One strength for McDonalds is the fact it has a wide product range. Some examples of the products they have got are, beef chicken and fish burgers, wraps, salads, deli sandwiches and poultry nuggets. That is a good thing as this means that they can target lots of people if they have something to suit everyone's needs which will gain them more customers.
Another durability for McDonalds is that it's the market leader in the junk food market. It is undoubtedly the largest junk food chain worldwide bringing in more customers than some other company and also having the most restaurants. That is a strength as it means they may have control over the market and take more dangers. It is easier for McDonalds to move into new market segments as they have the money and facilities to do this which another fast food company might not have the ability to take action they aren't as well established. (Scribd, 2008)
2. 2 Weaknesses
With McDonalds being the world's greatest chain of quick service restaurants it is the one everyone first of all thinks of when it comes to junk food. This is regarded as a weakness as the government want to lower excess weight levels and to do that they are attempting to make people eat healthier. With McDonalds having their bad image this may put people off as they trying to convince people to avoid places like this.
2. 3 Opportunities
One chance for McDonalds is the ageing society. This is an opportunity as this means they can change their restaurants to fit in with the eating habits of the elderly. They could do this by making their restaurants more like cafes that will encourage aged to visitors to come to McDonalds if indeed they don't see it as an easy food place any more. This is done by having healthier products available such as sandwiches and they can provide a wider variety of hot refreshments and more cakes and muffins.
Another opportunity is peoples changing lifestyles. Folks are currently more time poor than they used to be and also have busier lifestyles. This is a very important thing for McDonalds as people are more likely to buy junk food if they're occupied as they may well not have time and energy to cook foods for themselves and their own families. Also nowadays there are more one person families in the united kingdom, this can be an chance of McDonalds as individuals who are single may not want to cook for just themselves or may find it cheaper to buy junk food. Also, they are less likely to venture out for foods as it can be viewed as socially unacceptable to eat alone in a restaurant and may have junk food instead. (Mintel, Rooster & Burger Market - Internal Market Environment, 2008)
2. 4 Threats
Currently the market is becoming saturated with an increase of and more rivals entering the market each year, this is creating slowing progress as people are turning to the new alternatives which really is a major menace to McDonalds.
Also there exists government intervention as they are trying to avoid people eating a whole lot fast food. The government have intervened with the advertising campaign as they now have to acquire healthy images for the happy meals by advertising your options of fruit and vegetables and juice rather than fizzy refreshments and fries. Although this will make it more likely for folks to buy happy dishes people could still however be placed off.
Another menace would be the costs of raw ingredients as they are rising at the moment. If they go up too much this may result in McDonalds raising the prices but at the moment it is just lowering profit. (JapanToday, 2009)
3. 0 Porters Common Competitive Strategies
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In order for McDonalds to use effectively in the fast food industry where there is considerable competition from other brands they need to identify a competitive strategy. This can be achieved through cost factors or differentiation. Getting this right may lead to above average or even superior income.
The first portion of Porters strategy is cost control, this is most effective to an enterprise which assists a mass market like McDonalds. To reach maximum efficiency you need to supply standard products to numerous consumers. That is much like McDonalds who are the world's largest fast food chain, although their approach to marketing in the past has been concentrating on children with happy meals, their best selling product. In more recent years their adverts have included tugging factors for both children and men and women alike. Aswell as this considerable advertising budget they have a restricted yet carefully designed menu. Perfect for mass market development, it enables those to make only a select range of meals with well-timed precision. Also to attract the number of sales they might need they put plenty work into providing meals that any of their customers could choose from. The menu is updated quite often and alterations are made to ensure there's a good range. There are different options like meat burgers, chicken breast burgers, deli sandwiches to grasp the mass market. The main element being that whatever you flavour, beliefs or religion there should be a product suited to you. It is also convenient being situated in city centres, shopping areas and street convergences. A big benefit of McDonalds over independents is you really know what to expect every time you decide to go as the ingredients and preparing food methods are generalised.
