Mcd qspm strategy formulation

QSPM-

Quantitative Strategic Planning

By Alvin Paul T. Riel

STRATEGY FORMULATION

Overview

EFE-External Factors Evaluation

IFE- Internal Factors Evaluation

CPE- Competitive Profile Evaluation

Overview SWOT Analysis

EFE involves the Opportunities and Threats

which the company are facing;and

IFE is consist of Strength and Weaknesses of

the company.

Overview

INTERNAL FACTORS 2015 2014 % Growth/ Decline

STRENGTH

Restaurants worldwide (119 countries) 36,525 - -

Total Assets (in mn) 37,938.7 34,227.4 10.84

Net Income From Continuing Ops( in mn)/applicable to common shares

4,529.3 4,757.8 (-7.39)

WEAKNESS

Decreasing Total Income 25,413 27,441.3 (-7.39)

Decreasing Net Income From Continuing Ops( in mn)/applicable to common shares

4,529.3 4,757.8

(-5.04)

Long-term debts and liabilities (Interest expenses)

26,196.1 638.3

17,001.6 575.4

54.08 10.93

Internal Factors of McD

Overview External Factors of McD

EXTERNAL FACTORS

Opportunities

Technological advancement, social media platforms

Increase in DPI by 2%

Value and Quality-Oriented Consumers

Convenience-Oriented Consumers

Competitive price-oriented consumers

Growing market, incoming peace in Syria, and other war-torn countries,

emerging markets

Threats

Weather (Winter , Draught, etc)

Social and interest groups significantly more health-conscious and litigious

Obama’s Farm Act that will cut SNAP benefits by $8.7 billion

Federal and State Minimum Wage Increases

Terrorism and global wars

Competitors’ strategies

Overview The EFE Matrix of McD

EXTERNAL FACTORS Weight Rating Weighted Score

Opportunities

Technological advancement, social media platforms

0.1 1 0.1

Increase in DPI by 2% 0.1 2 0.2

Value and Quality-Oriented Consumers 0.1 4 0.4

Convenience-Oriented Consumers 0.1 4 0.4

Competitive price-oriented consumers 0.1 4 0.4

Growing market, incoming peace in Syria, war-torn countries, emerging markets

0.05 3 0.05

Threats

Weather (Winter , Draught, etc) 0.1 4 0.4 Social and interest groups significantly more health-conscious and litigious

0.07 2 0.14

Obama’s Farm Act that will cut SNAP benefits by $8.7 billion

0.08 1 0.08

Federal and State Minimum Wage Increases 0.05 4 0.2

Terrorism and global wars 0.05 1 0.05

Competitors’ strategies 0.1 4 0.4

Total 1.00 2.82

Overview Competitive Profile of Rivals vs McD

McD Yum! (KFC) Burger King

Weight Rating Score Rating Score Rating Score

Product Quality 0.13 4 0.52 4 0.52 4 0.52

Competitive Price 0.13 4 0.52 2 0.24 2 0.24

Convenience and

Accessibility 0.13 3 0.52 4 0.52 2 0.24

CSR 0.12 2 0.24 3 0.36 3 0.36

Financial Position 0.13 1 0.13 3 0.39 3 0.39

Good People

Practices

0.12 3 0.36 2 0.24 2 0.24

Market

Communication

0.12 2 0.24 2 0.24 2 0.24

Cultural Sensitivity 0.12 3 0.36 4 0.48 2 0.24

Total 1.00 2.89 2.99 2.23

QSPM Defined is the acronym for Quantitative Strategic Planning

Matrix.

is an analytical technique in designed to determine the relative attractiveness of feasible alternative actions (strategies).

objectively indicates which alternative strategies are best.

requires good intuitive judgment.

is comprised of 3 stages.

QSPM Defined The 3 stages of QSPM:

1. SWOT Matrix (EFE, IFE, CPE);

2. Grand Strategy Matrix; and

3. QSPM.

QSPM Defined The 3 stages of QSPM:

1. Analysis from SWOT Matrix (EFE, IFE, CPE) output for use as input for QSPM if matched with Grand Strategy Matrix;

2. Grand Strategy Matrix helps in identifying the appropriateness of strategies for relative Market status and degrees of Competition to avoid stereotyping and or illogical approach; and

3. QSPM, founded on matched data, information, plan and actions (from stage 1 & 2), is an analytical tool that helps strategists objectively evaluate and choose strategies .

Definition and McD Matrix

Grand Strategy Matrix

Grand Strategy Matrix–

2nd Stage to QSPM, Defined

is tool for formulating alternative actions/strategies.

is based on two evaluative dimensions: competitive position

and market (industry) growth.

All organizations can be positioned in one of the Grand

Strategy Matrix’s four strategy quadrants.

Some organizations may use one or more quadrants based on

branch or geographic-specific market growth and

competitive positions (Agustin, 2017).


2nd Stage to QSPM

Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

Quadrant I

1. Market development

2. Market penetration

3. Product development

4. Vertical integration—

Forward integration

Backward

integration

6. Horizontal integration

7. Related diversif ication

Quadrant III

1. Retrenchment

2. Related diversification

3. Unrelated diversification

4. Divestiture

5. Liquidation

Quadrant IV


2. Unrelated

diversif ication

3. Joint ventures


2nd Stage to QSPM McD Grand Strategy Matrix

Corporate-Business-Functional Levels

Quadrant I

1. Vertical integration—Unrelated Integration

Forward integration

Franchise increases

Backward integration

Local suppliers sourcing

2. Horizontal integration-Related diversif ication

New Restaurants, Franchisee initiatives

Geographically-suited New products for

dev’t & testing

Quadrant II

N/A for McD

Quadrant III

N/A for McD but

Divestiture---Selling

Restaurants

Quadrant IV


New Restaurants, Franchisee

initiatives

Geographically-suited New products

for devt & testing

2. Unrelated diversif ication

Forward integration

Franchise increases

Backward integration

Local suppliers sourcing


2nd Stage to QSPM

McD Grand Strategy Matrix Corporate-Business-Functional Levels


2nd Stage to QSPM


Market or Industry Situation must have a growth of

exceeding GDP of the host country of operations.

