Good Case Study On Strategic Management
McDonalds is a force to reckon with in the fast food business by revenue globally. However in the not so distant past, it’s been faced with what is being termed as a millennial challenge –losing its edge over its competitors over the fight to capture the ever growing young population. The fast food giant has been losing these young consumers to its rivals who among others include eating place like Chipotle Mexican Grill. This young generation seems to be looking for healthier foods and restaurants that provide flexible menu options for slightly above the rate of MacDonald’s specialty combo meal. The sharpest decline in sales was reported last year since ten years ago. Sales United States, which has 40% of all McDonald’s outlets, has been stagnant or declining for the past two years. This decline in sale has seen the giant restaurant replace its head of the US division for the second time in two years. The restaurant’s woes have also affected its stock that has been narrowly trading –with a slump of 2% recorded in the past year while that of their competitors has been on the rise.
Why is it that you are probably not eating at McDonald's? How would you define the 'Millennial' Challenge?
With the increasing campaigns on the determinants of health, most of the young people like me have started to be keen on the health lifestyle. The reason being Scepticism of fast food due to their correlation with some diseases and, the growth of the foodie culture -which lays emphasis on fresh ingredients and some global image concerns about quality of the food at McDonalds. The millennial have increasingly started to adopt fresher and healthier foods and a wide variety of foods and are ready to pay more for these. The millennial challenge is a difficulty in understanding what the generation of mid-teens to 30 tastes, preferences, style needs and how to come up with a product that will suit them. This millennial generation has a wide range of choices than the past generations. They are loose with their brand loyalty, and this poses a challenge to brands to earn and keep the loyalty of this generation.
For your generation, what is the main problem with McDonald's? Are you tired of hamburgers generally? Or are you just tired of hamburgers at McDonald's?
Are we tired of hamburgers generally? No. Are we tired of McDonald’s hamburgers? Yes. Although many will tell you they have nostalgic memories of the burger chain, most of this generation rarely visits the McDonalds anymore. The major factor is that it has lost its relevant with the young generation with the emergence of the fast casual chains. A survey conducted by theconsumer report magazine on approximately 32000 subscribers rated McDonald’s like the worst tasting among 20 rival burger chains. Taste and preference are critical factors. This group of youths are ready to go greater lengths for a tasty meal. McDonalds no longer appeals to the young people and these millennial have looked to the fast casuals who have tried to cultivate the image of social responsibility that appeals to more young people by offering organic and more natural ingredients. The burger chain is also grappling with a dangerous global image in regard to the quality of its food. After being accused of selling expired meat in China, a ripple effect in almost all of the regions it serves in terms of driving the sales down over a considerable range has been observed. Being accused of violating sanitary regulations and subsequent closure of some of its branches in Russia has not helped the situation.
Beyond just your own impression, what FACTS are cited in the article about the competitive position of McDonald's? Which of these facts does McDonald's most need to focus on?
Despite the all the recent woes, the McDonald’s is still the largest restaurant company by income. Having more 14000 outlets in the United States and over 35000 globally which is a huge a market share compared to its relatively small competitors. It still has serves 27 million daily in the united states alone. The farm has also had a stake in a fast casual business, so it has a considerable experience. The firm has also recognised its missteps, and it’s trying to set up a learning lab to work and learn what people want so that they can develop a custom product. The fact that it still serves 27 million customers daily is a reason enough for the restaurant to shrug off the current challenges. The firm should take the time to learn the current crop of customers’ needs and preferences and then come up with a bold move to suit the customers and once again spur growth. The introduction of the lab and subsequent introduction of the mobile app to provide information about its brand information on the digital platform is a positive step to reach the young audience.
In terms of the organizational life cycle, is McDonald's now starting to decline? Or is this setback just a dip in a much more open-ended process?
In terms of the organizational life cycle, one thing is for sure, McDonald’s is in the maturity stage, and it has been on that stage for quite some time. At this stage, it’s normal for a firm to gradually and continuously lose its ability to keep itself compact and under control. Loss of control more likely in a franchising model like McDonald’s because the design minimises control of some of its outlets. If the recent civil unrest, quality concerns are anything to go by, it may be a dangerous trend and without countermeasures, these can lead to decline and eventual demise. However, this is unlikely to reflect in this case as this big organization is deeply rooted, resilient and capable to extract and utilise its vast resources to reorganise and chart a new course.
Coca-Cola Company, PepsiCo and Dr Pepper Snapple,Soft Drink Company resolve to work with an aim to reduce calories intakeby 20% by the year 2025 done through encouraging water, less fattybeverages and reducedconsumption ratios of their existing brands. This initiative marks an unusual pledge by beverage manufacturers in the fight curb obesity at a time when the industry is under an intense study of its products and the part they play in the condition. The pact between the American Beverage Association and the Alliance for a Healthier Generation, started by the American Heart Association and the other NGO is the Clinton Foundation to improve the healthiness of children.
