Introduction to the Study
McDonald’s Company is one of the largest businesses in the world, with branches in 119 countries. The company serves over 60 million people daily in over 24,000 operational business zones worldwide. The following report focuses on one of the branches and/or subsidiaries operating in the UAE.
It gives a brief history and background followed by a strategic analysis of the company. The company’s chain of restaurants in the UAE will be discussed, including an assessment of their operations, investigation of the industry in which the business operates, and the market as a whole.
The report also states the mission, vision, values, and goals of the organisation in terms of its delivery of services to customers in the region and beyond. The Porter’s five forces model that is applicable in the analysis of performance and competition will also be applied in the company’s analysis. This will be followed by the competition analysis from new entrants in the market as well as the existing competitors.
An analysis of the company in terms of strengths, weaknesses, opportunities, and threats will be done in the section on SWOT analysis. The entry strategies that were used in the creation of the international brand of McDonald’s will also be analysed, with the provision of appropriate recommendations to the same. A conclusion is also provided encompassing all the suggested recommendations.
Background and History of the Company
McDonald’s Company began as a small restaurant in California under the steer of two brothers, Maurice and Richard McDonald in 1949. One of the other individuals responsible for the international expansion of the company is Ray Croc who is the American businessperson with roots from the Czech Republic. Croc bought the two brother’s equity in the company, thus transforming it into a nationally and internationally renowned brand.
McDonald’s business was listed as a public company in 1965 where it continued with its international expansion to markets away from America including Asia. The UAE subsidiary of McDonald’s Company was established in 1994. It has since been involved in the delivery of services in the area and in the region as part of McDonald’s Arabia Company. The company currently has over 100 restaurants that are spread all over the Arabian region.
Industry Analysis
The restaurant industry in the United Arab Emirates is one of the fastest growing industries in the world, with this growth being related to the relatively good performance of the economy. Several restaurants are spread out across the region and in the ever-growing cities. These restaurants provide services related to those that McDonald’s offers.
The industry is also well performing. In 2008, it recorded a growth of about 12% from the previous year in the purchase of food and beverages from the restaurants (Williams, 2008). The value was expected to increase from that of $841 in 2008 to over $1.2 billion in 2012 (Williams, 2008). In 2008 alone, there were over 11000 restaurants in the UAE, with McDonald’s business being among these establishments (Williams, 2008).
Market Analysis
The restaurant market in the UAE is relatively developed, with people here having a culture that is related to that in the Western nations. McDonald’s commands a respectable market share. It currently lies third in the market share in the region that it operates in the UAE. Most of the cities are places of work and residence in the UAE. McDonald’s business has capitalised on this to ensure that it is located in regions where the best market is located.
Mission of the Company
The mission of any company provides the strategic objectives for its existence in the region and industry. The brief statement of an organisation’s mission provides a means of guaranteeing the best services to customers of the organisation, thus ensuring that the company lives to the fullest of its customers’ expectations.
Mission Statement
McDonald’s Company mission is to be the, ‘customers’ preferred base and the way to eat’.
Vision of the Company
The company’s vision is to be the desired food outlet restaurant in the UAE, providing services to customer satisfaction.
Values of the Company
Company values are important to the organisation, employees, and customers. In the UAE, the company aims to be the favourite dining place for the population. The company also aims to provide unmatched quality services. It also hopes to maintain the highest level of cleanliness in its operations to facilitate in its vision of providing the safest food in the region. The company also values time. Besides, it has the value of providing timely services to its customers.
Goals of the Company
The goals of McDonald’s include being the market leader in the restaurant industry in the UAE and the region (Walker, 2007). It also has the goal of being the preferred eating-place for the population by providing the best ethically approved services. The company also aims to give back to the community and/or to grow its business positively in profitability.
McDonald’s UAE, which is a part of the McDonald’s Arabia, is a well-established company, with the brand name being strong in the region and internationally. The company has used this characteristic to ensure that it grows on the international front, with operations in the UAE being based on the desire to establish a restaurant chain as successful as in the mother country.