Why is it in Quadrant I if the Sales Growth is negative

pegged at -7.39?


2nd Stage to QSPM McD Grand Strategy Matrix

Corporate-Business-Functional Levels

High growth markets in Russia, China Italy, Korea Poland,

Spain, Switzerland, and Netherlands. 24% Lead Markets in Australia, Canada, France, Germany and U.K.

30%

Largest market segment is U.S. 34%

Purpose of the Strategies (Vertical & Horizontal Integrations): Competitive Advantage---Market Penetration, Market Share increases, Market Leadership, Keep what are the things on hold by McD.


2nd Stage to QSPM


Corporate and Business Levels

QSPM of McD

Transforming our Mindset, Acting

Differently

“In early 2015, we changed the way we think and act to strengthen the fundamentals of our business and reignite growth. Shortly after becoming CEO, I introduced four operating principles – customer-centricity, simplicity, progress over perfection and personal accountability.”

—Steve Easterbrook, President & CEO.

McD QSPM

Corporate-Business-Functional levels

The Grand Strategy Matrix used is an analytical tool for matching the feasible Strategies for Implementation (or implemented) with appropriate Market or Industry behavior and Competitive Position of McD.

Strategies are within the goals of “customer-centricity, simplicity, progress over perfection and personal accountability..”

Let us go to the next Stage. Stage 3 QSPM.

McD QSPM


In QSPM Matrix, strategies are evaluated in quantifiable score with adjectival value such as :

AS- Attractiveness Score Value

1 = not attractive

2 = somewhat attractive

3 = reasonably attractive, and

4 = highly attractive.

McD QSPM


McD QSPM


QSPM Matrix

The strategies under evaluation for Level of attractiveness for Appropriate Prioritization showed that New Product Development & Testing is the most appropriate strategy while selling restaurant is the least priority and appropriate for implementation.

McD QSPM


McD QSPM


McD QSPM IFE

The strategies under evaluation for Level of attractiveness for Appropriate Prioritization showed that Franchises and New Restaurants are the most appropriate strategy while selling restaurant is the least priority and appropriate for implementation for a Slow Market Growth and Strong Competitive Position.

Definitions and Hierarchical Level of Strategy

Overview: Levels of Strategy

Overview: Levels of Strategy,

Defined

Corporate Level

Business Level

Functional Level

Overview: Levels of Strategy,

Defined

Overview: Levels of Strategy

Reflection & Realization The Presented and discussed Grand Strategy Matrix and

QSPM of McD are confined to Corporate Level, Business Level and Functional Level.

Corporate Level Strategies include Franchisee increases, local supplies sourcing, and selling restaurants.

These Corporate Level Strategies are Vertical Integration(forward and backward) and Unrelated diversification strategies.

They are the decisions and responsibilities of the Personalities on the hierarchical level of the organization and strategies.

Reflection & Realization Business Level Strategies include Franchisee

initiatives (new restaurants, like in the Case of China), Geographical variations of Menu suited for customers’ preference and tastes (Product Dev’t., testing).

These Strategies will be carried with the Functional Level Strategies.

Functional Level Strategies included are for Franchisees, Franchise Division, Research and Development department of McD’s responsibilities and accountability.

Corporate Level Strategy

McDonald’s Grand Strategy Matrix and QSPM

"Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. But quantification alone is not planning. Some of the most important issues in strategic management cannot be quantified at all."

—Peter Drucker

McD Grand Strategy Matrix

Corporate Level Global Strategy

Quadrant IV

1. HEDGING/FX OPTIONS/SWAPS

2. Repurchasing Program

3. Credit Facilities Utilization

4. Dividend Payment Increases

5.Tools & Equipment Depreciation

Method

McD QSPM


Hedging/FX Options and SWAPS got the highest STAS which is 8.00 which suggests that the strategy is the most appropriate for a Slow Market/Industry Growth under the threat of an unstable economy.

McD QSPM


McD QSPM


Among the 5 strategies, the Repurchasing Program got the highest STAS which is 2.7 followed by Hedging/FX Options/Swaps strategy with 2.5. These STAS suggested that the strategies are the most feasible and appropriate strategies for a slow market/industry growth in consideration to Financial Weaknesses of the Internal environment of McD.

McD QSPM


Peter Drucker said that there are some most important issues in strategic management that cannot be quantified at all.

Is Peter Drucker in conflict against Prof Fred David’s QSPM?

If not, what are these issues that cannot be quantified or evaluated with QSPM tool?

McD QSPM


Is QSPM a dependable and reliable tool?

QSPM showed that McD strategies in dealing with financial positions in a slow market/industry growth as feasible and appropriate alternative strategies among the 5 strategies.

McD QSPM


What is the effect of the 2 strategies with the highest STAS to McD Financial position?

While the Repurchasing Program positively impacted the Financial Position of McD and satisfied the remaining stockholders with dividend payments of $3.23 Bn, the hedging and FX options and swaps contributed significant losses to McD with $1,947.3 mn in 2014, and $1.360.1 mn in 2015.

What went wrong? Or Which is wrong, McD or QSPM?

Or Mr Drucker is wrong by saying that there some which are not quantifiable?

OPEN FORUM

THE END

Mcd qspm strategy formulation

Leadership & Management

Transcript of Mcd qspm strategy formulation