Download - Mcd qspm strategy formulation
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QSPM-
Quantitative Strategic Planning
By Alvin Paul T. Riel
STRATEGY FORMULATION
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Overview
EFE-External Factors Evaluation
IFE- Internal Factors Evaluation
CPE- Competitive Profile Evaluation
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Overview SWOT Analysis
EFE involves the Opportunities and Threats
which the company are facing;and
IFE is consist of Strength and Weaknesses of
the company.
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Overview
INTERNAL FACTORS 2015 2014 % Growth/ Decline
STRENGTH
Restaurants worldwide (119 countries) 36,525 - -
Total Assets (in mn) 37,938.7 34,227.4 10.84
Net Income From Continuing Ops( in mn)/applicable to common shares
4,529.3 4,757.8 (-7.39)
WEAKNESS
Decreasing Total Income 25,413 27,441.3 (-7.39)
Decreasing Net Income From Continuing Ops( in mn)/applicable to common shares
4,529.3 4,757.8
(-5.04)
Long-term debts and liabilities (Interest expenses)
26,196.1 638.3
17,001.6 575.4
54.08 10.93
Internal Factors of McD
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Overview External Factors of McD
EXTERNAL FACTORS
Opportunities
Technological advancement, social media platforms
Increase in DPI by 2%
Value and Quality-Oriented Consumers
Convenience-Oriented Consumers
Competitive price-oriented consumers
Growing market, incoming peace in Syria, and other war-torn countries,
emerging markets
Threats
Weather (Winter , Draught, etc)
Social and interest groups significantly more health-conscious and litigious
Obama’s Farm Act that will cut SNAP benefits by $8.7 billion
Federal and State Minimum Wage Increases
Terrorism and global wars
Competitors’ strategies
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Overview The EFE Matrix of McD
EXTERNAL FACTORS Weight Rating Weighted Score
Opportunities
Technological advancement, social media platforms
0.1 1 0.1
Increase in DPI by 2% 0.1 2 0.2
Value and Quality-Oriented Consumers 0.1 4 0.4
Convenience-Oriented Consumers 0.1 4 0.4
Competitive price-oriented consumers 0.1 4 0.4
Growing market, incoming peace in Syria, war-torn countries, emerging markets
0.05 3 0.05
Threats
Weather (Winter , Draught, etc) 0.1 4 0.4 Social and interest groups significantly more health-conscious and litigious
0.07 2 0.14
Obama’s Farm Act that will cut SNAP benefits by $8.7 billion
0.08 1 0.08
Federal and State Minimum Wage Increases 0.05 4 0.2
Terrorism and global wars 0.05 1 0.05
Competitors’ strategies 0.1 4 0.4
Total 1.00 2.82
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Overview Competitive Profile of Rivals vs McD
McD Yum! (KFC) Burger King
Weight Rating Score Rating Score Rating Score
Product Quality 0.13 4 0.52 4 0.52 4 0.52
Competitive Price 0.13 4 0.52 2 0.24 2 0.24
Convenience and
Accessibility 0.13 3 0.52 4 0.52 2 0.24
CSR 0.12 2 0.24 3 0.36 3 0.36
Financial Position 0.13 1 0.13 3 0.39 3 0.39
Good People
Practices
0.12 3 0.36 2 0.24 2 0.24
Market
Communication
0.12 2 0.24 2 0.24 2 0.24
Cultural Sensitivity 0.12 3 0.36 4 0.48 2 0.24
Total 1.00 2.89 2.99 2.23
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QSPM Defined is the acronym for Quantitative Strategic Planning
Matrix.
is an analytical technique in designed to determine the relative attractiveness of feasible alternative actions (strategies).
objectively indicates which alternative strategies are best.
requires good intuitive judgment.
is comprised of 3 stages.
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QSPM Defined The 3 stages of QSPM:
1. SWOT Matrix (EFE, IFE, CPE);
2. Grand Strategy Matrix; and
3. QSPM.
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QSPM Defined The 3 stages of QSPM:
1. Analysis from SWOT Matrix (EFE, IFE, CPE) output for use as input for QSPM if matched with Grand Strategy Matrix;
2. Grand Strategy Matrix helps in identifying the appropriateness of strategies for relative Market status and degrees of Competition to avoid stereotyping and or illogical approach; and
3. QSPM, founded on matched data, information, plan and actions (from stage 1 & 2), is an analytical tool that helps strategists objectively evaluate and choose strategies .
