Strategic Management at McDonald's McDonald's Strategic Management

Strategic Management at McDonald's

Strategic Management at McDonald's

McDonald's: Introduction

Organizational Structure and Corporate Governance

Industry Sector Analysis

Michael Porter's Five Forces Model

Key conditions in the External Operating Environment of McDonald's and its Industry

The Value Proposition on McDonald's Products

Financial Performance

SWOT Analysis for McDonald's

TOWS Matrix for Alternative Strategies

BCG Growth Share Matrix for McDonald's

Marketing, Financial, and Research & Development Strategies

McDonald's Leadership

Joint Ventures, Strategic Alliances, and Partnerships

Performance Measurement Methods and Benchmarks

Recommendations

References

Table of Contents

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Particulars

Page No.

Figure 1: Organizational Structure of McDonald's

Table 1: TWOS Matrix

Figure 2: BCG Growth Share Matrix

Table 2: Gantt chart for Strategy implementation

List of Figures and Tables

Executive Summary

This report presents a complete analysis of strategic management practices at the world's largest fast food restaurant chain, McDonald's. The report starts by introducing and describing the organization's operations, location, product offerings, history, major achievements and significant strategic moves which it has undertaken during its life cycle. The next section presents a comprehensive overview of the company's organizational structure and Corporate Governance and analyzes how this organizational and senior management structure is aligned with its mission and strategy. The third section of the report discusses the industry structure of McDonald's in the light of Michael Porter's Five Forces Model and discusses the key external factors which affect McDonald's operations and the other participants in its industry. The market share analysis of McDonald's also gives a fair depiction of its market standing as compared to its top industry rivals.

The next section discusses the value proposition which customers get when they consume McDonald's products. The analysis of financial performance shows the company's growth over the last five years. One of the most important sections of the report is the analysis of company's internal and external environment in the form of SWOT Analysis. This analysis is followed by the TWOS Matrix and BCG Growth Share Matrix analysis which give alternative strategies and company's current market standing respectively.

The later sections of the paper consists of analysis of company's Marketing, Financial, and Research & Development Strategies, leadership capabilities, and strategic alliances which McDonald's has made in its life cycle. The company's performance measurement methods and benchmarks are also presented in the report which gives a brief understanding of how company analyzes itself on periodical basis. The final section of the paper gives a set of recommendations on how McDonald's can bring improvements in its organizational structure, strategies, and plans to succeed in the long run. These timeline for these recommendations has been graphically presented in the Gantt chart.

McDonald's

Introduction, Location, and Products:

McDonald's is the largest and the fastest growing fast food chain in the world. Headquartered in Oak Brook, United States, McDonald's operates with more than 34,000 outlets and fast food restaurants in 119 countries around the Globe. Due to this huge scale of operations, McDonald's is able to serve more than 69 million customers every day. The main product offerings of the company include Big Mac (hamburger), Chicken McNuggets, French fries, chicken sandwiches, desserts, Quarter Pounder, soft drinks, soups, milkshakes, salads, breakfast items, and coffee. The workforce strength of the company is almost 1.7 million people in its production houses, regional offices, and Headquarters (McDonald's, 2012).

History:

The history of McDonald's dates back to 1940 when Richard and Maurice McDonald opened a Bar-B-Q restaurant in San Bernardino, California. In 1948, the owners introduced Speedee Service System in their restaurant in order to cope up with the competition from the market leaders of those times. The original mascot of McDonald's, Ronald McDonald was first introduced in 1967 and became the trademark of the company. McDonald's continued to provide drive-in restaurant services and grew rapidly within the country. When McDonald's started franchising its operations to the investors from the general public; a business man, Ray Kroc first took a franchise of the restaurant and then purchased the whole McDonald's corporation from the owners. Since then, McDonald's has seen a rapid growth in its operations in the local and international markets. At present, McDonald's is present in every corner of the world with more than 80% of its restaurants are run by private business people through franchising agreements (McDonald's, 2012).

Growth over the years:

By analyzing the organizational life cycle of McDonald's at different periods, the very first thing that comes to mind is the continuous growth strategy which the owner pursued to make his business grow in the Global market with...

