SOLUTION: BUS 310 Arab Open University McDonald Strategic Management Case Study Analysis


BUS310: Strategic Management: Creating Competitive Advantages INSTRUCTIONS 1. TMA must be written in ESSAY (discussion) format, BULLETS and NUMBERING to be avoided. Avoid congruity TMA in primitive individual neat. E.g. “I allude-to that …” or “I am going to sift-canvass…” etc. 2. Promise estimate should be upcorrect succeeding a while 10% (More/less) tolerance. 3. You must retain all sources of instruction using ample Harvard Title Referencing (In-text referencing plus register of intimations at the end) Reserve of 5 intimations are required. MUST embody E-library and road materials. 4. Wikipedia is not recommended as a intimation. Please Note that this characteristic TMA is meant to accord to recommendations ardent by EE to encourage and enucleate senior ticklish analytical skills in-particular at roll 6, by hopeful the students to discaggravate aggravate widely; the senior use of relatively levelt studies; and hopeful sever-time students to mirror on the application of the theories sift-canvassed to their own issueplace -This TMA variedly draws from chapters 2, 3, 4,5,6 & 7. It consists of Three (3) questions and accounts for 50% of the entirety measure assigned to the road. TMA allure be measured out of 100 vestiges. N.B: Your measure allure be stuff to measure deductions if you did not consent succeeding a while the succeedingcited criteria: • Proper referencing (Harvard referencing) - Deductions could be up to 5 measures. • In-text referencing- Deductions could be up to 5 measures. • Adherence to fixed promise estimate – Deductions could be up to 5 measures. • Use of the E-library/External instrument – Deductions could be up to 5 measures. - In this TMA, you omission to teach your instruction and brains of the weight of the inner occupation issueings. In near, the levelt provides an occasion for an scrutiny of the entire arc of strategic harangue, succeeding a while appropriate circumspection to how strategies are formulated below uncertain and evolving conditions and how can a posse compose competitive advantages in the chafferplace that are not singly rare and absorbly but as-well-behaved reserved for competitors to vision or commute. -In your confutation, you should profession ticklish, analytical and vindication skills of the stuff stuff, rather than unmixed term. - You should extend a polite-behaved-structured and arranged element of issue that is of your own fable. 1 -In an essay format confutation the succeedingcited three questions: Q1. Critically sift-canvass the key forces in the unconcealed and assiduity environments that affect McDonald’s precious of policy. (35 vestiges- 800 promises) Q2. What inner instrument and goods does McDonald’s bear, that may grant it a competitive advantage? Critically sift-canvass whether McDonald’ posture is cherished by its prize fetter and other inner instrument. (35 vestiges- 800 promises) Q3. Critically sift-canvass MacDonald’s Occupation –Level, Corporate-Level and interpolitical strategies. What are the challenges MacDonald’s capability visage to live remain afront of competitors? (30 vestiges- 400 promises) ______________________________________________________________________ MCDONALD’S- A Event Study MCDONALD’S IN 2017 On January 18, 2017, McDonald’s announced that it was introducing two new renderings of the Big Mac on a poor basis. Although such changes are requisite for the globe’s vastst restaurant fetter, the new extendings allure be congruous to the ancient rendering consequently they allure use frozen beef patties and a concealed pickle. This is unreasonable to harangue the alter in sapiditys among consumers for noveler beef and a difference of toppings. In plainity, a novel inspect involved a grave producer for institution for the steadfast, opinion that singly 20 percent of Millennials had level mature a Big Mac (see Exhibits 1, 2, and 3). EXHIBIT 1 Income Statement ($ pets) Year Ending Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 $24,622 $25,413 $27,441 Operating Income 7,744 7,145 7,949 Net Income 4,686 4,529 4,758 Total Revenue Source: McDonald’s. 2 EXHIBIT 2 Balance Sheet ($ pets) Year Ending Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014 $ 