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Management Accounting

  1. Evaluation of internal environment to assess internal structure, capabilities and skills set of organization

VRIO Analysis of McHotel

  • Valuable: McHotel considers human resources as its highly valuable resource that have major experience of handling the work operations in McDonald’s and in the attractive and friendly ambience. The staff members are given with specialised training in order to help them in gaining required and adequate range of skills to remain flexible while performing their tasks (Boella 2017). It establishes values for the customers as well as for its staff members. The members of the staff are encouraged to grab the opportunities that are present in the market that further helps them in developing their career as it adds to their overall skills bundle. This multi-cultural exposure helps in attracting large number of customers and made them feel satisfied with the services offered by McHotel by gaining understanding with regard to their needs and culture.
  • Rarity: McHotel would gain ability to establish an effective customer image by ensuring sustainable satisfaction of customers for the long period of time. This will help the firm in setting the standards for its services and also make sure that the customer requirements are fulfilled by providing them with the adequate products and services and making sure that there is adequate presence of multi – cultural staff members who are highly motivated to accomplish excellence while working under pressure as well (Roy et al. 2018). It makes use of centralized hierarchical system that laid emphasis on various structural elements of the offered services. with multi-skilled and multi-cultural staff members who are constantly motivated to achieve excellence even under pressure. This is regarded as an additional rare benefit.
  • Inimitability: The major inimitable benefit of McHotel is concerned human resources that have made successive addition to the work experience gained in McDonald. The workforce is highly competent and is ready to accomplish desired objectives in a stipulated period of time. It is considered highly difficult for the competitive firms of McHotel to build an effective image of brand and also to executive efficient training programs for the staff members.
  • Organized: The firm undertakes suitable measures to ensure standardized performance of services. For this, McHotel plans and implements training policies and programs to raise competency and develop multi cultural skills among the staff members. This helps the organization in meeting goals and objectives of the firm and in making effective contributions to the profitability of McHotel operating in UAE.

McKinsey’s 7S analysis of McHotel

This analysis will help in exploring the major 7 elements of McHotel operations and therefore, will provide the idea about the internal environment of the company.

  • Strategy – McHotel makes use of segmentation strategy and its target audience includes families and millennials. It laid emphasis on the requirement of the customers and undertake suitable measures to attract them by implementing various discount schemes and offers. Its collaboration with several tour operators and airways will help the firm in maximising its cash flows and earnings (Fader and Toms 2018). Moreover, it can make use of low cost strategy to attract more number of customers in UAE.
  • Structure – The levels of management must be maintained in the organization and subordinates must remain answerable to their superiors. This hierarchical structure will help in maintaining adequate roles and responsibilities among various levels and sectors of the organization such as customer services, housekeeping and operational functions (Ugoani 2020).
  • System – This element includes maintenance of adequate database of clients, electronic payment mechanism, electronic security system, online placing of orders, etc. McHotel would be requiring a Management Information System from where it can revive financial reports in a less amount of time and helps in building understanding of the profitability and revenue amounts.
  • Skills – The human resources must be well equipped with the skills that are customer centric, multi cultural values and ethics and undertake suitable measures to ensure strong relationship with the customers.
  • Style – The management follows a style that goes from bottom to top. This style ensures active participation of employees in the effective decision making process of the organization and motivates the staff members to present innovative ideas to improve performance.
  • Staff – HR department consider effective recruitment process to select the best suitable employee for the particular job. It ensures requirement of minimum training as the staff is mainly directly hired from the workforce of McDonald (Ahmed and Ahmed 2019). HR looks after the presence of certain skills in the candidates like problem solving attitude, interaction skills, etc.
  • Shared Values – McHotel must carry out its operations keeping in mind the safety and sustainability of the environment. It must not discriminate its employees on the basis of caste, creed, age, sex and persuade them to do participate in the organizational policies and procedures.
  1. Porter’s Five forces model for McHotel

Five forces analysis helps in evaluating the external environment and the competitive forces that may significantly influence the operations of the company. These five forces are listed below –

  • Competitive rivalry – This acts as a strong force that may affect the operation of McHotel in UAE. The competition is intense as the fast food market is completely saturated. In case of McHotel, the extreme force of competitive rivalry is related to the following external factors –
  • Large number of firms
  • High level of aggressiveness among firms
  • Low switching cost
  • Low product differentiation
  • Bargaining power of customers or buyers – This factor deals with the demand and influence of customers on the business operations of the organization. In case of McHotel, the extreme force of bargaining power of customers is related to the following external factors –
  • Low switching costs
  • Large number of firms that provide substitutes
  • High number of providers
  • Bulk purchases of rooms in hotels by airlines, tour operators, etc.
  • Bargaining power of suppliers – The suppliers of the firm affect the company’s operations with regard to the availability of rooms. The bargaining power of suppliers in case of McHotel is considered to be weak because of the following external factors –
  • High number of suppliers
  • Involvement of hotel management
  • High, in case the rent of the property is charged at higher rate
  • Threat of substitutes – The McHotel corporation must consider the substitutes as a major concern that may significantly affect the operations of the corporation. This element undertakes the potential effect of the availability of substitutes on the growth prospects of the firm. Following are the external factors that makes it necessary to consider this force as a stronger one –
  • Large availability of substitutes
  • Low switching costs
  • High performance to cost ratio of substitutes
  • Threat of new entrants – Entry of new firms will influence the market share of McDonald and also affect its financial and operational performance. This element deals with the effects of new players on the existing or the present firms. There is moderate threat of the entry of new firms on McHotel and is based on the following external factors –
  • High amount of variable cost of capital
  • Large cost of development of brand
  • Low switching costs
  • High economies of scale

