McDonald competitive strategy and position in the fast food industry market - Essay Example

Task Operation management Report on McDonald competitive strategy and position in the fast food industry market Introduction McDonald Corporation has over 300,000 restaurants in about 121 different nations. Its restaurants are run by the McDonald franchises, corporations or affiliates formed under united ventures unions. What makes MacDonald stand out is that it has a strong brand name and is among the nine world popular brand names in the fast food commerce (Cateora & Graham 2007, 453). The brand names has been popularized by consistent promotion strategies and promoting superior personal relations. One of the inimitable attributes of McDonald is that it offers uniform products in all its branches. This includes, chicken, soft drinks and hard drinks. Over the previous few eons, a range of new products has been introduced to provide customers with a wide range of products to choose from increasing the number of sales compared to in earlier years. However, notwithstanding the upsurge in the quantity of foodstuffs offered, McDonald has promoted uniformity of the standard of services offered in its various branches. Competition in this industry is exceptionally stiff. McDonald has tried to stay top in the market by using extremely expensive promotional strategy a move which has narrowed its revenue. However, the corporation has shifted its focus from promotion to exploring other ways of promoting its market share. It is trying to set itself separate by increasing the items in its menu and also coming up with innovations. Its competitors have also employed the same strategies. However, these companies compete differently. This is because they are structured differently and as such the choices made should suit the structure of each in individual company. This paper focuses on how the organization of each separate company influences the decision making and on the type of competitive strategy adopted. McDonald chief competitive factors McDonald is faced by the challenge of operating in a saturated market. This makes it difficult to open up fresh outlets. The market grow prospects are very low about 2% annually. It also has numerous competitors who offer competitive prices making increase of product prices not to be a viable option of increasing source of revenue. It has, however, tried to overcome this by adopting a diversifying approach instead of a value approach. The corporation has shown low innovativeness with its last new product being the chicken nugget introduced in the year 1983. However, it has compensated for this lack of innovativeness by introducing new salads. The following are the most important competitive factors of McDonald: Uniformity of standards and services in various locations Despite the fact that McDonald offers an array of products, it has guaranteed its customers consistency in the standards of services offered. The consistency is evident in all the outlets founded in the U.S.A and in the global markets (Cateora & Graham 2007, 68). The company is very selective in forming affiliated ventures and franchises: it only affiliates itself to companies that meet its standards. Furthermore, testing of new products is done within a limited promotion time. Establishment of branches addressing different market needs. In addition to its restaurants, McDonald has also launched other branches addressing various market segments. This includes the fresh Mex-grill and Chipotle Mexican Grill in America which offers tacos and gourmet burritos. In the UK, It has a coffee chain serving pastries and sandwiches called the Aroma Cafe. This has made it conceivable for the establishment to access a larger market compared to its rivals who are limited. Large size The corporation has a very strong global impact with its closest contenders being only half its size. It has shown a hint in both the indigenous and international markets. As such, it enjoys reduction of cost via economies of scale brought about by its large size. Its large size also the fact that it has branches in few nations gives it the opportunity to take risks in different economies and can benefit from long term economic growth. This implies that it has better prospects of expansion compared to its competitors (Cateora & Graham 2007, 657). Strong real estate portfolio The company has located its major restaurants and other outlets in strategic areas, which are quite convenient, for its customers. They are constructed in areas where they are clearly visible, highly accessible and have large traffic volume which ensures that a large population visits theses outlets. Strong brand name The company has very strong brand name which is among the top ten worlds brand name. It has an excellent brand recognition which ensures that the company gets additional sales. The strong brand appellation also promotes product loyalty among its customer and this has ensured that the company does not lose its customers to her competitor. Reliable management It is directed by an exceptionally strong managing team which is not greatly affected by transition in leadership. Because the company has been in the industry, the management has enough experience that is valuable in dealing with the challenges that may face the company. Sound management is also very instrumental in dealing coming up with workable corporate goals and implementation of the same. The presence of reliable supervision attracts investors who feel that their investment is being used in the most appropriate manner. Adoption of sale promotion initiatives In the U.S.A, McDonald has registered a consistent increase in sales since the year 2003. This can be attributed to the service, menu and value initiatives. These projects include the extension of operation hours, introduction of new salads, implementation of new promotion strategies and laying more focus on operation. Resourcefulness has been the company shift from focus in price wars with its competitors to striving to win over its customer by creating pleasant ambience at its restaurants, giving excellent services and diversifying the menu. This shift has seen the company reduce its expenses greatly and promote its revenue. This has made its financial statements stabilize. It has also taken creativities to meet its customers’ needs by providing them with wholesome