TCA3 STRATEGIC MANAGEMENT

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BSc (Hons) in Business Management Name: Student ID: Level: 6 Module Title: Strategic Management Module Code: MBUWU3STM Location of Study: Westford University College Assignment type: Assignment – 3 Case Study Lecturer: Mr. Zawahir Siddique Date of Submission: 6 th December

Executive summary It is no surprise to the world that the Covid-19 pandemic took a major hit on many industries across the world including the food and beverage industry. Hotels and fast-food chains struggled to keep their businesses going all throughout early 2020 to 2021. But amidst all this, multinational fast-food chain, McDonalds adapted to the situation and found ways to improvise and strategize. This report is all about the strategies implemented by McDonalds to during the pandemic to improve their sales and to provide the safest and best experience for their customers. How did McDonalds manage to adapt to the Pandemic? McDonalds is known to be the largest food service leader group in this world with over 39,000 restaurants spread across 119 markets (GANTI, 2021). With this massive scale of restaurants spread across the world and because of brand and customer loyalty, McDonalds managed to be in a good place financially when the pandemic took place. One of the main reasons why they were able to improvise was because they started to focus more on offering their products to customers in the safest ways possible. After the covid-19 pandemic, the entire system of dining shifted to a more DDD (Delivery, Digital, Drive-thru) way. CEO of McDonalds claimed that this holistic strategy will help them to restore the profit back much higher than how the company performed in 2019. This growth strategy helped them to achieve the best monthly performance in almost 10 years and that too, in the middle of a pandemic. Apart from them they have made a lot of technological advancements that has made the service process a lot more effective. SWOT analysis of McDonalds Figure 1 https://www.businessinsider.com/ways-fast-food-will-be-different-after-the- coronavirus-pandemic-2020- 5 Strengths : One of the major strengths that McDonalds possess is their high brand image and customer loyalty. Even amidst the pandemic, they never failed to bring any reduction the quality of the products offered by them. Hence people kept coming back to the brand with the help of different channels. Besides, during Covid, many small and big restaurants that were mainly focused on dining in shut down because government-imposed capacity restrictions. This did not affect McDonalds because they had implemented the drive thru system of collecting the food on the go way before the pandemic. Because of the drive thru strategy, in

US, around 78 percent of the sales were generated from their drive thru system (McDonnell, 2021). Yet another strength of McDonalds is their safety. The management properly prepped the employees that were serving to go through all the mandated protocols set by the government. They made sure that all the employees were vaccinated and put signs all over the restaurant to wear masks and gloves and to sanitize from time to time. When the in-house restaurants opened in some locations, they also made sure to make plastic barriers between seats to ensure maximum safety (McDowell, 2021). McDonalds has initiated several other strategies to ensure maximum safety and less minimal contact between customers and employees. Weaknesses : One of the main weaknesses that McDonalds faced was the loss of 5.3 billion dollars in US dollars during one quarter due to the virus and lockdown in almost all countries. (Bhushan, 2020). Most of McDonald’s s’ profits are generated from the western countries like the US and the UK. McDonalds hasn’t completely emerged in countries like India and China. Yet another problem was the cut in pay of employees by McDonalds in the Indian markets due to early onset of the pandemic. On another hand, employees were not given the opportunity to take paid family or sick leave which meant, if they became sick, it would potentially lead to job loss. Because of this, employees are left with only two helpless options, which is either going to work while being sick or sitting at home to safeguard everyone’s health which would end up in unemployment (Regalado, 2020). Opportunities : Speaking of Opportunities, McDonalds has quite a lot considering the pandemic and how they are trying to overcome it. A major surge in the drive thru and mobile app orders has created a chance for McDonalds to boost their sales. By this, they also have a competitive edge over other fast-food chains because of how effective their contactless services are. Their implementation of AI into drive thru’s and kiosks has also made their service customer friendly. Yet another edge they have over other competitors are the successful campaigns they have run with major celebrities like BTS and Travis Scott which has initiated major global attention amongst young people as well. These marketing tactics has a very high success rate even during covid (Tyko, 2021). Threats : One of the major threats that the company would potentially face is the virus on its own. Even though, the pandemic has settled down a bit in some countries, with the arrival of the new virus strain known as OMICRON, there might be a good chance that some countries would go back to lockdown again. This would cause a dip in the revenue and sales. Yet another threat would be competitive rivalry. Even though McDonalds is leading in the fast- food chain, the have a major cutthroat competition from firms like KFC, Burger King, Taco Bell etc… The Holistic Growth Strategy adopted by McDonalds during the pandemic Delivery Over the last few years, McDonalds has expanded their food delivery service from 2000 locations to over 20,000 locations. This is because, after the pandemic, there was a steady rise in the number of sales that were coming directly through delivery. In Canada, 65 percent of their sales are from delivery meanwhile in Australia delivery only accounts to 10 percent. But globally speaking, McDonalds food delivery service has taken a major leap after the second quarter, reported by CFO Kevin Ozan (lucas, 2020). Third party food delivery services like

