McDonald's Sample Essay
McDonald’s Corporation is undoubtedly the largest fast food restaurant chain in the world. Currently, the restaurant chain has established its presence in over 115 countries. Furthermore, it serves a wide variety of customers estimated around 70 million every year. Despite numerous economic challenges, McDonald’s has always remained firm in the fast food industry, annually registering impressive results. With its headquarters in the Oak Brook, Illinois United States, McDonald’s operates numerous successful restaurant chains under its brand name (Porter, 1998). The corporation’s success in the ever-challenging fast food industry can be attributed to the fact that McDonald’s has a formidable strategic plan and an outstanding management team (McDonald’s Corporation, 2001). This essay focuses on McDonald’s and looks at some of the factors that have enabled the company to become a household name. Over the decades, managers at McDonald have continued to succeed, as a result of two factors which one will discuss in this essay. The first factor that one will discuss is the proper planning factor, and the second is the organization factor. These two factors are very important in any organization or business that aims to succeed in the market today.
Planning is the most important to any industry, and McDonald’s is not an exception. Planning is important because without planning, a company can end up in serious chaos. Planning is, therefore, the function of management, whereby the objectives of the firm are set, and the course of action aimed at the achievement of these goals is determined. Managers must, first of all, be aware of the different environments in which their restaurants operate before they can plan effectively. This will help them forecast into the future, so that they could plan any eventualities in the market. This is what the managers at McDonald’s did even, as they came up with strategic plans for their chain of restaurants (McDonald’s Corporation, 2001).
McDonald’s has a strategic plan that has been known as a ‘plan to win’. The company's project is not to be known as the largest world’s fast food restaurant chain. The company instead aims at being the very best fast food restaurant chain. In order to achieve this vision, McDonald’s has continued to use what is known as the five P’s: promotion, place, products, price, and of course, the people. Together with the five P’s, McDonald’s continues to apply its geographic strategic plans. In their US markets, they have adopted a strategic plan that places its focus on convenience, chicken, breakfast, and beverages. For the McDonald’s in the US, these are the key areas of focus.
McDonald’s success has mostly been as a result of the ability of the company to strategize or to plan properly. They have also introduced new items on their menu, such as the Southern Style Chicken Biscuit, which can be taken for breakfast, as well as the Southern Style Chicken Sandwich, which is mostly promoted as being ideal for lunch. When it comes to beverages, McDonald’s has also planned to introduce the new specialty of coffee as a hot drink. This introduction will, however, vary from market to market and will not be introduced at once in all markets.
Everything that the company does has been in an effort to keep with its global strategy. The global strategy is a Plan to win, which insists on offering only the best services to its customers. They have often come up with slogans that they hope will differentiate them from the other companies, and to set them apart from the competition. Planning is important to every organization. McDonald’s is the company that has managed to remain profitable because it has been able to plan ahead. They have strategically owned new restaurants only because they did proper market research and used their findings as a basis for doing business (Holmstrom & Milgrom, 1994).
The reality is that a company like McDonald’s would not be as successful as it is today if the company did not organize itself properly. The function of organization is one that is very important. A company that is not organized often becomes chaotic, as no one is held accountable for anything that takes place in the line of business. Proper organization from the top to the bottom is what has enabled McDonald’s to achieve the amount of success that the company has today. It remains a force to reckon within the fast food industry because of its organizational structure, which one will further discuss in this paper.
McDonald’s has also aimed at promoting diversity among all the employees that work for the organization. Managers want all their employees to feel like they belong. As a result, they often aimed at being their customers’ favorite way and place of eating. One of the strengths of the organization is that it is able to emphasize on proper leadership skills. They also offer leadership programs to their executives who are extensive and comprehensive. They have established very high standards for all their employees. They always insist on hiring only the best, and each time, a new employee or manager has to do a better job than the former one (Holmstrom & Milgrom, 1994).
The organization also focuses on its human resources. The way McDonald’s hires employees is in such a way that they ensure that they only select candidates who indicate willingness to put the needs of the organization ahead of their own personal ambitions. McDonald’s also has a culture of appreciating its employees, so that they do not feel the need to pride themselves as the authors of a project. Whenever a project is successful, the glory is shared among the employees, so that no one feels left out. In addition, the company does not have a culture where fingers are pointed or people are vilified whenever something goes wrong. Also, the organization has well laid out succession plans, so that when an employee leaves, a vacuum is not created.
