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Barriers to McDonald's Growth

Paper Type: Free Essay Subject: Business
Wordcount: 4900 words Published: 30th May 2017

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Be the best employer for our people in each community around the world. Deliver operational excellence to our customers in each of our restaurants and achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald’s system through innovation and technology. Try to fulfill our customer, automatically our profit will improve. Our customers’ favorite place and way to eat with inspired people who delight each customer with unmatched quality, service, cleanliness and value every time.

Objective of McDonald’s

Most people can find a McDonald’s in any metropolitan city anywhere in the world. McDonald’s global success can be attributed to company objectives. When consumers are aware of McDonald’s objectives, they better understood the value of such a large, global franchise in helping people find employment and in offering a cheap, sustainable product to their consumers.

Future goals of McDonald’s

In the next few years, McDonald aim to advance their balanced, active lifestyle efforts by, continuing to develop new menu offerings that provide their customer with range of choices that correspond to their needs and preferences and fit into a balanced diet, develop more happy meal choices, including new entrée offerings and non-carbonated beverages without added sugar and sticking to their timetable for phasing in their new nutrition information initiative for core packaging items, continuing to assess, listen, learn and evolve their policies and marketing and communication practices so that they can continue their special regard for young people .

The first original McDonald’s opened up in 1940, a restaurant created by Richard and Maurice McDonald, in San Bernardino, California. The first franchised McDonald’s was opened up on April 15, 1955, by Ray Kroc, in Des Plaines, Illinois, the 9th McDonald’s overall.

Miami entrepreneurs James McLamore and David Edgerton founded Burger King Corporation in 1954.

The Challenge

With more than 30,000 restaurants in 118 countries -many of them serving menu items that appeal to local tastes and cultural preferences – we face a major challenge in gathering, organizing and communicating the nutrition values of foods and beverages servedaround the world every day. We are therefore developing a new global database to maintain detailed information about our offerings.

When it comes to the pitfalls of operating a fast-food chain, Burger King (BKC) has experienced them all: falling profits and sales, angry franchise owners, mediocre innovation, growing competition.

What happened

McDonald had to face with high employee turn over. Some people say McDonald’s are entitled to sell junk food in exactly the same way that chocolate or cream cake manufacturers do: if people want to buy it that’s their decision. Nutritionists, for example, argue that the type of high fat, low fiber diet promoted by McDonald’s is linked to serious diseases such as cancer, heart disease, obesity and diabetes.

several parties, including the government have argued that Burger King has contributed to obesity and unhealthy eating behaviors in Western nations by producing products that contain large amounts of salt, fat, trans-fat and calories.

Over come

Editorial focuses on a series of endeavors launched by McDonald’s Corp. designed to reshape the chain into a more contemporary and versatile competitor. Views on the initiatives; Criticisms on the changes; Design of the chain’s kitchen systems.

Burger King has done none of that and is facing a difficult reality in this new world. As consumers demand higher standards, Burger King is going to have to invest billions of dollars in capital over a period of years to get its brand perception to where it needs to be.

Task 2

Employee.Mcdonald only hire employees with a good sets of personal skills. Personal skills like Communicate intelligently, Communicate intelligently, Deal with confrontation, Team work,Know when to speak up and many more. McDonald target the employee first, in order to have good sale. McDonald need to analysis the internal employee in order to have good performance. They are two types of employee which are skill employee and unskilled employee. Skill employee has good sets of personal skill whereas unskilled employee needs training from senior employee that works in McDonald.

Stakeholder .McDonald’s also plans to include in it contributions from a number of campaigning groups and organizations to highlight what it calls “some of McDonald’s more surprising connections – from The Marine Stewardship Council to animal welfare charity Compassion in World Farming.”

Competitors. The world’s biggest fast-food chain is battling more than the bleak global economy that is curbing appetites for purchases of its hamburgers, salads and smoothies. Restaurant chains like Burger King Worldwide Inc (BKW.N) and Yum Brand Inc’s (YUM.N) Taco Bell now are challenging McDonald’s in the United States with revamped menus, celebrity endorsers and a renewed focus on low-priced food. Burger king competitors with McDonald because it has to do with how they prepare their hamburgers. McDonald’s fries their hamburgers while Burger King Flame broils their hamburgers. In one sense, McDonald’s doesn’t have any real competitors, as they are the largest restaurant chain worldwide. But some of the other restaurant chains large enough to cut into its market share include Burger King Corporation,

Subway, Starbucks, Wendy’s/Arby’s Group, and YUM Foods(owners of Taco Bell, Pizza Hut, KFC, Long John Silver’s, and A&W, among others).

