Mcdonalds resource based view analysis

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Case 15

McDonald’s

Jamal Shamsie

Alan B. Eisner

Strategic Management:
Creating Competitive Advantages

McDonald’s
Discussion Question

What situation did Thompson inherit when he became CEO? What are the current forces in the external environment that might affect new CEO Thompson’s strategy?

What source of competitive advantage does McDonald’s have, and is that position supported by its value chain and other internal resources?

What other strategies did McDonald’s formulate to achieve a competitive advantage? What steps did Skinner take to fix the problems that McDonalds faced? What should Thompson do now to perhaps build on Skinner’s accomplishments?

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McDonald’s
Q1. Strategy Concept

Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.
Q1: What situation did Thompson inherit?

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Strategy is all about the ideas, decisions, and actions that enable a firm to succeed.

McDonald’s
Q1. Strategy Concept, cont.

Key Attributes of strategic management:

Directs the organization toward overall goals and objectives
Includes multiple stakeholders in decision making
Needs to incorporate short-term and long-term perspectives
Recognizes trade-offs between efficiency (cost) and effectiveness (performance)
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McDonald’s
Q1. Strategy Concept, cont.

The primary role of the organizational leader is to articulate vision, mission and strategic objectives
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Leaders face a large number of complex challenges. Leaders must be proactive, anticipate change and continually refine changes to their strategies. This requires a certain level of “ambidextrous behavior”, where leaders are alert to opportunities beyond the confines of their own jobs, and are also cooperative and seek out opportunities to combine their efforts with others. Leaders must make strategic management both a process and a way of thinking throughout the organization.

McDonald’s
Q1. Strategy Concept, cont.

Exhibit 1.6

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The primary role of the organizational leader is to articulate vision, mission and strategic objectives.

McDonald’s
Q1. Strategy Concept, cont.

Company vision
Massively inspiring
Overarching
Long-term
Driven by and evokes passion
Fundamental statement of the organization’s
Values
Aspiration
Goals
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Leaders must communicate their initial vision of the organization’s purpose: what was the original goal that evokes a powerful and compelling mental image of a shared future, one that would be massively inspiring, overarching, and long-term, that represented a destination that is driven by and evokes passion? Is the original vision still applicable given the present circumstances?

McDonald’s
Q1. Strategy Concept, cont.

Mission statements
Purpose of the company
Scope of operations
Basis of competition and competitive advantages
More specific than vision
Focused on the means by which the firm will compete
Reflects an organization’s enduring, overarching strategic priorities and competitive positioning
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The organizational mission also needs to be considered: a mission encompasses both the purpose of the company as well as the basis for competition and competitive advantages. In writing a mission statement, it is important to understand the definition of the business: 1) who are its customers, 2) what customer need is the organization trying to fulfill, and 3) how does the business create and deliver value to customers and satisfy their needs. Organizations must respond to multiple constituencies if they are to survive and prosper, and the mission provides a means of communicating to diverse organizational stakeholders. Although vision statements tend to be quite enduring and seldom change, a firm’s mission can and should change when competitive conditions dramatically change or the firm is faced with new threats or opportunities.

McDonald’s
Q1. Strategy Concept, cont.

Strategic objectives
Operationalize the mission statement
Provide guidance on how the organization can fulfill or move toward the “higher goals”
Specific, measurable, appropriate, realistic
Cover a more well-defined time frame
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Anticipating that things might change, an organization’s leadership must then establish strategic objectives to operationalize the mission statement with specific yardsticks. That is, objectives help to provide guidance on how the organization can fulfill or move toward the “higher goals” in the goal hierarchy—the mission and vision.

McDonald’s
Q1. Strategy Concept, cont.

McDonald’s original vision was to provide local customers with a quality meal at a fair price through a quick and convenient service delivery.
Mission became to deliver this service consistently, providing an all-around enjoyable experience for the whole family
Cantalupo’s objective was to inspire employees and franchisees to “put the smile back into the McDonald’s experience”
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McDonald’s
Q1. Strategy Concept, cont.

External forces had begun pushing for healthier forms of food
Franchisees had inconsistency in service, décor
New menu items had to be accepted by loyal customers
Would Thompson be correct to continue with the original vision & mission?
Should he rethink strategy as a result of factors in the environment?
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External forces had begun pushing for healthier forms of food. Company-owned and franchisee restaurants had inconsistency in service and décor. New menu items had to be accepted by loyal customers. Skinner appeared to have continued with the original vision & mission. Should Thompson do the same? McDonald’s provides an interesting example of a firm that did very well for decades with a clear strategy and then stumbled as it tried to reevaluate what it wanted to do. It is clear from the case that McDonald’s had been tremendously successful primarily as a fast food chain, with particular emphasis on hamburgers. Should Thompson rethink strategy as a result of factors in the environment?

McDonald’s
Q1. Strategy Concept, cont.

Strategic Management involves

Analysis
Strategic goals (vision, mission, strategic objectives)
Internal and external environment
Decisions - Formulation
What industries should we compete in?
How should we compete in those industries?
Actions - Implementation
Allocate necessary resources
Design the organization to bring intended strategies to reality
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During strategic analysis, the leader does “advance work” to anticipate unforeseen environmental developments, identify unanticipated resource constraints, assess changes in his or her preferences for how to manage. During strategy formulation, the organization addresses the issue of how to compete in a given business to attain competitive advantage. Strategies are formulated at the business, corporate, and international levels. Entrepreneurial initiatives may also play a role. In strategy implementation, depending on the type of organization structure, the leader might include key individuals in a discussion around selecting which strategies might be best to implement at which level within the organization. The leader must ensure proper strategic controls and organizational design, and establish effective means to coordinate and integrate activities within the firm as well as with suppliers, customers and possible alliance partners. Leaders should also be committed to excellence and ethical behavior while promoting learning and continuous improvement. Here’s where innovation is important.

McDonald’s
Q1. Strategy Concept, cont.

How can McDonald’s create a sustainable competitive advantage in the marketplace that is not only unique and valuable but also difficult for competitors to copy or substitute?
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The basic question strategic management tries to answer is: How can we create competitive advantages in the marketplace that are not only unique and valuable but also difficult for competitors to copy or substitute?

McDonald’s
Q1. External Environment

Q1 cont: What are the current forces in McDonald’s external environment?

External Scanning
Surveillance of a firm’s external environment:
Predict environmental changes to come

Detect changes already under way

Proactive mode