The company's succession culture, as well as its enduring culture, has seen its rise above the troubled times which have seen other companies going under. Even when the company needs to make changes in management, they do so under well-organized procedures, so that operations are not interrupted in the process. The firm never waits until a Chief Executive Officer has died or retired to replace him, as this has a way of creating a crisis. There are well laid out plans for succession, in case someone decides to retire or to leave the company for another one. It is these strong organizational capabilities that have contributed to its great customer service.
The company has over the years ensured that they have leadership skills which are sustaining. This is the reason why they have maintained the skills that are necessary to ensure that their customers are happy, so that they could keep coming back. They have been able to train their current leaders and even those they hope to have in the future. McDonald’s have over the years proven that they are capable of implementing leadership programs that are very strong and capable of producing the highest standards possible.
McDonald’s has remained strong because the company is able to adapt to changes that occur in demographics and technology. Changes in globalization have affected many organizations, and some have not been able to come through. The secret behind the success at McDonald’s has been as a result of their employee culture. The company has a culture where they build very capable team and emphasize on the value of teamwork. McDonald’s is a company where teamwork is valued. Each time they have a task to be accomplished or a business issue, the first thing that managers do is put a team together and empower them to accomplish the task. This is a culture that the company has natured for many years now, and can be seen by anyone who walks into any of the McDonald’s outlets anywhere in the world.
The corporation’s current Chief Executive Officer is Don Thompson. Mr. Thompson’s leadership style has been characterized the aggressive expansion and acquisition of the new market niches. As a part of its business strategy, McDonald’s regards business competition as a war (Clausewitz, 2010). McDonald’s allocates most of its resources on provision of core services in order to ensure that the corporation stays ahead of the rest in the fast food industry. In this respect, McDonald’s operates its outlets either as joint venture or through franchising. In 1997, the corporation redesigned its strategy to focus only on its core brand. This move saw the company divest itself off some chains in Mexico. McDonald’s primarily focuses on selling products that it can provide conveniently to its clientele. This includes various types of chicken sandwiches, hamburgers, French fries, and an assortment of in-house soft drink brands.
Concerning supportive policies, the corporation has ratified measures to ensure that it grows its business in the most profitable manner. Furthermore, McDonald’s believes in its systems, which ensure that the quality of its products remains high throughout the supply chain. Ethics is paramount to the corporation’s business. As a part of its policy, McDonald’s believes that good ethics means quality business. The corporation conducts its business in a fair and honest manner (Parasuraman et, el, 1988).
McDonald’s has a culture that ensures that the corporation grows continuously in order to respond to stakeholders’ needs effectively. The corporation has incorporated principles of organizational learning in its operations. These principles help the corporation to respond positively to ever-changing needs of consumers, system, and employees. Customer’s satisfaction is paramount to McDonald’s, since it is viewed as a business entity. The corporation offers excellent services to customers to afford them the unique experience that cannot be offered anywhere else. Currently, the corporation has the largest number of loyal customers than any other of its competitors. Additionally, the corporation has invested in the latest technology. McDonald’s was the first fast food restaurant to launch online shopping and selling of customized products. The company designs the business environment in which it operates, leaving others behind competition (Clausewitz, 2010).
Strategic leadership is critical for any business success. McDonald’s has an efficient labor force and a management team that is innovative and visionary. The aim of management and workforce at large is to shape the corporation’s culture and ensure that it is in tandem with the organizational strategy. Moreover, McDonald’s has excellent reward programs that are geared towards stimulating employee performance. A motivated workforce is critical to an organization that aims at making profits. McDonald’s uses numerous tactics to reward its employees. This helps meet the company’s objects and reduce overheads at the same time.
According to McDonald’s Corporation Annual Report (2012), the company concentrates on the strategies that would strengthen its long-term survival with objectives of distributing evenly the shareholder returns in the top one-third of their colleagues. The company’s long-term financial targets are to:
Grow organic sales from 1% to 2% faster than the market grows in product classes and regions in which they operate
Attain the Core EPS growth of high single digits to low double digits
Generate free cash flow productivity of about 90% or even more
The fast food industry is extremely dynamic. Customer tests and preferences change rapidly. The organization must adopt a sound business strategy to stay ahead of competition. McDonald’s has a competitive strategy that has always manipulated the market in its favor. The corporation recognizes talents and trains them in order to build a formidable team that will always carry on the corporation’s mission, vision, and strategic plan. This has seen the company establishing a good organizational culture that is a critical organizational growth. The corporation appreciates diversity and unique customer requirements in the retail industry. This explains why the company has collaborated with other businesses in some of its chains to ensure that it serves the wider society.
