INDUSTRY ANALYSIS: THE EXTERNAL FACTOR EVALUATION (EFE) MATRIX
Key External Factors
Weight
Rating
Weighted Score
Opportunities
Providing menu at low prices to the low income earners
0.16
3
0.5
Customers demanding for healthier food. Improved creativity on the products.
0.06
3
0.16
Competitors lack McCafe services
0.09
2
0.6
Expanding to other countries
0.07
2
0.05
Increased choices of salad on the menu
0.08
3
0.14
Providing Wi-Fi services compared to the competitors
0.08
3
0.1
Weaknesses
Fast foods alleged to cause heart attacks and obesity
0.06
2
0.18
Media negatively portray McDonald’s for targeting children in their advertisements
0.04
2
0.08
Increased price wars results to losing customers to the competitors
0.07
2
0.14
Employees high turnover rates affects operations
0.03
2
0.06
Economic situation cause high living cost
0.06
2
0.13
Posting nutritional value of calorie count on the products
0.09
2
0.17
Total
1
2.8
Evaluation matrix
This research paper Increasing sales by low price menu & McCafe
McDonald’s introduced both differentiation and cost leadership strategies to remain ahead of the competitors. The firm offers its products at relative prices over the years. The low product line and price have always been competitive in the market. The dollar menu is the best representation of differentiation. The firm became the first in the food service and restaurant industry to introduce the low-cost and small menu of items. Their product line cost went as low as $1 (Pederson, 2004). The advertisement of prices forced other competitors to follow suit to compete. McDonald’s business achieved much using the low-cost strategy. However, the strategy can lead losses where the raw materials prices for the products increase.
The firm has various opportunities where they can invest to succeed. Importantly, McDonald’s can concentrate on improvement of customer service and the menu offered. McDonald’s should start building new building that incorporates the arch as well as modern furnishing. The menu must change through an addition of breakfast items and introduction of McCafe in the different areas. Adding healthier fruits such as the premium white chicken and Asian salad to attract more customers and win their loyalty (Dess & Eisner, 2008).
Creating diversified menu with low prices
McDonald’s emphasizes on the development of a menu that consumers want. From the market research, the firm can establish what the customers want and creatively deliver. However, consumers’ demands constantly change over time. McDonald’s have to introduce continuously new product and discard the old products. Creatively, the products design, packaging and delivery must change. However, the firm takes a lot of care to avoid affecting sales of one preferred product that can cannibalize sales of an existing product (trade off). Items on the menu vary in popularity. Conversely, the revenue generated varies at different points of the product cycle. The Indian market forces the firm to concentrate on vegetarian consumers.
The pricing of the products determination should suit perception of the customers (Siehoyono, et al. 2005). Customers pay for what is worth their money. Pricing is a psychological connotation for consumers. Prices that are too low scare customers because they fear the quality of the product is compromised. McDonald’s uses the branded core value product (BCV) and branded affordability strategies. The company can satisfy consumers that have varying price perceptions.
Have competitive advantage and opportunities in different parts of the world
The fast food industry around the world experiences serious threats. All the competitors seek to have a share of the market. Large organization such as KFC, Burger King and Subway seriously threaten McDonald’s expansion. Besides, Starbucks, Dunkin Donuts, Domino’s Pizza, Pizza Hut and Taco Bell prove to be serious competitors. Competition entails improvement of the product quality and food services.
The fast food market reached the boiling point in many of the major markets such as the Germany, United States and in the United Kingdom. The war on prices among the food giant’s indicates that the market is saturated. For instance, Wendy’s food chain introduced a lower price value for its menu. The product life cycle attained maturity. On the other hand, the fast-food industry has to cope with substitute threats. The packed- food industries are taking over the food market, as they are convenient. The packed portable food is available in delis, supermarkets, petrol stations and convenient stores. The price wars in combination with increased raw material prices and substitute threats do not allow expansion or stablemen of new store or branches.
Advancement in technology affects every aspect of McDonald’s business environment. Technology at the firms ensures that technology plays an important part in achieving the organizational goals and gains the comparative advantage (Siehoyono, et al. 2005). Technology applies to food storage, room temperature regulation, supply chain control, financial control and reporting. Improved communication systems link the different responsibility centers thus enhancing optimal production and efficiency.
Biggest weakness is healthier issues and lawsuits issues
Cultural Trends have immense impacts on how customers respond to the company’s offering. The recent events in improvement in diet and good health programs allow researchers to have more interest in the food industry. Customers are more cautious about their nutrition and health status as well as demand for quality services acts as a threat to McDonald’s products (Evans, 2012). Consumers are concerned about the kilocalories a product is providing, the nutritional content and more so the link between the ingredients and impact to their individual health. Particularly weight loss programs advocate for cutting off wheat products from the diet. A challenge that good marketing strategies should be tailored to overcome.
Review methodologies also include the need to have more detailed, lengthier reviews. The clinical skills and training programs and the knowledge-based programs out there require detailed research for them to be useful to the population in the country. The company is embarking on systems that standardize, centralize and streamline the quality data from across value chain. This will be imperative for companies to have seamless food and beverage operations.
Employees turn over
The workers play an essential part in the food preparation and services to the customers. Restaurant workers form the largest group of the firm’s employment. The firm, however, receives criticism from the government and labor unions. There are constantly complaints of low wages and high turnover among the restaurant workers. The majority of the workers are teenagers, working mothers, students and transactional workers. The employee’s management is an important aspect of the firm. In recent years, the company deployed and marshaled the employees to work to their best. There are vocational training programs and opportunities to advance in career or promotion to higher positions. Motivation strategies to reward employees through incentives such as bonuses greatly improve performance.
In the United States, the McDonald’s Corporation faces litigations. The many business and competitors infringe on the copyrights of the logo and name of the firm. There are pending cases involving trademark infringement (Evans, 2012). The media coverage portrays the company negatively. There are cases in court due to unhealthy foods. There are several cases brought against the organization on issues of workers and employees rights. McDonald’s Corporation loses many of the cases brought against it leading to fines and penalties. For instance, a customer suffered a third-degree burn after a hot cup coffee spillage. The court ordered the corporation to reward her with millions of shillings. The managers now pay clear attention to the legal aspects of the operation of the business.
References
Bizzozero, J., (2014) Trending food. Retrieved on 8 February 2016 from food-growth.aspx
Dess, G. G., Lumpkin, G. T., & Eisner, A. B. (2008). Strategic management: Creating competitive advantages. Boston: McGraw-Hill/Irwin.
Evans S,. (2012) McDonald’s: The journey to health. Retrieved on 30 July 30, 2015 from http://news.bbc.co.uk/2/hi/business/3641603.stm
Pederson, J. P., ed. (2004). “McDonald’s”. International directory of company histories: Volume 26. Chicago: St. James Press.
Siehoyono, L et al. (2005). THE MCDONALD’S CASE: STRATEGIES FOR GROWTH. Institute of Research and Community Outreach – Petra Christian University.
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