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Strategic Paper: McDonald’s

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Introduction McDonald’s is the world’s largest chain of fast food restaurant serving more than 58 million customers daily. The firm has an excess of 30,000 restaurants worldwide employing 1. 5 million people. The business began in 1940 with a restaurant opened by two brothers namely Richard and Maurice McDonald in San Bernardino, California and then was bought by Ray Kroc who is now the founder of the McDonald’s corporation. A McDonald’s restaurant is operated by a franchisee, an affiliate, or the corporation itself.

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The corporation’s revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. Today, the Philippines is also one of the countries that has a franchise of McDonalds with 300 restaurants nationwide. As of 2005, McDonald’s Philippines is a 100% Filipino owned company which is built by George T. Yang the first golden arches in 1981 from its first restaurant along Morayta, Manila. McDonald’s Philippines is now in the pursuit of being a multi-billion peso company continuing to expand and serve the Filipinos all over the country.

McDonald’s is a customer-oriented company that strives to offer Filipinos a combination of great tasting, quality food products at value prices with excellent service. Objectives: 1. Awareness objective: Increase awareness amongst the public’s with the aim of knowing that McDo offers healthier alternatives. Create awareness amongst families with kids under 15 years old. (Increase of 20 % within a year) 2. Acceptance objective: Create a smooth transition when trying to increase positive attitude towards the healthier new alternatives. 3.

Action objective: – Opinion action: to have the customers who are fond of the changes spread the word – Behavior: To change the behavior of existing customers to also buy the new options, and to attract new customers who are interested in the new products. Organizational Chart: [pic] McDonald’s Vision McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. McDonald’s Missions

Be the best employer for our people in each community around the world Deliver operational excellence to our customers in each of our restaurants; and Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald’s system through innovation and technology. Try to fulfill our customer, automatically our profit will improve. History In 1937, Patrick J. McDonald opened “The Airdrome”, an octagonal food stand, on Huntington Drive (Route 66) near the Monrovia Airport in Monrovia, California. Hamburgers were ten cents, and all-you-can-drink orange juice was five cents.

In 1940, his two sons, Maurice and Richard (“Mac” and ” Dick”), moved the entire building 40 miles (64 km) east, to West 14th and 1398 North E Streets in San Bernardino, California. The restaurant was renamed “McDonald’s Bar-B-Q” and served twenty five barbecued items on their menu. In October 1948, after the McDonald brothers realized that most of their profits came from selling hamburgers, they closed down their successfulcarhop drive-in to establish a streamlined system with a simple menu of just hamburgers, cheeseburgers, french fries, shakes, soft drinks, and apple pie.

The carhops were eliminated to make McDonald’s a self-serve operation. Mac and Dick McDonald had taken great care in setting up their kitchen like an assembly line to ensure maximum efficiency. The restaurant’s name was again changed, this time to simply “McDonald’s,” and reopened its doors on December 12, 1948. In 1953, the McDonald brothers began to franchise their successful restaurant, starting in Phoenix, Arizona and Downey, California; the latter is today the oldest surviving McDonald’s restaurant.

The McDonald brothers created Speedee to symbolize the quick and efficient service system that they had devised. They later withdrew Speedee because the Alka-Seltzer mascot was named Speedy, and McDonald’s did not want to be affiliated with Alka-Seltzer. Downey’s Speedee is one of only a few remaining. His little legs, animated in neon, still run as fast as they can to serve the restaurant’s next customer. The Speedee sign was erected in 1959 at Downey with its single giant arch and is a one-of-a-kind.

It also hearkens back to the days of the postwar era when the roadside was filled with larger than life advertisements of all shapes and colors vying for motorists’ attention: “Hey pull in over here, This is Your Kind of Place! ” Designed by the architect Stanley Clarke Meston and his assistant Charles Fish, Downey’s restaurant is the oldest operating McDonald’s in the world. Since it was franchised not by the McDonald’s Corporation, but by the McDonald brothers themselves to Roger Williams and Burdette Landon, the Speedee McDonald’s was not required to comply with the McDonald’s Corporation’s remodeling and updating requests over the years.

Recognizing the historic and nostalgic value of the intact 1953 structure, the McDonald’s Corporation acquired the store in 1990 and rehabilitated it to a modern but nearly original condition, and then built an adjacent museum and gift shop to commemorate the site. Inside the small museum are many McDonald’s artifacts from over the years, and also a small display showing how the restaurant buildings evolved from the small walk-up candy striped stands to the large more common mansard-roofed restaurants.

In 1954, Ray Kroc, a seller of Multi-mixer milkshake machines, learned that the McDonald brothers were using eight of his machines in their San Bernardino restaurant. His curiosity was piqued, and he went to San Bernardino to take a look at the McDonalds’ restaurant. Believing that the McDonalds’ formula was a ticket to success, Kroc suggested that they franchise their restaurants throughout the country. When they hesitated to take on this additional burden, Kroc volunteered to do it for them.

