Analysis of McDonalds Renovation Strategy Shahnam Taheri

April 2012 1-Introduction:

McDonalds Corp. is the largest fast foods retailer in the world. McDonalds corporation has dominated the fast food sector for over five decades. McDonalds operates 32,737 restaurants in more than 117 countries on six continents. Its historical growth in revenues was amazing. The average number of customers served per day was 64 million people in 2010.The companys net income within 5 years from 2005 ($2,602 million) almost became doubled in 2010 ($4,946 billion). The sales volume in global level had 5 %( $16,233) and EPS had 11 %( $2.4 billion dollar cash dividends) growth accordingly. (10, 6) Although this company is well managed and organized but we believe that there are some important issues against the sustainable growth of company which will level off over long run if it doesnt make right strategic decision. The company faces three strategic issues: (A) How to deal with growing fierce competition in fast food market like Burger King, Wendys, KFC, Taco Bell and new competitors such as Tim Horton in Canada (B) How to deal with financial problems such as high franchise fees in contrast with geographical expansion goals, and (C) How to deal with worldwide economic crisis when everyone is hurting from recession and fighting to remain profitable as it has been. In order to achieve and sustain its competitive advantage, McDonalds Corp. Burger chain is pumping $1 billion into renovating its Canadian restaurants. The changes, including enlarging the
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drive through, installing fireplaces and flat-screen TVs, will create "more inviting and relevant" restaurants. Dining rooms will be divided to accommodate for large groups and those who want to linger over the free Wi-Fi access. The company will be using new color schemes, stone and tile accents and wood tones. (1) The purpose of this report is to examine the link and relation of the of renovation strategy in McDonalds restaurants in Canada with strategic definitions and investigating that if that strategy is in alignment to the organizations vision and mission.

2- Renovations Strategy and Strategy Concepts Mintzberg, in his article, presents five definition of strategy as plan, ploy, pattern, position, and perspective and considers some of their interrelationships.(2,11) We will examine the McDonalds Renovation strategy specifically and other strategies implicitly mentioned in the newspaper with those five definitions of strategy concept. (A) Strategy as Plan Strategy is a plan- some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation or something equivalent- a direction, a guide or course of action into the future, a path to get from here to there.(2, 11)In McDonald case, spending $1 billion (financial resources) for renovation is an intended course of action for keeping the current customers and attracting potential customers to McDonalds restaurants in response to sever competition in the fast food industry. The stores which are renovated so far in Toronto and Montreal succeeded in bring more customers as well as doubling sales (1, 1) (B) Strategy as Ploy

As plans, a strategy may be a ploy; too, really just a specific manoeuvre intended to outwit an opponent or competitor.(2, 11) The secret of McDonalds is its willingness to innovate. For example its breakfast menu, salads, Chicken McNuggets and Mclean Deluxe sandwich are example of ploy against its traditional competitors like Burger King, Wendy and KFC.McDonalds has given away 50 million free cups of coffee in the last two and half years in an attempt to steal away market from Tims which Yarbrough said dominates 45 percent of breakfast sales.(2, 1) Giving free cups of coffee is a strategy as a ploy against Tim Horton in Canadas coffee and breakfast market. Internet access, and comfortable sofa and cosier environment, and a special place for children play could also be are example of ploy against Burger King, Wendy, Starbucks and Tim Hortons.

(C) Strategy as Pattern Strategy is also a pattern that is constantly in behaviour over time. McDonalds perpetually markets new products and styles to attract its customers. Egg McMuffin and McCoffee and renovation restaurants plus quick service and friendly environment so that customers can linger longer, can attract more customers to stay longer and buy more are the examples of McDonalds pattern as a strategy. For McDonalds, consistency of hamburger and French fry quality is important as its taste and portion size.(146, 9) McDonalds coordinates all its restaurants in the entire world according to a consistent pattern. Coordination encompasses the setting standards in global level to achieve competitive advantage with consideration cultural differences. (113, 5) (D)Strategy as Position Strategy is a position-specifically, a means of locating an organization in what organization theorists like to call an environment.(13, 2)

