Case Study Description of McDonald's China: The Expired Meat Scandal
In July 2014, a Shanghai television station revealed that Shanghai Husi, a Chinese subsidiary of a reputable US-owned food supplier, was producing substandard meat products. McDonald's was one of its biggest fast food clients and had been sourcing from the supplier for more than two decades. After cutting tie with Shanghai Husi, McDonald's China and its branches in Hong Kong and Japan were forced to pull a number of products from the menu due to a severe shortage of meat and vegetable supplies. The impact of the scandal was clearly reflected in the poor performance of its sales and stock. The food scare dissipated the general belief that food produced by foreign brands was better than that from Chinese counterparts. With large foreign-owned suppliers in China no longer guaranteeing reliability, what could McDonald's China do to strengthen its supply-chain management? What lessons should it learn from the incident? Would it be better for McDonald's China to run its own food processing plants in China?
Swot Analysis of "McDonald's China: The Expired Meat Scandal" written by Zhigang Tao, Claudia H. L. Woo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mcdonald's Meat facing as an external strategic factors. Some of the topics covered in McDonald's China: The Expired Meat Scandal case study are - Strategic Management Strategies, Marketing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the McDonald's China: The Expired Meat Scandal 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, increasing household debt because of falling income levels, technology disruption, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of McDonald's China: The Expired Meat Scandal
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McDonald's China: The Expired Meat Scandal case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mcdonald's Meat, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mcdonald's Meat 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 China: The Expired Meat Scandal can be done for the following purposes –
1. Strategic planning using facts provided in McDonald's China: The Expired Meat Scandal case study
2. Improving business portfolio management of Mcdonald's Meat
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 Mcdonald's Meat
Strengths McDonald's China: The Expired Meat Scandal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mcdonald's Meat in McDonald's China: The Expired Meat Scandal Harvard Business Review case study are -
Highly skilled collaborators
– Mcdonald's Meat 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 China: The Expired Meat Scandal HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Mcdonald's Meat 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 China: The Expired Meat Scandal - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Sales & Marketing field
– Mcdonald's Meat 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 Mcdonald's Meat in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Mcdonald's Meat 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 Zhigang Tao, Claudia H. L. Woo 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.
Training and development
– Mcdonald's Meat has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in McDonald's China: The Expired Meat Scandal 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.
Learning organization
- Mcdonald's Meat is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Mcdonald's Meat is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in McDonald's China: The Expired Meat Scandal Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Mcdonald's Meat is one of the most innovative firm in sector. Manager in McDonald's China: The Expired Meat Scandal Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Mcdonald's Meat are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Mcdonald's Meat is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Mcdonald's Meat 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.
Sustainable margins compare to other players in Sales & Marketing industry
– McDonald's China: The Expired Meat Scandal firm has clearly differentiated products in the market place. This has enabled Mcdonald's Meat to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Mcdonald's Meat to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Mcdonald's Meat has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mcdonald's Meat 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.
Weaknesses McDonald's China: The Expired Meat Scandal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald's China: The Expired Meat Scandal are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McDonald's China: The Expired Meat Scandal, in the dynamic environment Mcdonald's Meat has struggled to respond to the nimble upstart competition. Mcdonald's Meat has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study McDonald's China: The Expired Meat Scandal, it seems that the employees of Mcdonald's Meat don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Mcdonald's Meat 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.
Aligning sales with marketing
– It come across in the case study McDonald's China: The Expired Meat Scandal 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 China: The Expired Meat Scandal can leverage the sales team experience to cultivate customer relationships as Mcdonald's Meat is planning to shift buying processes online.
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 Mcdonald's Meat supply chain. Even after few cautionary changes mentioned in the HBR case study - McDonald's China: The Expired Meat Scandal, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mcdonald's Meat vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Mcdonald's Meat 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 China: The Expired Meat Scandal should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Mcdonald's Meat is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Mcdonald's Meat needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mcdonald's Meat to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Mcdonald's Meat has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the McDonald's China: The Expired Meat Scandal 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 Mcdonald's Meat has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Zhigang Tao, Claudia H. L. Woo suggests that, Mcdonald's Meat 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McDonald's China: The Expired Meat Scandal, is just above the industry average. Mcdonald's Meat 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.
Opportunities McDonald's China: The Expired Meat Scandal | 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 China: The Expired Meat Scandal are -
Using analytics as competitive advantage
– Mcdonald's Meat has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study McDonald's China: The Expired Meat Scandal - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mcdonald's Meat to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mcdonald's Meat 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mcdonald's Meat can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Mcdonald's Meat 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.
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. Mcdonald's Meat can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Mcdonald's Meat can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Mcdonald's Meat 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.
Developing new processes and practices
– Mcdonald's Meat 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 Mcdonald's Meat 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.
Loyalty marketing
– Mcdonald's Meat has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mcdonald's Meat can use these opportunities to build new business models that can help the communities that Mcdonald's Meat operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mcdonald's Meat 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 Mcdonald's Meat to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Mcdonald's Meat can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats McDonald's China: The Expired Meat Scandal 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 China: The Expired Meat Scandal are -
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. Mcdonald's Meat can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mcdonald's Meat 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 China: The Expired Meat Scandal .
Consumer confidence and its impact on Mcdonald's Meat 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mcdonald's Meat 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.
Increasing wage structure of Mcdonald's Meat
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Mcdonald's Meat.
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 China: The Expired Meat Scandal, Mcdonald's Meat 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 .
Environmental challenges
– Mcdonald's Meat needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Mcdonald's Meat can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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. Mcdonald's Meat needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
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 Mcdonald's Meat business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Mcdonald's Meat 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.
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 Mcdonald's Meat.
High dependence on third party suppliers
– Mcdonald's Meat 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.
Weighted SWOT Analysis of McDonald's China: The Expired Meat Scandal 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 China: The Expired Meat Scandal 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 China: The Expired Meat Scandal 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 China: The Expired Meat Scandal 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 China: The Expired Meat Scandal 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 Mcdonald's Meat needs to make to build a sustainable competitive advantage.