McDonald’s had to apply various marketing concepts to percolate the global market. This market segmentation analysis did not include a survey; instead, it relied wholly on customer’s behavior data that was captured at various branches. The food is mostly served in bags, cartons, or plastic wrapping to minimize cost of operation and for quick identification. Menus are made from processed ingredients prepared from a central place, and then transported to individual outlets. Once in the destination restaurant, the food is finally cooked through grill, microwave, or deep frying for a short time to meet the ever-surging customer’s demand. Precooked food is constantly evaluated to root out stale or overstayed food products. Thus, food at fast food restaurants is mostly characterized by high amounts of fat, high sugar content and less fiber i.e. highly processed. For example, King Burger’s food had a characteristic flavor, aroma, mouth feel, and texture (McDonald’s Corporation, 2001).
Their products include chicken nuggets, pizza, sandwiches, and hamburgers. Customers check in any time of the day either for a bit or for a take-away. The customers are mostly youngsters, and a few old busy people who want to grab some food while on their chores. Young people, in particular, prefer fast foods because they are cheap. Food is packaged in a group and sold at a considerably cheap prize. The restaurant also has a value meal; this is a case when a collection of menu items is sold as a whole at a low price that would be also sold individually. These arrangement-attracted youths, especially school going children usually keep looking for either a hamburger or chicken nuggets to eat.
What is more, the restaurant has a hospital point of sale system to cope with high customer’s demand. This enabled kitchen crew to view orders placed at the counter and prepare them in real time. The system also ensures speed and accuracy in service delivery. Consumer spending was very high, for the time one had been there, the restaurant made sales amounting to $100000. It was evident that most Americans still prefer fast foods compared to cooking a meal at home.
McDonald’s customers in Asia, especially in China, are naturally conservative and prefer eating home-cooked meals, unlike fast food products. Fast foods are prepared with many additives, salts, sugars, flavorings, and preservatives that limit the nutritional value of the final product. McDonald’s restaurants in China include ingredients of organic foods to enrich quality of their food, in accordance with the recommended standards, and minimize the negative impacts of fast food. Despite all negative facts, fast food has become more appealing because it is cheaply priced with irresistible tastes. Consequently, this makes fast food almost everybody’s choice, despite its health implications. McDonald’s provides broad range of chic products, such as modern and classic foodstuffs, including chicken nuggets, pizza, sandwiches, and hamburgers. Its products’ design was initiated by designers, style makers, and buyers. For that reason, it becomes a new trend, which attracts a number of customers. The new items are channeled to the right stores at the right time. McDonald’s provides fashion and quality products at the best price to customers. The best price can be assured through buying in large quantities, purchasing the right products at the right place, focusing on cost-awareness, and making effective distribution. McDonald’s sells its products through stores, catalogues, and online stores. However, there is a limitation for shopping via catalogue and Internet, as this system exists only in some countries. Customers in up market estates are able to order products through catalogue and online, i.e. they can purchase merchandise via Internet. These two channels give advantages and convenience to the customers since they can purchase items at home. Nonetheless, the major distribution channel of McDonald’s consists in stores, which expands more rapidly than other two channels.
Catalogue and Internet shopping are the channels that offer customers more accessible and also increasing service, which reinforces its profile. The corporation does not own any stores, it rents all of them. Therefore, it can move its stores to the new location as the prime location changes. McDonald’s will not establish a new store until it finds the suitable place. Location of a store is essential for success. The company’s stores are always located in the best commercial regions, such as, busy streets and up market estates. A large number of customers are induced to shopping at McDonald’s because of the effective marketing tool of store displays.
McDonald’s usually launches several campaigns annually in order to promote fashionable products that satisfy the ever-changing consumer tests and preferences. Its customers can get up-to-date information about trendy fast food products from such social networks, such as Facebook, Twitter, and the magazine, which is also available on its website.
Video advertising, print advertising, and e-marketing are used to promote its products. Approximately 5% of its income is expended on advertising. There are websites, which customers can access 24 hours a day and 7 days a week. Customers can be acknowledged about a new trend and a new arrival of products via its website. The Internet utilization is a powerful tool in marketing. Online market can help to attract customers and encourage the business growth.
