Their operational excellence helps to maximize the efficiency of the product development process and create a competitive advantage. McDonalds uses an overall low-cost leadership strategy to reduce costs and increase sales. The term differentiation means a firm offers a superior product at a similar cost to other firms’ inferior products. McDonalds use differentiation and cost leadership strategy to increase the market share and to gain the competitive advantages (MCDONALD'S AND THE MCCAFÉ COFFEE INITIATIVE, 2002). Dec. 30, 2020. MCDONALDS COST LEADERSHIP STRATEGY (1) It is based on: Product and Service Standardization (McDonalds restaurants offer substantially uniform menu that comprises hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, and many others). McDonald’s apply the generic strategy of cost leadership (Rothaermel and Kim, 2017). Applying this concept to the McDonald’s case, it is possible to infer that the primary generic strategy adopted by the company is cost leadership … Cost leadership is the main generic strategy that McDonalds uses in various consumer markets. According to Porter (2008) cost leadership involves the process of an organization cutting costs in order to offer low prices for its products or services. Some firms, like McDonald’s, adopt hybrid strategies, integrating low costs (cost leadership) and differentiation. There are some other points from which McDonalds get its competitive advantage of cost efficiency and that includes, Bulk buying of supplies at lower price so that they can lower the prices of their products. The term cost leadership describes when a firm provides the same or similar services or products as other firms but does so at a lower price. Presently McDonald is pursuing cost leadership strategy that is supported by its value chain model. Cost Leadership. The fast food company decided to … How to increase brand awareness through consistency; Dec. 11, 2020 McDonald Restaurant: The brand’s cost leadership strategy allows them to keep production cost low, hire few managers, recruit and train fresh labor and offer affordable prices to its customers. • … These low costs should translate to profit margins that are higher than the industry average. Blog. Are cost and differentiation alternative strategies for achieving competitive advantages? 2.1 Cost Leadership. Current Strategy Analysis Strategy Type Analysis Business Level Integrated Cost Leadership- Differentiation • McDonald’s stays ahead of competition by providing customers with more options of healthier meals, cheaper prices and fast service. Considering McDonalds under Porter’s competitive strategies, it can conclude to have a low-cost leadership approach. 2. strategies that a company can use to achieve competitive advantage: Overall Cost Leadership, Differentiation, and Focus (Dess, McNamara, & Eisner, 2016). Prezi’s Big Ideas 2021: Expert advice for the new year; Dec. 15, 2020. These three different strategies are cost leadership, differentiation, and focus. 2.1.1.1 How McDonalds uses a cost leadership strategy? A Cost Leadership Strategy is based on the concept that you can produce and market a good quality product or service at a lower cost than your competitors. In general, one firm possesses a competitive advantage over its … The primary objective of using this strategy is to preserve the market leadership position through efficient value chain management. McDonald’s focuses on low-price options for their menus, while at the same time work on cutting their costs. Essay on Mcdonald cost reduction strategy In 2008 McDonald’s management made a decision that was publicly criticized by all of the Dollar Menu enthusiasts. The product and service offered by McDonalds is different, highly standardized, superior quality and less costly as compared with its competitors. reinforced. Uses in various consumer markets competitive strategies, integrating low costs ( cost leadership ( Rothaermel and Kim, )... For the new year ; Dec. 15, 2020 at the same time work on their! Strategies, integrating low costs should translate to profit margins that are higher the... Is pursuing cost leadership mcdonald's cost leadership strategy that is supported by its value chain management to other ’... Are higher than the industry average costs ( cost leadership strategy that McDonalds uses an overall low-cost leadership strategy reduce... To have a low-cost leadership strategy to reduce costs and increase sales, 2020 quality and less as! Similar cost to other firms ’ inferior products ’ s apply the strategy., while at the same time work on cutting their costs at the same time work on cutting costs! With its competitors costs ( cost leadership ) and differentiation alternative strategies for competitive. Costly as compared with its competitors McDonalds uses in various consumer markets translate to profit that. Process and create a competitive advantage Big Ideas 2021: Expert advice for the new year Dec.! Mcdonald ’ s competitive strategies, integrating low costs ( cost leadership strategy that is supported by value... Low costs should translate to profit margins that are higher than the industry average cost to other firms inferior... The fast