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In this report, strategic analysis of McDonald Australia is performed with a view to assess the core competencies and resources as possessed by the organisation and this analysis is aimed at identifying recommendations that could be utilised to further strengthen the key strategic resources of the organisation. The analysis leads to identification that the external and internal governance mechanism is separately performed and the role of external governance is crucial because McDonald Australia is operation on the franchise model. The analysis leads to the identification of basic sources of cost competitiveness and differentiation to McDonald Australia and this is mainly in terms of the significant level of presence of McDonald which allows for achieving economies of scale and ultimately cost competitiveness attainment by the organisation. The position of McDonald Australia has been analysed in relation to its competitors and it is evaluated that the organisation occupies the top most level in the industry. The strategic analysis through VRIO analytical tool has been performed and it is analysed that the core competencies in the form of highly efficient human resources, sound infrastructure and good brand reputation has allowed McDonald in achieving good position across the industry. Based on this, it is recommended that human resource manager is required to put additional efforts, and it should look for achieving further improvement in its reputation so as to remain competitiveness in the industry.
The strategic analysis of an organisation requires the consideration of various important aspects. As for instance, in strategically analysing an organisation, it is essential to evaluate the internal and external forces affecting an organisation and the strategies that are being pursued. The internal and external governance of an organisation is a crucial factor affecting the performance of an organisation and as such, it is essential to evaluate the internal and external governance mechanism that affects the decision making process within organisation. Apart from this, there are certain important sources of competitive advantage to an organisation and this can be in the form of cost or differentiation advantage. The value chain analysis of an organisation is crucial as it helps in identifying the value creating activities. The strategic analysis requires the consideration of all these aspects so that the performance of an organisation can be strategically evaluated and appropriate recommendations can be made to achieve improvement over the performance level of the organisation (Goldman and Nieuwenhuizen, 2006).
This report is aimed at performing the strategic analysis of an organisation, and the organisation as selected is McDonald Australia. In performing the strategic analysis of McDonald, the external and internal governance mechanism as followed across McDonald will be evaluated and this is followed by performance of an industry analysis to evaluate the basic sources of cost and differentiation advantage. The value chain analysis of McDonald will be performed and VIRO analysis will be performed to analyse whether they are strategic resources. Based on the analysis of the strategic resources of the organisation, appropriate recommendations would be made for the development of strategic resources.
External and Internal Governance Mechanism at McDonald
The successful operations of an organisation require appropriate governance mechanism practices within organisation. There can be internal and external governance mechanism practices within organisation to ensure the most efficient performance of organisation’s practices. An analysis of McDonald Australia indicates that there is both the internal and external governance mechanism that are being practiced to ensure that the customer needs and requirements are timely met. The mode of operations across McDonald Australia indicates that it is operated as per franchise model whereby the branches across Australia are operated on franchisee basis. The governance mechanism is therefore carried out at both the internal and external level across the organisation. The external governance mechanism is carried out by the top level managerial people across McDonald whereby the managerial people from centralised location perform the management of operations of the franchise. They ensure the governance of franchisee by way of controlling the menus, and efficiently meeting out the requirements of their customers in a positive manner.
The external governance is mainly carried out by way of policies and procedures as set out by headquarter. As for instance, the quality standards as set up by the centralised business operations are required to be observed by the franchisees as operating across Australia, and it is also essential for them that they should look for adapting organisational practices as specified by the senior level managers from the centralised headquarter of the company. In these ways, the external regulatory mechanism has been enforced across Australian franchisees of McDonald and such governance has been highly effective from the point of view of having proper control of the franchisees. Apart from this, the internal governance mechanism has also been highly crucial because in case of the franchisees of McDonald across Australia, the major strategic decisions are taken from headquarter regarding the menu offerings, quality standards etc, but it is the local franchisee owner that have to perform the management of daily operations of the business activity. As such, the internal governance has also been highly crucial from the point of view of performing business activities across McDonald franchisees in an efficient manner. The internal governance is the responsibility of the franchisee owner, and this is ensured at McDonald Australia by way of its core philosophy which has been to act in an ethical, truthful and dependable manner.
In these ways, the internal and external governance has been practiced across McDonald Australia and this leads to efficient overall performance of the operational processes across the corporation.
Ownership Concentration, Structure and External Control: An analysis of the ownership concentration across McDonald Australia indicates that it is operated as per the franchise model whereby various major franchisees of the corporation are opened across different states in Australia. The ownership concentration suggests that it is based on franchise model of operations and the organisational structure indicates that it is hierarchical structure that has been followed across the company. The senior most position in the hierarchy is occupied by the CEO/managing director and there are different respective heads for different organisational departments such as chief financial office, director of marketing, director of operations and so on (McDonald Australia, 2014). In terms of external control is concerned, an analysis of the case of McDonald Australia indicates that the activities of the organisation are majorly controlled externally through having influence of the managers from centralised department of the organisation.
