Introduction
The popularization of healthy lifestyle ideas and the abundance of information about the benefits of healthy food habits put a serious threat to the fast-food industry. Such global tendencies combined with certain specific organizational problems challenge the well-recognized giant of fast food restaurant business – McDonald’s. The company is currently facing the decline and needs to reconsider its current strategy (Wahba 2015; Peterson 2015). The analysis of the current situation faced by the company helps to reveal that the focus on providing healthier food products, changing the perception of the brand, and renovating the franchising system can be the best options for McDonald’s future strategy aimed at boosting the company’s financial success and restoring its popularity and reputation.
Identification of the recommended strategy
Assessment of current strategy
Though McDonald’s has managed to become the most successful multi-billion dollar fast-food chain, the company’s current strategy appears to be not suitable for the constantly changing market of the last years (Love 2008). The SWOT analysis reveals several drawbacks of the current strategy employed by McDonald’s and their influence on the competitive ability of the company. The SWOT analysis demonstrates that unhealthy food and negative publicity are the interrelated factors having a negative influence on the popularity of McDonald’s (Appendix A).
Besides, the franchising system is another factor leading to the decline of the business due to the poor quality of services. Therefore, health-conscious customers and threats from local competitors can be considered the external threats to the competitiveness of the company. The application of Porter’s five forces model supports the mentioned considerations and reveals that the company faces the need to struggle with competitors and the threat of substitutes (Appendix B).
The recommended strategy
The identification of current challenges faced by McDonald’s reveals that the future strategy needs to address the problem of healthy food, help to improve the public image of the company and renovate the franchising system of the fast-food chain. The first component of the future strategy needs to address the rising concerns about the health outcomes of consuming fast food products. As more and more customers prefer visiting the restaurants offering organic food, McDonald’s needs to introduce the alternative menu offering organic meals with nutritional facts (LaJeunesse 2014).
Such strategic decisions will not only attract more customers but also help to improve the public image of the company. McDonald’s has faced negative publicity, which caused severe negative influence on its popularity among the customers (Hassanien, Crispin & Clarke 2010). Therefore, the introduction of an alternative organic menu should be supplemented with an active media advertising campaign promoting the brand as the one that cares for the health of its customers. The renovation of the franchising system of the fast-food chain is another component of the recommended strategy, as the current system does not address the high competitive rivalry at local markets.
Though McDonald’s puts much effort in adjusting the menu to the needs of local populations, the company needs to develop the effective system of controlling the franchises, as the franchisees often neglect the quality standards, which leads to low quality of serves offered in some McDonald’s restaurants across the globe (Gilbert 2009). Therefore, the introduction of well-defined rules that need to be followed by the franchisees and the application of strict methods of controlling the performance of the franchises is another crucial element of the recommended strategy.
Application of SAF model
The application of SAF model reveals that the described strategy has a good potential for stopping the decline in the company’s growth and ensuring its future success. Suitability of the strategy is supported by the fact that it addresses the most vital issues related to the current challenges faced by the company. Acceptability of the strategy needs to be evaluated by the stakeholders (Nabyla 2015). The stakeholders appear to be ready to accept the offered strategy, as it suits their interests and is aimed at raising their financial profit. The feasibility of the strategy appears to be rather high, as the identified components of the strategy do not require enormous spending and correspond to the resources of the company.
Assessment of the strategy against potential alternative strategic choices
The potential alternative strategic choices can include the decreasing of current prices for the products offered by McDonald’s, the aggressive advertising campaign aimed at promoting the positive image of the brand and giving more rights to franchisees. Such strategic choices appear to be unsuitable. Decreasing of current prices for the products will not address the need to broaden the menu and will only harm the company’s accountability. The aggressive advertising campaign that is not based on the visible innovations of the company’s services will not help to change the image of the brand significantly.
Giving more rights to franchisees can lead to severe violations of quality standards and further decline of popularity of the brand. Though such choices appear to be rather acceptable and feasible for such stakeholders like employees and suppliers, they cannot address the initial causes of the recent decline in the performance of the company and respond to the needs of the largest group of stakeholders – the customers. Therefore, the recommended strategy appears to be much more effective than the alternative strategic choices.
Review of the proposed strategy
The proposed strategy has a huge potential for benefiting the accountability of the company but requires certain efforts put in its implementation. The proposed option of the introduction of an alternative organic menu corresponds to the latest tendencies on the market but needs to be carefully implemented to bring a competitive advantage over the rivals. The active media advertising campaign also can be considered an effective strategic choice and needs to be based both on the well-recognized values and history of the brand and the innovations corresponding to the current preferences of the customers. The renovation of the franchising system of the fast-food chain also can be regarded as an efficacious decision but needs careful selection of methods of assessing the efficacy of the performance of each franchise of the company.
Consideration of an effective implementation approach
Choosing an effective implementation approach is the key to providing the effectiveness of the future strategy (Johnson, Scholes & Whittington 2014). “Innovatory companies” have more chances of consolidating a strong market position (Thompson & Martin 2005). The implementation of the proposed strategy requires the introduction of several innovations: the alternative organic menu, the new approach to building the image of the brand, and the new approach to the provision of the accountability of franchises.
The interest of the main stakeholders, including customers, employees, and suppliers need to be taken into consideration. The effective implementation can be provided by introducing the organic menu that corresponds to the preferences of local the population and is cost-effective. Such an implementation approach requires finding the sources of reasonably priced organic products sold by local suppliers and adjusting the meal variation to the specifics of local cuisine. Such an approach will benefit both suppliers and the company.
