McDonald’s Scenario Planning in China in 2020
Using traditional planning tool is of significant value, and is the basic requirement in this case. Like geographical mapping, corporate mapping is also an essential document. Hence, incomplete, providing partial information ignoring the constantly changing factors like weather etc. Here, simulation is an effective strategy to get detailed meteorological information (Geus 1988, pp.72).
Scenario planning is one step ahead of such simulation. In this way we narrow down the possibilities into certain steps or scenarios. Every individual scenario takes into account various possibilities. Here, relationship between various elements is appeared to be formal that helps to develop quantitative models. It is better to evaluate the scenario for inner consistency as well as implausibility Interpretation is an important aspect of scenario planning. It is used to challenge the existing patterns (Schoemaker 1991, pp.552). Organizations facing such critical issues are suggested to use scenario planning.
- Manager shows confusion in predicting the future.
- Past high revenues and expenditures.
- Fewer opportunities are seen.
- Strategic thinking is relatively of low quality.
- Changing industry trends.
- Need for formal language use and proper framework.
- Contradiction exists in opinion.
- Scenario planning is followed by the competitors.
After constructing strategic scenarios, team is asked to follow instructions, hence, activates the managerial thinking skills. Scenarios are also constructed to better analyze different proposals (Schoemaker 1995, pp.28).
Scenario planning is now used as an effective tool to predict the possible future market situation. To conduct a scenario planning, companies conceive the image of different situations that can possibly affect the future that may lead to further amendments. This is an analytical tool that helps the managers to perform objective analysis, and devise various strategies to cope with the situations. Comparing manager with chess player, we can better understand the role and behavior of manager as how would he plan for the future steps. The reliability of scenario planning proved when Royal Dutch/ Shell overcome the crisis period of 1973 by predicting it earlier. Making hypothesis for internal and external circumstances, to get a competitive edge by the McDonald in fast food industries until 2020, the two most important factors effecting or challenging its position could be competitiveness and consumer needs. By putting both into metric of 2 x 2, one can assume 4 possible scenarios. On these individual scenarios, four hypothesis would be achieved that may help to overcome difficulties and hindrances that may cause unexpected loss to company (Schoemaker 1993, p.195).
Scenario A: Low competitive and minor change in customer needs
Basically, every business is based on the functions of demand and supply in general; the major objective of any business is long term survival and profit to satisfy all its stakeholders. There are many reasons of low competition and low customer needs. The major factors that influence the competition and customer needs are economic, political, social, technological factors and the environmental and knowledge about food and related items and brands. McDonald is a worldwide brand and the competition of the restaurant market in china can be low due to taste preference of customer or existence of a brand that attracts and meet the demand of all almost complete market of china. If we do a survey, we can easily get to know what customer needs, demand level. A product can also be used to offer people of China for the test purpose before its launch in the market as well. Customer needs can be low due to knowledge about the restaurant food effect on their health and financial position. If the products of restaurants such as McDonald are expensive and not according to the requirement of customer then they will not follow that brand and other brands of same nature at all. One other thing is the development of taste for the people of China, if foreign restaurant fail to develop the taste of their products in the minds of Chinese then they would still not be interested in those products (McDonalds UK 2012).
McDonald is intending to become the most favorite food spot in China and offering healthy diets to the modern families at reasonable price. However, if the situation in 2020 is expected to be less competitive and low need, McDonald would not be compulsive to bring any strategic change in its corporate governance that effectively control, regulate, and operate various rules and laws to bring positive change in the company’s situation. Both external and internal factors are monitored to prevent local barriers.
Being an internationally recognized brand, McDonald is working efficiently under corporate governance. This may help it to secure competitive advantage over others and facilitate it in earning the name of a trustable brand.
Scenario C: Strong Competitive and minor change in customer needs
The market environment of 2020 is expected to be highly competitive and the customer needs will vary swiftly and shockingly. Major fast food brands like KFC, Subway, and Grill are predicted to emerge as McDonald’s competitors will be able to maintain its position as an ideal food spot by adopting China’s culture and give it a local taste to make it the most favorite food for children, students, and office workers.
