strategic management- mcdonalds (1)

8/9/2019 Strategic Management- McDonalds (1)

1/23

Strategic

Management

ASSIGNMENT ON

External Environmental

Factors, Scanning andAppraisal

A case study orMc!onald"s

Assignment Submitted By:Abhishek MauryaRoll No. 10001116001

Santosh KumarRoll No. 10001116043

Kapil Dev Tiwari


2/23

Roll No. 10001116020

MBA HR !R "rd Semester!MS #u$know %niversity

Submitted To:

Mrs& Swati Raman

Organi#ational Environment An Introduction

Organizational environment consists of both external and internal factors.Environment must be scanned so as to determine development andforecasts of factors that will inuence organizational success.Environmental scanning reers to possession and utili#ation oinormation a$out occasions, patterns, trends, and relations%ips

&it%in an organi#ation"s internal and external environment. It helpsthe managers to decide the future path of the organization. Scanning mustidentify the threats and opportunities existing in the environment. Whilestrategy formulation an organization must ta!e advantage of theopportunities and minimize the threats. " threat for one organization may bean opportunity for another.

Internal analysis o t%e environment is the #rst step of environmentscanning. Organizations should observe the internal organizationalenvironment. $his includes employee interaction with other employeesemployee interaction with management manager interaction with other

managers and management interaction with shareholders access to naturalresources brand awareness organizational structure main sta% operationalpotential etc.

"lso discussions interviews and surveys can be used to assess the internalenvironment. "nalysis of internal environment helps in identifying strengthsand wea!nesses of an organization.

"s business becomes more competitive and there are rapid changes in theexternal environment information from external environment adds crucialelements to the e%ectiveness of long&term plans. "s environment is dynamicit becomes essential to identify competitors' moves and actions.Organizations have also to update the core competencies and internalenvironment as per external environment. Environmental factors are in#nitehence organization should be agile and vigile to accept and ad(ust to theenvironmental changes. )or instance & *onitoring might indicate that anoriginal forecast of the prices of the raw materials that are involved in theproduct are no more credible which could imply the re+uirement for more


3/23

focused scanning forecasting and analysis to create a more trustworthyprediction about the input costs. In a similar manner there can be changesin factors such as competitor's activities technology mar!et tastes andpreferences.

While in external analysis three correlated environment should be studiedand analyzed ,

immediate - industry environment

national environment

broader socio&economic environment - macro&environment

Examining the industry environment needs an appraisal of thecompetitive structure of the organization's industry including the

competitive position of a particular organization and it's main rivals. "lso anassessment of the nature stage dynamics and history of the industry isessential. It also implies evaluating the e%ect of globalization on competitionwithin the industry. "nalyzing the national environment needs anappraisal of whether the national framewor!helps in achieving competitiveadvantage in the globalized environment. "nalysis of macro'environmentincludes exploring macro&economic social government legal technologicaland international factors that may inuence the environment. $he analysis oforganization's external environment reveals opportunities and threats for anorganization.

Strategic managers must not only recognize the present state of theenvironment and their industry but also be able to predict its futurepositions.

$he external environment in a companyor an organization includes all theexternal elements and changes which can have a direct or indirect positiveor negative incidence on the companyor the organization. $hese changesconcern the customers the suppliers the competitors the mar!ets theeconomy the politics the new technologies the demographic pro#les.

