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Strategy Development Proposal Final Exam Assignment

Student

Institution

Professor

Course

Date
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Strategy Development Proposal Final Exam Assignment

Executive Summary

This scholarly write-up will use McDonald’s Food Company operating in USA as the

reference institution of discussion. McDonald's Corporation one of the successful centralized

and international business institution (Abdelali & Ngah, 2019). The company is considered as

the largest chin of fast food restaurants with approximately over 30450 fast-food restaurants

in 121 nations globally. However, of all the 30450 restaurants, 28% are operated by the

company itself, 58% by franchisees and the remaining 14% by affiliates (Humphrey , 2019). In

the write-up, under market status analysis, it will be illustrate that McDonald's is a highly

competitive institution with a big market share and growth volume in both USA and globally

in terms of market status. Under the competitor analysis using the various theoretical models

such as Porter Five Forces, the paper will explain the competitive nature of the fast food

sector, give insight into McDonald's key competitors both in USA and overseas and sum up

the competitive analysis by giving the strategies that the company can utilizes to stay ahead

of its market rival and achieve competitive advantage. In order to proof right the proposed

strategies, the publication will also provide in-depth justification of the merits of the proposed

strategies.

Current McDonald's Corporation Market Status in USA and Globally

Market Share

Market share is defined as the ratio of total sales in a certain industry produced by a certain

business entity. McDonald's Corporation posits the vastest market share in the fast food

industry. As per current statistics, the corporation holds 10% of the total global market share

and 43% of the United States market share. Based on research findings from various scholar

organization, the market size by revenue for fast food is $245 billion globally, including
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burger restaurants and fast food restaurants. McDonald's when narrowed down to the US

market, then of the total market share, the corporation posses $8.253 billion of the fast food

market, that comprises of 43% of the market. In the year 2015, a research carried out for the

quick service restaurants chain by revenue globally indicated that McDonald’s was at the

bream with $25.41 billion, followed by its main competitor Subway at $19.2 billion and

approximately $1.110 billion of the total market share (Keller, 2020). Later in 2016,

McDonald’s was ranked the highest fast food corporation brand with a value of $42.937

billion.

The chart below represents the total revenue of McDonald’s Corporation globally ranging

from the year 2013-2016 in dollars per region (Keller, 2020)

Market Capitalization
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Market capitalization commonly referred to as market cap, implies to the sum of market

value of a publicly traded business entity’s distinguished shares (Omodero, 2019). Market

capitalization is commonly utilized in the measure of how much a business institution is

worth. McDonald's market capitalization as at June, 2022 is $184.35 billion. With this

massive figures, McDonald’s has risen to the global 56h most profitable business institution

by market capitalization (Yahoo!, 2022).

Market Volume and Growth

Market volume implies to the sum of transactions that traders and business institutions

conduct in a particular market. Market volume is calculated over a specific duration such as a

day, month, quarter and years (Colman, 2018). On the other hand, market growth implies to the

rise in the demand do a commodity or a service in the market environment (Bhasin, 2020).

McDonald’s Corporation in its 2021 fiscal year report announced a global sales growth of

21% to $112.5 billion. The report illustrates that for the fourth financial year quarter, the

institution made a net sale increase of 12.3%, which reciprocated to positive comparable sales

across all segments (News January 28, 2022). Based on reports directed on USA alone,

McDonald’s sales elevated by 7.5% resulting into a 16.8% growth being registered in the

global market.

McDonald’s Corporation Competitive Analysis

Based on several research findings, McDonald’s is possibly the largest name in the fast food

industrial segment. The corporation has a chronology of massive innovations and provides

fast meals at fairly cheap prices (Downie, 2022). However, as buyer taste evolve, fast food

restaurants such as McDonald’s find themselves in a situation that they have to fight for their

own space to keep up with fluctuations in market demand.

Major McDonald’s Competitors in USA/Globally

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Burger King

According to reports, Burger King is possible the most influential competitor for McDonald’s

, challenging it with its brad whopper in the burger war. In the fiscal year 2020, Burger King

documented more than $20 billion revenue globally. The company also recorded over 18000

functional locations in over 100 countries, with approximately 11 million customers served

on a daily basis globally.

Wendy’s

Wendy's is a USA based fast-food restaurant chain possessing over 6800 functional location

globally. Similar to the aforementioned firms, Wendy's also duels more in burgers, fries and a

series of classic American dishes. Reports as of July 30, 2021 indicates that Wendy’s had a

market capitalization of $5.1 billion, with its stock trading at approximately $23 per share.

