Strategic management Essay Writing Analysis: Leadership analysis in Mc Donald’s Corporation
Strategic management Essay Writing Analysis Overview:
Introduction
McDonalds Corporation is one of the largest fast food chains providing hamburgers; the company serves more than 68 million customers in more than 119 countries. The company has its head quarters in US and has begun its operations in the year 1940. Initially the company was started as a barbecue restaurant by Richard and Maurice McDonald (Dahlen, Lange and Smith 2009). The restaurant is operated generally as an affiliate or franchise or by the organization itself. The corporation major revenue comes from the fees, rent and royalties paid by the franchisees of the company and also from the sales from the restaurants operated by the company itself (Raju 2012). The company basically sells, cheese burgers, hamburgers, French fries, soft drinks, shakes, chicken burgers and desserts etc. with the changes in the demands the company also changes its menu in recent the company has also started offering wraps, salads, smoothies and so on. The company tries to provide the food based on the culture of the country it is serving. The company operates through its large chain stores and has been a highly successful company in the retail and chain restaurant business (Marcus 2012).
In what way the company can be considered as successful
There are several manners in which the company is considered to be successful. The company can be considered as successful in the following terms:
Profitability: In financial terms the company is growing its profitability and the shareholders value, the company worldwide revenues has grown by approx 12 % in the year 2011 and is also at the all time high of $27 billion US dollars, and is showing the growing performance from the past nine consecutive years. Even after a high increase in the consumers expenses world wide the company still has managed to grow its profitability. The company also has increased its profit margin by .6 % and has reached 31.6 % in the year 2011, this resulted to an increase in the company income by 11 % and this has grown the EPS of the company by 15 % approx (Marcus 2012).
Size: The Company operates through a large chain network. The company is also very large in terms of its business operations. The company currently operates from more than 31000 chain stores and is also operating in more than 119 countries. The company serves more than 52 million people per day in more than 10 countries. The company restaurants are owned and managed by independent individual’s world wide. The company has an average of 40 employees in each of its restaurants and thus employee’s more than 1.2 people world wide. The size can also be evaluated by the massive profits the company earns per day (McDonalds (NYSE:MCD) report: Market share, margins on the rise 2012).
Market Share: The Company is the large market holder in the retail restaurant business. The company vision is to be the quickest service restaurant in the world. With the increasing revenues day by day and year by year, the company is growing with a large pace. The company has increased its revenues by approximately 12% in the year 2011. In the current year and in the first quarter the company has shown a high growth in its sales revenue and has been in a rise to capture large part of the market (Donaldson and O’Toole 2007). The company is also successful in terms of the rising growth of the company is over all terms, the company is rising in its restaurant chains and also opening new stores in new countries. The company is expanding vertically and is increasing its operational excellence. Looking at the market trend, burger king which is the second largest retail food chain just have 11200 chain stores, this shows the high market share of McDonalds in the industry (McDonalds (NYSE:MCD) report: Market share, margins on the rise 2012).
Porters five force model
The five forces includes,
Competition: The food and restaurant industry is highly competitive. There are several small business enterprises in the food industry which fight for increasing their customer base. Looking at McDonald it can be said that there are several players in the industry with whom the company faces competition this mainly includes Burger King, which is the second largest food chain (Carter, Clegg, Kornberger and Schweitzer 2011).
Ease of entry: thought it seems to be difficult to enter the restaurant chain business, it also seems to be hard to create a distinct brand name also. There is a high investment requirement to enter the chain store business. Large players like McDonalds make it more and more difficult for smaller firms to enter the market get succeeded in the market place, as the new entrant may face price competition due to the company’s large economies of scale (Olson 2009).
Substitution effect: there are several substitutes available in the industry, as there are several products that can be chosen by people. As the company products can be substituted by other local vendor burgers, dairy products and other eatables and so on.
Suppliers bargaining power: The bargaining power of suppliers will be relatively small due to the company huge demand for products and large suppliers easily available in the market (Olson 2009).
Bargaining power of buyers: the bargaining power of buyers is also relatively small in this fast food industry.
PESTEL Analysis
Political factors: the political factors have an high impact on the company operations. Government controls the marketing activities of the fast food restaurants and this impact the operational activities of the company, with the changes in these policies the company operations gets affected (Olson 2009).
Economic: The Company also highly impacted by the economic factors within the economy, as the company is dealing with the macro environment the company is impacted by the global supply and demand of the currencies exchange. The company is also affected by the changes in the economic policies alike the change in taxation policy (Olson 2009).
Social factors: With the changes in the social factors all around the world the company is also highly impacted by these factors. With increasing social life of people due to increase in the level of income of people the demand for quality food has increased in the recent periods.
Technological factors: this does not have a high impact on the company and nor have a high macro impact on the business factor for the company (Olson 2009).
Environmental Factors: being the highest consumer of potatoes, chicken and beef, the company faces large critics from the environmentalists. As this has an impact on the green house effect on the environment and thus impacts the company in an indirect manner.
Legal factors: There are several legal procedures that the company must follow in order to meet the certification requirements associated with quality.
