McDonald Case Study: Attractiveness Of Fast Food Industry

Question

Task: This assignment is based upon the case study McDonald’s Corporation. This TMA is intended to help you build towards achievement of several BB835 Learning Outcomes, but especially 7A1,3,4; 7B1; 7C1;7D1. There are two tasks that you must perform to complete this assignment. The tasks involved in this TMA have been designed to provide you with practice in answering the type of questions you will face in the BB835 examination.

TASK ONE (1750 words; 60 marks)
After reading the case study McDonald’s Corporation, prepare a report on the attractiveness of the fast food industry from the perspective of McDonald’s Corporation, an American fast food company founded in California, United States, best known for its hamburgers, cheeseburgers, french fries, soft drinks, wraps, and desserts now faces the challenges of increased competition. You should prepare your answer in a report format and comment on:

• The strategic issues that McDonald needs to address (20 marks)
• The core competencies of McDonald (20 marks)
• The business model of McDonald? Also, discuss on the various strategies/techniques how McDonald earns money?(20 marks)

TASK TWO (750 words; 30 marks)

Your task is to analyse McDonald Corporation’s external environment and prepare:

• The trends in McDonald’s’ external environment that are likely to have the greatest impact on the company’s ability to sustain a competitive advantage?

Answer

Task one:
1. Introduction: As per the information gained from the McDonald case study, in 1940, McDonald was established by McDonald brothers in San Bernardino, California. Dick and Mac were streaming their business by limiting their menu to burgers, drinks, fries. Ray Kroc joined with the brothers in 1954 and then McDonald started to flourish. They founded McDonald Corporation in 1955 (Mcdonalds.com 2020). Their vision was to establish McDonald Franchises in the United State. Kroc elaborates his philosophy as "three-legged stool"; where one leg was a parental corporation, the second was franchises and the third one was MacDonald suppliers. Ray Kroc built a larger network among the owner of stores and management system of the supply chain.

1.1 What are the strategic issues found in the McDonald case study that need to be addressed by McDonald?
Perception is one of the critical challenges for all fast food companies. The demand and popularity of the organisation provide competitive advantage (Howse et al. 2018). The expectation of the customers becomes high day by day. Similarly, the demand of the health conscious food is also high. In the present era, the demand for fast food is too high. Many companies try to get the top level in this industry. As per the McDonald case study, the menu of McDonald Company was established in 1955. Therefore, it is too old and the management doesn't change their menu for a long time. The quality of food in McDonald is very unhealthy and they are old fashioned. The supply chain of this company is becoming complex and it depends on the production and the supply of the goods. The company should give importance to their local ingredients.

The company has its operational complexity like other large companies. The company doesn't change its group of core customers. The other issue noted in the McDonald case study happened at the outside of the restaurant. For example, the other restaurants in china had caught in the food safety scandal. These problems make a significant impact on their industry.

Real estate problems are one of the serious problems of McDonald. The company faced activist investor over the years. The profits which are generated from the company's real estate is understandable. They are suffering from financial complexity. Moreover, the company have no funds to pay for the lands or the building.

Appeal to millennial is one of the recorded problems. In between 2011 to 2014, the 19-21 years olds increase their interest to go to a fast-casual restaurant by 2.3% while their McDonald’s trip decreases by 12.95. The customers who are 22-37 years old they increased their outing in fast-casual by 5.2% while at the same time their outing for McDonald was decreasing. They want to take "fast and healthy" food insist on "fast and convenient food".

McDonald has faced the labour issue as identified in the McDonald case study. The workers cannot impress customers. Their behaviour is very rude. They have a lack of staff at the peak time i.e. breakfast and lunch. 

1.2 Core competencies of McDonald

1. Five forces analysis: MacDonald is a famous fast-food chain around the global business. The five forces analysis of porter discussed the strength of this company explored in the McDonald case study. Around 375,000 employees are worked with this company and the income of this company is more than $24 billion.

The core competencies are concepts observed in the McDonald case study where a company obtain different skills or techniques that make them different from others in the market. The core competencies of the MacDonald are the trained and experienced staff. They are trained from Hamburger Company which was established by Ray Kroc. They are also work in several reputed restaurants which make them experienced. Product development is another core competency. This McDonald case study analysis signifies that the company maintains a high standard of product quality throughout the world. They can fulfil the demands of the population in an area which build their success. Technologies are such another competency. MacDonald Company adopts several new technologies to keep communication among the managers of different outlets. These technologies are also used in their training tools. The location makes a positive impact on this company. Most of the restaurant located in the self-standing building, beside the gas stations, airports, highroads. It is benefited for this company. The best way to expand the business is to take franchises. Through this way the products can distribute nationally and international market.

