Competition is an integral part of any firm’s functioning; the choice of the means, strategies, and tools to enhance the firm’s competitive advantage is often the key to understanding the roots to its success or failure, as well as the issues connected with its competitive behavior.
Every business owner wants to be successful, and wants to receive the highest revenue possible. Nevertheless, there are always certain limitations, requirements, and factors that produce a complex influence on the firm’s functioning and predetermine its profitability.
Business stakeholders should always keep in mind that the firm cannot function in an isolated way; the strategic success of any company depends first of all on the way it attracts customers. One of the effective tools to improve communication with customers, to raise the corporate image and reputations, and to preserve a positive social image, is to get actively involved in the corporate social responsibility (CSR) issues.
They are nowadays recognized as one of the dominant factors affecting the company performance; CSR has become particularly important under the conditions of the modern economic crisis when large corporations cooperate with worldwide NGOs and governmental authorities in order to help states overcome the problems of unemployment, hazards to health, and inequality of people (Royle 2005, p. 42).
The majority of large and successful corporations pose corporate social responsibility as one of their top priorities in business operations; it is evident that this way they manage to cater for their customers and to create the constant, stale, and reciprocal relationships with their clients.
In case corporate social responsibility standards are kept to, there is always much more customer confidence loyalty. As in case with McDonalds that is the subject of the present paper, the mission statement of the company clearly states that the main task of the company is to create unique and unforgettable experiences for their customers (McDonald’s Corporate Responsibility – Values in Practice).
The present mission statement is clearly customer-focused, which will surely create a positive feedback from customers feeling that they are valued.
It is true that the core assumption lying in the basis of the Porter’s model is that the industry structure produces a strong and inevitable influence on the firm’s performance.
The five forces outlined by Michael Porter include the threat for businesses because of the entry of new market participants, the intensity of rivalry firms experience inside the market segment, the pressure from product substitutes or very similar products of rivals, the bargaining power of buyers and suppliers (Ormanidhi & Stringa 2008, p. 57).
Therefore, engagement in CSR activities falls within the framework of ‘intensity of rivalry’ – all fast food leaders in the field have strong positions, and they can easily survive even under the conditions of fierce competition.
McDonalds is the $40 billion company that employed about 1.6 million workers worldwide in 2005, and reported serving 46 million of customer a day (Royle 2005, p. 45). McDonalds has been involved in the corporate social responsibility activities for a long time, since its administration realized the potential for the corporation in the socially responsible approach.
Even upon a glance at their CSR philosophy, one can assume that McDonalds provides 10% of Americans with their first job, and has become the number one job training center in the USA, which creates a highly positive reputation and image for the company and improves its position regarding its competitors (Royle 2005, p. 45).
There is a great number of corporate social responsibility activities in which McDonalds is currently involved; upon viewing its social responsibility page at the official McDonalds website, one can see that there are the following CSR activities McDonalds pursues:
- Proper care about nutrition and well-being of customer
- Expanding the food menu for children with proper attention paid to their unique needs
- Education and information provision about useful nutrition
- Implementation of the forestry policy
- Popularizing environmental considerations on product packaging
- Provision of financial and volunteer support for Ronald McDonald House Charities (RMHC)
- Proliferation of volunteer activities through an online management tool
- Publicizing all production and transportation processes through the “from Farm to Front Counter” program (McDonalds Corporation Worldwide Corporate Responsibility 2010 Report 2010, pp. 6-10).
It is not only a strong focus on the customer satisfaction but also considerations of profitability that make the CSR activities of McDonalds effective. There is a feasible contribution that McDonalds makes to the economies of the countries in which its major markets operate, such as the USA; for example, the expenditures for philanthropic activities in 2006 constituted $13.6 million, while the 2009 figure equals $19 million.
The McDonalds Corporation paid $493 million of social taxes in 2006, and the figure rose to $568 million in 2009 (McDonalds Corporation Worldwide Corporate Responsibility 2010 Report 2010, p. 10). However, at the same time the corporation experiences substantial gains deriving from the introduction of CSR initiatives.
