Case Analysis 1

Running Head: STRATEGIC ANALYSISCase Analysis of McDonalds McCafe Coffee InitiativeIntroduction

McDonaldss is a hamburger restaurant that offers diverse menu and quick services in 121 countries across the world. McDonalds has experienced rapid growth, partly attributable to the successful ad promotions and innovations in its menu. The sales of the company were increasing but, market share had declined (About McDonaldss, 2012). McDonaldss introduced McCafe concept in 2001 to regain dominance in breakfast and snack time sales and rebuild competitive advantage. In this case analysis, business level strategy, Porters five force model to analyze the new venture position in competitive industry, corporate strategies of McDonalds and its importance to create value will be explained. Along with this, justification of current corporate strategy and suggestions to overcome the potential barriers will be discussed in this case analysis.

Business level strategy of McDonalds

Business level strategy is an integrated & coordinated set of commitments and actions. McDonalds uses business level strategy to gain competitive advantages by exploring core competencies in the specific product markets. In todays corporate business scenario, there are several kinds of business level strategies used by the business firm to gain the competitive advantages. Cost leadership, Differentiation, focused cost leadership; focused leadership and integrated cost leadership/differentiation are the major business level strategies (Okumus, Altinay & Chathoth, 2010).

McDonalds use differentiation and cost leadership strategy to increase the market share and to gain the competitive advantages (MCDONALDS AND THE MCCAF COFFEE INITIATIVE, 2002). The product and service offered by McDonalds is different, highly standardized, superior quality and less costly as compared with its competitors. With the help of this, McDonalds is satisfying the needs & wants of consumer and providing high customer service in the international market (Proff, 2002). On the other hand, McDonalds is also providing the product and service at a very low cost as compare with its major competitors such as: Wendys, KFC pizza hut and burger king. Hence, McDonalds is using integrated cost leadership/differentiation strategy to gain the competitive advantages. It means, McDonalds is providing differentiate & highly standardized product at a very low cost as compare with its competitions.

The strategies of cost leadership and differentiation are used interchangeably with in the internalization approach of McDonalds. In addition, McDonalds should also follow focused cost leadership strategy along with the differentiation and cost strategy to create the competitive scope, because McDonalds can easily access the changed environment. So, McDonalds can use different business level strategy to create the competitive scope (Keillor & Hult, 2004).

Competitive Analysis of Mc-Cafe

In the Restaurant industry, Coffee Caf is a highly competitive industry in the business areas. There are many small Coffee Caf businesses in the industry that fight with each other to improve their customer base and improve profitability. Think Coffee, Snice, B Cup Caf and Gorilla Coffee are the major competitors in this industry. It is very difficult to develop a distinct brand name in this industry (Pines, 2006). Research & development cost affects the organization potentiality in the restaurant industry. Large established companies with strong brand identities such as Mc-Caf-Cafes do make it more difficult to enter and succeed within the marketplace; new entrants find that they are faced with price competition from existing chain restaurants. There are several substitutes in this industry (MCDONALDS AND THE MCCAF COFFEE INITIATIVE, 2002). There are a lot of products that customer can choose such as: Beverages and dairy products. In this restaurant industry, supplier power would be relatively small. Along with this, strength of buyers is relatively low in this industry (Hax & Wilde, 2001).

McDonaldss corporate strategyMcDonaldss current corporate strategies are different and based on specialty coffee and McCafe. Under corporate strategy, McDonaldss decide direction, composition and size of target market for McCafe. Direction: In order to compete with Starbucks, McDonalds has developed a plan to launch McCafe that provides coffee, cookies and pastries. Along with this, it resolves the issue of decreasing market share in fast food industry. Composition: In composition of marketing mix of McCafe, McDonalds has developed product line, pricing strategies and distribution strategies according to competition and requirements of customers (Coleman, Gao & Kim, 2009). Additionally, company plans effective promotional techniques and tools to promote the products of McCafe. In implementation team, entrepreneurial and experienced corporate employees with diverse backgrounds are included to ensure the success of this plan.

Size: Under size, target market of McCafe products is identified. The main customers of McCafe will be mostly current customers of McDonaldss. Company is trying to enter in luxury market of coffee. McDonaldss Corporate Strategy Value CreationMcDonalds corporate strategies are based on product differentiation and innovation that is helpful to create value for the customers and other stakeholders. The innovative and new brands represented value and fast service (Grinblatt & Titman, 2003). In the fast food industry, there is no competitor, who was able to match the brand equity associated with McDonalds Happy Meal. Along with this, under corporate strategies, company launched value campaign that promotes the value of the products to the customers. In coffee market, reliability, quality and service are helpful to create value and these are provided through corporate strategy of McDonalds.Factors of McDonalds GrowthThere are various factors that support the growth of McDonaldss and its business expansion. These are as follow:Quality and Innovative Products: McDonalds offers quality products at their stores that create a positive brand image in the market. McDonalds restaurants focus on quality, speed and accuracy of services. Its coffee houses also produce consistent quality products at different methods (Thompson, 2001). Along with this, company produces products in innovative manner that attracts customers towards the company and increases sales and growth.Quick Services: McDonalds provides services at low prices, good quality, safe food and fast services. In the quick service industry, McDonalds is the leader with highest market share that supports the growth of the organization in other new business areas (Grinblatt & Titman, 2003). McCafe offers special coffee conveniently, quickly and at low prices. Positive Brand Image: Company provides quality products at low prices and according to the tastes of customers quickly that builds positive brand image in the minds of customers. This positive brand image helps for organizational growth.

