McDonald’s Corp- Ray Kroc initiated McDonald’s Corporation in 1955 when he purchased a small hamburger chain from Richard McDonald and Maurice McDonald. The corporation has its headquarters in Oak Brook, Illinois, United States. Currently, the corporation owns the largest chain of fast food restaurants in the world, which serves more than 64 million customers per day around the globe. McDonald’s Corporation has carefully executed its Plan to win strategy. This strategy has allowed McDonald’s Corporation to expand in every region of the globe, increase its comparable sales, and efficiently manage its operational expenses. These fruits of its labor are quite evident in its annual financial statements.
Yum! Brands, Inc. – The Company is made up of other small businesses including Pizza Hut, KFC, Long Silver’s American Food Restaurants, and Taco Bell. The combination of these businesses has made it come out strongly and has dominated the China market where McDonalds has been enjoying the monopoly. Its main working strategy is its splitting of the resources into several brands, which has helped it in the generation of high revenues contrary to McDonalds, which run and operate all its business under the same flag. KFC Corporation is the world’s most popular chicken restaurant chain, specializing in variedly flavored chicken varieties. KFC operates in 109 countries around the world and its products have a good brand image.
McDonald’s Corp- The current business structure of McDonald’s Corporation allows the firm to operate its restaurants in one of three ways; by the corporation, a franchisee, or an affiliate. The corporation generates revenues from its own restaurants in terms of sales, royalties, fees, and rent. McDonald’s operations have been aligned Plan to Win. This strategy encompasses five Ps; people, products, place, price and promotion, in an attempt to ensure that the customers’ experience at McDonald’s restaurants remain exceptional and unparallel. By using these five Ps, McDonald’s Corporation has created a strong competitive advantage for itself; the company’s success is attributed to this competitive advantage. McDonald’s Corporation also remains committed to improving its operations constantly, which will eventually enhance customers’ experience.
Yum! Brands, Inc. – Since then KFC has been operating as a brand section under Yum! Brands. The main products of Yum! Brands, Inc include wraps, chicken pieces, sandwiches, and salads and its focus is fried chicken. It also offers roasted and grilled chicken products, desserts, and side dishes.
Conclusion
In the case of Yum! Brands, Inc, the P/E is high indicating that the market has faith in this stock growing and performing much better in the future. Investors are thus relying on this stock for capital gains. The McDonald Corporation has a lower P/E ratio as compared to Yum! Brands, Inc, but it is high enough and indicate that investors expect that the stock will go on performing well. It may also indicate that the stock is approaching maturity and will soon stabilize and so its growth rate has slowed down and in future this is a stock that will be relied on for dividends rather that capital gains. Other factors a part from P/E, McDonald’s performs well than Yum! Brands, Inc. This means that McDonald is a good investment as it has good returns for assets, higher market share, good quarterly results, and stable stock history.
The problem of our case study is the decreasing business activities at McDonalds. The fast food joint that was growing at a higher rate has become a last resort for most customers. Several branches have closed down as the rate of the new ones being established reduces in percentage. The franchisees that would wait in queues to be allowed to operate under the name have reduced substantially as others sell back their businesses to the company (Smith, 282). The company is now receiving very low attention from consumers who would rather go elsewhere for their burgers. The changing eating habits of the people have also affected this organization as it was mainly dealing in a particular line of products. It has basically remained with no alternative but to probably change its line of activity in order to suit the needs of their customers.
Alternative
The best thing that is remaining for the company is to change its line of production. Even though there are many other things that are being related to their poor performance, it has to be admitted that people are currently not into fast foods as they were in the late 80’s and early 90’s (Case 3-3, 283). The company will hence think of modifying the restaurant and make it into a hotel. By doing this they will be guaranteed that they will start off with their loyal customers who will bring in others as they realize that their services are of good quality. The company will probably have a place where those who want the first foods can go to. It should however venture mainly into the hotel industry to at least maintain the status of its name.
Alternatives – Pro and Con
By establishing a hotel industry, the company will have many options that they can rely on and will hence be able to stay in the market for a longer period. This will however change the image of the company completely as it is mainly known for fast foods. It will look strange for a customer to actually go to a McDonalds’s to obtain hotel services contrary to what they are used to. The industry may also not pick up at a faster rate as the restaurant did, considering the costs that are involved in establishing and running the same. As a restaurant, it was a place where they youth could meet in large numbers to have fun, it being transformed into a hotel will not be able to attract this caliber of customers. A hotel industry will however be accommodative enough to handle many other activity that the company may desire.
