Studying a backward vertical integration by replacing its most

Studying the internal resources, capabilities, and activities of a firm is very important because each of these factors explain how a firm can strategize and develop core competencies within a certain industry, helps in the efficient and effective utilization of resources, reduce cost and improve productivity in an organization.

The interaction and relationship between internal resources, capabilities, and activities of a firm is how insight can be gained. Furthermore, resources reinforce core competencies; capabilities arrange core competencies; core competencies leverage firm activities.

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Discussion Question 4.2 a:

            A value chain is a set of activities that business organizations operating in a specific industry execute to deliver valuable products and services to consumers. Below McDonald’s value chain would be analyzed.

Primary activities:

Inbound logistics:

McDonalds purchases raw materials from a fixed supplier only and by increasing capital and labor their production will increase proportionately. Also, McDonalds uses a backward vertical integration by replacing its most of the suppliers with the sole purpose of reducing cost and managing the quality of raw material. Furthermore, McDonalds has an exclusive partnership with Coca-Cola who supply them with all the soft drinks and soda’s required.

Operations:

One of McDonalds quality is that they possess a speedy kitchen.  McDonalds management team changed the design of the kitchen to make the food process faster. They have large grills where an individual can prepare a considerable amount of burger simultaneously; counter to manage customer orders faster, a drive thru station so has to decongest the number of customers in the restaurant and for convenience, a fryer so that one person can prepare French fries, soda fountain and milkshake machine to prepare beverages and the use of automated process which increase their supply chain efficiency in terms of capacity.

Outbound logistics:

McDonald’s is focused on energy conservation, sustainable packaging and waste management. McDonald’s are also open to new innovations for improving their operations so as to build a sustainable and environmentally friendly organization.

Marketing and Sales:

            McDonald’s operates over 31,000 restaurants and they have over 1.5million employees. They have maintained an advertising over the years in addition to sponsoring little league games and the Olympic games and other sporting event. However, television advert has played a significant role in McDonald’s advertising strategy.

Services:

McDonald’s offer customers Free Wi-fi in restaurant which makes it easier for customers get work done while they eat, Arch cards that never expires, and Play Place for kids.

Support Activities:

Firm Infrastructure:

McDonald’s use of modern and advanced IT services, eco-friendly workplace that reflects their sustainability goals for the environment.

Human Resource Management:

McDonald’s offers its staff flexible working hours and they provide job offers to individuals who find it difficult to get employment opportunities elsewhere.

Technology development:

McDonald’s have a five-year IT support deal with Fujitsu, they provide IT support to back-office operations and franchise outlets, and they also focus on modernizing all their outlets.

Procurement:

McDonalds E-Procurement System is very significant in the success of their supply chain management. This system provides the foundation to all the logistics and supply chain management required by McDonald’s. It is a centralized procurement hub that allows all of McDonald’s franchises worldwide to purchase everything needed to run their restaurants. Also, the procurement site also allows business owners to buy supplies and materials at a discounted price which makes it more convenient for the business owners and ultimately reduces costs for McDonald’s.

            Finally, inbound logistics, services and firm’s infrastructure add the most values to customers while IT support and outbound logistics help McDonalds reduce cost.

Discussion Question 4.2 b:

Yes, McDonald’s change to its traditional value chain activities was required because consumers have realized that junk food and unhealthy eating habits lead to obesity. If McDonalds did not alter their previous activities and become concerned about serving healthy and tasty meals to the consumers, their sales might have declined.  Therefore, McDonalds had to introduce a healthier version menu such as the Big Mac burger meal, with less calories consisting of a salad, medium fries, diet coke, and a dessert. Furthermore, some of McDonalds competitors had to change their strategies. For example, Burger King started baking instead of frying their meals. Therefore, McDonald’s had to change their strategy in other to sustain competitive advantage.  Also, individuals who patronize the restaurants can do their personal or professional work by using the wi-fi services this brings in more consumers and generates more revenue. With the varieties of products McDonalds have to offer now compared to the past, consumers are always more interested in purchasing more meals from them because they can customize their meals and even have different healthy varieties to select from.

 

Discussion Question 4.3:

            There are four criteria’s that the resource-based model identifies with. They include; valuable, rare, costly to imitate, organized to capture value. Firms can use these criteria to examine if certain resources and capabilities are core competencies and can, therefore, provide a basis for competitive advantage (Rothaermel, 2014). A resource is deemed valuable if it assists a firm in increasing the perceived value in the eyes of consumers by adding features that are deemed attractive, or by lowering prices because the resource aids in lowering firm costs (Rothaermel, 2014). Also, a resource is deemed rare if there are very few business entities that possess the resource and possess the attribute to operate similarly. A resource is considered costly to imitate if the resource is difficult to create or purchase at a sensible price (Rothaermel, 2014). Thus, if the resource is valuable, rare, and costly to imitate then the resource is deemed to be a core competence of the firm (Rothaermel, 2014). Finally, a firm is viewed as organized to capture value. Although, this can only be accomplished when the first three criteria are met (Rothaermel, 2014).  The above criteria are interdependent because each capability contributes to sustaining competitive advantage in specific ways. The two criteria’s “rare” and “costly to imitate” are interdependent because a rare resource almost defines a product that is hard to imitate, or in other terms costly to imitate. 

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