Special facts about the company
The major facts that are special about the company are the consistency in the taste and quality which it offers across the globe. The company also has the speciality to provide food according to the taste and preference related to the religion of the countries. Looking at the example the company does not provide beef burgers in Asian countries because of the religious factors. The company also provides taste according to the preference of the country (Ferrell and Hartline 2010). The company provides tastes based on the customers preferences and also tries to provide customers with what they demand. The company tries to launch different products from time to time in order to keep the market under control. The company also has the speciality that it is the best employer for the people around the world in each community it serves (Olson 2009). The company also has the speciality that it delivers the operational excellence in each community and restaurant from which it serves the customers across the globe.
The company also has the speciality of providing the best quality food at reasonable rates with high cleanliness, and value for the customers. The company has the speciality to provide smile to its customers by delivering quality food at reasonable prices to each individual customer. The company also specializes in providing high quality burgers which are highly famous among customers worldwide (Reid and Bojanic 2009). The company also offers French fries of high quality and consistent taste which are liked by the customers; the company also launches different ingredient tastes flavours at different countries as per the taste and preference of the customers of the community (McDonald’s Recipe for Success Brought New CEO to the Table 2012).
Success factors of the company
There are several success factors of the company which has made the company to rule around the world in the restaurant chain business. The success factors of the company mainly include:
- Franchising: this is the major success factor of the company. Franchising helps the company to capture individual talent world wide and with keeping a control on its brand, pricing and menu (Phillips 2012).
- Expansion internationally: the company has its presence in more than 119 countries. The company is also huge in US, the company main success factor is that it has expanded widely in geographical terms and has gathered large number of customers worldwide (Pride and Ferrell 2011).
- Global exposure but does local business: the company even being highly global perform business operations and provide menu which suits the local markets. The company provides tailor made offerings to its worldwide customers. The company offers products which suits the local plate (Raju 2012).
- Brand is its identity: the company success factor is its brand value. The company brand is among the most valuable brands in the world and this is also universally and easily recognized (Phillips 2012).
- New and old menu: the company menu mainly sticks to its some favourite old menu like the Big Mac or the chicken McNuggets, however the company keeps adding and deleting items from its menu and is also experimenting different tastes as per the popularity of local tastes and preferences (Pride and Ferrell 2011).
- Size of meals: This is also one of the most successful strategies of the company. The company menu offers meals size for every kind of customers and offers meals of all size and shapes. The company offers super size range of its meal for the over obesity customers and also has small size meals fro the smaller appetite customers base (Fyall and Garrod 2005).
- Marketing tie ups and sponsorships: the company keeps its regular promotions campaigns all around the world. The company teams up with several media partners, mainly the film companies. The company also launches several schemes related to several products and promote its products in an aggressive manner, which boosts its sales and revenues (Pride and Ferrell 2011).
- Lower Prices: the company success factor is also the lower prices it charges from customers for its high quality food all around the world. The company works on fixed margin concept and earns least revenue per product and thus has reached a level that millions of customers visit the door steps of its restaurants everyday (Phillips 2012).
- Recruitment of high talent: Millions of young individuals get their first job at McDonalds. The company provide excellent training to its staff and also provides on the job training to the new staff recruited. The company is also among the top best employers in the world (Raju 2012).
10. WI FI facility: The Company also offers the free wi-fi facility to the customer’s world wide. This helps the customers to remain connected with their work while taking their lunch or break fasts and dinner (Phillips 2012).
Recommended strategies to remain successful
It can be recommended to the company that the company must launch new schemes from time to time in order to bring in more and more customers. The company must also launch some scheme related to the prizes or lucky draw each day and some mega draw for the visiting customers who will be announced each day and every month and every year. This scheme will increase the number of customers visiting the company outlet and thus will increase the profitability of the company many folds. The company is also recommended that the company must announce some product or food which will be special per day, in terms of taste quality and quantity, to provide customers with options to have an excellent taste each day (Raju 2012).
In this internet world the company must also focus on promoting its brand online. The company uses very little online marketing strategies which is the need of the period. The company is recommended to promote its brand at several websites and can also announce several online schemes and offers (Thyne and Laws 2004). The company is also recommended to make tie up with multinational organization sand supply its food products in the corporate parties and events in order to increase its revenues. This will highly boost the company profitability. The company is also recommended to issue several home delivery schemes in order to grab large number of customers and provide them with the service to remain at home and enjoy the taste of the company.
Conclusion
From the above analysis of the McDonalds Company, its special factors and the success factors it has it can be concluded that the company has adopted the best strategies which cannot be failed in any of the global market. This is the success story from which learning’s can be taken to initiate global businesses. Each success factor of the company has its own prevalence an importance. The company is consistent in its performance in all the markets and has been a hit in terms of the quality and service it offers. It can also be concluded that the company has a large market share and has a high customer loyalty. The company adopts several marketing strategy which boosts its sales globally and also have several tie ups with the film industry. The company offers products to a wide range of customer base and offers a meal for each segment of customers. The company also offers low prices food and products which cannot beat by any other competitor. The company is price maker and not the price taker. The company sets its own prices and does not depend on the movement of the market demand and supply factors.
