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Principals in relation to the core competence of McDonalds, one of the largest food chain
companies in the world. Let us first start with the strengths and the positive aspects which
define the performance of this company. How can we define the company’s strengths?
Strength is a distinctive competence that gives the firm a comparative advantage in the
market place. For instance financial resources, image, market leadership and buyer
supplier relations etc
McDonalds is the no: 1 fast food chain stores with a 40 million customers visiting it per
day. It has over 30,000 branches in 120 countries. It derives 80% of its revenues from
eight countries like Canada, Brazil, Germany, France, Japan, UK, Australia and US. The
greatest strength was creating an image in the minds of the people and introducing them
to the fast food culture. Delivery speed, customer care and cleanliness are the core
strengths on which these stores expanded. They created a corporate symbol and their
advertisement campaigns were highly successful in establishing the brand image and logo
in the minds of the millions. Two main competitors generally identified with McDonalds
are the Burger King and the KFC. McDonalds marketing strategy is concerned with the
internal resources, external environment and its basic competencies along with its share
holders.

McDonald’s product value is also its greatest strengths. Customers know what to expect
when they walk into a McDonalds store. It gives great emphasis to human resources by
satisfying both the customer and the employees. Next is the innovation aspect wherein
new products line up to catch up with the new trends and tastes of the people. Its diversity
into other new business ventures can also be considered as its strengths.

How effective are these strengths to the company in the long run? McDonalds today is
not that amendable as it was during its inception. What are the driving factors which
results in its present decline in terms of sales and services? To analyze this factor we have
to look at the weaknesses part of the companies business and marketing strategy. What
can generally be termed as a weakness of a company? The same factors which were
considered as strengths also become a weakness if it impedes the overall performance of
the company.

Customer trends change and so does their choices. People are generally tired of the same
brands that they had been using over the years, so when they do not see the expected
innovation they migrate to new brands. Moreover people see McDonalds every where
and this over exposure might also be a reason for abstinence. Moreover maintaining the
standards of such a huge chain becomes feasible and when there is lack of quality service
in one store it effects the whole brand.
The secret of any marketing strategy is to reach the target audience. And here again the
target audience should be chosen carefully. In the case of McDonalds as projected in its
ads, the targeted audiences were the kids. Demographics and customer financial and
psychological aspects define a business concerns success. Health conscious women and
senior citizen comprise the major population but kids soon grow out to become adults.
Recent law suits and documentaries resulted in the companies recent innovation and a
major change related to health related product ranges and this switch over as per the
needs of today’s trend and needs has increased the lost popularity of McDonalds a bit.
All the above factors point out the external strengths and weaknesses. There are also
internal factors which affect the performance and overall benefits the company stands to
enjoy. Kids based marketing strategy which was earlier a weakness has changed since
2003. Now more teenagers and adults rule the McDonalds ad world. The research and
develop which lacked earlier is also looked into and the brand quality is being defined
with various research and development options today. McDonald at one stage started
concentrating on expansion and growing big that it missed out on key factors like quality
maintenance and R&D.

One major threat to any brand is its relationship between the management and the
franchise dealers. Organization strength is the back bone of any concern and when that
starts shaking the whole system will collapse. But slowing McDonald is recovering from
all these weaknesses as its brand managers can easily communicate, compare and
improve their services through the latest technological developments wherein they can
use the internet to motivate, compare and improve upon other centers performances.

The overall analysis of all the external and internal strengths and weaknesses on this
company should be linked in order to draft a sustainable plan for the companies’ further
improvement. For any improvement or expansion the internal resources must be readily
available. And thus analyzing this aspect can lead to a modified strategy to suit its vision.
Keeping in mind the available resources the planner should think globally. Hence making
use of all the core competencies the firm can definitely sustain in the competitive market.

The change in the top managerial level has creating a new wave in its performance and
major changes have been implemented to retain and sustain the brand quality and
innovation. As the new CEO rightly quotes,

“The world has changed. Our customers have changed. We have to change too."
James R. Cantaloupe, Chairman and CEO, McDonald's, 2003

Now let us analyze the sustainable competitive advantage of the company. What is
sustainable competitive advantage? How can it be related to McDonalds? SCA is the
advantage a company has which is difficult or impossible for other companies to possess
or break through. It can either be the brand, dynamic customer care, cost structure or its
patent. Whatever the advantage in order to be considered as sustainable it should either be
proprietary or distinctive. Other than this three different aspects that help in SCA are,
• The managerial and organizational process should share a good integration and
coordination. The much needed ‘value’ is created thereby as everyone strives to work for
a common goal. The organization should learn and bring about changes according to the
need of the hour and should always be flexible to changes in the environment such as
customer trends, legal or government restriction and developments in the technology.
McDonalds is presently concentrating on this advantage by concentrating on
organizational behavior and managerial expertise. Previously this advantage was ignored
as the organization was more into expansion of its outlets over the globe than
strengthening its core advantage. As the result the revenue did not see much of a change
while newer outlets were open. The company suffered a massive loss first time since their
inceptions which further lead to the change in the managerial heads.

