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McDonald’s Company: Scenarios Implementation Issues

Introduction

Although McDonald’s has been largely successful in entering the global scene through franchising its brand name to local people (Vignali 2001), it nevertheless continues to face difficulties related to negative publicity, burger fatigue, shifting tastes and lifestyles impacting the fast food restaurant market, as well as intense competition from other players in the market, such as Subway and Starbucks (Botterill & Kline 2007). A scenario planning assessment identified three potential scenarios that the corporation can implement in the future to deal with these difficulties, namely adapting a healthy food trend, banning highly saturated fats, and banning the targeting of children in advertisements. The present report reviews the implementation issues and difficulties associated with the proposed scenarios.

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Background of the Proposed Scenarios

Over the years, McDonald’s has become particularly vulnerable to negative publicity and subsequent loss of earnings due to a host of reasons, key among them being the health concerns associated with its fast-food offerings and the production of TV advertisements targeting young children (Lawrence 2005). Owing to the constant accusations levelled against the company as being mainly responsible for the obesity crisis mostly witnessed in the developed world, senior managers have come under mounting pressure to avail healthier alternatives to company’s standard fare (Lawrence 2005). Consequently, the first proposed scenario for McDonald’s involves the promotion of a healthy food trend.

McDonald’s and other fast-food companies have also received widespread criticism for their continued use of highly saturated oils in the preparation of food. While there is evidence that McDonald’s is increasingly using vegetable oil instead of the beef tallow mixture to prepare some of its food items, most meals continue to be high in fat, sugar, salt or all three, thus rubbing food campaigners and health-conscious consumers the wrong way, as it is evident that the contemporary menaces of obesity, heart disease, hypertension, high cholesterol and diabetes are not being confronted at McDonald’s (Botterill & Kline 2007; Donovan 2007). In this light, the second proposed scenario for McDonald’s entails the banning of highly saturated fats.

Lastly, the image and reputation of McDonald’s have also been severely affected by constant accusations appearing in the mainstream media to insinuate that the company targets children in its advertising campaigns without due consideration to the fact that children may not be aware of the health implications associated with the consumption of fast food (Clarke 2003). As such, the third proposed scenario for McDonald’s concerns banning the targeting of children in advertisements.

A Review of the Issues & Difficulties associated with Proposed Scenarios

Healthy Food Trend

Although McDonald’s is traditionally known for its sumptuous and mouth-watering hamburgers, cheeseburgers, chicken and French fries, the company has attempted to expand its menu due to health concerns to include items such as salads, fish, wraps, smoothies, fruit juice, and seasoned fries (Lawrence 2005). However, the expansion is yet to translate to increased revenues for the company, not mentioning that the balancing of core classics and the new menu is yet to generate the desired results (McDonald’s Corporation 2013). It is all clear from the many complaints received that McDonald’s must transform its operations and adopt a healthy food trend to remain competitive in the market; however, the company first needs to address several issues embedded in its organisational culture, change strategy, and customer preferences to successfully implement the health food trend scenario.

Although organisational culture is defined in the literature as “the deeply seated (often subconscious) values and beliefs shared by personnel in an organisation” (Martins & Terblanche 2003, p. 65), it nevertheless has a huge impact on corporate marketing, as it determines the degree of focus on external and internal customers (Wilson 2001). Consequently, McDonald’s organisational culture may go against the introduction of the healthy food options, in large part because of the fact that majority of the customers visiting the fast food outlets do not want anything different from the traditional “Big Macs” and “Cheeseburgers.” Lawrence (2005) acknowledges that consumers “who clamour loudest for a menu full of healthy alternatives are still more likely to order a conventional burger when they walk through the door.” (p. 9). As such, the company may lose its customer base and earnings if these customers find that their traditional favourites have been changed for fat-free fast foods (Lawrence 2005).

Organisational change scholarship shows that a radical transformation of an organisation invariably occasions its own uncertainties and risks (Ragsdell 2000). Available literature demonstrates that, while implementing the healthy food trend may bring new customers for McDonald’s, the payoff might come at a substantial cost if the new trend isolates customers who have traditionally served as the lifeblood of the company (Lawrence 2005). In such a scenario, according to this particular author, “customers previously loyal to McDonald’s might easily be driven into the arms of a welcoming rival should the focus shift too far from core products” (p. 10). Any change effort should aim to enhance organisational performance, improve members’ own position within the organisation, as well as ensure the organisation remains relevant in the competitive business arena (Saka 2003).

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In explaining the difficulties that may arise as a result of attempting to change customer preferences to fit the healthy food trend, it is important to consider the fact that it is almost an impossibility to successfully reposition an established brand such as McDonald’s (Lawrence 2005). Consequently, it may be difficult for the management to shift consumers’ perceptions of the McDonald’s brand name and the fast-food offerings the company is traditionally known for. The company must find ways to effectively deal with this challenge or lose customers in its attempt to implement a healthy food trend. This challenge can be successfully dealt with by embedding the healthy food trend into the long-term direction of McDonald’s not only to ensure its strategic fit with the business environment to avoid loss of customers but also to facilitate the dynamic capabilities of the company and its global networks (Agnihotri, 2013).