The company also recorded a trading volume of about $4.8 million shares on a daily basis. In

the year 2020, Wendy’s recorded a revenue of $1.71 billion (Downie, 2022).

Yum Brands

Yum Brands is a massive organization which currently runs a series of large fast-food

restaurant chains such as Taco Bell, Pizza Hut and KFC. In 2020 financial year, Yum Brands

announced operations in more than 290 nations with over 50000 restaurants globally. The

company also recorded that their stock was trading at $131 per share and posited a market

capitalization value of $39 billion (Downie, 2022). More importantly, Yum Brands also

recorded over $5.6 billion revenue value in the same fiscal year.

Subway

As of August 2021, Subway had emerged to be one of the biggest fast food restaurant chains

in the globe in terms of size. The corporation has over 37000 locations which are functional
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in approximately 100 nations. However, unlike Burger King and McDonald’s, and subway

mainly duel in sandwiches and salads. Being that Subway is a private institution, the exact

revenues are never publicised (Downie, 2022). However, as per 2019 reports, it was recorded

that the company per restaurant business made $10.2 billion in sales in United States.

Chipotle

Chipotle is one of the fast-casual restaurant chains dealing in salads, bowls, burritos and

tacos. Chipotle was established as a small local restaurant chain which later earned

substantial investment from McDonald’s it was rendered public in the year 2006. The

operation functions in more than 2800 global locations mainly in Canada, United States,

Unite Kingdom, France and Germany, with no franchises. In end financial year 30 th August,

2021, Chipotle recorded total revenue of $6.0 billion with a market capitalization of $52.3

billion and price per share trading at $1863

Starbucks

Based on study findings, Starbucks is the biggest coffeehouse restaurant chain in the world.

According to December 2020 reports, Starbucks operates in over 32000 locations in 76

national globally, encompassing 18000 extra in United States alone. The company mainly

serves tea, coffee, espresso, sandwiches and other foods (Downie, 2022). As at 2020, Starbucks

recorded a net revenue of $23.5 billion. In 2021, the company had a share price of $121 and a

market capitalization of $143 billion.

McDonald’s Five Forces Analysis (Porter's Model) & Recommendations

McDonald’s Corporation, internationalization objective through techniques which accounts

for external facets in the market, as depicted by the Porter's Five Model. The Porter's Model

furnishes valuable information to support strategic administration, particularly in handling

relevant issues in a business' external environment. This issues addressed by the Porter's
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Model are established on external components that characterize the level of competitive

rivalry in the market, the bargaining power of commodity consumers, the bargaining power

of suppliers, substitution related threats and new entrants threats (Gregory, 2018). In this case,

McDonald’s Five Forces analysis, the forces primarily lay within the fast food restaurant

industry. The corporation being amongst the largest restaurant chain businesses in the world,

it plays a vital role as an example of substantial strategic administration, particularly in

handling competition in different global market segments. This is implies that McDonald’s

strategic orientation is relevant to the external factors, like those specified in the Five Forces

analysis.

Recommendation and Summary: Porter’s Five Forces Analysis of McDonald’s

Corporation

Summary

Based in this Porter's Model analysis, McDonald’s Corporation experiences experience the

consequences of external components at different intensities, depending on the differences

among markets globally (Gregory, 2018). For instance, the United States' market environment

furnishes a competitive topography which is completely varied from that of the European

market. Therefore, McDonald’s has to implement techniques to fulfill the external market

demands and curtail any chance of negative consequence. Contemplating the assortment of

market climates, this Porter's Five Forces analysis of McDonald’s establishes a series of

intensities of the five forces such as:

 Competitive rivalry (Strong Force)

 Buyers or consumers bargaining power (Strong Force)

 Suppliers bargaining power (Weak Force)

 Substitution threats (Strong Force)

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 New entrants threats (Moderate)

Recommendations

The findings of this Porter's Five Forces analysis indicates that McDonald’s Corporation

should prioritize the strategic matters concerned with competition, substitutes and consumers,

which mainly posses a strong force on the institution and its external climate. Although of

less significance, the institution should also give attention to the weak forces of the

bargaining power of suppliers and new entrants threats (Gregory, 2018). It is therefore,

recommended that the organization strengthen its operation by establishing on the stability

listed in the institutions SWOT analysis. Further, the corporation's administrators have to

concentrate on curtailing the consequences of competitors and substitutes on revenue and

market share as supported by the marketing mix. Again, McDonald’s Corporation can make

its commodity innovation procedure extra aggressive in order to attract new clients and retain

the already existing customer base. Finally, McDonald’s can execute elevated quality

standards in order to handle the forces of substitution and competition.

