Case Analysis of McDonald’s McCafe Coffee Initiative

Running Head: STRATEGIC ANALYSIS

Case Analysis of McDonald’s McCafe Coffee Initiative

Introduction

McDonalds’s is a hamburger restaurant that offers diverse menu and quick services in 121 countries across the world. McDonalds has experienced rapid growth, partly attributable to the successful ad promotions and innovations in its menu. The sales of the company were increasing but, market share had declined (About McDonalds’s, 2012). McDonalds’s introduced McCafe concept in 2001 to regain dominance in breakfast and snack time sales and rebuild competitive advantage. In this case analysis, business level strategy, Porter’s five force model to analyze the new venture position in competitive industry, corporate strategies of McDonalds and its importance to create value will be explained. Along with this, justification of current corporate strategy and suggestions to overcome the potential barriers will be discussed in this case analysis.

Business level strategy of McDonalds

        Business level strategy is an integrated & coordinated set of commitments and actions. McDonalds uses business level strategy to gain competitive advantages by exploring core competencies in the specific product markets. In today’s corporate business scenario, there are several kinds of business level strategies used by the business firm to gain the competitive advantages. Cost leadership, Differentiation, focused cost leadership; focused leadership and integrated cost leadership/differentiation are the major business level strategies (Okumus, Altinay & Chathoth, 2010).

        McDonalds use differentiation and cost leadership strategy to increase the market share and to gain the competitive advantages (MCDONALD’S AND THE MCCAFÉ COFFEE INITIATIVE, 2002). The product and service offered by McDonalds is different, highly standardized, superior quality and less costly as compared with its competitors. With the help of this, McDonalds is satisfying the needs & wants of consumer and providing high customer service in the international market (Proff, 2002). On the other hand, McDonalds is also providing the product and service at a very low cost as compare with its major competitors such as: Wendy’s,  KFC pizza hut and burger king. Hence, McDonalds is using integrated cost leadership/differentiation strategy to gain the competitive advantages. It means, McDonalds is providing differentiate & highly standardized product at a very low cost as compare with its competitions.

         The strategies of cost leadership and differentiation are used interchangeably with in the internalization approach of McDonalds.  In addition, McDonalds should also follow focused cost leadership strategy along with the differentiation and cost strategy to create the competitive scope, because McDonalds can easily access the changed environment. So, McDonalds can use different business level strategy to create the competitive scope (Keillor & Hult, 2004).

Competitive Analysis of Mc-Cafe