Strategic Management in McDonalds Essay Sample
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Strategic Management in McDonalds Essay Sample
Competitive business level strategy and industrial environment
McDonald is the number one fast food chain store with a wide customer base of about 40 million customers who visit it outlets every day. The company has more than 30,000 branches in more than 120 countries. However it has concentrated most of its operation in the developed and emerging markets. 80% of its operations are positioned in countries like Canada, Brazil, France, Germany, UK, US, Japan, and Australia.
There are a number of strategies that have been used by the company in order to position itself in the market. The first important strategy that it has employed is that of creating an image to the people and introducing them to the culture of fast food. This ensured that it created a loyal customer base. This was used as a market entry strategy and has been reemployed in all the new markets that it has entered. One of the strategies that have been used by the company to introduce people to fast food culture is through using humor in its literature. The company has created as corporate system and use of advertisement campaign has created brand image and logo in the minds of the consumers (Flack, 2008).
After penetrating the market the company has also using market expansion strategy. In order to match the growing number of customers, the company has put in place strategies addressing speed of delivery, customer care, and cleanliness of the premises. This ensures fast delivery of services. This has been one of the cultures that have been identified with the MacDonald fast food stores.
The brand image is vested in the product which is used to identify the company. Customer knows what to expect when they walk into a McDonald store the product value has been one source of strength of growth. The market strategy has taken into consideration the internal and external environment to form a competitive edge based on product, price and service delivery. There has been a lot of innovation where new products are produced and catch up quickly with the developments in the market. It is respond to the changing concerns and taste of the consumers. For example it has developed new recipes to suit the health concerns of the consumers (Kroc 2001, p. 2).
Another competency of the company has also been based on its diversity of new business ventures. This has helped the company to keep up with the trend in the market amid the rising competition. The company has come up with health food, added salad to the menu, changed the appearance of the stores, and many other strategies that have been aimed at matching the level of competition. The marketing environment is getting competitive everyday with the entry of new players as well. The two main competitors with the company are Burger King and the KFC. There are other minor operators who have been competing with the company in the fast food industry but these two are the main competitors.
Corporate strategy: Vertical integration, diversification and strategic alliances
There are a number of corporate strategies that the company has taken in order to adapt to the market. Since it was incepted the company has been taking various steps toward vertical integration, diversification and strategic alliance.
McDonald has implemented backward vertical integration. In this case managers have added more value by producing inputs and distributing the products of the company. McDonald has invested in producing its own potatoes which are used for the production of recipes. This has led to lower cost of supply. McDonalds also owns the final restaurants or the final outlet. This has lowered the costs and ensured maintenance of final quality.
In diversification the company has been entering into new operations which are aimed extending its nature of operation to other businesses which are more responsive to the needs of the consumers. When the company opened its operation, it was providing low-cost humbugger changing with trench fries and soft drinks. But since then it has diversified its operation to other areas. It has diversified it recipes since then and also ventured in provision of other products and service. Today McDonald offers a variety of humbuggers, salads, chicken sandwiches, different breakfast menus and many other new items that are currently being tested in the market. This has been a diversification strategy to enter new markets and open wide businesses prospects. McDonald has also opened chain of hotels which has been seen as a new brand in its business.
McDonald has also entered into a number of strategic alliances. For example it has crafted an alliance with Paker Brothers in order to create monopoly game contest. This has been one of the most effective promotion strategies which have helped it to boost its operation. These are some of the corporate strategy that has helped MacDonald to compete effectively in the market and acquired a large market segment (Mitchell, 2001).
McDonald is one of the organizations with hierarchical cultures. The organization structure of McDonalds is vested in value matrix and is well defined by stability and control. There is also a lot of internal focus and integration of the value chain.
The company has been using a different management structure owing the variety of the franchise that operates the outlets but a flat structure is evident at the high level management. The CEO is given has a wide span of accountable and is held accountable for these measures including stock price, earnings per share and competitive market positioning. On the other hand the manager of restaurant is given a very narrow span of accountability and may be held accountable for specific measures, standard operating procedures, rulebooks and authorizations levels. Standardization of services and goods have been described as extreme in McDonald while friendliness and services have been shown to be robotic and machine like (Ulrich 2007, p. 3).
There is also standardization, control and an integrated well structured system of authority in regard to decision making process. The hierarchical structure provide for a good control and effective organization, coordination, control and monitoring of people and processes.
The hierarchical structure of McDonalds is well integrated in its culture. It has helped the company to have a high degree of standardization and efficiently. This structure has been adopted due to the high number of operations that operate under the chain and the need to have effective control. This can only be achieved through effective management.