A case study or Mc!onald"s() Introduction

Mc!onald*s +orporation is the worlds largest chain of hamburger

fast food restaurants serving around /0 million customers daily in 112

countries. 3ead+uartered in the 4nited States the company began in 1205

as a barbecue restaurant operated by the eponymous 6ichard and *aurice
http://en.wikipractice.org/wiki/Company_(D)http://en.wikipractice.org/wiki/Organization_(D)http://en.wikipractice.org/wiki/Company_(D)http://en.wikipractice.org/wiki/Organization_(D)http://en.wikipractice.org/wiki/Customer_(D)http://en.wikipractice.org/wiki/Supplier_(D)http://en.wikipractice.org/wiki/Competitor_(D)http://en.wikipedia.org/wiki/Hamburgerhttp://en.wikipedia.org/wiki/Fast_food_restauranthttp://en.wikipedia.org/wiki/Richard_and_Maurice_McDonaldhttp://en.wikipractice.org/wiki/Organization_(D)http://en.wikipractice.org/wiki/Company_(D)http://en.wikipractice.org/wiki/Organization_(D)http://en.wikipractice.org/wiki/Customer_(D)http://en.wikipractice.org/wiki/Supplier_(D)http://en.wikipractice.org/wiki/Competitor_(D)http://en.wikipedia.org/wiki/Hamburgerhttp://en.wikipedia.org/wiki/Fast_food_restauranthttp://en.wikipedia.org/wiki/Richard_and_Maurice_McDonaldhttp://en.wikipractice.org/wiki/Company_(D)


4/23

*c7onald8 in 1209 they reorganized their business as a hamburger stand

using production lineprinciples. :usinessman 6ay ;roc(oined the company

as a franchise agent in 12


5/23

demographics green issues and larger societal and environmental forces.$he micro&environment includes other environmental constraints such asthe structure of the mar!et the suppliers customers trends of the mar!etthe public and competition.E+ually important is the internal environment incorporating the examination

of the company's mar!eting mix Fproduct price place promotionG andservice mix Fpeople process management physical evidenceG. "n analysis ofthe internal environment also covers other factors such as sales pro#tabilitymar!et share and customer loyalty.

$he internal audit examines the company's own resources and suppliessuggestions as to the company's strengths and wea!nesses. Internalconsiderations are mainly controllable by the company and thereforecompanies should mostly avoid any problems from this area. It is evidentlyproven that product development and strategic formation is based upon theinternal organizational capabilities.

Every company after considering both its internal strengths and

wea!nesses and the external environmental inuences that a%ect itFopportunities and threatsG is in a position to develop an e%ective mar!etingplan. )ailure to understand the external and internal capabilities may lead tosub&optimisation of the organisation's strategy and resources invested.

*ultinational companies must highly consider environmental auditingand the development of the SWO$ Fstrengths wea!nesses opportunities andthreatsG analysis. $his is vital if they want to capitalise on organisationalstrengths minimise any wea!nesses exploit mar!et opportunities as theyarise and avoid as far as possible any threats.

It should be noted that the external environment is very important as itdictates the behaviour of any mar!eting orientated organisation.

Honse+uently for the purpose of this case considerations for the analysis ofthe external environment are highlighted for *c7onald's.>A

) Mc!onald"s and its external environment

)&' *oliti$al+legal ,a$torsolitical factors include laws agencies and groups that inuence and

limit organizations and individuals in a given society. $he dimensions beingevaluated include the government attitude to foreign mar!ets the stabilityand #nancial policies of a country and government bureaucracy.

olitical and legal forces are highly important as they cover manyaspects of company policy. overnment policy a%ects industry as a wholethrough regulatory bodies such as the 7epartment of the Environment andthe 7epartment of $rade and Industry. $hese bodies develop policies on thetrading restrictions and standards within their particular #eld. $he policiescreated can a%ect businesses in various ways8 in how their products areproduced promoted and sold.


6/23

*ultinational companies should understand that the politicalbac!ground is di%erent across the regions of the world. *any formercentrally planned economies for example are still heavily protected by thegovernment. In such a climate it is more li!ely that proposals for a (ointventure will be accepted.

It is argued that the legal rami#cations of mar!eting a product internationallyare very complicated. Each country has their own legal system and when acompany internationalises then it must !eep within these legal systems.

" legal issue occurred in 6ussia for *c7onald's when in 122A a lawwas passed in *oscow re+uiring all stores to have 6ussian names or at leastnames translated into the Hyrillic alphabet. $his meant the company had totranslate its brand name to . $his enabled *c7onald's to at least retain thesound of its name. $his also occurred in Japan where the pronunciation of itsname was changed to *a;udonaldoF7aniels et al. 1229G.

*oreover the law in 6ussia states that at least a three&+uartersma(ority vote is needed to approve important decisions. $herefore the

representatives of *c7onald's and the Hity Houncil must agree on all ma(ordecisions which could hamper opportunities identi#ed by the companyF7aniels et al. 1229G.