Supplier. McDonald’s supply chain is unique. Our supply chain model is based on a culture of partnership and collaboration which makes it possible for us to serve consistently safe and high quality food. It is important to us that our suppliers operate sustainable and profitable businesses and benefit from their partnership with McDonald’s Australia. It is equally important to us that we source our products in a responsible and ethical manner that contributes to the development of sustainable agriculture and food manufacturing processes. McDonald’s Canada works closely with more than 100 leading Canadian suppliers, striving to source quality products and supplies. Together, suppliers, the company and franchisees create new products, help reduce costs and ensure our customers get the same great McDonald’s taste in every community across Canada. McDonald invests in Canada’s agricultural sector by sourcing quality food products domestically, including the annual purchase of more than $760 million in food and materials from more than 100 suppliers in Canada. McDonald shop where our customers shop – our basket is just a bit bigger! McDonald’s buys and serves the same wholesome foods our customers use at home, supplied by brand name companies Canadians know and trust. McDonald’s suppliers include leading Canadian companies such as Coca-Cola, DANONE, Heinz, McCain, Minute Maid, Mother Parkers, Nestle, Renée’s, Quaker and Saputo.

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Customers. Internal Analysis once of the major problems faced by McDonalds and can clearly be seen in Internal Analysis McDonalds Value Chain, is the lack of recruiters and led to a dramatic falloff in the skills of it employees. As we can see on Competitive Advantage Building Blocks, McDonalds is very efficient. An organization is the analysis of strengths and weaknesses, which focus on internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. Strengths of McDonald’s are successful Advertisement (I’m loving it), Great Partnership (Coca Cola), Clean Environment and playgrounds for Kids, Professional Training for employees (Hamburger).

External Analysis there is two conditions that are most significant in McDonald’s external environment that are: The new trend in which customers are changing fast -food restaurants to healthier ones. The arising competition to achieve growth in this industry. The fast-food industry is very complex and saturated. The key success factors in show that in order to be able to compete there is a need for research and developments, achieve differentiation with your competition, create quality with your products, and be price competitive. Large capital is needed to be able to develop new products in order to differentiate among competitors. The creation of quality is very important because the switching costs majorly in this industry are very low. This explanation is supported in Five forces of competition. Although the environment is very competitive it is very difficult to enter because of the need of capital, the regulation faced by the government, and especially because of the customers loyalty towards other restaurants.

Distributors. Radhakrishna Foodland (P) Ltd. [“Foodland”] is a part of the Radhakrishna Group, which is engaged in food and related service businesses. Also one of the distributor for McDonald. From July 1993, much before McDonald’s started its operations in India; sincere efforts were made by Foodland to carefully understand McDonald’s operations and requirements for the Indian market. Better facilities and infrastructures were created and new systems were adopted to satisfy McDonald’s demands. Finally, all those efforts put in by Foodland culminated into a handshake agreement with McDonald’s India, to serve as Distribution Centres for their restaurants in Mumbai.

The division has focused all its resources to meet McDonald’s expectation of ‘Cold, Clean and On-time Delivery’. This in turn, evolved their mission statement, “To ensure that all McDonald’s restaurants are supplied without interruption, products conforming to acceptable standards at lowest local costs to the system.” The Distribution Centre (DC) is responsible for procurement, quality inspection programmed, storage, inventory management, deliveries to the restaurants, data collection, recording and reporting. Value added services like repacking of promotional items are also carried out at the DC. The DC plays a very vital role in maintaining the integrity of the products throughout the entire ‘cold chain’ – the distribution system that ensures the products, which arrive at McDonald’s restaurants from suppliers all over India, are absolutely fresh and as per McDonald’s Quality Standards. All these operations need to be managed in the most cost- effective manner. The operations and accountings are totally transparent and are subject to regular audit.

Marketing strategies of McDonald’s are demographic segmentation, psychographic segmentation and behavioral segmentation.

