Mc Donald’s is among the leading foodservice retailer globally. McDonald’s focuses on making fast food available to the consumers at very low competitive prices and gets profit by lowering the cost of production and expanding its business globally. This paper will focus on the business-level strategy of McDonald’s and examine how the business strategy has enhanced its economic performance. The paper will also examine some of the current issues that the company is facing and how it’s changing its strategy to address some of the issues.
“Plan to win” has been McDonald’s business strategy over decades. The main aim of the business strategy was to boost revenues at the current locations through refurbishing outlets, refining the menu, and lengthening hours (Dess et al., 2014). McDonald’s has also focused on cost leadership and international expansion. The low-cost leadership strategy involves lowering the costs of products. Mc Donald’s has been able to offer products at a relatively low price compared to its competitors.
McDonald’s has pursued global expansion to enter into new markets and gained presence in the global fast-food market. The strategy enabled the fast-food chain to grow and reach a wider market and serve millions of customers. McDonald’s international market expansion strategy is equally important in realizing its cost leadership position. By moving into foreign markets, not only are they able to reduce overhead costs because of their price point, but they are also able to grow revenue exponentially through innovation. While most US locations feature a drive-thru and indoor seating, many foreign locations feature walk-up windows and outdoor seating.
Over the years, McDonald’s has answered to competition through increasing its menu with new drinks, snacks, and salads. From the basic thirty-three items offered in 1990, the chain has grown to more than 120 items. Mc Donald’s has produced one of the healthiest menus, emphasizing healthier foods (Dess et al., 2014). Striving for a healthier image has been in response to the growing health issues. McDonald’s begun offering nutrition information on the food packaging bags, which would tell the consumers about the number of calories, proteins, sodium, carbohydrates, and fat. For instance, they removed the fructose corn syrup in buns, improved to real butter from liquid margarine, and cage-free eggs. Mc Donald’s has also been trying to attract more consumers through offering more customers products that are also healthier.
Being one of the largest fast-food restaurants chain globally, the intensive growth strategy has supported the continued growth of the business over the years. For instance, in the global markets, McDonald’s is well-positioned to gain the advantage of long-term economic growth. This is because the company has international profitability realized from the economies of scale in expansion and purchasing. Considerably, McDonald’s has uniform menu offerings; they focus on mass production, which lowers the cost of production.
The fast-food chain has faced a decline in performance due to its quality problems linked to its rapid expansion. The core plan of McDonald’s has been to boost its sales through varying approaches that have failed to be enough. The decline in performance has also been linked to quality and service (Dess et al., 2014). Towards the end of their first decade, the chain ran into more problems due to the tight labor market. Falling off in the skills of employees lowered their performance far behind their competitors. McDonald’s has lost ground with most of its target consumers, such as the millennials who moved to their competitors such as Wendy’s and Burger King. The changing taste and quality have also been responsible for the loss of consumers that have moved into customized ordering and fresh ingredients in restaurants such as Chipotle Mexican Grill.
McDonald’s has laid out a turnaround plan whose aim is to change the business model and improve its operations, thus reducing the problems it’s facing. McDonald’s has refocused its strategy by delivering on vital aspects of fast, consistent, friendly services and an all-around enjoyable experience for the entire family (Dess et al., 2014). They have also focused on inspiring franchisees and employees through retaining to put their smiles back into McDonald’s experience. They have also developed a tough “out or up” grading system to eliminate underperforming franchisees.
These strategies aim to address the quality and service issues that affect the food chain’s performance. Rebuilding the foundation will add value and growth to McDonald’s. Additionally, to focus on the food chain’s business, they have sold off the non-burger chains and stopped opening of more outlets (Dess et al., 2014). They are now aiming to generate more sales from the current outlet and increase new products to attract more consumers. For instance, in 2019, they announced that they would acquire one of the largest artificial intelligence startups, Dynamic Yield, which will enable them to update their menus instantly based on trending menu items, time of the day, and weather. Creating a more personalized experience for the customer through technology and data will play a great role in the growth and future of the food chain. These changes are expected to address some of McDonald’s challenges in many markets and the franchised restaurants.
In summation, the business strategy for McDonald’s has supported its existence for the longest time with growth in revenue and performance. However, they have also encountered challenges that have led to a decline in their performance. The effort to focus on its core business and the turnaround strategy, such as healthier products, refurbishing outlets, and rethinking the business model through new concepts, will offer a growth opportunity for McDonald’s.
Dess, G. G., Lumpkin, G. T., Eisner, A. B., & McNamara, G. (2014). Strategic management: Text and cases.