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uber eats and door dash also plays a significant role in boosting the delivery sales in US. Uber eats offers McDonalds in 6 continents across the globe meanwhile door-dash focuses more on the US, Canada, and Australian market (Maze, 2021). Digital service Figure 2 https://www.delish.com/food-news/a36968484/mcdonalds-rewards-program/ Loyalty reward program Figure 3 https://www.bloomberg.com/news/articles/2019-11-13/mcdonald-s-finds-a-flaw-in- its-ordering-kiosks-no-cash-accepted\ digital kiosks One of the main digital services introduced by McDonalds to boost sales was their loyalty programs in the McDonalds app. Even though the loyalty rewards program was introduced in other countries a long time ago, it was never tested in McDonalds biggest market, US until now. CEO Chris mentioned that this program became an instant fan favourite and has also generated 14.6 percent growth in sales for the third quarter. The company s’ vice president in CRM, Alycia said that this program will bring a personal touch to the overall customer experience. To encourage more people into it, the app gives 1500 points to a new customer that signs up. They can redeem a burger or a snack using these points. Once these points accumulate, they can start redeeming full meals as well. Moreover, when customers use the drive thru platform, loyalty customers will be greeted with their name and new deals will be sent to them personally as well. Another one of their prominent services is their digital kiosk service. With the help of the kiosk, customers wouldn’t have to stand in long queues to pay for their orders (MORILLO, 2021). The kiosks are very customer friendly to the point that people can customize their meals according to their liking before placing the order. This service improves efficiency and time especially during the pandemic. According to the CEO, Chris, even the kiosks are designed in such a way that the main popular items such as the Big Mac, Quarter Pounder, McNuggets, Soft Serve ice-cream etc are highlighted for easy customer accessibility. Drive thru The drive thru service was prominent in McDonald’s way before the pandemic. But once the company started seeing that most of their sales are generated from drive thru, they decided to upgrade it to make it more easily accessible. Currently speaking, 90 percent of the sales alone in US is generated from drive thru alone. Because of this, McDonalds acquired an AI powered start-up known as Dynamic Yield to improve the drive thru experience for their customers (littman, 2019). With the help of this, they have set up digital drive thru boards at

the beginning of the line which displays the current popular items in the menu which changes according to time and season. Some stores have double lanes of drive thru to help manage the crowds (BARRETT, 2020). McDonalds is also working on setting up voice activation powered by AI technology to interact with the customers on their orders or other inquiries. Process innovations of McDonalds Radical Radical innovation is a business concept that tries to fully demolish and replace an existing product/ service or to build an entirely new business. In the post pandemic era, the one radical initiative taken up by the company was the loyalty reward program introduced by the company. Even though this program was available to some markets in Asia. It was only recently available in the US market. Yet another innovation is the order ahead service which enables customers to order their food ahead of time and helps them choose the closest locations near them to collect their food on the go. This service helps customers save time if their running late or can’t wait in the drive thru lanes. One radical innovation that the researcher would like to propose for McDonalds is to introduce plant-based burgers and meals into their menu. A lot of people are more health driven nowadays. Introducing a much more vegan focused menu would increase their sales and revenue since the popularity of plant-based meat and foods are increasing day by day. The ideology of veganism is rapidly evolving in western countries like US, UK, and Canada which is also where McDonalds has a high market share. They could introduce more selective stores that has an exclusive menu for vegans (Media, 2021). This would help in creating more brand popularity and in being diverse. Incremental The practice of adding tiny modifications to current goods, services, processes, methodologies, or even the company itself is known as incremental innovation. Some of the incremental innovations introduced by McDonalds recently was the upgradation in the drive thru lanes. Since drive thru has become very popular among their customers, with the help of AI technology, they have enhanced the entire experience of collecting food on the go. Double lane drive thru is also now available in some locations where the populations are dense. Another incremental innovation was the new line of spicy McNuggets, which was quickly a favorite among customers. They also have seasonal incremental innovations like introducing fresh mojito drinks during summer and pumpkin flavored cookies during fall. The researcher would like to propose giving out offers and discounts on meals on third party delivery services more often. By this way, customers will be prompted to order meals on these apps often. Another thing that they should bring is, at drive thru lanes, they should be handed out tablets or screens to make orders digitally. It is proven that many customers feel comfortable in making the orders via the kiosk service rather than directly because of the customization feature. This should also be implemented in drive thru to make the whole process faster and convenient. Their Mc-Café should also be set up in more locations which are around offices and universities. This will help in bringing more popularity to the coffee brand because companies like Starbucks and Tim Horton’s are the leading cafés which is a potential threat to McDonalds.

