br />Assignment
Report of case study on Management Strategies
of
McDonalds Corporation
Jun 2006
Table of Content
INTRODUCTION 1
ORGANIZATIONAL BACKGROUND 1
LOW THREAT OF ENTRY 2
Economies of scale, Learning Curve and Experience Curve 2
Brand differentiation 3
Cost and technology advantage 3
Access to distribution channels 4
HIGH THREATS FROM SUBSTITUTES 4
Price and quality 4
Better performance/service 5
Different industry(Similar product) 5
HIGH THREATS FROM THE BARGAINING POWER OF BUYERS/CUSTOMERS 6
Forcing down prices 6
Customers wants and needs 7
Healthy life style 7
Fast-and-Convenient Service 7
LOW THREATS FROM THE BARGAINING POWER OF SUPPLIERS 8
Forward integration 8
LOW RIVALRY AND COMPETITION AMONG COMPETITORS 8
Competitors 8
Industry growth 9
Product/Service 9
HIGH THREATS FROM STAKEHOLDERS 9
Local Communities 10
Social Welfare 10
Interest Groups and Suppliers: Environmental protection 10
RECOMMENDATION 11
CONCLUSION 12
REFERENCES 13
APPENDIX 14
Introduction
This report is to study McDonalds Corporation using Michael Porters Analysis on
strategies used to deal with the competitive environment.
Organizational Background
McDonald restaurant established in Illinois in 1955, more than 30,000 restaurants in 119
countries worldwide, serving 47 million customers per day. In December 2005 reached a
record high of more than US$20 billion revenue and 398,000 employees. McDonalds is the
largest quick service restaurant organization in the world1.
This report uses the Five Forces Model from Michael Porter to analyze McDonald
Corporation Ltd.
Source: Michael Porter Five Forces Model, www.brs-inc.com/porter.asp
This model studies the relationship between competitors within the same industry, such as
potential competitors, suppliers, and buyers. Give alternative solutions to enable the
management to develop an appropriate strategy.
Five forces analysis looks at five key areas namely “The threat of entry”“, “The threat of
substitutes”“, “The power of buyers”“, “The power of suppliers”“, and “Competitive
rivalry”“.
McDonald is a multi-national corporation; they are big in size with broad target markets.
McDonald belongs to stuck in the middle”“ case, with no competitive. McDonald mainly
uses analyzer type of strategy, combination of competitive strategies used, such as: cost
leadership, differentiation, diversification, and backward integration. They also use growth
strategies in corporate level like, concentration, backward integration and diversification
strategies used. Those strategies used to against competitive environment will be
illustrated in following sections.
Low Threat of Entry
Economies of scale, Learning Curve and Experience Curve
As new entrants may bring new capacity to the industry, a desire to gain market share and
substantial resources, these may bring threat to an existed company. New entrants need to
spend huge costs in purchasing and setting up machinery for running production, huge
costs in advertising and R&D. With McDonald 52 years of well-found learning curve, new
entrants have less advantage in handling costs spent. For the hamburger fast-food industry,