4,849 $ 9,643 $ 4,186 31,024 37,939 34,281 3,468 2,950 2,748 Total Liabilities 33,228 30,851 21,428 Stockholder Equity (2,204) 7,088 12,853 Current Assets Total Assets Current Liabilities Source: McDonalds. EXHIBIT 3 Breakdown of Revenues ($ pets) 2016 2015 2014 $8,253 $8,559 $8,651 International Lead Markets 7,223 7,615 8,544 High Enlargement Markets 6,161 6,173 6,845 Foundational Markets & Corporate 2,985 3,066 3,401 U.S. Source: McDonald’s. Nevertheless, Steve Easterbrook, who took the helm of McDonald’s in March 2015, has continued to butt for changes to different of the ingredients that the steadconstant has been using in its products. It has departd noble fructose corn syrup from its buns, newfangled from the use of liquid margarine to plain butter, ruled to use chicken that has been proud-minded succeeding a whileout antibiotics, and to establish use of cage-free eggs. Mike Andres, superintendent of McDonald’s USA, explained why the steadconstant has ruled to establish these changes: “Why seize a posture to defend them if consumers are declaration they don’t omission them?” These changes are expected to harangue some of challenges that McDonald’s has been facing in abundant chaffers, including the U.S., where it has aggravate 14,000 of its 35,000 for-the-most-sever franchised restaurants. It has obsolete a lot of reason succeeding a while consumers, in-particular Millennials, who are defecting to unwritten competitors relish Burger King and Wendy’s as polite-behaved-behaved as to new designer burger vents such as Five Guys and Shake Shack. Changing sapiditys are as-well-behaved lawful for the waste of customers that are integument up at constant-casual fetters such as Chipotle Mexican Grill and Panera Bread, which extend customized ordaining and novel ingredients (see Exhibit 4). EXHIBIT 4 U.S. Chaffer Divide of Fast-Food Burger Chains McDonald’s 3 2016 17.0% 2014 49.6% Wendy’s Burger King Five Guys 2012 50.0% 2010 49.2% 2016 4.4% 2014 12.3% 2012 12.2% 2010 12.7% 2016 15.4% 2014 11.9% 2012 12.1% 2010 13.2% 2016 1.8% 2014 1.7% 2012 1.5% 2010 1.1% Source: USA Today, December 8, 2014; and cause estimates. Over the years, McDonald’s solution to this growing rivalry was to envast its menu succeeding a while snacks, salads and new swallows. From 33 basic items that the fetter extended in 1990, the menu had confirmed by 2014 to 121 items. The very-much enlargeed menu led to a weighty issueion in costs and longer provision opportunitys. This oppressive the steadconstant to issueion the values of abundant of its items and to seize aggravate opportunity to attend customers, emotional it afar from the attributes that it had built its letter upon. “McDonald’s stands for prize, analogy and freedom,” said Darren Tristano, a restaurant assiduity consultant. The constant aid fetter has been through a congruous occasion precedently. End in 2002–2003, McDonald’s had conversant a disengage in deed consequently of condition problems as the issue of rapid expansion. At that opportunity, the steadconstant had brought James R. Cantalupo end out of concavity to decthinterpret things encircling. He formulated a “Plan to Win,” which has been the basis of McDonald’s policy aggravate the decisive decade. The centre of the sketch was to issueion sales at real subsidences by improving the menu, refurbishing the vents, and extending hours. This opportunity, nevertheless, such incremental steps capability not be ample. Pulling out of a Downward Spiral Since it was founded aggravate than fifty years ago, McDonald’s has been defining the constant aid business. It supposing pets of Americans their primitive jobs level as it newfangled their eating habits. It rose from a solitary vent in a nondescript Chicago environ to befit one of the 4 largest fetters of vents spdiscaggravate encircling the globe. But it fragmentarily began to run into various problems which began to sluggish down its sales enlargement (see Exhibit 5). EXHIBIT 5 McDonald’s Milestones 1948 Brothers Richard and Maurice McDonald disclosed the primitive restaurant in San Bernadino, California, that dispose-ofs hamburgers, fries, and milkshakes. 1955 Ray A. Kroc, 52, discloseds his primitive McDonald’s in Des Plaines, Illinois. Kroc, a distributor of milkshake mixers, figures he can dispose-of a bundle of them if he franchises the McDonalds’ occupation and establish his mixers in the new shops. 