Technology and innovation are crucial in the survival, growth, and competitive advantage of a company. The company’s operating environment will help it determine if its strategy will compete favorably against immediate competitors (Kapoor, 2018). McDonald’s is a global leader in the fast-food industry with an estimated annual global turnover of $ 21.08 billion in 2019. The company has about 37000 restaurant outlets populated in over 130 countries worldwide (Kapoor, 2018). McDonald’s often competes with global brands like Burger King, Subway, and Wendy’s, among other brands. The company’s major product lines are the hamburger lines, beverage, chicken lines, and desserts, among other products. Its global brands like Big Mac and Chicken McNuggets and its specialty coffee are some of the most popular brands that make McDonald’s a market leader in the fast-food business (Kapoor, 2018). This paper analyzes McDonald’s product technology strategy and how it relates to its technology and innovation management in the quick-service restaurant industry
Analysis of McDonald’s Technology and Innovation Strategy
Key Findings on Strategy
McDonald’s utilizes the “Need Seeker” strategy on the Booz innovation strategy type as a global franchise. In this type of strategy, the company seeks to ascertain consumers’ needs and desires and then develop products that address those needs before they get addressed by its immediate competitors (Jaruzelski & Dehoff, 2020). The company understands that the quick-service industry is very competitive, and achieving a competitive edge rests on its ability to connect with its customers through ongoing market assessments and product innovations. McDonald’s has so far identified many deep consumer and customer insights through its ongoing market assessments. For example, the company found out that automating its restaurant service through self-order kiosks could improve service delivery and create more value. This strategy worked well for the experimental restaurants because McDonald’s was realized a 30% increase in customer value with a corresponding 20% in the increased purchase through upselling (Gavett, 2015). That market insight, obtained through ongoing market assessments, helps McDonald’s stay ahead of the competition.
Relying on the need-seeking strategy has allowed McDonald’s to collect broad consumer and customer insights into the fast-food business. The company’s PESTEL analysis shows that children and demographically young persons are the company’s greatest market segment. The company has endeared to make itself an attractive dinner for these market segments because of these findings. For example, the company created value for the children segment by creating children’s spaces where children could play and interact instead of just going for a regular dining experience (Howard, 2015). The company also found that creating children’s spaces for special occasions like birthdays allowed it to systematically examine customer needs to assign their available resources for continued exchange that created value (Sanchez-Gutierrez et al., 2018). Therefore, McDonald’s has become more of a psychosocial identity than a dining experience that leads to high market ratings.
While McDonald’s may be relying on need-seeking innovation strategies to gain a competitive advantage over immediate rivals, the strategy may not be efficient in offsetting the threats from the external environment. The company’s PESTLE analysis shows that McDonald’s is facing significant threats from changing shifts towards more health-conscious products to mounting pressure from social movements that target fast-food businesses. Besides, the company faces threats from the rising cost of inputs and real estate costs that increase operating costs. These factors, coupled with volatile economic situations, have shrunk McDonald’s profit margins, demonstrated by its 15% revenue reductions from 2016-to 2020 (Team, 2015). While McDonald’s need-seeking strategy may be helpful in the identification of innovator knowledge, the company may be lacking the adequate resources to coordinate the “what,” “how,” and “why” of innovator knowledge to introduce new innovator brands (Sahil, 2006). This latency between knowledge development and implementation could be hurting the company’s commercialization, as shown by weak product innovations in recent years (Kapoor, 2018). As a result, the company needs to realize more product implementations than discontinuation.
Key Findings on Product Analyses
MacDonald’s products are augmented brands that resonate with its global customers. The company’s Big Mac, Chicken McNuggets, and specialty coffee are significantly visible brands that ideate global brand loyalty recognition and loyalty. McDonald’s brands are complex bundles of product add-ons that transcend the physical product design to include psychosocial and emotional attributes that make them relatable to customers (Howard, 2015). This aspect of customer relationships is found in the augmented product features like McDelivery, self-service kiosks, clear subway, family-friendliness, and the creation of children’s space, among others. While building customer value and exchange rapport, these attributes also promote McDonald’s sustainable business model and competitiveness (Sanchez-Gutierrez et al., 2018).
The McDonald’s brand is a visible global brand in the quick-service industry. McDonald’s is one of the global fast-food chains in over 130 countries worldwide with over 37000 restaurant outlets. As an industry leader, the company has managed to ideate and develop brands that resonate with customers and create memorable experiences that create systematic value for further exchange. Some of the company’s most popular brands include Big Mac, chicken McNugget, and specialty coffee. While these brands are physical, McDonald’s has managed to create an experience with its customers that is difficult to imitate by its immediate competitors. This experience is coupled with the self-order kiosks and McDelivery services, among other product add-ons.
While the company’s technology and innovation strategy of “need-seeking” appear to contribute to the company’s innovative products and sustainability, there is an apparent lapse between product ideation and implementation. The “need-seeking” strategy is a crucial success factor because it helps the company gather vital consumer and customer insights through ongoing market assessments. The company may not be leveraging on this crucial innovator knowledge for more product portfolios because it has limited recently confirmed menus in the market. This construct, coupled with the intense competition and changing market dynamics towards healthy products, could impede future profit margins.
However, the company should conduct a continuous audit of its product portfolio to determine if they fit within the current public health definitions as healthy. For products that perform well but may not meet the public health criteria for healthy foods, the company should consider reinventing them for compliance reasons. The company should also reduce the latency between product ideation and implementation since it is hurting the release of new innovator brands that hurt the company’s new product offering for market competitiveness.
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