Strategic Analysis and Internationalization of McDonalds Paper Example

Company Description and History

The fast-food industry emerged in 1902 in the United States with the first Automat that consisted of a simple food vending machine, from there they began to develop the restaurants that would offer this type of food in United States premises from mid-twentieth century (Nixon et al., 2015 p.492). The fast-food sector emerged in response to the needs of workers based on time and their economic capacity. Currently, the fast food sector also offers healthy alternatives, even for vegetarians in certain brands, or even differentiate providing a sense of quality as in Starbucks. This sector has important well-positioned companies that lead the market, so they are a great barrier for others who want to compete in the sector, both in price and quality (Rehm & Drewnowski, 2016 p.108).

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The first establishment of McDonald's is located in the United States in 1940 as a simple hamburger stand, years later on 1955 began to expand by expanding its menu and through its franchise regime (Povod et al., 2016 p.59). The cost structure of McDonald's focuses on innovating to save costs and time, which allows it to offer products at low prices. The financial structure is also variable but positive since it can invest heavily thanks to its good positioning (Rehm & Drewnowski, 2015 p.502).

The technological area is adequate since they keep the technology updated to favour the productivity and speed of the processes. The company focuses on training its employees and its franchisees to ensure the smooth running of the business, McDonald's offers training courses and even require their franchise managers to pass an exam (McDonald's, 2018 p.1). The company has an organizational structure with rigid rules established in a manual to guarantee a good social climate and promote the business culture.

McDonald's strategic profile corresponds to that of a competitive organization with long-term plans, and with a clear context of its corporate social responsibility, on whose bases it must develop its plans to achieve the sustainability of its proposal of quality, healthy and safe products through a supply chain that respects diversity and unique customer choices (Rowley & McMurtrey, 2016 p.37; Povod et al., 2016 p.59; Jeble, 2018 p.520).

Strategic Analysis and Internationalization

McDonald's has expanded all over the world, a success that is due in large part to its corporate social responsibility policy, which consists in giving back to communities what they have given (doing the right things and in the right way). The internationalization strategy has required the incorporation of suppliers who, as an extension, participate in the strategic pillars of the supply chain. McDonald's has prioritized nine major markets: Germany, Australia, Brazil, Canada, China, the United States, France, Japan (McDonald's Corporation 2017), and the United Kingdom, which account for 75% of revenues and 82% of sales (80% of restaurants in the world). Geographically, it is segmented into four areas comprising North America (United States and Canada), Europe (with France, Germany and the United Kingdom as major), Latin America (Brazil) and APMEA composed of Asia-Pacific (China, Japan and Australia), Middle East and Africa (Vitasek, 2016 p.128; Ahmed et al., 2014 p.127).

Since 2003, McDonald's has implemented its "Plan to Win" program, designed by three pillars: innovation in the menu, renovation of restaurants and improvement in the shopping experience; with which it has achieved consistently solid financial results (see fig 1).

McDonald's internationalization strategy is based on its strengths of an efficient value chain, in which standard processes are applied, as well as a business model with a lot of knowledge and supported by a very solid brand in the US market (Tom, 2018 p.1). From this, the corporation has replicated the model of its international expansion process; in some cases, actively imposing its standardization and, in other cases, with reasonable adaptations. The trend of the industry is inclined to obtain the two types of generic strategies, leading by costs and by differentiation and quality, achieving high competition and efficiency on the part of companies.

To this end, McDonald's has conveniently exploited the advantages of its affordable price, the speed of delivery, advertising campaigns and an increasing variety of products. The most important variables in the internationalization process of a fast food chain are cost control, the franchise scheme, the adaptation/standardization strategy and the human resources policy (Rowley & McMurtrey, 2016 p.35).

• Costs control. Apply the operations model with a standardized supply chain, in which suppliers (global or local) ensure to provide a large volume in exchange for competitive quality and price - franchisee scheme. The franchises operate under a standardized operating model with proven business processes, as if it were an extension of McDonald's, and with demanding compliance that ensures mutual benefits.
• Adaptation/standardization. The standardization strategy has been preponderant concerning adaptation in international markets. However, flexibilization is a variable to be considered by McDonald's, especially in countries with a culture very different from the American one.
• Human resources policy. It is a variable that is imperative to respect in each country since it depends on the equipment to make the service to the final consumer tangible.
• Supply. Like any company that is in constant search of efficiency, it is essential to maintain each functional area with the necessary tools and resources, but in a very fundamental way, maintaining the elements of hygiene, technologies and inputs in the production process is the most important for this company.
• Development of technologies. To reduce costs and preparation time, creation and constant innovation are necessary.
• Administration of human capital. Use incentives according to the needs of workers to increase the degree of commitment. It is of vital importance since it is in your hands the experience and the preparation of the products.
• Infrastructure. Each location, whether owned or franchised, must be located at strategic points of high visibility, also, must be kept clean and orderly, the customer service area is designed for workers to show at least 40% of the body. After the dining room, the kitchen is the largest space in the room.