Recommendation
The company is in urgent need of a solution considering the state of affairs. The fast food idea that made the company to soar higher is no longer working as the number of customers continues to reduce day in day out. If the company mainly wants to retain the name, then it will have to consider an alternative in the food industry. It should provide more than just a place to sit eat and have fun. More services as those of a hotel will be beneficial to the company. It should not completely wipe out the fast food idea but test it for another period of time. The most urgent thing to do know is to ensure that its name is not completely thrown to the drench. It can have an alternative that will keeps its customers alert for the changes that may be made.
Works cited
Case 3-3 McDonalds Corp Smith, Brian. Making marketing happen: how great companies make strategic marketing planning work for them, Publisher Butterworth-Heinemann, 2005.
McDonald’s started its operations in China in 1990, however, they failed to gain first mover’s advantage in the country as the Yum! had already entered the Chinese market with fast food chains like Pizza Hut and KFC. The problem that McDonald’s faced in the Chinese market is the Chinese food preference and habits and the already established market of KFC and Pizza Hut. The sale of the company’s competitors is much higher than that of McDonald’s in China. The reason for this is due to the inward expansion of KFC into second and third tier cities while McDonald’s has concentrated in first-tier cities only. The reason for refraining from expanding beyond first tier cities is increasing infrastructure and transportation cost. So the main strategy that McDonald’s has adopted in China is to concentrate in first-tier cities and make more drive-through outlets and introduce localized menus for the Chinese market based on three levels.
The strategy that McDonald’s has employed i.e. expand through drive-through restaurants and serve localized menu is the right strategy to begin with. The car sale in China is booming and evidently so is car ownership in the country (Oliver). China experienced a new vehicle sale of 7.2 million from January to September of 2009, a rise of 42% since 2008 (Oliver). This shows that with more car ownership the demand for drive through restaurants will increase, as people would prefer to pick up their food on way for convenience. Therefore, the strategy to increase drive-through restaurants is appropriate for the changing Chinese society.
Localized menu is served in most of the Western style food chains in America. For instance, KFC has a special menu like Dragon Twister, etc. The reason to employ localized menu is to cater to the taste and preference of Chinese customers. The set menu of the western fast food chains is attuned with the western taste. However, there exists a huge gap in the customer preference, demographics and socio-economic-cultural difference between Chinese and American or European customers. The corporate culture of the western fast food chains must be altered to a great extent in order to gain acceptance among Chinese customers (China Today). Further, there exists a great difference in taste preference of people in China, as chicken is popular food than beef and therefore KFC a preferred choice than beef serving McDonald’s. Thus, cultural differences also play down the performance of McDonald’s in China.
The recommendations that can be given to McDonald’s in case of china are mainly related to stores and strategy. First, McDonald’s must try to expand and at a faster rate than KFC in order to gain a greater share of the Chinese market and enjoy the first mover’s advantage. KFC has started expanding aggressively in second and third tier cities, which will provide a greater access to the Chinese market. So concentrating only in first tier cities will make McDonald loose on to a substantive part of the Chinese revenue. Thus, McDonald’s must try to establish drive-through restaurants not only in first tier cities but also in second tier cities. This can be done by giving out more franchise in second tier cities. Second, localization of the menu offered in McDonald’s is important. Chinese cuisine in rich with variety and Chinese preference for food does not match that of the western taste. Therefore, it is important to cater tot he taste and preference of the Chinese customers and provide more of chicken and Chinese versions of the food offerings. A third option might be to attract the younger generation through arrays of modern marketing channels and change their taste preference. For instance, beef could be promoted through social networks of clubs. Research shows that the Chinese beef consumption is increasing in the middle class population than chicken or pork (Ray). Chinese beef consumption has increased seven times in 2008 than what it was in 19909 in China (Ray). Therefore, beef can be promoted to the bussing middle class in China. Fourth, price must also be considered as Chinese population is price sensitive to a large extent and there exists a different categories of people with different price sensitiveness. Thus the menu must be arranges in order to appeal to these customers.
References
China Today. “KFC and McDonald’s — a model of blended culture.” 2004. China Daily. Web.
Oliver, Chris. “China’s booming car sales, falling gas usage stump analysts.” 2009. MarketWatch. Web.
Ray, Daryll E. “USDA top officials’ comments versus USDA data.” 2008. The Praire Star. Web.
McDonald’s corporation is undoubtedly the largest chain of hamburger fast food restaurants in the world. The restaurant serves more than 58 million customers every day (McDonalds, 2010). The operation of McDonalds is like a typical large chain that operates as a corporation, a franchise, or at times as an affiliate. It draws its revenues from various sources such as franchise fees, rent from its various properties across the world and mostly sales from its company operated restaurants. In the last three years, significant growth has been evident with the company registering a 27% growth (McDonalds, 2010).
