Professional Documents
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Management of Strategy: Mcdonald Malaysia
Management of Strategy: Mcdonald Malaysia
BSM 3114
NAME STUDENT ID
CORY TIFFANY FERNANDEZ 1112701673
CHONG JING YI 1121117404
CHEE GUI QI 1121117523
MUHD HARIZ BIN MD. YUSUF 1141327490
NOR ALIAWATI MUHD 1131120892
NORMALIENA BINTI AB. MALIK 1131123066
Table of Contents
INTRODUCTION.....................................................................................................................................1
OBJECTIVES............................................................................................................................................2
SCOPE.......................................................................................................................................................2
BACKGROUND.......................................................................................................................................3
SITUATIONAL ANALYSIS.....................................................................................................................4
PORTER 5 FORCES ANALYSIS.............................................................................................................7
The Threat of New Potential Entrants...................................................................................................7
Threat of Substitutes..............................................................................................................................7
Threat of Rivalry....................................................................................................................................7
Bargaining Power of Buyer...................................................................................................................8
Bargaining power of supplier................................................................................................................8
Threat of Substitutes..............................................................................................................................9
SWOT ANALYSIS....................................................................................................................................9
Strength..................................................................................................................................................9
Weaknesses..........................................................................................................................................10
Opportunity..........................................................................................................................................11
Threat...................................................................................................................................................12
VALUE CHAIN ANALYSIS..................................................................................................................12
STRATEGIC OPTIONS FOR MCDONALDS.....................................................................................16
INTRODUCTION
McDonalds fast food restaurant is world largest chain serving hamburgers. There are
more than 36,538 McDonalds restaurants, serving in 119 countries and they serve
roughly about 68 million customers daily. McDonalds began as a barbecue restaurant
owned by Richard and Maurice McDonald. More than 75 % of McDonalds restaurant
worldwide is operated by by independent owners. McDonalds main menu are
hamburgers, french fries, coke and nuggets and their famous desserts are apple pie and
breakfast sandwich which is the egg muffin.
McDonalds keep thriving as a successful business by having their own ethical and
social responsibility policies which focusing on customer experience when they dinned in
the restaurant, keeping track of employee performance and rewarding them, and
maintaining the companys standards and giving back to the community.
Secondly, McDonalds keep track of the risk they have to faced which are country
risk, industry risk, facility risks combination of country and risk groundwork. Country
risk is where the country is located following the cultures and religion. Industry risk is the
supplies produce.
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OBJECTIVES
SCOPE
In this report, we are able to identify the general environment and industry conditions
by using the Porters Five Forces Model. Besides that, we managed to inspect the
companys internal and external environment including the companys key competitors
by using the SWOT analysis which are the companys strength, weakness, opportunity
and threats. We were able to performed the value chain analysis and search into the
business level strategy and found out that the companys strengths, core competencies,
weaknesses, opportunities, threats and current environmental conditions. We have listed
out the key selection criteria to make it easier for us to identify the affect selection of
strategies to recommend to the company to make repair the companys weakness.
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BACKGROUND
McDonalds operation began in March 1953, the restaurant was owned and opened
by two brothers named Richard and Maurice McDonalds. The first restaurant operated at
Phoenix, Arizona. The original mascot was a man named Speedee with a chefs hat on
top of a hamburger-shaped head. Later on Ronald McDonalds replaced the mascot when
the company first filed a U.S trademark on a clown-man having puffed-out costume legs.
May 4,1961 McDonalds first filed for a U.S trademark on the name McDonalds
with the description Drive-In Restaurant Services which then continue to upgrade up
to December 2009. The company then filed a logo trademark of a double arched M
symbol on September 13th the same year. The M symbol was rejected on September 6 th,
1962 and appeared on November 18th, 1968 when the company applied for a U.S
trademark.
On April 15, 1955 businessman Ray Kroc franchised a restaurant in Des Plaines,
Illinos making it the ninth McDonalds restaurant overall and because of many
remodeling the restaurant was then demolished in 1984. Ten years before the company
became a listed on the public stock market, Ray Kroc bought the two brothers equity and
then expand it worldwide. Ray Kroc is also known to be aggressive in the business line,
he tried persuading the brothers to leave the industry and later on Ray Kroc and the
brothers had a conflict over the business control and finally the restaurant was then
demolished in 1976 and the site was sold to Juan Pollo restaurant chain. The area became
the headquarters for the Juan Pollo chain, mcdonalds and Route 66 museum. With the
McDonalds expanding their horizon, the company has become the symbol of
globalization and the spread of American way of life.
