The study is on the topic strategic management of Mc Donald’s Singapore which is a branch of mc Donald’s corporation which has its headquarters in the United States (McDonald’s Investors 2013). The research talks about fast food sector where McDonald belongs, the competition, threats, the satisfaction of customers and, the preference toward McDonald’s branch in Singapore. The research further analyses the strategy adopted by McDonalds Singapore and hoe strategic it is in the market (McDonald’s Investors 2013).
The study tries to bring out the strategy adopted by McDonalds and evaluate how effective the several strategies adopted are. The study analyses the political environment, social, technology, and the legal atmosphere in which the business operates. Also, there is an analysis of the weaknesses, strengths. Opportunities, and threats the company faces in its endeavors to offer services to its customers (McDonald’s Investors 2013). Lastly, the study analyses the internal environment of the firm and evaluate the effectiveness and suitability of the internal strategies adopted by McDonalds Singapore. The analysis helps understanding the market environment of restaurant and fast food business in Singapore (McDonald’s Investors 2013).
According to McDonald’s Investors (2013), McDonalds is a United States based corporation founded by Dick and Maurice McDonalds in the year 1940. It is the words largest chain of hamburger fast food restaurant. He further states that, McDonalds is present in 119 nations and serving more than 70 million customers every day. Most of the McDonald’s branches worldwide are owned and ran by independent local franchisees. The Singapore branch was first operational in 1979 at list tower. At present day there are over 120 restaurants and 6000 staffs who run McDonalds in Singapore (McDonald’s Investors 2013).
The main scope of McDonald Singapore is offering food service to the customers. The restaurants in the country serve ready food to the customers and the food consists a variety of products. The timings of the meals is indefinite as a customer can pop into the restaurant at any time and get served (McDonald’s Investors 2013). Lately, McDonald Singapore added McAloo Tikki burger which is a vegetarian burger offered on regular menu. The firm is also involved in training its employee to acquire the necessary skills for efficient performance of their duties. The firm carries out social corporate responsibilities to the society by taking part in activities that are aimed at developing the society. The firm carries out marketing activities aimed at informing the customers the types of food available, the prices and the time of service. The food products also undergo branding by the firm in order to appeal to the customers (McDonald’s Investors 2013).
The main products offered by McDonalds Singapore include chicken, French fries, hamburger, soft drinks, milkshakes, desserts, salads, breakfast, and coffee. McDonalds has been able to maintain its success through the ability of understanding the customer needs. The firm can expand the products it offers to the customers through the creative staff and digging deep about the customer needs (McDonald’s Investors 2013). The firm’s strategy of social marketing has brought innovativeness which play an important role in the growth of the company. The products the firm develop are related to the culture of the target country but they maintain the branch identity (McDonald’s Investors 2013). The company values its customers by placing their needs first. The firm provides the customers with high quality food and clean food. The firm is also committed to its people ranging from the staff to customers where it appreciates talent, reward achievement and develop leaders. The vision and mission of the McDonald drivers toward offering great quality, great experience to all who interact with the firm (McDonald’s Investors 2013).
External Factors – Macro and Industry – Environment
PESTEL analysis is a method used to analyze the external actors or environment of business within a given geographical area. The word PESTEL stands for political, economic, social, technological, and legal factors in which business operates. The following is a PESTEL analysis of McDonalds Singapore.
McDonalds began its operation in Singapore in 1979. It has over 100 restaurants, and it serves over 1.2 million people in Singapore every week. Its operations is highly affected by political factors in the country. Changes in the procedures and rules of the country influences the business of McDonald. Changes such as labor laws, health-related laws of food administration laws also affect the company greatly (The New York Times 2012).
Singapore is considered a bureaucratic country with the political power belonging to the government who influence all the activities that relate to trade in the country. The government of Singapore prefers communicating its abilities directly to the citizens rather than collecting opinion from the public. The politics in the country is a mixture of democracy and bureaucracy (The New York Times 2012).