He returned to his home outside of Chicago with rights to set up McDonald’s restaurants throughout the country, except in a handful of territories in California and Arizona already licensed by the McDonald brothers. Kroc’s first McDonald’s restaurant opened in Des Plaines, Illinois, near Chicago, on April 15, 1955, the same day that Kroc incorporated his company as McDonald’s Systems, Inc. (which he would later rename McDonald’s Corporation). Ray Kroc’s first McDonald’s was then demolished after many remodels in 1984. Once the Des Plaines restaurant was operational, Kroc sought franchisees for his McDonald’s chain.

The first snag came quickly. In 1956 he discovered that the McDonald brothers had licensed the franchise rights for Cook County, Illinois to the Frejlack Ice Cream Company. Kroc was incensed that the McDonalds had not informed him of this arrangement. He purchased the rights back for $25,000, five times what the Frejlacks had originally paid, and pressed forward. McDonald’s grew slowly for its first three years. By 1958, there were 34 restaurants. In 1959, however, Kroc opened 68 new restaurants, bringing the total to 102 locations. Internal environment: • What is the quality of your organization´s performance?

McDonald’s is performing very well internally because of global standardization leading to increased effectiveness. This is a core competency of McDonald´s internal environment. At the same time McDonald’s integrates local differences. They are very committed to diversity and this is furthermore one of their greatest internal qualities. As a globalized company they have managed to maintain their focus on adapting to the local societies by hiring local people to the company. The openness towards diversity, together with standardization, creates internal values of trust and dependability in a safe environment. What communication resources, including budget, are available? Due to the magnitude of McDonald´s corporation they have all communication resources available. It is important, however, that they have a clear focus in their internal communication and provide guidelines on how the franchise restaurants should be managed. We believe that McDonald’s have done this well since they have been able to incorporate a strong standardization throughout their restaurants. A way to create effective and homogeneous communication is done by providing each restaurant with PC access in crew rooms where the employees can be updated on internal activities.

This is a proactive method with the purpose of constantly keep the staff informed and updated. External Environment The external environment for McDonalds as well as all organizations can include many variables such as: • Competition • Changing demographics • Government interference, laws, regulations • The Economy McDonalds SWOT Analysis Strengths * It has a strong global presence and is considered as a market leader in both the domestic as well as the international markets. * It is a global brand that owns 31,000 restaurants serving in 120 countries.

Of these 31,000 restaurants at least14,000 restaurants are situated in the US. * It uses economies of scale for reducing the cost, as its huge expansion diversifies the overall risk involved with the economic performance. * They own an active children’s charity by the name ‘The Ronald McDonald House’. * It earns revenue by fast food sales as well as a property investor and a franchiser of restaurants. * It has a firm real estate portfolio. * It has branded menu items i-e Big Mac, Chicken McNuggets, which further promote McDonalds. * Its recognized as one of the worlds’s most recognized logos. It is recognized as a socially responsible and community oriented firm. * It adapts to the cultural differences regarding the region where the restaurant is set up. * It has located itself in major airports, cities, highways, tourist locations, theme parks. * It has an efficient food preparation style that follows the process in a systematic way.

* It takes food safety extremely cautiously. * It was the first to provide the customers about nutrition facts. Weaknesses * It uses advertising that mostly targets children. * High employee turn-over. * It has yet to accomplish going on the trend of organic food. Price competition with the competitors resulting in low revenue. * Lack of innovative products. Opportunities * It can adapt to the needs of the societies and undergo an innovative product line. * It can research ways to use ‘green’ energy and packaging which will work as a part of their promotional effort as well as fulfill their social responsibility. * It can create new product offerings, use mobile text messaging to offer services that appeal to consumers. * It can upscale some of its restaurant settings at luxurious locations to attract more customers. It can provide optional items that are regarded to be the basis of allergy for some. * It can slow down the level of expansion in order to increase the profitability of the organization. Threats * The recession negatively impacts the holding position of the firm regarding its revenue streams, even though they are quite diversified.

* More restaurants that are increasing their food offering and declining the price. * Health issues regarding the fast food chain. * Heavy investments on promotional campaigns which decrease the gaining of market share. Some parents criticize the firm’s ‘cradle to grave’ marketing strategy that focuses on kids, who later on take it as a trend to their adulthood. * Sued various times for unhealthy food, usually with addictive additives. * The expansion has made the firm vulnerable to the slow economies of the other countries. PEST A NALYSIS Political Environment: In general terms the government policies do not affect the company much nor do the changes in the government influence the organization of the company. Mostly what company obligation to the government is the paying of different taxes which include payroll taxes and business taxes.

