Strategic Audit Assignment Sample

Part - 1 Introduction To Strategic Audit Report

This report is going to analyse the business of the McDonald’s along with different factors. McDonald’s is world’s largest US-based fast food business which operates in numerous countries and offers their products. The restaurant was established in year 1954 by one man d Ray Kroc (McDonald's, 2024). He introduced a small burger store in the California and now the company runs almost 36,000 restaurants in over 100 countries. The head office of the McDonald’s is situated in the Chicago in West Loop. This area is most famous In US and has award-winning restaurants, corporate offices and residential living. From last 65 years, the company has served lots of fries and burgers to the customers and fulfil their wishes. McDonalds is a private limited corporation with a significant portion of its shareholders. It is the second largest private employer who provides numerous employment opportunities to the people. The CEO, Director and President of the McDonald’s are Christopher J. Kempczinski who is highly proficient, talented and knowledgeable. The company also has excellent management team including vice president, senior executives, corporate controller, accounting officers, marketing officers and many more (Morning Star, 2024).

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The restaurant has adopted the franchise business model and generates income through franchising their fast food business and renting assets to franchisee usually at remarkable mark-ups. McDonald’s easily attracts the franchisees by their good brand value and profitability. Like other organisations, globalisation has also impacted the business operations. Because of globalisation, they went from being a USA’s local fast food outlet to international fast food company. The company became capable enough to start its business operations in other countries worldwide without any difficulties and it allows them to generate higher revenue. Since, its foundation in 1954, the restaurant has effectively and successfully operates lot of restaurants and become favourite brand of people (Han, 2023). MAIN BODY

Industry and competitors

McDonald’s is operating under the fast food industry worldwide. Fast food sector consist and liable for prepared food products often from restaurants, food trucks, street vendors and stores. They serve food items quickly and at affordable prices to the consumers in take-out and disposable container. Most fast food firms work with the low preparation time as well as precooked food in order to minimise the transaction time and price. The market of fast food began in year 1920 and has been quickly developing with top fast food chains like McDonalds, KFC, Wendy’s, White Castle, Burger King and many more (Market Research, 2024). Burger King and Wendy’s are top two competitors that give strong competition to the McDonald’s and put high pressure on the company. There are several macro-environmental factors like inflation, GDP, Goods and Services Tax, consumer spending, employment rates that impact the business operations in high manner. For example – all countries have own rules and regulations regarding tax and McDonald’s has to pay GST accordingly otherwise they can encounter problems.

Strengths and weaknesses

One of the key strength of the McDonald’s is that it is international fast food chain which has high popularity in the world. The company follows franchise model which in result in result, the firm has significant global impression. The market share of this restaurant was 25.24% in first quarter in April 2023 and it reached at 25.49% at the end of second quarter (Singer, 2024). McDonald’s French fries is largest-selling food product around the world and sells approximately 9 million pounds each day only from French fries. The company face the fierce rivalry and opponents use the excellent marketing activities and offer delicious and better quality food. The meals of this restaurant are still imbalanced, which is the greatest weaknesses but the company also make full efforts to meet the nutritional guidelines.

Macro environment analysis

The macro-environment analysis of the McDonald’s in detail is described given below:

Political forces

The government of the different countries have eyes on fast food companies because of safety and protection of people. The political relationship among countries can affect the business operations of the company. McDonalds closed their business operations in Russia because of war between Russia and Ukraine. Iran also has banned the restaurant in their country because of its unfavourable political relationship with the USA. The trade policies, taxation rules as well as foreign investment regulations about fast food highly affect the business activities. Most of the countries in which McDonalds operate have strict rules, which are not easy for the restaurant to adhere to, therefore, it created barriers for the business (edrawmax, 2024). The political stability in many countries is favourable condition for McDonald’s and provides many benefits to business. The restaurant uses it as an opportunity and operates their business efficiently in those countries.

Economic forces

McDonald’s is a US-based fast food company and its customers are worldwide. Thus, there success is not reliant on USA’s economic condition but also depends on other counties in which they operate. After recession of 2008, the company obtained a setback during the Covid-19 pandemic. Like other business sectors, the fast food industry had to slow down because of lack of customers coming in restaurants in lockdown. The global sales of the McDonald are reduced by 22% in pandemic. As safety of customers, the company also had to work with limited workers which reduce their production (Strategy Story, 2024). McDonald’s is second largest employer who provides lot of job opportunities to the potential people. The turnover rate is also high for the company and they recruit and lose workers on regular basis.