McDonald’s business is considered to face different political situations in the operation of its business in the different locations all over the country. At the several locations, the firm faces political challenges such as the changing regulations and rules because of health implications of fast foods such as cholesterol or obesity. However, handling the political situation in Singapore is not difficult for McDonald as it is simplify supposed to follow the rules and regulations available in the country which is managing very well (The New York Times 2012).
The economy of Singapore is very attractive to different industries of the world. Heritage Foundation’s Index of Economy Freedom graded Singapore as the second most open economy of the world. The economy of Singapore is considered very stable in economic terms. The country has no foreign debt; government revenue is very high and constantly in surplus. The economy of Singapore has exhibited its strength during the financial crisis period. In the year 2007 – 2008 when the world was suffering from slowdown in the economy and many neighbors of Singapore were sliding, Singapore showed stability in its economy. In 2010 Singapore appeared as the fastest growing economy of the world when most economies of the world like United States and Europe were struggling. The area of Singapore is very small with less natural resources (The New York Times 2012).
The economy of Singapore is very beneficial for the food industry which McDonald takes part. The country is a tourist place offering a scope for establishing food industry serving different kinds of people. The economy of Singapore is developing at a 4.9% rate with a high level of disposable income. The GDP of Singapore is about 320 billion US dollars and with a GDP per capita of about 62200 US dollars. With the high GDP per capita and the continuous growth, Singapore attracts food business. McDonald has established itself in the country very well and managed to cover the small area of the country very successfully (The New York Times 2012).
General McDonalds Corporation is efficient in dealing with different socio-cultural environments in the different countries. Singapore has a high quality of life which has helped McDonald establish its business in the country. Being the smallest county in South Asia and an excellent quality of life, food business performs well in the country. The country has people from different social and cultural backgrounds who live in the country (The New York Times 2012). The fact that the nation is a tourist country, the tourists come from different parts of the world and they have different tastes and preferences. The fast food industry depends on the different tastes and preferences the consumers have and for McDonald taste and preferences change time to time and from place to place in Singapore (Emberton, 2006).
Singapore’s culture is materialistic, and there is a steady pressure on the people. The people of Singapore maintain life according to the 5 C’s: car, cash, condo, country club, and credit. Despite of the stress as a result of such pressure, Singapore was named the happiest country in South Asia in findings published by ABC news. Most people who live in Singapore are visitors from china, United States, Malaysia, India, and from other parts of the world. Because McDonalds has already established its business in the different countries, it understands the preferences of the people and, therefore, it does not have problem dealing with the preferences and the tastes of the visitors (The New York Times 2012).
Technology plays a big role in developments in the country and also in the business. The country is technologically developed which helps in the production. Marketing, and distribution of the different products. McDonald uses several mediums in communicating with the customers such as television and internet (Aaker & Mcloughlin 2010).
Technological improvement in the country such as vender management, inventory management, and supply chain management is very beneficial to the company. The introduction of computer technology has made billing and pricing to become very simple reducing the cost incurred by the firm (The New York Times 2012).
Legal aspects such as tax obligations, standards of employment, and quality desires are only a few amid the other similarly important legal aspects on which the firm has to take into account in its operations (Ivythesis, 2011). The government has always been increasing the programs aimed at supporting healthy living that are to the disadvantage of McDonald Singapore due to the fact that the food products it serves are considered unhealthy. The campaigns by the government makes the people to consume less of the fast foods because the food is considered as junk (Cheang 2007).
Porter’s Five-Forces Model for analyzing the competition is a widely applied approach for developing strategies for in many countries. The intensity of competition between companies vary widely across industries (Aaker & Mcloughlin 2010). Threats of Entry
Threats for entry in the business of food industry in Singapore is very high. There is easy possibility of entry into the market by competitors because of low regulations limit, easy access to the market, and low startup cost (Aaker & Mcloughlin 2010).
Threats of Substitute
The threat of substitutes is strong- moderate. The industry is faced with substitutes such as MCD products. The company also faces a threat of substitutes introduced by the local firms which meet the local taste (Aaker & Mcloughlin 2010). The placing of a ceiling on prices McDonalds Singapore can charge, substitute products limit the potential of the firm. The substitutes further limit the existing firm’s profits (Aaker & Mcloughlin 2010).