food and introducing new products that complement its chief products. The provision of wholesome food has helped in reimaging the company’s image, which has often, received bad press because fast foods are said to be linked to obesity and other health problems. It has thus continued to evolve its menu ensuring that it remains relevant to current needs of its customers. Burger King Holdings, Inc The holding can be considered as one of the prevalent series handling fast foods. The company operates a chain of restaurants globally directly as well as through franchising. It handles a wide range of food commodities such as sandwich, hamburgers and pies. The company utilizes its most recognized brands which are the Burger King and Whopper. The company operates in many countries all over the globe and can be considered to be the most spread with procedures underway in about 75 countries. The company has been on a constant rise for a long period which has partially been achieved through intensive market campaigns. With reference to the biggest competitor McDonald, Burger King can be regarded to be operating at the average although there is still anticipated growth (MGT790 2010, 1). In order to ensure continued competitiveness and success in the fast food business, Burger King aims at providing the best burgers in relation to other burger producers. The company also aims at providing a variety in the wholesome and authentic foods. These foods are freshly primed according to the requirement of the consumers. The company puts emphasis on equality, assortment, concern, reverence, accountabilities for the foods that their workers provide, teamwork, quality standards of the served food and dedication to superiority. The company aims at offering its customers with quality services through rapid food preparation, and sale in a sanitary environment that is often not prevalent in the competitor’s environment. The company also manages its commercial undertakings in an ethical manner by employing the best employers all over the world although within the restaurant chains (MGT790 2010, 4). The company continues to focus on its mission statement that aims at increasing profitability although in responsible ways as well as the provision of career progression for the willing members of the firm. In addition to the benefits bestowed upon the employees, the company provides customers with a comprehensive nutritional guide to allow for informed decisions on what to take. With respect to this, the company has built up a novel brand that accentuate on fulfilling the customer needs or preferences. Additionally, the company creates responsiveness through incorporated market communication as well as carrying out business to stay in business given the competitive landscape that threatens business undertakings. Burger King has also taken new measures to prevent losses in future by the creation of new objective markets as well as the development of marketing mixes that have relation to the fast foods industry. The company has focus on the strategic market planning that ensures that the company has an edge over its competitors. The new target groups are the people who concentrate on convenience as well as value of the presented commodities. These groups of the populace are the scholars and the families with the lower and middle societal classes. Over the years, Burger King has altered the approaches that it utilizes in marketing its merchandise. The alterations often arise from far-reaching environmental scanning and scrutiny of the target market in order to develop an appropriate marketing mix. Currently, Burger King has also introduced a chain of lenient products intended to attract the intense fast food transaction. The merchandises have been remodeled by taking into thought the marketing mix that assists in the introduction of novel and competitively priced menu options (Ackerman 2009, 5). In Burger King, price is intended to be a competitive advantage. The company presents its customers with good price ranges that are achievable by majority and reasonable in relation to the provided benefits. However, price alone cannot offer the best competitive advantage because the competitors also respond to cheap prices to try and keep most of their loyal customers. Kentucky Fried Chicken KFC can also be regarded as one of the companies that currently bear the most prevalent chain of restaurants that offer fast foods. The company has been in existence for a long period and offers quality familiarity of value-added chicken meals as well as other overall fast foods (Reynolds 2001, 1). The company has so far managed to offer many obstructions to individuals and companies with the potential of entering into the business. This implies that it becomes intricate to be a competitor with KFC although one can still enter into the fast food business easily. The company becomes unbeatable since it has already established commerce links, economies of scale. Product differentiation and has already established concrete distribution channels. The company also enjoys some extent of monopoly since only a moderate rivalry exists within business. However, the company experiences some degree of price competition even though the company barely makes efforts to considerably raise sales than engage in unnecessary price and promotion battles. The business venture also offers huge exit barriers that ensure accountability for the firms entering into the venture. The high entry and exit costs aim at ensuring good results for the customers although it is usually risky to business undertaking. Currently, the company’s food substitutes in relation to improved healthiness and obesity concerns have gained positive response to the consumers therefore increasing the consumer satisfaction and eventually improving the position of the company. The establishment also offers the customers with the opportunity to give their feedback that is utilized to bring improvement and innovativeness within the company (Reynolds 2001, 8). Analysis How different competitive factors influence the making of operation objectives. The marketing strategy adapted by these companies is aimed at reducing expenses and increasing revenue. Burger King and KFC are among the major competitors of the McDonald Company. These companies have distinct competitive factors, and this has influenced the formulation of