When it comes to developing mar!eting mix elements in foreignmar!ets the company's approach may have to be adapted. $he legalenvironment must be assessed to determine whether it would a%ect thelaunch of a product into a new country. In many countries government andregulations have a direct inuence on product design. Kaw often imposesminimum or special product standards which may necessitate the shape!ind components or even the brand name of a product used.

Lovernment regulations and restrictions regulate the content of

promotion. $he law restricts the advertiser's freedom particularly withregard to the advertising message and visual presentation. romotionalactivities also may have to be changed depending on the country involvedand the legal systems that ta!e place. )or example in )rance and Hhinadoor&to&door selling cannot be used as it is prohibited FMrontis and Mronti>550G.

*oreover Lermany forbids superlatives or comparative claims. $hewords Nbetter' and Nbest' are words to be avoided. In the case of productcomparisons the manufacturer with whose products the advertised productsare compared may be able to sue for damages.

rice regulations may be another factor that a company needs to loo!

at when launching into internationalisation. In some countries governmentsmay control the price that is set for products. )or example Lhana controlsthe manufacturers' pro#t margins which indirectly controls the price paid bycustomers F*uhlbacher et al. 1222G.

)&) -$onomi$ ,a$torsEconomic factors include factors that a%ect consumer purchasing

power and spending patterns. Economic trends are again to a large extent


7/23

bound up in government policy and are a crucial issue to businesses andmar!eters because of the way they a%ect consumer spending power. Inperiods of relative prosperity a consumer's disposable income will berelatively high and therefore there is a willingness to spend more money.rice becomes a less sensitive issue and this a%ects mar!eting strategy

itself. 7uring a recession however spending power decreases ma!ing pricemore relevant.$he di%erences that exist between countries in di%erent stages of

economic and industrial development have a profound inuence on pricesetting. 7i%erences in income levels may suggest the desirability ofsystematic price variations. It is therefore important for *c7onald's tounderstand that in countries with a lower stage of economic development itis necessary to set a lower price.

$he limited purchasing power in developing countries often combinedwith low levels of literacy poses special problems for mar!eters onpromotion. "lthough theoretically a company has a wide choice of

promotional tools in practice the choice of e%ective tools is somewhatlimited. )or example in foreign mar!ets with low economic development*c7onald's should try to use cost e%ective methods of promotion otherwisethe #nal price would be beyond the reach of most customers.

)&" Te$hnologi$al ,a$tors$echnological developments have made international travel and

communication more accessible to consumers and led to a situation in whichsocial habits and fashions change much +uic!er. *oreover lifestyles andattitude changes cause changes in product demand and how products canbe sold to customers.

$echnological factors include forces that create new technologiescreating new product and mar!et opportunities. It is based on considerationsas to whether the local mar!et has su=ciently developed technologies tota!e full advantage of the product. It should be noted that high technologiesare re+uired to ma!e full use of the variety of promotional methods usingalternative advertising media such as television or websites FMrontis andMronti >550G.

*c7onald's successful internationalisation can be partly attributed tothe way the company has overcome technological problems. $he systematicsubstitution of e+uipment for people and the carefully planned use andpositioning of technology have helped each franchise to be of the same high

standard. When *c7onald's entered the 6ussian mar!et the company too!into account that technology transfer could provide important long&termbene#ts to the Soviet citizenry. "lso since the Soviet machinery lagged 15 years behind Western technology new machinery from 3olland was usedto harvest potatoes used to ma!e )rench fries.2


8/23

)&. So$io/$ultural ,a$torsShifts in spending power are also a%ected by sociological demographic

trends. "nalysis of population uctuation suggests to mar!eters in which agegroups there is going to be the largest demand for articular goods. " baby

boom for example will increase the need for baby products initially then infollowing years a greater demand for toys educational products andchildren's clothes etc. "nother emerging trend is the changing family withthe traditional family unit of mother father and two children in decline. $heincrease in one person households creates di%erent needs in home productsas homes re+uire smaller products and money is spent due to more fre+uenthome movement. Hhanges in demographics can therefore a%ect thingssuch as the development designing pac!aging and promotion of products. Itcould also shape the organisational setting of strategies and strategicplanning.

