Overview

McDonald’s is one of the largest fast food companies with its brand known worldwide. McDonald’s has shown a remarkable ability of scale and scope expansion in all its operations and adaptability capacity so as to meet the ever changing consumer needs. Currently, MacDonald’s is facing a problem in the company’s growth, which is slowly ebbing due to stiff competition both at home and also internationally. This is evidence from weak sales, which have been realized by the company and earning results. 

One of the main triggers of the problem that McDonald is facing is the global economy, which is very weak like in some countries like Australia. The biggest challenge that McDonald’s is facing is the growing competition in the fast food industry and the McDonald’s market saturation. In countries like Japan, McDonalds is facing very strong competition from the Mos Burger; in China, it is faced by Kentucky Fried Kitchen (KFC) among other fast food companies. The growth rate of the revenues of McDonald’s for the last five years has been rated at 7.5%, which is relatively very small as compares to the growth of the industry, which is at 13.6%.

The competitive lead by McDonald’s came to be under pressure after the appearance of many fast food outlets, which have copied the blazing ideas of McDonalds, and came up with their own new ideas. This has made the fast food industry and market to be very crowded with companies being forced to adapt new ideas, which can make them stay in the market. The scale of advantage of McDonald’s has been highly associated with menu, which is standardized with very little localization and which fared very well as it catered fully for the world market’s highly globalized segment. 

With market saturation, it becomes very hard for McDonald’s to attain a double-digit growth since there is a lack of opportunities for potential growth. With the increase in the number of competitors, the revenues and sales of McDonalds have been on the decline over the years as some of the traditional rivals to McDonald’s  like Taco Bell, Wendy’s and Burger Kings tried to increase their revenues and sales. Chili’s and Olive Garden became potential competitors to McDonald’s in the quick service field where they managed to capture some of the customers of McDonald’s as the company had concentrated so much on the fast food field and it ended up not doing enough in the dinner menus section so as to be able to accommodate families that are desiring to get an upscale dining experience.

Recommendation #1

McDonald’s should seek to increase the competition gap through the use of modern technology, which can help in the coming up with new innovations and can add greater value to the products and services of the company, enhance and improve the in-house experience and make the visiting process to McDonald’s controlled and less routine. McDonald’s should adapt and take advantage of new technologies so that they can be able to streamline all their processes, and also improve their efficiency of their services. The use of technology implementations like improved network, Help Desk Service and application consolidation can improve the operations of the company, which can in turn give McDonald’s the ability to have a sustained competitive advantage over the close competitors. For example, the company can introduce a service like a touch order, which can allow a customer to be able to place his/her order just through using a mobile phone. This can make customers be at ease as they can place their orders when they are still relaxing on their tables by just using their mobile phones; moreover, they can pay using a cashless payment system showing that customers do not have to carry cash money around all the time.

Justification

The recent adaption of new technologies has resulted to improvement in the processes of delivering products to customers, which have created a competitive advantage for the company. This occurs because these technologies can encourage anonymity customer feedback through the installation of a feedback system, a cashless system, and a Touch Order system. The implementation of technology can be very useful in the company as it can improve the supply chain system and can allow customers to access all the information they need in order to make decisions, which are based on the information they get about the type of food that they want to eat.

Implementation

McDonald’s cash position means that it can be able to implement new technologies to be used in the company. Due to high employee turnover in the company, it shows that the company spent more money on the training of the employees. The implementation of new technology calls for employing or training of employees so that they can be able to operate technologies.  McDonald’s should be able to acquire new technology without any difficulties. I would recommend that it pursue an adoption of new technologies, and it could also implement a total of three strategies: customer value, customer convenience and optimal operations. The company should also focus more on the identification of new market segments as there are no limitations to business expansion, and the company cannot also be able to survive in the highly competitive fast food industry without any promotion or growth.

 

Recommendation #2

McDonald’s should try to expand to the semi global segment, which is a market where consumers often show a mix of local and global preferences. In fact, the local segment is a market where consumers have a choice to retain and maintain their local preferences. This penetration into these segments is not an easy task as these markets are not so large, and they can be very costly when it comes to the operating expenses, which are required so as to be able to tap into them. For McDonald’s to be able to penetrate these market segments, the company would require qualified and efficient staff as the quality of a service or product is determined by employees of a company, and how well motivated they are towards increasing their output levels. I would recommend that McDonald’s raise wages of its employees.

Justification

The recent saturation and overcrowding of the market calls McDonald’s to try and put in strategies to enable the company to reach out to other two world economy segments, which necessitate the need for a menu, which is more localized and which can erode the scale of advantage of the company as it would pit it against the local competitors. With McDonald’s offering better wages than any of competing companies would give the company a competitive advantage as it would retain the best employees who would deliver their services with professionalism in the company as they would be highly motivated. Raising the wage rate is one of the best strategies to respond to the increasing competitive pressures in the company. This would make it extremely difficult for the smaller restaurants and chains to retain and attract top employees who are highly talented. McDonald’s would, in turn, have a very large pool of applicants for jobs of which only few jobs will be available as many of the tasks in the company will be automated showing that the company will only have to employ the services of few talented employees. Increasing wages would make services being offered to consumers to be better, which would increase the sales and revenue of the company.

Implementation

In order to crush the competition being faced by McDonald’s, the company should try and consider making a better compensation plan for employees as employees are the reason behind the profitability of any company. McDonald’s should increase wages of workers to about $15 as a part of the implementation plan to the recommendations. Since McDonald’s would have a line of staff who are stable and also efficient enough as compared to competitors. Employees would be motivated to work hence they would increase their output levels and sales and revenue of the company would increase at a very fast rate. 

With so doing, it would be very hard for small upcoming companies and fast food chains to retain and attract skilled and top talent employees, which would give McDonald’s an opportunity to get better employees, and, consequently, competitors will not be able to level up with wages being paid to workers. Accordingly, higher wages would lead to an improvement in services and products of the company. If other competing firms try to increase wages for their employees, they would be forced to increase prices of their products and services so as to be able to cover up new wages.

In conclusion, McDonald’s being the market leader in the fast food industry and mostly the concept of the Quick Service Restaurant has to respond to the ever changing business environment. New products, which can be made through continuous innovative ideas through the use of advanced technology, could enable the company to expand its services to other segments of the world market. Therefore, it would further raise revenues and sales of the company as compared to close competitors by giving the company an opportunity to be the leader in the highly competitive market place.

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