Strategy Formulation Case Studies Example
Functional strategy cannot be formulated in isolation. Different functional areas are interdependent and interwoven, and there must be synergy between strategies across functional departments. For instance, marketing strategies may relate to financing and hiring of employees in the organization( human resources). Likewise, manufacturing of products is closely linked to R & D and must work in harmony with overall business plans. Succinctly, functional strategies must be synergized to contribute to corporate level and business level strategies.
McDonald has successfully combined different strategies to achieve a competitive advantage in the industry. It has invested in innovation, and R&D to develop customized products for indigenous taste and disseminated sophisticated advertising in local languages. The motto of McDonald, " Think Global, Act Local", has effectively integrated HR, Marketing, R&D and other functional tasks. The international success of the organization is attributed to franchising to local people in terms of services and product. McDonald has made a fine balance between globalization and localization; it is the basic thought that has reflected in all functional tasks and keep then intertwined towards common goals.
McDonald has positioned itself as a low-cost food chain. Globally, its pricing strategy closely resembles penetration policy. Offering affordable menu cards in almost all countries of operations, it has preferred to gradually increase the prices( less than one percent in one time) to retain the customers who are food sensitive. Succinctly, its response to escalating food costs has not been rapier and prices have not been raised in that proportion.
McDonald has focused on increasing the market share and adopted pricing technique according to the markets. For instance, the food retailer has focused on high-income group in Vietnam by adopting a skimming pricing tactics. It has selected a location convenient to car drivers and offered drive-thru service
In short, McDonald pricing models have not been limited to skimming or penetration pricing. It has efficiently combined different types including value pricing( by offering combo meals), product line pricing, promotional pricing, depending on demand elasticity of products and other economic factors. However, it has used penetration model to launch a new product or to enter a new market. For instance, penetration pricing was used when it entered in the coffee market in India.
Considering the empirical evidences and literature, it is clear that adopting penetration pricing model can help the organization to increase sales volumes and market share. The organizations may enjoy economies of scale with increasing demand and reduce costs significantly.
Transaction cost theory has been developed for the purpose of analyzing comparative costs of adapting, planning, and monitoring tasks under alternative structures. As per the approach, decision makers must weigh-up the costs of in-sourcing (executing a transaction within firms) and outsourcing (passing the operation to a third party).
In March 2005, McDonald attempted to outsource order-taking( drive-thru customers) to the professional call centers. The fundamental was to improve the client service by outsourcing the task to people with better communication skills. This instance resembles a resource-based approach to outsourcing. Additionally, the retailer, following core competency approach, has outsourced IT operations to Xerox owned ACS.
Ahlstorm, D., & Bruton, G. (2009). International Management: Strategy and Culture in the Emerging World. Mason: Cengage Learning.
Ferrell, O., & Hartline, M. (2012). Marketing Strategy. Mason: Cengage Learning.
Hall, L., & Torrington, D. (1998). The Human Resource Function: The Dynamics of Change and Development.
Lagorio, C. (2005, March 11). Outsourcing DriveThru. Retrieved March 11, 2015, from cbsnews.com: http://www.cbsnews.com/news/outsourcing-drive-thru/
Mahmoud, A. (2013). Avoiding Price Wars: Exploring Discounting and Strategies that Determine Your Rates. Retrieved March 11, 2015, from hotelexecutive.net: http://hotelexecutive.com/business_review/2497/avoiding-price-wars-exploring-discounting-and-strategies-that-determine-your-rates
Manisha, S., & Deepa, S. (2011). Human Resource Outsourcing: Analysis Based on Literature Review. International Journal of Innovation, Management, and Technology , 2 (2).
Paul, J. (2011). International Business. PHI Learning.
Thompson, J. L. (2005). Strategic Management: Awareness and Change. London: Cengage Learning.
Torrington, D., Taylor, S., & Hall, L. (2002). Human Resource Management. Pearson Education.
VietnamNet Bridge. (2014). Mc Donald Tries to Conquer Vietnam with Skimming Strategy. Retrieved March 11, 2015, from Vietnamnet: http://english.vietnamnet.vn/fms/business/94227/mcdonald-s-tries-to-conquer-vietnam-with-skimming-strategy.html