This action might not be possible to undo. Are you sure you want to continue?
What is strategy?
Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. In other words, strategy is about: Where is the business trying to get to in the long-term (direction?) Which markets should a business compete in and what kinds of activities are involved in such markets? (Markets; scope) How can the business perform better than the competition in those markets? (Advantage) What resources (skills, assets, finance, relationships, technical competence, and facilities) are required in order to be able to compete? (Resources) What external, environmental factors affect the businesses' ability to compete? (Environment) What are the values and expectations of those who have power in and around the business? (Stakeholders) Strategy formulation as part of a strategic management process that comprises three phases: Diagnosis, Formulation Implementation.
Strategic management is an ongoing process to develop and revise future-oriented strategies that allow an organization to achieve its objectives, considering its capabilities, constraints, and the environment in which it operates.
Strategy Formulation is the stage of strategic management that involves planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan.
In other words it include Long term vision While maintaining flexibility Adopting to change
STEPS IN STRATEGIC FORMULATION:
The formulation of strategy may be seen as having six important steps: 1. The company or organization must first choose the business or businesses in which it wishes to engage. in other words, the corporate strategy.
2. The company should then articulate a "mission statement" consistent with its business definition. 3. The company must develop strategic objectives or goals and set performance objectives (e.g., at least 15 percent sales growth each year). 4. Based on its overall objectives and an analysis of both internal and external factors, the company must create a specific business or competitive strategy that will fulfill its corporate goals (e.g., pursuing a market niche strategy, being a lowcost, high-volume producer). 5. The company then implements the business strategy by taking specific steps (e.g., lowering prices, forging partnerships, entering new distribution channels). 6. Finally, the company needs to review its strategy's effectiveness, measure its own performance, and possibly change its strategy by repeating some or all of the above steps.
Content of strategy formulation:
First we suggest setting some principles, this allows for a healthy discussion around authenticity, transparency and humility as well as the defining the engagement policy with the client. Next we get into the 'Why', clarifying objectives, linking them with appropriate metrics and if possible setting targets.’ What' comes next covering stage 3 Substance and stage 4 Sources Substance focuses the mind on what topics, subjects and point of views the brand wants to have as well as considering the type of social currency value entertainment, useful, monetary, information or personal value. Sources look at who is going to be creating or producing this content, from employees to agencies to crowdsourcing. Next we get into the 'How', who's going to be managing the content, which social and digital channels will the content be going out thru, which formats are most appropriate and a schedule over an agreed time period.
Lastly, with active listening in place we are able to constantly review the conversational effect of our content against our objectives and the brand will be able to respond in accordance with their engagement policy.
THREE ASPECTS OF STRATEGY FORMULATION:
The following three aspects or levels of strategy formulation, each with a different focus, need to be dealt with in the formulation phase of strategic management. The three sets of recommendations must be internally consistent and fit together in a mutually supportive manner that forms an integrated hierarchy of strategy, in the order given. Corporate level strategy It includes the corporations like joint ventures and mergers. Business level strategy E.g. textile, chemical, auto parts etc. Functional level strategy
Include different department e.g.finance, HRM, R&D, marketing, etc.
Corporate level strategy:
Corporate level strategy fundamentally is concerned with selection of businesses in which your company should compete and with development and coordination of that portfolio of businesses. Corporate level strategy is concerned with:
Reach: defining the issues that are corporate responsibilities. These might include
identifying the overall vision, mission, and goals of the corporation, the type of will be integrated and managed.
business your corporation should be involved, and the way in which businesses
Competitive Contact: defining where in your corporation competition is to be localized.
Corporate-Lev What business
Managing Activities and Business Interrelationships: corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities.
Management Practices: corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through autonomous government (decentralization).
Types of corporate level strategies:
It includes: Growth strategy Related diversification Unrelated diversification Merger & acquisition Joint venture, etc. Stability strategy Retrenchment strategy Combination strategy
Business Level Strategy
An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets In selecting a business-level strategy, the firm determines who it will serve what needs those target customers have that it will satisfy how those needs will be satisfied At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of resources among functional areas and coordination between them for achievement of corporate level objectives. These strategies operate within the overall organizational strategies i.e. within the broad constraints and policies and long term objectives set by the corporate strategy.