Social forces

From last few years, people are focusing highly on their health and number of people who are health-conscious is increasing. Thus, they avoid the oily, sugary and unhealthy food products. McDonald’s sales fast food items like burgers and cannot keep up with healthy food demand. Though, the restaurant has introduced the protein smoothies and low-sugar drinks. As global company, McDonald’s has thought about the palette of customer they serve. The food items like burgers, fries and cold drinks are not demand in high manner in those countries that has local famous cuisine (Makos, 2024). The restaurant has included special food items to generate revenue in countries such as; Japan, Canada etc. But, special food items costs are quite high and it may leave the business with less profit.

Technological forces

McDonald’s invests in technology and has adopted the automation to improve effectiveness of the business. The company has applied the digital technologies to decrease the labour costs and improve the customer service. For example – automated equipment of cooking, AI for inventory management and self-ordering kiosks. With the growth of online food delivery platforms, the restaurant also invests in online food delivery to cater to demand. The firm already has powerful brand image at global level. The company uses the various social media platforms for marketing and advertisement. They make attractive campaigns and posts to grab the attention of the people. McDonald’s is highly active on Facebook, Instagram, and YouTube etc. The food business is highly responsible for increasing waste and it is crucial for the firm to use technology to reduce waste. Advance data analytics can be useful for the company to understand consumer’s habits and needs and latest market trends in better way. It will allow firm to make informed and data-driven decisions and develop menu, advertising and marketing strategies accordingly.

Threats and opportunities

The restaurant is currently operating in extremely competitive markets with several top fast food companies band each firm is striving to achieve higher market share. Burger King is major opponent of the McDonald’s which also operates in all over the world. It also offers a same menu including fries, soft drinks and burgers. The one of the main changes in demands is shift towards organic and healthier products (Pereira, 2023). High inflation rates and economic downturn are major threats which can result in decreased consumer spending that can negatively impact the sales and revenue of business.

New and advance technologies and new working methods create many opportunities for the McDonald’s. Increasing disposable income and developing cities as well as growing demand for fast food have provided many growth opportunities to the restaurant. McDonald’s can expand their business in other countries where they are not currently operating. Pressure by the government and customers is experienced by fast food restaurants to reduce carbon emission and maximising the sustainable practices. The firm can invest in green technology which will not only help to protect the environment but also help to use cost effective solutions and increase chances of success (Gupta, 2024).

Industry analysis

The analysis of the industry in which McDonald's is operating can be analysed by using different factors and tools.

Strategic groups and competitors

McDonald's utilises the strategic group analysis in their competitive strategy. It facilitates the company to identify their direct competitors and know their strategies. It allows the organisation to position itself proficiently within the market and differentiate its products. McDonald's has adopted ‘think global, act local’ who helps to make strong global presence and reduce the weaknesses (Karle, Peitz and Reisinger, 2020). McDonald's operates under the food and beverage sector and there are many strategic groups in the sector. It includes fast-food restaurant chains, family restaurants, cafes and fine-dining restaurants and many others. There are many companies such as; Subway, Burger King, Pizza Hut, Dunkin’s Donuts and many more give tough competition to the McDonald's.

Porter’s five forces

Competitive rivalry – The impact of competitive rivalry is moderate to high for the McDonald's. For example – although, the company holds a high market share in the global market of burger segment, the marketplace is dominated by the small and medium fast food firms in all over the world. There are many top companies like KFC, Burger King, Subway and Wendy’s are top companies that give stiff competition to the company. It becomes easy for the consumers to choose other options over McDonald's. Also, McDonald's mainly focuses on vegetarian food, therefore, consumers often choose KFC for non-vegetarian food (Panmore Institute, 2024).

Threat of new entrants –Setting up new restaurants needs comparatively low capital as well as no existing consumer base. Also, with the leasing premises options, the cost of setting new firm in the fast food industry becomes lower. Furthermore, saturation in the sector is very high, though it has dominant tendencies in which few companies dominate the marketplace. In spite of the easy market entry, it is not easy for the new companies to compete with already top and well-established firms (Dudovskiy, 2022).

Threat of substitution – The substitution threat is very high within the fast food sector. For instance – many people want to made and eat food from their homes because of comfort and also there is marginal differentiation among food and beverages offered in the various fast-food companies. Additionally, since there are no switching cost for the target audience so the threat from substitutes can said to be high. Small restaurants are also providing the online food delivery services which also grab the attention of the customers. People also choose these local restaurants because they are more accessible which can create problems for McDonald’s.

Customer’s bargaining power – The influence of the bargaining power of the consumer is moderate for the McDonald's. The company is increasingly marketing differentiated food products like ‘Big Mac’ in the market. Though, there are several substitutes in the market and no switching costs, market leaders like McDonald's position procedure of food products in the dominant market. On the other hand, growth in people’s disposable income and transformations in lifestyle that pushes the consumer towards expensive and healthy food products influence the fast-food sales (Cenamor, 2021).

