McDonalds has seen it’s sales fall for many reasons: in China, there were quality issues as suppliers sold them bad meat. This is a problem for globalized businesses, an increasing supply chain but how to guarantee quality? In Japan an aging population means less consumers in their target age group. In North America consumers have become more health conscious and are eating more at competitors like upmarket burger restaurants Burger Shack. McDonalds has begun closing loss making restaurants in Japan and United States. However, in the UK McDonalds has improved sales through innovation aiming more products at local consumers and improving it’s image. Can this be copied elsewhere without upsetting existing customers and franchisees?
McDonalds has restructured it’s business so that instead of being split into 4 sections – America, Europe, Asia Pacific (Japan and China) and Other – where McDonalds are grouped according to geography they will be grouped according to their similarities – America, International Lead Markets (Australia, Canada and the U.K). High-Growth Markets (China, Poland, South Korea), Foundational Markets (Japan). This makes sense as Japan is a highly developed country with low economic growth and poor growth opportunities for McDonalds, whereas China is a developing country with higher economic growth and high growth opportunities. McDonalds can have separate strategies for China and Japan, however Poland and China are thousands of miles apart, there maybe cultural and competition issues related to each market so separate policies will still be needed.
McDonalds has innovated in the United States by introducing Create Your Taste burgers which allows customers to customize their burgers. This has been unpopular with many customers and franchisees. Customised burgers means service has slowed down. Franchisees have had to spend $100,000 on the equipment which allows customization which has angered franchisees. McDonalds has also introduced upmarket Sirloin burgers which may not increase sales as McDonalds has a poor reputation in the US. McDonalds could try to only use organic products but this raises many issues: how to guarantee supply as McDonalds would be buying vast quantities; creating new menu’s takes time; prices would surely have to increase to such a degree that the products would be price elastic. This would upset customers and franchisees.
McDonalds wants to sell some 3,500 restaurants it owns to franchisees. If new plans are not successful attracting new franchisees will be hard, and in fact may mean that more franchisees decide to close existing restaurants. It may make more sense for McDonalds to target growth by taking over local competitors in the fast food industry who are more upmarket and sell healthier foods, but allow them autonomy.
In conclusion innovation brings with it opportunities and threats. New customers can be targeted but maybe at the expense of existing customers. McDonalds may have to manage decline which means less successful franchises also go out of business. Instead McDonalds could takeover other fast food businesses in growth markets.
626 words.
Criterion A – has defined globalisation and innovation. Clear knowledge. Relevant examples to do with McDonalds are chosen which shows how they are struggling in global terms and how they are reacting. Some good analysis. Examples of how they are innovating.
Criterion B – lot of examples given, seem well applied and relevant.
Criterion C – Arguments seem logical, justified with reasonable conclusion. Perhaps could be more developed.
Criterion D – is good though it seems that the candidate has set out to meet specific criteria (section for definitions, section for stakeholders) so maybe lacks some coherence. Conclusion is about innovation, should be more clearly linked to globalization.
Criterion E – Franchisees (group or individual?) covered in some depth, though tends to look at it in negative way, but seems appropriate. Customers covered in less depth, have erred on side of caution. Individual?
by
saketradhayahoocom (student)
