Competitive Advantage of McDonald’s
Since its inception, McDonalds has been able to build up a set of competitive advantage which is very difficult to cultivate for any other competitor. McDonalds have sustained these competitive advantages throughout the globe and have helped McDonalds to survive in local markets. Following summarized are the competitive advantages McDonalds enjoys:
Valuable and Rare:
McDonalds have resources and capabilities which add value for customers and also are rarely seen in other major competitors. Following are the instances that support McDonald’s focus and capability to add value for customers: * Customization of menu according to local tastes: While entering a new market, McDonalds assesses the local taste and preferences of the consumers and then customizes its menu. For e.g.: Introduction of vegetarian offerings In India to cater to dietary preferences for non-meat dishes and exclusion of beef in their menu because of religious prohibition of its consumption in India. Another example is introduction of McRice in Indonesia to align with consumer familiarity. * Consistency across servings: McDonalds carefully buys supplies to ensure that taste at each offering remains consistent, so that consumers know exactly what they are getting and do not face any disappointment. For e.g.: McDonald's gets high ratings on its French fries partly because it has very strict specifications on the potatoes it purchases from its supplier. * Introduction of low calorie healthy menu: With consumers getting more focus on healthy diet, McDonalds has leveraged its resources to introduce more healthy options in its menu. In 2014, McDonalds served 30% more fruits, vegetables, low fat dairy or whole grains compared to 2012. * Strategic and seasonal offerings: McDonalds experiments with its offerings and tries to new menu items to develop new tastes and incentivizes its customers to visit the restaurants on a regular basis. For e.g.: McRib sandwich is a limited offering in Asia which adds to its appeal.
Non Imitable: * Quicker service and delivery: McDonalds has a top-tier operational efficiency to ensure that customers enjoy quick delivery of their orders and superior service. McDonalds has used technology to make sure that process for cooking food is simple and easy to learn for its employees, with low failure rate. Their restaurant systems including menus, assembly line processes and store locations has led McDonald’s to become one of the most efficient restaurant systems in the world. McDonalds also offers “Drive-in-restaurants” services which coupled with its quicker delivery helps McDonalds add to convenience of its consumers. * Cost Leadership: McDonalds strive to be cost leaders and offer their servings at a rate that is unmatched by their competitors. To do this, McDonalds continue to innovate with new efficient technology to ensure low cost per production. Also, McDonalds have reduced their fixed cost by leveraging supply chain (McDonalds buys in bulk to get lower prices) and reducing Real Estate cost by leasing land and property they own to franchisees.
Organization:
* Backward and Forward Integration: McDonalds has expanded and diversified using franchising with 57% of its total restaurants being conventional franchises, which helps McDonalds reduce rifts between local governments and McDonalds official, and ensure enough control and quality of offerings. Also, McDonalds buys supplies for its offerings from a very specific set of suppliers, which helps ensures consistent taste at low price. * Global presence and Brand reputation: McDonalds is well known brand which has a huge global presence. With McDonalds chain being almost 65 years in service and huge number of outlets, its awareness among the customers is particularly high, much more than its competitors. * Focus on Innovation through technology: McDonalds has continued to focus on modernizing restaurants, upgrading their point of sale technology, evolving menu and engineering value by forming alliances with major IT companies like Fujitsu. Also, McDonalds has developed E-procurement system which basically serves as the main reason for their successful supply chain management by allowing business owners to buy supplies and materials at a discounted price. According to McDonald’s supply chief Edwards E-Procurement allows 85% cut in costs.
Sources:
1. http://www.bloomberg.com/bw/stories/2007-01-24/mcdonalds-is-loving-it-in-asiabusinessweek-business-news-stock-market-and-financial-advice 2. https://fagansusanto.wordpress.com/2012/11/22/value-chain-and-competitive-advantage-of-mcdonalds/ 3. http://seekingalpha.com/article/1275991-mcdonalds-leveraging-competitive-advantages 4. http://www.montana.edu/brester/agbe445/readings/Strategy.pdf 5. http://www.researchfactors.com/does-mcdonalds-have-a-competitive-advantage/ 6. https://sites.google.com/site/mcdonaldsfranchisestrategy/home/mcdonald-s-competitive-advantage