Supplier’s bargaining power – McDonald's acquire most of the raw materials and ingredients from the suppliers and has a strong partnership with most suppliers, therefore allowing it to have control over suppliers. It closely measures the quality as well as services offered by the suppliers in order to uphold the standard of finish products offered to the consumers. The distribution is performed by various distribution centres which make checking smoother. Additionally, most of the suppliers of the company are not vertically integrated which means that suppliers do not control the supply network which supplies raw materials to fast-food companies.

Potential profitability of the sector

According to the National Restaurant Association report, the average profitability for the fast food companies is approximately 5 to 8%. It means for each dollar of sales, the business earns 5 to 8 cents as a profit. Though, several fast food companies have profitability as high as 20% (FoodIndustry.Com, 2024). Both McDonald’s and Burger King fast food companies earned profit margins approximately 18% as many people especially younger generation likes fast food in excessive manner and go in the restaurants frequently. Dazo, Dinner Lab, Kitchit, Munchery and PepperTap are some examples of fast food businesses that faced failure because poor marketing and business strategies.

Critical success factors for the sector

The critical success factors related to food sector involves communication, dedication and support of upper management, learning and training and skills and proficiency. Top fast company like McDonald’s highly invests in research and development and find new ways to operate business and attract customers. The company hire the skilled and talented employees and also provide training opportunities so that they perform best and contribute to the success of the company (Ngullie et al., 2021). McDonald’s encourage employees to involve in decision-making process and also provide flexible working culture.

Internal environment of organisation

The analysis of the internal environment of the McDonald’s is explained below:

Current financial situation of McDonald’s

McDonald’s has almost 39,000 outlets in 100 countries which help to generate high revenue. The restaurant has generated 6.9% growth in cash flow and is anticipated to reach at 14.6% in year 2024. Nearly, 95% restaurants are owned and functioned from independent local businessmen in all over the world (Yahoo Finance, 2024). McDonald’s uses the excellent business model such as; franchising as it one of the beneficial business models for the restaurants. As of December 31, 2022, the net profitability of the restaurant was 26.65% which made it most successful restaurant worldwide, worth around $193.05 billion. To franchisors, the restaurant is extremely profitable business with net income of above $2 billion (Pereira, D., 2023). The company has solid record in terms of profitability and the average income of the McDonald’s in year 2019, 2020 along with 2021 was approximately $2.480 billion.

Comparison with competitors and standards

The restaurant enjoys a powerful competitive position within the IEO means Informal Eating out Segment versus rivals like Burger King, KFC etc. Like McDonald’s, there are many other fast food chain such as; Subway, KFC, Burger King, Wendy’s, Fatburger and many more uses the franchisee business model. McDonald’s is true to their fast food format of their restaurants and it is popular for the robust customer service without compromising service quality (Steinbaum, and Stucke, 2020). All these elements and strengths make McDonald’s different from their rival companies. Universality of the flavour of food to high level is strength of the restaurant and this is the reason to choose McDonald’s over rivals. The taste of Big Mac is same in all outlets worldwide because of utilisation of similar ingredients in similar quantities.

Analysis by using financial tools

Profitability ratio analysis

The above table shows that the company is regularly increasing their gross profit, net profit and annual revenue. The gross profit of the company was 13,207.20 in the year 2022 but it increased by 14,562.50 in year 2023 which shows that McDonald’s has high potential and generate profit from their food sales and has good financial health. It also shows that the company can achieve a substantial profit in future and can gain high competitive advantages in the market. The above figures also presents that McDonald’s has achieved growth in net profit from 26.65% to 33.22% which is good for the business (Morning Star, 2024).

Liquidity ratio analysis

From liquidity ratio analysis, it is identified that has to maintain their current ration and quick ratio by focusing on business strategies. McDonald’s can enhance their financial ratios by reducing the unessential operating costs and use savings in other valuable activities. If the company gain the high liquidity then they can easily fulfil short-term debts.

Key performance indicators of the company

There is a list of KPI that are applied by the McDonald’s to track progress.

Average order value – It is a KPI which evaluates the average amount of money used by the customer each time at McDonald’s outlet. This KPI assist in examining the efficiency of menu offerings as well as pricing strategies in increasing sales. It provides the valuable insights into the customer behaviour. High average order value shows that customers are buying more food items.

Cost of products sold – This KPI is closely related to profitability. Through tracking this KPI, management can find out which food products are contributing to generate most profit and which products are costing the firm money. This information is utilised to decide which food items to focus on and which require discontinuing (Al Dakheel et al, 2020).

Customer satisfaction and retention – This KPI evaluates the capability of corporation to retain customers and to increase profitability from existing customer. This metric track the different aspects like customer queries, response time, problem resolution rates and retention rates. It is performed by online surveys, social media and live chats.

Gross profit margin – It helps to evaluate the left revenue percentage after subtracting the cost of sold products. A higher margins means a company earn high profit and business is profitable. It offer more controllable metrics which facilitates the McDonald’s focus on performance of product and implement cost control solutions efficiently (McDonald Consulting Group, 2024).