McDonald’s Competitive Position (Porter's Five Forces Model Analysis)

Competitive Rivalry with McDonald’s (Strong Force)

McDonald’s experiences rigorous competition being that the fast-food restaurant market is

permeated. This component of the Porter's Five Forces analysis model deals with the impacts

of playing against other similar institutions in the industrial environment. McDonald’s

Corporation's strong competitive forces are established on three major elements consisting of:

high number of organizations, high aggressiveness of similar firms and low switching costs.

Research indicates that the fast food restaurant industry posits several organizations with

varied sizes, for instance, worldwide chains like Yum Brands and local mom-and-pop fast

food restaurants. This aforementioned factor strengthens the intensity of competitive rivalry
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in the industry. Further, the Five Force analysis model considers organization aggressively

advertise their commodities and services (Macmillan , 2019). This factor enhances the vigor of

competitive rivalry which McDonald’s faces. Further, minimal switching expenses makes it

quite simple for clients shift to other similar restaurants, for instance Wendy’s and Yum

Brands. This factor amplifies to the force of rivalry. Therefore, this facet of Porter's Model

analysis with regards I McDonald’s Corporation implies that competition exists among the

most crucial external forces for reference in the critical administration of the business.

McDonald’s Customers/Buyers Bargaining Power (Strong Force)

Based on this force, it is crucial that McDonald tackles issues related to customer or buyers

business performance. Customer bargaining power of the Porter's model analysis focuses on

the significance and demand of clients and how the various decisions made within the

organization affect the business operations of the firm. Based on McDonald’s case, there are

three external factors which support the strong bargaining power of consumers including; low

switching costs, massive number of providers and high availability of substitutes. The low

switching expenses allows consumers to easily compel their demands on McDonald’s. With

reference to the Five Forces analysis model, this factor boosts customers bargaining power

which is more consequential being that the market is permeated and consumers can easily

shift from one firm to the other than McDonald’s. This situation makes buyers bargaining

power to be a strong force in impacting the firm’s external setting. Moreover, substitutes

availability is key in this external analysis. For McDonald’s case, the existence of a variety of

substitutes, such as food kiosks and outlets, artisanal bakeries and microwave means, adds to

the customer bargaining power. According to this component of Porter's Five Forces analysis,

it is advisable that McDonald’s establishes techniques to enhance customer loyalty,

particularly in the of sociocultural trends mentioned in the firm's PESTEL analysis.

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McDonald's Suppliers Bargaining Power (Weak Force)

Suppliers impact McDonald’s with regards to the organization’s production capability

established on the accessibility of raw materials. This component of the Five Forces analysis

model demonstrates the consequence of suppliers on corporations and the fast food restaurant

industry setting. In McDonald’s case, the weak bargaining power of suppliers is established

on three main facets including: vast number of suppliers, high supply and minimal forward

vertical incorporation of suppliers (Macmillan , 2019). Based on the above facets, its visible

that the vast supplier population weakens the consequences of individual suppliers on the

firm. Further, it is identified that several suppliers of McDonald’s are not vertically

incorporated hence they lack the ability to control the distribution network which moves their

supplies to organizations such as McDonald’s. Based on the Porter's model, such low vertical

integration acts as a causative agent of weakened supplier bargaining power

Substitution Threats (Strong Force)

Substitutes are crucial facets for McDonald’s Corporation. This component of the Porter's

Five Forces analysis model handles the probable consequences of substitutes on McDonald’s

growth. For McDonald’s, there are three elements that makes the threat of substitution more

concrete. This components include; elevated substitute accessibility, minimal switching cost

and elevated performance-to-cost rate of substitutes. McDonald’s products have a series of

substitutes from external competitors such as artisanal food produces and bakeries. According

to Porter's model, this element has the capacity to strengthen the threat of substitution being

that its simple to shift from the firm to a substituting organization. Moreover, substituting

firms are always more competitive in relation to customer satisfaction and quality hence

require McDonald’s to engage extensively in quality enhancement.

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New Entrants Threats (Moderate Force)

McDonald’s market share and financial performance can be greatly influenced by new

entrants. This facet of the Five Force analysis implies to the consequences of new entrants on

existing firms. For McDonald’s case, the applicable threat of brandy entry is established on

three main elements namely; low switching costs, elevated variable capital expenses and high

expense of brand development (Macmillan , 2019). Further, variable capital costs of

beginning a new firm empowers new businesses to enter the international fast food industry.