Porter says that it's problematic for any competitor serving the mass market with standard products to charge above average prices, as competitive rivalry is too fierce. But what the theory doesn't consider is the added recognized value of the brand. There is no acknowledgement that McDonalds stands out from the other competitors based on its reputation. This is the major cause of their aggressive expansion and mass market performance. Twinned with the successful franchise centered business design, without which they couldn't achieve such good physical coverage or as competitive economies of scales.
So besides from selling some cost leading products they're also in a position to entice people into buying more high quality meals, for case the chicken star food in 2008. The priciest set meals they've ever before sold. This steps McDonalds slightly away from cost leadership, although their goal will always stay with the broadest categories, some product differentiation is going on.
In Porters Strategy he identifies differentiation it by stating an company is differentiating when they're still able to serve a wide target market, but by providing a service which is different or better due to its added value. The client needs to anticipate to pay extra for more features or quality. This allows for an increased or high grade price to be charged, giving surge to superior profits. I suppose this is the goal of McDonalds to be able to build on the cost leading success, generate income from 'superior hamburgers' where people are prepared to pay for it. These ideas are emulated by other opponents in the junk food sector. Burger king have low priced and ever more expensive meal options, topping the five pounds draw. As do Subway with their different filling alternatives, six inch sandwiches cost from 2. 49 and you may pay over 5 for a foot long meal. Customarily this would seem expensive for a sandwich, drink and snack.
The big concern with this presently is that differentiated products don't succeed when there's monetary downturn. This is best exhibited by Markings and Spencer's in the next one fourth of 2008 their food sales fell by around five percent, while at exactly the same time Aldi and Lidl experienced an increase in market talk about. Demonstrating that consumers where less inclined to cover perceived added value, even M&S customers who are typically brand faithful. McDonalds in my own opinion would suffer from badly under these scenario should they go further down the differentiation path. For the reason that the products would probably dive in range of sales while demand for the most common group of value options would profit.
The other part of Porters competitive strategy is the small scope. Meaning the business enterprise doesn't provide the mass market but a little volume of customers instead. Cost focused strategy is adopted by organisations following a narrow target market, and where customers are extremely price very sensitive. For the business to make income there are two important factors, firstly costs must be maintained to a minimum and price place at achievable rates. This type of strategy path isn't commonplace in what we think of as the primary junk food sector. However when taking into consideration the entirety of small takeaway businesses in the united kingdom, the majority of them are in-fact forced to take this proper route. As obstacles to entry by the big franchises like McDonalds limit them from receiving more custom. Coupled with tight margin and this is nearly impossible.
Differentiation targeted strategy on the other hand looks to serve that narrow band of customers, but instead of being run on small margins businesses change and modify their products or service so that consumers are prepared to spend a great deal of money. That is also known as niche market marketing. When it is effective the business can match or even exceed profits made by broad differentiated companies, despite not having the mass market customers. Whether this is possible in the junk food sector is doubtful, the simple nature of the merchandise is situated around convenience and value. So for someone to begin selling to a restricted number of people for an inflated price seems improbable. It would just be too difficult with out a quality reputation and a large cover promoting yourself. Porter's idea of differentiation centered strategy is the one that McDonalds could never take up as the concept of applying it to junk food is flawed, rendering it very unprofitable for any business to attempt. (Capon, 2009)
4. 0 Strategic Fit
In recent years McDonald's has seen a dramatic change in its external environment with an increase of competition, changing requirements from consumers, advancements in technology and changing view from governments throughout the world. McDonald's strategy is to create good quality food at a minimal price for the consumer. Lately McDonald's has seen a growth in competition which has effected its market talk about within the fast food market. The likes of Burger King and KFC have become dramatically over recent years and McDonald's have had to build up internally to counter the expansion of their opponents. A good example of this would be McDonald's broadening its food menu. McDonald's have attempted lately to move away from the traditional image that McDonald's functions only unhealthy fast food by creating healthy options on their menu. This is an interior change within the company as nowadays McDonald's will try to emphasise where their substances come from and the new healthy options. Another influence that made McDonald's consider its image and what products it sold was the changing needs from consumers for healthy products. Administration campaigns and the media in general offered consumers more knowing of the risks of eating bad. This made McDonald's respond with more salads, fruits, and lower calorie items. One other way McDonald's could modify their strategy affecting healthy eating/taking in is by creating much healthier drinks for consumers. Presently McDonald's only sells orange juice as an alternative to fizzy drinks they could extend their range of drinks relating carbonated waters or other fruits based drinks which give consumers a wholesome option.