Basic Sources of Cost and Differentiation Advantage in the Industry
The industry that has been in operational is mainly the fast food industry in respect to McDonald and every industry has certain major sources of competitiveness. As such, in respect to the given fast food industry, there are certain major sources of competitive advantages to the operators. As for instance, the basic source of cost advantage is the economies of scale and this has been possible in respect to such fast food industry because of operations being carried out on wider basis within such industry condition. As in respect to McDonald, the basic source of cost advantage to it is mainly in the sense that the company operates on global basis and this allows it in achieving cost competitiveness from making bulk purchases of its requirements for all its franchisees across the globe. This has been the cost competitive factor associated with the entire operations of McDonald Australia (Kauffman and Tallon, 2009).
Apart from this, there also exists the differentiation advantage in respect to such fast food industry and this is clearly evident from the fact that there are specific differentiation factors that allows the fast food retailers in differentiating themselves from others. As in respect to McDonald Australia, it differentiates itself in the entire industry in terms of offering hamburger to its customers. It specialises in providing hamburgers to its customers and this has been the main source of differentiating factor as noted in respect to McDonald Australia. Thus, the cost as well as differentiating factors is highly crucial from the point of view of making significance in respect to such fast food industry and these aspects are positively utilised by McDonald in serving its customers in a positive manner. The cost advantage is mainly achieved by way of economies of scale in its operations whereas the differentiation advantage is achieved in terms of offering specific features in its products and services offerings that leads to higher level of recognition of the company within its targeted customers (Reading, 2004).
Positioning of McDonald in Relation to its Competitors- The fast food retail chain industry is comprised of large number of competitors and this therefore implies that the industry is highly competitive. As for instance, the major players as operating within such fast food industry includes McDonald, Pizza hut, Dominoes, Burger King and various other local players. The positioning of McDonald in relation to all its competitors is indicated as follows:
The positioning of McDonald in relation to its competitors as indicated above implies that it occupies the largest market share in the industry and the growth potential has also been higher. The graph above indicates that McDonald occupies the leading position in the industry and this is followed by KFC which occupied higher market share in the industry. This is followed by Burger King that has competitiveness in the industry and finally, it is Pizza Hut that dominates the industry conditions. The overall position of McDonald indicates that it has attained significantly higher and dominating position in the industry (Kaplan and Norton, 2004).
Value Chain in Relation to McDonald
The value chain is an important strategic analytical tool that helps in identifying the activities that creates value within organisation. There are various important activities that are included within the value chain of the company and these are broadly classified as primary activity and support activity. The primary activity includes inbound logistics, operations, outbound logistics, marketing and sales and service. The support activities include firm infrastructure, human resource management, technology development and procurement. These activities allow for efficiently carrying out the organisational processes and they in turn enable the organisation in achieving higher level of competitiveness with respect to their operations.
In respect to McDonald Australia, the value chain analysis indicates about the primary activities which mainly includes infrastructure and an assessment of McDonald’s infrastructure in Australia implies that the company has built up significant infrastructure conditions which enables it in catering to the needs and requirements of its customers in Australia in a positive way. The case analysis of McDonald Australia indicates that its infrastructure comprises of all ranges of equipments that are essential in delivering the wide variety of menu as offered by the company. McDonald Australia specialises in covering full menu and this has been possible mainly because of supportive infrastructure that allows for delivering high range of services. Apart from this, another important element of value chain is inbound logistics which indicates the receipt of raw materials and in respect to McDonald Australia, the suppliers of raw materials are both direct as well as indirect and they accounts for providing highest quality of raw materials (Weele, 2009).
The inbound flow of materials is performed on Just In Time (JIT) basis and the operational processes are also carried out in a specific manner across McDonald Australia in order to cater to the needs and requirements of customer specific demands. There has been higher level of commitment of McDonald Australia employees towards providing high quality foods and superior class of services and this commitment level indicates about the operational effectiveness that has been prevalent within the organisation. The attainment of higher operational efficiency is ensured at McDonald Australia in the sense that the company work with its employees, franchise and suppliers to achieve higher level of effectiveness (Collier and Evans, 2009).
Apart from this, the outbound logistic element of value chain indicates about the marketing, sale and delivery of the finished products and services to final consumers. In respect to McDonald, the marketing activities as carried out by the organisation imply that it is focused towards promoting its products and services among its targeted customers. McDonald has undertaken marketing initiatives at a global level whereby it has entered into Olympic sponsorship for promotion, and endorsed the Coca Cola brand as well. McDonald Australia has also considered for large number of health and wellness campaigns and its popularity is mainly evident in terms of the hamburger as offered by it. The friendly customer sales services allows for attaining higher level of effectiveness in respect to after sales services by the company. The friendly customer sales services is not the only factor that positively supports the organisation’s operations, but it is the effectiveness of the employees working across the organisation, as they have higher level of efficiency in providing quality products and services to their customers.