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SITUATIONAL ANALYSIS
One approach to do natural filtering for the particular business or firm is through General
Environment Analysis. When we talk about General Environment Analysis, we are
actually covers the bigger picture of the external environment (MACRO) of the business
or firm. There are six segments of General Environment Analysis which are known as
PESTEL. PESTEL is stand for politic, economy, social, technology, environment and
lastly legal requirement. This six components are normally beyond the ability to control
of the firm itself however can give an immense effect to the firm success or failure.
Because of that, it is essential for Pizza Hut to take this analysis as their consideration on
their business strategy setup, their product development furthermore on each decision that
they need to make.
In this global financial crisis, McDonalds managed to maintain its sales and performed
better compared to its competitors by reducing product price and offering value meals.
Furthermore, McDonalds is expecting its delivery service business to increase as its new
call center can handle more orders. On the other hand, McDonalds implements
systematic price variations that are affordable for different countries. This systematic
price variations affects the purchasing power of consumer in Malaysia where most of
them are from middle-class of income.
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practicing to protect the community and natural resources that saves a lot of energy and
recycles as much as they can which are affected with their activities and products made
from the recycled materials and eliminated several million pounds of packaging. In
addition, it is however to note the important of how the weather and physical terrain
which are giving the remarkable effects of the demands and what types of products made
available according to the seasons. Other than that, the changes of temperature and
humidity can cause the effect of climatic conditions that can affect products in a foreign
market. Conclusion, the environment effects were really important to keep their standard
and status of good in many areas in the country.
In this global financial crisis, McDonalds managed to maintain its sales and performed
better compared to its competitors by reducing product price and offering value meals.
Furthermore, McDonalds is expecting its delivery service business to increase as its new
call center can handle more orders. On the other hand, McDonalds implements
systematic price variations that are affordable for different countries. This systematic
price variations affects the purchasing power of consumer in Malaysia where most of
them are from middle-class of income.
Next component is Social. People live in different society that might generate various
beliefs and values. In December 1980, McDonalds arrived in Malaysia and it known as
the largest global fast food chained. In Malaysia, McDonalds targeted to various social
class which are lower-middle and upper-middle. In order to let lower middle class to
enjoy McDonalds fast food, menu of Mac had been provided and its value gives more
convenience for the middle class. For the upper-middle class purchasers, they could
purchase the big value meal which is more expensive than Mac value. Since Malaysia is a
Muslim country, when McDonalds entered Malaysia, the chain decided not to launch its
pork burger to better suit the Malaysia's religion rules. For instead served chicken, fish
and beef burgers. And also according to Muslim law, while preparing chicken or beef that
goes into burgers must be slaughtered.
Technology is an element that constantly changing. This is due to the rapid advancement
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of research and development of all industry, include the fast food industry. Not to be left
in this wave of evolution, McDonald also have its own technology in producing its meal
to the users. The technology adapt by McDonald include the food production, operation
and its marketing strategies. With these current technology, they able to meet demand for
about millions customer all over the countries include Malaysia. However, there is always
room for improvement that can be done to make it better fast food provider. For instance,
McDonald can apply more advance cookware that can shorten the cooking time of their
menu as we can see customer need to queue up in a long line especially during public
holiday and so on. Furthermore, a sophisticated cooking ware or method need to replace
current deep fried cooking ware. It is need to make their food more nutritious, yet it
instant or take less time to produce. Hence, it can cleanse McDonald bad reputation as
fast food provider that leads to obesity among youngsters. On the other hand, to serve
customer better, McDonald might have a new ordering system by using devices on table
itself. The interactive table which allow customer itself, can design their own burger,
choose their own favorite meat, patty, can grooming the burger itself with the meat offer
by McDonald. Next, the food will be appeared on the table itself without a long wait.
With the advance of technology, these are not possible and it can boost satisfaction of
their customer.
Malaysia is a nation of Islamic which Muslim had occupies the largest part of its
population. For the purpose of capture the market, McDonalds believe that believes in
working with government, local businesses, suppliers and authorities throughout their
worldwide operations. In Malaysia, all the food served by McDonalds must be Halal
because they are bound with the Syariah law. The rigorous inspections will be
implementing by the Muslim clerics to guarantee ritual cleanliness; the chain was
rewarded with a Halal (clean and acceptable) certificate, indicating the total absence of
pork products (Journal). Therefore, McDonald's had gained Muslim consumers
confident.