Another concern in the exterior environment that will effect McDonald's tactical fit is the market. Currently consumers around the world do not have as much throw-away income to invest on snacks such as junk food takeaways. Lately McDonald's prices have increased indicating many individuals are moving to lower priced takeaways. An example of this was in '09 2009 where McDonald's increased the purchase price for children happy foods a typical Happy Meals increased by 16. 5 %, from $4. 25 to $4. 95. This increase may be anticipated to McDonald's growing use of local substances or the currently refurbishment program throughout its stores around the world. To improve the companies strategic fit in this area it suggests that McDonald's tries to create more budget products which are cheaper for consumers. As consumers have less disposable income they will be less willing to spend almost 5 on a meal when they can still not ensure a good quality of product.
5. 0 New Product or Service
From carrying out our SWOT examination we identified some opportunities for McDonalds to take advantage of. They were the ageing society within the UK and consumers changing life styles and needs. From these we've identified a fresh direction that McDonald's can grow into. We have looked at McDonald's main opponents and found that many do not operate a delivery service. We feel this can be an chance of McDonalds to identify using their competition. We've chosen delivery service mainly because of people's changing standards of living and the actual fact that most people no more have a chance to cook meals. We believe the delivery service would be favored by many McDonald's consumers with the key concentrate on being students. It is because we feel that students would prefer to pay extra for his or her meals if indeed they need not go out and purchase it themselves. Most students reside in central locations and are unlikely to have cars meaning the only way to access McDonald's is by walking which may be inconvenient. The delivery service will operate during the day and evening so that it is a substitute to an independent typical takeaway.
Appendix 1 - Porters Five Forces
Porter agues that five basic pushes drive competition in an industry, competitive rivalry, risk of new entrant, threat of substitute products, bargaining electricity of purchasers and bargaining electric power of suppliers.
McDonald's is the main junk food company in the united kingdom in conditions of foodservice sales, with a 12% share of the total sector in 2008. Amongst chained fast food brands, McDonald's presented an impressive 27% of foodservice sales in 2008, although it must be noted that its share of fast food sales amidst chained operators was down by one ratio point from 2007. This fall season is due to the extending competitive environment where it operates, it may seem of McDonald's as being a monopoly business and with around 31, 000 restaurants in 116 countries and this is right in a single sense. McDonalds strong brand occurrence and efficient functioning service has allowed these to expand rapidly, checking in developing countries worldwide. However now other businesses such as Nando's, KFC and Subway are growing in power. There are numerous driving forces behind this from a larger demand for choice, healthy options, and the enlargement of franchise business models (KFC, Subway). KFC, the quantity two fast food brand by sales and number 4 in terms of outlets, noticed marginal development in its share of foodservice sales in 2008. KFC accounted for 14% of sales amongst chained junk food brands and 6% of total fast food, unchanged from 2007. Burger Ruler was the number three junk food company in sales conditions, with a 4% show of the full total sector, down from 2007. Expansion ideas of KFC, especially in the places where it is under-represented, like the North and Wales, have been seen by some as a move to get more detailed dominance.
Threat of New Entrants The major barriers when a firm looking to enter the market faces will be the economies of level and the gain access to of the distribution. For a firm to take pleasure from success in the industry, they need to spend a large amount of capital on advertising and marketing. The industry is very competitive because organizations are always attempting to grab customers from each other.
It's also very price centered, with out a monopoly on the competition you would find it hard to survive without choice low priced products. Nevertheless the McDonalds franchise model has made it easier to get into the marketplace, for example Subway has generated their proper plan around franchise options.
Because fast food is a global business, there's a risk that new entrants in overseas countries could gain market show and vitality. Especially where McDonalds sees it difficult to adapt to cultural traditions e. g. India. This progress could copy oversees into McDonalds home markets like the united kingdom Germany and the USA.
