Through three main techniques, franchising, company owned restaurants and joint ventures, McDonald's used intense, fast expansion into overseas nations. With most global restaurants derived from franchise contracts, McDonald's management depended on this technique to assist in accepting a fresh eating style into unfamiliar markets. It has utilised a mixture of two methods to regulate its operations expanded abroad. Most controls would fall under the strategy of regulations, which means that control resides with headquarters establishing processes and policies for the subsidiaries to follow. This report has discussed the challenges prevailing in its structure and analysed its business context by implementing the idea of CATWOE and based upon the analysis and systems thinking approach, it will suggest some changes to be implemented into the system in order to counter outlined circumstances.
McDonald's has risen from a few branches in the U.S. to a global brand having outlets in almost every nation in the globe. Known for reasonably priced fast food and service meals, they have made it even difficult to become both a recognizable brand that attracts clients to the strength of their name and brand, but also to adapt to local traditions and traditions in such a manner that they can be integrated into the neighborhoods in a powerful fashion (Talwar, 2018).
Fig. 1. Major challenges in McDonald’s; Source: Self
The previous report has presented a detailed description of business challenges faced by McDonald’s, operational functionality, and has also discussed the way systems thinking approach has been used by this business organization to evaluate the situation, process and has provided a compatible, holistic as well as effective strategic ways to bring this organization back on right track. It has also discussed various approaches for dealing with growing concerns and improving its performance through several new and innovative approaches.
Fig. 2. Rich picture stating the system complexity in McDonald; Source: https://medium.com/@jainaditya017/supply-chain-management-of-mcdonalds-india-58e1064274b5
The above rich picture clearly states the major challenges and complexity involved in the business structure of McDonald’s in running its operations globally. Some of the major issues as indicated by above rich picture clearly involves a lot of mediators in between consumers and higher authorities. Other issues accounts increased competition, poor leadership, old marketing strategies, and absence of reaction to changes in franchise and customer needs. Apart from all these things, lack of autonomy has also played its role in making the situation more critical. All the policies regarding consumer needs, expansion etc. are taken by the headquarter without involving franchise and stakeholders. This led to the strategic problems which needs to be considered properly in order to continue the organizational growth and success. The growing saturation rate in most of the major economies and the fight between corporate and franchise autonomy must be resolved with extreme urgency and by allocating the needed funds.
CATEWOE is the acronym given to the factors like consumers, actor, transformational processes, world view, owner and environment grouped together (Mayoza et al., 2018). It is a problem-solving method that seeks to examine a problem from six unique perspectives. This in-depth strategy needs and will further help in developing a better perspective of the challenges mentioned in the above rich picture and will also help in finding out the ways to deal with them.
McDonald's serves millions of customers every day. The company's customers in developed countries enjoy great facilities, such as quality food, free Wi-Fi, and frequent customer discounts. There's the perception issue for clients. During a fast-food age, the restaurant chain became popular with customers (Teichert et al., 2015). Fast food comfort fits perfectly in a post-industrial society where time was a premium commodity. The McDonald's menu remained unchanged and, to some extent, quaintly unhealthy and old-fashioned, even as competitors gained popularity with millennials with their fast casual food.
Another element that McDonalds has to concentrate on is quality, service and cleanliness to cope with its strategic issue. A fresh set of inner checks must be developed by the business. Factors that made McDonald's invincible were quality, service and cleanliness. Customers are no longer pleased with them, however, understanding of clients is very crucial for a company's well-being.
Usually they are workers within an organization. They guarantee a method of conversion occurs. They are accountable for performing job and are engaged in implementing system modifications. McDonald's current sales of the same store that on the US market are small or declining. In long term, low or negative sales per store might be highly detrimental to McDonald's.
Transformation is the change that is brought about by a scheme or process. McDonald's has grown larger and larger worldwide through its franchisees. This method has made it simple anywhere in the globe to access its services (Sharma, 2019). The business has implemented home delivery in some nations where customers can order food from their workplace or home and wait for delivery. These strategies made keeping clients and market share easy.
It is seen as the most important step in the analysis of CATWOE. With other (conflicting) interests, stakeholders often have distinct solutions to the same problem. The firm is undoubtedly seen as one of the leading fast food businesses. In the fast food sector, it has become a low-cost food business. Health problems such as obesity are connected with the business. And due to increasing awareness for health related concerns, it is facing a significant reduction in its sell globally. McDonalds is also trying to provide their products with data (Kapooria, 2017). Their local business units create and enforce nutrition information, which can be found on the product packaging, in collaboration with their worldwide nutrition team. The packaging offers data in a straightforward and clear format on important dietary values, allowing clients around the globe to make menu decisions that fit their preferences. Other communication instruments, such as advertising on television and on the World Wide Web, are also used to provide data on the quality of their food products.