The effective implementation approach to building the new image of the brand requires thoughtful use of previous brand reputation (such as history) and paying more attention to creating a new image of the brand aimed at changing its reputation from the one offering cheap and unhealthy food to the one that offers the variety of healthy products for moderate prices. Such an approach corresponds to the interests of the customers. The part of the strategy related to the usage of the new approach to the provision of the accountability of franchises can be effectively implemented if the company develops a comprehensive system of control of the franchises through regular check-ups conducted by the specialists from the major offices. Such an approach corresponds to the interests of the employees working in the company’s franchises all over the world.
Conclusion
The analysis of the current situation faced by McDonald’s reveals that providing healthier food products, changing the perception of the brand, and renovating the franchising system appears to be the most effective future strategic options for the company. The choice of the strategy implementing these options is more suitable than the strategy implementing alternative options. The implementation approach needs thoughtful consideration of the innovations needed for boosting the financial sustainability of the company and the overall popularity of the brand.
Recommendations
The careful and comprehensive assessment of the preferences and tastes of the customers in every country where the company operates is highly recommended before the implementation of the proposed strategy. Studying the experience of companies implementing similar strategies, making appropriate conclusions, and using them to improve the proposed strategy is also considered strongly-recommended. Besides, the assessment of the efficacy and results of the identified strategy is needed at the first stages of its implementation and throughout the further stages. Continuous assessment of the changes in external and internal environments can be considered the key to preventing the ineffectiveness of the strategy and providing timely interventions if needed (Cole 1997).
Appendices
Appendix A – SWOT Analysis
Strengths
- Largest fast food market share in the world.
- Absolute efficient food preparation process.
- Adaption to cultural differences.
- Own academic institutions (Hamburger university).
- Excellent locations (theme parks, train stations, airports etc.).
- Very High brand recognition and world’s most recognized logo as well as use of well-known food brands in their products (Heinz, Coca- Cola etc.).
- Great advertisement and complimentary Wi-Fi
- More than 80% of restaurants are owned by independent franchisees.
- Locally adapted food menus.
Opportunities
- Being more responsive to the social changes to healthier options.
- Expansions of business into newly developed parts of the world.
- Open products up to allergen free options (nut free and gluten free).
- Create Special offer menus for holidays.
- Creating new brand items (i.e. Big Mac, Quarter Pounder etc.)
- Increasing trend of preferences for healthier food options.
- Growing take-away and home delivery market.
- Internationalization (Serving only 1% of Population every day).
- High growth on breakfast market.
Weaknesses
- Unhealthy food menu (more focused on burgers and grease fried products), minimum concentration on providing organic products.
- Negative publicity.
- High training costs due to high employee turnover.
- Not much variation in products (not many seasonal products variations that are offered).
- Lack of rational innovative products.
- Quality concerns due to franchised operations.
Threats
- More Health Conscious Customers.
- Threat from local Competitor in different countries (e.g. independent fast food restaurants in the UK) as well as strong competitors such as Subway, KFC, Burger King etc.
- Global economic recession and wars.
- Lawsuits for offering unhealthy food that have alleged addictive additives.
- Heave investments in advertising and promotions due to competitors pressure.
- Rising Resource prices.
- Same kind of service anywhere.
Appendix B – Porter’s Five Forces Model
Bargaining power of Suppliers – MODERATE
- Lower the cost of raw materials and high competitive price.
- World largest restaurant chain in sales.
- Suppliers do not have the ability to increase prices but operators do not have the ability to bargain makes supplier moderate.
Competitive Rivalry – HIGH
- Firms compete for market share in a saturated market.
- Slow industry growth: fast food is saturated.
- High fixed costs: need to sell high volumes to recuperate.
- Standardized products/services: intense price competition.
Threat of New Entrant – LOW
- Difficult for new entrants due to price competition.
- Firms must spend a large amount of capital in marketing and advertising.
- It takes pretty much time to establish in the fast food industry.
Bargaining power of Buyers – HIGH
- Less chances of switching, high brand image through differentiation and uniqueness.
- Attractive price.
- Buyer do not have bargaining power (low volume).
Threat of Substitutes – HIGH
- Low switching costs.
- High substitutes availability
- Substitutes with healthier options.
Reference List
Cole, GA 1997, Strategic management, 2nd edn, Letts Educational, London.
Gilbert, S 2009, The story of McDonald’s, Jaico Publishing House, Mumbai. Web.
Hassanien, A, Crispin, D & Clarke, A 2010, Hospitality business development, Butterworth-Heinemann, Oxford, United Kingdom. Web.
Johnson, G, Scholes, K & Whittington, R 2014, Exploring strategy, 10th edn, FT Prentice Hall Pearson Education, Harlow, United Kingdom.
LaJeunesse, S 2014, Customers prefer restaurants that offer nutrition facts and healthful foods. Web.
Love, J 2008, McDonald’s: Behind the Arches, Bantam Books, New York.
Nabyla, D 2015, Developing strategic business models and competitive advantage in the digital sector, IGI Global, Hershey, Pennsylvania. Web.
Peterson, H 2015, McDonald’s CEO reveals his massive plan to save the business. Web.
Thompson, J & Martin, F 2005, Strategic management: Awareness and change, 5th edn, Thomson Learning, London.
Wahba, P 2015, McDonald’s leans on franchisees to spur growth, win back customers. Web.