Main Discussion
The main products of McDonalds are: hamburgers, chicken products, cheeseburgers, french-fries, typical American breakfast snacks like eggs, a variety of soft drinks, desserts, and shakes. With the changing trends of health realization, more consumers are focusing on healthy diets and the company has come up with a menu that accommodates alternatives which targets customers interested in healthy products like salads, fruits and wraps (McDonalds, 2010). This is basically what McDonald’s deals with and this is how it operates in its various outlets and franchises. Being such a big company, it attracts a lot of investors and it is important to periodically determine its financial worth. Analysis in this study will be based using four methods of determining McDonalds worth namely: net worth method, future earnings, price earnings ratio, and lastly the outstanding shares method.
In the year ending 2008, the net worth or the stockholders’ equity was $31,207,900. This includes the addition of common stock, retained earnings, and intangibles like goodwill (David, 2008). This means that the shareholders were confident enough to hold onto their stock and the revenues that were collected and retained was relatively high, amounting to $28,953,900. This is a large retained amount for any company since all expenses have to be deducted including dividends to shareholders so that profits can be ploughed back as retained earnings.
It is also a valuable company if the expected future earnings are considered. The future earnings of McDonalds were promising going by the estimated figures of $21,566,000 (David, 2008). This figure was calculated using the net income method with a staggering $4,313,200 being the net income times five. The value of McDonalds is considered great based on current earnings and expected earnings.
Using the price earnings ratio, the McDonald is worth precisely $45,445,479 (David, 2008). This was a result of calculating the share price of McDonald’s stock divided by the earnings per share times the average net income divided into three years. The share price is $55 quite a stable figure for a chain of Restaurants Company. This figure is affordable and attractive to any investor, and also at the same time a good price for a shareholder who wants to offload the share depending on the buying price at the time of purchase. It is also a stable share because it earns $0.81 per share a relatively fair earning per share.
The value of McDonalds can also be analyzed using the outstanding shares method. By using this method, McDonald is worth $61,693,000 (David, 2008). This involves multiplying the 1,126,600 shares that McDonalds has with the share price of $55. This is the easiest way of findings McDonalds worth and any investor willing to deal with McDonalds in any form of business or to purchase stock will consider the company’s worth using this method.
Conclusion
According to the study, McDonalds is worth an estimated figure of between $21,566,000 and $61,693,000 depending on the method used to calculate its worth. This makes it the biggest and most profitable chain of hamburger fast food restaurants in the world. Over the years it has steadily claimed a deserved place among the biggest companies in the world. With such a large income it has been able to attract a large pool of investors. What is more amazing about McDonalds is that despite being an extremely valuable company, it currently has a share price that is affordable to all types of investors i.e. it’s not too expensive or cheap. It is advisable for any rational investor to invest in McDonalds because if it continues with the steady trend of raking in similar amounts of income, and expanding at the same rate, it will soon be a global giant in the same rank as Coca Cola Company.
References
David, F. (2008). Strategic Management: Concepts and Cases. North Carolina: Pearson Education.
Human resource is the most valuable asset of an institution. This is merely because in absence of the work force, implies no production in the industries, or offering of services. This in turn results that the institutions would have to fall. Consequently, it is of great importance to manage human resource effectively. Walker points out that emergent strategies blend the benefits of the formal planning approach with the realisation of behavioural realities in organizations, which encourages such things as strategic learning and grass-roots management (Walker, 1992, p. 72).Human resource management is a function mostly undertaken by the human resource department in a company. Human resource management is a task facet within an institution that mostly involves itself with hiring, compensations and salaries, training, motivation of workers, performances appraisals, directing and managing people employed within an institution. In today’s dynamic environments HRM calls for one to be smart enough especially when it comes to recruitment and attracting the best candidates to your organisation. This is the trickiest area of human resource management, as with liberalism of labour, it is very uncertain on the part of the institutions to retain their best quality.
MacDonald Case Study Summary
MacDonald is faced with crisis of attracting top-flight candidates in the market in their company through their entry positions known as McJobs. They are planning to hire more workforce of about 50,000 store level employees on April 19. However, they have the problem of negative perception of their McJob and competition from Starbucks, which of late has been the one stop employee for most the workers in spite of the hard employment times. Over the years, the job has lost its former glory among people and its good reputation built over the years is slowly declining both within the company, but the adverse effects are being witnessed in the outside public.
These effects have also been brought about by some publications that associated MacJobs negatively, implying they are not well remunerated and are of lower status. McDonalds were both displeased with these publications in the year 2003 and tried to stop them, but the publishers went ahead to tarnish the perception people would later half to be employees with McDonalds. This has gone to the extent that McDonald addresses these issues and achieves their goal of employing workforce for the summer period when they will be having more work to be done. They have embarked on the redefinition of the McJob from a low paying job that requires little skills and provides little opportunity for advancement to a job that is stimulating, rewarding and offers skills this they hope will recast back confidence in the entry-level jobs of their company.
