Strategic frame work — macdonald 2 Essay Example
Strategic Framework of McDonald’s
McDonald’s is considered the world’s largest fast food company in the world. It has about 30,000 restaurants in more than 120 countries (Pangarkar and Subrahmanyan 1). It has a very strong brand that is valued worldwide. McDonald’s ensure that it offers consistency in its food in order for customers to get the same taste in all the outlets. Nevertheless, the company offers cultural diversity in its foods in order to succeed in different countries. For instance, in India, the company introduced new foods in its menu in order to tap the Indian market (Pangarkar and Subrahmanyan 6). In addition, it has a very strong financial capability that contributes to its success in many countries. It has about $40.2 billion system-wide sale, $21.7 billion in assets and about $2 billion in net profit (Pangarkar and Subrahmanyan 2). McDonald’s has a diversified income due to its operation in different countries.
McDonald’s is faced with negative publicity. In India, its foods are considered unhealthy loaded with fat, sodium chloride and sugars (Pangarkar and Subrahmanyan 4). It has been criticised for promoting unhealthy eating habits in the country that can result to increase in Obesity. Due to this, the health conscious people do not consider having a meal at its outlets. In addition, compared to local food outlets, McDonald’s offer its foods at higher prices. This can be advantageous given that India has a large number of people living in poverty (Pangarkar and Subrahmanyan 4). Also, due to large number of vegetarians in India, it is hard for the company to adjust its menu to suit customers.
McDonald’s has an opportunity to upgrade its menu. There is a plan for the company to introduce new foods to cater for the Indian market (Pangarkar and Subrahmanyan 7). There is an opportunity also to change the perception that McDonald’s offer unhealthy foods by introducing new menu for health conscious consumers. McDonald’s is on a lookout to increase its outlets in India and to expand its market share. In addition, the company plans to open new outlets in airports and railways stations in order to reach potential customers (Pangarkar and Subrahmanyan 8).
McDonald’s is faced with intense competition from local and internal companies KFC, Kellogg’s, and Starbucks among others (Pangarkar and Subrahmanyan 6). It competes in terms of elements such as price, service, and product quality as well as menu variety. Also, due to the changes in preferences, customers today go for healthier diet. This can result to future fall of the company.
The junk food industry was under developed when McDonald’s entered the market. India was faced with many barriers to entry of Multinational Corporations (Pangarkar and Subrahmanyan 3). In 1991, India encouraged foreign investment and many fast food companies tried to enter due to the attraction of large middle class. However, entry into India was a complex process and many companies fell due to poor understanding of the market (Pangarkar and Subrahmanyan 4). Some major competitors of McDonald’s in India include KFC, Wimpy’s, Pizza Hut, Starbucks and Burger King.
Starbucks is the largest coffee outlet in the world. It serves coffee, sandwiches, espresso and other foods. Customers prefer Starbuck over McDonald’s due to health factor. Another big competitor of McDonald’s is KFC (Pangarkar and Subrahmanyan 4). Although KFC faced some challenges when entering India, it reopened its operation and is now doing well. This intense competition in the market makes McDonald’s loose many of its customers who prefer other menus (Pangarkar and Subrahmanyan 5). Although the market share of the competitors is small compared to that of McDonald’s, these brands try to gain customers already taken by the company. Furthermore, the price factor makes customers prefer other brands over McDonald’s.
McDonald’s incorporated wholly owned subsidiary and joint venture as entry strategies in India (Pangarkar and Subrahmanyan 4). These strategies were favourable given that the company did not have enough information about the market. These strategies enabled the company to gain knowledge of the market and reduce international risks. Also, in order to satisfy the needs of the Indian market, the company replaced some of its core products with other acceptable ones in order to avoid sensitivity of the market. It also increased new menu in order to cater for vegetarian population. International strategy went beyond the entry strategy and menu. It established itself as a family restaurant.
McDonal’s cut its prices and carried out some promotional activities in order to fight the premium image among people. To survive in India requires consideration of the preferences and behaviours of consumers. By reducing prices and changing its menu, McDonald’s was able to cater for the local market which increased its customer loyalty. After establishing its operation in major cities, it established its presence in small cities near the metropolitan cities (Pangarkar and Subrahmanyan 6). In addition, it established local suppliers of raw materials. This was a good strategy since the company would be able to cut on prices due to long distance travel.
Nitin, Pangarkar. and Saroja, Subrahmanyan. Beefing up the Beefless Mac: McDonald’s Expansion Strategies in India. National University of Singapore, 2001. Print.
More Important Things