BA (Hons) Business Administration

Programme; Business Strategy

Module Leader: Mr. Ron Wells November

Lecturer: Mr Vinod Bridglalsingh 2013
Tutor

GROUP:

Ephraem Robinson - Student No: 14014560

Brian Dabideen – Student No: 14014866

Christelle Jno Baptiste – Student No: 13082852

Programme Delivered by:

CTS College of Business and Computer Science Ltd

Trinidad West, Indies

Submission Date: 29/11/2013

Total Word Count:

Main Body: (excluding tables)

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Table of Contents

Introduction .................................................................................................................................................. 3

"Plan to win" Strategy.................................................................………………………………………………………..…….3

Innovation/Adaptation Strategy……………………………………………………………………………………………………………...4
Differentiation Strategy....................................…………………………………………………………………………………..……6

Customer Orientation Strategy......................................…………………………………………………………………………..7

Operational Effectiveness Strategy...............................................................................................................8
Theoretical Tools Used.................................................................................................................................9
Porters Five Forces Framework......................................................……………………………………………………..….10

The Ansoff Matrix ........................................................ .………………………………………………………………………...10

Conclusion….………………………………………………………………………………………………………………………………...........16
Appendix 1……………………………………………………………………………………………………………………………………………17
Appendix 2……………………………………………………………………………………………………………………………………………17
Group Contributions
Group Meeting Log
References…………………………………………………………………………………………………………………………………………….18

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Introduction

Strategies are important for all companies, regardless of their product or service. In monitoring
and evaluating the global marketing environment, corporations are better able to develop
marketing plans in identifying opportunities to pursue and threats to avoid, thereby allowing
the company to stay abreast of current business trends and keep surveillance on the
competition. Any thorough analysis in this regard will reduce the risk of failure and assist global
strategy planning and decision making. Effective strategic management culminates into
increased profit from sales, stable market and brand positioning and significant levels of
customer loyalty.

McDonalds is one of the most prominent food chains internationally and sales and market
share is being increasing despite some concerns being raised against the company. McDonalds
have been able to employ various strategies to develop and sustain their competitive
advantage in the market (Miranda, 2010) and in this report we intend to examine the impact of
those business strategies used.

“Plan to Win” Strategy

This has allowed for Mc Donald’s to have continuous years of international positive sales, with
growth beyond the industry average. This strategy includes a matrix of people, place, product,
price and promotion. This model perceives improvement in every thinkable angle of the
corporation. The main effort of this strategy is to maintain the firm’s unique power, additional
benefits from experience and the development of its market share.

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Innovation/ Adaptation Strategy

This competitive strategy provides new and different products and services via added features,
and new methods of production. McDonalds is a prominent international icon of globalization,
being among the first companies in the fast food industry to globalize. McDonald’s initial,
approach was to take their harmonized American practices to external markets. This approach
was met with resistance which mandated the company to shift to an internationalization
strategy where they adapted their products and customer service to the domestic country. One

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such approach was used in China where McDonalds introduced “Aunt and Uncle McDonald”
because of that country’s emphasis on family values (Anon., 2008).

In keeping costs at a minimum, McDonald’s maintains their production procedures when they
enter into new markets but frequently adapts product selections and service with the customs,
culture and traditions of the host country (Anon., 2008). Internationalization has become so
engrained in McDonald’s culture that they’ve coined the term “Mc Donaldization,” (Anon.,
2008).

One of the discernible examples of McDonald’s adjustment to local food preferences is its
change of items to adapt to local food availability. On the Canadian east coast, where lobster is
readily available, McDonald’s has developed the Mc Lobster, consisting of a lobster salad
sandwich. In Quebec, McDonald’s serves a local favourite; French fries covered with gravy and
cheese curds. In Egypt, the Mc Falafel was in response to a local cuisine preference and in
Finland, the Mc Luks, salmon burger is favoured over beef burgers (Anon., 2008).This
innovation has resulted in McDonald’s achieving growth and market share in the global market.

Their innovative approach was to “become global by acting local”, In the United States;
the McDonald's brand has been synonymous with affordable hamburgers for decades. Mc
Donald’s decentralized resources from centralized corporate functions to regional managers,
who were encouraged to customize local menus and store amenities to suit local tastes. Until
2003, McDonald’s had a common hamburger menu worldwide. Today it serves breakfast
porridge in the United Kingdom, soup in Portugal, and burgers that are topped with French
cheese in France (Anon., 2012).