Organisational analysis

Organisational analysis is a kind of diagnostic business procedure which can help firms to understand their performance, spot problem areas, discover opportunities and make an action plan to enhance performance. There is detail analysis of the organisation given below:

Mission of the company

The mission statement of the company is ‘to become favourite place of the customers and desired choice to eat and drink’ (McDonald’s, 2022). Now, the company make changes in their mission statement. At their best, the restaurant do not just serve food products to the people, they serve moments and time to feel good all with the welcoming, light hearted, dependable personality and unpretentious which understand and like by the customers (Nichols, and et. al., 2022).

Vision of the company

The vision of the McDonald’s is to feed and empower societies while preserving the environment and whole plane by sourcing ethically and sustainably. The vision of the firm is to raise their people practices to make sure that their people feel valued, respected, welcomed and essential part of McDonald’s community (Panmore Institute, 2024). The new vision of the company is to move with the speed to achieve the profitable growth and be even better fast food restaurant. McDonald’s wants to serve delicious food to more customers every day, around the globe, with the motive to maximize both sales and profitability.

Core values and operating guidelines with problems

The backbone of the restaurant is a dedication to a group of core values which define who they are and how they operate the business and outlets. The restaurant always puts their customers and community first and uses ethical and sustainable practices in each department so that they can attract more customers. Meeting basic requirements of the customers is central to what the firm do (McDonald’s, 2022). The restaurant faces the problems in people management. The company lacks ethical aspects through abusing the employees’ rights and in different countries which negatively impact the business.

Core competencies

The core competencies of the restaurant are efficiency, brand recognition, menu innovation, supply chain management and convenience. They offer fast as well as convenient facilities by their drive-thru windows and online platforms. The firm is continuously innovating their food menu and include new items which are great competency. The company has introduced the McPlant which is a plant-based burger along with Travis Scott Meal. McDonald’s has a large supply chain network and distribution centres which enables to maintain the quality (Ou, Wong and Huang, 2021).

Broad and specific objectives and goals

The company help in feeding people in millions each day with concentration on providing families the options they like. The business is customer-centric and it is reflected in gaols of the company. The objective of the firm is to be favourite restaurant of their clients. As a leading global fast food chain, the company believe they have a chance to make positive impact on this world. They aim to utilise their size, reach and influences and increase engagement with the customers, employees, suppliers, investors and franchisees in order to impact community positively where they operate.

Organisation along with business strategies

Current strategies of company and business unit

The management of the McDonald’s extremely focuses on organisational and business level strategies and this is the reason behind success. In March 2017, the company announced their Velocity Growth Plan. The firm believes that they know the most meaningful way to develop business that’s why they focus on food. The company has good management plan to direct the business operations to achieve goals. Long-term objectives of restaurant guide company design to highlight patterns of business in various units, product lines and customer groups (Singer, 2024). Vertical integration allowed the organisation to take control on supply products instead of subcontracting to minimise costs.

The organisation uses the market segmentation based on age, cultural values, taste and preferences to determine the various needs of customers. McDonald’s also uses the competitive pricing strategies and set the prices of food products after analysing the competitor’s prices. Brand differentiation by different products and prices allows business to handle stiff competition. The firm’s price differentiation strategy has allowed them to handle sales and market recognition. Maintaining cultural values by equality and inclusion is another business unit strategy. Discovering values across diverse cultures and updating food menus in various geographic segments have enhanced customer attitudes towards firm (McDonalds, 2017).

CONCLUSION

As per above analysis, it is concluded that McDonald’s serve the confidence, friendship, smiles, connection and opportunities along with burgers and other products. The firm prefers not to transform its way of performing business to adapt to other cultures instead of it modifies local cultures to fulfil their own requirements. It is identified that the food preparation procedure is same in its all restaurants and also uses same ingredients and methods to maintain its authenticity and legitimacy. McDonald’s is a vast company and offer excellent jobs to the candidates and support them to improve their life by receiving fair salaries. The company produces revenue in huge amount because of this franchise model. McDonald’s will has excellent future as the restaurant is consistently working in the direction of streamlining its digital business. Continuously increasing people’s income has boosted the sales of products as they spend willingly which ultimately help to increase profitability of business. They have solid financial state and have slowly increased their market share. The firm has successfully won the trust of the local as well as global customers. Although, McDonald’s is big company but they also has some flaws which impact overall business functions. As a result, the company lost a large number of customers. This report has also analysed that it is important for the McDonald's to include healthy and organic products in their menu so that they can increase the loyal customer base which will help to increase competitive advantage in all over the world. The competition basically is cost-based in which corporations consistently investing in the cost-effective operations in order to get the competitive advantage over rivals. If the restaurant wants to maintain its revenue and profit margins then they should use different cost management tools which will be helpful in evaluating the effectiveness of the cost management in the organisation. The main strength of McDonald’s its network including franchises, supply chain network and landowners.