There is also expectation that many new names will appear on the map of China that will create a competition and divide the customers. However, we are living in the most competitive era and can better predict and overcome the future situation that can possibly remain same. Fast food industry will flourish in the coming era and the competition will be higher with slight change in consumer taste and demand.
In scenario C, where competition is high but the consumer needs are low, McDonald is better to maintain the current standard of food by improving the services. Delivering fresh food with top class service may bring fame and success. Focusing on the strong competition, McDonald in 2020 would exhibit new and improved strategy. The first threat appears in the form of supplier. Furthermore, their collaboration with Coca Cola to enjoy the fast food by increasing the digesting process is fun and relief (Schoemaker 1997).
Scenario B: Weak Competition and High Customer needs
The scenario in which competition is less but consumer needs increases by 2020; the customer will make a shift from fast food product to brand name. Consumer behavior is considered a constant variant that increase the demand for more food as there is found less competition. To meet the satisfaction level of customers, better to come up with new and effective strategies that may track the fast changing need of customers. Advance identification of customer needs to satisfy the basic urge of customers. Richardson suggested learning process is an important process that helps the organization in improving its brand image as well as achieving customer satisfaction. McDonald earned a brand name and now it is intending to hit China market to get the success response. McDonald has established its brand name but is intending to improve the strategy and is focusing the cost leadership. This may requires innovation in food and services on the part of McDonald administration. McDonald acknowledges the growing needs of consumer at different levels and age to affect the shopping habits.
It is, therefore, significant for McDonald novelty in menu and service it their product. Introducing new items is a matter of routine activity for McDonald. To meet the appetite of consumer, McDonald is suggested to introduce local dishes in its menu to accommodate more consumers
Scenario D: Strong Competition and high customer needs
- Attract Chinese by Introducing Local taste in McDonald
- Healthy Diet at Low cost for Modern families
- Increase the numbers of outlets to accommodate more customers
- Control the price to satisfy the urge for healthy food at low cost is also great incentive
To devise strategic planning required reinforcing McDonald in Chinese Environment with new vigor and taste. For this, coming festival of Olympic in 2020 is the target to revolutionize the concept of fast food service by including local taste in McDonald menu (Gibson 2012).
McDonald needs to fulfill the wants of its focus audience. To do this it needs to discover out what is assisting it and what is not. It looks at its own pros and cons. For example, the item is durability. It then looks at outside possibilities and risks. This is known as a SWOT analysis. Its marketing plan creates on the powerful points and possibilities. It makes sure that any weak point or risk has as little impact as possible.
McDonald is aiming at specific marketing objectives. It then adopts the strategies that will help in achieving them. A strategy is a set of agendas. Objectives will be set on the way to the goals so that McDonald could track the progress.
The 4 P’s
Market success relies on a good marketing mix. This is the mixture of price, product, publicity, and place often known as ‘the four Ps’.
