Strategy in Global Context

Strategy in Global linguistic context January 29 2010 Submitted To Mr. Nirmaalya B Biswas Submitted By Jaskaran Singh Apoorva Veeksha Rai Robin Gupta ? Table of Contents decision maker Summary3 Introduction4 outdoor(a) Environment5 cozy Assessment6 organisational Purpose8 Strategy Analysis and Choice9 Current Strategy11 Conclusion11 Bibliography12 Annexure-113 EFE intercellular substance13 Annexure-214 Per capita income14 Annexure-315 IFE matrix15 Annexure-416 The native External (IE) matrix16 Annexure-517The luxurious Strategy intercellular substance17 Annexure-618 QSPM18 ? Executive Summary McDonalds is a signature restaurant range of mountains serving 58 million customers for each one(a) day tout ensemble over the world by its 31000 restaurants in 119 countries. This narrative views the various internal and immaterial factors affecting the McDonalds prior to that the cut through gives a brief introduction about McDonalds, its evolution and the way it entered the Indian mart. Evaluation of the response McDonalds is giving to the internal and external factors has been calculated through the Internal constituent Evaluation matrix and External Factor Evaluation matrix.We piss employ the I/E matrix and the eminent schema matrix to melodic lineulate strategies. We formulated two possible strategies i. i. refinement in the grocery and product discipline. The strategies that we formulated using the above utter matrices have been evaluated by using the Quantitative Strategic Planning Matrix to know which dodge is more(prenominal) viable. Furthermore, the report provides an insight into the organizational social function of the McDonalds. Current strategies and recommendations include the analysis of the strategies that McDonalds is using to hold and conserve its competitive advant senesce.Introduction McDonalds is the largest burger speedying viands chain which has its trading operations in 119 countries. It serves around 58 million customers every(prenominal) day through its more than 31,000 restaurants (McDonalds, 2009). McDonalds was marked by two br opposites Dick and mac McDonalds in the year 1940. Ray Kroc became the first franchisee as he capable a restaurant in Chicago. Restaurant became so popular among the fundamentaille that in just four years the number of McDonalds restaurants reached 100. QSCV i. e.Quality, avail, Cleanliness and take account became the motto of the company and the execution of the same is one of the primary reasons why McDonalds is what it is today. In 1961, Ray Kroc payed $2. 7 million to Dick and Mac McDonalds and acquired all the rights reserved of McDonalds. McDonalds was growing at such(prenominal) a fast speed that in 1963, 500th restaurant was circulate. In 1965, McDonalds went public and in 1967 first restaurant across the borders of ground forces was exposed in Canada and since so McDonalds has never looked back.Presently McDonalds has its restaurants in 11 9 countries of the world (McDonalds History, 2009). McDonalds got the approval to enter in the Indian grocery store in the year 1991 itself but it took 5 years to necessitate the grocery, needs of the people, adjust the calling card according to the culture and to build a squ be come forth chain. McDonalds finally entered India in 1996 as it loose its first restaurant in New Delhi. McDonalds is a conjunction venture in India, which was signed in April 1995 and is managed and owned by Mr. Amit Jatia (MD of Hardcastle Restaurants confidential Ltd. who heads the operations in South and West India and by Connaught Plaza restaurants mystical Ltd. which looks after the operations in noth and East India. There argon 158 restaurants in the whole country today ( close to McDonalds, 2009). McDonalds has always believed in thinking global and acting local. Before entering into the Indian grocery store McDonalds made to changes in its menu as in India complain and pork barrel ite ms bear non be offered because of the religious sentiments of the people so they had to be eliminated from the menu.Thus, devising India the first country where McDonalds does not serve beef and pork in its burgers. External Environment External factors are the factors which do not exist within the realm of line of business itself and on which business has no control at all. We have use the EFE Matrix to conduct an external strategic precaution audit (Annexure-1 shows the EFE matrix). The inwardness weighted invoice of McDonalds is 3. 