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The Threat of New Potential Entrants
The new potential entrants pose as a threats and its increase the competition of the
industry. The greater the threat of new potential entrants, the lesser the attractiveness of
an industry as it is in the manufacturing industries. Due to obviousness of product
differentiation and high switching cost, new competitors not easy enter the market. If
there is a retailing industries as the McDonalds, the new entrants such as Carl's Junior
and Wendy's can easily enter the market, because there is lack of product differentiation
and low switching cost.
Threat of Substitutes
McDonalds is encountering high threat of substitutes and high switching cost. This is
because it has many competitors in fast food chain such as Kentucky Fried Chicken
(KFC), A&W, Marry Brown, Burger King, Carls Jr and even roadside burger stall. They
deliver almost similar function and value to their consumer. In this fast food industry,
they compete on the quality of the product, time consume and value of money. Each of
these fast food chain restaurant offers limited choice of product. Therefore, switching cost
occurs often in fast food industry.
Threat of Rivalry
In Malaysia, as well as around the world, even though the success of McDonalds in fast
food industry, competitive rivalry is still very high. The chain faces threat of rivalry with
many current and potential competitors such as KFC, burger king, and marry brown, they
all engage in international business, fast food franchise, dine in and delivery service,
which creates strong competition. KFC can be said to be the biggest rival to McDonalds.
KFC sells similar products for example burger, fried chicken, potato fried, and more. It is
also about the same size as McDonalds are in competition in Malaysia. Not only that,
there are many local burger outlet compete with McDonalds that provide similar food
and offer lower price to customers that prove to be threats to the chain development. This
situation would make customers to switch to others outlet to search for burger.
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Bargaining Power of Buyer
It could be said that McDonalds has a very low risk as the customers were not taken a
little much over their product offerings, price and place of distribution. Despite that,
customers also can easily change their interest to another (low switching cost) similar fast
food restaurant which could satisfy their demands. Similarly, McDonalds also has plenty
of substitutes (strong force) fast food restaurants where the other suppliers also offerings
the same that can convince their potential customers whether to choose to buy from their
products or not which it could be also empower the buyers. Hence, this situation can also
be said that the fast food industry fail to fit the satisfaction of the buyer according to their
demands. As a result, the fast food industry must level up their products that can match
with other successful product and product packages that go globally. In addition to this
matter, the customer feedback which requires the whole market can change the
perspective of the customer based on their brand and preferences on which fast food
restaurant they would choose to suit their satisfactory. In the final analysis, an
international of market research of taking any necessary strategy and with the new
adaptations should be made to increase the customer loyalty and acquire the customer
satisfactions.
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Threat of Substitutes
McDonalds is encountering high threat of substitutes and high switching cost. This is
because it has many competitors in fast food chain such as Kentucky Fried Chicken
(KFC), A&W, Marry Brown, Burger King, Carls Jr and even roadside burger stall. They
deliver almost similar function and value to their consumer. In this fast food industry,
they compete on the quality of the product, time consume and value of money. Each of
these fast food chain restaurant offers limited choice of product. Therefore, switching cost
occurs often in fast food industry.
SWOT ANALYSIS
Strength
Recognized brand
Almost items on McDonalds menu is favor by the customers. But the most demand fast
food lovers of McDonald are their burger, and ice cream. Sundae and mcflury. In
consequences, McDonald using this opportunity to serve more ice cream by set up kiosk
that just sell ice cream and drink in certain places especially mall.
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This NGO is one of McDonald CSR. It is already served the community well by its
continuous and effective charity.
Weaknesses
- Health issue
McDonalds provides large amount of calories in each of its meal. This is
always linked in many health campaigns which recommend people to avoid
consuming fast food with facts that most of Malaysian is having obesity.
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McValue Dinner is not available for delivery. Thus, the price of a meal will be
slightly expensive.
Opportunity
McDonalds success is indisputable. The chains services return delivered to the customer
had made it be successful fast-food chain in Malaysia. This is because McDonalds
provide convenience place to eat for their consumers. In addition, the technology
McDonalds use in services area able the chains consumers order through online and
phone. However, McDonald's still have an opportunities to expand their business to new
market can even attract potential consumers. Since McDonalds target market is who no
time to prepare for their foods for their children. Nowadays, as people are more concern
in health, healthy and fresh ingredients such like subway products which sandwiches
include a lot of vegetables and very nutritious should be introduce. Other than that,
McDonalds should also introduce meals that only can purchase for a limited time like
McDonalds in Japan. This strategy will create a fresh try and attract customer to try a
new taste of McDonalds as the McDonalds products is good for health.