Part 2 Introduction

Strategic audit or strategic diagnosis mainly concentrates on the understanding and inspecting goods and services, consumers, markets, development areas, competitors, business ways, internal capabilities, skills and technologies of the organisations. This report will examine the business operations of the McDonalds detailed manner. This report will explain about the organisational-level strategy as well as business level tactics of the McDonald’s. This section will involve the compatibility of the strategies of the company with organisational structure along with the alignment of strategies with business goals. This report will also present the excellent comparison between McDonald’s strategies and its competitor’s strategies. This report will shed light on strengths, weaknesses, opportunities and threats of the restaurant which will be helpful to suggest several alternative strategies. These strategies will be highly beneficial for the company to reduce the threats and improve weaknesses. These strategies will also help to leverage strengths as well as opportunities. Furthermore, this report will explain about the different macro-environmental factors which highly impact the business operations and its industry. There are various elements such as; political, economic, social and technological that has an immense impact on the McDonald’s business constantly. The company has strong presence in all over the world and has become a favourite restaurant. McDonald’s has achieved this position in the market because of its excellent services and food items. The restaurant gained high competitive advantages within the industry as they follows the ethical and sustainable procedures and high quality raw ingredients to prepare food items. In this section, this report will also discuss about the different key performance indicators utilising by the company. KPI’s are very useful for the companies as it provides the clear benchmarks for achievement and driving employees and teams to meet these benchmarks. With the help of the KPI’s, a company can track the performance of current marketing campaign, existing business procedure and different strategies used by the firm to conduct business. As stated in part 1, the restaurant has exceptional financial conditions and gained high profit margins from their franchise business model. Moreover, this report will analyse the functional strategies in-depth manner which helps the company to carry out business functions in an effective manner. It will also describe about the different functions such as; marketing, human resources, finance, purchasing and information systems of the company. All these functions holds a valuable place within the organisation and provide greatest strengths to the everyday functions. All functions are interrelated with each other and highly focuses on achieving business goals and objectives. Human resource management is most crucial function of any organisation and is responsible for recruiting, selecting, training and retention of the employees. The other departments such as finance, information technologies, purchasing also plays a significant role in carry out the business operations and functions smoothly. The company has good strategies and tactics but they can focus more on efficiency and productivity of the business so that they can acquire more revenue in future. This report will describe about each and every factor related to McDonalds’s business in a significant manner by using different tools.

Organisational level and business unit strategies

Business strategies refer to the course of the action or group decisions which support the organisations to accomplish business objectives. Business strategy is considered as foundation to the success of the corporation.

Compatibility of the organisational structure with corporate strategies

The organisational structure of the company is hierarchy structure which is also known as tall structure. Most large and global companies follow the hierarchy organisational structure as it makes easier for the companies to manage workflows and uphold standards. Hierarchy organisational allows for immediate decision-making as well as close supervision in each and every department that is most crucial for the large organisations in which errors can be costly. Because of hierarchy structure, the company has divided its leaders, managers, supervisors and employees into different groups and departments. This kind of approach facilitate to develop a sense of loyalty as well as team spirit. The CEO is the top position of the company and chief operating officer, chief financial officer and chief people officer are also included in the management team. The business departments are divided into: marketing, finance, information technology, human resources, security, national operations, corporate affairs, regional operations and strategic planning. All departments are work together and communicate with each other (McDonalds, 2024). Hierarchy structure of the firm provides opportunities in terms of attract as well as retain skilled and talented employees. The company also focus on the promotions of the employees which further help to improve the morale, performance and productivity of staff members. Hierarchy organisational structure is well-matched with the strategies of the organisation. Organisation structure and strategies have a great influence on how the restaurant performs and meets its mission. The structure is completely integrated with corporate strategy and facilitates to accomplish its goals. Hierarchy structure supports strategy and when organisation makes some changes in their strategy they also adjust their structure so that it can support the new strategies. The company modifies their strategies according to latest market demands and changing needs of customers. The management team of the McDonald’s highly pay attention on market research in order to identify the current needs of the customers. Market research is crucial otherwise, customers can choose other restaurant over McDonald’s.