Strategic Drift within the organization:
Strategic Drift can be considered as the deviations in the planned strategy, which leads to unexpected outcomes of the strategic initiatives. Strategic drifts are the misfit of the organization’s actions with the strategy. Frequent strategic drifts shows the weaker planning and incompetence of the management of the organization.
The problem of strategic drift can be aligned with the failure of leadership within the organization. As the strategy formation within the organization is the prime task undertaken by the leader of the organization, the competence and skills of the leader can be proved quite important in avoiding any drift within the strategy of the organization. Failure of a leader can lead to mismanagement of the proper accomplishment of a particular strategy which leads the strategy towards an unexpected outcome (Dziri, 2011).
The evaluation of the role of leadership in the strategic drift can be revealed with the help of the example of Research in Motion Limited (RIM) and Wal-Mart. In both of the organization strategies drift has taken place which lead to harm the company at different frontiers.
Strategic drift in Research in Motion Limited (RIM)
Research in Motion limited has regarded as one of the most prominent business organization which is engaging in the manufacturing of Smartphone of BlackBerry. The company has registered a strategic drift in its new product development strategy. The company has undertaken stability strategy at corporate level according to which the company has not launched any new product within the market since August 2010. The prime motive behind this strategy of the company was to cultivate profit from the Blackberry Smartphone, which is one of the most popular products of the year of the company. However, by the time the company has witnessed drift in this strategy when its close competitors like Apple, Sony acquired its market share by producing some of the innovative products frequent basis. For the second quarter of the year 2011, the company has registered that its share value has dropped by 57%. Along with this market share and revenues of the company also has dropped quite significantly as per the unexpected drifts in the strategy (Lai, 2011).
The failure of strategic and long term approach of the leader of the company is the prime reason behind this strategic drift. The ineffective and inappropriate estimation and forecasting of the demand of the company is the main cause behind the adoption of inappropriate strategy for the organization. Forecasting of future demand and trend is one of the utmost responsibilities of the leader. In the case of RIM, the leadership of the company proved quite failed. In addition to this, for a leader, it is quite essential to have progressive and innovative approach which can be proved quite helpful for the organization to beat its competitors. Along with this, the case of RIM has also reflected that inefficiency of the leader to change its plans and strategies according to situation can also be proved a crucial reason behind the strategic drift (Decloet, 2012).
Strategic drift in Wal-Mart’s case
Wal-Mart, world’s giant global retailer, has also seen a strategic drift in its business expansion strategy in Germany. As per its global business expansion strategy, the company undertook the decision to make investment in the country to have a strategic business expansion (Saee 2006). The prime motive behind this strategy of the company is to register its remarkable presence in the market of the Germany so that it can be able to be market leader of the new market and address problems of its domestic market. However, by the time this, business expansion strategy was undergone a dramatic drift in which, the operations of the company within the country has changed or become unprofitable in the existing period of time. In this direction, The Company has to wind up its business operations and investment made within the country (Knorr, & Arndt, 2006).
The prime reason behind this strategic drift faced by the company is the failure of the leadership quality to comply with changed culture and business environment. When a company decides to go in a new geographical market for business environment, it has to face a number of different cross cultural and external environmental issues while getting established within the new market. In this context, the role of leader in this regard is quite important. A good leader helps the subordinates to cope up with new business condition. Self adaptation according to the surrounding environment is one of the most crucial and essential feature of the nature of the leader. In the case of Wal-Mart in Germany is the example of the incompetency of the leader of the organization to reveal some of crucial and distinguished feature of the business environment of the country, which leads to improper and inadequate strategies to address cultural differences between both the countries. In addition to this, the company has made some frequent changes in the leadership of the organization in Germany that did not allow any leader to have in depth understanding of the market of the country which led to the strategic drift (Clark, 2006).
On the basis of the review of both the cases, it can be understood that leadership is the prime factor behind the success of any strategy and behind any strategic drift, the role of leadership can be understood quite vital.
Ways to avoid strategic drift:
Business organizations can avoid strategic drift by having proper and perfect planning which is dully confined and aligned with timely and adequate information about external and internal business environment. In this regard, the management is required to undertake an effective management information system (MIS). This information system should be updated time to time. In addition to this, proper communication with external as well as internal stakeholders of the organization such as shareholders, employees, customers, and so on is also an important measure to avoid strategic drift. The communication gap within the organization can lead to ineffective planning and poor coordination among different teams operating within the organization. The achievement of desired goals and outcomes becomes quite difficult in this condition. For this purpose, the organization should employ some of the advanced and innovative methods of communication through which, a secure and fast communication among different parties can be possible (Dziri, 2011).
Along with this, effective forecasting of future events and trends can be considered quite necessary measure for avoiding strategic drift. For the purpose of having proper forecasting of future events and contingencies, the organization can use various tool and methods of forecasting like Spreadsheet forecasting, Time series method, moving average method and so on (De Wit, & Meyer, 2010).
These are some of the crucial suggestions that will help the company to avoid the occurrence of strategic drift.
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