It can be concluded from the Porter’s five force analysis that there is intense competition in the market because of low switching cost and large availability of substitutes. In case of Hotels, the fixed cost in relation to the maintenance of rooms is very high affecting the profitability of the firm. In house development of McDonalds in McHotel will helps in restoring the income at a high amount. Moreover, arranging various types of conferences, seminars and exhibitions will help in fetching continuous income in the form of rents. It can also undertake planning to develop a shopping complex that includes the shops for beauty and health treatment shops will help in achieving greater amount of income. It must ensure attractive location for the construction of hotels in different regions that can be easily accessed and helps in providing high quality services to its customers.

  1. Strategic management plan

Porter’s generic strategy analysis of McHotel

As per the generic strategy model of Porter, organizations are available with the three basic strategy options that may help the firm in achieving competitive advantage, namely, cost leadership, focus and differentiation (Islami et al. 2020). Organization that follow cost leadership strategy can achieve advantage in the form of rise in market share by offering products and services at lower prices. On the other hand, organizations can achieve profits by differentiating its products from the other rival firms.

  • Cost leadership strategy – This strategy is concerned with charging lower price for the services in order to gain competitive advantage over the other rival firms in the industry (Kharub et al. 2019). McHotel can undertake the following measures with regard to cost leadership strategy –
  • It can improve its sales revenue by offering discount schemes to the customers
  • Creation of brand awareness will help in grabbing economies of scale
  • It must target audience in distinct segments to increase its market share
  • Differentiation leadership strategy – McHotel can add unique features to its services to remain at a better place in comparison to its competitors. These are the measures that McHotel can introduce –
  • It must ensure the opening of McDonald restaurant in McHotel for 24x7
  • Attractive ambience and designing of the rooms
  • Effectively address health and beauty related treatments
  • In order to establish brand image, it must undertake aggressive advertising
  • Focus strategy – The organization may lay emphasis on using the key resources for modernization and expansion of operations in different markets (Bergendahl et al. 2018). McHotel can undertake the following measures to perceive focus strategy –
  • Value offering in relation to best ambience, taste of food, services quality that completely satisfies the needs of the customers
  • Rapid changes in the designing of rooms
  • Peaceful environment

Ansoff matrix analysis of McHotel

This analysis concentrates on current situation of the company, its products and markets. It takes into consideration the various ways to grow with the help of existing products or with the development of new products and market (Loredana 2017). There are four dimensions in which this matrix is analysed. These are as follows –

  • Market penetration – This dimension considers growth prospects with regard to existing products and existing markets. It has been analysed that McHotel can arrange for various international business and public programmes like summits, etc. It can raise awareness with the help of advertising campaigns and by developing special discount schemes for new customers. In order to grow brand image, it can start sponsoring for some international and local based events.
  • Product development – This dimension is concerned with the growing aspects with regard to development of new products and dealing with the existing markets. McHotel can add new interior designs and furniture that completely resembles McDonalds. It can significantly shift from disposables to plates and dishes having unique designs (Said 2020). It can also introduce taxi or luxury cars for the convenience of important guests.
  • Market Development – This dimension is concerned with promoting the existing products and services in the new markets. McHotel can easily open new branches in unexplored cities that have high growth prospects and have liking for McDonalds (Langert 2019). It must look for the continuous feedback from the customers in order to enhance its operations.
  • Diversification – This dimension is concerned with development of new products along with exploring into new markets. McHotel can upgrade itself as the environment friendly hotel of UAE. It can adopt electronic car charging station and solar energy panels to build public image in the new markets.

Bowman’s Strategy Clock analysis of McHotel

This strategy helps in analysing the different aspects regarding how a corporation can place its product or services on the basis of two dimensions. One dimension is concerned with price and other is concerned with perceived value (Echchakoui 2018). Different combinations of these dimensions led to the development 8 strategies out of which a corporation can go for one which will help it in accomplishing competitive advantage.