McDonalds introduced a new product called Egg McMuffin- the American breakfast in a bun. This was to encourage the use of the restaurant facilities in the morning of day in another word it was as a strategy of a new position of McDonalds in its existing perspective of fast food industry. (E)Strategy as a perspective Strategy is a perspective. Its content consisting not just of a chosen position, but of an ingrained way of perceiving the world (16, 2) McDonalds perspective concentrates on sheer productive efficiency as a fast food industry to serve the customers quickly. McDonalds senior managers see franchising as the best way for global expansion and growth. We view ourselves primarily as a franchisor and believe franchising is important to deliver in great, locally relevant customer experience and driving profitability (9,10)

3- Renovation Strategy and McDonalds Vision and Mission

McDonalds vision is to be the worlds best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile.(11) McDonalds Mission is: Be the best employer for our people in each community around the world. Deliver operational excellence to our customers in each of restaurants and achieve enduring

profitable growth by expanding the brand and leveraging the strengths of McDonalds system through innovation and technology. McDonalds value is to be our customers favourite place and way to eat out with inspired people who delight each customer with out matched quality, service, cleanliness and value every time(13)

With situation (SWOT) analysis, McDonalds implemented a strategy that they titled Plan to win. McDonalds focused on making a deeper connection with customers through five business drivers of people, products, place, price, and promotion. (8, 10)

Have a cleanliness environment when customer enjoys the meal and renovation of restaurants make McDonalds restaurants a friendlier and cozy environment along offering new menu items such as salads and healthier food and McCafe (smoothies, pastries and higher end coffee was in direction to McDonalds vision and mission to be the worlds best quick service restaurant in the world.

4-Summary Attracting more customers to McDonalds remains its goal for growth. Annual report shows McDonalds has been successful during the five past years although world economy has been in recession. New menus, offering healthier foods, making restaurants and facilities as a cozy places by renovations with internet access Wi-Fi, staying open longer, accepting all credit and debit cards were among a comprehensive and related parts of execution a comprehensive strategy aligned with the mission and vision of the company to satisfy customer demand with quick service, choice and variety, and friendly environment with maintaining its consistency of its core strengths- affordable and good service-with carefully experiencing new menu and aggressive marketing are the keys to success of McDonalds in future

Works Cited Newspaper 1-The Canadian Press. McDonalds earmarks $1 billion for Canadian renovations. The Globe and Mail 7Sep.2011.Print. Journals 2-Mintzberg Henry. The Strategy Concept I: Five Ps For Strategy. California Magazine Review (2001):11-24. Print. Books 3-Beamish Paul W. and C.Patrick Woodcock. Strategic Management. Canada, McGraw-Hill Ryerson Limited, Fifth Edition, 1999. Print. 4-Berkowitz, Crane, Kerin, Hartley, Rudelius. Marketing. Canada, McGraw-Hill Ryerson Limited, Fifth Edition, 2003.Print. 5-Fahey Liam and Robert Randall, The Portable MBA in Strategy, Canada, John Wiley & Sons, Inc.1994.Print. 6-Hitt, Ireland, Hoskisson, Rowe and Sheppard. Strategic Management: Competitiveness and Globalization-Concept.3rd Canadian Edition. Toronto, Nelson, 2009.Print. 7-Kaplan Robert S. and David P. Norton, The Strategy- Focused Organization, Harvard Business School Publishing Corporation, 2001.Print. 8- Kaplan Robert S. and David P. Norton, Strategy Maps, Harvard Business School Publishing Corporation, 2004.Print. 9-Porter Michael E. Competitive Advantage, New York, The Free Press: A Division of Macmillan, Inc.1985. Websites 10-McDonalds Corporation. Annual Report 2010.Web. 25 Sept. 2011. http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations3.Par.56096.File. dat/2010%20Annual%20Report%20(print).pdf 11-McDonalds Corporation, mission, Web. 26 Sep. 2011. http://www.mcdonalds.com.my/abtus/corpinfo/mission.asp 12-McDonalds mission and vision statement, Web.26 Sep.2011. http://www.sampleshelp.org.uk/mission-statements/mcdonald-vision-statement.htm 13- McDonalds mission and vision statement, Web.23 Sep.2011. www.mcdonalds.com.my/abtus/corpinfo/mission.asp