Issues
The issues McDonald’s was faced within 2013 were a considerable decrease in sales growth, seriously slowed the growth of operating income, and decreased success overseas due to the weakness of the global economy. Also, McDonald’s was forced to engage in stiff competition with numerous rivals such as Burger King, Wendy’s, Taco Bell, as well as with coffee shops such as Starbucks, and with providers of higher-quality burgers.
Situational Analysis
External Environment
The external environment was rather tough. As for Porter’s five forces (Hill, Schilling & Jones 2017), perhaps the bargaining power of suppliers was increasing due to the customer’s new demands on the quality of foods. There probably was some threat of new entry (from small restaurants providing similar food). Consumers had high bargaining power due to the availability of numerous similar restaurants, so there were fewer consumers than desired. There was a high threat of substitutes from rivals (e.g., ones mentioned above), and there was severe competitive rivalry among the existing firms. As for PEST (Wheelen et al. 2015), while political climate was often favorable, the economic situation was not favorable: the weak economy of the world meant customers bought less overseas, whereas at home they also wanted to eat out less; social problems (e.g., anti-obesity issues) meant clients had additional demands; the technological climate was probably neutral.
Therefore, all the firms were faced with competition and other problems of the external environment. These posed a threat to McDonald’s, which fell behind on several criteria. A probable opportunity was to capitalize on the desire for more healthy foods.
Internal Environment
McDonald’s’ financial situation (a drop in revenues, a decreased market share, a lowered operating income) meant the firm faced several internal challenges, too. One of these was high turnover rates of workers, slow service in restaurants due to the tiredness from monotonous work and low salary, etc. That culture also meant that the customers were unsatisfied, complaining that the service was poor. The foods provided in McDonald’s were often of lower quality than those sold by the rivals, and customers often sought quality over cheapness; however, cheapness remained a competitive advantage, helping retain some of the clients. Overall, the main strengths were probably the low prices of most of the foods, and several new high-quality menu items (primarily the McWrap). The main weaknesses of the value chain included poor service culture and the relatively low quality of most foods compared to that of the competitors; workforce turnover was another issue.
Key Industry Success Factors
There were several key success factors in the industry; one of the external factors was the quality of the food which could be purchased in the restaurant, for there were increasing health concerns in the society; McDonald’s faced issues pertaining to this, whereas those restaurants that sold more expensive, but higher-quality foods started gaining new customers. Around the world, one such factor was the ability to adapt the menu to the local culture (McDonald’s was successful in this respect).
As for internal factors, of great importance was the quality of service in the restaurants, which meant that a positive organizational culture was needed; McDonald’s lacked it.
Strategies
At the business level, McDonald’s worked on improving the quality of food; McWrap (high-quality food item) was rather successful in the U.S. At the functional/operational level, there was a shift from opening new locations (which was costly) to maximizing the profits from the existing ones (apparently a reasonable move, because it allowed for saving costs needed to open new locations). At the cooperative level, no apparent changes were seen; it should be worth noting, however, that McDonald’s traditionally used the franchise system. At the international level, the company expanded primarily through franchises, and tried adapting the menu to the local demands (e.g., kosher foods in Israel) and attempted to make the foods cheaper (and affordable to the locals). Both steps were needed, for, without them, the sales would probably be much lower.
Recommendations
It might be possible to recommend that McDonald’s switches to more healthy foods in the U.S., where the concerns on the healthy diet were growing. Perhaps the enterprise should introduce new food items on the menu, which cost more than the traditional hamburgers and cheeseburgers but are of greater quality. This would probably require working on the restaurant’s image and changing it so that it presents the foods sold in the restaurants as more healthy, attracting some of the customers looking for food of higher quality, but still relatively cheap.
Also, the service in restaurants should be addressed to increase its quality. Probably the workers should not be trained in one area only but should be taught a wider array of skills so that they would be able to help substitute for one another when the need arises.
Update
Nowadays, it is apparent that McDonald’s focuses on the promotion of the image that sells high-quality food to its clients (McDonald’s n.d). However, this company remains to be perceived as a provider of food of lower quality than, e.g., food sold in Subway or Starbucks (Harrington, Ottenbacher & Fauser 2017).
Reference List
Harrington, RJ, Ottenbacher, MC, & Fauser, S 2017, ‘QSR brand value: marketing mix dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks’, International Journal of Contemporary Hospitality Management, vol. 29, no. 1, pp. 551-570.
Hill, CWL, Schilling, MA & Jones, GR 2017, Strategic management theory: an integrated approach, 12th edn, South-Western Cengage Learning, Mason, OH.
McDonald’s n.d., McDonald’s – official corporate website, Web.
Wheelen, TL, Hunger, D, Hoffman, AN & Bamford, CE 2015, Strategic management and business policy: globalization, innovation, and sustainability: global edition, 14th edn, Pearson Education Limited, Harlow, UK.