  • Low price and low added value – Consumer here perceive lower value in spite of lower price. McHotel can remain competitive by keeping its prices low.
  • Low price – This strategy is concerned with cost minimisation associated with economies of scale. McHotel can keep lower profit margins and high volume of output will help in generating high profits.
  • Hybrid – This strategy comprises of some element of low price and some differentiation. Major objective is to persuade the customers that the corporation is providing effective value addition through this combination. McHotel can target mobile users by using internet and e-commerce based measures.
  • Differentiation – The major objective of this strategy is to fetch customers with the highest perceived value. McHotel must enhance operational efficiency and brand identification with the help of advertising. It must undertake measures to collaborate with the highly competent suppliers and tour agencies to further improvise its business processes and undertake effective CSR activities (Curras – Perez et al. 2018).
  • Focused differentiation – The objective of this strategy is to place the product at the highest price level where the customers will opt for the product because of the high perceived value. McHotel can add premium services that will help it in charging higher prices and must ensure training of the staff members to improve the satisfaction of customers (Konuk 2019).
  • Risky high margins – This strategy is concerned with raising the prices so high without adding any value to the services. It is considered risky as raising so much prices will lead the loss of customers as customers will shift to the competitors’ services being offered at lower price and with better perceived value.
  • Monopoly pricing – This strategy is concerned with setting the price in a market where the corporation is the sole provider of such products and services. The corporation will face difficulty in charging whatever price it wants, as the government intervenes in such monopoly types businesses to protect the customers from overpricing (Lambert 2017).
  • Loss of market share – This indicates that the company has made a loss in market share as it is unable to offer the products that are required by the customers and also charging very high price than its competitors.

After analysing the recent market situation of UAE, it is suggested that McHotel must undertake differentiation strategy. It must improve its operational efficiency and brand image with the help of advertising. It must design the rooms and the overall ambience in such a way that allows the customers to repeat their stay. It must offer good quality food and promote environment friendly activities and always ask for the customer feedback so that it can get the idea about the scope of further enhancements required.

List of several strategic steps that can be considered effective while formulating business plan for UAE

  • McHotel must duly comply with all the laws and regulations with regard to environment and society of UAE (Alameeri et al. 2018).
  • It must try to minimise the use of paper for official work and rather used internet based sources.
  • It must install energy efficient equipment in its premises and avoid wastages of food items.

References for McHotel Management Analysis

Ahmed, K.U. and Ahmed, B.F. 2019. External Recruitment Practices of an Organization.

Alameeri, A., Ajmal, M.M., Hussain, M. and Helo, P. 2018. Sustainable management practices in UAE hotels. International Journal of Culture, Tourism and Hospitality Research.

Bergendahl, J.A., Sarkis, J. and Timko, M.T. 2018. Transdisciplinarity and the food energy and water nexus: Ecological modernization and supply chain sustainability perspectives. Resources, Conservation and Recycling133, pp.309-319.

Boella, M.J. 2017. Human resource management in the hotel and catering industry. Taylor & Francis.

Currás‐Pérez, R., Dolz‐Dolz, C., Miquel‐Romero, M.J. and Sánchez‐García, I. 2018. How social, environmental, and economic CSR affects consumer‐perceived value: Does perceived consumer effectiveness make a difference?. Corporate Social Responsibility and Environmental Management25(5), pp.733-747.

Echchakoui, S. 2018. An analytical model that links customer-perceived value and competitive strategies. Journal of Marketing Analytics6(4), pp.138-149.

Fader, P. and Toms, S. 2018. The customer centricity playbook: Implement a winning strategy driven by customer lifetime value. Wharton School Press.

Islami, X., Mustafa, N. and Latkovikj, M.T. 2020. Linking Porter’s generic strategies to firm performance. Future Business Journal6(1), p.3.

Kharub, M., Mor, R.S. and Sharma, R. 2019. The relationship between cost leadership competitive strategy and firm performance. Journal of Manufacturing Technology Management.

Konuk, F.A. 2019. The influence of perceived food quality, price fairness, perceived value and satisfaction on customers’ revisit and word-of-mouth intentions towards organic food restaurants. Journal of Retailing and Consumer Services50, pp.103-110.

Lambert, T. 2017. Monopoly Capital and Entrepreneurism: Whither Small Business?.

Langert, B. 2019. The Battle To Do Good: Inside McDonald’s Sustainability Journey. Emerald Group Publishing.

Loredana, E.M. 2017. The use of Ansoff Matrix in the Field of Business. Annals-Economy Series2, pp.141-149.

Roy, S.K., Shekhar, V., Lassar, W.M. and Chen, T. 2018. Customer engagement behaviors: The role of service convenience, fairness and quality. Journal of Retailing and Consumer Services44, pp.293-304.

Said, L. 2020. Concept of collapsibility/new interior design approach: a design framework for understanding and designing change and impermanence.

Ugoani, J. 2020. Effective Delegation and Its Impact on Employee Performance. International Journal of Economics and Business Administration6(3), pp.78-87.

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