Alignment of strategies with goals

It is most important for any business organisations that their business and corporate strategies aligns with the business goals and objectives. Strategic alignment refers to the procedure of making sure that all corporate aspects including resources, activities, functions and goals are coordinate and in synchronisation with overall strategies. McDonald’s pay close attention to its business process and make sure that their strategies properly align with the goals. It is top priority of the company because misalignment can create many challenges in business. The company aligns its department groups, procedures and systems in order to work symmetric in the direction of goals. Alignment of strategies matters most to the McDonald’s which helps to stay competitive in the marketplace (Antypas and Miller, 2018). The restaurant also concentrates on barriers on time and eliminate immediately so that it cannot prevent the firm to achieve goals. They execute the new as well as old strategies in an effective way so that they can operate their business without any difficulties. The restaurant makes sure association with its product-centric strategy through focusing manager’s attention on formulating and organising scalable procedure and practices along with selling products worldwide at predictable quantity, quality and price. Through alignment of business and organisational level strategies with the goal, the company is capable enough to keep their employees working in the direction of the overreaching objectives and goals of the restaurant. The company align the different strategies with the common business goals by utilising strong communication process. McDonald’s uses the various communication channels such as; email, instant messaging applications and video conferencing. Clear communication is the key to align the strategies with the goals. The company is also regularly focusing on the monitoring as well as modification of the strategies in order to make alignment between strategies and goals. Regular feedback is also helpful in aligning strategies and McDonald’s is also paying attention on feedback to carry out activities in efficient. The managers and supervisors offers the constructive feedback to each and every team member so that they can aware about their performance and make sure that their work aligns with the company goals.

Comparison of company strategies with competitors

Burger King, Subway, Wendy’s and KFC have outstanding marketing strategies. Burger King is also extremely popular among people and highly uses social media channels in excessive manner. Like McDonald’s, Burger King also make eye-catching posts and short videos. Rival companies such as; Burger King, Wendy’s and KFC offer the similar services in high quality which easily attract the customers and have large base of loyal customers. In recent year, there are many restaurants like BurgerFi, Chipotle and Pita Pit emerged in the fast food market that offers health food options which are pesticides and antibiotic free. They are also using the biodegradable, sustainable and recyclable materials for food packaging (The Strategy Story, 2024). It has reduced the customer base of McDonald’s because it is obvious that customers will choose healthy options over oily and sugary foods. Both Burger King and McDonald’s have invested in advance technologies and launched mobile applications so that customers can easily order products online from their home. Wendy’s also introduced the limited time food products and mobile app like McDonalds to meet the changing requirements of the customers. McDonald’s majorly sells the vegetarian food while KFC specialises in non-veg food products. Subway is another fast-food chains that has good presence in all over the world. The food menu of both McDonald’s and Subway are different. Subway is popular for their different type of sandwiches and salads where McDonald’s offer burgers. Both firms uses the fresh and high quality food ingredients to prepare food products. Both fast food chains offer food products in affordable price range in order to grab the attention of price-conscious consumers. Like McDonald’s, Subway also continuously pay attention on branding and marketing to attract lot of customers and increase sales. Subway offer more healthy food options to the customers compare to McDonald’s. This approach of Subway can highly impact the McDonald’s business by reducing the customer’s numbers.

Alternative strategies by using SWOT and Gap analysis

From the SWOT analysis, there are some excellent strategies for the McDonald mentioned below:

Increase customer interaction – The company need to focus on making strong relationship with the customers through social media platforms. The company can organise live chat on Instagram as most of the business use this kind of strategy in their business. It will allow the company to interact with the customers and know their perceptions towards the brands. The company can also conduct the online survey where customers can give review to the company’s food products and share their experiences.

Introduce healthy food – McDonald’s only sells burgers and fries and does not has healthier food product line. If the company want to stay competitive and relevant in the market then they need to introduce new healthy food products. There are many other restaurants that offer healthy food items. McDonald’s can include salads, protein choices and fresh fruits to menus in order to increase customer choice. It will definitely help business by gaining more new customers and increase sales (Temple, 2020).

Focus on retaining top talent – McDonald’s is facing high employee turnover continuously which negatively impact brand image. As a top business, they have to focus on retaining top talent so that they can stay with the company for long time. The HRM can change their existing recruitment strategies and focus more employee training and development which will surely motivate the employees. This approach can increase the engagement of workers in their job and they will stay with the company for long-time.

Support eco-friendly practices – The food business is responsible for increasing environmental problems like pollution, waste, climate change etc. The company need to invest in green or renewable technologies which will help to save natural resources. It will also help in reducing the carbon footprint. They should enhance its practices and processes to reduce waste and attract eco-friendly customers.

Evaluation of implementation of strategies

Marketing strategies – McDonald’s highly focuses on digital marketing strategies and change their strategies according to current market trends. The marketing team of the restaurant regularly posts stories, images and short videos to attract people who use the social media. The company is only reliant on basic promotional strategies and they need to use more options that are available on social media. The marketing team can invest in influencer marketing which will help to improve brand awareness. This marketing technique can help to boost the website traffic along with the conversation rates. Influencers who are famous among people can easily convince the people by using their skills and appealing abilities.