In the case of *c7onald's several social forces greatly a%ected its

success in 4S. One factor was the prevailing family structure in the 4S andthe trend towards a youth&orientated culture. In the 12/5s and the 12?5s thedecision&ma!ing role had changed to such an extent that children oftenmade the selection of a place to eat. *c7onald's special emphasis onchildren and teenagers as advertising targets was successful largely becausethe strategy capitalised on these existing social trends.>

)&0 -nvironmental ,a$tors$he climate and physical terrain of a country are important

environmental conditions which have a signi#cant e%ect on the demand andthe type of product made available. rior to entry into a new mar!et it is

very important for *c7onald's to consider the physical terrain and climate inthe appraisal. "ltitude relative temperatures and humidity are some of theclimatic conditions that can a%ect products in foreign mar!ets.

:eing environmentally friendly is another important issue to consider.Environmental groups forced *c7onald's to reduce its use of plastic andstyrofoam pac!ing. While *c7onald's internal mar!et research shows thatenvironmental issues will have neither a positive nor negative impact onsales they have agreed to wor! with the Environmental 7efence )und anenvironmental pressure group to reduce unnecessary and harmful waste.

)&1 Stakeholders

It is important that multinational companies highly consider and valuetheir general public or sta!eholders their sta% suppliers distributorsshareholders and the consumer itself. 3ow a consumer and indeed theother Npublics' mentioned view the company and the products mar!eted isimportant #rstly in order to assess what mar!et you are in but secondly toassess whether the corporate image of the company is functioning in apositive manner. ublic perception of your product allows it to be positionedor repositioned to reach the re+uired target mar!et and therefore be


9/23

successful. If you view your product as portraying a certain image that is atodds with the public perception of it obviously your mar!eting strategy isnot functioning properly. Ki!ewise if your business itself is viewed in anegative light by actors both internal and external to the company stepsneed to be ta!en including the design +uality mar!eting and strategy of

what is o%ered to correct this and therefore create a feel good factor. 3avinga good relationship with all publics is highly considered by *c7onald's.A0

)&2 3ustomer tastesHustomer tastes is another very important issue to consider. Every

company should underta!e mar!et research and understand consumers'needs and wants. :ased on that it should design mar!eting strategies andtactics to meet the needs and re+uirements of its target audience. $his iscrucial as by underta!ing necessary adaptations the company can maintainits mar!eting orientation and go in line with the mar!eting concept.

*c7onald's is not an advocate of global mar!eting where this involvesproducts and services being treated as though the world is a single uniformentity thus mar!eting standardised o%erings in the same way everywhere.$hey follow an internationalization mar!eting strategy which involvescustomising mar!eting strategies Fthis may also include pricing strategiesGfor di%erent regions of the world according to cultural regional and nationaldi%erences in line with local needs. $herefore the concept of Nthin! globalact local' has been clearly adopted by *c7onald's FMignali >551G. :elow aresome !ey examples of the Internationalisation mar!eting strategy pursuedby *c7onald's.)&4 *rodu$t

One of the aims of *c7onald's is to create where possible astandardised set of items that taste the same whether in Singapore Spain orSouth "frica. Mignali F>551G notes that adaptation is re+uired for manyreasons including consumer tastes-preferences and laws-customs. $here aremany situations where *c7onald's adapted the product because of religiouslaws and customs in a country. )or example in Israel after initial protests:ig *acs are served without cheese in several outlets thereby permittingthe separation of meat and dairy products re+uired of !osher restaurants.*c7onald's restaurants in India serve Megetable *cPuggets and a mutton&based *ahara(a *ac F:ig *acG. Such innovations are necessary in a countrywhere 3indus do not eat beef *uslims do not eat por! and Jains Famong

othersG do not eat meat of any type. In *alaysia and Singapore *c7onald'sunderwent rigorous inspections by *uslim clerics to ensure ritual cleanliness8the chain was rewarded with a halal FNclean' Nacceptable'G certi#cateindicating the total absence of por! products. $here are also many examplesof how *c7onald's adapted the original menu to meet customerneeds-wants in di%erent countries.?)&5 Stru$ture o, the market+$ompetition


