Producing substitutes to the main products to gain a larger market share

Merger and acquisition

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Contents

TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc2615075 \h 2Introduction PAGEREF _Toc2615076 \h 4Strategic Review PAGEREF _Toc2615077 \h 4McDonald's Strategic Analysis PAGEREF _Toc2615078 \h 4PESTEL analysis. PAGEREF _Toc2615079 \h 4Porter's five forces model PAGEREF _Toc2615080 \h 6SWOT analysis of McDonald's. PAGEREF _Toc2615081 \h 7Resources and Competence Analysis PAGEREF _Toc2615082 \h 10Core competencies of McDonald's PAGEREF _Toc2615083 \h 11Recommendations for Future Development PAGEREF _Toc2615084 \h 11TOWS Matrix PAGEREF _Toc2615085 \h 11McDonald's: Ansoff Matrix PAGEREF _Toc2615086 \h 13Recommendations PAGEREF _Toc2615087 \h 14References PAGEREF _Toc2615088 \h 16Appendix PAGEREF _Toc2615089 \h 18McDonald's Ansoff Matrix PAGEREF _Toc2615090 \h 18

IntroductionMcDonald's is a leader in the fast food industry. The company is committed to offering the highest quality of food, great value, premium service, and a clean, friendly atmosphere. McDonald's is an international brand operating in over 100 countries. The company remains the most prominent brand because of its quality, various types of fast-foods and widespread presence internationally. McDonald's employs over 14.7 million people and is expected to create an additional 1.6 million jobs by the year 2027 in the U.S alone (Dey, 2016). The fast-food industry is highly competitive. McDonald's key rivals in this industry include Burger King, Panera Bread, and Subway. KFC is a strong competitor and offers chicken nuggets and fries on its menu. The competitor has more than 11000 outlets in over 80 countries (Dey, 2016). The report conducts MacDonald's strategic analysis such as PESTEL, Porter's five forces model, SWOT analysis and then provides recommendations for future development.

Strategic ReviewStrategic analysis refers to the procedure of researching an organization and its operating environment to formulate a strategy. The strategic review involves the definition of internal and external environment and using analytical tools like SWOT analysis, PESTEL and Porter's Five Forces.

McDonald's Strategic AnalysisPESTEL analysis.Political factors.

The political factors are very crucial for the operations of any organization. The quick-service is extremely affected by regularly changing political situations. McDonald's is subject to extreme guidelines, management, and supervision by the government agencies. The political aspects are also intensified by an unstable political environment that can disrupt the supply chain (Thomson, 2009).

Economic factors.

Economic aspects have a direct impact on the transactions and viability of global corporations. There has been a recession in various countries which cause unemployment and low economic activity. Negative economic impacts lead to reduced consumer spending due to lower disposable income (Perera, 2017). The US fast food industry has grown after the 2008 recession. This has also been the case for McDonald's.

Social factors.

Social aspects are crucial in determining the profitability of a business. McDonald's is entitled to address the public concerns in regards to nutrition. Most customer segments are known to change their tastes and preferences. This means that the company must change its marketing and business strategy to align with the customers' needs (Grant, 2016).

Technological factors.

Technology is crucial for the survival of any business. McDonald's should invest in technology to attain a competitive advantage. Nowadays, McDonald relies heavily on technology in service and delivery thus increasing sales and profitability.

Environmental factors.

Environmental factors are crucial in the fast food industry. McDonald's has been focusing on sustainability as a strategy for its business.

Legal factors.

McDonald's operates in over 100 nations and has to be vigilant about amenability with the local law. Legal factors include compliance with health quality related laws and inspection checks from local authorities.

Porter's five forces modelNew entrants.

The initial entry to the quick-service industry is not capital intensive. Due to the low capital requirement in this industry, numerous firms can enter and compete with MacDonald's. New entrants can enter and gain advantage by providing discounts and differentiating their products. Thus, the negotiating power of the entrants is low (Magretta, 2012).

Bargaining power of suppliers.

The suppliers of food and labor are the two major suppliers for McDonald's and other firms in this industry. The initial cost of a supplier relationship is high but becomes inexpensive and efficient with time. The power of suppliers is moderate due to the influence of labor supply and moderate bargaining power of suppliers (Wahlen, Baginski, & Bradshaw, 2011).

Bargaining power of buyers.

Customers in this industry have non-existing switching costs. A client can decide to buy food products from a different fast food outlet depending on the quality and price. Therefore, the negotiating power of clients is high.