• Technological, structural and financial assets of a company are excellent market

position which helps in the SCA. McDonalds no doubt is abundant with such aspects like
structure, technology and finance. To identify and implement these assets in the proper
direction towards the improvement of the company is all that is needed. After 2003 the
company has really started to concentrate on its greatest advantages.

• Most of all the greatest advantage is the vision or the dream with which the company
was started. Sustaining this dream over the years is any companies’ greatest advantage. A
brand usually revolves around this vision sustaining this vision and working in lieu with
it is a great SCA. McDonalds was started out to help people who had very little time to
cook or was too busy to get into a proper restaurant. The vision was to provide quick
service, cheap products and quality satisfaction. Keeping this vision in mind the company
which slackened a bit because of incompetent franchise holders is being weeded and new
and better people are put in this place as the torch bearers of the company sustaining and
living the vision.

To sum it all up SCA means implementing the best value based strategy using all the
advantages which are unique to the company and that which cannot be copied or
replicated by other competitors. The importance of this SCA can be evident by the reply
the great investment guru Warren Buffet gave when asked about how he evaluates his
investment portfolio. He simply answered ‘sustainable competitive advantage’. Hence
based on the dynamic integrated and intelligent human resources can always be the only
dependable and sustainable SCA.
Outsourcing boom or doom in today’s business environment

Today everything is outsourced from employee appointment to finance and customer

care. No organization is best enough to handle all kinds of work. Moreover concentrating
on every detail is not possible with a big concern especially like McDonalds. But great
care should be taken not to outsource the core competences of the company. General
advantages of outsourcing are cheap service, knowledge of markets offshore, flexible
resources, speedy operations, expansion in supplier relationship etc. most of all the
company can concentrate on its core competencies and outsource rest of its operation.
Recently McDonald has tested its drive through order facility. Wherein it makes sure that
the order placed with the outlet is accurate. The order taken by the outsourced company is
reverted back to the home restaurant. These call center has a digital camera which clicks
the vehicle you drive through and the delivery man back home can integrate the order and
the person who placed it using the image of the car. Outsourcing thus helps in the
increase of the external suppliers and fills up the difficulties faced because of the lack of
the latest technologies and other innovations.

What started of as a success story with McDonalds had to face a number of risks,
competitions and major set backs. What makes it still strong and ranked among the top
business concerns is its core competences and the sustainable competitive advantages
both internal and external. Of course keeping up with the changing times the company
has also set foot in outsourcing but the point to keep in mind here is not to be driven
away by this outsourcing mania. This company has started to revert back to its golden
glory recently because of large scale revamping of its organizational and structural
changes being implemented.

Conclusion:

No particular competitive strategy is guaranteed to achieve success at all times. Risk

attitudes can change and vary by industry volatility and environmental uncertainty and
several internal conditions also might be involved. Thus the “four P’s” of marketing
(product, price, place and promotion) provide a good starting point for consideration of
the requirements of strategy implementation in the marketing function. The mix of these
marketing elements should be appropriate and the plans for each of the elements should
also be appropriate.

The marketing function is consumer oriented and hence marketing decisions are based on
the careful identification of consumer needs and on the design of marketing strategies to
meet those needs. The distribution system brings the product or service to the place where
in can best fill customer needs. Access to distribution can mean all the differences
between success and failure for a new product. Because many products require support
from distribution channels in the form of prompt service, rapid order processing etc the
choice of distributors, wholesalers and jobbers is extremely important.

Promotion is more than advertising. The location, size and nature of markets which the
business strategy defines will guide promotion mix decisions and should indicate the
content of promotional material as well. Pricing is a complex issue because it is related to
cost, volume, trade offs etc and because it is frequently used as a competitive weapon.
Pricing policy changes are likely to provoke competitor response. Using price to jockey
for position can lead to price wars, which usually hurt all participant