Types of business level strategies:
Cost leadership strategy Differentiation strategies Diversification strategies 6
Functional Level Strategy
The functional level of your organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to functional business processes and value chain. Functional level strategies in R&D, operations, manufacturing, marketing, finance, and human resources involve the development and coordination of resources through which business unit level strategies can be executed effectively and efficiently. Functional strategy deals with a relatively restricted plan providing objectives for specific function, allocation of resources among different operations within the functional area and coordination between them for achievement of SBU and corporate level objectives.Sometimes a fourth level of strategy also exists. This level is known as the operating level. It comes below the functional level strategy and involves actions relating to various sub functions of the major function. For example, the functional level strategy of marketing function is divided into operating levels such as marketing research, sales promotion, etc. The three levels of strategies have different characteristics as shown below; Dimensions Impact Risk Involved Profit potential Time Horizon Flexibility Adaptability Corporate Significant High High Long High Insignificant Levels Business Major Medium Medium Medium Medium Medium
Functional Insignificant Low Low Low Low Significant
INTRODUCTION OF MCDONALD:
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving more than 58 million customers daily.The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald in 1963. The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Japan, the Netherlans, Germany, Australia, France, El Salvador and Sweden in order of openings. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955  , the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965 Kroc was also noted for aggressive business practices, compelling
the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility
STRATEGY FORMULATION OF McDonald:
McDonald formulate their strategy on the basis of
Strategy (how do we get there)
Objectives (Where do we want to go?)
STEPTS IN STRATEGY FORMULATION OF MCDONALD:
These steps involve in strategy formulation: Developing vision and mission Identification or external opportunity and threats Determining internal strength and weakness Establishing long term objectives Generating alternative strategies Choosing particular strategies to pursue
ASPECT OF STRATEGY FORMULATION OF MCDONALD:
McDonald used Corporate level strategies Business level strategies Societal level strategies
World wide growth strategies
CORPORATE LEVEL STRATEGIES: a) Growth strategy of McDonald
icControl (6) Control (6) ic
Form For --Devel Deve -S -
In corporate level strategies McDonald use the growth strategy. McDonald’s
grown-up thinking about design is part of its "Plan to Win" growth strategy, initiated in 2003 when executives realized their core markets had gorged on expansion. The Golden Arches increasingly looked like a corporate shrug, and its stock price dipped below $13 a three pillars are share. Since that nadir, the Plan to win has helped drive the stock up 437%. The strategy's
Stra Str Exte
menu innovation, store renovation An upgrade of the ordering experience. McDonald's efficiency and its continued expansion of premium menu items snack wraps! Sweet tea! Frappes! Has helped boost the average annual store gross by 25% over the past six years to around $2 million. McDonald's execs say, depends on design. "People eat with their eyes first," says president and COO Don Thompson. "If you have a restaurant that is appealing, contemporary, and relevant both from the street and interior, the food tastes better."Mc Donald’s is horizontally integrating itself by increasing the number of outlets. At current timing there are nine outlets operating only at Lahore and they have Twenty one outlets in all over Pakistan. They are also planning firstly to go into the Metro Areas like Islamabad and Rawalpindi and then they will look toward Mutant.
b) WORLDWIDE GROWTH STRATEGY
McDonald is operating more than 121 countries which mean it is following global diversification strategy. McDonald's world wide growth strategy is based on three elements; Adding restaurants, Maximizing sales and profits at existing restaurant Improving international profitability. Maximizing sales and profits at existing restaurants will be accomplished through better operations, reinvestment, product development and refinement, effective marketing and lower development and operating costs. Improved international profitability will be realized as economies of scale are achieved in individual markets and as the company benefits from the global infrastructure.
c) Retrenchment strategy:
McDonald also uses the retrenchment strategy for growth in corporate level. For example, in its retrenchment, McDonald's reduced complexity in its operations, in part by simplifying the menu. Any new item had to meet the company's stringent test-kitchen demands for being simple to prepare consistently. It repositioned its brand, refined its pricing strategy and pulled the market segmentation lever, making sure it was targeting young adults and moms with kids.
BUSINESS LEVEL STRATEGY
Customers are the foundation of successful business-level strategies and Levels should never be taken for granted. When selecting a business-level strategy determines: Who will be served? What needs those target customers have that it will satisfy? How those needs will be satisfied? McDonald’s answers to these 3 questions were: People of various ages globally, A quick, delicious, and non-expensive meal, They offer a variety of breakfast, lunch, and dinner meals, snacks, and drinks for adults and children in various places around the world. Since McDonald’s operates in 119 countries on 6 different continents they have different food selections for most, than what we see in the United States. They offer these different products because of different needs in each country, due to religion, diets, and resources of each individual country. This flexibility and knowledge allows McDonald’s to achieve global targets and compete with the other competitors. I would have to say that McDonald’s uses the Integrated Cost Leadership/ Differentiation Business-Level Strategy. McDonald’s has strategically planned to stay ahead of their competitors by providing customers with more options of healthy meals, the firm
cheaper prices, and better service. McDonald’s is competitive in many categories like price, quality, management, and employee training. From looking at the Direct Competitor Comparison for 2006-2008 I saw that McDonald’s was indeed ahead of the others in revenue by as little as 12 billion to as much as 22.15 billion. Obviously, they are doing something right, but in these times things change at such a fast pace that you have to know how to keep up or your competitors will blow you out of the water. Most people are also more inclined to follow trends to be accepted and fit in, so if your competitor comes out with a new product you better have something better in your back pocket or you
McDonald’s has “Broad Target” and it wants to achieve competitive strategy adopted by McDonald’s is “Differentiation” i.e. Mc Donald’s wants to a make its products unique and highly differentiated.
b) Cost leadership strategy of McDonald:
A leading cost strategy for McDonalds is the ability to purchase the land and buildings of its restaurants. McDonalds also developed a strong division of labor for its production processes, tight management control and product development strategy. Creating a strong top-down style of management is another leading cost strategy for McDonalds. Using fewer in-store managers allows the company to hire lower-wage workers to complete tasks. Limiting autonomy is also central to avoiding costly and unnecessary restaurant expenditures like improvements or altering business processes. These five forces influence the business level strategy of McDonald.