Cost leadership strategy – This strategy provides the greater efficiency in business that helps to getting more consumers. It also facilitates to enhance the competitiveness and increase the chances of success. However, this strategy involves lack of research and innovation and reduction of product development and prevents the company to introduce new products. The restaurant should consider the other aspects of the cost leadership strategy so that they can implement this strategy in effective manner which give advantages instead of failure.

Vertical strategy – McDonalds use this strategy in a way that helps in controlling the quality of products and streamline logistics services. By applying this strategy, the restaurant has achieved high competitive advantage in the market. It is quite complex strategy and the company took more time to implement it which impacts other activities (Abbas, and Stevens, 2024). The organisation might encounter higher operational costs along with the regulatory issues. These problems can affect the business operations negatively and reduce the profitability.

Competitive pricing strategy – The restaurant perform research on internet and identify the prices uses by the rival companies. After that, they set the own products prices which help to attract lot of customers. But this strategy increases the chances reducing profit margins. Because of competitive pricing strategy, the company can lose their potential profits and revenue.

Key performance indicators

Key performance indicator (KPI) refers to the quantifiable measure of business or activity performance over time for exact objective. KPI’s offers targets for company, milestones to measure progress and perceptions which facilitate people across the corporation to make informed decisions. McDonalds uses the various key performance indicators to track the performance that is described below:

Food cost percentage – This metric quantifies the cost of sold food items as proportion of overall sales. It helps business in enhancing profit margins through discovering high-cost menu products. It also improved the management of budget and prediction. It represents the profitability of food items and financial condition of McDonald’s.

Employee satisfaction – This metric can be described as degree of satisfaction or contentment, employee sense with their jobs. This contains satisfaction with every day projects and tasks, co-workers, managers, satisfaction with corporate policies and the impact of work on personal lives of workers. Through this metric, McDonald’s discover the areas of improvement into their staff members and make strategies and tactics to boost satisfaction of employees.

Delivery time efficiency – This KPI evaluates how efficiently a restaurant’s franchise organises the time which is taking to meet delivery of orders. It is required metric for measuring the speed and accountability of services that directly affects satisfaction of customers. Delivery time efficiency metric enhances customer’s satisfaction by delivering food items on time. It helps to boost competitive advantage within the fast food sector (Aithal and Aithal, 2023).

Employee turnover rate – It is crucial key performance indicator which measures the rate at which workers leave the company over certain period. It shows the total number of workers who left the company, irrespective of reason, divided by average number of employee throughout that period. By this metric, the company will able to know how many employees left job.

Functional departments and strategies

Different function departments

McDonald’s follows tall organisational structure and has many departments that manages and supervises various activities and make sure that goals of each department are aligned with the company goals.

Human resource management – HRM is most crucial function of any organisation including McDonald’s. Human resource management helps the company through making excellent recruitment strategies and brining talented and skilled people. This department make excellent strategies and uses online job portal to attract potential candidates. The HR managers of the restaurant promote and support positive workplace culture and give priorities to the satisfaction of the employees. HRM also provides the benefits and perks and fair and competitive wages. The restaurant’s approach to HRM has been dynamic in maintaining a flexibility and satisfied workforce which provides quality as well as quantity of work (Haak, and Beckmann, 2020). HRM also organises the training programmes at the workplace to improve the skills, abilities and knowledge of staff members. By training, employees also know about the latest market demands and perform accordingly.

Marketing management – Marketing and promotion is essential for any organisation as it increase the sales. McDonald’s has an outstanding marketing team that uses their expertise to attract more new people each day. The company uses both traditional and digital marketing strategies to promote products and brand. The firm utilises the print media and television to attract those people who are not active on social media. Moreover, McDonald’s utilises different social media platforms like Facebook, Instagram etc. and share posts on regular basis. Marketing team focus on customer satisfaction so, they make attractive and relevant campaigns so that they can make large base of loyal customers (Gilch, and Sieweke, 2021).

Operations management – It refers to the administration or management of business procedures, practices along with structure in order to improve efficiency and boost profit. Operations unit of the McDonalds manages every day functions including supervising various departments and setting goals and objectives. They make sure that company match the expectations and demands of the customers regarding food products, drinks and customer services (Chión, Charles, and Morales, 2020). Operations management consistently optimise and monitor the production unit and make sure that production department perform their activities without any errors. The safety and quality of food items are prime focus of the restaurant.

Information technology – IT department of McDonald’s is responsible for marinating computer systems, hardware and software systems in the company. The IT team configures and updates applications and software timely. They also update the databases, devices and servers of employee’s computer systems and other IT infrastructure. IT team has developed successful transaction system, security system, decision support system etc. McDonald’s utilises the TPS means Transaction Processing Systems while ordering the hamburgers from the suppliers. This technical tool records the , contact numbers, addresses as well as quantities ordered.