Demographic Segmentation is McDonalds offers different products like Happy Meal which includes a free toy for kids. For families it has made different outlets and meals which are suitable for takeaways and drive-thru. McDonalds has made its environment which is suitable for students of school to hang out with their friends and can get their lunch at McDonalds. Psychographic segmentation is McDonalds has adopted itself according to the convenience and lifestyle of the consumers. Malaysians has different culture people so McDonalds came up with a different and new product line which includes items like McChicken, double beef chicken and etc. They also made McDonalds as a place to relax and even for entertainment. Behavioral segmentation is McDonald’s offers occasions like certain family’s select McDonald’s on various occasion like birthday party, treat to their children, wedding anniversary and etc.

Targeting, from the market segments discovered, the most profitable target market segment seems to be the working adults market. The working community segment is considered the largest group of consumer of McDonald compared to children and youth. There are more sensitive to trends and lifestyles in today’s culture and in almost everywhere. In addition, working adults has their own income thus able to make their own choice without too much constrain. Hence they have the tendency to determine their eating habits. Also, the McDonald provides fast services thus suit those working adults who are also always on a go and fast moving especially those in the capital cities. Positioning, in order to position itself successfully, McDonalds need to establish criteria that may allow it to differentiate itself from other competitors (Schiffman, et.al, 2008). In the fast food industry, McDonalds has positioned itself as the market leader in the sense of pricing and services. Its 24 hour services in almost all of the outlet nationwide makes them a place to look for food even it is in the middle of a night. However, it is hard for McDonalds to position itself far away from the competitors as others are also following the trend.

There have 4 market mixes in McDonald’s:

Product: McDonald’s takes into account cultural factors in serving the Malaysian consumers. The food serve is halal and servers local taste as well. They have wide range choice of menu similar with burger king. Seasonally they serve the ‘prosperity burger’ for Chinese New Year. McDonald’s also serves healthy food but this will effect on the taste and consumers eating experience. Product is the physical product or services offered by the company to its customers.

McDonalds include certain aspects of its product such as packaging, desirability, looks etc.

Price: McDonald’s have more price reduction compared to KFC and Burger King. They offer a very competitive food prices. They have the “Value Mc Savers” and the “Mc Value Meal”. KFC do have their value meal called “Jom Jimat Everyday” and Burger King but in term of their price, McDonald offers the best price for fast Food. However, McDonalds, they offered only during certain period of time there-for rise the question of its availability. McDonald s has certain value pricing and bundling strategies such as happy meal, combo meal, family meal, happy price menu etc to increase overall sales of the product.

Place: They are built or open in retail areas like shopping malls due to a trend of all Malaysian who loves to shop in malls. They also open in some rural area’s however KFC has more restaurants in the rural area. In some strategic places, McDonalds also opens in several local gas stations such as PETRONAS Mesra. They open an express café that serve some popular products. There are also games for children the one example is Children play games till the time there parents spend quality time in McDonalds.

Promotion: McDonald’s television advertisement is place on a seasonal basis which they only advertise during festive seasons and movie. Normally, their ads attract children rather than adult consumers. McDonald’s in Malaysia primarily focus of it marketing campaign by sending flyers to houses and attach coupon in newspapers. McDonald’s also advertise their product using billboard. They place their latest advertisement on “McDonald’s Mc Value Meal” at major roads that indeed attract attention.

Task 3

There are a few factors that affect this non-organizational based on microenvironment. Among the factors are Political, environmental, economic, technological, social-culture and legistration. Below is the explanation of each factors.

Political factors

The international operations of McDonald’s are extreme under influence of a policy of the separate state put into practice by each government. For example, there are certain groups in Europe and the United States which demand the acts of governmental power concerning medical values of meal of fast food. They have specified that harmful elements as cholesterol and negative influences as fatness are concerning consumption of products of fast food.

On the other hand, the company operates the separate policy and instructions of operations. The certain markets concentrate on various areas of anxiety, such as various area of health, protection of the worker, and environment. All these elements are noticed in the state control of licensing of restaurants in the corresponding states.

