Read McDonald’s Comeback in the US Burger Market? (Barney et al, 2019, PC 2-1) and complete the assignment which follows.
Assignment:
The case highlights a crucial strategic dilemma that the company faces and that often confronts companies that compete on lower cost. Sales have been declining and McDonald’s faces an important challenge in its core business of hamburgers. A number of smaller but fast-growing competitors have been offering burgers with fresh beef that are perceived as better tasting. McDonald’s is trying a number of things to respond (menu tweaks, kiosk ordering, delivery), but its decision of how to respond to better tasting burgers is much more fundamental. If it goes with fresh beef and fresher hamburgers, what changes in its value chain will such a move require? And, what will such changes do to its cost structure?
Objective: By the end of this assignment students will be able to identify and develop arguments for different business strategies.
Case Questions:
1. What is McDonald’s strategy in burgers? What resources and capabilities has it developed in support of that strategy? What is your assessment of the VRIO framework for McDonald’s?
2. What are McDonald’s strategic alternatives?
3. What are the risks of an aggressive response to fresher, better tasting, more customized burgers? How much additional cost would McDonald’s have to incur to make customers switch from Five Guy’s?
4. What are the risks of maintaining its status quo?
5. What should McDonald’s do?
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Case Study on McDonald’s
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Case Study on McDonald’s
Question One
The primary strategy was to ensure customer satisfaction. The company shifted to fresh beef for burger preparation. MacDonald’s company modified its recipe for burger preparation. The bugger was being prepared using fresh beef; artificial preservatives were replaced with margarine with butter and many other changes. Fresh-beef burgers proved to attract more customers due to their excellent taste compared to traditional burgers. In 2017, the company announced that in the majority of their restaurants, baggers would be prepared using fresh beef (Hesterly, 2018). In support of the fresh-beef preparation strategy, McDonald’s developed some of its capabilities. First, the company leveled mobile ordering to all of its branches in the United States. Second, the company decided to scale and accelerate food delivery. The assessment for McDonald’s VRIO framework includes collaboration with other delivery services to promote food delivery (Hesterly, 2018). The second is the use of modern technologies for effective and efficient food ordering. Third, based on their specific recipe, there is sufficient uniqueness of their food products.
Question Two
Some of McDonald’s strategic alternatives include focusing on the prices of their drinks. The company decided to sell its drinks at slightly lower prices compared to other shops. The company decided to be selling its drinks at 2 dollars (Hesterly, 2018). All the branches of McDonald’s focused on serving coffee of high quality at a price significantly lower than other coffee houses. Additionally, the company emphasized store renovation and mobile ordering programs.
Question Three
Preparation and use of better tasting, fresher, and more customized bears some risks to the company. The burger made from fresh meat was only prepared on order. That means the client had to wait longer during its preparation. Most of the branches serving fresh-beef burgers were not offering drive though services. Also, there was a possibility of increasing the prices of burgers due to the use of fresh beef. Some price-sensitive customers may not be interested in buying the burger due to the price rise (Hesterly, 2018). The company incurred some losses due to the use of fresh meat. The use of fresh beef also increased health risks. Fresh meat is highly attacked by viruses compared to frozen beef. To make customers shift from five guys burgers, the company will have to incur a high cost. For instance, the company will have to incur a cost of approximately 6500. They will have to sell fresh-beef burgers at a lower price to attract more customers. Considering the cost of preparing fresh beef is slightly higher, the company will be running at a loss.
Question Four
There are so many risks to maintaining the status quo. First, there is no development and improvement when maintaining the status quo. The company might be doing a great work in the deals they are currently working on. But to experience a bigger improvement, it has to change its strategies towards enhancing customer satisfaction. For instance, the company may insist on making a five guys burger because it is the brand most people like in the nation (Hesterly, 2018). But when they shift to fresher and testier fresh-beef burgers, the company will make a high profit because people will start accepting the product and its price after a while.
Question Five
McDonald’s company should stick to its strategy of serving fresh beef burgers. Even though the strategy may bear many risks, they should stick to it because people will eventually accept burgers after a while. Similarly, the company should reduce customer’s waiting time to enhance their satisfaction. Therefore, they should emphasize on serving their customers in the shortest time possible.
Reference
Hesterly, W. (2018). Case 2–1: McDonald’s: Comeback in the U.S. Burger Market?
Mukherjee, Kaushik, Byron Chandler, and Richard Gentry. “McDonald’s USA: A Restaurant Icon’s Potential to Thrive in a Global Pandemic.” (2022).