04 this shows that it is performing with regards to the external factors in a very good manner. agree to Technopark report in 2009 the food effort in India stood at $13 one thousand million and estimates say that by the end of 2011 the fast food industry alone will grow to $6. 3 billion (Economic Times, 2010). The Technopark report to a fault says that within the organized food servicing which is growing at a furious pace of 20% per annum th e fast helping restaurants are the windy growing. This forms a huge probability for McDonalds and it is determined to grab that opportunity with both the hands as it is planning to open 180-190 more restaurants in the country by the year 2015 (fiscal Express, 2009).McDonalds is determined to expand its market share in the industry which is growing at a fast pace. The new(prenominal) reasons which are triggering this expansion are the mettlesome early days world in the country and sneak in urbanization and per capita income. These reasons develop the unseasoned opportunities for McDonalds. Population living in the urban areas has resemblingwise emergenced to 28% in 2004 and is expected to be increase by another(prenominal) 12% by year 2025 (Indian Demographic Scenario,2025, 2009). In urban areas the number of ternary income households is change magnitude.Thus females, like their husbands, spend time away from home which has attach the way the females use to mange fam ily meals. People have started opting for food away from home. Per capita income in India is alike increasing very rapidly and moreover according to the homo Resource Institute report Structure of poverty in India which was published in the 2004 around 53% of the household income in India is spent on food, beverages and around Rs. 35000 crores is spent on eating out annually (Annexure-2 shows the leaven in per capita income). Thus, the fast food industry has good prospects ahead.Other bring up external factor that forms an opportunity for the fast food industry as a whole and also for McDonalds is the fact that 30% of the creation of the country is the jejuneness which is in the age group of 10-24 years of age who are generally inclined towards the fast foods (Youth in India, 2009). Rising cognizance about the health forms one of the greatest threats for the fast food industry. The cause has been changing towards the natural foods and the warm service restaurants will hav e to adjust themselves to sustain their market share. McDonalds has slowly started to adapt to this change by introducing salads.For the foreign fast food chains like McDonalds, KFC etc. patriotism watchs a constant threat for example when in 2005 the States denied a diplomatic visa to the Gujarat Chief Minister Mr. Narendra Modi, various protests were launched by the BJP party activists against the Ameri toilet MNCs. Low barriers to entry in the fast food industry is also a potential threat for the players in the market because if the barriers are low and the offset opportunities of the industry are high, new players will be willing to enter into the market and thus increasing the competition.Internal Assessment Internal factors are the factors which exist within the realm of business itself and on which business exercise certain measuring of control. We have employ the IFE Matrix to conduct an internal strategic management audit (Annexure-3 shows the IFE matrix). The total w eighted score of McDonalds is 3. 14, which sum that it is performing with regards to these factors in an highly well manner. McDonalds is a well known and a accept trademark across the globe. This familiarity of the brand among the masses forms one of the biggest strengths for McDonalds. efficacious preparation chain is one of the other profound strengths for McDonalds. In India 50,000 crores of food produced gets washed-up because of lack of proper infrastructural facilities of transportation and storage. McDonalds had set up an high-octane supply chain by investing 450 crores in supply chain management even before opening its first restaurant in India to implement its Quality, Service, Cleanliness and Value principle (About McDonalds, 2009). For any business, employees form the greatest summation and it is even truer in case of McDonalds.The proficient work force that McDonalds has is one of the key reasons why it is one of the key players in the market today. The ability to provide the order within one minute is one such manifestation of this proficiency. The efficiency of the employees is also increased because of the various educate programmes they go through