Product has to modify as preferences modify. It must indicate what industry research revealed that the urge for the local taste is there and could increase the prospects in better ways. Chinese will be the world’s second biggest customer industry by 2015. By 2015, China’s customer intake nation-wide will quantify to $ 5 trillion of the complete international intake, behind only the U.S. (35 percent) (English News 2012). Between 2012 and 2020, the variety of houses in China with yearly non reusable earnings above US$10,000 (in affordable terms) will almost quadruple from 57.1 thousand houses truly to 2,22,000 by 2020. China’s per-capita G.D.P. is about $7,000, with intake creating up only 35% of the economic system, due to the great stages of benefits and business earnings. So China’s per-capita intake the cash the individual usually spends is only about $2,500 a season. In the U.S., that determines about $30,000 McDonald’s desires to dual the variety of places in China in the period of three decades. In 2010, it had about 1,100 sites but desires to develop to a complete of 2,000 shops by 2013. McDonald’s started out its first store in Shenzhen in 1990 and utilizes more than 60,000 individuals throughout the nation. McDonald’s specifically has decided to really focus on nourishment, for the benefit of country’s children and for everyone in general (Fitperez 2012). They launched a MASSIVE strategy on how they devised to do this:
They will instantly start including product or low-fat milk in each bite. McDonald will also create additional veggie, fruit or low-fat milk options for the Satisfied Meals and move out over the next few years. It will introduce localized Meals Options that meet the new, extensive Authorities of Better Business Agencies Children’s Meals and Drink Promotion Effort (CFBAI) Meals show requirements. It is also decided to decrease salt by an average of 15 % overall across the nationwide selection of diet, taking out drinks, by 2015 Decrease added carobs, fats and calorie consumption with different serving sizes, reformulations and enhancements by 2020 (Fitperez et al, 2012). It is another point that will enhance nourishment and/or effective way of life information in 100 % of nationwide children’s devices, such as marketing, advertising, digital and Satisfied Meals appearance by the end of 2012. To identify a Kids’ Meals and Nutrition Advisory, board consists of mother and father and professionals in children’s nourishment, education and actions to help develop effective nourishment and effective way of life promotion information and development for kids (Fitperez et al, 2012). There are other major points as a part of their massive strategy such as:
– Provide financing for grassroots group nourishment attention programs.
– Increase in-restaurant, website, mobile devices and promotion automobiles making access to nourishment information even easier.
-Begin a Hearing Trip to gather information from mother and father and health professionals about how McDonald’s can be a factor in nourishment.
-Release new online father and mother’s group forum for McDonald’s and mother and father to interact with on nourishment subjects.
-Start contract with third party to testify our performance/progress against our dedication objectives.
One fact that we found very interesting was that “approximately 80% of McDonald’s nationwide selection options are 400 calorie consumption or less.” Hopefully McDonald’s is true to its word and makes the changes they’re referring to. It is difficult to predict the strategy to do things by “2020” but it’s better than nothing (McDonalds China 2012).
Here are some local food examples that are test by introducing them in the McDonald’s menu to check whether they prefer their local and regional taste or prefer international items (McDonalds China 2012).
McDonald (Waiki) Saimin is prepared from noodles pasty with charsiu slice.
Source :(McDonalds China 2012)
Then, there is Bubur Ayam McDonald prepared with chicken stripes in a thick porridge with vegetables and hot peppers.
Source : (McDonalds China 2012)
And McSpeghetti is an attractive meal for Chinese to satisfy their appetite.
Source :(McDonalds China 2012)
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English News 2012, China to become world’s largest consumer market in 2015: Commerce Minister, 10 October, viewed 10 October 2012, < http://news.xinhuanet.com/english/china/2012-05/28/c_131615744.htm>.
‘Fitperez 12, 2012, McDonalds to Focus on Nutrition with Huge Menu Overhauls. Accessed 16 October, 2012, http://fitperez.com/2012-09-12-mcdonalds-going-healthy-with-nutrition-plan
Owen, Gibson 2012, London 2012: IOC chief praises ‘country that invented modern sport, viewed 15 October 2012, < http://www.guardian.co.uk/sport/2012/jul/21/london-2012-ioc-chief-praise>
Paul J. H. Schoemaker 1991, ‘When and how to use Scenario planning: A Heuristic Approach’, Strategic Management Journal, vol.10, no.6, pp.549-564.
Paul J. H. Schoemaker 1993, ‘Multiple Scenarios Development: Its conceptual and behavioral foundation’, Strategic Management Journal, vol.14, pp.193-213.
Paul J. H. Schoemaker 1995, ‘Scenario planning: A tool for strategic thinking’, Strategic Management Journal, vol.36, no.2, pp.25-40.
Paul J. H. Schoemaker 1997, ‘Disciplined Imagination: From scenarios to strategic options’, International studies of management and organization, vol.27, No.2, pp.43-70.
McDonalds UK 2012, our world, viewed October 12, 2012, < http://www.mcdonalds.co.uk/ukhome/Ourworld.html>
McDonalds China 2012, Viewed on 16 October 2012, <http://www.mcdonalds.com.cn/>