The vision, mission, and goals of the company are related to those of the mother company. They are necessary in facilitating the success of the company and quality service delivery. Some of the recommendations include that the company should invest more in other aspects of the economy and/or diversify its services in the region by providing foods that are culturally general in the area.
External Analysis of the Company
A competitive analysis of McDonald’s Company in the UAE is possible although with reference to the mother company and the regional branches from which the company operates.
Porter’s Five Forces Model
An analysis of McDonald’s using Porter’s five forces model is necessary to show the competitiveness of the company both in the region and in the UAE specifically. Porter’s competitiveness model shows the attractiveness of a market based on the outcome of the negative and positive influences that this aspect has on the profitability of the organisation on focus.
Risk of entry by Potential Competitors
The entry of potential competitors into a market is an important factor in the model. It is assumed that markets with a high performance index and with high returns will lead to attraction of new member of the market. There are a number of determinants to the entry of new members in a specific market.
They include the barriers that exist, as imposed by the existing market participants, or the nature of the industry in which they operate. For McDonald’s, the brand name is a very important factor in the prevention of entry of other competitors, as these are deemed to be afraid of competing with the well-established brand that the company has created.
Rivalry among established Companies
In any industry, competition is driven by the rivalry between the major industry players who determine the course of the competition. Several factors influence the competition, with different forms of competition being driven by the rivalry between the companies. The main determinant of the intensity of competition in the market that McDonald’s operates in the UAE is the use of advertising and majoring on innovation to attain competitive advantage.
The company has a number of recognised advertising campaigns that it has run in the region. These campaigns have ensured that it is ahead of the pack in competition. The rivalry in the industry is between the company and the major players who originally dominated the market before McDonald’s entry.
The Bargaining Power of Buyers
The bargaining power of buyers, also known as the market of outputs, is also a pillar in the Porter’s five forces model. Consumers have the power to determine the performance of any organisation.
One of the major ways that firms reduce customers’ bargaining power is using loyalty programs that ensure that customers are faithful to the organisation. Another component of this pillar is the number of customers in relation to the number of outlets that the organisation runs. McDonald’s in the UAE has a significantly better ratio, having a number of branches distributed throughout the UAE.
The Bargaining Power of Suppliers
Suppliers are also a significant factor in determining the performance of any organisation. McDonald’s is not an exception of this fact. As opposed to the bargaining power of customers, bargaining power of supplier, also known as market of inputs, affects the availability of raw materials for use on the organisation. If an organisation secures a good supply chain with trusted suppliers, the output also improves.
There is the availability of goods and services to the convenience of its customers. McDonald’s UAE has ensured that suppliers are available for the main utilities in the organisation. These utilities are sourced locally and internationally as per the requirements. Suppliers have also contributed to the quality services that the organisation provides.
Substitute Products
There are several restaurants in the UAE that offer competition to McDonald’s. While these restaurants offer direct competition, the hotel and catering industries around offer an indirect competition through the provision of related products. McDonald’s ensures that the competition that is provided by these substitute products is reduced through the pricing of its own products. When the prices of a product are lower than that of another related product, the customer often makes the choice of buying the cheaper product.
External Threats to the Company
Despite the company performing well both internationally and on the local front, there are a number of threats that it faces. These are likely to affect the future operations and profitability of the business. The main threat is the heath campaign against the company that is evident in many avenues. There has been concern about the prevalence of obesity in other areas of the world where the company operates. This situation is likely to emerge in the UAE. The negative publicity that the campaign creates for the company is likely to affect its performance.
External Opportunities for the Company
Despite the threat above, the company has a potential opportunity on the international front. With the improved performance of most of the economies in the region and the development of major infrastructure projects, the population will increase in the region (Robison, & Goodman, 1996). This provides an opportunity to the company to use its well-established brand name to improve its presence and performance in the region.
Internal Analysis of the Company
Resources and Capabilities of the Company
The company has a number of resources that it can attribute to its success in the country and the region in general. One of the major resources is the strong brand name that it has created over the years. The company also has a large number of experienced personnel to ensure that the services provided are adequate.