Economic factors

The organizations in the fast food industry aren’t excused from any disputes and problems. Definitely, they really have the separate problems involving business factors. Branches and privileges of networks of the enterprises of fast service as McDonald’s has a tendency to experience difficulty in cases where the economy of the corresponding states is amazed by inflation and changes in exchange rates. Clients hence face a survey stalemate through their separate budgets, whether they should spend more on these foreign networks of the enterprises of fast food. Hence, to these chains, possibly, it is necessary to take out problems of effects of economic environment. Especially, their problem depends on the answer of consumers to these main principles and how it could influence their general sales. In an estimation of operations of the company, food chains as McDonald’s tend to import the biggest part of the raw materials to certain territory if there is a delivery lack. Exchange rate fluctuations will also play an essential role in company’s operations.

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Socio-Cultural factors

Articles about the international strategy of McDonald’s, apparently, function on several areas to guarantee profitable returns for the organization. To illustrate, the organization changes to the best an establishment of positive thinking from their basic consumers. McDonald’s indulges a special variety of consumers with certain types of persons. Also it has been noticed that the company has given the markets, such as the United Kingdom, a choice concerning their lunch requirements. Specified that McDonald’s beginnings considerably valued set of meal which offers a reliable degree of quality for the corresponding market where it works. In addition, those who are elderly only below a bracket of thirty five as said are the most frequent consumers of McDonald’s privileges.

Many-sided character of business is reflected now in sharp value of the information about the existing market. This procedure is essentially identified in area as market research. Information concerning the reference and potential areas of the market would double as a barrier to success of the company if this area of operations neglected. In case of McDonald’s they establish good system in determining of requirements of the market. The company uses concept of consumer individuality of a product of behaviour and decisions on purchase to its advantage.

Technological factors

McDonald’s makes a demand for their organizations own products. The key tool of the company for marketing is by means of TV advertisings. There are some requirements that McDonald’s is inclined to interest the younger population more. Existence of game stains also toys in the meal offered by the company shows this validity. Other demonstration of such marketing strategy is obvious in advertising they use. They use recovered descriptions of the characters as Grimace and Hamburglar. Other advertising operations employ popular celebrities to promote their products. Similar became endorsees for McDonald’s all over the world “loving’ it” campaign. Besides, operations of McDonald’s have considerably been infused with new technology. Elements as the system of stock and management of the value chain of company’s creation consider easy payments for the suppliers and other sellers with which the person supplies in the corresponding agreement on the markets. Technology integration into operations of McDonald’s tends to increase cost of their products. Basically it is shown in improvements on its chain of creation of value

Legal factors/ Legistration

There was a current roar against the fast food industry. It has forced McDonald’s to apply more close examination on their corporate social responsibility. As a whole it has addressed to requirement of the company to generate its corporate reputation to more positive and the more socially responsible company. The reputation of McDonald’s is obviously a huge question. Noticed on company’s web site, seems, that they have got steps to take in hand the key social condemnation that they abused them in the last decades. The company gave to their clients the corresponding data in which they need the relation of food essence of their products. It is connected with socio-cultural market signs which they influence. For example, operations in predominantly Muslim countries demand, that their meat corresponded to Halal requirements of the law. In the same regard, those that operate in countries in the European Union should correspond to the existing laws forbidding usage of genetically modified meat products in their meal. Other legal concepts as tax obligations, employment standards, and requirements to a degree of quality are only a few of important elements on which the company should consider. Otherwise, smooth operations should be difficult to reach.

Environmental factor

Social responsibility of McDonald’s on the state influences to company operations. They involve charges of harm to environment. Among the reasons why they are accused of such requirements, is that the work of substances is not decomposed by microorganisms for their drinks glasses and treasury of expanded polystyrene for meal. Some civil groups in Hong Kong have made actions to make McDonald’s privileges in Hong Kong aware of the rather copious use of containers of expanded polystyrene and resulting abusing by environment. Further, has specified that in 1995, McDonald’s Hong Kong ran through the expanded polystyrene used by both Australia and the incorporated United States.

Task 4 and Task 5

Agriculture -potatoes

In 2007, with the share of 19,3%, the EU-27 was the second largest producer of potatoes in the World (China occupying the first place). Despite the relative and absolute decline in production observed over the recent years, which was mainly due to structural transformations of the potato sector in the new member states, potatoes for human consumption belong to the most competitive segments of EU agriculture. The sector shows also a competitive edge in international markets, especially in the sub-sectors of seed potatoes and processed products.

Potatoes for human consumption are not covered by the Single Common Market Organization, except for the standard rules on state aids. Since 2008 all the potato areas in the EU can be potentially eligible to receive direct payments. Moreover, potato operators may benefit from the CAP promotion and quality schemes.