McDonald’s believes in people. Its employees are the most important asset. It encourages employees to share their ideas and attitudes. Moreover, it avoids line of authority. Teamwork and cost awareness are promoted. Responsibility is delegated to employees. Consequently, staffs will feel that they are one part of the company. Freedom and responsibility exist in all business functions and workplaces. People can make their own decisions. Some unexpected situations might happen, but the critical thing is that one can learn from mistakes and avoid them next time. There are policies of diversity, gender equality, and non-discrimination policy. The company usually concentrates on customer’s demand and always provides base of products, according to customer’s requirement. Employees in the stores are well-trained about customer’s services. When customers walk to the company’s outlets, they can feel revitalized, since McDonald’s always provides new fashionable products to clients. Its store layout is obviously separated among merchandise for children, teenagers, women, and men.
An analysis of McDonald’s indicates that successful firms do not target every customer; instead, they satisfy and meet demands only of certain groups of customers. This circumstance is called market segmentation. Consumers have different needs and interests. Firms have to differentiate products according to customers’ need in order to satisfy all clients. One cannot imagine that one product can meet all customers’ demands. However, avoiding mass marketing and focusing only on specific group of customers is significant. This process consists of three elements, which are segmentation, targeting, and positioning (Hale, 1996). Transforming demand and need of customers into marketing mix, which comprises of product, price, place, and promotion at the maximum satisfaction is the challenging job. It is vital to provide well-defined and large enough segmentation. The successful position of products depends on how well companies are able to offer more preferable products than their competitors.
Evidence indicates that there are four standards for effective segmentation:
Identifiable: Ability to determine
Viable: Enough quantity of customers which share the same interest in order for firms to get profit
Merchantable and governable: Easy to create sales and promotion
Static: Remain stable to carry out an activity
There are various types of segmentation, such as geographic segmentation, distribution segmentation, media segmentation, price segmentation, demographic segmentation, time segmentation, and psychographic segmentation (Treacy & Wiersema, 1993).
McDonald’s segments its customers based on both demographic and psychographic factors. Demographic segmentation can be defined as gender, age, income, and education level, while psychographic segmentation is based on customers’ lifestyle, attitudes, values, behaviors, perceptions, beliefs, personality, and interests. The company concentrates on satisfying demand and requirement of target customers rather than making and selling its products. Moreover, it offers products for children, teenagers, women, and men. Children segmentation includes a target audience starting from a newborn infant to an adolescent aged 14. In this segment, products will be produced based on the nature of tastes and preferences. McDonald’s segments’ customers are classified by demographic principle. It involves children, youngsters, women, men, relying on preference and style of everyone in that segmentation (Narver & Stanley, 1990).
After the market segmentation was discovered, firms got alternatives regarding decision about a group of customers that they will target. Firms can target only one segment with one brand of product, or provide different segments with one brand of product, or offer each customer groups with different brands of products. The choice of entirely targeting specific market is not always suitable. The successful company such as Body Shop targets only one segment, which is well-determined. Therefore, it can strongly enhance the appeal of products. McDonald’s major customers are young people aged between 18 to 45 years. The range of target customers was expanded into all ages of both female and male customers.
Positioning is the processes of making customers perceive its products in their minds. Customers’ demand of selected group has to transform into marketing mix, product, price, place and promotion. It is essential, regarding to the fact how customers perceive and position the products in their opinion relatively to the rivals. Sometimes, customers do not sense the correct image of the brand. The uniqueness of the brand is the main factor that leads to success. Positioning can be defined through various factors. It is essential for customers to make judgment and selection from them. The key factor in selecting a grocery store can be defined by price, the possible parameter in choosing a hotel can be made by level of service, the major element in buying electrical device, such as computer, can be chosen from quality and reliability. Some customers perceive that H&M provides cheap products relatively to its quality. It means that McDonald’s positioning is still unclear to some customers, since they understand the company in the wrong direction. Moreover, some customers do not know what the full name of the company is.
It is vital to create a strong brand, which provides competitive advantage to the corporation. Customers should perceive that McDonald’s offers fashion and quality products at the best price. Its merchandises are always updated. In addition, new items are always available. Website is one of the communicative tools that strengthen its brand. Moreover, online shopping is used to convey the business concept and induce customers to come to stores, and purchase products online or by catalogue.
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