which help them in performing their tasks quickly and in a die way but also enhances their capabilities which help them rise in their careers. Around 40% of the employees in middle management of McDonalds in India are the ones who had joined as crew members. subscriber line surround is very dynamic no business drive out afford to remain static it has to work continuously towards innovation. Nearly 80% of McDonalds restaurants in India give certain serving of their profits for seek and development activities. This is another grave strength for McDonalds. McDonalds has its operations in 119 countries one of the key reasons for the McDonalds is the ability to make itself a part of the community. In India also McDonalds has been a part of various social welfare activities like raising fund s for charity on Worlds Children Day, destiny in setting up pulse polio to eliminate polio.McDonalds strategy revolved around customization of the menu to suit the Indian palate. (About McDoanlds, 2009) matchless of the key weaknesses that McDonalds has is that it faces a high attrition ratio as high as 83%, which means that company has to invest gold for educational activity of new employees again and again. (Business Standard, 2009) McDonalds often faces protests from milieualists for promoting practices harmful to the environment through the disposal of tons of packaging material and through the effects of cattle ranching.Another internal weakness for McDonalds is that is yet to gain on the trend towards organic food. Even though it has reacted to the changing preferences of the consumers by introducing salads in the menu but it is still to make the most of the opportunity. Organizational Purpose Clearly defined organizational design is very important for an organization as it describes the basis for its existence. It works as a guiding force on the basis of which every decision is taken. The organizational purpose can be known with the help of three elements which are 1. wad . Mission 3. Objective McDonalds vision is to be the worlds best quick service restaurant experience. (emailprotecteds, 2010) Being the best means offering excellent quality, service, cleanliness and value, so that it makes each customer in every restaurant smile. It has been the execution of the motto of QSC and V i. e. Quality, Service, Value and Cleanliness that has made McDonalds a success story. It strategizes to attain best value by providing blanket quality products at reasonable prices. McDonalds mission is to be its customers favorite charge and way to eat.To fulfill this McDonalds has been using the concentration strategy where in it is trying for greater market penetration by attaining high aim of efficiency in servicing its customers with a curb product line. livery of QSC and V on one hand obtains the customers satisfied and on the other hand also economises the competitive edge over the competitors. The delivery of QSC and V is accomplished by taking care of every minute expound whether it is the unique cold chain network which makes sure that the customers get sweet-flavored products at low cost or the supply chain management which makes sure that customers are offered good quality products. About McDoanlds, 2009) Moreover to keep the customers satisfied McDonalds continuously updates its menu. Strategy Analysis and Choice In the IFE matrix the total weighted score came out to be 3. 14 and in the EFE matrix the total weighted score was 3. 04. This means that McDonalds is responding to the internal and external factors in a good way. We have used I/E matrix to come out with a strategy for McDonalds on the basis of its score in the IFE and EFE matrix (Annexure-4 shows the I/E matrix). The basis f I/E matrix are the total weighted sc ore of the IFE matrix which is represented on X axis and the weighted score of EFE matrix is represented on Y axis. The I/E matrix is divided in three regions which have strategy implication. Quadrants I, II and IV are the regions of grow and build. Firms which position in Quadrant III, V and VII can be managed with hold and maintain strategy where as the organizations positioned in Quadrant VI, VIII and IX can be managed with harvest and divest strategy. McDonalds is placed in the I/E matrix it comes in the Quadrant-I because of its score in the IFE and EFE matrix which is 3. 4 and 3. 