Analyze the I/O model on McDonalds, using the information from the opening case of Chapter 1. Please note that this is an individual assignment, not a team assignment. You can discuss your answer with your classmates, but you will write the answer yourself.

Please address the following questions as in the exercise:

1. What are external pressures and constraints McDonalds is facing?

2. What are relevant resources available to other firms in the industry? Which ones are mobile (easily duplicated) across firms?

3. What strategies has McDonalds used as mentioned in the opening case? Are these strategies successful?

Please pay attention to the following when you prepare the answer:

The purpose of this assignment is to do a reality check on I/O model, one of the two models we will use in strategic analysis, as in Ch2 and 3 to be covered in Module 2. The two models are the theoretical foundation of strategic analysis and they are complementary to each other, as you see in Chapter 1 and the corresponding lecture note #2.

Vividfour / Shutterstock.com, Bikeworldtravel/Shutterstock.com THE GLOBAL IMPACT OF THE GOLDEN ARCHES McDonald's has achieved Finally, McDonald's serves about one in many countries across the world. substantial success over the billion pounds of beef annually in the However, its success has created a years, which is exemplified United States, which requires approxi- company of such size and reach that it by its impact throughout mately 5.5 million head of cattle. is also easy to criticize. For example, in the world. Many people McDonald's is larger and has been 2012 it created an advertisement that know about and are custom- more successful in the market than its received acclaim because it included ers of McDonald's. For example, close competitors, Burger King and farmers and ranchers who supplied a recent survey found that 88 percent Wendy's, as well as other large compet- the food to McDonald's. The evalu- of people recognize the golden arches itors for the fast food customer, such ations showed that it was perceived and associate them with McDonald's. as Subway and Starbucks. It has been to be authentic. Early responses from This is likely because McDonald's estimated that McDonald's has about the public were positive but over time touches a lot of people in a year. Each 17 percent of the limited service restau- the tweets became more negative day, about 68 million people eat at a rants in the United States. Its success with people voicing criticisms of the McDonald's, which equates to almost against competitors is demonstrated company and its food. It especially has one percent of the world's population by the results of a recent review of the been criticized because of its supposed In the United States alone, McDonald's specialty coffees offered by fast food contribution to the obesity problems hires approximately one million outlets. McDonald's McCaf was rated in the United States. employees per year. Approximately higher than the "gourmet" coffees sold McDonald's has tried to respond to 12 to 13 percent of all U.S. workers by Burger King (a new entrant in this this criticism and the public's concerns have been employed at McDonald's product category), Wendy's, Subway, about obesity by offering more healthy at one time (including such famous and 7-Eleven. In fact, McCaf even stole food alternatives such as salads, people as actress Sharon Stone, singer, some customers from Starbucks when chicken, and fish and by providing the Shania Twain and comedian Jay Leno). it was first offered by McDonald's. amount of calories in its foods on their Given that McDonald's includes a toy McDonald's made a decision early packaging. McDonald's now serves in about 20 percent of its sales, it is to move into international markets and more Happy Meals with Chicken the world's largest distributor of toys. now one can find the golden arches McNuggets than with hamburgers. 3 Part 1: Strategic Management Inputs It also offers apple slices in place of French fries. It recently has introduced Fish McBites following its popular entry of Chicken McBites. In addition to providing new food products for customers, McDonald's now offers Wi-Fi, which has been particularly popular with students. Even with all of its success and rapid responses to criticism, McDonald's must always be prepared to react to negative outcomes. For example, while its global sales revenue in 2012 increased by 6.7 percent over 2011 sales, early sales in 2013 have been discouraging. Sales in January dropped significantly in Asia, the Middle East, and Africa. It also has experienced recent sales declines in Europe, especially Germany and France. Some of these reductions in sales reflect general economic conditions with which McDonald's must regularly cope with intensify- ing competition from regional and global rivals. These results suggest that its global reach has helped the firm in many ways (massive economies of scope, recognition in the market) but also means that it must deal with geographic economic differences and varying competitive forces across the globe