McDonald’s: Polishing the Golden Arches

PROBLEM IDENTIFICATION

The main problem from McDonald’s case, McDonald’s Polishing the Golden Arches, is how to classify McDonald’s strategy through Plan to Win into one of the five generic competitive strategies. Before we solve this main problem, we should determine the chief economic and business characteristics, the five forces analysis, and also the driving forces of the fast-food industry. After that we identify the strengths, weaknesses, opportunities, and threats by using SWOT analysis. Finally, we classify McDonald’s strategy into one of the five generic competitive strategies.

ANALYSIS

The chief economic and business characteristics of the fast-food industry

In 2003 sales for the U.S. consumer food-service market totaled approximately $408 billion. For the sandwich segment, the top 30 sandwich chains had U.S. system wide sales of approximately $64 billion. Future growth in the sandwich segment was expected to be only around 2 percent annually for the foreseeable future. McDonald’s and Burger King were the earliest and most aggressive hamburger chains to begin to expand internationally. The products of the various sandwich chains in U.S. were strongly differentiated, continuously follow the trends that are changed all the time.

The five forces analysis and the driving forces of the fast-food industry

By using the Porter’s five forces model of competition, we identify rivalry among fast-food chains and buyers as the strong forces that make the competition in fast-food industry more and more tighten. In general, McDonald and its main competitors (Burger King Corporation, Wendy’s International, Inc., Hardee’s, and Jack in the Box) are active in making fresh moves to improve their market standing and business performance by introducing their product innovation and launching a lot of outlets (franchise). On the other hand, buyers were more increasingly focusing on value and healthy foods. This condition can force McDonald and its competitor to offer product innovation that can attract the buyers and match with the buyers’ requirements.

Besides the five forces, we also identify some driving forces in this industry. Emerging social issues and changing attitudes and lifestyles can be powerful instigators of industry change. Consumer concerns about health and focus on value have emerged as the major drivers of change in this industry. Product and marketing innovations have been key driving forces in fast-food industry too. The other driving forces are growing use of the Internet and emerging new Internet technology applications, increasing globalization, changes in the long-term industry growth rate, technological change and manufacturing process innovation through lay out and drive-thru process, and diffusion of technical know-how across more companies and more countries.

SWOT analysis

Based on the explanation above, we can identify some opportunities and threats of fast-food industry. As we can read from this case, we know that the fast-food chains were recognizing the saturation of the industry in U.S. This condition can become a threat, but it can be an opportunity if the companies in the industry try to do international expansion throughout U.S. because growth in other countries was expected to be one of the only sources of growth for many of the top hamburger chains in future years. Consumer concerns about health can also become one of the threats, but it can be an opportunity if the company can serve this kind of niche market. We conclude that the fast-food industry is still attractive.

Then we identify McDonald’s strengths and weaknesses to make a SWOT analysis. McDonald has some strength that makes it different from its competitors. The strengths are a well-known and well-respected brand name and brand image (“I’m lovin’ it”), clever advertising (advertising featuring music from leading recording artist), high labor productivity (Hamburger University training program), big market share (through franchises), a lot of franchises (easy requirements), leader in social responsibility, distinctively local flavor in its menu items in foreign countries, and variety product innovations. While the weaknesses are poor customer service ranking including slow service at the drive-through window, high employee turnover rate, and also poor order accuracy.

After we identify all elements of SWOT analysis (strengths, weaknesses, opportunities, and threats), now we can formulate McDonald’s strategy. In this term, we do not formulate new strategy for McDonald, but we use existed McDonald’s strategy that’s called Plan to Win because our point of view is not to formulate