The difficulties for McDonald’s do not end there, as it is a well-known fact that a broader range of salads that may be required by the company to implement a healthy food trend is ultimately dependent on the availability of larger quantities of fresh produce, which clearly has a substantially shorter life span than frozen burgers. Although this may be viewed as an operational issue as it involves the transportation, storage, and preparation of the fresh produce, it certainly has strategic connotations as the company must develop more innovative ways to deal with extra costs that may be passed on to customers (O’Keefe 2002; Agnihotri 2013). As a matter of fact, these operational issues require McDonald’s to take a proactive strategic approach not only to encourage advancements in technology by investing in research and development activities to come up with new management/operational procedures and the invention of technology not previously used by competitors, but also to facilitate cost leadership (e.g., coming up with innovative ways to produce quality burgers at a lower price relative to the competition), engage in differentiation (e.g., following a healthy food trend that produces a unique product meeting a unique set of needs sold at a higher relative price to recoup the costs brought about by the mentioned operational issues), and focus on innovative products that better meet the specific needs of the targeted market segment (Martins & Terblanche 2003).

Banning Highly Saturated Fats

Another scenario that has been proposed for implementation in the future is the banning of highly saturated fats. Saturated oils, which are mainly found in fatty meats, full-fat dairy products, butter, hard margarine and ghee, have been associated with adverse health outcomes, including obesity, high blood pressure, constriction of the arteries, heart attack and stroke (Donovan 2007). It is evident that McDonald’s uses many of these ingredients to make its hamburgers, cheeseburgers and other assorted conventional food items. The implementation of the ban on highly saturated fats is therefore likely to face difficulties mostly arising from the company’s strategic perspective and implementation-related costs.

Available literature demonstrates that effective implementation of a firm’s strategy is critical to its success in terms of performance and competitiveness (McGuinness & Morgan 2005). Over the years, McDonald’s strategic approach has been “to create a standardised set of items that taste the same whether in Singapore, Spain, or South Africa” (Vignali 2001, p. 99). This view is reinforced by Donovan (2007, p. 5), who argues that the “consistency is what has made McDonald’s a worldwide success and it is what many customers still value about the fast-food firm.” In consequence, the company may face difficulties in making the strategic switch to the use of unsaturated fats not only because saturated fats are considered an integral component of the texture and taste of the various food items on offer in its outlets worldwide, but also due to the fact that the highly saturated oils have a much longer “fry-life” than their unsaturated counterparts (Lawrence 2005). Consequently, McDonald’s has to develop another strategic approach geared towards using unsaturated oils while at the same time ensuring significant cost savings through standardisation.

McDonald’s will also have to deal with the strategic issue of converting its production lines, with the view to ensuring that highly saturated oils are no longer utilised during the cooking of Chicken McNuggets and French fries without necessarily harming the texture and taste. For this strategic issue to succeed, the company must engage in making a dramatic shift in its organisational structure. The functional organisational structure utilised by McDonald’s, though advantageous in ensuring more specialisation and evaluating performance, is quite ineffective due to challenges of communication, knowledge sharing, and cooperation witnessed between the headquarters and numerous other franchises located in diverse locations around the world (Curado 2006; Stanleigh 2008).

Due to the fact that over 80 percent of McDonald’s fast food outlets are operated as franchises using the functional organisational structure (McDonald’s Corporation 2013), it is increasingly difficult for the company’s senior management to enforce the implementation of best practices in dealing with the issue of highly saturated fats owing to the fact that some franchises opt to exercise a certain level of autonomy in their strategic orientation depending on existing market opportunities as well as prevailing internal and external environmental factors. Consequently, it has been increasingly difficult for senior management located in the United States to get some of these franchises to agree on ensuring that highly saturated fats are no longer in use, particularly upon the realisation that these owners have been cited as suggesting they should not be held responsible for consumers’ dietary habits (Donovan 2007; Kujala et al. 2013). A new organisational structure for the company, it is believed, may provide the senior management with the leverage needed to enforce the implementation of strategic decisions at the local level, hence ensuring compliance among the franchises in desisting from using highly saturated fats. The local managers of different franchises must form a key part of the strategy to use other alternative oils for the strategy to succeed, as the quality of lateral relationships is becoming fundamentally important in the successful implementation of a strategy (Agnihotri 2013).

Banning the Targeting of Children in Advertisements

The last proposed scenario that needs to be implemented in future concerns banning the targeting of children in advertisements. McDonald’s realises that many consumers of its hamburgers, cheeseburgers and other conventional food items are young children and hence continues to target this group of the population in its advertisement campaigns despite the full knowledge that fast food consumed by these children in quick-service restaurants and take-away outlets is of particular concern as it is often associated with elevated calorie intake and subsequent adverse health-related challenges (Bernhardt et al. 2013). Consequently, the company needs to promote an ethical preposition by banning the targeting of children in TV advertisements, with the view to encouraging healthy lifestyle choices. However, the implementation of such a ban is likely to face pertinent challenges, as discussed below.

