The most important general environmental factors to be considered for the industry and McDonalds include its demographic, sociocultural, global, and physical environment segmentations. The demographic segment is important in terms of this industry because of the consumers that make up the fast-food industry. The demographic segment associated with McDonalds consists of a wide range of consumers with their new and improved menu that offers the success of the new dollar menu to healthier menu options including moderately priced salads.
Teenagers were previously the firm’s primary targeted market; however McDonald’s objective is to target the larger, more profitable family market. McDonalds is distributed globally and known as the world’s largest fast-food restaurant business. The demographic segment has a positive effect on the industry because it has expanded its targeted market for all fast-food restaurants, increase motivation among competitors and diversify product offerings. Its sociocultural segmentation is important because of the company’s new socially responsible initiatives help maintain the company’s reputation abroad.
McDonalds has chartered employee development, internal promotions, and advancement opportunities for women. The sociocultural factors have a positive effect on the industry because it has changed consumers’ negative attitudes toward the fast-food industry. Its global segment, with continuing growth, the magnitude of McDonald’s impact on national and world culture has become increasingly significant. McDonalds has established unique and customized approaches to each individual country and significant variance in strategic actions with differing cultures in different countries.
This is a positive effect for McDonalds on the industry because it is able to respond quickly. Its physical environment segment is important within the industry because there are many negative environmental associations with the fast-food industry. McDonalds has formed relationships with other organizations to understand the firm’s impacts on water pollution, waste management, and soil erosion. Its EcoProgress program enables its restaurants to decrease energy consumption by up to 11 percent. This has a positive effect on the industry and provides both defense against criticism and support of the company brand.
Important factors of the industry forces affecting both the industry and the company consist of economies of scale which has a high effect on the industry, bargaining power of suppliers with a moderate level of effect and threat of substitute products that also has a moderate level of effectiveness. The industry is rapidly changing and firms need to continually make an effort in its competitive environment. Majority of firms are well-established in the industry which makes it challenging for new entrants to join the market, making the industry unattractive for new entrants and incumbents.
Uniformity has allowed for greater cost control through greater economies of scale that in turn allow McDonald’s to maintain low prices. For McDonalds, supplier relationships are a key component in its efforts to control costs. There is a threat of substitute products since the fast-food industry is closely related and has developed similar strategies. The two major competitors for McDonald’s are Wendy’s and Burger King. Significant future action that Burger King is undertaking is its improvements in trying to keep up with changing trends and the competition.
For example, Burger King now offers coffee beverages and a new menu that is more health conscious. Wendy’s is keeping up with competition by trying to make itself unique by marketing itself away from typical fast-food preparation, marketing its salads as freshly made. Important value chain analysis factors in regards to the company consist of management information systems which is superior over competitors, marketing which is neutral towards competitors, supply chain management which is superior and distribution which is also superior over the competition.
The company has identified a set of key performance indicators centered on sustainability concepts, such as the company’s supply chain area, chartered the worldwide percentage of firms that affirm the Code of Conduct created for McDonalds suppliers. In terms of distribution, the company started utilizing local suppliers and incented local suppliers to upgrade their operations and even build plants overseas to serve stores in foreign markets. Distribution is superior over competitors because it is now a global market company, giving it a competitive advantage.
McDonalds would not be where it is today without the expertise of its top management and hard work from employees. It is continual effort for managers to compete successfully throughout the rapid and changing competitive environment of the fast food industry. By 1985, McDonalds had the largest and most powerful promotional budget of any brand and continued as becoming viewed as a pioneer when it advertised during the first Super Bowl. The McDonald’s Corporation has gained competitive advantage in both national and International fast food industry.
McDonald’s holds a strong position among its competitors. McDonald’s market value because ROI and ROE are two major ratios investors analyze when they consider capital investment. Social responsibility of the company is also significant for profitability, obtaining its brand image. McDonalds SWOT Analysis and the strengths of the company consist of: one of the best brand recognition in the world, global operations all over the world, and cultural diversity in products depending on restaurant locations.
The opportunities include opening more joint ventures with several different retailers, more responsive to social changes to healthier options, advertising the capabilities of Wi-Fi internet services in branches, expansions of business into newly developed parts of the world and diversify products to allergy-free options. Its weaknesses include increased training costs due to high turnover, minimal concentration on organic foods, large fluctuations’ in net and operating profits, impacting investors, little variation offered in seasonal products and quality concerns id due to franchised operations.
The threats associated with McDonalds includes the criticism the company receives, the vast amount of fast food restaurants (increased competition), social changes in a more balance d meal, focus on healthier dieting by consumers, and if the economy picks up and leads to a result in decreased demand for lower-priced fast food. I think the company’s competitive advantage is its global expansion into majority of countries and still continuing to expand into new markets.
Other fast food restaurants have failed to compete globally and only compete nationally. If McDonalds is able to keep up with changing lifestyles and predict consumer behavior in the other countries it operates in, then I believe this advantage will be sustainable. The company’s current business level strategy uses an integrated cost leadership/differentiation business level strategy. The firm has strategically planned to stay ahead of competitors by providing consumers with more options of healthy product offerings, low-cost prices, and better service.
McDonalds has an advantage within specific categories such as price, quality, management and employee training. Its corporate level strategy is expanding, intending to not only compete in the fast food industry by also the coffee industry and diversifying its product line to attract more health conscious consumers. The cooperative strategy of McDonalds is its several relationships into several productive relationships with non-governmental organizations in attempt to improve and better track the effects of its operations on both suppliers and customers.
Its international level strategy is based around its multi-domestic strategy, currently operating in 119 countries through its standardized business practices, leveraging standardized product offerings, clean and bright environments and American brand equity. All strategies fit in with the previous analysis because McDonalds has maintained stable strategies, however constantly keeping up with changes necessary. I believe McDonalds biggest problem is its homogeneous image and remains a Household name with offerings known for a uniform taste.
This has affected its international relationships; however the company is making changes to adapt to differing cultures. A suggested solution is to significant research in countries McDonalds operates in. The 7S’s that is most significant to McDonalds is its structure, strategy and system of operations. These factors are most important because it has led to the company’s success and its advantage over the competition. Based on this analysis, questions to the presenter would be 1. ) Do you think McDonalds is being contradicting trying to maintain a menu serving both unhealthy and healthy foods? 2. ) Would you consider McDonalds ethical?