Therefore, the external component in this facet of the Porter's model analysis indicates that

the threat of brandy entrants is a substantial though not much important issue.

Proposed McDonald’s Generic Competitive Advantage Strategy for Intensive

Growth

This proposed generic strategy implies to McDonald’s forecasted business technique for

substantial competitiveness. As the vastest fast food restaurant chain globally, McDonald’s

needs to utilize an intensive growth strategy to achieve an extreme competitive level in the

gradually fluctuating industry environment.

McDonald’s should primarily utilize cost leadership as the key generic competitive strategy.

Base on the above Porter's Five Forces Model analysis, this strategy involves minimizing

product and service costs in order to provide pocket friendly purchase prices as compared to

their competitors. Being a low cost provider (Gregory, 2017), McDonald’s will furnish its

customers with products at relatively cheap prices compared to their competitors such as

Yum Brandy. However, the firm can also utilize extensive differentiation as an alternative

technique which involves establishing the business as its commodities distinct from rivals.

For instance, the company can apply the broad differentiation generic strategy through
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McCafe commodities. Linking to the low cost leadership strategy, McDonald’s can

implement vertical integration, for instance, by owning facilities which produces standardized

ingredients. Further, McDonald’s can use cost minimization as a financial technique based on

low cost generic technique.

Proposed McDonald’s Intensive Competitive Strategy

Market Penetration

It is suggested that McDonald’s implements the use of market peneration as its base intensive

technique for accomplishing effective competitive advantage. By implementing this

technique McDonald’s will grow its competitive advantage by reaching more clients in the

various market settings where it already operates (Gregory, 2017). For instance, McDonald’s

launches a brandy restaurants in South America and Europe through franchising or corporate

ownership. This technique is highly lucrative for international expansion through

establishment of new locations.

Market Development

Besides this strategy for this case being a secondary technique, McDonald’s should

implement it by establishing new locations in areas where it does not have existing operations

such as Africa and Mongolia. This technique will create a competitive advantage by out

doing its competitors in market expansion (Bhaskar, 2021).

Product Development

McDonald’s should utilize new product development as a tertiary or pivoting intensive

competitive technique. By utilizing this strategy, McDonald’s will be capable of developing

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new products over time, for instance McCafe products. The new commodities may vary from

the prevailing or totally new (Gregory, 2017). This strategic intensive technique will help the

organization to capture more customer attention by attracting them with brandy commodities.

Besides, this criterion completely agrees with the institution's vast differentiation strategy in

regards to commodities that make the institution distinct (Kumar, 2020). Therefore, it noted

that McDonald’s will stay ahead of its competitors in terms of customer attraction and

retention.

Justification for Proposed Competitive Strategies

By applying generic strategy of cost leadership as a competitive technique has high chance of

enabling McDonald’s to sustain its market leadership over its competitors such as Yum

Brandy and KFC. The proposed broad differentiation strategy also will greatly help the

organization to vast its competitive advantage over its competitors (Gregory, 2017).

However, the most lucrative strategic path that McDonald’s Corporation should embrace is

the establishment of extra locations in the developing countries and in the nations where the

institution lacks market presence. For product development, the main purpose will be to

understand the consumer needs and establish commodities using innovative techniques which

posits the capacity to add value and accomplish competitive advantage over rivals. Market

development on the other hand has the capacity to expand an organizations operations into

untapped markets hence unleashing enhanced market share over its competitors.

Conclusion

The daily dream of any business institution is to always stay ahead of the prevailing market

competition. However, in order to achieve competitive advantage, any company has to

establish concrete strategies to out do their competitor in industry setting. This write-up gives
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an insight of McDonald’s Corporations competitive advantage. The publication begins with a

precise executive summary that explains succinctly the main topics of discussion in the essay

body and the organization's background overview. Further, the discussion provides well

formulated explanation of McDonald’s market status in terms of market shares, market

capitalization and market volume and growth. The discussion proceeds to give an highlight of

McDonald’s main competitors in the fast food restaurant industry both in USA and globally.

Trickling down, the paper provides gives McDonald’s competitive positioning with regards

to Porter's Five Forces Model analysis. From the Five Forces analysis, the paper goes ahead

to establish proposals for strategic competitiveness of McDonald’s. Finally, the write-up

gives a succinct justification that explains how the proposed strategic competitiveness goals

can be attained through the aforementioned techniques.

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