Why are soda companies suddenly cooperating? Why is an agreement like this being made at an industry level, rather than separately and competitively by individual firms offering rival products with fewer calories?
The sudden cooperation is a rare occurrence among these three brands. In regards to corporate social responsibility, every brand looks to devise ways to improve the lives of the citizens. Mostly, to be competent in matters of great importance to health, all concerned parties have a duty to put down their differences and adopt a common stand to curb the issues at hand. The move can also be an acknowledgement that the soda industry has unanimously contributed to the rise in the obesity rates and area joining hand to do right by it. However the real reason for this can be the increased scrutiny of their products in regards to their linkage with obesity and the imminent legislation that will diminish their earnings which already has been affected by a considerable reduction in soda consumption. The voluntary agreement is made jointly to try and create a real image of “being concerned” or a regrettable thereby trying to minimise the attack on their respective brands. This alliance is a tactic called competition. It enables the expansion of the market and setting the standards and developing products –in this case, the perceived healthy products the three companies plan to launch, and that compete using the same standards set.
The story mentions a couple of NGOs. What kind of organizations are these? What role do they play in mediating an industry agreement?
A non-governmental organization (NGOs) sometimes called civil society are institutions that are not allied to the government and do engage in profit-making ventures. They are a citizen-based group that work without interference from the government. NGOs, sometimes called civil societies, are organized nationally and global levels to serve particular purposes. Being not allied in nature, NGOs offer a sense of neutrality, trustworthiness and genuine and goodwill towards a particular course. They are the voices of the masses. They play a role in ensuring compliance by creating the pact with the industry players towards a course or proposing alternate neutral solutions.
Though it is a substantial step towards the ongoing fight against obesity, to a large extent it is a serious commitment. The companies have pledged high volume of resources towards this course. Providing calories counts on all 3 million vending machines in restaurants and other soda points of sale, requires a serious deal of funds. First acknowledging their products have an adverse effect on the masses is bold. The companies have pledged to withdraw the sale of sodas in elementary and middle schools which is a huge market for these firms and resort to selling less attractive products like water, milk and fruit juice. Also agreeing to limit the sale of soda to only diet drinks in high school –one of the most famous drink consumption place is a pretty serious step.
German Auto Parts
ZF Friedrichshafen AG of Germany decided to acquire US rival TRW Automotive to form the globe’s second-largest automotive dealer by sales. The car parts maker looks to build scale at the time when there are technological changes in the worldwide automobile business. The joint group will be a one of the industry’s major player boasting with a workforce of about 138 employees. This vast human resource will develop and equip a technology-hungry auto industry with systems to power and control electric automobiles, vehicles connected to the Internet, and systems for autonomous cars. Big car makers such as Volkswagen depend on suppliers such as ZF, TRW and Bosch to convey not just single parts but comprehensive systems.
Normally companies worry about losing bargaining power when their suppliers merge. What do automakers like VW have to say in this case? Do they really mean it?
When a company entirely buys out another company it does so because of a number of reasons. Some of thisreason in many cases many not favour the companies they supply their products because on the new status of the company that has acquired another. In this case, VW welcomes the merger terming it as a positive thing to have a strong partner with resource capability to meet emerging challenges in the automotive industry such as controlling the automobile, autonomous driving, driving safety, that all require considerable amount of resources. The acquisition of one company by another involves taking over it's the coming together of two corporate firms with the objective of combining their resources so as to accrue some benefits associated with the economies of scale. I think the VW board member means what he says. Before the merger, the two companies sold distinctive products to VW the two independent companies serves same market but are not immediate competitors. The both specialize in the different products and so this merger is just for complementary purposes and to place the supplier strategically in a position to withstand and be at par with the projected technological advancement.
In fact, what kind of scale is involved here? Is the merger objective of these auto suppliers to increase their bargaining power? What is the objective? What kind of scale is involved here, if not oligopolistic economies of scale?
An acquisition like this one can occur to serve a number of purposes. It may occur for diversification, to consolidate resources, increase the market share, eliminate competition, and another important reason may be to accrue the economies of scale. In the case of economies of scale, joining of two firms cuts duplications of tasks and roles which will lower the cost of doing business and in most cases these is seen as a win-win situation as the lower operating cost is passed down to the consumers. However, some are wary of acquisitions and mergers as they tend to eliminate competitions thereby monopolizing the market that gives the firm a position that can be used to exploit customers. In this case, the motives of ZF Friedrichshafen AG are less of oligopolistic economies of scale and more about technological capability and diversification. As the application of technology in the automobile industry soars, auto parts suppliers will have to have access to massive resources and skills to remain relevant and able to meet the industry needs. Hence the automaker giant like VW are genuinely not worried nor concerned by such merger of the supplier but openly welcomes it as it sees it for what it really is which is more of capacity building and nothing more.
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