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Q.1 what opportunities and threats did McDonald’s face? How did it
handle them? What alternatives could it have chosen?
Soln.:-
OPPORTUNITIES
As McDonald’s was the first food retail chain which started in 1955. At that
time there was no other food retail chain. McDonalds established the brand at
that time to get recognition in the market and started the organized food retail
chain.
The opportunities for expansion are great. For example, in China, with a
population of 1.2 billion people, there are only 62 McDonald’s restaurants. It has
been realised that 99 per cent of the world population is not yet McDonald’s
customers.
As McDonald’s has already made a good impression on the minds of the people
there is a good scope for introducing new food items in order to have some
variation in the food item. They have the ability to add healthier lines of food.
They have already gotten rid of super sizing and I think they have made their
fries healthier.
4) Low competition-
When McDonalds was entered in the market there was very low competition.
There were few players in the market like Burger king, Wendy’s Kentucky fried
chicken etc. This didn’t have the better quality as compared to McDonalds. It
helped the McDonalds to attract the customers and established brand loyalty.
THREATS
3) Follow the local laws- - McDonald’s had a very good and pre-planned
strategy to enter in the market. They got very good market in US and
wanted to expand their business, so they made plan according to the local
law of that area, because if they didn’t follow the local law it would hurt
the sentiments the people.
McDonald’s created the retail chain and brand for its product, as that time
there was no strong brand was present in the market.
McDonald’s rightly analyzed that food market was very big for its
product and has lots of potential,
McDonald’s introduced the new product and charged very reasonable
price for it.
As that time, competition was very low. It was the very big opportunity
for the McDonald’s to create the brand and easily attaining the customers
attention and loyalty.
Soln.:- It is true that European market has a huge scope of fast food because
there was no any branded fast food chain available in Europe. European
people have different food behavior and think that they can easily follow such
change. McDonald’s prepared foods accordance with the local laws. It have
different price rate of materials according to their people behaviors as well as
there make different menu according to the dining habits.
For example- The prices vary considerably around the world ranging from
$5.20 in Switzerland to $1.05 in China for the Big Mac that costs in the United
States $2.32. The Economist magazine even devised a ‘Big Mac Index’ to estimate
whether a currency is over or undervalued. Thus, the $1.05 Chinese Mac translates
into an Implied Purchasing Power Parity of $3.88.
McDonald’s introduced the Japanese to French fries, potatoes were
used in Japan only to make starch.
Soln:- McDonald’s have a very great strategy and philosophy. The main
philosophy of its success is to cover mainly four golden arches- quality, service,
cleanliness and values........
Quality- McDonald’s concentrated on quality of product. Better the quality
better will be the selling, and ultimately increase the profit.
Service- The main power of McDonald’s is provide better service to the
customer. They make good service for customer and keep in mind to become
the best service provider.
Cleanliness- McDonald’s sell product in an healthy environment so that they
give force on cleanliness.
Values- The value of the customer is important and well known by each and
every worker as well as to the managements.
Its products, handling and cooking procedures and kitchen layouts are
standardized and strictly controlled. McDonald’s revoked the first French
franchises because the franchise failed to meet its standards for fast service and
cleanliness, even though their restaurants were highly profitable. This may have
delayed its expansion in France.
Q.4 Should McDonald’s expand its menu? If you say no, then why
not? If you say yes, what kinds of products should it add?
Soln:- McDonald’s should expand its menu. The reason behind it is that, as of
now, it is facing a fierce competition from many companies like Burger king,
Wendy’s Kentucky fried chicken, pizza hut etc. In ordered to have an edge over
others, there is need to introduce variety in eatables and some additions could be
made in terms of products which have not been introduced by any of the
competitive firms.
Some of these products that should be added to the company are-
PIZZA
MOMOS
NOODLES
SEA FOOD
HOT DOGS
ICE CREAM
MOCKTAILS/BEVERAGES
Soln.:– Ray Kroc opened the first McDonald’s restaurant in 1955 with its
QSCV (Quality, Service, Cleanliness and Value) model which was a hit. By
1983 it had 6000 restaurants in US and by 1985 it reached on its 18000
restaurant in 89 countries. The success McDonald’s achieved in this span was
tremendous. Following has some points that was behind this outstanding
success of McDonald’s -
1. McDonald’s was the first one in organized food retail chain . It had no
competition in the beginning , that helped in creating its brand image in
the mind of people.
11.McDonald’s time to time adapted the new items in its menu but never
disrupted existing operations. Hence it shows that McDonald’s
introduced new items in the market carefully.
METHODOLOGY
to its Far Eastern operations, where many restaurants are joint ventures
with local entrepreneurs, who own 50 percent or more of the restaurant.
European and South American restaurants are generally company-
operated or franchised (although there are many affiliates—joint ventures
—in France).
Every day, more than 33 million people eat at McDonald’s around the
world with 18 million of them in the United States.
For the Big Mac, The prices vary considerably around the world –
Switzerland $5.20, China 1.05, US $2.32 , Britain, $2.80, Denmark
$4.92, France $3.85, Germany $3.48, Hong Kong $1.23, Japan $4.65 and
Russia $1.62.
1) Internal Factors
QSC&V strategy
Employee satisfaction
Training managers
2) External Factors
Local laws of countries
Traditional menus
Advertising
Population
Franchisees
SWOT analysis
Strengths
The advertising campaigns are based on local themes and reflect the
different environments
Like the U.S. franchises, restaurants abroad are allowed to experiment with
their menus.
McDonald’s has done very well with a great percentage of profits coming
now from international operations.
Weaknesses
In Moscow, McDonald’s entered the market with a bang but they were
unable to handle the customer effectively..
According to Big Mac Index, McDonald’s was unable to set the price
according to purchasing power parity of the countries.
Less number of retail outlets in 1995.
Opportunities
Yet fast food has barely touched many cultures. The opportunities for
expanding the market are great when one realizes that 99 percent of the
world population is not yet McDonald’s customers. For example, in China,
with a population of 1.2 billion people, there are only 62 McDonald’s
restaurants (1995). McDonald’s vision is to be the major player in food
services around the world.
Any new venture is risky and can be either a very profitable addition or a
costly experiment.
Threats
Franchisee
Consciousness among people about their health-
Follow the local laws-
People dining behaviour
Threat of Substitutes
Threat of New Entrants
Operative decisions:-
Well planned
Good advertising
Work according to local laws
Traditional menu
Making family restaurant
Employee satisfaction
Customer satisfaction
Bringing new items & taking initiatives
Strategic decision:-
QSC&V
Pricing
Different age section concentration
Family restaurant
Making good brand image
Recommendation:-
McDonald’s should provide 24 hour service.
New food items should be introduced.
More kids can be attracted with the help of more toys in the form of
happy meal.
Some new stores should be opened for the convenience of the customers.