Analysis
In the effort of the company to redefine and reclaim its Macjob glory has endowed itself with several approaches. The MacDonald has realised that for effective change it has to start from within, as evidenced from the management team going out of their normal day-to-day tasks to pass a positive McJobs message. They achieve this through career advancement while in McDonalds this is aimed at reducing if not eliminating the prejudices and misjudgements in the minds of people concerning McJobs. In addition to achieve their goal they saw it being wise to undertake campaigns and promotions so as to sensitize, reach and inform as many people as possible on the paramount issue. The main message during these promotions was the great extent to which an employment opportunity at McDonalds would offer any promising candidate. They also cemented their arguments with claims that these benefits are available to the employees currently employed. These campaigns have their supporter and those who disagree from within the company. Ron Paul is among those who disliked and he claimed that all the efforts aimed at the redefinition of the MacJob would amount to nothing in the end. On the other hand, Paul had a contrary view that the company had more in its docket to frame the MacJob with and could not stalled in its quest to convince people out there that it had and offers more better opportunities than its competitors, and more so the chance to be responsible as a restaurant manager.
The company in order to estimate and get a better view of the state of how their image as an employer was distorted conducted a survey from within. They enquired to know if they were satisfied, working at McDonalds and again what was the contributing factor in the company that made them feel comfortable while being an employed. To their amazement they found out that majority of employees were very happy with working with them, although from the environment outside the company these same jobs had below average perception. This was a clear signal that employees of McDonalds like their work and the company in general. The company sales may have dropped and business is better although sales figures could have decreased due to the reason that we are in recession and most people opt for cheaper goods and services that is more of cheaper food when they are taking meals. It has of late been very clear in most countries that the company has operations in that since the inception of the policy of three Fs there has been the perception that McDonalds is the best employer compared to the rest.
The company has all the best intentions in the end to clear off the bad perception. This is mainly due to the fact as employment chances are due to rise, the company may experience high staff turnover with most of them moving to better paying jobs. It is inevitable that Job turnover will go upwards as the conditions of the economy stabilizes and we are clear the recession period. It is worrying that the company restaurant is very high which implies employees in these restaurants do not stay more than twelve months before they leave for better positions. There are also some advertisement and research information, which goes to worsen the company image in the outside public. Most of the senior management are aggravated by this and are of the opinion that it is of high important to spread the good news of the benefits and the better working conditions and terms provided by the company. This at least will be of beneficial in creating a good public image as well as contributing in redefining MacJob.
Recommendations
It is worthwhile from the above case for MacDonald in future to be wise enough to have and be conducting continual assessment in regards to the market. This is because without such they will ever be resulting to same scenario where they lose more in advertising and campaigns.
The company should have their salaries and wages being reviewed according to the market rates. Moreover, the MacJobs allowances should be structured to attract talents into Macdonald. This can be achieved through market research for market salaries and wages of all individuals.
MacDonald should consider social responsibility tasks or project participation so as not to lose touch and good relation and perception from its environment; on the other hand, the company should shy away from cyclical hiring of staffs i.e. during summer time. This should be encouraged to put a stop a scenario whereby
The company should also strengthen their human resource development with more qualified employees who have new and more advanced procedures to evaluate and recognise such crisis as bad reputation early enough before their effects takes toll on the company. Who are in a better position and capable to correct or address the matter amicably.
Conclusion
Human resource department in an institutions is necessary since it foresees different needs of the employees, thus they are the links between the Management of the organisation with the employees. They conduct HRM is their sole tasks. Concerning McDonalds the steps they have undertaken towards redefining Macjobs will bore result since they have assessed themselves clearly known where they are and their goal. This is the first solution to any problem, determining the root cause. Human resources management is increasingly being used and applied by several institutions to reveal the interconnections between human resources management with the cultural evolvement and planning. HRM is the new application being used by several organisations to understand the various facets of interactions points of the companies with the environment.
As a brand for analysis of the competition, McDonald’s was selected, which is the world’s most popular fast-food chain. However, it has many competitors, such as KFC, Burger King, Dunking Donuts, Subway, and others. Using the Concentric Circles of Competition tool, it is possible to identify aspects of McDonald’s competition with other fast-food establishments. Despite the numerous challenges in the market and the arrival of new players, McDonald’s restaurants remain in trend.
An important factor determining the levels of competition is whether it will be direct or indirect between players in the market. According to Tier (2017), “Direct competitors such as Burger King and Hardee’s. And even more indirect competitors competing for the fast-food dollar: Taco Bell, Pizza Hut, Domino’s, Kentucky Fried Chicken…” (p. 24). The first circle of competition for McDonald’s is in direct competition with fast food brands such as Burger King and KFC, whose menus are the same. The second form of competition is local restaurant chains with similar dishes. According to the second concentric circle, the competition is less direct, and competitors of McDonald’s here will be such restaurants as Pizza Hut, whose menus are different. The second form of competition in this circle is food delivery services. The third concentric circle implies Even Less Direct Competition. In the case of McDonald’s, it is a competition with stores that sell ingredients similar to those used in food from McDonald’s restaurants and other types of fast-food that can be bought in supermarkets and shopping centers.