04 respectively. The business organizations which are positioned in Quadrant I can be best managed through grow and build strategy. The Grand Strategy Matrix is another widely used tool for formulating strategies. A firm can be positioned in the four quadrants on the basis of market growth and competitive position that it holds in the market. When we placed McDonalds in the Grand Strategy Matrix it wa s positioned in Quadrant I mainly because of its high market share of 18% in the highly fragmented quick service restaurant and also because of rapid growth of the quick service restaurant industry itself. Financial Express, 2009)Thus, McDonalds is in a strong strategic position (Annexure-5 shows the Grand strategy matrix). For the firms in Quadrant I market penetration, market development and product development are take into account strategies. By using the Grand strategy matrix and Internal/External matrix we have come up with two strategies which are expansion in the market i. e. opening more restaurants in the country and the other strategies is product development which is developing the new products and continuously updating the menu in order to pull more customers.Need for product development arises specially because of the rising health understanding among the people particularly in the educated class. To identify which strategy is more feasible we have used the Quantitat ive Strategic Planning Matrix popularly known as QSPM. QSPM is a strategic management tool to evaluate which of the possible strategies is better for the business organization. In QSPM weights and attractive scores are given to each factor according to the amount of effect it can have on each strategy and then the product of weight and attractive score is calculated.The product for whichever strategy is greater is selected. We used two strategies expansion in the market and product development, the total attractive score for expansion in the market is 3. 37 and for product development is 2. 60. Thus, opening more restaurants is a more viable strategy than product development. Currently McDonalds has 157 restaurants all over India, majority of these are in the metropolitan cities or in larger cities like Chandigarh, Kanpur, Jaipur so it has very less or limited presence in humbleder cities.So, McDonalds should target these cities as they form a large potential market for it. With th e per capita income on rise, high youth population in the country and increasing urbanization the smaller cities can prove promising markets for McDonalds. If we look at the current plans of McDonalds it becomes unclouded that they have spotted this opportunity as they are planning to open 180 restaurants by the year 2015 majority of these restaurants will be opened in smaller cities. Retail initiatives are being taken up by petroleum companies like Bharat Petroleum Corporation. Financial Express, 2009) McDonalds can capitalize on this trend and can set up more outlets near the petrol stations on the highways and can thus increase its presence. Current Strategy McDonalds is currently focusing on expanding its radix in the Indian market. By the year 2015 McDonalds is planning to start around 180 more restaurants, majority of which will be opened in Tier II cities where McDonalds has very limited presence. (financialexpress, 2009) So, McDonalds is trying to penetrate very deep into the Indian market.McDonalds is also trying to come up with new products so as to run across its customers. Nearly 80% of McDonalds restaurants in India give certain percentage of their profits for research and development activities which helps McDonalds in coming up with new products and efficient service. When McDonalds entered the Indian market it had to re-engineer its menu and since then it has included several products especially for the Indian customers as McDonalds believes in thinking global but acting local.McDonalds should continue with its strategy of expanding its base into the Indian market as still there are lot of untapped regional markets in the country especially in the Eastern India where it has less presence as compared to the other parts of the country. McDonalds should also concentrate on the smaller cities as large amount of population (nearly 177 million people) lives in smaller cities. So there is a huge market potential for McDonalds in Tier II and III cit ies. (Population in small cities, 2010) Conclusion The Indian Quick Service Restaurant industry is growing at a very fast pace.Per capita income, urbanization and youth population is also increasing in India. So India is a very potential and attractive market for the quick service restaurants. McDonalds should make the most of the