Mgt 599 Case 4: Strategic Choices
One of the possible strengths of McDonalds would be its dedication to provide higher customer satisfaction in terms of product and service quality. On 2006, McDonalds launched major overhaul on its store design and provide more services in order to keep their customers satisfied every time they will visit McDonalds’ store. Comfortable armchair, cool hanging lights, Wi-Fi access, and “funky” graphics and pictures on the walls are just some of the added features on McDonald’s newly designed store (Gogoi, Arndt & Moiduddin, 2006). Furthermore, strength of McDonalds would be its 24/7 operations in the market compared to its competitors (Arndt, 2007). This provides McDonalds enough room to tap those customers awake and working late at night or those “hippies” hanging around the streets. This strategy of McDonalds would surely improve its target customers and so with its sales and profitability. Compared to other fast food chains in the market, McDonalds pioneers operating round the clock to boost their profits and sales, which at the end of the day would strengthen the brand loyalty of their present customers and attract more potential customers in the market. The last but not the least strength of McDonalds would be its fast delivery that serves as an avenue for the said multinational fast food chain to experience impressive growth in the market, specifically in China (Arndt & Ghobrial, 2007). McDonalds outperformed its rival fast food chain in the Chinese market and in other countries as the customers prefers those fast food chains with efficient delivery services.
One possible weakness of McDonalds, particularly its operations in the Japanese market, would be its offering of cheaper burgers which at the end of the day do not contribute to its profit growth. Due to weak pricing strategy of McDonald’s branch in Japan, its 2005 net profit slumped 98 percent to $515,000 with a stagnant sales in 2006 compared to the same period in 2005 (Rowley & Tashiro, 2006). At present, there is less to expect the McDonald’s Japan will be able to attain its target number of stores in the Japanese market as well as the improvement of their stock trades on Tokyo Stock Market. Furthermore, the fact that McDonald’s Japan has new CEO with less background on the overall operations of McDonalds, this can provide major impact on the overall performance of McDonalds branch in Japan which serves to be the second largest market next to United States.
McDonalds can use its advantage on fast delivery service on countries where the said service has still not yet been fully implemented. McDonalds can use its fast delivery services as the main source of its competitive advantage in Beirut and Riyadh. Furthermore, McDonalds can expand its workforce on delivery services especially during the peak season on summer in Shanghai. McDonalds started its delivery services in Taipei by 2007 with around 1,000 drivers to meet the large demand in the said city. Through this strength of McDonalds on delivery services, it can expand its profit at unprecedented rate plus minimizing their operational costs.
One of the main threats to McDonalds would be the tight market competition in the international market as new fast food chains starts to emerge in the domestic markets of countries where they operate. Like for instance, KFC and Burger King competes at par with McDonalds in terms of market penetration and marketing strategies. Furthermore, Starbucks high quality coffee beverages and services might outperformed the quality of services and coffee beverages of McDonalds, though the new store design and added features of McDonalds provides enough room for it to compete significantly to Starbucks. Aside from tight market competition, another factor that McDonald must not overlook would be the condition of the international financial market and the performance of US Dollar in the foreign exchange market since any instability on the performance of US Dollar can adversely affect the profitability of McDonald’s international operation.
Main Strategic Choices of McDonalds
One of the functional strategies of McDonalds would be the decentralized delegation of authority in McDonald’s management which allows their franchisees to manage their own stores depending on the values and procedures which they think would fit into their business location. Though the CEO of McDonalds still has the mandate to provide large-scale company decisions, the franchisees are allow only to a certain degree of freedom to structuralize their own McDonalds store. This functional strategy of McDonalds provides more flexibility of the entire McDonalds franchise since each stores can align their operation based on the values, nature, and behavior of people in a given place or country. At the end of the day, this functional strategy of McDonalds serves as one of the sources of its competitive advantages in the market and success on its international operation and target market penetration.
Furthermore, with regards to the business strategies of McDonalds, the said leading fast food chain the market has been on the process of expanding its product lines from fast food chain to coffee shops in order to secure a sustainable growth of the company in the next decades. The said business strategy of McDonalds also provided them with enough room to increase their target market and sales revenue as their McCafe competes at par with the top seller of coffee beverages in the international market – Starbucks.
On the other hand, the corporate strategy of McDonalds is to provide training programs into their managers and employees to improve the quality of McDonald’s services to its customers. Furthermore, through the improvement of skills and talents of their managers and employees, McDonalds aims not only to provide high customer satisfaction but also to minimize their operational costs without sacrificing their integrity and brand name. McDonald’s management allot significant amount of budget for the training programs of their managers and employees to maintain that all of the McDonald’s store are still aligned with the vision and goals of their “mother company”.
The last but not the least, the global strategy of McDonalds would be to expand their international operation through establishing more McDonald’s store to countries that have not yet been being invested by McDonalds and to those countries where there is an overwhelming market response. By increasing the number of McDonald’s stores in the international market, the y can easily establish brand loyalty to their target customers and easily attract potential customers that later on will provided successful market penetration on countries where McDonalds operates.
Growth Strategies of McDonalds and Wal-Mart
Wal-Mart growth strategies concentrates more on providing cheaper products into the market as shoppers in the market nowadays are too much price conscious (Bianco et al., 2003). Wal-Mart relies much of its profit and sales growth on the rate of their inventory replenishment and discount rate from their suppliers. Since consumers in the market prefers retail stores that provides the cheapest product in the market, Wal-Mart has been able to maintain its market dominance and great market share, leaving its competitors with less available customers in the market. Wal-Mart is presently relying to its expansion on the international market just like McDonalds, as the American domestic market starts to become saturates. McDonalds, on the other hand, do not rely its growth on providing cheaper products in the market; rather, its growth depends on providing high quality products and services to its customers. Though McDonalds and Wal-Mart have different set of products to offer into the international market, the only thing common to these two multinational companies is that they both rely their international growth to the establishment of more stores to various countries around the globe that can provide them with higher sales and profit.
Arndt, M. (2007). McDonalds 24/7; By focusing on the hours between traditional mealtimes, the fast-food giant is sizzling. Business Week. New York: February 05, 2007., Issue 4020; page 64.
Arndt, M. & Ghobrial, C. (2007). KNOCK KNOCK, ITS YOUR BIG MAC; From Sao Paolo to Shanghai, McDOnalds is boosting growth with speedy delivery. Business Week. New York: July 23, 2007., Issue 4043; page 36
Bianco, A., Zellner, W., Brady, D., France, M., Lowry, T., Byrnes, N., & Zegel, S., Arndt, M., Berner, R., & Palmer, T., A. (2003). IS WAL-MART TOO POWERFUL? Low prices are great. But Wal-Marts dominance creates problems — for suppliers, workers, communities, and even American culture Business Week. New York: Oct 6, 2003., Iss. 3852; pg. 100
Gogoi, P., Arndt, M., & Moiduddin, A. (2006). MICKEY DS MAKEOVER. Business Week. New York: may 15, 2006., Issue 3984; page 42.
Rowley, I., & Tashiro, H. (2006). Shrimp Burger To The Rescue. Business Week. New York: September 11, 2006., Issue 4000; page 36