1961 Six years succeeding, Kroc buys out the McDonald brothers for $2.7 pet. 1963 Ronald McDonald establishs his debut as municipal spokes clown using hence NBC-TV weatherman Willard Scott. During the year, the posse as-well-behaved dispose-ofs its 1 billionth burger. 1965 McDonald’s supply goes generally-known at $22.50 a divide. It allure secede 12 opportunitys in the instant 35 years. 1967 The primitive McDonald’s restaurant beyond the U.S. discloseds in Richmond, British Columbia. Today there are 31,108 McDonald’s in 118 estimateries. 1968 The Big Mac, the primitive issueion of McDonald’s basic burger, establishs its debut and is an immediate hit. 1972 McDonald’s switches to the frozen difference for its prosperous French fries. 1974 Fred L. Turner succeeds Kroc as CEO. In the thick of a recession, the reserve wage rises to $2 per hour, a big absorb issueion for McDonald’s, which is built encircling a pattern of young, low-wage issueers. 1975 The primitive drive-through window is discloseded in Sierra Vista, Arizona. 1979 McDonald’s accords to the omissions of issueing women by introducing Happy Meals. A burger, some fries, a soda, and a toy grant issueing moms a infringe. 1987 Michael R. Quinlan befits main supporter. 1991 Responding to the generally-known’s crave for vigorier aids, McDonald’s introduces the low-fat McLean Deluxe burger. It flops and is succeeding a whiledrawn from the chaffer. Aggravate the instant few years, the fetter allure misapprehend different opportunitys up-hill to smug up its menu. 1992 The posse dispose-ofs its 90 billionth burger, and stops estimateing. 1996 In ordain to dispose aggravate adult customers, the posse launches its Arch Deluxe, a “grownup” burger succeeding a while an idiosyncratic sapidity. Relish the low-fat burger, it as-well-behaved droops dull. 1997 McDonald’s launches Campaign 55, which cuts the absorb of a Big Mac to $0.55. It is a solution to discounting by Burger King and Taco Bell. The agitate, which prefigures congruous value wars in 2002, is widely considered a insufficiency. 5 1998 Jack M. Greenberg befits McDonald’s fourth main supporter. A 16-year posse veteran, he vows to smug up the restaurants and their menu. 1999 For the primitive opportunity, sales from interpolitical operations eclipse private revenues. In search of other concepts, the posse acquires Aroma Cafe, Chipotle, Donatos, and, later, Boston Market. 2000 McDonald’s sales in the U.S. peak at an middle of $1.6 pet year-by-year per restaurant. It is, nevertheless, calm?} aggravate than at any other constant-aid fetter. 2001 Subway surpasses McDonald’s as the constant-aid fetter succeeding a while the most U.S. vents. At the end of the year it had 13,247 shops, 148 aggravate than McDonald’s. 2002 McDonald’s posts its primitive-ever quarterly waste, of $343.8 pet. The supply distils to encircling $13.50, down 40% from five years ago. 2003 James R. Cantalupo produce to McDonald’s in January as CEO. He following a whileout-delay pulls end from the posse’s 10–15% obviate for per-divide hues enlargement. 2004 Charles H. Bell seizes aggravate the steadconstant succeeding the quick cessation of Cantalupo. He states he allure live succeeding a while the strategies that bear been enucleateed by his forerunner. 2005 Jim Skinner seizes aggravate as CEO succeeding Bell announces concavity for vigor reasons. 2006 McDonald’s launches appropriatety beverages, including coffee-based swallows. 2008 McDonald’s sketchs to add McCafes to each of its vents. 2012 Don Thompson succeeds Skinner as CEO of the fetter. 2015 Thompson resigns consequently of decintegument deed and is replaced by Steve Easterbrook, the steadfast’s main stigmaing official. 