BEE Partner, South Africa Economy Watch

South African business organisations now find themselves in a global environment that is characterised by a number of trends, which increasingly shape strategic thinking. Given that the object of business strategy is to continually place a company and its products in a more favourable position In themarket place relative to its competitors, and to do so where it matters most, namely in the mind of the customer, it follows that these trends should be considered by any South African strategist. Over the past decade, the global business environment has witnessed a major shift from mass markets, and even mass customisation, to micro-markets. This has had major ramifications for strategists, as many organisations either have had to reinvent themselves, or, at the very least, revisit the fundamentals of their business to take cognisance of this shift. McDonald’s is a good example.’

During 2001, the results of the company’s customer-satisfaction surveys indicated that competing brands Wendy’s and Burger King were stealing a march on it. Furthermore, the research indicated that not only were customers looking for healthier food, but also that the company’s philosophy of quality, service, cleanliness and value (QSC&V) was floundering in the wake of poor custom_er ratings on hygiene and staff attitude. By the end of 2002, the company had posted its first quarterly loss since 1954, and senior management concluded that it had lost direction. Company woes did not end there. Three global environmental factors emerged to provide McDonald’s with one of its most severe challenges:

• Due to the anti-American sentiment that was spreading throughout the world, McDonald’s restaurants were subjected to physical attack, particularly during anti-globalisation protests.
• Many Western countries were becoming deeply concerned about obesity levels amongst the population.
• There was the related concern about the effects of junk food on a person’s overall well-being.

McDonald’s response to these issues was to develop a recovery strategy dubbed ‘Plan to Win’. Part of the strategy was a return to basics — cleaner, more efficient restaurants, backed up by the latest technology to ensure operating procedures were adhered to. On top of that, the company adopted the strategy of looking for more sales from its existing outlets. (It has about 9 000 company-owned restaurants and about 22 000 franchised outlets). Although its basic business is hamburgers and cheeseburgers, company strategy has been adapted to put healthier food, such as salads and fruit, on the menu. The company has also been experimenting with sandwiches and gourmet coffee, a move that will more than likely bring it into direct conflict with new competitors, such as Starbucks. McDonald’s is trying to reach three main target groups, children, mothers and young adults, because it no longer believes that mass-media marketing is an option.

Another trend that has appeared over the past few years is the shiftaway from long-term brand loyalty to long-term direct relationships, which has led many organisations to focus more on marketing value instead of brands. This is not to say that brands and branding are _unimportant. Branding is a vital part of the marketing effort of any business organisation. However, it is only through focusing on the development of direct relationships with customers that a strategist can hope to provide them with the right kind of experience. In the modern business arena, the kind of experience a customer has with a brand and/or an organisation often determines the rate of repeat purchase. Thus it makes sense for strategists to focus a lot of their attention on ensuring that customers experience greater value with their company’s products than with that of the opposition. The emphasis goes beyond a transactional to a partner relationship. Searching for ways to achieve this is a strategic challenge, and it does demand a high degree of innovation on the part of an organisation.

Customers worldwide are also beginning to put greater trust in the opinions of their fellow customers than in those of professionals or experts in the field. This has resulted in growth originating from customer references, rather than through marketing expenditure. In order to effectively respond to this shift, progressive-thinking organisations are beginning to not only focus on their customers, but to adopt a wider organisational focus. This means that they are looking to utilise organisational resources on a wider scale in order to achieve their strategic objectives. One means of accomplishing this is to bring their employees into the process by tapping into their intellectual capital to find ways of becoming more innovative in serving customers.

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