McDonald’s is an American fast food restaurant and hamburger chain which was founded as a barbecue restaurant and was operated by Richard and McDonald (Wiersema & Beck, 2011). It is one of the world’s largest restaurant chains today. Primarily, it sells the hamburger, chicken products, French fries, cheeseburgers, soft drinks, breakfast items, wraps, milkshakes, soft drinks, and desserts. Moreover, the company expanded its menu to include salads, fish, smoothies and fruit to satisfy the customer’s changing tastes. Notably, it is operated by either an affiliate, franchise or the corporate itself.
A business strategy by definition is a means by which a company sets out to achieve its objectives or goals (Krug, 2009). It can also be referred to as long-term business planning. A business-level strategy is the specific actions that should be taken to provide ultimate value to customers and help gain a competitive advantage by exploiting the core competencies in a specific, individual product or a service market. Examples of business strategies that companies employs includes growth, internationalisation, retrenchment and competitive strategies. Growth strategies entails expanding the operations of the company through purchasing of new assets, acquisition of new businesses and development of new products. Internationalisation or globalisation strategies on the other hand entails moving the operations of the company beyond the local boundaries. Competitive strategies are also important to any company as they are aimed at ensuring the business performs better than its rivals in the sector.
McDonald’s business-level strategies can be ranked one of the best in the fast food industries. It maintains a strategy of cost leadership while it delivers food with quality services that are needed. With the cost leadership strategy, the company offer products at a relatively low cost compared to its competitors like Arby’s. The strategy entails cost minimisation to achieve low prices for the market offerings. In addition to cost leadership generic strategy, the company adopts broad differentiation as a secondary or supporting generic strategy. In this strategy, the company develop it business and products in a way that they are distinct from those offered by its competitors. Today, McDonald’s is seen in a mature industry that uses product proliferation to meet several needs in the industry (Sussland, 2004). Importantly, it keeps the strategies fresh by innovating both products and their markets. The practical strategies support the business level strategy. The practical strategies include McDonald’s ability to maintain the superior efficiency, innovation, quality and customer services.
The demonstration of their effectiveness is evident in their assembly line process for making the food besides the mechanized process that that requires little knowledge. Moreover, their quality is consistent due to their third party the distributors. Besides, they continue to innovate, for example, the introductions of McCafe, the Shamrock Shake, McGriddle, Snack Wraps, and Christensen. The company effectiveness is further evident in customer service, and training of the workforce.
In its primary markets, McDonald’s uses the cost leadership and brand differentiation as a business level strategy. Notwithstanding, its use of marketing and sponsorship in particular events as football, and Olympics has led to the addition of value to the image and brand name of McDonald’s. Also, it employs a franchising business level strategy which appears to be the most important in all the strategies (Sussland, 2004). Franchising has led to the long-term success of the firm in several ways. First, it enables McDonald’s to grant franchisees the right to use their name, reputation, and business model in exchange for a fee of the profits.
Second, with the firm model, franchisees are highly motivated to maintain quality in both provisions of services and their food. Moreover, the franchisee has less financial burden hence enjoys economies of scale of worldwide distribution, advertisement, and management. Therefore, a higher percentage (70%) of the restaurants are operated by the franchise while the few remaining percentage (30%) managed by the company due to their capital-intensive nature (Sussland, 2004).
Another way by which the firm maintains its business level strategy is to whom they market to and how they market to them. This way is evidently seen in how McDonald’s focuses on children. The firm, therefore, utilizes a stable market involving the whole family. They also sell to existing segments like breakfast eaters who are in a hurry to get to work, through their breakfast on the go. McDonald’s business level strategy is, therefore, that of brand loyalty, differentiation, and low cost which has led to its long-term success. I therefore confidently say it’s a good choice that has and will bear success to the firm.