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Definition and McD Matrix
Grand Strategy Matrix
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Grand Strategy Matrix–
2nd Stage to QSPM, Defined
is tool for formulating alternative actions/strategies.
is based on two evaluative dimensions: competitive position
and market (industry) growth.
All organizations can be positioned in one of the Grand
Strategy Matrix’s four strategy quadrants.
Some organizations may use one or more quadrants based on
branch or geographic-specific market growth and
competitive positions (Agustin, 2017).
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Grand Strategy Matrix–
2nd Stage to QSPM
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Vertical integration—
Forward integration
Backward
integration
6. Horizontal integration
7. Related diversif ication
Quadrant III
1. Retrenchment
2. Related diversification
3. Unrelated diversification
4. Divestiture
5. Liquidation
Quadrant IV
1. Related diversif ication
2. Unrelated
diversif ication
3. Joint ventures
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Grand Strategy Matrix–
2nd Stage to QSPM McD Grand Strategy Matrix
Corporate-Business-Functional Levels
Quadrant I
1. Vertical integration—Unrelated Integration
Forward integration
Franchise increases
Backward integration
Local suppliers sourcing
2. Horizontal integration-Related diversif ication
New Restaurants, Franchisee initiatives
Geographically-suited New products for
dev’t & testing
Quadrant II
N/A for McD
Quadrant III
N/A for McD but
Divestiture---Selling
Restaurants
Quadrant IV
1. Related diversif ication
New Restaurants, Franchisee
initiatives
Geographically-suited New products
for devt & testing
2. Unrelated diversif ication
Forward integration
Franchise increases
Backward integration
Local suppliers sourcing
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Grand Strategy Matrix–
2nd Stage to QSPM
McD Grand Strategy Matrix Corporate-Business-Functional Levels
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Grand Strategy Matrix–
2nd Stage to QSPM
McD Grand Strategy Matrix Corporate-Business-Functional Levels
Market or Industry Situation must have a growth of
exceeding GDP of the host country of operations.
Why is it in Quadrant I if the Sales Growth is negative
pegged at -7.39?
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Grand Strategy Matrix–
2nd Stage to QSPM McD Grand Strategy Matrix
Corporate-Business-Functional Levels
High growth markets in Russia, China Italy, Korea Poland,
Spain, Switzerland, and Netherlands. 24% Lead Markets in Australia, Canada, France, Germany and U.K.
30%
Largest market segment is U.S. 34%
Purpose of the Strategies (Vertical & Horizontal Integrations): Competitive Advantage---Market Penetration, Market Share increases, Market Leadership, Keep what are the things on hold by McD.
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Grand Strategy Matrix–
2nd Stage to QSPM
McD Grand Strategy Matrix Corporate-Business-Functional Levels
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Grand Strategy Matrix–
2nd Stage to QSPM
McD Grand Strategy Matrix Corporate-Business-Functional Levels
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Corporate and Business Levels
QSPM of McD
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Transforming our Mindset, Acting
Differently
“In early 2015, we changed the way we think and act to strengthen the fundamentals of our business and reignite growth. Shortly after becoming CEO, I introduced four operating principles – customer-centricity, simplicity, progress over perfection and personal accountability.”
—Steve Easterbrook, President & CEO.
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McD QSPM
Corporate-Business-Functional levels
The Grand Strategy Matrix used is an analytical tool for matching the feasible Strategies for Implementation (or implemented) with appropriate Market or Industry behavior and Competitive Position of McD.
Strategies are within the goals of “customer-centricity, simplicity, progress over perfection and personal accountability..”
Let us go to the next Stage. Stage 3 QSPM.
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McD QSPM
Corporate-Business-Functional levels
In QSPM Matrix, strategies are evaluated in quantifiable score with adjectival value such as :
AS- Attractiveness Score Value
1 = not attractive
2 = somewhat attractive
3 = reasonably attractive, and
4 = highly attractive.