1.3 Business model of McDonald
McDonald’s internationalization strategy: Franchises mean an authorization which is granted by a specific company or government. They enable them to continue their commercial activity. McDonald's has several franchises throughout the world. According to the McDonald case study readings, it can help the company to spread its business throughout the world. It helps them to build their emperor globally and make them economically strong. Through this many people get a job and settle their life (Crawford 2015).

World's leading foodservice network is McDonald's franchise. They have more than 35,000 restaurants in 100 countries. Approximately 70 million people worked in there. In the United States there are nearly 13,000 franchises and outside of the U.S its number over 17,000. In India, there are 400 stores. Bakshi’s CPRL and Westlife Development operate the company in India. The company earns a huge amount from the rental payments from franchisees. In 2010-2015 it rose 26% (Forbes.com 2020). The company opens joint ventures of McDonald's Corporation or other local companies as noted in the McDonald case study (Nadolny and Ryan 2015).

The founder of McDonald was written the value proposition of this company. The value proposition of this company stands for friendliness, cleanliness, consistency. Moreover, the company has chosen the large segment of customer where the demographic, gender, income of the people are included. They deliver different types of offers by which everybody can purchase their product. Moreover, the company has built a strong relationship with the customers and the also opened online delivery service to fulfil the demand of the customer. In essence, the company distribute its product to the restaurants for enhancing the sale.

Various strategies how McDonald earns money

• The company should make their product unique. This uniqueness of their products attracts customers. The increasing number of customers helps to increase the productivity of the company moreover the company to earn more money (Madalina 2015).
• McDonald should implement various technologies in their business. It helps to produce more products quickly and also it helps to keep communication among the managers.
• The company should open more franchises at a proper location. Location plays an important role to furnish the economy of business.
• The company should concern about the present economic condition of a certain country before investment. McDonald Company should prepare a proper market plan (Thompson, Strickland and Gamble 2015).

Conclusions
It is concluded from the McDonald case study analysis that McDonald is a famous company of fast food in the present market. The company is mainly known for its widely distributed franchises. Ray Kroc one of the business partners encourages their owner to maintain the four main principles i.e. quality, service, cleanliness and value. The company faced several problems currently. Operational complexity and real estate issue in the American market provides challenges to the organisation. There are several core competencies which help to overcome these problems. By taking various strategies they can earn huge amount of money. They implement a different kind of business plan to established well business. 

Task 2
McDonald’s’ external environment that is likely to have the greatest impact on the company’s ability to sustain a competitive advantage
External analysis is mainly done in the fast-food restaurant chain in global business. This is strategic management that helps to identify the external factors, opportunities, challenges or threats.

The present McDonald case study analysis illustrates that political factors are affecting McDonald's business as several policies and governmental rules make an effect on the economy of the McDonald's business. I think political condition can determine the developing business path. There are several factors involves in the fast-food chain industries like

• International trade agreements are increased (com 2020).
• The government specified a guideline for diet and health.
• Implementation of public health policies.

McDonald's corporations expand their multinational business which is based on international trade. It can enhance supply chains globally. The government implements policies focused on diet and health purpose. They give some pressures on McDonald's which is a threat for this company. McDonald's marketing mix or 4P is included in their business strategies are which is a healthful option. The company input more strategies to improve its political factors.

Product mix
MacDonald has a product mix concept based on the McDonald case study and the main lead delivers food and beverages product. Ham burgers and sandwiches, salads, chicken and fish, desserts and snacks are included in the product mix strategy

Place marketing mix
The location is the most important thing to expand a business. In essence, the company mainly choose the Metropolitan cities to launch their outlets and also adopts mobile apps for delivery of the product.

Promotional mix
The company is highly concerned about the advertisement, sales promotion as well as direct marketing segment because it is the main element which enhance the business.

Pricing strategy
McDonald offers their products in a discount. Moreover, they also offer combo meal which is the pricing strategy.

Economic factors can change the business directly or indirectly. Different factors like the global economy, regional economy and local economy makes an impact on McDonald industry. The slow but stable economy makes opportunities for McDonald. In business chain restaurant bit increase the stability. The U.S. market is the biggest economic contributor to McDonald Company. The slowdown of the Chinese company is a threat to the McDonalds market. McDonald's revenues are majorly contributed by the Chinese market. They have opportunities for rapid growth in developing countries such as Asia. It can help them to become economically strong. Disposable income in the UK was £29,600 in the financial year ending and it has been increasing with time (Telang and Deshpande 2019). I think the disposable income of the customers will help to spend money on buying food items. After Brexit, the economic condition of the UK has degraded and the GDP growth has been slowed down (Howse et al. 2018).

