Case Study Description of McDonald's Russia: Managing a Crisis
In August 1998, George Cohon, founder and senior chairman of McDonald's Russia, is facing an economic state of emergency. Russia is in the midst of a severe currency crisis--the ruble has plummeted in value, creating massive inflation and widespread economic disarray. Traffic in the 26 restaurants has plummeted, and Cohon is struggling to figure out how to entice consumers back to McDonald's. Cohon is debating two issues: whether to raise prices and whether to add low-priced items, such as cabbage soup, to the menu.
Swot Analysis of "McDonald's Russia: Managing a Crisis" written by Youngme Moon, Kerry Herman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cohon Mcdonald's facing as an external strategic factors. Some of the topics covered in McDonald's Russia: Managing a Crisis case study are - Strategic Management Strategies, Customers, Pricing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the McDonald's Russia: Managing a Crisis casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is backlash against globalization, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
wage bills are increasing, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of McDonald's Russia: Managing a Crisis
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McDonald's Russia: Managing a Crisis case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cohon Mcdonald's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cohon Mcdonald's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of McDonald's Russia: Managing a Crisis can be done for the following purposes –
1. Strategic planning using facts provided in McDonald's Russia: Managing a Crisis case study
2. Improving business portfolio management of Cohon Mcdonald's
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cohon Mcdonald's
Strengths McDonald's Russia: Managing a Crisis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cohon Mcdonald's in McDonald's Russia: Managing a Crisis Harvard Business Review case study are -
High brand equity
– Cohon Mcdonald's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cohon Mcdonald's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Cohon Mcdonald's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Youngme Moon, Kerry Herman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Sales & Marketing field
– Cohon Mcdonald's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Cohon Mcdonald's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Cohon Mcdonald's is one of the most innovative firm in sector. Manager in McDonald's Russia: Managing a Crisis Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Cohon Mcdonald's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cohon Mcdonald's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Cohon Mcdonald's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Cohon Mcdonald's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in McDonald's Russia: Managing a Crisis Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Cohon Mcdonald's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in McDonald's Russia: Managing a Crisis HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the McDonald's Russia: Managing a Crisis Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Diverse revenue streams
– Cohon Mcdonald's is present in almost all the verticals within the industry. This has provided firm in McDonald's Russia: Managing a Crisis case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Cohon Mcdonald's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cohon Mcdonald's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Superior customer experience
– The customer experience strategy of Cohon Mcdonald's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses McDonald's Russia: Managing a Crisis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald's Russia: Managing a Crisis are -
Need for greater diversity
– Cohon Mcdonald's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Cohon Mcdonald's supply chain. Even after few cautionary changes mentioned in the HBR case study - McDonald's Russia: Managing a Crisis, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cohon Mcdonald's vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McDonald's Russia: Managing a Crisis, is just above the industry average. Cohon Mcdonald's needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McDonald's Russia: Managing a Crisis, in the dynamic environment Cohon Mcdonald's has struggled to respond to the nimble upstart competition. Cohon Mcdonald's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study McDonald's Russia: Managing a Crisis has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cohon Mcdonald's 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Cohon Mcdonald's, firm in the HBR case study McDonald's Russia: Managing a Crisis needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the McDonald's Russia: Managing a Crisis HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Cohon Mcdonald's has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study McDonald's Russia: Managing a Crisis that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case McDonald's Russia: Managing a Crisis can leverage the sales team experience to cultivate customer relationships as Cohon Mcdonald's is planning to shift buying processes online.
High cash cycle compare to competitors
Cohon Mcdonald's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As McDonald's Russia: Managing a Crisis HBR case study mentions - Cohon Mcdonald's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Cohon Mcdonald's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities McDonald's Russia: Managing a Crisis | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study McDonald's Russia: Managing a Crisis are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cohon Mcdonald's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Cohon Mcdonald's has opened avenues for new revenue streams for the organization in the industry. This can help Cohon Mcdonald's to build a more holistic ecosystem as suggested in the McDonald's Russia: Managing a Crisis case study. Cohon Mcdonald's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cohon Mcdonald's is facing challenges because of the dominance of functional experts in the organization. McDonald's Russia: Managing a Crisis case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cohon Mcdonald's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Cohon Mcdonald's in the consumer business. Now Cohon Mcdonald's can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cohon Mcdonald's can use these opportunities to build new business models that can help the communities that Cohon Mcdonald's operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Cohon Mcdonald's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Cohon Mcdonald's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Cohon Mcdonald's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Cohon Mcdonald's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Cohon Mcdonald's can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cohon Mcdonald's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Cohon Mcdonald's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Cohon Mcdonald's to increase its market reach. Cohon Mcdonald's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats McDonald's Russia: Managing a Crisis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study McDonald's Russia: Managing a Crisis are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study McDonald's Russia: Managing a Crisis, Cohon Mcdonald's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Cohon Mcdonald's needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Cohon Mcdonald's has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Cohon Mcdonald's needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cohon Mcdonald's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Cohon Mcdonald's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Cohon Mcdonald's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cohon Mcdonald's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study McDonald's Russia: Managing a Crisis .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Cohon Mcdonald's.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on Cohon Mcdonald's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Cohon Mcdonald's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Cohon Mcdonald's is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of McDonald's Russia: Managing a Crisis Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study McDonald's Russia: Managing a Crisis needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study McDonald's Russia: Managing a Crisis is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study McDonald's Russia: Managing a Crisis is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of McDonald's Russia: Managing a Crisis is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Cohon Mcdonald's needs to make to build a sustainable competitive advantage.