10/23

$he issue of the competitive environment must be seen as probablyone of the most important issues. :y gathering continuous data aboutcompetitors such as their strategic strengths and wea!nesses theirob(ectives strategy tactics and reaction patterns and the sort of mar!etingactivity-budget a company can decide its own position in relative terms and

be prepared for what challenges are facing them in terms of competitorattac!s. $his information also can be used to interpret sudden moves bycompetitors and how they will respond to a move you are considering ta!ing.

orter F1295G and 7oyle F129AG are both proponents of positioningstrategy. orter considers the external factors which impact upon a #rm'scompetitive positioning. 7oyle refers to the choice of target mar!et segmentwhich describes the customers. " business will see! to serve and the choiceof di%erential advantage which de#nes how it will compete with rivals in thesegment.2>511orter claims that competition is at the core of success or failure ofthe #rm and that a successful competitive strategy can establish a pro#table

and sustainable industry position. 3e claims that there are two fundamental+uestions underlying the choice of a competitive strategyD #rstly howattractive is the industry with regard to pro#tability and secondly what arethe determinants of a competitive position within an industry."ccording to orter there are #ve competitive forces that will govern therules of competition and these rules will prevail in any industry both indomestic and international mar!ets. $he #ve forces areD

& the entry of new competition to the mar!et

& the threat of substitutes or replacement products

& the bargaining power of buyers

& the bargaining power of suppliers

& the rivalry between #rms of the same sector.

)&5&' Threat o, rivalry+$ompetitors

$he concentration of #rms within the fast food industry is low due tothe established presence of *c7onald's :urger ;ing and ;)H. 3owever incertain mar!ets *c7onald's will face competition from established domesticfast&food outlets.

)&5&) Threat o, new+potential entrants$he barriers to entry are +uite high for new entrants as the size of

*c7onald's means they have achieved economies of scale and havepreferential access to raw materials and distribution channels. Pew entrantsmay #nd that a high cost of investment is re+uired in securing plant andmachinery.)&5&" Threat o, substitutes


11/23

" substitute product is one that can be used as an alternative to acompany's own. It could be argued that the threat of substitutes to*c7onald's comes from pizzas and other domestic !ebab and fast foodhouses. 3owever most of the above do not have the same level ofconvenience that *c7onald's o%ers in having a number of outlets in big

cities and also through the use of multiple drive&through outlets.)&5&. Bargaining power o, buyers$his area is perceived to be fairly low ris! for *c7onald's as consumers

have little control over the variations in the product o%erings price and placeof distribution. 3owever international mar!et research should ta!e place andany necessary adaptations made. $he company should !eep customerssatis#ed as switching cost is low and the possibility of switching to anotherbrand in case of dissatisfaction is relatively low.)&5&0 Bargaining power o, suppliers

$his ranges from the threat of forward integration to the threat ofcutting o% supplies. "s *c7onald's has a great deal of inuence over their

suppliers due to the fact that it aids them and trains them the threats fromsuppliers are low. 7ue to the scale of *c7onald's operations suppliers are!een to retain their contracts with the #rm. 1

)&'6 3ompetitive positioningSo what is a good strategyQ Han a #rm position itself in order to gain

competitive advantage over its competitorsQ Is there a speci#c position a#rm should ta!e in order for its strategy to be successfulQ 6umelt F1295Gstates that competitive advantages can normally be found in superiorresources superior s!ills or a superior position. 6esources and s!ills enable a#rm to do more or do it better than the competition. 7i%erent resources and

s!ills will be re+uired depending on the industry or mar!et segment.ositional advantage is how the arrangement of these resources and s!illsare used to out man oeuvre the competition.