In the process of decision making, McDonalds has a centralized structure after unsuccessfully trying to decentralize most of it operations and later to recentralized control over quality. This was aimed at achieving standardization. The company has been making various efforts in order to come up with a structure that fits it areas of operation. With the need to have such high level of control on quality, the company has opted to operate in both models. With most of its stores run by franchise, MacDonald had found it difficult to centralize the decision making process. Thereof it has found a high level of decentralization most useful to its operations.
Matching structure and control, culture and reward system to strategy
There have been various strategies that have been taken by the company in order to achieve an integrated management approach in the way it match structure and control, culture and reward system. This has been achieved through a combination of different strategies.
In order to match structure and control, the company has been adopting a tight management structure. With most of the chains run by a franchise, there have been systematic efforts aimed at ensuring that a high level of control is put in place. Matching of structure and control is one of the more important factors that have enabled the company to control the wide network of franchises.
One of the strategies that have been used to achieve the growth strategy has been occasional change in the management. The management is one of the most important factors that determine the viability of operation of the organization. From time to time McDonalds has been carrying out effective change in the management structure in order to adapt to the changes in the market. For example, the company had been operating under centralized control structure. However as the franchise chain grew, it found it hard to maintain control over the chain and changed the structure to a more decentralized one. But it found out that it was loosing some control on quality and other aspects and therefore decided to revert back to the centralized structure in quality in order to maintain more control. This is one of the strategies that have been used in order to achieve a structure that matches structure and control (Muthukishan, 2007).
Since it was started, MacDonald has kept to its culture of quality customer services. It has upheld the value of customer satisfaction through delivery of quality services. In order to achieve this, the company has kept a high level of standardization in all its services. One of the key aspects of matching the structure to the culture of the organization is the way it has maintained a centralized control of quality of products and services.
The company has a goal of achieving a 100 percent customer satisfaction. In order to achieve this, the management has been given a lot of control of the in the work place. The CEO has a wide span of control and accountability. On the other hand the manager are given a narrow span of accountability but is left to look at the operating procedure, rule books and other levels of authorization.
Managing strategic change
McDonald has been coming up with various strategies which are aimed at managing strategic changes in the organization. There have been various emerging strategies that have been put in place by the company. There are various strategies put in place in order to ensure that there is adoption to the changes that are taking place in the environment. Macdonadization environment which involves timely response to the changes that are taking place in the environment has come to be identified with many business operations (Howard 2004, p. 4).
McDonalds has been instituting strategic drift management plans aimed at making the operations of the company more responsive to the changing environment. In order to achieve this, the company has ensured a higher degree of flexibility in the planning process. Flexibility in the strategic management process involves giving a room or an allowance in which there can be a space to make any changes to the strategy to suit the operation environment.
To ensure flexibility, there is avoidance of rigid strategies that can inhibit change during implementation. Fro example the company has adopted a more flexible management structure which can accommodate changes. Initially operating on a highly centralized management structure, the company has been adopting a decentralized structure but with a degree of control on some areas like quality. This is important in order to maintain the high level of standardization that is needed in its operation.
With the emerging wave of globalization, the company has adopted wide operation network. It has a wide network of franchises which operates its outlets with the head quarter in the US. Such level of operation structure requires a highly standardized operation with a lot of control. The process of management of strategic change can be considered to be successful in the company as it has been adapting to the environment very well. This has not been reflected in its fast food chains alone but is has also been reflected in number of its other operations as well.
The management strategy that adopted by the company has been useful in the overall growth of the company. With a wide operating structure, Macdonald has put in place flexible management strategies that respond to the changes in the environment. It overall operating structure has been matched to control and culture of the organization with a high level of control and standardization.
Flack, J 2008, McDonald’s upgrade its story by upgrading its competitive set, Retrieved from http://www.portfolio.com/views/blogs/business-spin/2008/01/07/mcdonalds-upgrades-its-story-by-upgrading-its-competitive-set on 31st May 2008
Howard, J 2004, McDonaldisation of business, Oxford University Press
Kroc, R 2001, The making of McDonalds, Harvard Business Review
Mitchell, B 2001, McDonald’s strategy revealed, Retrieved fromhttp://www.bbspot.com/News/2003/08/mcdonalds.html on 31st May 2008
Muthukishan, V 2007, McDonald’s business analysis, Retrieved from http://ezinearticles.com/?McDonalds-Business-Analysis&id=687438on 31st May 2008
Ulrich, D 2007, Human Resource Agenda in McDonalds, Harvard Business School Press