For instance, the electricity consumption rates have decreased considerably to the level of 1.689 kWh/TC, 100% of meat-producing plants go through thorough certification and analysis, and more than 90% of employees receive their professional certification in the McDonalds-owned Hamburger Universities (McDonalds Corporation Worldwide Corporate Responsibility 2010 Report 2010, pp. 7-10).
The popularity of CSR activities has been realized by all leaders in the fast food market, which is proven by the active engagement in such actions by other US leaders in the fast food industry such as Burger King, KFC, and Pizza Hut (Royle 2005, p. 45).
The present observation supports the claims of Ormanidhi and Stringa (2008) about the applicability of the Porter’s Five Forces model to the assessment of CSR activities as well, since they contain the element of competition for the customer loyalty as well.
The deep involvement in community work, volunteer work, and other types of CSR activities called philanthropic activity by the company are first of all driven by the effort to reduce the negative impact of such Porter’s force as ‘pressure from substitutes’. There is a clear indication on the emphasis put by the company administration on authenticity of their products and services.
Even their mission statement claims about the creation of unique customer experiences for each single client coming to a McDonald’s restaurant. In addition, the business objectives published at the official side of McDonalds indicate the wish to take care about customers’ health, and to place their customers and commitment to them to the core of their corporate values.
Obviously, it is a clearly beneficial competitive strategy, since the principle of ‘stakeholder democracy’ is fully retained at each level of the corporation’s functioning (Royle 2005, p. 42).
Another popular CSR activity that McDonalds has implemented only recently is the online discussion blog “Open for Discussion” initiated by the company in order to engage in closer and more active communication with customers and stakeholders on health and environmental issues (Fleck, Fieseler, & Meckel 2009, p. 1).
It is an experimental form of communication between the complex body of an organization and its stakeholders that proved highly successful and beneficial in terms of ensuring the implementation of corporate business objectives, tracking customer satisfaction, and monitoring the feedback received from customers as well.
The present feature of the McDonalds CSR activities is also directed at reduction of the ‘pressure of substitutes’ factor from the Porter’s five forces model of competition. There is a clear advantage in communication tools that McDonalds employs, and the CSR activities it undertakes provide the corporation with a confident competitive advantage, and customer loyalty in the industry with very easy entry conditions.
Arriving at a conclusion in the discussion of McDonalds CSR activities ensuring its sound competitiveness in the market of fast food, one should assume that the company has chosen the correct focus of its CSR initiatives, and manages to secure its leading place in the global fast food production and service.
The competitive business strategy of the company is highly adjusted to the current needs of all stakeholders, including investors, shareholders, customers, and international controlling institutions. The business strategy of McDonalds is focused on environmental protection, care about health and well-being of clients, education for staff, and adjustment to customer needs.
The company also ensures transparency of its processes (e.g., through the “From Farm to Front Counter” manual). In the industry offering more or less standardized and comparatively cheap products, the present strategy wins a leading role, positive reputation, and beneficial social image for McDonalds, ensuring its profitability and diminished impact of Porter’s five forces of competition.
References
Fleck, M, Fieseler, C, & Meckel, M 2009, ‘Micro-Dialogues in Cyberspace – McDonalds Blogging Efforts in Communicating Corporate Social Responsibility online. The 59th Annual Conference of the International Communication Association, Chicago, IL.
McDonald’s Corporate Responsibility – Values in Practice 2011, McDonalds Official Site. Web.
McDonald’s Corporation Worldwide Corporate Social Responsibility 2010 Report 2010. Web.
Ormanidhi, O, & Stringa, O 2008, ‘Porter’s Model of Generic Competitive Strategies: An insightful and convenient approach to firms’ analysis’, Business Economics, July 2008, pp. 55-64.
Royle, T 2005, ‘Realism or idealism? Corporate social responsibility and the employee stakeholder in the global fast-food industry’, Business Ethics: a European Review, vol. 14, no. 1, pp. 42-55.