Evaluation and selection of differentiation as a strategy for McDonald’s

Elaboration, 2015

15 Pages




MacDonald’s Macro environment

MacDonald’s Micro environment




Reference List


Appendix 1: SWOT Analysis

Appendix 2: TOWS Matrix

Appendix 3: Force-Field Analysis Model

Appendix 4: SAF Model


As the business environment changes, businesses are forced to change their strategies in an attempt to adapt to the changing environment neither as a means of survival, or in order to prosper (French, Kelly & Harriosn 2004). In such a case, determining the strategic position of a firm is crucial. Johnson, Scholes and Whittington (2005) define strategy as “the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations” (2005). The three key generic strategies that a business can use are: differentiation, focus, and cost leadership (Kraus, Harms & Schwarz 2006). McDonald’s is a leading multinational player in the fast foods industry that is famous for providing basic fast-food items at low cost. The firm has been very successful in implementing this strategy by taking advantage of its high bargaining power to acquire raw materials cheaply thus passing the benefits of costs savings to the end-consumer (Han 2008). While this strategy worked during the introductory phase of the company's business operations, McDonald’s has now been forced to pursue a growth strategy by ensuring quality and product differentiation. This report is based on an evaluation and selection of differentiation as a strategy that McDonald’s should pursue in order to realise growth and competitive advantage in the fast food industry.

MacDonald’s Macro environment

PESTLE analysis


- Reduce impact on taxation
- Reforming strategies and practices to reduce the effect of taxation on business while still obeying the law (Roper 2012)
- Changing public health policies that discourage the consumption of fast food


- Reducing inflation rates in the UK
- Increasing trend in disposable income among UK households
- Increasing consumer spending in the UK
- Reducing rates of unemployment in the UK

Social-Cultural Factors

- Increased population among the 15-64 age bracket; this group is more likely to eat out due to possession of disposable income
- Changing lifestyles among the population with a higher propensity to eat out
- Expanding wealth gap


- Fast food industry characterized by restrained R&D activities
- Increased automation of business processes
- Increasing sales via the use of mobile devices


- Recycling promotional activities to conserve the environment
- Reusing used fat as biodiesel


i) The UK has introduced new levels of legal minimum wage
ii) Health regulations in local schools and workplaces (Gillespie 2007)

Suitability of Strategy: MacDonald’s Micro environment

Porter’s Five Forces

i) Rivalry among competitors is high

- The fast food industry is very competitive
- Advertising capabilities of competitors of major competitors such as YumBrand Inc and Burger King a force to reckon with

ii)Buyer Bargaining Power

- Power of buyer is low owing to low quantity purchases, industry limitations and due to lack of bargaining power among buyers.
- McDonald’s and other players in the industry have ensured high brand image through uniqueness and differentiation strategies, further limiting chances of switching

iii)Threat of Substitutes

- Threat of substitutes is low to moderate. This is due to the availability of McDonald’s products (Porter 2008)
- McDonald’s has also introduced products that suits the preference of locals and thus further narrowing the threat of substitutes

iv) Threat of new entrants

- Threat of new entrants into the fast food industry is high, owing to low start up cost and ease of access to the market.

v)Supplier bargaining power

- Power of suppliers is also low considering that McDonalds’ is the largest restaurant chain in the world in terms of sales. This affords the company a high bargaining power over suppliers.
- Due to low suppliers power, McDonald’s is able to reduce the cost of raw materials, thus affording the company high competitive price of its products.

SWOT Analysis

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TOWS Matrix

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Force field Analysis

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Strategic Choice (Ansoff Matrix)

Ansoff Matrix’s growth strategies would enable McDonald’s to focus on its potential and current markets, customers and products by exploring growth strategies trough new products and existing products, as well as in new markets and existing markets. The table below provides four likely combinations of market-products that McDonald’s can make use of to achieve its growth strategy in various markets across the world:

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Strategy evaluation and selection

Johnson, Scholes and Whittington observe that the success of a strategy hinges on three vital criteria: sustainability, acceptability, and feasibility. This method of strategy evaluation and selection is thus identifiable by the acronym SAF model. Suitability is concerned with whether the alternatives are sufficient responses to the company's evaluation of its strategic position. Acceptability evaluates if the alternatives fulfill and are in harmony with the company’s objectives. Moreover, such options must be acceptable to the company’s stakeholders (Daft 2004). On the other hand, feasibility evaluates in the form has the resources necessary to execute the strategy. The criteria have found wide application in diverse strategy decisions like growth strategies, competitive strategies, or even development techniques.

Acceptability is concerned with two elements of strategic choices namely, the stakeholder element and the financial elements.


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Evaluation and selection of differentiation as a strategy for McDonald’s
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Apakshit Sachdeva (Author), 2015, Evaluation and selection of differentiation as a strategy for McDonald’s, Munich, GRIN Verlag, https://www.grin.com/document/337921


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