References BARRETT, B., 2020. The Future of McDonald's Is in the Drive-Thru Lane. [Online] Available at: https://www.wired.com/story/mcdonalds-drive-thru-mymcdonalds-app/ Bhushan, R., 2020. Covid lockdown: At McDonald’s, Domino’s sellers, staff get paid in slices now. [Online] Available at: https://economictimes.indiatimes.com/industry/cons-products/food/covid- lockdown-at-mcdonalds-dominos-sellers-staff-get-paid-in-slices-now/articleshow/ 75463388.cms?from=mdr GANTI, A., 2021. How McDonald's Makes Money. [Online] Available at: https://www.investopedia.com/articles/markets/032015/how-mcdonalds- makes-its-money-mcd.asp littman, j., 2019. McDonald's buys Dynamic Yield for $300M to improve drive-thru experience. [Online] Available at: https://www.restaurantdive.com/news/mcdonalds-buys-dynamic-yield-for- 300m-to-improve-drive-thru-experience/551316/ lucas, a., 2020. McDonald’s customers changed their behavior during pandemic, but some trends could endure. [Online] Available at: https://www.cnbc.com/2020/07/28/mcdonalds-says-some-pandemic- consumer-trends-could-endure.html Maze, J., 2021. MCDONALD’S ANNOUNCES NEW DEALS WITH DOORDASH AND UBER EATS. [Online] Available at: https://www.restaurantbusinessonline.com/financing/mcdonalds-announces- new-deals-doordash-uber-eats McDonnell, S., 2021. What Percentage of Sales Are From Drive Through Windows at Fast Food Restaurants?. [Online] Available at: https://smallbusiness.chron.com/percentage-sales-drive-through-windows- fast-food-restaurants-75713.html McDowell, E., 2021. 14 ways fast-food chains have changed because of the coronavirus pandemic. [Online] Available at: https://www.businessinsider.com/ways-fast-food-will-be-different-after-the- coronavirus-pandemic-2020-5 Media, S., 2021. Veganism Is More Than Just a Fad. [Online] Available at: https://sentientmedia.org/increase-in-veganism/ MORILLO, A., 2021. McDonald’s New Loyalty Program Is Launching Today—Here's How It Works. [Online] Available at: https://www.delish.com/food-news/a36968484/mcdonalds-rewards-program/ Regalado, N., 2020. McDonald’s Employees are Working through the COVID-19 Pandemic. So Why Don’t They Have Access to Paid Sick and Family Leave?. [Online]

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Available at: https://www.aclu.org/news/racial-justice/mcdonalds-employees-are-working- through-the-covid-19-pandemic-so-why-dont-they-have-access-to-paid-sick-and-family- leave/ Tyko, K., 2021. McDonald's BTS meal is here through June 20 with McNuggets and spicy dipping sauces. [Online] Available at: https://www.usatoday.com/story/money/food/2021/05/26/mcdonalds-bts- meal-kpop-music-mcnuggets-south-korea-global-launch/7417730002/

TCA3 STRATEGIC MANAGEMENT

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