The substitutes present a strong threat to McDonald Singapore because the consumers have a low switching cost because the substitute products ‘price is lower. Also, the quality and the performance capabilities of the substitute firms are equal or greater than the fast food products like the burgers, drinks, and hot dogs that are for example provided by supermarkets (Aaker & Mcloughlin 2010).
Bargaining Power of Buyers.
The buyers of the products want the products at the lowest price possible. The industry in which McDonalds operates is characterized by many consumers who purchase in small quantities and therefore, they are unable to bargain the prices because the firm uses fixed prices. The buyers have a low bargaining power due to industry limitations, low quantity of purchases, and the less chance of switching high brand image through differentiation and uniqueness (Aaker & Mcloughlin 2010).
The food products offered by McDonalds Singapore are standard, undifferentiated and, therefore, the buyers can always find alternative suppliers. Another credit threat is that the buyers can make their own food at home. As a result of such flexibilities, the buyers tend to be very price sensitive (Aaker & Mcloughlin 2010).
Bargaining-Power of Suppliers
The suppliers exert bargaining power on McDonald Singapore by swelling the price or reducing the quality of the goods purchased and services offered. The suppliers have a low bargaining power because McDonald is the largest restaurant chain in sales (Levy 2008). The high bargaining power by McDonald over its suppliers leads to low cost of raw materials and very high competitive prices. The suppliers have less bargaining power because they are many suppliers willing to supply the same raw materials. Also the products supplied are not unique. Very important, and differentiated for the success of McDonald Singapore. Finally, the suppliers don’t create high switching costs (Levy 2008).
Extent of rivalry between competitors.
Firms need to adopt a competitive advertising plan. It should put into consideration the plan of the competitors. There is a requirement for good location of the business to capture on a wide market. The major competitors of McDonald Singapore are YumBrand Inc. and Burger King (Levy 2008). There is high rivalry in the industry shown by the following. First, competitors are many and equal in power and strength. The condition makes McDonald Singapore to use tactics like price competition and promotion. Secondly, there is no differentiation in the products offered in the market. The substitutes are many that threaten the profits of McDonald Singapore. Finally, the barriers to exit are high for franchisees and large firms. McDonald Singapore needs to continue operating in order to return the invested capital (Levy 2008).
Company’s position in the specialized industry
McDonald Singapore enjoys the brand name benefits that has enabled the franchisee to make more profits over time. The big name created by the founding company influences the customer decisions to buy food in the restaurant (Levy 2008). The loyalty of the customers has increased overtime influencing the firm’s performance. Comparing McDonald Singapore to its rivals like Burger King and Wendy’s Singapore, McDonald is better positioned in the trade as an outcome of the branding and management strategies adopted by the management. McDonald Singapore is ranked the top fast food restaurant in Singapore (Levy 2008).
All organizations have strengths and limitations in the business functional areas. No firm is equally strong or weak in all areas of operation.
Value of Strategic Capabilities
McDonald Singapore holds a high value in the brand name, image, and exploitation of the resources it has. The strategy has helped the firm evolve successfully for over five decades (Harrison & John 2010). The firm further creates value through inbound logistics, outbound logistics, operations, and service. The advertising and publicity campaigns are formed and outsourced by McDonalds Singapore that creates its value (Harrison & John 2010).
Rarity of Strategic Capabilities
The utility of resources available is franchise oriented but the main control remains in the hands of top 50 management authorities. The firm follows the rules of McDonald’s Inc. in the running of its activities. The skills used in the creation of the food products by McDonald Singapore is not rare and is also no unique. There is a likelihood of adaptation of the methods by competitors (Harrison & John 2010).
Imitation of Strategic Capabilities
McDonald Singapore is not difficult to imitate in terms of the products it produces. Burger king and Wendy’s’ Singapore have been able to copy the products offered by McDonald Singapore. However, the functionality of McDonald is difficult to imitate. The two major competitors have not been able to copy the management functionality of McDonald Singapore (Harrison & John 2010).
Company’s value chain analysis
McDonald Singapore gets a lot of support from McDonald Inc. in its operations. The company readily exploits new resources and it has a well-organized organization structure (Levy 2008). Firm human resource management, and infrastructure continuous two-way communications among McDonald Singapore and McDonald US is a top priority (Levy 2008).