ositional advantage can be gained by forward planning greater s!illand resources or luc!R Once a dominant position is gained it is di=cult forthe competition to dislodge the incumbent #rm provided the position meritscontinuation and that it is extremely costly for competitors to ta!e over."s long as environmental forces remain constant position can remainconstant. ositional advantage can ta!e the form of size or scaledi%erentiation from competitors and successful trading names. $o besuccessful a company needs to get both its strategy and tactics wor!ing in

harmony to provide the optimum return bounded by e=ciency F*c7onaldand Keppard 122AG. :oth strategy and tactics should be designed after acareful consideration of the situational environment.>A It is apparent from )igure > that businesses #nding themselves to theleft of this matrix are destined to die strategy being the !ey factor as to how+uic!ly. Honsidering *c7onald's international performance we can argue thatthe company is thriving as it is e%ective doing things right Fhaving the


12/23

desired e%ect producing the intended resultG and e=cient doing the rightthing Fable to wor! well and without wasting time or resourcesG.

0Figure Strategy tactics grid Ffor colours see online versionG


13/23

competitors allows us to price our products correctly balancing +uality andvalue.TOverall the ultimate goal of *c7onald's pricing and di%erentiation mix is toincrease mar!et share. $he strategies of cost leadership and di%erentiationare used interchangeably within the internationalisation approach of

*c7onald's.0$he *c7onald's positioning in the cost leadership +uadrant is achieved

not only through economies of scale in research development and promotionbut also through learning !nowledge and experience in production andoperational processes as well as the way it manages its franchises. MignaliF>551G provides an explanation of the pricing decisions of *c7onald's. 3enotes that this is based on a six step approach namelyD

1 selecting price ob(ectives

> determining demand

A estimating costs

0 analysing competitors' costs prices and o%ers

< selecting a pricing e%ort

/ selecting the #nal price.

$he use of a di%erentiation strategy is where the #rm attempts todiversify from its competitors by adding something to its product that willprovide a uni+ue value to its customers. $here are also various ways a #rmcan di%erentiate depending on the industry in which it operates however the

costs of this di%erentiation policy must be lower than the additional pricingthe #rm can obtain. 7i%erentiation for *c7onald's is achieved through aperceived superior +uality product which surpasses their nearest rivals andhigh brand image and recognition. $he company also has used theirpromotion and pac!aging as a means of further di%erentiation for examplethe golden arches which have become an internationally recognised symbolfor high +uality at low cost. $hey can therefore adopt a premium pricingpolicy in many mar!ets where economic conditions allow. $here are severalapproaches a #rm can ta!e to become a low cost producer which can beused in isolation or as a combination to di%erentiation. $he most basic wayto a low cost is to remove all the Nextras' from the product and produce a no

frills o%ering. $he danger in this strategy is that the way is paved for afeature war. $he design or ma!e up of the product can create advantagesfor example the use of alternative materials. $he standardised productionand operational processes a #rm employs can also reduce costs. "notherexample would be the e=cient use of distribution networ!s manufacturingsystems or the use of low cost labour and product innovation.$he *c7onald's company has perhaps contrary to orter's warningmanaged to adopt both a di%erentiation and a cost leadership strategy.


14/23

*c7onald and Keppard F122AG have developed a strategic focus matrixFsee )igure 0G which emphasises the impact of time on business activities.$he elements relating to the mar!eting mix have been emboldened to showwhere they are positioned in relation to time. It is our view that *c7onald'sadopts the following recommendations not only in the short term but also in

the medium and long term./?9Figure . Strategic focus matrix Ffor colours see online versionG

205

1

>A

)&'' Strategi$ marketing planningStrategic mar!eting planning ma!es use of a number of analytical modelsthat help to develop a strategic view of the business and thus can be usedas decision&ma!ing aids. $he :oston Honsulting Lroup F:HLG matrix Fsee)igure


15/23

9

roducts or services and their respective strategies fall into one of four+uadrants of the :HL matrix. $he typical starting point for a new business is

as a +uestion mar!. If the product is new it has no mar!et share but thepredicted growth rate is good. What typically happens in an organisation isthat management is faced with a number of these types of products but withtoo few resources to develop them all. $hus the strategic decision&ma!ermust determine which of the products to attempt to develop intocommercially viable products and which ones to drop from consideration.Uuestion mar!s are cash users in the organisation. Early in their life theycontribute no revenues and re+uire expenditures for mar!et research testmar!eting and advertising to build consumer awareness.