McDonald is considered to be one of the most innovative companies in America today Michael
Lewis, (2013) cited , Jim Cramer, who recently compared and contrasted two companies by
indicating while there are companies that do not have any innovative surprise factor. There are
two companies that are always coming up with new innovations, the first one is Apple, and the
second is McDonald’s. This business experienced a healthy global 2.6 % increase in restaurant
sales for May. The development that accounted for this was a late-night breakfast menu
according to McDonald's management (Lewis, 2013).
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While this organisation can be considered the most innovative of the last decade, it’s all about
looking forward and not back. The use of franchising provides various perspectives that lead to
innovation for products, market share, competitive advantage and solutions. Franchisees agree
to operate their restaurants in the “McDonald’s way” but there remains room for innovation
(Anon., 2012).

Differentation Strategy

Differentiation allows companies to provide products that are different or offer more features
than their competitors (Boundless,2013). At McDonald’s they differentiate their services and
products from their competitors based on the location of the store and the franchise owner
support. Usually at McDonald's customers can find facilities which include convenient drive
thru, warm happy themes, clean restrooms, breakfast menu, lunch menu , and team members
who are sometimes multilingual (Miranda, 2010).

WI-FI is provided in over 14,000 restaurants which is a free service for the customers allowing
them to enjoy their meal while working. It is expected by the business officials that free Wi-Fi
will help draw customer to visit a local restaurant during less crowded times (Anon., n.d.)
thereby encouraging customers to purchase Mc Cafe coffee drinks or regular value meals,
appreciating the value in their food and their services (Miranda, 2010). McDonald's also
employs successfully a differentiated market segmentation strategy by targeting the family unit
and particularly children with their happy meal. Their products’ flavours and names are unique
to them, and the brand of McDonalds is differentiated by the looks and tastes of their foods.

In the business life cycle, Mc Donald’s is a mature company focusing on competition and their
product line’s survival. The culture of McDonald’s is keeping their customers happy and to do
whatever they can to create a wider customer base along with a product line that satisfies any
taste (Miranda, 2010).

The Corporation has tried both cost leadership and differentiation as strategies to beat the
competition. It is known for their low price product line and has been competitive with other
establishments in the business (Anon., 2012).

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An illustration of differentiation is Mc Donald’s dollar menu. They were one of the first in the
industry to do a very low-cost smaller menu of items on their product line that cost only $1. As
this was marketed, other fast-food businesses started similar promotions. Focus strategies
would not work as well in this business mainly because the product line is similar in all areas of
the world. McDonald’s has also attempted a differentiation strategy with different products like
the McRib and the Big Mac (Miranda, 2010). In order to maintain a competitive advantage
McDonalds manages switching cost and entry barriers by providing good, quality products that
are given at competitive prices to their customers, with excellent service.

Customer-Orientation Strategy

Customer-orientation competitive strategies focus on making customers happy through

exceptional customer service. The focus is on what the customer wants from the business and
how it is provided (Boundless, 2013). McDonald’s is probably the world’s best acknowledged
valuable brand holding a top share in the global, quick service restaurant segment on the
informal dining-out market in just about any country in which they do business (Anon., 2013).
As a leader in the fast food industry, McDonald’s is often specific. Some of the ways McDonald’s
handles the attacks on the media and competition is by setting up a marketing mix to highlight
the positive impacts this company. McDonald’s must keep the proper nature of its marketing
efforts to be on top and provide exactly what customers want (Anon., 2013).

Marketing and advertising mix concentrates on the product, prices, promotion, and placement
of an item in order to make it successful. Marketing and advertising strategies attributes
customer orientation, insight, and accessibility. It is observed that McDonald’s primary target
audience is children age groups 3-11 and their parents. McDonald’s understood how the parent
generates the buying decision, most likely based on price (Anon., 2013).

McDonald’s marketing strategies should be viewed traditionally in order to ascertain the larger
picture of the firm’s success. There have been numerous strategies since the invention of the
organisation that it's difficult to account on their behalf all, the two most memorable include
the development of the “Golden Arches” and also “Ronald McDonald”. These two icons have
given customers a mental image of what to take into consideration when they want quality
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food for a low price fast (Anon., 2013). McDonalds revolutionized the junk food industry and
placed itself as the market leader with low-priced, quality food and provided an entertaining
atmosphere for the children. These were the kind of environment the market wanted back then
and the firm answered in spades (Anon., 2013).