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Here, the major implementation issue entails how McDonald’s should radically change its marketing and advertising strategies to ensure the message gets through without necessarily targeting children. Although this may entail stimulating the creative thinking processes to develop a novel advertising paradigm (Ragsdell 2000), it may nevertheless prove disastrous for McDonald’s, as substantial revenue earnings come from this group of the population (Donovan 2007). Available literature demonstrates that “global food companies have an influential impact on public health, and the enormous resources they direct toward marketing and branding of unhealthy foods has generated scrutiny of how food is marketed to children” (Bernhardt et al. 2013, p. 1). Additionally, the company must find ways to erase the ethical concerns it has caused by targeting children in its advertisement campaigns. Although corporate social responsibility is at the core of companies that may want to be seen by the outside world (e.g., the media, consumers) as ethical (Polonsky & Jevons 2006; Aktar 2013), it may be difficult for McDonald to be viewed as socially responsible in the short-term owing to the fact that most local owners running the franchises may still want to advertise their product offerings to young children despite a ban from headquarters (Gbadamosi et al. 2012).

Conclusion

The present report has comprehensively reviewed the issues and difficulties associated with the proposed scenarios, namely adapting a healthy food trend, banning the use of highly saturated food items in the production of food, and banning the targeting of children in advertisement campaigns. It is evident from the critical review that most of the issues and difficulties are hinged on McDonald’s organisational culture, and customer perceptions, the company’s functional organisational structure and implementation challenge predominant in franchising arrangements, difficulties in repositioning an established brand such as McDonald’s, cost implications for implementation, issues in organisational change efforts and strategy, as well as ethical concerns.

Reference List

Agnihotri, A 2013, ‘How much is strategic fit important?’, Business Strategy Series, vol. 14, no. 2, pp. 99-105.

Aktar, I 2013, ‘Disclosure strategies regarding ethically questionable business practices’, British Food Journal, vol. 115 no. 1, pp. 162-189.

Bernhardt, AM, Wilking, C., Adachi-Mejia, AM, Bergamini, E, Marijnissen, J & Sorgent, JD 2013, ‘How television fast food marketing aimed at children compares with adult advertisements’, PLoS ONE, vol. 8 no. 8, pp. 1-6.

Botterill, J & Kline, S 2007, ‘From McLibel to McLettuce: Childhood, spin and re-branding’, Society and Business Review, vol. 2 no. 1, pp. 45-54.

Clarke, B 2003, ‘The complex issue of food, advertising and child health’, Young Consumers: Insight and Ideas for Responsible Marketers, vol. 5 no. 1, pp. 11-16.

Curado, C 2006, ‘Organisational learning and organisational design’, The Learning Organisation, vol. 13 no. 1, pp. 25-48.

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Donovan, WB 2007, ‘It’s all McChange at McDonald’s: McDonald’s is making changes to reflect modern tastes of the firm as an agent of globalisation’, Strategic Direction, vol. 23 no. 11, pp. 5-8.

Gbadamosi, A, Hinson, RE, Tukamushaba, EK & Ingunjiri, I 2012, ‘Children’s attitudinal reactions to TV advertisements’, International Journal of Market Research, vol. 54 no. 3, pp. 543-566.

Kujala, J, Rehbern, K, Toikka, T & Enroth, J 2013, ‘Researching the gap between strategic and operational levels of corporate responsibility’, Baltic Journal of Management, vol. 8 no. 2, pp. 142-165.

Lawrence, RJ 2005, ‘McDonald’s and healthy eating: But can the burger king really be transformed?’, Strategic Direction, vol. 21 no. 4, pp. 9-12.

Martins, EC & Terblanche, F 2003, ‘Building organisational culture that stimulates creativity and innovation’, European Journal of Innovation Management, vol. 6 no. 1, pp. 64-74.

McDonald’s corporation 2013 annual report 2013, Web.

McGuinness, T& Morgan, RE 2005, ‘The effect of market and learning orientation on strategy dynamics: The contributing effect of organisational change capability’, European Journal of Marketing, vol. 39 no. 11/12, pp. 1306-1326.

O’Keefe, T 2002, ‘Organisational learning: A new perspective’, Journal of European Industrial Training, vol. 26 no. 2/3/4, pp. 130-141.

Polonsky, MJ & Jevons, C 2006, ‘Understanding issue complexity when building a socially responsible brand’, European Business Review, vol. 18 no. 5, pp. 349.

Ragsdell, G 2000, ‘Engineering a paradigm shift? A holistic approach to organisational change management’, Journal of Organisational Change Management, vol. 13 no. 2, pp. 104-120.

Saka, A 2003, ‘Internal change agents’ view of the management of change problem’. Journal of Organisational Change Management, vol. 16 no. 5, pp. 480-496.

Stanleigh, M 2008, ‘Effecting successful change management initiatives’, Industrial and Commercial Training, vol. 40 no. 1, pp. 34-37.

Vignali, C 2001, ‘McDonald’s: Think global, act local – The marketing mix’, British Food Journal, vol. 103 no. 2, pp. 97-111.

Wilson, AM 2001, ‘Understanding organisational culture and the implications for corporate marketing’, European Journal of Marketing, vol. 35 no. 3/4, pp. 353-367.

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