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Strategic Planning for the Supply Chain
Marketing Management (Grand Canyon University)
Brief Overview of the McDonald
McDonald’s is a quick-service nourishment industry leader. As a pioneer, McDonald’s is dedicated to the provision of highest quality nourishment, prevalent service, incredible value and an environment that’s welcoming. McDonald’s focuses on a sustainable business style that’s focused on conservation of energy and reduction of waste. In 1948, McDonald opened its first eatery in San Bernardino California by founder’s dick and Mac McDonald (Sherri, 2013, p.1).
The opened location served as a self-service drive-in eatery where nine primary products were served comprising: milk, pie, espresso, hamburgers, chips, soft drinks and cheeseburgers.
Classic burger was the typical product sold. Currently McDonald in headquartered in Oak Creek, IL. McDonald had been operating as a private business until 1965 when its first sale of stock was made at $22.50 per share. Currently, McDonald has over 36,000 eateries located in more than one hundred nations where eighty percent are franchised.
McDonald’s supply chain is intended to be practical, versatile and shared characteristics that have empowered the organization to enter new markets at a scale and pace that is unmatched by its rivals. Conventional supply chains can split under the demands of unanticipated political, natural, or aggressive changes, yet the McDonald’s “three-legged stool” reasoning and agreeable methodology can assimilate the stuns created by the unexpected while rapidly adjusting to habitually evolving requests, particulars, and volumes. Macdonald supply chain adaptability and flexibility dependent on trust. McDonald’s profoundly instilled culture for the long haul, win-win associations with providers goes back to its initiation when founder Kroc set up a culture of confidence and steadfastness (Baron & Schmidt, 2011, p.14).
Steps that McDonald’s has taken to fortify its supply chin supportability incorporate associations with nongovernment associations (NGCs). A code of conduct for suppliers, and to expand supplier ability in developing economies. It has started store network objectives and conventions for estimating, distinguishing and scaling feasible meat generation; economic logistics through framework wide consistent upgrades in logistics productivity, including the expanded utilization of biofuels; advancing ecological accepted procedures at provider offices through a Worldwide Provider Execution Record and the Implicit Provider rules.
–External analysis of the company- Pestle
Various government regulations demands pose an inherent risk to McDonald. Such areas include:
McDonald’s should comply with business regulation in its countries of operations. For instance in the U.S McDonald complies with FDA regulation on preparation, labeling, and sourcing of food.
Global economic variations affect McDonald operations. The tremendous financial impacts are steady yet moderate advancement of the U.S economy, Unsafe yet stable European economy and the abating development of China’s economy (Gillespie, 2009).
McDonald’s has a chance to develop gradually, in the U.S economy, where its most significant market lies.
Changing client perspectives are affecting MacDonald business. In the U.S currently, a movement on health-consciousness is developing. Clients are acknowledging the balance diet importance and adopting healthier alternatives and eateries sourcing their nourishments from sustainable providers.
McDonald’s is always adapting to innovation. McDonald is implementing new technologies with the smartphone through fast-food ordering. McDonald has developed apps in speeding its ordering system and clients can order food before coming to the eatery. The touch- screen technology has made it easy for clients to order food without doing it over the counter (Rachel, 2014, para.1).
Entry into a fast-food industry is low since it isn’t capital intensive. Many suppliers are ready to negotiate material prices and building new relationships in meeting new businesses demands. It’s challenging competing with established global brands. McDonald and YUM Brands enjoy economies of scale concerning supply chain efficiency. Competitors retaliate in the fast-food industry competitive nature. Price wars are often wagged by global brands in markets that are saturated to prevent competition (Dobbs, 2014, p.33).
Product differentiation and new products give an advantage to new entrants. The fast- food industry success factors indicate that setting a new trend is possible, market entry and
threatening competitors who are established is possible. Market exposure and proper planning are required to do this. The new entrant’s strength is low although there aren’t switching costs for customers. This connects to the global brand and economies of scale enjoyed by large companies.
McDonald and other food industry players have two critical providers, food suppliers, and labor suppliers. Its costly establishing an initial reaction with providers as building a supply chain that efficiently takes time. Although providers have various profits generation sources, they are often seeking relations with food industry significant players. McDonalds and Wendy’s are the major players. McDonald can develop to envelop a good relationship and dictate the provider relationship because of its impact and market size. McDonald depends on labor in running its operations efficiently. The U.S law on minimum wages affects costs and reduces McDonald margins creating average employees power. It essential for McDonald to adhere to fair pay legislation and maintain a good relationship with labor unions. The supplies power is low to moderate due to labor supply power and the suppliers’ low bargaining power.
The buyers’ power for the business is high. This is due to non-existing switching costs. A client can change a food eater easily depending on what they prefer eating. Fast food industry competes on price and quality menu products because of change customer tastes and preferences. For fast food chains to maintain a customer means the marketing expenses will be high and pricing strategies carefully considered remaining competitive. A price discrepancy makes the customer switch to a competitor who offers a better value.
There a high threat of substitute products. There are many substitute products available where customers have a variety of options for selecting products. The possibilities range from customers choosing home-cooked food to frozen foods purchase and eating out in other restaurants. The fast food primary attractiveness is the convenience desire, value, and accessibility. Clients compare different eateries prices, and the most attractive one is chosen. Customers can prefer making home-cooked meals than eating in a restaurant. The strong and sustainability increasing popularity is a challenge of fast food chains, and re-imaging needs to be done. McDonald’s faces moderate to high risk from substitutes.