McDonald’s has made itself into the people friendly low cost restaurant in the fast food
business. They still try to keep their target market narrowed down to families, but others ought
to have attention, as well. They are focused on cutting delivery time and lowering the cost of
food. The computer operated machinery permits you to keep cost low by only requiring a few
employees to do the work of quite a lot (Anon., 2013). It is observed, many McDonald's have
dual drive-through to reduce wait time and to increase amount of customers served. They have
stuck to their core market throughout the years even through the changing times, by marketing
to the family market where as its competitors market to a broader base in some cases or to
different generations such as Burger King marketing to young adults.

McDonald’s way to retain its key strengths and consistency while continuing to evolve. Many
ideas for new menu items come from franchisees responding to customer demand. Developing
new products is crucial to any business even those that successfully relied on a limited menu for
many years (Anon., 2013). As consumer tastes change, menu invention injects interest allowing
the organisation to explore markets and menus formerly ignored to maintain its customers and
attract new ones. McDonald’s has taken price competition out of the picture because the
customer is of the opinion they have found quality, convenience, service, and value for their
dollar. However, McDonald’s still makes customers feel like they are getting a break in their
hectic day. Creating catch phrases are only one type of promotion the Corporation uses to keep
the restaurants at the top of the industry (Anon., 2013).

Operational Effectiveness Strategy

This approach seeks to improve the quality in areas such as employee productivity, customer
satisfaction, with the objective of increasing operational efficiency. These business activities are

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performed internally with a view to better serve its customers (Boundless, 2013). McDonalds is
certain that team of individuals who well trained with diverse background and experiences are
essential to their continued success by working together in an environment of respect. The
opportunity is provided to nurture the collective talents, develop leaders and reward
achievements (Anon., n.d.).

The company prides itself on customers feeling good about eating at McDonalds and wanting to
visit again. It’s also about raising their iconic brand to build consumers’ trust and maintain long-
term sustainable growth. The effectiveness of the operations in an increasingly demanding
market place is the strategic positioning of McDonalds to have its work force of today to see
themselves as tomorrow’s leaders. This is accomplished by encouraging franchises, leading
citizens who started as crew together with those who aspire to grow with and through the
organisation (Anon., 2012).

Within most successful organisations the management leads and control functional activities by
continuously measuring and improving the processes through standardisation. Communication
and automation must be included to close the gap and provide greater efficiency and
effectiveness which would mould these functions into a logical strategy for success (Anon.,
2002).

In recent times, customers have come to be increasingly aware of the impact of large
companies on the environment due to the vigilance of the media and other conservationist
groups. This has compelled companies to be more responsible and has forced a responsive
approach towards allocating and protecting natural resources. McDonald’s, unlike most,
employed many initiatives well before the media build up brought about change. They have
been applauded for their proactive attitude towards accomplishing environmental
sustainability. The consequences of these changes are noticeable along all properties of the
supply chain, ranging from the beef buying choices from suppliers to the type of lighting used in
each restaurant. As a frontrunner in the food industry, McDonald’s has the exclusive
opportunity to pressure toeing the line from other competitors and to set the bar on these
matters ( Penn State University, n.d.).

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Recently, the company’s suppliers got added demands to manage business in accordance with
the Corporation’s superior policies if they want to go on to enjoy the benefits of trading with
the Fortune 500 Company. In an effort to reinforce these policies, McDonalds initiates
sustainability award to compensate the supplier that best represents the McDonald’s vision,
principles, and values for sustainable resource. Qualifications for the award included the
humane handling of animals and application of programs that reduce impacts on the
environment and maintain and protect natural resources (Anon., 2013).This strategy ensures
service delivery to customers in accordance with the established policies, procedures and
changing demands.

• Strong competitor for all sit-down resturants

• Market leader in both domestic and
international markets
• Economies of scale due to its size.
Strengths • Lower risks due to worldwide business
diversifying
• Long-term economic growth as an international
of company
• Strong real estate protfolio

McDonald's • Outlet locations

• The brand is easily recognised amoung
competitors ans is very strong
• Agressive market planning
• Strong youth market

Weaknesses • Looming market saturation, which can lead to

difficulties in advertisinf new products.
• Fast growing and competitive market.
of • Income problems and huge compeition do not let
the range of production rise into value one but
McDonald's makes to diversify a range of cheap and quickly
made ones.