Threat
The competitors such as KFC, Subway, Burger King, and others has increase the
competition and made the competition for market share in Malaysia become tighter.
Consumer have no brand loyalty with one brand because many options of fast food being
offered for them. In order to gain the customer loyalty, McDonalds need to spend a large
amount of money on their advertisement and promotion. Otherwise, the concern of health
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has become a main treat for McDonalds as most consumers concern on healthy foods.
The sales of McDonalds will be decrease because the fast foods are considered as
unhealthy due to too oily.
Primary Activities
Activities which relate directly to the actual creation, manufacture, distribution, and sale
of a product or service to the firms customers.
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Support Activities
Diagram 3.3 Value chain model from Michael E.Porters Competitive Advantage.
3. Technology Development
McDonalds enter five-year IT support deal with Fujitsu.
Inbound Logistics
The sources of McDonalds Malaysia raw materials are most of it supply from its origin
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country, United States (U.S). Each ingredient comes from different supplier such as a
beef supplier is handled by Lopez Food, chicken supplier by Keystone Food, fish supplier
by Kenny Longaker and others. Meanwhile for potato, McDonalds assesses from three
(3) different farms that are harvesting high quality potato to produce World Famous Fries.
McDonalds provides good source of food to make their menus healthy and preferable.
To make sure the raw materials compliance with Malaysias Halal requirement, Jabatan
Agama Kemajuan Islam Malaysia (JAKIM) with other Halals governance bodies in U.S
have took into consideration and inspection the raw food from the country to supply halal
food in Malaysia. According to the Halal issue, MacFood Services in Malaysia always
make sure they are following the requirement. MacFood Services(M) Sdn Bhd is the
main supplier for McDonalds Malaysia. They supply processed food to each McDonalds
restaurant in Malaysia.
Outbound Logitsics
Serving the customer comes with two ways, either serve the customer in the restaurant,
serve from the counter, or by McDelivery, which the food is delivered straight to your
door. For serving customer in the restaurant, there are Standard Operating Procedure that
practice by all the staff. While for the McDelivery, not only call to place order, there is
well attractive, helpful system which customer can place their online with the least
requirement of registered account. With that, they easier to have their favorite food
without go the any McDonald restaurant branch.
Operation
In Malaysia, the McDonalds would have converted the raw materials into the finished
goods, such as the burgers, fries and pie. McDonalds are able to hire production and
factory workers at a lower wages as the supply of factory workers is plentiful due to they
are an internationally recognized company. The quality control of the McDonalds are
guarantee since they checked their machinery whether there are any defects and they also
emphasis on the hygiene of factory workers for avoid any food poisoning or toxicity in
their products. The image of McDonalds will be affect, if there is any foreign element in
the food products that result the consumers to be ill.
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Marketing and Sales
McDonalds has been using the same strategy as the other fast food industry commercials
which are includes the social media advertising, print and media, TV commercials, radio
and all types of marketing strategies that successfully attract their potential customers and
caught their attention. Moreover, they also joined an extensive advertising campaign as
one of the sponsor in any sport events as it can be seen on the billboards and signage or
any local events with their logo available everywhere. Evidently, the televisions are
playing the central role in the companys advertising strategy for decades and still
maintain to attract their target customers. Therefore, the amount that McDonalds based
on their advertising budget with a higher cost was spent on the sales and promotions,
sponsor events and public relations. However, these strategies that this company used and
spent is successfully encounter most of their target customers segment with their
marketing message in order to communicate and promote their food products.
Service
McDonalds provide services to their customers in multiple ways. Such as:
1. McDonalds web page: http://www.mcdonalds.com.my/
2. Online Delivery services: https://www.mcdelivery.com.my/my/
3. Social media page like Twitter, Facebook and You tube:
https://www.facebook.com/My.McDonalds/ https://twitter.com/mcdonalds_my?
lang=en https://www.youtube.com/user/McDonaldsMalaysia
4. Customer Service Hotline Counter 1 300-13-1300
The chain strive hard to reach their customers. Regardless of services that provide to
customers or complaint from respondent, McDonalds doing well to fulfill customers
expectation in service area.
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I. Need for family value meal
II. Healthy Perception
- fast food is unhealthy
III. Unlimited Reach
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KEY SELECTION CRITERIA
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