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CCT College Dublin
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Module Title: Module Code: Assignment Title: Lecturer Name: Student Names: Student Nos.: Assignment Due Date: Academic Year: Year 1 Year 2 Year 3 DECLARATION Strategic Management StratMgt_BBSL8_Feb McDonald’s company Alan Foran Flamarion Rodrigues 2021173 12.04. I, the above named student, confirm that by submitting, or causing the attached assignment to be submitted, to CCT, I have not plagiarised any other person’s work in this assignment and except where appropriately acknowledged, this assignment is my own work, has been expressed in my own words, and has not previously been submitted for assessment.
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Strategic Management
Coursework Assignment
Student Number and Name: 2021173 Flamarion Rodrigues Course Title: Strategic Management Lecturer Name: Alan Foran Assignment Title: McDonald’s company Number of Words: 2200 – 2500 Date: April 2020
The McDonald's brand is one of the largest and most powerful global brands for mass consumption. It is the best known of American fast-food restaurants in the world, present in more than 110 countries and owning over 37 thousand outlets, but like any successful enterprise, it underwent some changes in its business model, which made it achieve success and brand recognition around the world. History In 1937, brothers Dick and Mac McDonald open a hot dog stall called Airdome in Arcadia, California. In 1940, they move the Airdome tent to San Bernardino, also in California, where they open a McDonald's restaurant on Route 66, on May 15th. Initially, the menu had more than 20 options, most of them involving barbecue. The first McDonald's hamburger cost US $ 0.15, and the restaurant had 20 waiters who, on roller skates, delivered the customer's order in the cars. The business became popular and the number of customers increased rapidly. When the brothers realised that most of the profits came from hamburgers, they closed the restaurant for several months to create and implement an innovative quick service system, a kind of serial assembly for hamburgers (Love, J.F. 1995). When the restaurant reopened in 1948, it started selling only hamburgers, milk shakes and fries, becoming an extreme success, whose fame was spread by word of mouth. After a few years, in 1953, the McDonald brothers formed to create franchises for their restaurants, with Neil Fox opening the first franchise and the second opened in Phoenix, Arizona. The restaurant inaugurated in Arizona was the first one to use the style based on the gold arches. In the same year, the original restaurant was rebuilt based on gold arches style. Still in 1953, the fourth restaurant was opened in Downey,
California, on the corner of Lakewood and Florence Avenue, where it still operates today, being the oldest functioning restaurant. In 1954, during a visit to McDonald's, Ray Kroc, the entrepreneur of the milkshake machines, was fascinated by the extraordinary capacity and popularity of the franchise (Schlosser, E. 2001). The brand’s negotiation After seeing the restaurant in operation, Kroc proposed to McDonald brothers, who were already selling franchises, to sell them outside the company's original location (California and Arizona), being his first new franchise. In 1955, Kroc and the McDonalds brothers became partners in a franchise business and became a commercial representative of the brand. Kroc would find franchisees or people willing to pay to use McDonald's name and its methods. In this period, Kroc founds "McDonald's Systems, Inc.", a legalized structure for its planned franchises. At that time, the interested franchisees could buy a license to run a restaurant for twenty years and after that the partners could take over if they chose. An important hiring that took place in 1956 was that of Fred Turner, to work as a clerk for McDonald's. He would soon become McDonald's chief operating officer, setting the standard for the quality, service and cleanliness surrounding the McDonald's brand, and who in future years became the chairman of the board of the company. Kroc in 1960 changed his company name to McDonald's Corporation, and the following year, he aspired to national expansion, but the McDonald brothers did not have that ambition, and agreed to sell to Kroc the rights of their company for $ 2,7 million.