2016 McDonald’s discloseds restaurant in the 120th estimatery; the primitive McDonald’s restaurant discloseds in Astana, Kazakhstan, on March 8, 2016. Source: McDonald’s. This disengage could be attributed in vast sever to a distil in McDonald’s once-vaunted benefit and condition gone its expatiation in the 1990s, when headquarters stopped grading franchises for cleanliness, press, and benefit. By the end of the decade, the fetter ran into aggravate problems consequently of the tighter drudge chaffer. McDonald’s began to cut end on trailing as it struggled hard to invent new recruits, inherent to a ceremonious droopoff in the skills of its employees. According to a 2002 inspect by chaffer researcher Global Enlargement Group, McDonald’s came in third in middle benefit opportunity following Wendy’s and sandwich treasure Chick-fil-A Inc. By the initiation of 2003, consumer inspects were indicating that McDonald’s was headed for grave grief. Measures for the benefit and condition of the fetter were permanent to droop, dropping far following those of its rivals. In ordain to dispense succeeding a while its deteriorating deed, the steadconstant ruled to cause end sequestered Vice-Chairman James R. Cantalupo, 59, who had aggravateseen 6 McDonald’s prosperous interpolitical expatiation in the 1980s and 1990s. Cantalupo, who had sequestered singly a year prior, was perceived to be the singly applicant succeeding a while the requisite qualifications, resisting divideholder arrive-ating for an beyondr. The consideration had felt that it omissioned someone who knew the posse polite-behaved-behaved and could agitate straightly to decthinterpret things encircling. Cantalupo plainized that McDonald’s frequently tended to ignore the vestige on delivering the ticklish aspects of consonant, constant, and affectionate benefit and an all-encircling pleasant trial for the whole race. He belowstood that its franchisees and employees arelish omissioned to be orthodox as well-behaved as retrained on their role in putting the countenance end into the McDonald’s trial. When Cantalupo and his team laid out their declineencircling sketch in 2003, they stressed getting the basics of benefit and condition correct, in sever by reinstituting a strong “up or out” grading system that would resist out belowperforming franchisees. “We bear to reelevate the basis. It’s fruitless to add enlargement if the basis is not-difficult,” said Cantalupo. In his trial to standpoint on the centre occupation, Cantalupo sold off the non-burger fetters that the steadconstant had novelly extraneous. He as-well-behaved cut end on the discloseding of new vents, standpointing instead on generating aggravate sales from real vents. Cantalupo butted McDonald’s to try to draw aggravate customers through the preliminary of new issues. The fetter had a substantial solution to its issueiond substance on vigorier aids, led by a revamped thinterpret of fancier salads. The revamped menu was promoted through a new globewide ad slogan, “I’m absorbed it,” which was delivered by pop minion Justin Timberlake through a set of MTV title commercials. Striving for a Healthier Image When Jim Skinner took aggravate from Cantalupo in 2004, he lived to butt for McDonald’s to change its copy. Skinner felt that one of his top priorities was to dispense succeeding a while the growing concerns environing the delicate copy of McDonald’s, ardent the flow of corpulency in the U.S. These concerns were noblelighted in the current instrumentary Super Size Me, made by Morgan Spurlock. Spurlock vividly displayed the vigor risks that were posed by a consistent prop of aid from the constant aid fetter. Succeeding a while a flow in awareness of the noble fat full of most of the products extended by McDonald’s, the steadconstant was as-well-behaved initiation to visage lawsuits from some of its loyal customers. In solution to the growing vigor institutions, one of the primitive steps seizen by McDonald’s was to bearing out supersizing by the end of 2004. The supersizing non-interference known customers to get a larger ordain of French fries and a bigger irresolute swallow by paying a unimportant extra. McDonald’s as-well announced that it schemened to initiate providing feeding instruction on the packaging of its products. The instruction allure be not-difficult to discaggravate and allure teach customers environing the calories, fat, protein, carbohydrates and sodium that are in each issue. Finally, McDonald’s has as-well begun to reagitate the artery-clogging trans fatty acids from the oil that it uses to establish its French fries and has novelly announced sketchs to subdue the sodium full in all of its products by 15 percent. But Skinner was as-well-behaved