The fourth and fifth circles of concentric circles represent very indirect and completely indirect competition. Competition of McDonald’s in the fourth circle will occur with other services that provide people with food. The second form of this circle is the sphere of entertainment. There can be various fairs, holidays and other events in which there will be food. In the fifth circle, the competition will occur in the phenomena occurring at some time when McDonald’s competition with other fast-food restaurants takes place in particular conditions, for example, coronavirus and natural disasters. I will apply PR strategy to fight these competitions in each circle of Concentric Circles of Competition. Development of the brand identity, improvement of its logo, restaurant interiors play an essential role in successful competition.
In conclusion it might be important to emphasize, that the competition among brands is on many stages and McDonald’s restaurants have a significant experience in achievement high results in that.
Reference
Tier, M. (2017). How to spot the next starbucks, whole foods, walmart, or mcdonald’s before its shares explode. St. Martin’s Publishing Group.
McDonald’s is one of the leading and most famous fast food companies globally. In 2020, the profit of this giant amounted to almost five billion U.S. dollars, and the revenue of the organization amounted to almost twenty billion U.S. dollars (“Net income of McDonald’s Corporation worldwide from 2005 to 2020”, n.d.). However, the net income decreased to six billion U.S. dollars compared to l last year. The leading indicators of the company’s efficiency, which also depend on emerging trends, are the percentage of product defects, profit, cost of goods, the satisfaction of customers and employees. Following these indicators, the company has the opportunity to develop the competence to reduce costs that affect its financial performance. These aspects often negatively affect the performance of any company, especially such a large one. The efficiency of the organization’s work consists of the fact that employees’ salaries have increased despite the rise in the price of some resources. Moreover, the decline in the company’s indicators can positively impact its profits.
Trends for the company:
Traffic keeps shrinking
Despite the difference from the indicators and success that companies do not have customers, customer turnover is the first trend that needs to be considered.
Delivery challenges related to promotional pricing
Many companies that are offering promotional pricing to obtain a market share, and that situation appears to be adverse for the company since its competitors Domino’s and McDonald’s.
Clues for the financial steps forward
Research shows that “McDonald’s has 44% of operating margin” (Kalogeropoulos, 2020, para. 7). However, the core profitability figure hold steady for the last year. It grew seven years ago and it was powered by the chain’s refranchising initiative. This may cause stakeholders to be unwilling to continue their activities due to the impossibility of growth.
References
Kalogeropoulos, D. (2020). McDonald’s earnings: 3 trends to watch. The Motley Fool. Web.
Net income of McDonald’s Corporation worldwide from 2005 to 2020. (n.d.). Statista. Web.
I could recommend buying small businesses for the company’s growth. For a company like McDonald’s, it is necessary to engage in vertical integration. The company should invest in businesses that create products that can be recycled and reused in the future. Being one of the largest enterprises in public catering, the company uses tons of plastic, which are sent to landfills. Investing in “green” companies will help reduce the burden on the environment and attract new customers because the trend towards protecting nature has many supporters more than ever. McDonald’s and the acquired company will benefit because their partnership will be effective.
In several regions of the world, there are some of the few restaurants of the McDonald’s chain operating under the Better McDonald’s Store system. It is a so-called eco-friendly concept; the restaurant is testing various packaging solutions that reduce the burden on the environment (Tien et al., 2020, p. 25). All plastic cups have been replaced with cardboard and waffle cups (Sanyal and Haddock-Millar, 2018, p. 47). Wooden spoons instead of plastic ones and burgers wrapped in paper-based on grass. (Anaf et al., 2018, p. 134). Glasses with drinks began to be sold without lids and eco-friendly paper tubes (Ibrahim et al., 2020, p. 773). However, not all of the proposed concept was to customers’ taste. For example, paper tubes get wet too quickly, and visitors have to take several pieces at once to finish their drink. (Dekkers, 2020, p. 10). Wooden spoons also have their drawback – visitors get an unpleasant taste of wood in their mouths. The company assures that they are following the reviews and will refine the packaging. One of the tasks of this restaurant is testing eco-solutions for fast food.
For such an experiment, the background of the McDonald’s logo changed to green to stand out. If the company continues to cooperate with eco-brands and invest in the production of eco-packaging and tableware, it will establish McDonald’s as a quality and caring manufacturer. They start with individual regions and track work progress for about a year. In the case of successful testing, it is possible to bring the eco-friendly production of food packages to the world level.