OPERATIONAL /FUNCTIONAL STRAEGY OF MCDONALD:
An operations strategy consists of a sequence of decisions that, over time, enables a business unit to achieve a desired operations structure, infrastructure, and set of specific capabilities in support of the competitive priorities.
Statement of McDonald’s Operations Strategy
“To provide unmatched consistency in operations in support of high product quality. This must be accomplished with adequate speed, low cost, and process innovation to accommodate changes in consumer tastes.” 14
From the statement of McDonald’s operations strategy, it is clear that both consistent and high-performance qualities are considered order winners, while speed, cost, and innovation are considered order qualifiers. Evaluation of the operations strategy: Internal and external consistency - Looking at the operations strategy along the seven dimensions, they all support the operations mission and the business strategy from the previous page. Contribution to competitive advantage - Systemic strategy creates unmatched consistency in operations that has been difficult to imitate. McDonald’s Operations Strategy
Strategy • Growth as needed through additional stores - but capacity added
carefully. Well-utilized - franchisee's well-being depends on it being used heavily • Distributed facilities, each facility being very similar to the next, all focused around the same menu - although the uniformity is beginning to change • High degree of process understanding, emphasis on "fool-proof" processes
Process Technology Vertical Integration
• A leader in the technology of fast-food delivery • Partnership arrangement • Long-term relationship with suppliers to promote innovation and
quality improvement • Franchisees: well-trained, carefully selected, entrepreneurs
• Operators: high-turnover, cheap Organization • Guidelines provided by corporation, but franchisees push to
• Centralized buying • Bulk contracts • "Push" system for basic supplies, "pull" system day-to-day in the
DATA COLLECTION METHOD:
I took data from internet, books, reports, etc.i have collected secondary data which I use as my primary data.
DATA ANALYSIS: Strengths
Good innovation and product development. It continually innovates to retain customers in the business. The McDonalds brand offers consumers choice, reasonable value and great service Globalization: 31,000 restaurants serving 120 countries. Of the 31,000 restaurants at least14,000 restaurants in the US It adapts to the cultural differences regarding the region where the restaurant is set up. It has located itself in major airports, cities, highways, tourist locations, theme parks. It has an efficient food preparation style that follows the process in a systematic way.
Core product line out of line with the trend towards healthier lifestyles for adults and children. Product line heavily focused towards hot food and burgers Seasonal
Quality issues across the franchise network.
Joint ventures with retailers (e.g. supermarkets). Consolidation of retailers likely, so better locations for franchisees. Respond to social changes - by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning. Use of CRM, database marketing to more accurately market to its consumer target groups. It could identify likely customers (based on modeling and profiles of shoppers) and prevent brand switching Strengthen its value proposition and offering, to encourage customers who visit coffee shops into McDonalds. The new “formats”, McCafe, having Wifi internet links should help in attracting segments. Also installing children’s play-parks and its focus on educating consumers about health, fitness. Continued focus on corporate social responsibility, reducing the impact on the environment and community linkages. International expansion into emerging markets of China and India.
Domestically is the lack of growth opportunities Social changes - Government, consumer groups encouraging balanced meals, 5 a day fruit and vegetables. Focus by consumers on nutrition and healthier lifestyles. Competitive pressures on the high street as new entrants offering value and greater product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.
Recession or down turn in economy may affect the retailer sales, as household budgets tighten reducing spend and number of visitors. Pressure groups - environmental.
McDonald’s faces some difficult challenges. Key to its future success will be maintaining its core strengths an unwavering focus on quality and consistency while carefully experimenting with new options. These innovative initiatives could include launching higher-end restaurants under new brands that wouldn’t be saddled with McDonald’s fast-food image. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater. The company’s environment efforts, while important, should not overshadow its marketing initiatives, which are what the company is all about.
After writing the conclusion of the company I personally recommend the managers of McDonalds to take of the politics form their employees and also treat the employees on the equal basis. The people get jobs with huge references in it. These processes of references are very common in country like Pakistan but the company needs to appoint new people on merit basis a good working environment also enhance the capabilities of the people working in an organization so mangers can work to improve those conditions in order to get good results.
http://www.mcdonalds.com http://www.wikipedia.com http://www.scribed.com
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.