McDonald’s enjoys an added advantage in countries where consumer protection laws are not very strong. In countries like US, where the consumer protection laws are very strong, there are great costs associated with a breach in quality or service in the form of litigations and lawsuits. Economical Environment: There are many factors which can affect the operation of a company. In Philippines McDonalds offer the food at higher rates in comparison to the local food restaurants. Most of the people in Philippines fall in the category of middle class and it is not affordable for them to have McDonalds at regular basis.

Due to layoffs and other economic downturn of the current recession period the profits of McDonalds might have dwindle as people consider it as a luxury to go and eat out at some local restaurant. Social Environment: When McDonalds entered the Philippine market people were not very much into fast food eating style but now the business has been influenced by the changes made in the society especially changes in the eating habits among young people who helped in the acceptance of the fast food idea but also the rapid change of way of life which is very quick now as everyday people are running out of time.

This in turn has helped the company to grow and to increase its profits. As McDonalds offer Highly nutritious food majorly so there are no religious, ethical or cultural issues associated with the operations. For the rising importance of corporate social responsibility recently McDonald’s has announced that it is giving further backing to Rain forest Alliance certification by offering a cup of tea with a conscience in all of its 1,200 restaurants in the Philippines. Technological Environment: Philippines is a developing country and new technology gadgets and techniques are always welcomed.

McDonalds’s introduced new food production techniques in Philippines which were later adopted by local restaurant. Food made with the help of machines is considered more hygienic. However, the continuous developments in the technology sector needs McDonalds to be updated regularly but as in Philippines food making technology is still in the development stage so McDonalds has an edge over others in this regard. It is natural that technology has helped McDonald and especially its employees as they have to serve quick services.

Computers and smart cashiers are used by the employees so they would not get confused and they are provided with customized database management system. PORTER’S FIVE FORCES OF MCDONALDS 5 Forces of competition Low High Threat of new entrant Development of substitute products Bargaining power of customers Bargaining power of suppliers The Threat of new entrants The threat of new entrants in the fast food industry is high because there are no legal barriers which would keep them from entering the industry.

The economies of scale and the access of the distribution are the major barriers that firms face in the industry. Firms must spend a large amount of capital on advertising and marketing in order to enjoy successful existence and long life of a fast food outlet. Large established companies with strong brand names such as McDonald’s make it more difficult to enter the market because new entrants are faced with price competition from existing chain restaurants. Thus, it takes a pretty much time for a new business to establish in the fast food industry. Supplier bargaining power

The bargaining power of suppliers of McDonald’s is high because McDonald’s restaurants use the same products from the same suppliers. This is a feature McDonald’s want to keep going on by encouraging consistency among its restaurants. Supplying these products to McDonald’s across the globe is the whole business for the suppliers and, however, if McDonald’s would lose even one supplier it would have to change one or more of its product lines and perhaps the whole menu what the McDonald’s customers were used to. This gives the suppliers of McDonald’s a high bargaining power.

Buyer bargaining power Buyers, in the fast food industry, “are those who is ordering fast food at the local restaurant, over the telephone, or internet or just paying or consuming the products”. Bargaining power of customers of McDonald’s is low because of low customer switching costs which are nearly zero. Thus, fast food industry does not worry about customers’ loyalty. Fast food products industry is differentiated which are usually or almost always promoted by advertising – that is because of a vast competition between fast food firms.

Product differentiation is very important in fast food industry to make your product stand out against the crowded fast food industry products. Furthermore, quality of the product or service in the fast food industry is very important as customers have full information of the products they buy and consume. The threat of substitutes Several factors determine if there is a threat of substitute products in an industry. First, if the consumer’s switching costs are low, which means that there is little of anything stopping the consumer from purchasing the substitute instead of the industry’s product, then the threat of substitute products is high.

Second, if the substitute product is cheaper than the industry’s product there is a high risk of threat of substitutes. Third, if the substitute product is having equal or superior quality, functions, attributes, or performance compared to the industry’s product, the threat of substitutes as well is high with so many firms in the fast food industry with low switching costs, vide variety of similar products that people can chose, and healthier alternatives, the threat of substitutes is very high.

As there is intense competition between rival sellers in the fast food industry, the competition between firms selling substitute products is intense as well. One very important issue is that the customer always tends to find another product comparable or better in terms of the quality of fast food products. Another thing is that fast food industry is unhealthy to its customers’ health. Proposed Strategy • They must give importance to their customer for them to gain loyalty and also to serve good food and in a friendly and fun environment to be a socially responsible company.

They also provide its customers with food of a high standard, quick service and value of money and they must an eco friendly food chain establishment for them to gain trust. • They should provide and improve their quality service by having more service crew that will accommodate the needs of customers. • They should also making sure that the materials and utensils they are using is clean and not harmful to their customer, to their crew also they make sure that they are wearing a proper uniform and the safeties’ way of serving their food.

Cite this Strategic Paper: McDonald’s

Strategic Paper: McDonald’s. (2016, Oct 11). Retrieved from https://graduateway.com/strategic-paper-mcdonalds/

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