7. Analysing strategic position

• SWOT analysis - McDonalds

  • Strength: global brand presence + consistency, efficient supply chain
  • Weakness: dependent on franchisees for operational success, unhealthy
  • Opportunity: expanding into plant based + health-conscious menus
  • Threat: competition from Burger King, KFC, rising labour costs - minimum wage up
• Why ROCE important?

  • Measures efficiency in converting capital funding (debt+equity) into profits
  • High - attract investors
  • Esp important for capital intensive industries like manufacturing as efficient resource use sig. Impacts profits
• Why Current ratio important?

  • Does firm have cash to pay debts? - identifies liquidity problems
  • How efficient in managing working capital
  • Compare with industry + competitors
  • Reviewed by investors + suppliers
• Core competencies

  Apple - ability to combine cutting edge tech with user-friendly designs

  Amazon - customer-centricity focus - personalisation. Also logistics and supply chain management

  Coca-Cola - brand recognition + value
• Short-termism

  • Fast fashion brands - SHEIN, Zara

  --> emphasis on low pricing and fast production comes at expense of long term sustainability or ethical practices

  --> prioritise quick inventory turnover to meet short-term demand

  • Toys R Us - neglected investment in e-commerce and innovation + short term cost cutting led to bankruptcy
• Long-termism

  • Amazon - reinvests profits into infrastructure, tech and market expansion - dominates multiple sectors
  • Tesla invests in R+D, electric vehicle production - leader in clean energy
• Elkington's triple bottom line - IKEA

  • People - invests in fair labour practices and community projects
  • Planet - aims for 100% renewable energy + sustainably sourced materials
  • Profit - long-term strategy balancing costs, affordability and growth
• Competition legislation

  • CMA investigates markets where competition may be restricted

  Eg: stopped Sainsbury and Asda merger as would reduce competition - higher prices for consumers

  • Tobacco ads banned
  • Facebook fined for breaching data regulations after users data used for targeted political advertising
  • ASA regulates ads - truthful - protect consumers eg: required Kylie Jenner to clearly disclose paid partnership in Instagram posts
  • Eg: banned Volkswagen ads misleading emission levels of its vehicles
• Labour Market legislation

  • Equality Act 2010 - prohibits discrimination
  • National Minimum Wage Act 1998 - hourly wage
  • Immigration, Asylum and Nationality Act 2006 - employers have to check employees have legal rights to work in UK
• Environmental legislation

  • Phase out single use plastics - plastic straws ban 2020
  • Plastic packaging tax 2022 - targets plastic packaging with less than 30% recycled content
  • 2024 Requirement for bottle lids to be attached to plastic bottles
• Tesco's contribution to economy

  • Job creation
  • Revenue contributes to GDP
  • Makes business for suppliers
  • Tax revenue to gov
• GDP slow growth UK

  Announced in November 2024 that GDP only grew by 0.1% - less than expected

  --> businesses withheld investments until Labour new budget announced

  
  

  - financial recession 2007

  - 2020 recession - COVID
• Impact of COVID pandemic

  • Decline in consumer spending
  • Many hospitality, travel and retail businesses closed
  • Supply chain disruptions - impacted global trade
  • unemployment increased
  • Shift to e-commerce - Amazon massive surge in demand. Netflix + Zoom thrived
  • Many small businesses failed - restaurants + cafes as cash flow problems

  Eg: Debenhams bankrupt

  • Furlough scheme - gov paid up to 80% up employees wages - allowed companies like John Lewis to keep employing staff despite closure of physical stores
• Exchange Rates - McDonalds

  • Vulnerable to fluctuations as has outlets in over 100 countries
  • Strong US dollar - earnings from overseas worth less when converted into USD - impacts profits
• Inflation - peak of 11% UK 2022

  • Ukraine war - sharp rise in global energy prices - cost of gas + electricity rose
  • Cost of goods still disrupted due to pandemic
  • Brexit - higher costs for imported goods
  • Led to cost of living crisis
  • BoE rose interest rates in response
• Fiscal policy

  • Gov Spending: COVID 19 Furlough Scheme - job support to prevent job losses - kept businesses afloat
  • Taxation: VAT, national insurance, income tax, corporation
  • Borrowing to cover deficits or fund projects without raising taxes
• Monetary policy

  • 2020 BoE reduced interest rates during pandemic to encourage investment and spending
  • Raised after 11% inflation 2022
• Brexit impact on Protectionism

  • UK regained control over trade policy - no longer bound to free single-market of EU
  • Introduction of tariffs on food, custom checks
  • Increased cost of doing business between UK and EU - faced delays, higher shipping costs and more paperwork for new regulations
• Globalisation

  • McDonalds in over 100 countries
  • Adapted menus to local tastes eg: McSpicy Paneer in India
  • Zara over 90 countries in major cities
  • has efficient global supply chain
  • Localisation - offers different styles + sizes depending on market eg: offers more modest clothing in Middle Eastern markets
• Emerging Economies - Vietnam

  • Strong economic growth - manufacturing, exports and rising domestic consumption
  • Young growing population - strong labour market
  • Growing middle class - more demand for consumer goods and services
  • Weak currency - cheap exports - one of largest textile and tech exporters eg: Nike, Samsung
• Urbanisation + Migration

  • Larger customer base in cities - London, Manchester
  • Retail chains M&S and Tesco thrive in cities - high foot fall
  • Increasing as more employment, higher wages, better education, improved infrastructure
• Corporate Social Responsibility

  • IKEA project making furniture designed for needs of disabled people
  • Lush - against animal testing + ethical sourcing of ingredients
  • Asda offered 60+ discount meal deal during cost of living crisis
  • Thames Water fined over 3m for pumping sewage into rivers
  • Poor working conditions of Ralph Lauren India factory
• Investment decisions

  • Amazon's investment in AWS was risky as it diverged from its core e-commerce business but paid off as transformed Amazon from retail giant into global cloud computing service
  • Blockbuster turned down buying Netflix
• Technological change

  • Positive - Uber disrupted taxi industry - opportunity thru tech - smartphone apps + GPS
  • Negative - rise of e-commerce didn't benefit traditional brick and mortar retailers - struggled to compete with competitive pricing and global reach
• Porters Five Forces - Apple

  • HIGH threat of competitors - Samsung, Google - has to stay ahead
  • LOW threat of new entrants - sig. Barrier to entry
  • Moderate bargaining power of suppliers - has lots of suppliers but some like chips are from limited number
  • HIGH customer bargaining power - highly demanding for quality, innovation - has to justify premium pricing
  • Moderate threat of substitutes - similar at lower prices BUT apple differentiates thru brand loyalty