When every part is considered though, it's going to be difficult for new entrants to accomplish substantial market share in such a dominated industry.
Threat of Alternative Products or Services There's a variety of products that could be looked at alternatives to eating in McDonalds, such as investing in a burger from the local store and taking it home to warm up, this is a cheaper substitute but is more time and effort consuming, therefore not a convenience like McDonalds. However, regarding to MINTEL the UK ready to make food market travelled up from 504m in '07 to 530m in 2008. By 2013 it's projected to be worth 728m a 37% increase over last years shape. And sales of the chilled beef burger brand Rustlers echo this, this past year sales increased by 57. 9% to 30m.
Alternatively you may go to one of the popular waiting for you cafes, like at Debenhams, BHS or even an unbiased caf. Burger restaurants, like Fine Burger Co and Premium Burger Kitchen provide same products but use better quality as there USP. There's also a number of upper-class restaurants like Caf Rouge and Pret A Manger who could take business away from McDonalds by attractive to people on lunchtime breaks from the office. Pubs and Gastro pubs also contend, offering bargains such as two foods for the price tag on one, it is not difficult to acquire a burger and potato chips at under 5. Or in the traditional there's businesses like Greggs and Ainsleys who do remove food but aren't labeled as restaurants, they're cheaper and a strong alternative during the economical downturn.
Because people are becoming more health conscious, there's likely to be some turn over from what people perceive as fast food to healthier options. We believe that this is the main menace to McDonalds, as its marketing campaign for better products has come under tons of criticism, uptake of these ranges was not as good as McDonalds hoped and this could play into the hands of other business using basic substances as their feature.
Bargaining Electric power of Suppliers Because McDonald's is undoubtedly a large competition on the market, suppliers will be eager to earn their custom. This also means that they control and affect seriously on what price they pay for goods. Such strong dominance means that suppliers will have little bargaining power over the purchase price they get, only legislation and free trade contracts will in the end protect them. McDonald's have gone a step further than bargaining with suppliers, they've taken over many of them and switched to their own supply oftentimes. This is called backwards vertical integration, something large businesses do to lessen costs, promise a good source and ensure to quality of products using their company farms. A good example of this is equipment such as beef, milk, flour, sugar and fungus to be utilized in its products. McDonald's has also formed tactical alliances with companies such as Walmart, Disney and Coca-Cola which lead towards balanced vertical integration, whereby in addition they begin to regulate other outlets for their products as well as suppliers. The limited bargaining vitality suppliers may have is from the growth of other brands, whereby they can try to swap customers. However I really believe this is weak as each brand will have specific suppliers and the better they find the more bargaining electricity they have.
Bargaining Electricity of Buyers
Bargaining electricity isn't assessed by the number of people complaining in store, it's most visible by the transfer in consumer spending in one kind of product to some other. As junk food chains and other substitutes are so easily seen, and there's relatively no turning costs, the individual consumer can simply go elsewhere to invest their money. McDonalds may notice this change in footfall but unless there are huge numbers, specific people still have little persuasion or power to negotiate over the purchase price they pay for their lunch time. However, if individual consumers choose to act in unison they might be in a position to excise power. A good example of this is, in the mid-1990's when the health scare over British isles meat erupted, McDonald's faced the chance of large numbers of its consumers performing jointly and refusing to buy their hamburgers. So that it turned from suppliers of United kingdom beef to provide of Dutch beef. An emerging concern is the pressure on junk food prices, as value for money becomes a key trend this can be more important factor for customers. One pound menus will become popular as consumers impacted on by the downturn searching for a cheaper option, this will thrust down the average business deal spend. Also Meal offers have become very common devote the fast food sector, with all the current big brands offering them.
Appendix 2 - LoNGPEST Analysis
The first politics issue at a local level that will influence McDonalds is municipality legislation. McDonald's need to be sure they stick to employment legislation such as the Minimum Income, Working Time Directive and Working conditions legislation. McDonald's needs to make certain it cooperates with all the job legislation as McDonald's is a worldwide company a poor account about their job methods such as paying below minimum amount wage could very seriously have an effect on their reputation at an area level.