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McD QSPM
Corporate-Business-Functional levels
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McD QSPM
Corporate-Business-Functional levels
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McD QSPM
Corporate-Business-Functional levels
QSPM Matrix
The strategies under evaluation for Level of attractiveness for Appropriate Prioritization showed that New Product Development & Testing is the most appropriate strategy while selling restaurant is the least priority and appropriate for implementation.
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McD QSPM
Corporate-Business-Functional levels
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McD QSPM
Corporate-Business-Functional levels
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McD QSPM
Corporate-Business-Functional levels
McD QSPM IFE
The strategies under evaluation for Level of attractiveness for Appropriate Prioritization showed that Franchises and New Restaurants are the most appropriate strategy while selling restaurant is the least priority and appropriate for implementation for a Slow Market Growth and Strong Competitive Position.
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Definitions and Hierarchical Level of Strategy
Overview: Levels of Strategy
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Overview: Levels of Strategy,
Defined
Corporate Level
Business Level
Functional Level
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Overview: Levels of Strategy,
Defined
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Overview: Levels of Strategy,
Defined
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Overview: Levels of Strategy
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Overview: Levels of Strategy
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Overview: Levels of Strategy
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Reflection & Realization The Presented and discussed Grand Strategy Matrix and
QSPM of McD are confined to Corporate Level, Business Level and Functional Level.
Corporate Level Strategies include Franchisee increases, local supplies sourcing, and selling restaurants.
These Corporate Level Strategies are Vertical Integration(forward and backward) and Unrelated diversification strategies.
They are the decisions and responsibilities of the Personalities on the hierarchical level of the organization and strategies.
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Reflection & Realization Business Level Strategies include Franchisee
initiatives (new restaurants, like in the Case of China), Geographical variations of Menu suited for customers’ preference and tastes (Product Dev’t., testing).
These Strategies will be carried with the Functional Level Strategies.
Functional Level Strategies included are for Franchisees, Franchise Division, Research and Development department of McD’s responsibilities and accountability.
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Corporate Level Strategy
McDonald’s Grand Strategy Matrix and QSPM
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"Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. But quantification alone is not planning. Some of the most important issues in strategic management cannot be quantified at all."
—Peter Drucker
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McD Grand Strategy Matrix
Corporate Level Global Strategy
Quadrant IV
1. HEDGING/FX OPTIONS/SWAPS
2. Repurchasing Program
3. Credit Facilities Utilization
4. Dividend Payment Increases
5.Tools & Equipment Depreciation
Method
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McD QSPM
Corporate Level Global Strategy
Hedging/FX Options and SWAPS got the highest STAS which is 8.00 which suggests that the strategy is the most appropriate for a Slow Market/Industry Growth under the threat of an unstable economy.
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McD QSPM
Corporate Level Global Strategy
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McD QSPM
Corporate Level Global Strategy
Among the 5 strategies, the Repurchasing Program got the highest STAS which is 2.7 followed by Hedging/FX Options/Swaps strategy with 2.5. These STAS suggested that the strategies are the most feasible and appropriate strategies for a slow market/industry growth in consideration to Financial Weaknesses of the Internal environment of McD.
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McD QSPM
Corporate Level Global Strategy
Peter Drucker said that there are some most important issues in strategic management that cannot be quantified at all.
Is Peter Drucker in conflict against Prof Fred David’s QSPM?
If not, what are these issues that cannot be quantified or evaluated with QSPM tool?
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McD QSPM
Corporate Level Global Strategy
Is QSPM a dependable and reliable tool?
QSPM showed that McD strategies in dealing with financial positions in a slow market/industry growth as feasible and appropriate alternative strategies among the 5 strategies.
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McD QSPM
Corporate Level Global Strategy
What is the effect of the 2 strategies with the highest STAS to McD Financial position?
While the Repurchasing Program positively impacted the Financial Position of McD and satisfied the remaining stockholders with dividend payments of $3.23 Bn, the hedging and FX options and swaps contributed significant losses to McD with $1,947.3 mn in 2014, and $1.360.1 mn in 2015.
What went wrong? Or Which is wrong, McD or QSPM?
Or Mr Drucker is wrong by saying that there some which are not quantifiable?
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OPEN FORUM
THE END