opportunity and should penetrate deep into the market by increasing the number of restaurants in India. It should concentrate on increasing its base in the smaller cities which can form potential markets for McDonalds. References About McDonalds. (2009). Retrieved 2009, from mcdonaldsindia. com http//www. mcdonaldsindia. com/aboutus. html Brief history of McDonalds. (2009).Retrieved December 22, 2009, from mcspotlight. org http//www. mcspotlight. org/company/company_history. html Business Standard. (2009). Retrieved January 2010, from business-standard. com http//www. business-standard. com/india/storypage. php? autono=290494. Economic Times. (2010). Retri eved January 2010, from economictimes. indiatimes. com http//economictimes. indiatimes. com/News/articlelist/1715249553. cms Financial Express. (2009). Retrieved 2009, from financialexpress. com http//www. financialexpress. com/news/mcdonalds-india-to-open-180190-more-restaurants-by-2015/466279/ Financial Express. 2009, June). Retrieved January 2010, from financialexpress. com http//www. financialexpress. com/news/mcdonalds-to-invest-rs-400-cr-in-india/321481/ Financial Express. (2009). Retrieved January 2010, from financialexpress. com http//www. financialexpress. com/news/bpcl-plans-to-grow-in-retail-initiative/101536/ financialexpress. (2009). Retrieved 2009, from financialexpress. com 3. http//www. financialexpress. com/news/mcdonalds-india-to-open-180190-more-restaurants-by-2015/466279/ McDonalds. (2009). Retrieved January 2010, from aboutmcdonalds. com http//aboutmcdonalds. om/mcd/our_company. html McDonalds History. (2009). Retrieved January 2010, from aboutmcdonalds. com htt p//aboutmcdonalds. com/mcd/our_company/mcd_history. html Population in small cities. (2010). Retrieved January 2010, from infochangeindia. org infochangeindia. org/ India/Cityscapes/Slumdogs-and-small-towns. html emailprotecteds. (2010). Retrieved 2010, from mcdonaldsindia. com http//www. mcdonaldsindia. com/workat. html Youth in India. (2009). Retrieved 2010, from www. popcouncil. org http//www. popcouncil. org/projects/TA_IndiaYouthSituationNeeds. html Annexure-1 EFE Matrix S. No.Key External FactorsWeightageRankWeighted Score 1. 2. 3. 4. 5. 1. 2. 3. Opportunities Increasing urbanization broad(prenominal) youth population Rise in per capita income Indian quick service industry expected to be around $6. 3 billion High simile of household income spent on food and beverages. Threats Rising health consciousness Anti American sentiments Low barriers for entry 0. 10 0. 15 0. 10 0. 15 0. 10 0. 10 0. 10 0. 20 1. 00 4 3 3 4 3 4 2 2 0. 40 0. 45 0. 30 0. 60 0. 30 0. 40 0. 20 0. 40 3. 04 An nexure-2 Per capita income Annexure-3 IFE Matrix S. No. Key Internal FactorsWeightageRankWeighted Score 1. . 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. Strengths High brand awareness Efficient supply chain Community involvement Efficient workforce World class training programmes Investment in research and development Quality of food Customization of menu Weaknesses High employee turnover slight variety Environmental issues Yet to capitalize on trend towards organic food 0. 10 0. 10 0. 05 0. 10 0. 09 0. 10 0. 10 0. 08 0. 10 0. 08 0. 05 0. 05 1. 0 4 4 3 3 4 4 3 3 2 3 2 1 0. 40 0. 40 0. 15 0. 30 0. 36 0. 40 0. 30 0. 24 0. 20 0. 24 0. 10 0. 05 3. 14 Annexure-4 The Internal External (IE) Matrix McDonalds Strong(3. 0 4. ) Average (2. 0 2. 99)Weak (1. 0 1. 99) High (3. 0 4. 0) Medium (2. 0 2. 99) Low (1. 0 1. 99) Annexure-5 The Grand Strategy Matrix Annexure-6 QSPM Expansion in the marketProduct Development Key FactorsWeightAS TAS ASTAS Opportunities Increasing urbanization0. 1040. 4010. 10 Hig h youth population0. 1540. 6010. 15 Rise in per capita income0. 10- Indian quick service industry expected to be around $6. 3 billion by 20110. 1530. 4520. 30 High proportion of household income spent on food and beverages0. 1030. 3020. 20 Threats Rising health consciousness0. 1020. 2040. 40 Anti-American sentiments0. 0- Low barriers to entry0. 20- 1. 00 Strengths High brand awareness0. 1020. 2010. 10 Efficient supply chain0. 1030. 3020. 20 Community involvement0. 05- Efficient workforce0. 1030. 3020. 20 World class training programmes0. 0920. 1810. 09 Investment in research and development0. 10- Quality of food0. 1020. 2030. 30 Customization of menu0. 0820. 1640. 32 Weaknesses High employee turnover0. 10- Less variety0. 0810. 0830. 24 Environmental issues0. 05- Yet to capitalize on the trend towards organic food0. 05- 1. 00 Total Attractive Score 3. 37 2. 60