The company prides itself in having an experienced human resource. Some of the future resources that the company may invest in are cleaner and efficient way of producing the goods that it sells. This will be a likely source of future better performance.
Competencies of the Company
The company has a number of competencies that it is known for in the industry. As a restaurant with a powerful brand name, McDonald’s provides some of the tastiest fast foods available, with the best known of these foods being the burgers and chips. The organisation has used them as the marketing strategy to ensure that customers can relate the company with the sweetest foods.
The company also offers delivery services for some of the foods that it produces. It often has promotions where these foods are provided at a reduced cost. The main competence of the company is the efficiency with which it is able to provide quality foods. Some of these foods also include sandwiches and coffee, fruits and vegetables, and beef products.
Competitive Advantages of the Company
The company has a competitive advantage in a number of ways that it has managed to add value to its customers. One of the ways that the company adds value to customers is saving them time and money. Through the availability of cheap foods, customers can work comfortably in any city where there is a McDonald’s business. The organisation also ensures that families can save time and money through providing them with cheaper food options as opposed to travelling to their home places to look for food.
Strengths of the Company
The company has a number of strengths that are a source of its dominance in the region and on the international arena. One of the major strengths that have been mentioned is the strong brand name that it has created internationally. This continues to influence its performance even in the UAE.
Another source of strength is the location of the branches at the most convenient places where customers can access them. A large market and consumer base is another of the strengths that the company has. Many people in the UAE have at least dined, or wanted to dine, in the restaurant. The ownership of the restaurant is also by the locals. This makes them tailor their services according to market needs.
Weaknesses of the Company
Despite the strengths discussed above, the company also had its share of flaws. The major weakness of the company is the absence of varieties in the provision of services. The company has embarked on the preservation of its brand name. This has involved the restriction of services to the food and restaurant industry. The company is also located in the large urban areas, thus locking other markets that have a potential to develop.
SWOT Analysis
Global Strategy
The company has adopted an efficient global strategy that is run by the mother company. This involves spreading to all corners of the world. Now, the company has subsidiaries and branches in over 110 countries. The ownership of these branches is purely by the local investors in each of the countries. The company controls the activities of these subsidiaries. The main achievement that the company has had is the establishment of branches in all the major continents and the provision of services related to the mother company.
Entry Strategy
The company used a number of strategies in its entry into the global markets. One of the strategies that it used was the acquisition of other international companies and organisations offering the same services elsewhere where they wanted to enter the markets. The company bought the smaller chain of restaurants where its operations were to run in the countries.
Another strategy that the company used was to contact investors in the different parts of the world. These investors were contracted to provide services on behalf of the organisation using its strong brand name to provide these services. The company used this entry strategy in most of the restaurants that are run in the UAE.
Entry Strategy Recommendation
The Arabian region is one of the regions that McDonald’s may expand into with a large presence. A number of branches are already available in one of the UAE neighbours. In order to expand to countries such as Iran and Iraq, the company needs to invest through the local investors.
It should build its own restaurants and contract locals to run the outlets. This method will be an effective strategy to ensure a widespread acceptance in the new places in terms of determining the entry strategy that should be used when the company enters a market in the future.
Conclusions
Based on the expositions made in the paper, McDonald’s qualifies to be one of the largest restaurants chain in the world. One of the international branches is the McDonald’s UAE. The company, as discussed, is locally owned by different investors, with the brand name being the most significant of its strengths in the operations. Some of the characteristics of the organisation have been discussed in brief.
Some suggestions are possible for this international organisation. One of the recommendations is that it should consider diversification of its services to other industries apart from the restaurant chain. This move would be important in guaranteeing performance even with the threats in the restaurant industry.
Reference List
Robison, R., & Goodman, S. (1996). The New rich in Asia: mobile phones, McDonald’s and middle-class revolution. London: Routledge.
Walker, J. (2007). Oman, UAE & Arabian Peninsula. Footscray, Vic.: Lonely Planet.
Williams, D. (2008). United Arab Emirates FAIRS Subject Report—UAE Establishes Arabic Labeling Requirements for Food Products 2008. USDA Foreign Agriculture Service. Retrieved from https://www.fas.usda.gov/