If the correct decision is made and the product selected achieves ahigh mar!et share it becomes a :HL matrix star. Stars have high mar!et

share in high&growth mar!ets. Stars generate large cash ows for thebusiness but also re+uire large infusions of money to sustain their growth.Stars are often the targets of large expenditures for advertising and researchand development to improve the product and to enable it to establish adominant position in the industry.

Hash cows are business units that have high mar!et share in a low&growth mar!et. $hese are often products in the maturity stage of the productlife cycle. $hey are usually well&established products with wide consumer


16/23

acceptance so sales revenues are usually high. $he strategy for suchproducts is to invest little money into maintaining the product and divert thelarge pro#ts generated into products with more long&term earnings potentiali.e. +uestion mar!s and stars.7ogs are businesses with low mar!et share in low&growth mar!ets. $hese are

often cash cows that have lost their mar!et share or +uestion mar!s thecompany has elected not to develop. $he recommended strategy for thesebusinesses is to dispose of them for whatever revenue they will generate andreinvest the money in more attractive businesses F+uestion mar!s or starsG.

3aving used the :oston Honsulting Lroup matrix above it should alsobe noted that the :HL matrix su%ers from limited variables on which to baseresource allocation decisions among the businesses ma!ing up the corporateportfolio. Potice that the only two variables composing the matrix arerelative mar!et share and rate of mar!et growth.

Pow consider how many other factors contribute to business successor failure. *anagement talent employee commitment industry forces such

as buyer and supplier power environmental sensitive practices corporategovernance corporate social responsibility and the introduction ofstrategically&e+uivalent substitute products or services changes in consumerpreferences and a host of others determine ultimate business viability.

$he :HL matrix is best used then as a beginning point but certainlynot as the #nal determination for resource allocation decisions as it wasperhaps originally intended. In other words (ust analysing the coordinates ofa product into the dogs category would not necessarily mean that it shouldbe singled out for termination. $he technological production and mar!etsynergies Fwith reference to a perceived Ntotal o%ering'G to customers shouldalso be parts of any elimination of Ndogs'.

)urther if we consider *c7onald's position as mar!et leader within theNrestaurant based fast food' mar!et Fthis is as opposed to frozen home madefast food itemsG and the relative pro#ts derived from this mar!et then itbecomes clear that they are positioned in the Nprotect position' +uadrant ofthe *c!insey matrix F)igure /G. $his means that the company shouldconcentrate e%orts on maintaining its existing strength by investing to growat maximum digestible rate.

Figure 0$he *c7onald's company's position in the *c!insey matrix Fforcolours see online versionG


17/23

It is also recommended that they can capitalise on N#rst mover' advantageand therefore Ndrive' mar!et innovation. $his reects the concepts of theNinside&out' or competencies based approach or the capabilities basedapproach i.e. due to their relative size in the mar!et *c7onald's can tosome extent drive the mar!et.

)&') Strategi$ options*ar!ides F1222G further states that behind every successful company

there is superior strategy. $he company may have developed this strategy

through formal analysis trial and error intuition or even pure luc!. Po matterhow it was developed it is the strategy that underpins the success of thecompany.

Strategists have a tremendous amount of both latitude andresponsibility in developing and balancing the strategic options of anorganisation. $he countless decisions re+uired of these managers can beoverwhelming considering the potential conse+uences of incorrect decisions.One way to deal with this complexity is through categorisation8 one


18/23

categorisation scheme is to classify corporate&level strategy decisions intothree di%erent types or grand strategies Forter 1299Gdiscusses the concepts of strategy as a position and strategy as aperspective. 3e notes that as position strategy loo!s down . . . to the xTthat mar!s the spot where the product meets the customer . . . and it loo!sout . . . to the external mar!etplace. "s perspective in contrast strategy


19/23

loo!s in . . . inside the organisation indeed inside the head of the collectivestrategist . . . but it also loo!s up to the grand vision of the enterpriseT.

*intzberg provides an illustration to demonstrate the concept. $his hasbeen adapted and shown in )igure ?.