Company’s Business Strategies
McDonald Singapore has successfully adopted a differentiation strategy in its operation venturing into different products. For example offering drive through, rest rooms, lunch menu, breakfast menu, and lobby services. The restaurants provide Wi-Fi services for customers. The firm also adapts a differentiated market segmentation strategy where it targets the family unit in particular the children with their happy meal and price (Harrison & John 2010).
McDonald Singapore offers the basic fast-food meals at very low prices compared to competitors. The firm is able to keep the prices low through the division of labor that enables the firm to hire and train inexperienced workers rather than the trained ones. The firm also has few managers that helps in reducing the cost of running the firm (Harrison & John 2010).
Evaluate and Suitability of Business Strategy
The business strategies applied by McDonald Singapore of market and product differentiation, and leading price are very affective given the type of market in which the firm is operating. The firm is able to expand the products it offers to the customers through the creative staff and digging deep about the customer needs. The firm’s strategy of social marketing has brought innovativeness which play an important role in the growth of the company. The products the firm develop are related to the culture of the target country but they maintain the branch identity (David 2011).
The company values its customers by placing their needs first. The firm provide the customers with high-quality food and clean food. The firm is also committed to its people ranging from the staff to customers where it appreciates talent, reward achievement and develop leaders. The vision and mission of the firm drivers toward offering great quality, great experience to all who interact with the firm. All these strategies by the firm are very suitable for the success of the firm in the industry (David 2011).
PEST analysis of McDonald in Singapore evidently explains that it is a highly suggested country for the fast-food business as the economy of Singapore is continuously rising and people in the country have high level of disposable income. Singapore is tourism based state and hence provide ample chance for the fast food industry as tourists prefer the fast-food. The Political, the Economic, the Legal, the Social and the Technological environment of the republic are in favor of the fast-food business. Accomplishment of McDonald obviously explains that it is the first priority of the corporate establishment but with brilliant marketing strategy and a business plan so that the new competitor can sustain in front of the fast food giants (Levy 2008).
McDonald Singapore has adopted a differentiation and leading price business strategy in its operations given the competitive nature of the industry. Threats for entry in the business of food industry in Singapore is very high. There is easy possibility of entry into the market by competitors because of low regulations limit, easy access to the market, and low startup cost. The threat of substitutes is low- moderate. The buyers have a low bargaining power due to industry limitations, low quantity of purchases, and the less chance of switching high brand image through differentiation and uniqueness. The suppliers have a low bargaining power because McDonald is the largest restaurant chain in sales (Levy 2008).The firm puts more value in the brand name, its operations are not very unique and very easily imitable. However, the functionality of McDonald is difficult to imitate (Levy 2008).
The New York Times, 2012. How McDonald’s Came Back Bigger Than Ever. Available at: http://www.nytimes.com/2012/05/06/magazine/how-mcdonalds-came-back-bigger-than-ever.html?pagewanted=2&_r=0&ref=mcdonaldscorporation
McDonald’s Investors 2013. Company profile. Available at: http://www.aboutmcdonalds.com/mcd/investors/company_profile.html
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The case study relates to McDonald Singapore business strategy in the fast food industry. The industry is experiencing stiff competition from the incumbent industries trying to take advantage of the available profits (David 2011). The industry also faces a period of criticism from the government and other health organization in relation to the effects the food has on the consumers. The study is on the topic strategic management of Mc Donald’s Singapore which is a branch of mc Donald’s corporation which has its headquarters in the United States (David 2011).
The research talks about fast food sector where McDonald belongs, the competition, threats, the satisfaction of customers and, the preference toward McDonald’s branch in Singapore. The research further analyses the strategy adopted by McDonalds Singapore and how strategic it is in the market (David 2011).
The firm is able to expand the products it offers to the customers through the creative staff and digging deep about the customer needs. The firm’s strategy of social marketing has brought innovativeness which play an important role in the growth of the company. The products the firm develop are related to the culture of the target country but they maintain the branch identity.