Reference List
Anaf, J., Baum, F., and Fisher, M. (2018) ‘A citizens’ jury on regulation of McDonald’s products and operations in Australia in response to a corporate health impact assessment,’ Australian and New Zealand Journal of Public Health, 42(2), pp. 133-139.
Dekkers, J. (2020). ‘From servant to driving force: Transforming the role of the supply chain in McDonald’s The Netherlands,’ Journal of Supply Chain Management, Logistics and Procurement, 3(1), pp. 6-17.
Ibrahim, N. F., Arunasalan, T. D., and Mohamed, N. A. (2020). ‘Cheap vs healthy: Analyzing McDonald’s menu using linear programming,’ Bulletin of Electrical Engineering and Informatics, 9(2), pp. 771-776.
Sanyal, C., and Haddock-Millar, J. (2018) ‘Employee engagement in managing environmental performance: a case study of the Planet Champion initiative, McDonald’s UK and Sweden,’ Middlesex University London, pp. 39-56.
Tien, N. H., et al. (2020) ‘Analysis of McDonalds’ entry strategy into Vietnam market,’ International Journal of Advanced Research and Development, 5(3), pp. 23-29.
The case study features Mcdonald’s during the 2010-2014 period, which saw the company’s net income drop from 5,503 million dollars in 2011 to 4,758 million dollars in 2014 (McNamara and Lee 194). The company has been seeing a slow decline since 2010, which has been demonstrated by shrinking market share, increases in operating costs, degrading quality of service and personnel, and the rising popularity of competitors. Companies like Wendy’s, Burger King, Chick-Fill-A, and others have been finding more success with younger customers, offering more and healthier food varieties, and imposing McDonald’s monopoly on fast service (McNamara and Lee 195). In addition, events outside of the company’s control (Chinese scandal, Russian sanctions) have undermined its position in several key markets (McNamara and Lee 195). The company would need alternative leadership solutions to emphasize its competitive advantages and maintain a stable position in the market.
Effectiveness of Company Leadership
Mcdonald’s leadership has faced a crisis on a similar scale before. From 2002-2003 the company faced problems associated with rapid expansion (Schramade). Because the franchise opened up in various places in the US and around the world, it gradually lost control to enforce quality and keep the franchisees accountable. As a result, the quality of service declined, and with it – so did the reputation of Mcdonald’s. This challenge was met by James R. Cantalupo, who created the “Plan to Win”, which Mcdonald’s has been following for the past decade (Schramade). The plan emphasized improving the menu, increasing the quality of restaurants, and having them work longer hours. Corporate leaders after Cantalupo followed his strategy without trying to adapt to the changing realities of the market.
Jim Skinner, who was elected new company president and CEO after Cantalupo died in 2004, did not introduce anything different to how Mcdonald’s operates, instead preferring to use the old plans laid out by other people (Schramade). As a result, the company was surpassed by Subway as the largest single-brand restaurant in 2010 (Schramade). It is clear that the company took a reflexive approach to leadership and answering challenges, rather than proactively addressing any of the issues Mcdonald’s has. Instead of emphasizing strengths and creating new services to entice customers, the company leadership chose to simply copy services and products found in their competition, in an attempt to become a replacement for all fast-food companies. This diversification did not work and shows a lack of initiative in Mcdonald’s leadership.
The basis for Competitive Advantages
Mcdonald’s has numerous factors that contribute to its competitive advantages. The company’s brand name is one of the strongest competitive advantages it has, being recognizable everywhere and associated with fast food, meaning that it is capable of attracting customers that have never tried fast food before (Schmid and Gombert 156). The company has a great number of restaurants operating across the globe, meaning exposure and popularity in various markets, from the US to Asia. The company benefits from forging ties with local suppliers in order to deliver fresh goods to the restaurants, thus ensuring a relatively high standard of quality (Schmid and Gombert 157). Finally, it has a great number of experienced employees and managers, who are familiar with the technologies of food production. Mcdonald’s also has plenty of well-recognized and well-loved recipes that are popular with the general public, as well as restaurants located in convenient places to ensure maximum coverage (Schmid and Gombert 157).
All of these aspects can lend themselves to future McDonald’s expansion and success. They have the infrastructure necessary to once more be the largest and most successful fast-food restaurant in the world. They have to utilize these strengths and play to them in order to stop the bleeding and start regaining positions in the market. To do so they have to address some of the challenges to their existing strategy and come up with new ways of selling McDonald’s to the public.