Corporate level strategy in business is concerned with the strategic decisions that are made in that business (Krug, 2009). It considers the allocation of resources, mergers, and acquisitions, human resource management, and financial performance of the organization. McDonald’s is seen to be successful due to the corporate level strategies that it employs to enable it to meet its corporate goals to be cost effective. Evidently, this firm in question only concentrates on a single task which is the fast food business (Sussland, 2004). This strategy helps the business to concentrate on a particular task hence it gains power, consumer loyalty, and market share. The firm fully exploits the plans, research, and run a lot of strategies to find the best solutions of the consumer preferences and needs.
Another corporate level strategy is diversification. By definition, it is to move to a new business to provide a new commodity and service. McDonald’s is known to diversify its operations in many ways. To explain, it mainly produces similar products in a variety of choices. For example, it produces burgers and salads in varieties like Big Mac, Mac chicken, different kinds of salads, and operate in many geographical areas yet perform the same task.
In my opinion, although concentrating on one field may be risky, it has more benefits and can help where a firm needs a long-term success. It enables a company to put all its ability on one business hence high output. Moreover, in cases where there are two of the firms in one city, they can co-operate and coordinate to enjoy facilities such as suppliers and advertisements.
McDonald’s has several competitors internationally, nationally, regionally, and locally. The primary competitors include Starbucks, Yum Brands, Chipotle, Burger King, Wendy’s, Popeye’s and many others. McDonald’s competitive advantage is beheld on being loyal to first food. It is well known for the speed with which they serve their customers without compromising the quality of the service. Besides, low prices which are the main advantage is brought by the company’s engagement in a full employment of economies of scale to achieve the same.
Thirdly is the universality of the taste. To explain, Big Mac, tastes the same almost everywhere due to the use of same ingredients in the same quantities. Also, a standardized way of cooking is applied around the world. This consistent taste has a positive implication on the consumer loyalty. Also, McDonald’s business level strategy responds to the very competitive industry by innovating new products such as Snack Wrap, penetration in the market, product proliferation and market development.
Wiersema and Beck (2011) note that Yum Brand’s business strategy is multi-branding. Its brands are said to be the most aggressive of all the restaurant’s franchisor combining many concepts. This cobranding strategy is intended to boost the sales per unit, and it allows Yum to locate restaurants in locations that may not support any concept by increasing the traffic and sales at a certain location. Yum also focused on building strong brands, running good restaurants, and growing the international business. Yum faced challenges when introducing and developing the western concept in an Asian country. There was a view that it required people who not only had the complete knowledge of the business practices in the West but also understood the eastern culture to smoothly and efficiently run the restaurants (Krug, 2009). It is evident that all organizations need to be in touch with the business environment, however, competitive or challenging it may be so as to make sure that they satisfy the customer’s expectations.
The main areas of competition in the fast food industry are the minimization of cost, customer satisfaction, healthy ingredients, and convenient locations. As discussed in this paper, it seems clear that McDonald’s is most likely to proceed with its success in the fast food industry. Moreover, it recognizes the need to respond to the pressure put by its competitors and looks to increase the competitive gap. The gap needs to be widened by adding value through innovation, making the process of visiting a McDonald’s café or restaurant less routine and controlled. Another way for widening the competitive gap could be enhancing the overall in-house experience and also leading on all the social media platform.
Fast-cycle markets are those in which the firm’s competitive advantages are barred from imitation for what are commonly long periods of time and where imitation is costly. Competitive advantages like those in McDonald’s are suitable in the slow-cycle markets (Krug, 2009). On the other hand, a slow-cycle market can be defined as one that currently exhibits low trading volumes. The slow market is one with few issues coming up for sale to investors through initial public offerings in the equity markets.
Despite of various challenges in the industry, McDonald have been able to implement appropriate strategies that have enabled them to remain among the largest Global restaurant chains. The company maintain a cost leadership business strategy where it minimizes operational costs to offer lower prices than the competitors do. This has ensure attraction and retention of its customers. The company further adopts broad differentiation strategy as a secondary strategy, which enables it to develop its business and products to be unique to those offered by the competitors. The effectiveness of the company strategy is evident in their assembly line process and their continued innovativeness. McDonald’s success is also attributable to its corporate level strategies, which provides them with direction to take.