This generally relates to an organization's proprietor, businessman or investor who wishes to create changes and chooses whether to begin or stop a project. They have the greatest officials as decision-makers. McDonald's franchise policy has reinforced its place on the market, making it accessible worldwide and enjoying important market share. This has reinforced its market competitiveness. The business buys raw materials in bulk, which means that they work in economies of scale. It therefore sells its products at rates that are smaller than its rivals. In petrol filling stations, the business has chosen to open stores where they reach many customers. For advertisements like TV, radio, cinema, and internet advertisements, the business utilizes a lot of cash. Customer-friendly services such as free WI-FI were a marketing strategy to attract more customers. Ownership of the company is owned by franchisors and other shareholders. Eighty percent of McDonald's had been franchised by the end of 2010. Nearly 65 percent of all McDonald's restaurants worldwide are under franchise. 21% Licensed to overseas subsidiaries and approximately 20% owned by the business.
McDonald's social responsibility affects the activities of the company. It is damaging to the environment. The firm is accused of such damaging conduct because it is not decomposable for certain substances such as drink glasses and polystyrene used for meals. McDonald's has the Rain Forest policy outlining its dedication to buying beef that limits tropical deforestation ("McDonald's faces significant challenges in bid to serve AI with fries", 2019). Continuous use of natural resources may result in an ecosystem imbalance. Another element that McDonalds has to concentrate on is quality, service and cleanliness to cope with its strategic issue.
The problems identified and existing in this organization needs some immediate as well as long term action plan to meet the organizational objective. Thus, the whole recommendation part has been divided into two parts namely, short term recommendation and long term recommendation.
McDonald's core competencies lie in quality, service and cleanliness so it should perhaps create a fresh provision of inner checks by implementing laws, inspection and penalty in the event that the conditions are not fulfilled.
There is a need to reduce the system complexity by providing some autonomy to franchise owners and involve them or take their consent in matters subjected to consumer policies and services
It should review the aggressive expansion strategy and should focus on considerably decreasing development in US stores while at the same moment continuing to grow in overseas nations while being flexible in those nations with their menus. McDonald's should concentrate on emerging markets like India and China.
McDonald's attempted to alter the menu, but it was ineffective. I think it needs to put more emphasis on conducting detailed market research and policies should be based on the consumer-oriented approach, i.e. crowdsourcing. It will assist them in comprehending business requirements, possibilities, priorities, and will likely result in more favourable reactions from customers.
McDonald's has evolved from a single food outlet in California into a gigantic fast food industry worldwide. Through its unique operating strategies, expansions have been accomplished. "Franchise Policy" has been instrumental in extending the market of the company. The skilled workforce has succeeded in introducing contemporary methods to promote McDonald's products to reach many customers around the globe, making the company the world's second biggest fast food industry. However, along with its expansion all across the globe, there has reportedly been some issues which has greatly impacted its business growth. This study has successfully analysed some major challenges and also suggested ways to fix them as well as fulfilling both short and long-term accomplishment.
Kapooria, P. J. (2017). Customer Relationship Management: Key to Customer Sovereignty. Idea Publishing.
Mayoza, L., Agus, A., Lili, W., & Rizal, A. (2018). ANALYTICAL BUSINESS DEVELOPMENT ON NEON TETRA (PARACHEIRODON INNESI) ORNAMENTAL FISH CULTIVATION. GSJ, 6(7), 938.
McDonald's faces significant challenges in bid to serve AI with fries. (2019). Retrieved 18 July 2019, from https://phys.org/news/2019-04-mcdonald-significant-ai-fries.html
Sharma, R. (2019). 3 Big Problems Facing McDonald’s New Change Agent. Retrieved 18 July 2019, from https://www.cheatsheet.com/money-career/3-big-problems-facing-mcdonalds-new-change-agent.html/
Talwar, J. (2018). Fast food, fast track: Immigrants, big business, and the American Dream. Routledge.
Teichert, T., Effertz, T., Tsoi, M., & Shchekoldin, V. (2015). Predicting brand perception for fast food market entry. Theoretical Economics Letters, 5(06), 697.
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