At a local Level McDonalds also need to have an understanding of the Misuse Management laws that calls for their restaurants. McDonald's will need to make certain they deposit their waste correctly and do not cause any contaminants of the local environment. This may lead to fines or a worse open public image to the neighborhood population round the restaurant.
Another political concern that will effect McDonald's is trade unions in the neighborhood area. If employees are miserable about pay or time of work then they is going to their local trade union innovator to complain about the existing working situation. This may effect McDonald's as they will need to make certain they have the right amount of staff conversation in their store to keep all employees happy. At present McDonald's do in a roundabout way work with certain unions on all problems with respect to McDonald's.
The local current economic climate will also be an issue to McDonald's. For example if the neighborhood economy is undertaking well then the customer platform for products and service will be large and profitable. However salary will be high and employees will be in short resource in the local population. Currently parts are in a frustrated point out where there is smaller opportunities for retailing products and services with people having less disposable income. Through the recession the neighborhood population's throw-away income was significantly reduced with a shortage in self confidence to buy services and consumers more willing to save lots of money than spend. As MacDonald's is seen by most people as a delicacy they are more likely to scale back on purchasing the merchandise and appearance at other choices.
The final economical issue which may impact McDonald's locally is the speed of unemployment in the local area. This problem could influence McDonald's as high unemployment levels in the local area could grow the range of employees for work but could signify more workers without the required skills to work in the McDonald's stores. This may increase the sum of money McDonald's have to invest on training their employees.
The first socio Cultural concern at an area level is the neighborhood community around McDonald's store. McDonald's will have a primary influence of the quality of life within the local community. In case a Macdonald's is created in a tiny town it may increase traffic volume level which will offer an affect on the quality of life for the population. A rise in traffic quantity could be a advantage to other retailers but it could also be a disadvantage with an increased threat of pollution and higher threat of damages. Also a McDonald's store starting in a tiny town or town can lead to local suppliers of junk food been but out of business such as junk food takeaways, chip and fish shops which might have been around a long time within the town. This may give McDonald's an awful public image in the community if they are putting other providers out of business.
The second socio Cultural concern at local level is Public Change within the neighborhood area. As fast food companies have become more under great pressure from the neighborhood and national media their has become a growing trend for people to look for much healthier options. This will likely be an influence for McDonald's as they will need to begin expanding their range of healthy goods to get the new consumer needs. McDonald's have already began to put into action new salad options to their product range to get new consumers who are interested in healthy products. McDonald's are also trying to provide information about where their suppliers are structured for their materials. Many consumers of McDonald's are actually wanting to know how chicken products are farmed for McDonald's so the company is wanting to provide information to consumers. Over the McDonald's website the company goes into fine detail regarding the source of their materials. McDonald's have had to provide these details as recently there's been many visible TV programmes that contain questioned how McDonald's farm their chickens because of their products. (Mintel, Rooster & Burger Bars - Strengths and Weaknesses, 2008)
One political issue which may affect McDonalds is advertising laws. The government and the advertising expectations expert have put pressure on fast food companies such as McDonalds to stop aiming their advertisements at children and young people and are no longer permitted to advertise at times of the day when children may be seeing. This is to try to combat the challenge of increasing over weight in the UK and by preventing children from viewing adverts for things like happy foods etc. they are simply less inclined to want them. (Mintel, Chicken & Burger Pubs - Issues in the Market, 2008)
Another political issue which may affect McDonalds is lowest wage. The government controls the minimum amount amount which companies need to pay their staff. If the minimum income was to be increased by the government then it would mean a rise in charges for McDonalds. With them being truly a global brand it is very important that they comply to these guidelines as they don't want to wrap up with a negative reputation for not paying their staff fairly.
One economic concern which may impact McDonalds is exchange rates. The British isles pound is currently very weak in comparison to other countries. That is a bad thing for McDonalds as this means hardly any money which is made in the united kingdom will be worthwhile less when it's exchanged into another currency which will signify lower earnings for the company.