Potential Challenges to McDonald’s Strategy
As it stands, McDonald’s attempts to match its competitors in every venue of expertise. Namely, it attempts to become a brand associated with health, provide customization to its sandwiches, greatly expand the number of products offered at the restaurants, and include numerous options other than burgers (Schmid and Gombert 160). This strategy comes with a myriad of challenges and issues. The first issue is the increase in the complexity of supply and production logistics – instead of producing around 40 different products like McDonald’s did in the 1990s, the company has to manage over 110 products (Schramade). This results in increased prices, decreased revenues, and higher prices.
Additionally, the increase in product range makes the production and training more costly and strenuous. As a result, the quality of employees at McDonald’s between 2010 and 2014 plummeted (Schramade). Competition for quality employees between different companies makes it difficult for McDonald’s to replenish its ranks as quickly and efficiently as before (Schmid and Gombert 160). Further expansion would mean an even greater employee vacancy crisis, which is further exacerbated by the fact McDonald’s is not being as vigilant towards the franchisees as it used to be in the past.
The attempts of McDonald’s to rebrand itself as a healthy-eating place have been ineffectual at best. This issue stems from the very nature of the products they serve – burgers and fast food have become euphemisms for unhealthy eating (Schmid and Gombert 160). Because of that, attempting to entice the youth into believing and associating McDonald’s with fresh and healthy food is a bit of an oxymoron. This is further exacerbated by the use of frozen goods and conserving agents in McDonald’s food to prolong its freshness – something their competitors in Subway and Wendy’s do not utilize (Schramade).
Finally, McDonald’s strategy, while providing a quantity of choice, does not specifically improve the quality of goods. Surveys show that McDonald’s products are rated very low, in the bottom 20 fast-food restaurants, being surpassed by smaller companies and main competitors alike (Schmid and Gombert 165). The issues associated with employee training, food quality, and supply chain mishaps in turn mean that McDonald’s produces inferior burgers at higher costs and lower rates than Burger King or Wendy’s. This is critically damaging to the company, as it was founded upon the principles of fast, affordable, and quality products. These were the main competitive advantages of McDonald’s for a very long time, and they have been lost to other fast-food companies, without being replaced by anything else that could make the company stand out.
Alternative Growth Strategies to Pursue
Mcdonald’s, despite its ailing revenues, remains the largest fast-food company in the US domestic market, with around 50% of the total market share still belonging to it (Schramade). As such, it can afford to try and pursue different growth strategies. One potential solution would be returning to the roots and focusing on what made McDonald’s superior to its competitors back in the day – speed, affordability, and quality (Schramade). It can cut back on many of the unpopular products that it currently offers, significantly simplify the existing supply chain, and instead increase the quality of the popular products – burgers, chicken products, and fish-fillet sandwiches among others. Instead of using frozen produce like McDonald’s has been doing for several decades, the company can afford to replace them with fresh beef and vegetables. That would significantly increase the competitive qualities of the food compared to Wendy’s and Burger King, effectively putting Mcdonald’s in the same quality bracket rather than that below (Schmid and Gombert 163). This solution, however, comes with several downsides, some of which include the complete rejection of the new customers (millennials, Gen Z), and poor long-term profitability – McDonald’s will be forced to pander to new tastes eventually (Schmid and Gombert 167).
Another solution would be to expand beyond the brand and generate new ones associated with healthy eating. They could share space and logistics with the main brand (Mcdonald’s) while simultaneously promoting themselves as a healthier alternative to competitive brands (Schmid and Gombert 170). As such, it would be possible to transition from the McDonald’s brand to these new ones and claim more of the market. Finally, there is the potential solution of innovating the production process in the same way McDonald’s did during their starting years. It would require investment in the R&D department, but could potentially push McDonald’s ahead. On the other hand, a failure to make any significant breakthroughs would not solve the company’s current problems.
Conclusions
McDonald’s current slow decline is the result of following one strategy for too long coupled with a failure to capitalize on its strengths and ineffectual leadership. In order to return to the positions of undisputed dominance and increase its net gains, the company should focus on employee quality and product quality. Some of the potential other solutions include brand diversification and returning to the roots.
Works Cited
McNamara, Dess, and Eisner Lee. Strategic Management: Text & Cases. McGraw-Hill, 2017.
Schmid, Stefan, and Adrian Gombert. “McDonald’s: Is the fast-food icon reaching the limits of growth?” Internationalization of Business. Springer, Cham, 2018. pp. 155-171.
Schramade, Willem. Case study – McDonald’s. Erasmus Platform for Sustainable Value Creation, Web.
