McDonalds and Ecommerce

How can e-commerce provide a competitive advantage for McDonald’s? McDonald’s is a terrific example of utilizing e-commerce to provide a competitive advantage for it organization globally (nationally and internationally). Basically, competitive advantage for an organization can be viewed as being able to have the ability to stay ahead of the competition essentially in terms of product differentiation, focus and cost leadership. Through utilizing e-commerce strategies, McDonald's can bring down costs significantly in such a way that it attains cost leadership.

That is, becoming the low-cost fast food services provider in relation to the competition.

One application of e-commerce might be the elimination of intermediaries through the use of new innovations based on e-commerce technological advances. In fact, McDonald’s has gained a distinct competitive advantage by recognizing and utilizing e-commerce early. In early 2000, McDonald's took a baby step into e-commerce by investing in San Francisco, California-based Food.com, a company that offered an online food takeout and delivery service.

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Food.com users could browse menus from more than 14,000 restaurants nationwide and then place orders online. McDonald’s had no intention of going into the food delivery business. Rather, it was committed to new thinking and new technologies for all aspects of our brand,'' according to James Cantalupo, president and vice chairman of McDonald's at the time.

This was followed an announcement in June 2000 by McDonald's Corporation and Accel-KKR, Inc. that they had agreed to form eMac Digital, a new company designed to accelerate the development of global Internet related businesses.

eMac Digital would initially focus on business-to-business opportunities that drive efficiencies, maximize cost savings and create new markets and distribution channels. Jack Greenberg, chairman and CEO of McDonald's Corporation, define this strategic business partnership decision as a step to continue to be the best and “an ideal way to use online technologies to create additional value for the McDonald's System, one of the world's largest purchasers of agricultural products, by streamlining processes and reducing costs.''

In 2001, McDonald’s partnered with FreedomPay.com and expanded its use of an e-commerce system called Speedpass in more than 400 Chicago-area McDonald's restaurants that allowed customers to pay for their orders using a cash-free keytag system originally developed for Mobil gas stations. In April 2001, McDonald's expanded the program to include 29 restaurants in Boise, Idaho. Although the pilot programs response was overwhelming and not implemented nationally, McDonald’s gained valuable e-commerce knowledge and experience that it would apply a few years later with the advent of WI-FI.

Installing WI-FI hotspots is the most recent development in most of there restaurant globally. This model is made to introduce more young and tech-people into the restaurants creating some what of a starbucks feel, which by the way is free. It should be noted that a corporation like McDonalds advertising Wi-Fi could only mean everyone else would soon follow suit. McDonalds’ flexibility allows it to be able to mold themselves to every emerging consumer trend. Offering free Wi-Fi and affordable coffee house style beverages helps them broaden their consumer outreach. Instead of just marketing to kids and their parents, the coffee and Wi-Fi strategy caters to young or older professionals with or without children. Actually Free Wi-Fi is a perfect follow-on response to the emergence of handheld devices and neutralizing any ambient advantage once held by Starbucks. Think of the many consumers who actually bought Starbucks simply because they knew they could stay connected.

McDonald’s has removed that competitive advantage. When it comes to McDonald's, the function of e-commerce for a competitive advantage can be seen from two perspectives, that is, business to business perspective as in the examples of its early investment and use and business to consumer perspective as seen above with installation of WI-FI. I look for McDonald’s to continue to expand in the consumer relationship area with hot spot app to alert you to the nearest McDonald’s while traveling to preorder and have pick-up ready using your pre-paid account or speed-pass.

Finally, restating that McDonald’s is a terrific example of utilizing e-commerce to provide a competitive advantage for it organization globally (nationally and internationally) is seen in the following example of McDonald’s in China. McDonald's is planning to launch a presence on Alibaba's TaoBao online auction site in China. According to plan, it will sell such products as consumer electronics, mobile phones and cosmetics. McDonald's has a presence in China with over 1,000 restaurants and said last week it had plans to open another 500 stores in China over the next three years.