Threat of substitute products.

Substitute products are widely accessible and can comprise a client choosing another product from a wide variety of choices. The main attraction for customers to fast food outlets is value, convenience, and availability. The bargaining power of substitute products is high.

Intensity of rivalry among competitors.

The fast-food industry is filled with numerous autonomous outlets that compete locally and globally. The intense competition is also driven by the absence of exit costs and readily available capacity for expansion. In this industry, price wars are intense with competition from established fast food chains like Burger King (Mohapatra & Singh, 2012). The intensity of rivalry is high. SWOT analysis of McDonald's.Strengths.

Global presence.

McDonald's sells across more than 100 states through its company-owned and franchised outlets. In 2017, the number of system-wide outlets across 120 countries reached 37,241. The company owned 3133 restaurants and franchised 34, 108 outlets (Dolnicar, Grun, & Leisch, 2018).

Brand image and equity.

McDonald's is one of the most popular brands in the international market. The company has been able to establish its brand on a high level of confidence among its clients. The brand image helps the company in marketing and sales. The stronger the brand image of a firm, the higher the sales and revenues. In McDonald's case, the firm is one of the leaders in the quick-service industry.

Innovative menu.

McDonald's has a diverse menu that entails cheeseburgers and hamburgers, Filet-O-Fish, Big Mac, salads, French fries, wraps, McNuggets, pies, oatmeal, sundaes, several chicken and sandwiches, desserts, soft serve cones, coffee, soft beverages, McCafe, and other drinks. Additionally, the outlets sell a wide range of other items during short-term campaigns (Yuece, 2012).

Customer service.

Customer service is one of the core elements of McDonald's. It assists the restaurant in attracting new customers and retaining the old ones. The restaurant uses a wide range of tools to serve its clients in a better and efficient way.

Weaknesses.

Food quality related issues.

Food quality related problems occur now and then in the McDonald's system. In 2017, Some of the McDonald's cafeterias in India received low food quality and had to be closed to maintain the reputation of the fast-food chain

Franchisee issues.

McDonald's has 90% franchise-based system. Therefore, franchise issues are bound to occur every time. Because of its large framework which relies on the franchise, quality control has become of the issues facing the company. McDonald's has closed some restaurants in various parts of the world due to the inability to attain the intended quality.

Opportunities.

Product innovation.

The global population has changed and provides opportunities for menu innovation. McDonald's must re-configure its menu according to the customers' preferences and serve high-quality items. The millennial generation is extremely health mindful and demands healthier items. Another major element is affordability which entails low-priced products on the menu (Fleisher & Bensoussan, 2015).

Customer engagement opportunities.

McDonald's should focus on using modern technologies to engage its customers. The current customer segments are conversant with the latest technology. Thus the firm cannot rely on the traditional modes of communication. Social media is a crucial element in engaging the customer. Therefore, McDonald's should use social media sites to engage its customers.

Threats.

Legal compliance.

Compliance concerns have advanced in the 21st century due to the greater level of legal and political regulation of global business. Failure to comply leads to penalties and can lead to huge monetary losses. Additionally, there are numerous laws linked to food safety, quality, health and labor that firms have to succeed in the investment regions.

Increasing competition.

There is increasing competition in the fast food industry which has resulted in higher advertising and customer service expenditures for firms. The quick-service industry is inhabited by numerous international and local firms that are aggressive in their marketing strategies. Some of the approaches used by competitors include seasonal discounts and offer to attract customers. Development costs have also increased due to increased competition (Rhodes & Liley, 2013).

Rising health awareness.

Internationally, health awareness is rising, and customers demand healthier food. The millennial generation is highly health conscious and prefers affordable and good food. McDonald's is popular for its calorie-filled menu and have received a lot of criticism in the past for its unhealthy food. Increasing health awareness and food quality related reproach can negatively affect sales in the fast food industry.

Resources and Competence AnalysisFor the organization, the strategy is focused on matching a company's resources and competencies to the prospects that occur in the macro environment. The resources and competencies of a firm are regarded as a strategy. The rising focus on the role of resources and competence as the foundation for approach may occur in two components. First, the industry where the company belongs become unstable and so the internal resources and competencies of the company are given more emphasis in formulating strategies. Secondly, the focus of the strategy may occur when the combination of the resources and competencies of the company become the superior competitive advantage and profitability (Rodrigues, Nikhil, & Jacob, 2016).

Resources are a firm's productive assets and include physical, financial, human and organizational elements. Restaurant locations come under McDon...