)&'" %tilisation o, value $hain

Miswanathan and 7ic!son F>55/G provide a conceptual three&factormodel describing the right conditions for the standardisation of products andservices for a global organisation. "lthough it has been argued that*c7onald's uses a customised approach for setting up its local strategies inthe various countries in which it operates the Miswanathan and 7ic!sonmodel F)igure 9G encompasses elements that if considered by internationalcompanies could perhaps be used to enable them to capitalise on theirexperiences elsewhere for successfully launching and managing their

expansion.

Figure 1 osition and perspective concept Ffor colours see online versionG


20/23

Figure 2 Standardising global mar!eting strategy


21/23

$he use of this model serves as an aid to managers for analysing theconditions of the perspective host country with regard to being favorable forthe transferability of tried and tested practices. If all three conditions are notfavorable then management would at least be in a position to !now where tofocus attention or where new strategies and tactics would need to becustomized to suit the new environment.


22/23

-) +onclusionsIt is argued that e%ective mar!eting strategies and tactics cannot be

developed without #rstly analyzing the environment in which the companyoperates. " number of uncontrollable elements a%ect *c7onald's

international mar!eting strategy and tactical implementation. $hese groupsof elements include the ES$KE Fpolitical economic social technologicallegal and environmentalG structure of the mar!et and competition beingfaced Forter's F1295G #ve forces analysisG as well as analysis of itssta!eholders customers and product adaptation within itsinternationalization strategy. "ll of these aspects are crucial to a company'sstrategic decision ma!ing. $he level of understanding that exists in theserelationships will determine the success of a company.

*c7onald's is not ma!ing a one&time standardized global choice but itis stri!ing to #nd a balance. $his is not a straightforward tas! as identifyingthe balance between standardization and adaptation is a challenge and very

di=cult to achieve. $he goals of reducing costs and complexity lead*c7onald's to consider standardization while customer orientation sways ittowards adaptation. It is evident through the analysis that *c7onald's isadapting its mar!eting mix elements in order to go in line with the externalenvironment. "t the same time it should be noted that the company is alsostandardizing when and where possible in its desire to achieve economies ofscale and global uniformity and image.With respect to *c7onald'sinternationalization strategy the company's e%ectiveness and pro#tability isobviously well supported by their strong competitive position and mar!etshare in their primary product mar!et. Its' international success is achievedby the company's strategy and tactics which complement each other and

wor! in harmony providing the optimum return bounded by e=ciency. $hecompany is thriving as it is both e%ective Fdoing things rightG and e=cientFdoing the right thingG.

*c7onald's portfolio of products is well managed and ensures the best#t between the company's strengths and wea!nesses and for o%setting thethreats found in its competitive environment. In considering the strongcompetitive position of the #rm in a highly attractive mar!et it is suggestedthat *c7onald's should protect its position F*c!insey matrixG. $his can beachieved by concentrating e%orts on maintaining its existing strength byinvesting to grow at maximum digestible rate.It is recommended that *c7onald's continue this approach that isD

simultaneously focus its attention on aspects of the business that re+uireglobal standardization and aspects that demand local responsiveness. Whenappropriate processes should be standardized however operation in localmar!ets necessitates the maintenance of the appropriate local exibility.

*c7onald's is adopting di%erentiation and cost leadership strategiesFgeneric strategiesG. In terms of di%erentiation the #rm attempts to bediverse from its competitors by adding something to its product that willprovide a uni+ue value to its customers. $his is achieved through well&


23/23

designed and managed mar!eting activities resulting in a perceived superior+uality product and high brand image and recognition. )urther costleadership is achieved not only through economies of scale but also throughlearning !nowledge and experience in production and operational processesand through e%ective-e=cient distribution networ!s and manufacturing

systems.It is recommended that further international expansion may bene#tfrom the use of a value chain analysis with regards to identifying the degreeof homogeneity of a new country with the ones in which *c7onald's alreadyhas a presence. Such an analysis will help to avoid expensive mista!es andfalse starts as well as achieve further economies of scale through thetransferability of the experiences and lessons learned in other countries.

strategic management- mcdonalds (1)

Documents