Social conditions in different aspects can support the McDonalds business. The customer's behaviours influence the business. Rising incomes among the people of the UK make opportunities for the company. The customers have a trend to buy fast food. They avoid cooking at home. It increases the sale of the Company. According to me, the tight schedule and busy lifestyle of U.S, people make opportunities to the Company. They produce satisfying products which attract the sociocultural factors. The trend of healthy lifestyle makes a threat for McDonalds Company. Many people avoid fast food which decreases the productivity of the company. It influences the economic background and slowdown their sales rate (Rodrigues, Nikhil and Jacob2016).

Technological factors also influence the McDonald Company. The success level is depending on the adaptation power of the company. They can be benefited by technological trends and resources. McDonald can improve their business effectiveness by developing the research and development teams. I think it is an opportunity for them. They have a higher level of R&D activity among competitors. The company can maximize their productivity by applying more automation. Such changes are required for McDonald's to increase their productivity. The Company should improve mobile service. By this, they can reach to the customers via mobile app. They started their business through mobile services.

Legal systems and new laws can change the external environment of the business. Health regulation acts on fast food impose on the schools and workplaces. Moreover, the Food Safety Act 1990 can be a major threat for the fast food industry (Food.gov.uk 2020). It is a great threat to the company. I believe the company's main product is fast food. Considering the McDonald case study, it can be stated that the sales of these in those places are decreasing their productivity. Animal welfare regulation can make a thread for the company. It increases the cost of suppliers in McDonald's. The company also faced the threat of wages. It makes high the prices of the products (Balogun, Sotoudehniakarani and McDonald 2017).

Environment factors obtained in the McDonald case study refer to how ecological trends influence the business and customers. Environmental programs are improved by McDonalds Corporation which helps them in business sustainability and gives strength to their bands. They have opportunities for the rising interest in environmental programs corporately and sustainable business practice. It can help the company to grow potentially (Perera 2017). According to me, climate change in a certain region is a threat to the company. It directly related to the availability of food and their supplies. Company's supply chain can be influenced by it. It highlights the factors of McDonald.

As per the McDonald case study, U.S. faced Economic recession. The rate of unemployment cut off to 10.0 to 5.1 per cent. It makes a good and bad effect in the fast-food industry. The supply cost if the restaurant is increased. The healthier foods involved a high price where the customers are sensitive in that McDonald case study. It makes a difficult situation for the company.

Reference List
Balgun, A.O., Sotoudehniakarani, F. and McDonald, A.G., 2017. Thermo-kinetic, spectroscopic study of brewer’s spent grains and characterisation of their pyrolysis products. Journal of analytical and applied pyrolysis, 127, pp.8-16.

Crawford, A., 2015. McDonald's: A case study in glocalization. McDonald case study Journal of Global Business Issues, 9(1), p.11.

Howse, E., Hankey, C., Allman-Farinelli, M., Bauman, A. and Freeman, B., 2018. ‘Buying Salad Is a Lot More Expensive than Going to McDonalds’: Young Adults’ Views about What Influences Their Food Choices. Nutrients, 10(8), p.996.

Madalina, A., 2015. Innovative integration of social responsibility in business strategy.Annals-Economy Series, 6, pp.175-180.

Nadolny, A. and Ryan, S., 2015. McUniversities revisited: a comparison of university and McDonald's casual employee experiences in Australia. Studies in Higher Education, 40(1), pp.142-157.

Perera, R., 2017. The PESTLE analysis.Nerdynaut.

Rodrigues, J., Nikhil, S. and Jacob, S., 2016. Promotional Strategies of McDonalds and Market Effects.Journal of Management Research and Analysis, 3(1), pp.53-55.

Telang, A. and Deshpande, A., 2019. Keep calm and carry on: A crisis communication study of Cadbury and McDonalds. Management & Marketing, 11(1), pp.371-379.

Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts and readings. McDonald case study McGraw-Hill Education.

Wijaya, I.P.S.A. and Nurcaya, I.N., 2018. KepuasanPelangganMemediasiKualitasProdukdanKewajaranHargaTerhadapLoyalitasMerekMcdonalds di Kota Denpasar.E-JurnalManajemenUniversitasUdayana, 6(3), pp.23-34.

Food Standards Agency. 2020. Key Regulations. [online] Available at: [Accessed 23 September 2020].

Mcdonalds.com. 2020. Mcdonald's: Burgers, Fries & More. Quality Ingredients.. [online] Available at: [Accessed 23 September 2020].

Team, T., 2020. Here's How Mcdonald's Is Now Seeking To Attract Millennials. McDonald case study [online] Forbes. Available at: [Accessed 23 September 2020].