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 - – there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing energy prices,
talent flight as more people leaving formal jobs, increasing commodity prices, 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 -
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.
Organizational Resilience of Cohon Mcdonald's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cohon Mcdonald's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Sustainable margins compare to other players in Sales & Marketing industry
– McDonald's Russia: Managing a Crisis firm has clearly differentiated products in the market place. This has enabled Cohon Mcdonald's to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Cohon Mcdonald's to invest into research and development (R&D) and innovation.
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.
Ability to recruit top talent
– Cohon Mcdonald's is one of the leading recruiters in the industry. Managers in the McDonald's Russia: Managing a Crisis are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Cohon Mcdonald's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Cohon Mcdonald's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study McDonald's Russia: Managing a Crisis - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
High bargaining power of channel partners
– Because of the regulatory requirements, Youngme Moon, Kerry Herman suggests that, Cohon Mcdonald's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Cohon Mcdonald's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study McDonald's Russia: Managing a Crisis, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Products dominated business model
– Even though Cohon Mcdonald's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - McDonald's Russia: Managing a Crisis should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Cohon Mcdonald's is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Cohon Mcdonald's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cohon Mcdonald's to focus more on services rather than just following the product oriented approach.
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.
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 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.
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.
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 -
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.
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.
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.
Developing new processes and practices
– Cohon Mcdonald's can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cohon Mcdonald's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cohon Mcdonald's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Cohon Mcdonald's to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cohon Mcdonald's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, McDonald's Russia: Managing a Crisis, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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 -
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Cohon Mcdonald's in the Sales & Marketing sector and impact the bottomline of the organization.
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 .
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.
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.
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.
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.
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.
Regulatory challenges
– Cohon Mcdonald's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Cohon Mcdonald's business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cohon Mcdonald's in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cohon Mcdonald's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.