objectives guiding their operation. For instance, McDonald has a very strong brand name and therefore in order to expand the market, it requires to formulate objectives that capitalize on utilizing is brand recognition. Its large size and also gives it the competitive advantage of taking risks and expanding into new markets. KFC, on the other hand has a less recognizable brand name. As such it can increase its competitive edge by promoting the brand name. This implies that the marketing objectives formulated should be geared towards this end. Burger King has also embarked on the same strategies (Hill & Jones 2007, 456). McDonald has several branches in various nations but the other two companies the KFC and the burger King have not ventured a lot into the foreign markets. For McDonald, opening of new branches may not be viable as it has already accomplished that and already has a large market portion. Instead, it implements strategies that prevent its customers from switching to other companies. It has tried to achieve this by diversifying the products offered. It has tried to correspond with the demands of the customers. Originally, it focused mainly of small children who loved junk food. However, with the current globalization, people are finding less time to cook and are relying additionally on fast food stores than before. McDonald now provides products to cater for this market. Burger king holding establishment on the other hand has formally focused on the local market. It has now decided to expand its perspective to other countries specifically Turkey. This means that is operational objectives are now focused more on globalization than the development of local markets (Doole & Lowe 2008, 78). KFC which has a limited product as they present chicken only can increase their market by refining the quality of chicken offered. Due to the current health concern, the companies have responded to the customers need by coming up with more heath food product. McDonald restaurants sell whole meal food. Burger king offer low fat foods to its customers. The pressure by the people to get healthy foods and the law suits against these fast food joints have made them formulate objectives towards the provision of more healthy foods (Pride & Ferrel, 2011, 67). The success of McDonald Corporation can be attributed to the capability of this company in the creation of sound operational strategy. The company has been able to match the available resources with the marketing demands. This has been easy for this company because it has been in productiveness for protracted period and has a better understanding of the market compared to its counterpart. The other companies have not been lingering. They are conducting rigorous market research so as to know what marketing strategies to institute. Its large size bringing about large economies of scale gives it a competitive advantage as it is able to make more revenue at lower costs than its competitors. In operation strategy preparation therefore, McDonald strives to maintain its market share while the other two chain outlet of KFC and Burger King strive to increase the alignment between the company operations and the market requirements. CFS and Burger Kings strategizes on conducting thorough market research so as to appreciate their consumer needs. Like McDonald, they also plan on diversifying their menu thereby giving their customers a wide range to choose (Hill & Jones 2007, 23). McDonald has fulfilled both the order winning and the succeeding competitive factors, and this has put it in the lead. The order winning factors is the ambience of its restaurant and their easy accessibility. They also include the provision of a wide range of products. A major weakness of the KFC is its lack of a specific target market. This makes application of marketing strategies quite difficult. It also takes a very long time to market its new product compared to McDonald which markets within a limited time span. However, it has internal competitive factors, which gives a competitive advantage and this includes its popular multi-branding strategy. KFC also has a recognizable brand and is very popular. It has also made efforts in reaching out to the global market. It has also shifted its focus to non-traditional markets expanding its market scope. Conclusion External competitive factors affecting the fast food industry includes the opportunities and threats. The prospects that the companies in the industries have include; is expanded international market as a result of current universal appeal for fast foods. This has come as a major opportunity for UK companies to explore the market in other countries around the globe (Doole & Lowe 2008, 94). UK anticipates to explore international markets principally in the Aroma Cafe which is a coffee chain offering diverse menus. The economic downturn has also been a great opportunity for investment in this industry. The threat to the growth of this industry has been the development in concern about consumer health. This is because fast food because of their rich content in sugars and saturated fats has been believed to cause plumpness and many congenital diseases. This has seen the company in the fast food commerce getting sued, and this has tainted their image making them lose sales. Another major threat is the saturation of the fast food business market. The market growth is very gradual at only 2% annual growth. This means expanding the markets is very difficult and this has occasioned in stiff competition among the company involved. Bibliography Ackerman, S., et al (2009), Research Team KFC Final Research Plan Book. < http://www.slideshare.net/imctommyb/kfc-research-analysis> Accessed on Jan 19, 2012. Cateora, P. R., & Graham, J. L., (2007), International marketing. Boston, Mass, McGraw-Hill. Doole, I., & Lowe, R., (2008), International marketing strategy: analysis, development and implementation. London, South Western Cengage Learning Fort, E., (2010), McDonald's: Controversies, legal vows, and its competitors in the fast food industry, [United States], Six Degrees Books. Hill, C. W. L., & Jones, G. R., (2007), Strategic management: an integrated approach. Boston, Mass, Houghton Mifflin. Lamb, C. W., Hair, J. F., & McDaniel, C. D., (2009), Marketing. Mason, Ohio, South-Western Cengage Learning. MGT790 (2010). 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