Purchasing department – This department always works with full responsibility and make sure that they purchase materials, equipment and other essential things ethically. The company also give priority to the welfare and health of animal. The company has E-Procurement system which is a kind of website that enables McDonald’s franchises to purchase everything that are required to operate restaurants successfully. The company has developed the strict food safety related standards, rules and protocols within the procedures. It involves different areas such as; sourcing of food ingredients, menu development, food packaging and food product distribution. The company approach the responsible sourcing to reduce the impact of the various business operations on the environment. McDonald’s also give priority to the health & welfare of the animals and thereby contributes in CSR activities. The restaurant also organise the food safety audits to maintain the quality standards.

Finance management – Finance department is also crucial function as it provides capital to the all departments so that they can execute the strategies and help business to achieve its objectives. Accounting team is liable for handling all receivable and payable transactions, organising working capital and maintaining fixed asset. The financial team analyses the past financial conditions of the company and use this information to enhance future results. McDonald’s earn income and generate high profit by their restaurants. The financial team compares the sales of food products at different times in a day, sales at different restaurants and sales of particular products. After that, they analyse all information and calculate the earnings generated by the company (Betti and Sarens, 2021).

Alignment of functional strategies

McDonald’s highly focuses on each and every departments and settings goals and objectives for all so that they carry out their work at own level. The company management encourages all teams to work with each other when required to achieve goals as soon as possible with higher accuracy. Each department whether it is human resource management, finance, marketing or any other align their actions and objectives with the overall organisational goals. Finance team provides the money to the all other departments as without sufficient capital they cannot work effectively. HRM uses their strategies and hire employees for production, finance, supply chain and marketing. All department of McDonald’s communicate with each other so that they can aware about what is going within the company. Functional strategies involve standardisation production procedure, training and growth of the staff members and developing new products. The company heavily pay attention on infrastructure, marketing, information system, materials organisation, production and human resources (Pratap, 2020). The restaurant follows the research strategies so that they can enhance the quality of food items and drinks through providing healthier options which are developed from market research. The team in the restaurants regularly communicate with their upper management so that they can improve their work and perform best in their area. The company works alongside their supply chain management and target customers to be aware regarding essential developments or improvements to make new quality related standards. IT team provide safety and security to the business processes as well as to the customer’s confidential information. If the company does not provide secure customer’s information then it can reduce the trust of the people towards the restaurant. Because of their excellent functional strategies, the company has achieved greater success in the fast food sector and become favourite brand of the customers in all over the world.

CONCLUSION

Future competitiveness and success

From above analysis, it has identified that McDonald’s has an excellent business process and profile that provides many advantages to the business. The company has adopted and applied the franchise business model which is extremely beneficial model for the fast food restaurants. The firm has restaurants in more than 100 countries which will definitely help the business in future. The company want to develop regularly as both physically and digitally by their strategies and processes. The company is planning to expand their business and open more restaurants in different regions worldwide. The company is known for their burgers and French fries worldwide as they uses the high quality ingredients for preparing food items. McDonald’s can use their popularity and powerful presence to open the new restaurants in all over the world. By using excellent management, the company can easily set up business in new regions and achieve high growth. Although, like other companies McDonald’s also needs to follow the strict rules and regulations while carry out the business activities. The food business like McDonald’s are highly responsible for increasing different environment issues such as; pollution, waste, harm of natural resources and many more. The increasing pressure by the government forced the company to make adjustments in existing business strategies. The company should focus on protecting environment by adopting sustainable approaches and practices. It will definitely facilitate the business by improving reputation and image of the brand in the different countries. Due to this reason, the company had to shut down their business in several countries which highly affected their profit margins.

The above analysis has represented that the innovation, communication, digital technologies, marketing strategies, customer satisfaction, human resources, robust strategies and job satisfaction are critical factors of the firm. The company’s business level strategy pays attention on satisfaction of the customers through tapping into their demands, requirements and taste. All these factors help the company to achieve success and stay competitive within the global fast food market. The restaurant is highly committed to its consistency and has capability to adapt to local culture and tastes. The company has also invested in technical innovation and used the vertical integration, cost leadership and stay only on one product line. All these strategies and factors have allowed the restaurant to maintain reputation and status as an international fast-food giant. The company want to become a world’s favourite fast food brand and achieve highest market share. The company leveraged fast food business in order to become a global company which generates income through renting its properties to the franchises. The existing strategies and overall business procedure will help the McDonald’s to fulfil the long term goal and maximizes profitability.

The short-term profitability are essential for producing liquid capital on the other hand, long-term profitability along with the survival makes sure the longevity of success of the restaurant. Short-term profits facilitate to pay monthly bills and wages to employees. Long-term profits influence the growth of the business, strategic planning and technical innovation in high manner.

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