The level of internationalization in 2006 covers the operation of more than 17,000 restaurants as shown on the map of the world that shows the progression of McDonald's service coverage until 2006 (Lillford, 2008 p.33). As can be seen, there are no limits for McDonald's in its internationalization, except the African countries considering the capacity of the consumer market that this continent has to date, except for Algeria, Egypt and South Africa as seen in the map. The share of APMEA concerning the income of the corporation does not exceed 15%, and within it, Australia, China and Japan represent almost 50% (see table 2). This participation could be improved by taking advantage of the market size and the improved income capacity of its consumers, especially in the Chinese market (Saifullah et al., 2014 p.10). The American market, which is the origin of the organization, is saturated. Although there are a clear positioning and known brand strength, the penetration and coverage have been high, and the subsequent growth rates are lower.

Competitor Analysis

Rivalry among competitors. Prominent fast-food competitors are KFC, Burger King, Subway, Starbucks, Pizza Hut, Domino's, Dunkin' Donuts, Wendy's, Chinese restaurants and recently the supermarkets themselves offering precooked food. The score denotes that the sector is unattractive in the global market, from the large-scale players who compete, basically due to the presence of medium and small competitors, towards whom they can change easily consumers (Anaf et al., 2017 p.7).

In the field of adaptation, McDonald's selects the most favorable strategies to achieve its objectives by paying special attention to the cultural adaptation, for example introducing new products to the menu. In addition to adapting to preferences, it also adapts to the circumstances of each customer such as vegetarian products for people who want healthier food. In this way, it is capable of covering different types of clients, achieving a certain degree of differentiation in the brand. The company uses vertical integration backwards integrating its value chain with that of suppliers, and forward as it exercises control over its franchises and maintains market competitiveness (Nixon et al., 2015 p.490; Jacobs et al., 2014 p.534).

Definition of the Strategic Problem

The central market strategy of McDonald's is to ensure the corporation's integral sustainability that supports effective management of a Supply Chain and with economic, social and environmental responsibilities on a global scale (Elmes & Barry, 2017 p. 54). This means:

• Prioritizing the sustainability in regards to other supply chain goals (cost reduction, food safety).
• Reconciling different priorities and expectations of sustainable operation around the world, understanding that local practices sometimes influence the global brand.
• Involving suppliers, activists and other interested parties in the sustainable supply chain efforts (Saravanan, 2017 p.6).

Future Strategic Direction Proposal

Analysis of vision and mission

Current vision: "Be the best leading providers of fast food around the world" (King & Newman, 2015 p.22).

It is brief; with focus on the business (fast food), and global (consider the whole world).

Be the best, not necessarily the greatest. This is consistent with its principles.

Proposed vision: "To be the best leading and sustainable suppliers of fast food in the whole world".

The reference to its sustainability is added, both in the social, environmental and economic aspects.

Current mission: "The mission of McDonald's is to be the place and way of eating favorites of our clients, with inspired people, who delight each customer with unparalleled quality, service, cleanliness and value at all times" (McDonald's Corporation 2018).

Proposed Mission: "The mission of McDonald's is to be the place and way of eating favorites of our clients at a global level, with inspired people who delight each client with unrivalled quality, service, cleanliness and value at all times, ensuring sustainable development and supply with our community with the responsible use of technology. "

Proposed general objective: "Ensure the sustainability of the Corporation, offering the community food with quality and safety, with an efficient supply chain that ensures the growth of the value of the company."

SWOT Analysis

STRENGTHS

Good Infrastructure

High management quality Leading Company in the sector Wide variety of products

Excellent technology and designs Quality and price

Fast in the service with the system "ready to eat". A study on the market indicate that consumers prefer restaurant food

WEAKNESSES

At rush hour delays occur

The dominant position can be questioned

Bad orders and meals in poor condition

THREATS

Substitute products

Complaints and claims from Interest groups

Entry of new competitors

Change of trends

OPPORTUNITIES

Acquire new technologies

Introduce new products

Open new branches

Increase in franchises due to lower prices

Most qualified human capital

Co-branding and strategic alliances

Strategic Objectives:

The strategic objectives of the corporation are aimed at adapting to the new characteristics of the market, targeting customers who opt fo...