Business – Competitors

The competition authorities inform each other of proposed decisions and take on board comments from the other competition authorities. In this way, the ECN allows the competition authorities to pool their experience and identify best practices. It should ensure an efficient division of work and an effective and consistent application of EC competition rules. The EU Commission and competition authorities from EU member states cooperate with each other through the ECN by, informing each other of new cases and envisaged enforcement decisions, coordinating investigations, where necessary, helping each other with investigations, exchanging evidence and other information and discussing various issues of common interest.

Climate – environment

The EU’s role:

Spreading knowledge on climate change impacts and risks;

Providing guidance on best approaches;

Coordinating national activities, particularly when impacts cross borders such as in river basins;

Adopting legislation and targets; and

Providing funding.

Employment and social right

Health and safety at work is one of the areas where the EU has had the biggest impact – with a solid legal framework covering the maximum number of risks with the minimum number of regulations. The Commission also works with the European Agency for Health and Safety at Work and the Conditions to disseminate information, offer guidance and promote healthy working environments – particularly in small businesses. Legal basis: encourages improvements in occupational health and safety in all sectors of activity, both public and private, Promotes workers’ rights to make proposals relating to health and safety, to appeal to the competent authority and to stop work in the event of serious danger, Seeks to adequately protect workers and ensure that they return home in good health at the end of the working day. Statistics: European Statistics on Accidents at Work (ESAW) – case-by-case data on occupational accidents with more than 3 days of absence from work and fatal accidents and European Occupational Diseases Statistics (EODS) – harmonized data on occupational diseases from 2001 onwards, Labor Force Survey ad hoc modules on accidents at work and work-related health problems. Committees: Committees of national experts contribute to developing, implementing and monitoring EU legislation on health and safety at work, Advisory Committee on Safety and Health at Work (ACSH), Scientific Committee on Occupational Exposure Limits (SCOEL) and Senior Labor Inspectors Committee (SLIC).

Task 5

Economic Factors:

Definitely turbulence in economy also plays vital shift of demands of the market segment. Recent world economy is shaken by the Credit crunch issue, citizen has less disposable income, and there is wild redundancy and less GDP in almost every economy. The major geographic markets of McDonalds are also affected by higher interest rate and inflation. So, cost of doing business has increased and a sale is generally decreased. This has affected also the sales of McDonalds like all other businesses throughout the world. McDonalds has recognized this issue & reduced their menu to a reasonable prices and also offering a wide range of foods.

Environmental factors:

Green issues, renewing energy sources, recycling of rubbish or waste disposal all are a matter of concern. But these are less of significance for McDonald for the moment.

Environment is the biggest challenge due to its commitment towards the environment; it has adopted Rain Forest Policy. This state’s its assurance for beef purchasing practices that do not cause tropical de-forestation by any means. It fully aware of the fact that enormous utilization of the natural resources can imbalance the eco system. That is why, it is recycling vegetable oil, grease etc. by converting them as fuel for their diesel trucks.

Demographic factor

The world’s age is changing. In some areas, mostly in developed countries such as the United States, Japan and many in Western Europe, the median age of the population is growing older, due to slowing birth rates and longer life expectancy. In the newer, emerging countries, such as those in Asia or Africa, the median age is getting younger mostly due to higher birth rates. These different trends require different marketing approaches. McDonald’s caters to both segments of the population, domestically and globally by targeting each segment individually. It is not unusual to see television commercials showcasing older generations enjoying a McDonald’s meal. A viewer is just as likely to see another commercial aimed at the younger generation, characterized by progressive music or urban attractions. In McDonald’s stores, customers will see “Happy Meals” complete with an advertisement for the latest Hollywood action movie as well as coffee offered to senior citizens for 49 cents.

Technological factor:

Till now, the market trend does not reveal high impact on fast food restaurant for technologies. However, the general equipments, temperature regulators, control devices, point-of-sales(POS) systems, inventory management, financial information and communications are all linked to different technologies. Any improvement of integrating better technologies for better purposes will give an edge of operations and can also help it better marketing strategies.

For example, recently McDonald has installed facility for free access to internet at their restaurants through Wi-Fi systems. This has increased the value of brand & market positioning.


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