McDonalds being one of the largest food franchise company locally and abroad, has been successful in all its undertakings since its foundation in 1955. With its principle of increasing the shareholder’s welfare by increasing the growth of their profits and markets shares, McDonald’s family continuously holding its impressive growth condition in the market. Now, in order for us to systematically evaluate the advantages of McDonalds, we’re going to use the “Resource Based View” of competitive advantage in this study. RBV is defined as a tool by which is being used in determining the strategic resources that are available for the firm.
Basically, based from this principle, competitive advantages of firms come from the efficient allocation and application of bundles of valuable resources for its own consumption (Kotelnikov, 2007). The issue here is on how to have sustainable growth rather than having short term growth only, and the only way by which firms would attain sustainable growth would be when its bundle of goods are heterogeneous in nature and not perfectly mobile. One of the elements in order for a bundle of goods to be considered as heterogeneous is that each firm has its unique capabilities.
McDonalds as taking into consideration its co-industry companies, they have their own characteristics. It is easy for customers to distinguish the difference in the design of the stores as well as the tastes of the food. As for McDonalds, one of its distinguished characters especially for kids is its “M” logo. At one glance they would already know that it is a store of McDonalds. Its foods are prepared in such a way that it would serve as their trade mark. Like the tastes of their burgers and fries. Another element of a heterogeneous bundle of resources is the ability of the firm to compete in the market place.
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In the case of McDonalds, it is pretty obvious that they have the “guts” and capabilities to compete fact to face with other international fast food chains. With its large market share and years of experience in this industry, they already have the advantage over other companies in the competing with each other. It is not only being heterogeneous of the bundle of resources is the factor that contributes for a firm to have competitive advantage. There are still other factors to consider such as resource and capabilities. In other words, the firm is very hard to imitate or has already been in the industry for several years.
Of course, McDonalds has all of these traits. McDonalds has been in the industry of fast food chains for over 50 years and this gave them enough chances of improving their products and to study the behavior of the market. Its market dominance can be seen on the number of branches that the company has around the world. Last 2006, its CEO Jim Skinner, announced that the company had a 6% increase in their revenue and 5. 2% on their sales and expected to increase further by the start of the next quarter (McDonaldscorporation, 2006).
This only gives us how successful and stable McDonald is for it to be able to compete with other companies around the globe. Moreover, it is very difficult to imitate this company for it is being protected by law. In order for one to be able to establish their own McDonald stores into their locality they have to apply first for franchising the name of the business for you to have a right to establish another McDonald store. Another factor that must be considered in order to say that a firm has a competitive advantage is its resources. There are two types of resources that are being taking into consideration in this case.
First is the tangible resource. McDonalds has enough plant capacity for it to supply its stores with raw materials and other ingredients to prepare their foods to be served to their customers. Having sufficient supply of ingredients would ensure the company with continuous production to meet the demand of their customers as well as to avoid making their customers disappointed with regards to the time it takes for their orders to be served or delivered. McDonalds has large numbers of plants each focusing to deliver supplies on designated McDonald stores. It is not only the plant size that is being taking into consideration here.
Information system is another element by which must be fulfilled in order to attain higher efficiency especially in dealing with the orders of their customers. In Hong Kong, McDonald had invested on call center agencies in order to help the crews in getting the orders of their clients as well as the efficiently distributing the orders to the stores to deliver the orders. This alone increased the sales of the company that gives way to their impressive development. McDonalds was also granted by patents to its original products. This only means that they are the only one who could produce those goods for a certain period in time.
With that, all the available markets would be on their hands giving them the power to “monopolize” the production. Another type of resource that is being considered in evaluating the competitive advantage of certain firms is the intangible resources. This includes the brand-name reputation, organizational culture and loyalty of company’s primary agents. With regards to the reputation of the brand-name of their foods, I could say that there are no flaws on this kind of aspects because all other foods “kicked” the tastes buds of their customers which enable them to be credited for preparing good burgers, fries, chickens and a lot more.
In terms of their organizational culture, McDonalds adopts organizational culture based from the market where they belong. Organizational culture of McDonalds in Hong Kong is different from that of the US and same with the other stores in order to cope up with the kind of environment they are dealing with. This gives them enough flexibility to whatever the culture of their customers and other available market in the economy. Moreover, McDonalds is also encouraging their staffs and employees to treat their customer’s goods as they enter the store. Always wear a smile and greet them whenever they are near.
Suppliers are also giving premium by McDonalds. They give justifiable terms and conditions in order to have good working relationship with their suppliers. With this kind of set up, McDonalds have chances of making special favors into their suppliers especially during emergencies. Capabilities are also another factor to consider in evaluating a firm with its competitive advantages. McDonalds, unlike any other firms, could easily influence the market forces due to its large share in the economy. It can influence the level of price of burgers and prices.
One simple action of McDonalds could affect other industries like their suppliers of potatoes, chickens, beef and a lot more. In short they have a large part in the development of the economy since they are the one who is having the ability to make or break the market. They could also prevent new entrants into the industry by using “cut throat competition” wherein they would cut their prices in order for the consumers to patron their goods leaving the new entrants with fewer number of markets thus causing it to shift its interest and invest on other kind of business (Bylund, 2007).
Moreover, McDonalds get most of its top level officers from promotion. This gives the firm positive effect on their efficiency since this strategy would motivate other employees to work well. Moreover, those persons who were promoted has already mastered and has full knowledge of what is happening inside the company as compared to getting, say marketing manager, outside of their system (Anderson, 2004). In terms of recruitment, rest assured that its top and middle level managers have distinguished accomplishments with their respective areas.
This only means that employees of McDonalds are skillful as compared to other companies. They also introduce new varieties of foods line to customers to satisfy their cravings for “something new” in the industry. With regards to the order processing of the company, as I have said I while ago, McDonalds has been investing on other means of increasing the efficiency of the company’s system in getting and serving/delivering the orders, like using IT systems for a faster way of delivering the orders.
Now, evaluating the company if this indeed could have a sustainable development, in terms of the rareness of the raw materials being used by the company and based from the discussions above, I could say that McDonalds has heterogeneity resources that is a primary factor for it to have sustainable growth. The company’s foods are very hard to imitate due to legal protection as well as the acquisition of skilled individuals to manage the firm.
Anderson, E. T. S. , Duncan I. . (2004). Long-run effects of promotion depth on new versus established customers: three field studies. [Electronic Version] from http://goliath. ecnext. com/coms2/gi_0199-3530420/Long-run-effects-of-promotion. html. Bylund, P. (2007). Cut-Throat Competition [Electronic Version] from http://www. lewrockwell. com/bylund/bylund18.
html. Kotelnikov, V. (2007). Resource-Based View (RBV) of Firms [Electronic Version] from http://www. 1000ventures. com/business_guide/mgmt_stategic_resource-based. html. McDonaldscorporation. (2006). McDonald's Announces Strong Operating Results for First Quarter 2006 [Electronic Version] from http://www. mcdonalds. com/corp/news/fnpr/2006/fpr_042106. html.
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