McDonald’s is owned by an international conglomerate and is one of the most well-known fast-food restaurants in the world. The company’s headquarters are located in the United States of America. The company was founded by Ray Kroc in 1954 and has been in operation ever since. Daily, McDonald’s serves approximately 70 million customers in 119 countries and territories (Jauhari, 2020). More than 2 million people work for the company in various locations worldwide. The business, a franchisee, an affiliate, or a business affiliate is responsible for keeping things running smoothly. An approximation of 20% of the restaurants at McDonald’s are owned and operated by the McDonald’s Corporation (Kee et al., 2021). The company’s primary sources of revenue are franchisee payments, fees, and rental income. Restaurants that the company owns generate revenue for the company as well. McDonald’s offers a variety of products in addition to cheeseburgers and hamburgers. Therefore, McDonald’s applies various strategies and employee benefits that ensure the company’s success.
McDonald’s Organizational Strategies
Several organizational strategies are embraced in most McDonald’s restaurants in the United States of America. The techniques include health and protection, dental plan, and insurance covering employees with short-term and long-term disabilities. One of McDonald’s primary goals is attracting, retaining, and motivating employees through its benefits program. These strategies aim to gain a competitive edge in ensuring the sustainability of their working population, thus enabling sustained improvement of the company’s service delivery.
Health and Protection
Employees can choose Preferred Provider Organization (PPO) medical plans from McDonald’s company, where these plans use the first health provider network. When a program is set up, in-network costs get paid more often than those born outside the network. This is based on the strategy. In addition to a prescription drug benefit, each plan has a benefit cap that can’t be reached throughout a person’s life. It also includes well-baby care and child immunizations or vaccinations, which cost around $500 per person. This plan helps employees to save money using the plan’s network.
Dental Plan
The company’s dental insurance plan covers a variety of dental treatments and procedures, allowing our employees to see any dentist they choose as part of their health care coverage. Preventive services such as sealants are almost always free of charge, with no out-of-pocket expenses. After deductions, approximately 80% of the cost of primary and significant services is paid for in full. The cost of orthodontic treatment for both adults and children is covered up to 50% after a one-time deductible (Kee et al., 2021). With this type of compensation plan, most employees have been well retained, thus enjoying the employment benefits.
Disabilities that Last for a Short and Long Time
Where employees have short-term and long-term disabilities, McDonald’s allows them not to pay anything. Benefits for short-term disability are based on the type of disability the employee has and the length of time the employee has worked for the business. Short-term disability insurance may be available to employees who cannot work for more than ten consecutive days (Chia et al., 2020). If an employee cannot return to work for a predetermined period, the policy pays 60% of their monthly base salary.
The Components of the compensation plan and their Justification that Enables the Organization’s Success
A well-structured compensation plan aims to ensure employees get the appropriate insurance coverage. To ensure the continuity of the organization, the company facilitates several ranges for the employees. The insurance policies covered by McDonald’s company are accidental and dismemberment and accident coverage for personal and professional travel. These insurance policies ensure that employees are well covered and protected when delivering services and their usual ways of life.
Accidental Death and Dismemberment Insurance
A policy known as Accidental Death and Dismemberment (AD&D) provides coverage for employees who are killed or seriously injured in an accident while on the job. McDonald’s employees receive accidental death and dismemberment insurance equal to two times their annual base salary. According to the company, additional Accidental Death and Dismemberment insurance are provided to employees who choose to increase their life insurance coverage at no extra cost (Kee et al., 2021). This coverage facilitates adequate healthy living for the employees, thus ensuring they continue to work for the organization
Accident Coverage for Personal and Professional Travel
All McDonald’s employees are given free travel accident insurance equal to two times their base salary. If you get into an accident while on a business or pleasure trip, your insurance will care for you. For all of its employees who are traveling on the company’s behalf for business purposes, McDonald’s also provides complimentary business travel accident insurance. There are two types of travel accident insurance, called trip cancellation and interruption insurance, which cost either $100,000 or $200,000.
Therefore, McDonald’s company is one of the best food service organizations in the United States of America. This has been contributed by the various compensation plans and benefits offered to the employees. For a company to ensure continued growth in its operations, employees’ needs must be well considered. With the proper management of the company activities, the objectives and aims of the company have been achieved, leading to great success.
References
Chia, X. R., Kee, D. M. H., Khor, S. T., Chan, K. Y., Lok, T. X., Almutairi, H. A.,… & Kulkarni, S. (2020). Contributing Factors to Organizational Success: A Case Study of McDonald’s. International Journal of Tourism and hospitality in the Asia Pacific (IJTHAP), 3(2), 38-47.
Jauhari, D. S. (2020). A Study on Impact of Promotional Strategies by Branded Fast Food Industry on Consumers. PalArch’s Journal of Archaeology of Egypt/Egyptology, 17(7), 7009-7020.
Kee, D. M. H., Ho, S. L., Ho, Y. S., Lee, T. W., Ma, H., & Yin, Y. (2021). Critical Success Factors in the Fast-food Industry: A Case of McDonald’s. International Journal of Tourism and hospitality in the Asia Pacific (IJTHAP), 4(2), 124-143.
