attracted many customers in the market. These indicate clearly that sweeter breakfast foods have high demand.

The marketing departments had come up with a brilliant idea of merging the sweet taste of pancakes with the salty taste of sausage or bacon; this helped in attracting all classes of customers in the market increasing the market share of McDonald’s.

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The human resource manager of McDonald’s has also trained the chef to find the perfect mix which has attracted the customers and even create a positive relationship between the company and the customers.

McDonald’s ensures that its suppliers are international to improve its image. For example, Coca-Cola Company is the main supplier for McDonald’s and many other organizations all over the world. The company prefers suppliers with good reputations. The director of McDonald’s has suggested that the company needs to adopt products that take less time to prepare because the objective of the company is to serve customers most quickly.

Industry Environment

Any industry has its own structures of the economy. These structures don’t come as an accident. They have adverse effects on the management of the company as it gives the manager a new way of thinking and a new way of effectively managing the system to come out unscathed in the long run. The five forces that Porter talks about are found in all industries (Cateora, 2009). They are the bargaining power of buyers, bargaining power of suppliers, the threat of new entrants, rivalry among competitors, and threat of substitutes. The profits made by the company are determined by the combination of all these forces.

Bargaining power of suppliers

The business will require inputs to operate effectively. The inputs that any business requires include labor, raw materials, and services. In this case, the suppliers for the McDonald’s have been somehow affecting the management and the marketing strategy of the company. This will determine the power the suppliers have over the industry or company. If the power of bargaining of the supplier is weak, then the company will have a stronger and better opportunity to cut favorable deals that will suit them and thus will be more profitable to the business (Parrott, 2009). Some factors will determine this force which includes the uniqueness of the input that is in question. If the product in question is unique, then it will mean you have better bargaining power over the supplier. If the supplier does not depend on the input as to their main business, then it will mean that the company will stand a chance to lose in the bargaining of the product.

Bargaining power of buyers

This is the power that your buyers and consumers have over you. If they have more say on the profit nature of the business and that they are capable of convincing you to the downside of the bargain, then there is less that one can make out of this arrangement. It has been found out that if the buyers buy a large number of goods from you. If you have a few large buyers, then they have the power to manipulate the buying nature and thus have the ability to affect the way you sell to them. Buyers also can affect the way suppliers do business with you. They can affect rivalry between your suppliers. In so doing, your inputs will be affected so much. If many buyers don’t buy much from you, then you have much control over them and will stand a chance to manipulate and have a great say in the business. Some factors affect the bargaining nature of the buyers which include the size of the buyers and the size of the suppliers.

The threat of new entrants

There are cases where the product that you are supplying motivates others to start producing the same. They may have seen your success and feel that they can also try the same business. In so doing they are threatening to share the market with you. The new entrants will make sure that they share the market with you (Huang, Shin, & Ya, 2009). The existence of the new entrants results in lowered prices. It will mean that the management will have to re-strategize so that they have optimal profits from the new ratio of market share. Some obstacles can deter new entrants from entering the market. These include the legal requirements that are needed to make the new products into the market. These rules could help the companies which already exist to stay in business for long. The reaction of the other companies in business could also affect the way the new entrants will enter the market (Kotler, 2009). The businesses which are already established will have an upper hand in determining and easing the entrance of the new entrants. The established businesses can decide to reduce prices so that the new entrants have nothing much to get out of their new ventures. Some barriers are unique and include the fact that the established businesses could be having well-established brand names and their products are well-differentiated (Armstrong, 2009). This will mean that it will be hard work to try to strategize to have a bite of the share.

Threats of substitutes

Some products are produced from the company that is found in other places. The production of fries from the company can be produced in other places as well. Switching to a new product is possible if the customer has little loyalty to the company. Another issue that can lead to substitutes is if the product that the company is producing does not satisfy the need in question fully. This will force the customers to look for it elsewhere.

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Rivalry among competitors

Rivalry among the competitors in the market usually accrues especially in the quest of the competitors to woo numerous customers. This is very essential since it leads to the quality provision of goods and services. Lack of rivalry amongst the competitors would otherwise lead to the production of low-quality products and the market setting of unrealistic prices of products and services. The battlefield of the rivalry amongst the competitors is mostly skewed to t the price competition amongst the competitors in their bid to be the market leaders in the provision of quality products and services. In some other cases, the rivalry arises as a result of the diverse strategies and relationships embraced by the competitors as a result of different goals, missions and visions. The role of the rivalry amongst the competitors in the industry market strategy is aimed at stepping up the efforts of the industries to produce quality products and services which adequately meet the needs of the customers as well as the establishment of fair prices.

Among the five potter’s forces, the bargaining power of the buyers is the central force since it determines the trend of the organization. The core aim of every organization is to make realistic profits whilst minimizing the expenses and this is determined by the bargaining power of the buyers. The major decisive stakeholders in the battleground notwithstanding other forces such as the threat of the new entrants, rivalry among the competitors, threats of substitutes, and the bargaining owner of suppliers are the existence and the commitment of the buyers to the business organization. It is therefore the responsibility of the business management to put proper mechanisms in place o attract and retain customers. The positive development and the sustenance of a business organization are determined by the buyers.

Pricing strategy

Pricing is a very important marketing tool to McDonald Company, the company has been using this tool to position its products well in the market. The following are the pricing strategies that McDonald’s has planned to adopt so that they use when setting its prices in the market (Aaker, 2009). These strategies are competitive pricing, cost plus mark-up, loss leader; closeout, versioning, bundling, and quantity discounts.

For McDonald’s to retain its competitiveness, it should use competitive pricing in the following means. The management of McDonald’s should observe what the competitors are doing then price their products slightly below that of competitors. This scheme should be used carefully because the strategy is illegal in some countries and is termed as collusion. Furthermore, McDonald’s should use cost-plus pricing when pricing their products, this is done by just reviewing the amount of profit they planned to make and price their products. In other instances, McDonald’s needs to use a close-out strategy especially when there are excess stocks in their stores (Armstrong, 2009). This strategy aims at minimizing losses instead of maximizing profits. The marketing department has proposed that the company should offer trade discounts as a means of attracting heavy users group of customers in the market. This strategy works just like bundling and quantity discounts. The only difference is that bundling is a strategy whereby the company sets a price for a customer who purchases goods in large quantities.

References

Aaker, D 2009, Marketing Research, Wiley, India.

Armstrong, G 2007, ‘Marketing: An Introduction’. Financial Times, Prentice Hall. Vol. 3, 5th edn. P 124-127.

Armstrong, G 2009, Principles of Marketing. Pearson, United Kingdom.

Cateora, P 2009, International marketing. McGraw-Hill, New York.

Hill, G Jones, J Galvin, P & Haidar, I 2008, Strategic Management: An Integrated Approach, John Wiley & Sons, Australia.

Huang, C, Shin, Y, & Ya, H 2009, ‘Using strategy to improve company performnace’, International journal on management. Vol.12, no. 23, pp.51-53.

Kotler, P. 2009. Marketing Management. Prentice Hall 4th edn. P 78-82.

Parrott, C 2009, Kaplan AP Macroeconomics/Microeconomics, Kaplan Publishing, Arkansas.

Schlosser, E 2007, Fast food nation: McDonald’s contribution to quality food production, Cengage, CA.

Williams, C 2006, Human resources and personal management, Cengage Learning, CA.

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