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Strategic Issues

Concerns currently facing the organization are summarised in the aforementioned table.
options that can be pursued to neutralize some of the concerns will include;

 Reduction of employee training spending by lowering employee turnover. This can be

achieved by only employing highly motivated persons, using model on the job
employees to facilitate the training and motivate employees by rewards and/or
premiums.
 Taking advantage of the organic food industry popularity by making a line of organic
food on the menu.
 Continuous research and product development,
 innovation,
 standardization,
 following healthy food trends and
 positive media imaging

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Concerns currently facing the Mc Donald’s Corporation

Theoretical Analysis Tools Used

An analysis of the dynamics of the industry and the market is essential to ensure effective and
successful competitive advantage. The forces which drive competition and market
attractiveness are created by the interaction of five different forces acting on a business.

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In using the Porters Five Forces Framework analysis tool of Michael E. Porter, McDonald's is
analyzed as having a high buyer power because of its many restaurants (Miranda, 2010). The
supplier power is also high because its products can be bought from different providers. The
Risk of substitute products or services is low because their recipes are unique to their brand,
however there are many competitors. Threat of new entrants is high and the threat of
competition is high because there are other types of fast food restaurants to eat from that
offers some of the key menu items that McDonald's offers like the Dollar Menu (Anon., 2012).

The Ansoff Matrix describes a company's possible growth opportunities with current as well as
new markets and products (Boundless, 2013). The possibilities according to this theory deal
with four growth possibilities, including market penetration and development, product
development and diversification. In all strategic approaches examined McDonald’s applied this
theory to maintain its competitive advantage over its rivals.

Market development targets new customers in new sectors in order to develop the potential
market. New markets can be seen as geographic, demographic, institutional, or psychographic.
Another avenue is to expand sales through new uses for the product. Market attractiveness is
determined by the degree of measurability, accessibility and the size and profits of the market
(Boundless, 2013).

Product development is a process which involves the idea generation, product design, and
detail engineering that involves market study and marketing analysis. Companies usually see
new product development as the first stage in the strategic process of the product life used to
maintain and grow market share (Boundless, 2013). Diversification increases value through
sales volume resulting from new products and new markets. At the business unit level,
expansion is most likely to grow into a new sector of the industry where business already exists
(Boundless, 2013).

To evaluate or re-evaluate marketing strategies Seven P’s Formula is used to develop a

marketing strategy. They are price, promotion, place, packaging, positioning and people
(Tracey, 2004). These seven Ps must be continuously revisited to achieve maximum result as
products, market and customers’ needs change over time. Organisations need to develop
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continuous business assessments to determine if the right product or services is delivered to
the customer (Tracey, 2004). Compared to your competitors, is your product or service superior
in a significant way to others available on the market? Should you be offering this product or
service at all in the current marketplace?

The second P in the formula is price, re-examining the price of products and services needs to
be an ongoing exercise to determine if the price is still relevant to the current market. At times
it may be appropriate to raise prices or lower prices because, many companies have found that
the profitability of certain products or services doesn't validate the amount of effort and
resources that go into production (Tracey, 2004).

The third component is promotion, which includes the ways customers know about your
products or services and how you then market and sell to them. By simply changing the
headline in an advertisement can promote higher sales to your product or service. Whatever
mode of marketing and sales an organisation is using today will stop working. In either case,
approaches of marketing and sales will eventually stop working, and new marketing and
advertising approaches, and strategies must be devised (Tracey, 2004).

The fourth P in the marketing mix is the place where the product or service is actually sold.
Some companies sell their products in various different places by using different approaches. In
each case the organisation will make the best choice in relation to the best place for the
customer to receive essential information to make an informed decision before purchasing
(Tracey, 2004).

The fifth element in the marketing mix is the packaging. Organisation must see through the
eyes of a customer how their product or service is packaged. Customers have different reaction
to changes in the packaging or external appearance of a product (Tracey, 2004). Packaging also
refers to sales personnel and their attire, your offices, waiting rooms, brochures and every
visual element about the organisation. Everything helps or hurts in relation to a customer's
confidence about dealing with you (Tracey, 2004).

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Positioning could help in determining how to create the ideal impression in the hearts and mine
of the customer and also what place the organisation would like to have. What can be done to
get the customers to think and talk about the product in that specific way? What changes
businesses need to apply in their interaction with customers today, in order to be seen as the
very best choice for customers of the future? (Tracey, 2004). The final P of the marketing mix is
people. Persons are responsible for every element of the sales and marketing strategic activities
both inside and outside of the business. The success in any business depends on who is
responsible for carrying out each task, attracting the right person for the right position can be
significant in moving forward. Many good quality business plans developed have not gotten off
the ground because the persons who created them could not find the key people to execute
those plans (Tracey, 2004)

There have been previous research studies on McDonald Corporation using the Ansoff Matrix
to describe a company's possible growth opportunities within current as well as new markets
and products (Boundless, 2013). McDonald’s has introduced the American concept of fast food
and franchising in many foreign markets resulting in a negative reaction to their globalisation
thrust, due to a lack of market entry analysis. This theory when applied assisted in maintaining
the competitive advantage over its rivals.