Currently McDonald's Mission and Vision follows these steps, where it is based on serving quality food, always providing an extraordinary experience, doubling the company's value, expanding the leadership in each of the markets. The concept of quality food value, fast and low cost had been already implemented, but new challenges related to territorial expansion and increase in the consumer market emerged, so one of Kroc's marketing ideas was to associate the brand image to a place ideal for fun, in a decision to sell McDonald's hamburgers to families and children. At that time, there was still no national marketing plan for McDonald's brand and each local franchise established the criteria with which they would have to attract their own audience. The children's shows, at that time, were among the programs with the largest audience, especially Bozo's Circus, broadcast by a channel in Washington, affiliated to the NBC television network. The McDonald's franchisee became one of the sponsors of the program, envisioning in it the vehicle by which the company could reach its target audience: children. Thus, McDonald's started appearing on television through the clown Bozo, who advertised its products in a very subtle way: directly inducing children to ask dad and mom to take them to McDonald's. The clown was so successful that he was invited to participate in the opening of the new McDonald's restaurants. However, in 1963, the franchisee lost his great spokesman with the children as the Bozo’s Circus was discontinued. Without being able to produce the program on its own, the store owner in Washington decided to create his own clown for television advertisements, using the same actor who had personified the Bozo clown, William Scott. The new mascot first television appearance was in 1963, but the clown only came to be adopted nationally in 1965. The McDonald's was faced with an invitation to participate in the traditional Macy's Parade of “Thanksgiving Day”, celebrated on November 25, in the city from New York. It was there that the company made its first national purchase of television media. In 1971, Ronald, the mascot, won a group of friends, who lived in the city of McDonaldland (The land of McDonald's), made up of Hamburglar, Grimace, Mayor McCheese,
Captain Crook, Professor and Birdie, they became a source of attraction for the network of food (Fishwick, M. 1983). The great strategy from McDonald's is not the television market only, as at all times the company seeks to expand and innovate its concepts to reach and satisfy its customers. With the expansion to the foreign market, the company saw the opportunity to join new products in his menu, giving the franchisee the chance to get closer to the culture of the new countries. New sandwiches were added to the menu over time as fish in 1965, in 1968 the famous Big Mac, 1973 The Quarter Pounder, 1979 Happy meal, 1983 nuggets among others. Nowadays, in the other countries where the franchise has expanded, it is possible to find different snacks, drinks such as coffee and beers, as well as different layouts that are attractive to the local culture. Other significant and strategic changes took place in 2006, where McDonald's started a true revolution in its food concept after heavy criticism regarding the harms of its meals. With this concern, the company started offering a healthier and less calorie menu to its consumers. The menu now contains healthier food options such as salads, chicken and other fresh items, and all product packaging now contains nutritional information. The strategy adopted by Ray Croc and incorporated in Mcdonald's was precisely to offer fast, low-value, quality, and standardized food, whether in any establishment of the brand. Today all marketing actions are planned by a specialized team. TV commercials, the choice of menu, inclusions, and changes respect the ideas that generate value for their customers, consumers, and also for their franchisees. It is possible to say that McDonald’s is not only a food company but also a large real estate chain. The strategic idea is to buy the land and build the stores, renting the land directly to the franchisee, who sells hamburgers to pay for the properties. This expands the company's equity as land and properties are increasing in value and have become a highly profitable business, as around 80% of McDonald's stores are franchises.
Although not present in so many countries as McDonald's, the number of franchises and service stores is higher, making it the largest in the fast-food segment and the leader in open stores worldwide. Burger King, which has more than 15,000 stores in operation worldwide, was founded in 1953 by James McLamore and David Edgerton, who started their work in Miami, Florida, USA. Subway is also a North American chain with more than 44 thousand coffee shops spread over more than 100 countries. Specializing in sandwiches and salads, it was founded in 1965 by Fred De Luca and Peter Buck. The restaurant had an initial investment of just a thousand dollars and was called Pete’s Super Submarines, in the city of Bridgeport, in the state of Connecticut, in the United States. With the growth of the business, the two entrepreneurs changed the name of their restaurants in 1968 to Subway, and today it is the fast-food chain that has grown the most in the world. An organization's strengths, weaknesses, opportunities, and threats are better known as SWOT. This helps the organization determine its position in the market and whether or not it has a competitive advantage over competitors. Regarding McDonald's, it can highlight as strengths and pillars of success its global reach, present in several countries, the brand recognition with its logo of Golden Arches and for its mascot, the popular clown Ronald McDonald (Ritzer, G. 2008). The joint ventures, as it stands out not only in independent stores but also in stores within other large ones renowned as Walmart, in airports, and even in amusement parks incorporated around the world like Disneyland. In addition to the diversity to adapt their menus to meet the best conditions in the franchisee's country of origin. Its weaknesses would be the limited options, since it does not include other important foods, such as tacos, pizza, or hot dogs found in its competitors. Another important factor is the high employee turnover, since it does not have attractive salaries and is aimed at young people, mainly as a first job, generating training costs more frequently.
Even with all the menu changes that have taken place since 2006 and other initiatives that have been implemented to provide healthier options, McDonald's is still behind several other competitors when it comes to offering healthier menu options to consumers such as organic food and fresh meat for hamburgers. In relation to opportunities, an alternative would be to expand the menu, including other types of food, such as tacos or pizza and even drink options. The chance to add healthier items, like additional salads and sugar-free desserts for adults and children. Another opportunity would be to focus on expansion within other commercial ventures, such as cinemas, stadiums, and universities. When it comes to threats, the big note is an increasingly negative warning for the consumption of foods high in fat, calories, and cholesterol. Another possible threat would be new establishments, which generate curiosity and which can attract potential investors and franchisees.
- Strength - brand recognition
- Weakness - Lack of a healthier menu
- Opportunities - Expand menu
- Threats - unhealthy menu options Conclusions All actions to implement new franchises are analysed and approved by the company's management. Franchisee training has a long stage of learning how to operate a restaurant, according to the established standard. There is a booklet for its franchisees with all the information, principles, and values of the company, which are passed on to all employees of the company, making everyone involved understand the company's vision and mission.
