Group Assurance of Learning Exercise 2: Analyzing McDonald's External Factors and Competitive Profile
1. Running head: GROUP ASSURANCE OF LEARNING EXERCISE 2 1
Group Assurance of Learning Exercise 2
Melanie Allerdings, Amy Cashion, Tiffany Clay, Candida Dean, and Tammy Gobert
Liberty University
Group 1 - BUSI 400-D02 201240
Dr. A. Blossom
2. GROUP ASSURANCE OF LEARNING EXERCISE 2 2
Issues for Review and Discussion – Chapter 3 (p. 84)
3.17 - Explain how to conduct an external strategic-management audit.
The purpose of an external audit is to develop a list of the opportunities that can benefit a
firm and a list of the threats that the firm should avoid. The audit should involve as many
managers and employees as possible, and should begin with a company gathering competitive
intelligence and information about economic, social, cultural, demographic, environmental,
political, governmental, legal, and technological trends. After the information has been gathered,
a team should be assembled to evaluate and organize the opportunities and threats into lists.
Management should then be assigned the task of prioritizing the lists from most important
opportunity/threat to least important opportunity/threat. Once the finalized list has been agreed
upon, the material should be communicated and spread throughout the organization as a helpful
resource (David, 2011).
3.18 - Identify a recent economic, social, political, or technological trend that significantly
affects the local Pizza Hut.
With the current state of our economy, many people are choosing to not eat out as much.
This trend has hurt all restaurants and has significantly affected the profit margin of local
eateries. With families having to budget their income more tightly than usual, eating out is one of
the first things to go. Some people are eliminating dining out and opting for preparing meals at
home. This economic trend has affected all restaurants, including the local Pizza Hut.
A social trend that would affect Pizza Hut specifically is society’s consciousness of
eating healthy. Many people are choosing healthier restaurants to dine at that will not hurt their
diet. Pizza Hut along with many other less healthy eateries have been affected by this health-
conscious trend.
3. GROUP ASSURANCE OF LEARNING EXERCISE 2 3
A technological trend that is benefitting Pizza Hut is society’s dependence on technology.
Pizza Hut has developed a website that allows customers to order their pizza online and reduce
the amount of wait time it usually takes. This new service which caters to the technologically
savvy has greatly benefited Pizza Hut and allowed them to service this new market.
3.22 - What major forecasting techniques would you use to identify (1) economic
opportunities and threats and (2) demographic opportunities and threats? Why are these
techniques most appropriate?
Economic opportunities and threats can best be forecasted using quantitative technique.
Since there is historical data present that can be gathered and used when forecasting, it is easiest
to utilize the quantitative method. However, demographic opportunities and threats do not have
as many numerical values and historical data to help with predictions, so it is easier to use the
qualitative technique. Quantitative methods place greatest reliance on representing developments
numerically; whereas, qualitative methods are, of course, often employed where the key trends or
developments are hard to capture using simplified indicators, or where such data are not
available (JRC European Commission, 2005).
3.27 - Give some advantages and disadvantages of cooperative versus competitive
strategies.
The advantages of the cooperative strategy are that it promotes teamwork and allows for
joint ventures. It allows two firms to work together, pull their resources, and share in both
triumphs and failures. The disadvantage would be that profits and success would also be divided.
The advantages of competitive strategies are that a firm can learn about its competitors and use
its resources to gain a competitive edge against rival firms. It promotes a sense of dedication to
creating better products or services for their own company as a way to become more popular
4. GROUP ASSURANCE OF LEARNING EXERCISE 2 4
than competing brands. Competitive analysis allows a firm to do research on the strengths,
weaknesses, threats, and opportunities of their industry and organize their firm in a way that
promotes their strengths, downplays their weakness, avoids their threats, and takes advantage of
their opportunities. The disadvantages to the competitive strategy are the rivalry of other firms,
the shared customer base, and the bargaining power of suppliers.
3.31 - Let’s say your boss develops an EFE Matrix that includes 62 factors. How would you
suggest reducing the number of factors to 20?
An EFE matrix should include between 15 to 20 factors. If my boss develops a
matrix with 62 factors, chances are many of those factors are very similar. First, you could
reduce many of the factors by combining all the ones that are similar into one factor group.
Second, you can pick the most important 20 factors that are left in the already reduced list and
incorporate those into your final EFE matrix.
Assurance of Learning Exercises 3A, Step 1 (p. 86)
Table 3A.1
EFE Matrix for McDonald’s Corporation
Weighted
Key External Factors Weight Rating Score
Opportunites
Reimaging of 900 stores in 2012 0.03 4 0.12
Need exists to increase staffing during peak hours 0.08 1 0.08
Increase restaurants operating 24/7 schedule 0.08 2 0.16
Increase of liabilities by $967 million from 2007 to 2008 0.05 4 0.20
Leadership turnover 0.12 2 0.24
Enhance food image 0.06 4 0.24
Optimize current menu options 0.07 3 0.21
Threats
Direct relationship between diet & health 0.09 3 0.27
New competitor: Starbucks 0.06 2 0.12
Competition from Yum! Brands 0.04 1 0.04
Foreign currency translation losses 0.04 2 0.08
Antiglobalization Activism Protests 0.06 1 0.06
Increased Supply Costs 0.08 3 0.24
Proposed IRS tax adjustments 0.06 4 0.24
Proposed Government Regulations Regarding Fast Food 0.08 1 0.08
Total 1.00 2.38
6. GROUP ASSURANCE OF LEARNING EXERCISE 2 6
References
(2005). Quantitative Versus Qualitative Methods. JRC European Commission. Retrieved from
http://forlearn.jrc.ec.europa.eu/guide/4_methodology/meth_quanti-quali.htm
David, F. R. (2011). Strategic Management: Concepts and Cases (13th Ed.). Upper Saddle
River, NJ: Prentice Hall.