The marketing strategies has a historical perspective to it, over the years there have been many
strategic approaches however the two that stands out are the Golden Arches and Ronald
McDonald. This has resulted in customers having a mental image of what to look for when low
priced quality food is needed. The firm positioned itself as the market leader when it
revolutionised the fast food industry by creating an entertaining atmosphere for children. The
Seven Ps strategy as illustrated by (Tracey, 2004) takes into consideration the evaluation and
re-evaluation of market strategies by focusing on the place where your product or service is
actually sold. Some companies sell their products in various different places by using different
approaches. Organisations need to develop the habit of doing honest business assessments to
determine if the right product or services is delivered to the customer.

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Conclusion and Reflective Report

This task has been a very challenging one, our expectations was that the workload would be
split equally amongst the members of the team however as each person had multiple roles to
fulfil on a daily basis separate and apart from our university commitments. Team work is a very
unique activity which entails a collaborative effort by all concerned.

We were able to develop our communication strengths. Discussions ranged from face to face
meetings, emails, and Skype video conferring. We were able to capitalize on each person’s
strength to get the job done on time.

Information was abundant and easily accessible.

In terms of personal development, this module has helped us to broaden our scope of work and

has allowed us the opportunity to introspectively analyse our strengths and weaknesses which

is critical in the real world.

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Appendix 1

Appendix 2

BUSINESS STRATEGY ASSIGNMENT 1

GROUP MEMBER CONTRIBUTIONS

NAME OF GROUP MEMBER CONTRIBUTION

1. Brian Dabideen Information, analysis, presentation

2. Ephraem Robinson Information, analysis, presentation
3. Christelle Jno Baptiste Information, final editing of presentation

GROUP MEETING LOG

DATE TIME

18/11/13 4:00 – 5:00 PM

20/11/13 4:00 – 5:00 PM
24/11/13 5:00 – 5:30 PM
25/11/13 5:00 – 5:30 PM
OTHER COMMUNICATION DONE VIA EMAIL BETWEEN 18 – 28/11/13

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Available at: www.personal.psu.edu/lyd5003/blogs/portfolio/McDonald'sCorporateReport.pdf_br
[Accessed 25th November 2013].

Anon., 2002. Strategy is wasted without "operational effectiveness". [Online]

Available at: http://www.hci.com.au/hcisite2/journal/Operational%20effectiveness%2001.htm
[Accessed 27th November 2013].

Anon., 2008. McDonald Corporation Executive Summary. [Online]

Available at: www.personal.psu.edu/lyd5003/blogs/portfolio/McDonald'sCorporateReport.pdf_br
[Accessed 25th November 2013].

Anon., 2012. McDonald's Successful Innovation Strategy - Be Global, Act. [Online]

Available at: http://blog.teknirvana.com/2012/10/mcdonalds-successful-innovation.html
[Accessed 26th November 2013].

Anon., 2013. Mc Donalds"s. [Online]

Available at: http://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html
[Accessed 21st November 2013].

Anon., 2013. McDonald’s Strategic Marketing Mix. [Online]

Available at: http://www.assignmentpoint.com/business/mcdonalds-strategic-marketing-mix.html
[Accessed 26th November 2013].

Anon., n.d. Mc Donalds Case Analysis. [Online]

Available at: http://www.assignmentpoint.com/business/mcdonalds-case-analysis.html
[Accessed 26th November 2013].

Boundless, 2013. Sustainable Competitive Advantage. [Online]

Available at: https://www.boundless.com
[Accessed 24th November 2013].

Lewis, M., 2013. McDonald's: More Innovative Than Apple?. [Online]

Available at: http://www.dailyfinance.com/2013/06/13/mcdonalds-more-innovative-than-apple/
[Accessed 26th November 2013].

Miranda, B., 2010. Mc Donalds"s. [Online]

Available at: http://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html
[Accessed 21st November 2013].

Tracey, B., 2004. The seven P of Marketing. [Online]

Available at: http://www.entrepreneur.com/article/70824
[Accessed 27th November 2013].

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