Tuesday, April 12, 2011

McDonalds: The Big Shark in the Ocean

When it comes to business strategy, McDonald's is a "no-brainer." They are simply remarkable in their ability to continuously attract customers. In, Types of Strategy: Which Fits Your Business, the goal for every for-profit company is
"to identify and pursue a strategy that will give it a defensible and profitable hold on some segment of the marketplace."
This aim is achieved through a plethora of initiatives ranging from, low-cost leadership to customer relationship strategy. The best businesses use a combination of all the strategies available. A company that has done so, in a competitive industry, is McDonalds, Co..

McDonald's strategy is of extreme importance, considering the industry they operate in. In W. Chan Kim and Renee Mauborgne's, Blue Ocean Strategy, blue oceans are described as "calmer waters" where there is uncontested market space and competition is irrelevant. Conversely, red oceans are crowded market spaces with intense competition for market share. The chronological framework of McDonalds history from its founding in 1940, to present day, serves as the perfect example of a blue ocean evolving into a red one. However, McDonalds still remains the shark in the fast food ocean (as their market share affirms above)iii.

McDonalds has employed strategies to keep them at the forefront of the fast-food market in a fashion that competitors simply attempt to emulate. Examples include, but are not limited to:

- Exploiting the experience curve - As McDonalds (1940) was the earliest burger chain out of its current competitors (Wendy's (1969), Burger King (1955), etc...) they have simply capitalized on their ability to benefit from cost advantage.

- Differentiation - when McDonalds came under fire for increasing unhealthy habits of Americans, they offered healthy alternatives.

McDonalds seems to remain the leader in fast-food, which is a claim not many corporations can make in any industry. How does McDonald's maintain its presence as the most dominant fast food provider? Is it simply because they have done more, earlier than all competitors? Is their reign on top of the food-chain (pun intended) everlasting?


i. Types of Strategy: Which Fits Your Business. Harvard Business School Publishing Corporation. 2006
ii. Blue Ocean Strategy. W. Chan Kim and Renee Mauborgne. Harvard Business School Publishing Corporation.2007
ii. Business Model Institute. http://businessmodelinstitute.com/mcdonald’s-business-model-ten-times-better-than-hardee’s/ . 10 APR 2011
iv. McDonalds, Co.- http://www.mcdonalds.com/

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