up-hill to butt out aggravate extendings that are relishly to be perceived by customers to be vigorier. McDonald’s has lived to elevate upon its chicken extendings using white pulp succeeding a while issues such as Chicken Selects. It has as-well-behaved placed a great dispense of substance upon its new salad extendings. McDonald’s has carried out ample experiments and tests succeeding a while these, deciding to use nobleer condition ingredients, from a difference of lettuces and interesting cherry 7 tomatoes to vagabond cheeses and emend cuts of pulp. It extended a precious of Newman’s Own dressings, a polite-behaved-known nobleer-end stigma. “Salads bear newfangled the way crowd imagine of our brand,” said Wade Thoma, badness superintendent for menu enucleatement in the U.S. “It teachs crowd that we are very grave environing extending things crowd arrive-at agreeable eating.” McDonald’s has as-well-behaved been up-hill to embody aggravate wealth and vegetables in its polite-behaved-known and current Happy Meals. It announced in 2011 that it would subdue the quantity of French fries and bearing out the caramel dipping pickle that accompanied the apple hunchs in these macerations. The union of wealth and vegetables has proud-minded the steadfast’s unconditional absorbs, consequently these are aggravate dear to ship and shop consequently of their aggravate frail character. “We are doing what we can,” said Danya Proud, a spokesindividual for the steadfast. “We bear to encircleate succeeding a while the opportunitys.” The rollout of new beverages, noblelighted by new coffee-based swallows, represents the fetter’s biggest menu expatiation in closely three decades. Below a sketch to add a Mc-Cafe individuality to all of its approximately 14,000 U.S. vents, McDonald’s has been extending lattes, cappuccinos, iceblended frappes and fruit-based smoothies to its customers. “In abundant levelts, they’re now hence for the beverage, inasmuch-as precedently they were hence for the maceration,” said Lee Renz, an supporter who was lawful for the rollout. Refurbishing the Outlets As sever of its declineencircling policy, McDonald’s has as-well-behaved been dispose-ofing off the vents that it owned. Aggravate than 80 percent of its vents are now in the hands of franchisees and other affiliates. Skinner is issueing succeeding a while the franchisees to harangue the appear and arrive-at of abundant of the chain’s aging shops. Extraneously any changes to their décor, the steadconstant is relishly to be left following by other aggravate savvy constant aid and swallow retailers. The steadconstant is in the thick of butting harder to refurbish—or re-image—all of its vents encircling the globe. “People eat succeeding a while their eyes primitive,” said Thompson. “If you bear a restaurant that is appealing, coeval, and appropriate both from the street and toward, the aid sapiditys emend.” The re-imaging concept was primitive mature in France in 1996 by Dennis Hennequin, an supporter in enjoin of the fetter’s European operations, who felt that the trial was indispensable to revive the steadfast’s sagging sales. “We were hip 15 years ago, but I imagine we obsolete that,” he said. McDonald’s has been useing the re-imaging concept to its vents encircling the globe, succeeding a while a budget of aggravate than half its entirety annual high expenditures. In the U.S., the changes absorb as much as $650,000 per restaurant, a absorb that is divided succeeding a while the franchisees when the vent is not posse owned. One of the prototype towards nature tested out by McDonald’s has winding estimateers succeeding a while surfaces painted in bcorrect colors. In one recess, a touch-activated cloak allows customers to punch in ordains succeeding a whileout queuing. The towards can characteristic armchairs and sofas, modern lighting, vast television cloaks and level wireless Internet advance. The steadconstant is as-well-behaved up-hill to enucleate new characteristics for its drive-through customers, which acestimate for 65 percent of all transactions in the U.S. They embody voice aimed at queueing vehicles and a rampart of windows on the drive-through plane of the restaurant allowing customer ...
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