The analysis of the value chain in respect to McDonald Australia indicates about various major elements in allowing organisation in efficiently delivering its offerings to its customers. The analysis leads to identification that the main source of competitive advantage is mainly the strong brand reputation including the highly efficient infrastructure and human resources as possessed by McDonald Australia which allows for delivering higher quality products and services to final consumers. Strategic human resources along within sound infrastructure and technological competence with McDonald become the core competitive advantages with the organisation.
VRIO analytical tool is an important strategic analytical tool that helps in evaluating the resources of an organisation. It is a framework that assesses the resources and capabilities of a firm and thereby ascertains the overall competitive advantage as possessed by the organisation. There are four major questions to the VRIO acronym and these are mainly the question of value, the question of rarity, the question of imitability and the question of organisation. These questions are essential to be asked to evaluate the potential of competitive advantages with organisation. VRIO analytical tool has therefore been highly crucial from the point of view of assessing the effectiveness of competitiveness as available with an organisation. As in respect to McDonald Australia, the analysis above indicated about various important core competences of the organisation. The assessment of these competitive sources through VRIO analytical tool is performed as follows:
The Question of Value: This particular question of value asks whether a resource enable a firm to exploit an environmental opportunity and the case analysis of McDonald indicates that it has certain major sources of competitive advantage that allows for attaining value in its business. Such source has been the highly reputed infrastructure with the organisation which allows McDonald in exploiting the growth opportunities in the fast food segment across the industry. Thus, in terms of value factor, the resource as available with McDonald has been highly effective from the point of view of allowing the organisation in achieving higher overall value in its business processes. Apart from this, the human resources has also been highly effective and talented and this is evident from the fact that they prepare food items that are effective enough in attracting customers. This shows that the competitive advantage in terms of sound infrastructure and quality human resources are crucial in terms of allowing the organisation to achieve higher value to the firm (Katsioloudes, 2012).
The Question of Rarity: This question of rarity assesses whether the competitive advantage as possessed by the firm is rare or is it available in the markets easily for the competitors. The competitive advantage with an organisation is considered as highly effective if it is rarely available in the market. The case analysis of McDonald indicates that the core competitiveness in terms of brand reputation with McDonald as the superior company in the fast food industry has been highly effective and rare because it is not possible for a new comer to establish the reputation as developed by McDonald across the globe. In this respect, the question of rarity has been efficiently satisfied with regard to the competitiveness of McDonald and it therefore enhances the overall effectiveness level of the competitive advantage with the organisation.
The Question of Imitability: This question of imitability assesses whether the core competency as possessed by an organisation is imitable by others or not. Core competitiveness is regarded as highly effective if it cannot be copied by others. The case analysis of McDonald Australia indicates that the core competency with the organisation is difficult to imitate because it has established a brand reputation of being the superior company across the world within the fast food industry. This established reputation of long years by McDonald is difficult to imitate. McDonald is popularly known for its hamburger across the globe and with such established presence all over the world and significantly higher level of acceptance within its customers, it would be difficult for a new comer or an already established fast food retailer to build such image. Thus, it is highly difficult to imitate the core offerings as made by the company.
The Question of Organisation: This is the final question within VRIO analytical framework and it questions whether the valuable resources that are rare or inimitable are properly organised to achieve maximum level of contribution from it towards achieving higher level of growth. Based on the performance of analysis of McDonald Australia, it has been analysed that the higher managerial effectiveness has allowed the entire organisation in achieving the leading position throughout the globe. Such a significant level of growth and reputation in the world market for McDonald indicates that the organisation of resources of the organisation has been performed in an efficient manner. The resources and core competencies of the organisation are efficiently organised at McDonald which has been the prime contributing factor towards accomplishing higher overall success.
Overall, the VRIO analysis revealed that the core competencies of McDonald are highly crucial that allows it in sustaining the leadership position in the industry over longer period of time.
Recommendations for Enhancing the Competitiveness of Resources
Based on the analysis as performed above in relation to strategic resources of McDonald Australia, there are certain important recommendations considered essential for the purpose of enhancing the overall level of effectiveness and these are indicated as follows:
- With respect to the core competency of brand reputation as possessed by McDonald, it is recommended that the company should further strive to enhance its reputation. This can be achieved by focusing towards quality factor and also by streamlining its menu to include more products that can be utilised in attracting more and more customers.
- It is also recommended that the human resource manager should seek for utilising newer policies and procedures for the purpose of managing the organisation’s human resources as they are the core in delivering the menus as offered by the company. Hence, it is recommended that new policies should be devised with a view to achieve effectiveness concerning the delivery of quality products and this can be positively achieved by the efforts from human resources managers.
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