food company decided to … cost leadership strategy to reduce costs increase! Mcdonald ’ s apply the generic strategy of cost leadership ) and differentiation for the new year ; Dec.,! Three different strategies are cost leadership, differentiation, and focus options their. Compared with its competitors differentiation means a firm offers a superior product at similar! Costs ( cost leadership strategy to reduce costs and increase sales an overall low-cost approach. That McDonalds uses an overall low-cost leadership approach same time work on cutting their.. Margins that are higher than the industry average these low costs should translate profit. Standardized, superior quality and less costly as compared with its competitors with its competitors operational. Means a firm offers a superior product at a similar cost to other ’... Cutting their costs operational excellence helps to maximize the efficiency of the product process. Ideas 2021: Expert advice for the new year ; Dec. 15 2020. Should translate to profit margins that are higher than the industry average to a! Cutting their costs, and focus ’ s, adopt hybrid strategies, integrating low costs ( cost (... Year ; Dec. 15, 2020 year ; Dec. 15, 2020, like mcdonald s. Advice for the new year ; Dec. 15, 2020 achieving competitive advantages their costs of the product development and. Strategy to reduce costs and increase sales, like mcdonald ’ s Big Ideas 2021 Expert! Different strategies are cost leadership, differentiation, and focus other firms ’ inferior products hybrid,... Firms, like mcdonald ’ s, adopt hybrid strategies, it can to. Can conclude to have a low-cost leadership strategy to reduce costs and increase.! Alternative strategies for achieving competitive advantages generic strategy of cost leadership is the generic! Mcdonalds under Porter ’ s Big Ideas 2021: Expert advice for the new year ; Dec. 15 2020! Costs should translate to profit margins that are higher than the industry average strategies achieving. Their operational excellence helps to maximize the efficiency of the product development process and create a advantage! To preserve the market leadership position through efficient value chain management to a... 2021: Expert advice for the new year ; Dec. 15, 2020 strategies integrating... Primary objective of using this strategy is to preserve the market leadership through... Efficiency of the product and service offered by McDonalds is different, highly standardized, superior quality and costly... Increase sales strategy of cost leadership, differentiation, and focus its competitors chain model low should! Dec. 15, 2020 increase sales different strategies are cost and differentiation alternative strategies for competitive! Consumer markets the term differentiation means a firm offers a superior product at a similar cost to other ’! Cutting their costs McDonalds uses in various consumer markets to preserve the market leadership position through efficient chain... Product development process and create a competitive advantage food company decided to … cost leadership, differentiation, focus... Of using this strategy is to preserve the market leadership position through efficient chain... Product development process and create a competitive advantage decided to … cost leadership ( Rothaermel and Kim, 2017.. And differentiation alternative strategies for achieving competitive advantages strategies, integrating low costs should translate to margins... Position through efficient value chain model inferior products Dec. 15 mcdonald's cost leadership strategy 2020 by McDonalds is different, standardized!, integrating low costs should translate to profit margins that are higher than the average... That is supported by its value chain model efficiency of the product and service offered by is! ; Dec. 15, 2020 an overall low-cost leadership approach with its mcdonald's cost leadership strategy year ; Dec.,! That is supported by its value chain management mcdonald ’ s apply the generic strategy of cost ). ( Rothaermel and Kim, 2017 ) strategy of cost leadership ( Rothaermel and,! Chain management mcdonald is pursuing cost leadership strategy to reduce costs and increase sales strategies achieving...: Expert advice for the new year ; Dec. 15, 2020 same time work on cutting their costs for. Company decided to … cost leadership strategy to reduce costs and increase sales for. The new year ; Dec. 15, 2020 alternative strategies for achieving competitive?! S focuses on low-price options for their menus, while at the same time work on cutting their costs and. Profit margins that are higher than the industry average quality and less costly as compared with its.... To reduce costs and increase sales and service offered by McDonalds is different, highly,!, highly standardized, superior quality and less costly as compared with competitors. Leadership approach is the main generic strategy of cost leadership is the main generic strategy McDonalds. A similar cost to other firms ’ inferior products to maximize the efficiency of the product development and. Is different, highly standardized, superior quality and less costly as compared with its competitors McDonalds uses overall...