Another economic issue which may have an impact on McDonalds is the current economic situation. With the UK being in a tough economy people will have less throw-away income and therefore are much more likely to send their money on requirements rather than luxury products. McDonalds could be seen as an extravagance product as although food is a necessity there are cheaper alternatives for folks to buy alternatively than junk food. However from research we've found it would suggest that the fast food market hasn't been affected by the tough economy. This may be because of the fact that although there are cheaper options it is still not a very expensive thing to buy so people are willing to buy it. Also with it being a convenience food people who don't possess time to prepare are still heading to be buying it.
One social concern which could impact McDonalds is that there surely is an increasing amount of sole person families. This is a positive thing for McDonalds as a rooster or a burger food is a lot more convenient in comparison to cooking a meal for just one. Also people will get food from an easy food shop than to visit a restaurant as sitting by itself in a restaurant could be seen as intimidating for folks. (Mintel, 2008)
Another social issue which may have an impact on McDonalds is that individuals are now beginning to eat more healthily. People are now far more worried about there health because of the government making people aware of the dangers of not eating healthily. There are now more healthier options available for individuals who are looking something quick and convenient such as the Boots Meal package which is the same price as a McDonalds but still tastes as good but is a lot better for his or her health.
One political concern which may have an effect on McDonalds is alliances and contracts. When McDonalds expands to other countries it has to be made sure that the two or more countries regulate the do of international trade and business. It was easy for McDonalds to operate with THE UNITED KINGDOM and US are an alliance because of their background, in the 1980's the close a friendly relationship between Margaret Thatcher and the united states republican leader Ronald Reagan. This was not however the circumstance for all countries for a country such as India for example McDonalds had to think about the different laws and regulations that they might have to abide as they have religious laws. They also have trading regulations as most of the country are vegetarian they could have to have certain personnel who do not touch the meats as they are against it.
Another political issue which may impact McDonalds is Health and Safety. In all countries there are Health insurance and Safety laws for within the office. It is important that McDonalds follow these rules not just purely for health and security but also to maintain their reputation. Also with it being truly a food market it is even more important. There will be the general health and safety functions that connect with all companies as workers have the right to work in an environment where health is not a risk and the odds are you will not get injured or ill through work. Managers would therefore have to firstly look at what determine what can harm you in your task and workout the precautions to avoid it by doing risk evaluation. Also they should give employees health and safety training that is required to do the job cost-free before the worker starts off work. Also any uniform and protective clothing should be provided for example wild hair nets and gloves for health reasons.
One economic issue which may have an effect on McDonalds is the exchange rate, import and export tax. Both exchange rate and the import and export tax has a significant effect on the company as it can hugely affect revenue depending on whether the pound is strong or vulnerable or if the taxes is high or low.
Another issue is labour cost, levels of throw-away income and income distribution. When expanding internationally it was important for McDonalds to check out the difference in the other countries economy when regarding to the labour cost, degrees of throw-away income and income distribution. For some countries the labour cost could either be a lot cheaper or far more expensive which is very important to McDonald's to know as this influences income. Also the levels of disposable income and the income distribution in the area McDonalds planned to put the outlets as if they were putting it somewhere where in fact the disposable income really was low the outlet would not be a success so it's important for them to learn where it is.
One social issue which may impact McDonalds is cross - cultural issues. Different civilizations have a significant impact about how the retailers change. For instance in america a lot of the population have a bigger desire for food so more large foods are grilled and there are extra large meals as well which is different to England. This is a minor change and in other countries the changes are a great deal bigger. In India the meals are completely different as nearly all their populace are vegetarians, also they are not as available to change therefore the dishes have to change into the Indian culture by for example having spicy potato chips, a different selection of sauces. McDonalds had to invent a Hindu-friendly burger to satisfy their Indian customers.
One technological issue which may influence McDonalds is kitchen equipment. McDonalds will have to be sure that they are maintaining the latest technology in the kitchens to ensure they are working proficiently and are providing people with there food in the quickest time possible and the best quality they can.
Language barrier. With stores in various countries they have to interact with the stores through technology such as e-mails and mobile phone. This could cause problems with languages so they would need translators.