Justification for current corporate strategy

McDonaldss current corporate strategy is not the best one. Companys corporate strategy is based on open more stores to increase the sales and for this, company gives franchisee of its brand. Franchisees paid a monthly rent and service fee to McDonalds based on a percentage of top-line sales (Haberberg & Rieple, 2008). It is required for the franchisees to match the corporate standards of quality and responsibility to represent the company in community in good manner. Sometimes, it is difficult for the company to maintain quality, quick services and its brand image through franchisees. So, company should develop business intelligence strategy that is based on plan to win including place, people, products and promotions (Nigel, 2009). Company should develop standard questions and measures to identify the customer experience from an internal perspective. The company should also include a toll free line or feedback form to take the response and comments of customers regarding the products quality and services. Recommendations to maintain growthIf McDonaldss McCafe initiative hit a plateau in terms of growth, then company should take some steps to maintain this growth and success and overcome on barriers. These steps or recommendations are as follow:Product Innovation: In order to maintain growth and success, company should create some innovations in its current product line. Innovative products and offers are helpful to attract new customers and retain existing customers (Hitt, Ireland & Hoskisson, 2010). Along with this, company should create innovation or changes in product line according to the requirements of customers or any loopholes in existing product line.Changes in marketing mix strategies: Company should create some changes in current marketing mix strategies to overcome on obstacles or barriers and adopt new marketing mix to compete with competitors and increase its market share (Haberberg & Rieple, 2008). Company should use new product mix, price mix, place mix and promotion mix to overcome on barriers and maintain growth of the company.

Quality and quick services: McDonaldss McCafe should provide quality and standardized products. Along with this, company should employ well trained and educated people to deliver services to the customers quickly and pleasantly (Haberberg & Rieple, 2008). SummaryOn the basis of above discussion, it can be included that McDonaldss use differentiation and cost leadership strategies to increase market share and gain competitive advantage over the competitors. It is identified that McCafe faces tough competition from other competitors and substitute products like beverage, dairy products etc. Along with this, it is found that McDonaldss develop corporate level strategies to direct, compose and target market for launching of McCafe. McDonaldss products provide value to customers in terms of quality, quick services and innovation. Apart from this, if McCafe is failed to achieve its expected growth and success, then company should implement innovation, suitable marketing mix and standard to maintain this success and overcome on barriers. ReferencesAbout McDonaldss (2012). Retrieved January 31, 2012 from: http://www.McDonalds.com/us/en/home.html Coleman, D., Gao, C. & Kim, H. (2009). McDonaldss: Breaching the Luxury Coffee Market. Retrieved January 31, 2012 from: http://www.mcafee.cc/Classes/BEM106/Papers/2009/McDonalds.pdf

Grinblatt, M. & Titman, S. (2003). Fin Mkts & Corporate Strategy 2E. New York: McGraw-Hill Education.

Haberberg, A. & Rieple, A. (2008). Strategic Management: Theory and Application. UK: Oxford University Press.

Hax, A. & Wilde, D. (2001). The Delta Model discovering new sources of profitability in a networked economy. European Management Journal, 19(4), 379-391. Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2010). Strategic Management: Competitiveness & Globalization, Concepts. USA: Cengage Learning.

Keillor, B. D., Hult, G. T. M. (2004). Predictors of firm-level political behavior in the global business environment: an investigation of specific activities employed by US firms. International Business Review, 13(3), 309-329.

MCDONALDS AND THE MCCAF COFFEE INITIATIVE. (2002). Ivey Management Services, 1-12. Nigel, S. (2009). Operations Strategy. South Africa: Pearson Education Inc.

Okumus, F., Altinay, L., & Chathoth, P. (2010). Business-Level Strategies. Strategic Management for Hospitality and Tourism, 91-108.

Pines, J. M. (2006). The economic role of the emergency department in the health care continuum: Applying Michael Porters five forces model to emergency medicine. The Journal of Emergency Medicine, 30(4), 447-453.

Proff, H. (2002). Business unit strategies between regionalisation and globalization. International Business Review, 11(2), 231-250.

Thompson, J. L. (2001). Understanding corporate strategy Course ILT Series. USA: Cengage Learning EMEA.