There’s high fragmentation of fast-food market with various autonomous eateries and chains competing globally and locally. The competitive intensity is fueled by a lack of exit costs and easily accessible expansion in capacity. The development of restaurants is natural because of the franchising model convenience and desirability. Price competition is intense in this industry with high-value provision competition. The fast-food chain is driven by promotion and brand presence. There high rivalry among competitors because of top price competition and marketing exposure required to become competitive.
$85.7 billion was McDonald’s brand value as per a study conducted by Statista. This signifies that McDonald has been successful in its global expansion. The omnipresent characteristics of MacDonald are strength. McDonald’s has the most location in the U.S at14, 339 and globally at 36,000. This epitomizes the area and convenience ideal. The marketing exposure to potential clients has benefited McDonald.
McDonald’s is perceived as a low-cost nourishment pioneer, where customers who are cost-conscious are lured by the value menu ($1). The customer perception of value is fueled by the marketing campaign McDonald does.
McDonald’s size has enabled it to establish good relations with suppliers \nd supply chain efficiencies found. Collaboration and trust in focused on McDonald relation with providers.
McDonald signs an agreement on a code of conduct with providers on facilities maintenance.
The franchise model successful implementation has made MacDonald’s cash flow to be strong. McDonald’s locations are 80% franchised, making McDonald not worries about location operation costs and franchise fees are collected based on sales percentage. This model has proved successful for McDonald and propelled its global expansion (Cherkasky, 2009, p.6).
The 2013-2014 sales declines were a significant weakness for McDonald. The U.S stores customers’ traffic declined in 2014 by 4.1%.
There have been expansions of McDonald menu to incorporate healthier options to appeal to customers who prefer healthy foods. The menu expansion offering has become a challenge for setting up kitchen restaurants which slows production and instigates an increase in McDonald’s wait times. McDonald should concentrate on food quality to enhance client satisfaction in operations of the drive-thru.
McDonald’s is situated to exploit the nourishment service market that’s growing. U.S food restaurants served nine billion burgers in 2014 which displays an opportunity for McDonald as its main product is different burger differentiation (Deshpande, 2013, p.4).
McDonalds’s model is suitable for quick expansion in new markets. With U.S market being competitive, McDonald can expand services to other developing markets. The growth of the middle class in China and Brazil offer McDonald new opportunities.
New advances in technology display opportunities for McDonald. McDonald can use the smartphone technology in speeding the payment and order process
Negative media reports have criticized McDonald and affected the food quality perception of customers. Morgan Spurlock’s narrative, Supersize me (2004), discusses the adverse effects of over-consuming fast food. McDonald has been targeted by environmental organizations and its practices of food production. Today customers are interested in GMO-free and antibiotic promotion. Natural Society has published articles on McDonald’s unnatural ingredients. Tertiary butyl hydroquinone (TBHQ) and polydimethylsiloxane were distributed as preservatives MacDonald uses in French fries. Such media exposure raises food quality questions on McDonald and damages the brand reputation and causes a decline in sales.
McDonald’s is among companies accused of Greenwashing where they deceptively market healthy alternatives and sustainable nourishment while in reality customers perceived McDonald as not environmentally conscious.
Consumer Reports ranked McDonald burger as the worst tasting burger compared to other competitors. Customers might be scouting for an option with quality products.
Many McDonald has gone on strike asking for an increase in wages. McDonald employees from various locations in 2014 protested requesting for $15/hour minimum wage. Dissents for better wages have been predominant in the drive-thru food industry which likewise makes a negative discernment for McDonald’s and their worker connections. Work compensation similarly relies upon government enactment and the choice to raise the lowest pay permitted by law rates.
In 2014, McDonald sales declined in Japan ad customers’ perception was negatively affected by the Shanghai Husi supply scandal. As indicated by Forbes magazine the Chinese provider had been processing spoilt meat. The plant workers were observed grabbing contaminated chicken that had fallen on the ground and set it back on the processing machines (Goh, 2014, para.1).
There’s been financial and political instability in global markets. Russia is presently experiencing economic problems with U.S unstable political relations and annexing the Crimean Peninsula decision. There’s been weakening of the European euro, and economic turmoil is happening in Greece. The EU nations declining productivity represents a considerable threat for McDonald operations leading to profits decline.
There’s intense competition in the U.S market that McDonald faces. New entrants are chipping away MacDonald’s upper-middle-class clients. Better Burger is a direct risk to McDonald’s core capability as a burger joint. New rivals like Shake Shack, Five Guys threaten McDonald’s market share and pose challenges for McDonald. Changing client tastes towards more healthy and fresher choices are likewise a risk as famous chains like Chipotle and Panera are situated to focus on these sorts of clients.
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Deshpande, R. (2013). McDonald’s supply chain and customer service: On Method and Theory in Research Marketing. Journal of Marketing. 47(Fall), 101-110.
Dobbs, M. (2014). Application of Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Fortune Online. “McDonald’s Posts a Global Sales Decline as Troubles Linger.” Fortune.
Accessed from http://fortune.com/2015/02/09/mcdonalds-worldwide-sales-fell-more- than-expected-in-january/.
Goh, Brenda. (2014). “The McDonald’s Meat Supplier Scandal in China Keeps Escalating.” Business Insider. Accessed March 10, 2015. http://www.businessinsider.com/mcdonalds-china-food-supplier-scandal-2014-7.
Rachel, K. (2014, April). How digital technology is changing McDonald’s structure. Retrieved from SMWF: http://www.smwf.com/blog/2014/04/london/how-digital-technology-is- changing-mcdonalds-structure.
Sherri, D. (2013). The history and McDonald’s profile. The New York Times.
Statista. “Brand value of the ten most valuable fast food brands worldwide in 2014 (in a millio
U.S. dollars).” Statista. Accessed from http://www.statista.com/statistics/273057/value- of-the-most-valuable-fast-food-brands-worldwide/.