McDonald's successfully left the competition behind and became the largest counter service and drive-through fast food restaurant in the world. It not only expanded its scale of operations geographically, but also kept on introducing innovative products and services with the passage of time. For example, it introduced the world famous French Fries in 1949, Quarter Pounder in 1973, Happy Meals in 1978, Fruit and Yogurt Parfait in 2000, Big n Tasty Sandwiches in 2001, McCafe real fruit smoothies in 2007, and Shamrock shake in 2012 (McDonald's, 2012). In addition to these main products, McDonald's also introduced numerous other products from time to time in order to cater the changing preferences of its target customers in different corners of the world (Hitt, Ireland, & Hoskisson, 2011).
Changes undertaken with the passage of time:

McDonald's also kept itself updated by instituting the cutting-edge technology in its production operations, inventory management, and customer services. It started its online incarnation in the form of McDonald's.com in 1996. It is a comprehensive website that provides very useful information to the visitors from all ages and cycles of life. McDonald's has also won numerous awards and recognitions in its history for its quality, brand image, innovation, performance, leadership, sustainability, and industrial relations. These awards and recognitions are given by famous International rating agencies, newspapers, magazines, and other publications and indexes including Forbes, Fortune, Bloomberg BusinessWeek, BrandZ, Interbrand, Barron's, Dow Jones Sustainability Index, Corporate Responsibility Magazine, etc. (McDonald's, 2012).

Successful Strategic Moves:

Each and every strategy which McDonald's adopted to keep itself strong and competitive was aligned with its core values and targeted to beat the competition in an effective and tactful way. McDonald's did not only focus on expanding its business operations on its own strengths; rather, it used franchising arrangements to sell its brand image to the potential investors and chose the fastest path of business expansion. This strategy made it the number one brand in the Global fast food industry with respect to brand recognition, customer base, scale of operations, and financial strength (McDonald's, 2012).

Organizational Structure and Governance

Worldwide Organizational Structure and Corporate Governance:

The Organizational Structure of McDonald's is both divisional and functional. The corporate level decisions and strategies are formulated at the Headquarters in the supreme supervision of Don Thompson, the President and Chief Executive Officer of McDonald's. He heads the Directors of all the departments at the corporate level. The Senior Management that directly functions under the President and CEO includes Chief Restaurant Operations Officer, President Supply Chain, Development & Franchising, Chief Financial Officer, General Counsel and Secretary, Chief Branding Officer, Chief Operating Officer, Chief HR Officer, and the Presidents of European, American, and Asian regions. These presidents are directly responsible to head all the directors in their respective regions. For example, the President of McDonald's USA, LLC heads the President of Central Division, West Division, and East Division, Executive Vice President and Chief Operations Officer, and the President of McDonald's, Latin America (McDonald's, 2012).

Structure at Individual Divisions:

The presidents of each individual division have to report their performance to the President of McDonald's USA, LLC. These presidents lead the team of directors from different functional areas and business affairs, including but not limited to: Finance, Human Resource, Sales and Marketing, Supply Chain, Social Media, Diversity Management, Brand Management, Franchising, Production, and Legal Affairs. At the level of single business unit or franchise, the organizational hierarchy and structure of McDonald's is fully functional. The director of one particular area focuses on the performance of his entire team but keeps direct coordination with other departments of the Unit. For example, the Director of Sales and Marketing coordinates with the Finance department to set the marketing budget for new strategic marketing plans. Similarly, the Director of Production and Operations keeps direct coordination with the Supply Chain Department in order to ensure a good balance between the demand and capacity options at the production units (McDonald's, 2012).

Franchise level:

The Top Management in every McDonald's franchise or self-owned restaurant is responsible to show exceptional sales and financial performance on periodical basis. The Top Management directs the middle level managers in every business function and affairs. These middle level managers get the work done through lower level managers and subordinates to achieve the assigned targets (McDonald's, 2012).

Alignment with Mission and Strategy:

Keeping in view the organizational hierarchy and the senior management and governance structure at McDonald's, it can be said that the company is moving in the direct direction towards its strategic goals and objectives. The mission of McDonald's is to provide the best eating experience to its customers through high quality food and beverage products and highly efficient and superior customer services. The corporate wide strategies of the organization are to keep up pace…