Project on McDonald’s Corporation
Project on McDonald’s Corporation
Introduction and Background
In 1940 two brothers Dick and Mack Macdonald opened their own restaurant. Eight years ago the first concepts and rules of fast food production and sales were formulated by them. Initially the business was created in a such way that everything should be very fast and effective. Brothers spent much time elaborating the layout of the kitchen in their first restaurant, so they achieved the goal.
Inspire of the fact that later they sold their business and their family no longer the owners of it, nowadays mcdonalds have the same efficient system of production and sales that it is able to introduce and maintain all over the world using different strategies and methods.
External environment is a bunch of various outward forces that may have a great impact on the company’s performance. The external environment of every company comprises of three levels: the general, industry and competitor environments. The integration of information received from these environments helps to identify and shape the company’s strategies. Thereby, in order to understand what hindrances company faces or may encounter in the future, it is essential to analyze all the levels of its external environment.
It was mentioned earlier that the headquarters of McDonald’s locates in the U.S. so we will analyze general and industry environments in this region.
The general environment is usually examined by the analysis of 7 segments: demographic, economic, political/legal, sociocultural, technological, global and physical environment segments. First of all, the demographic segment is concerned with the population structure and сomposition. The USA’s population is estimated at 313 286 000 people in 2012. By analyzing population composition, it can be said that there is very high level of immigration. Moreover, it can be said that the birth rate is sufficient: 13.68 births/1,000 population in 2012, according to CIA World Factbook.
Thereby, these statistics help to understand that the region is quite profitable and comfortable to operate in due to the large population size and excessive number of potential employees. Last but no least, according to U.S. Census Bureau, the median household income during period of 2006 to 2010 is $51914 which is quite high. Secondly, the political/legal segment is quite important for the analysis because the industry is highly contingent on the different kind of taxes imposed by the governments. McDonald’s Corporation is obliges to pay business taxes, payroll taxes, Food Product Association taxes (19% of
the total profit and 19% in the price of each product) and health and social insurance for the employees. The changes in government’s tax policy may utterly affect the company’s revenue. As regards the economic segment, one of the major challenge for fast food industry is that to keep the price is low for the customer. However, it is quite hard because nowadays the USA is still suffering from the financial crisis which can be a possible reason to decrease in outside food consumption in a whole.
The dimension influencing the fast food industry the most is the sociocultural. The reason is that the industry is dependent on people’s preferences and opinions that’s why even tiny changes are crucial. From 2000 to 2002 McDonald’s profits dropped from $1.977 million to $893 million. It was caused by the increase of customer’s health-consciousness and fears of obesity, as a consequence, some customers prefer more healthier options which offer a greater variety of food for health conscious customers.
Furthermore, it is quite important to devote attention to technological segment because the technologies always mean faster operation and cost minimization. McDonald’s uses different modern appliances to prepare its food without many dangers and in a quick way. Moreover, the majority of McDonald’s restaurants provides free Wi-Fi. In addition, McDonald’s improved the technology of its supply chain management.
Regarding the global segment, it should be highlighted that most U.S. companies are focused globally which means that they operate in many different countries. McDonald’s is not an exception. It is located in 119 countries and is known as one of the most spread fast food restaurants’ chain.
Last but not least, nowadays more and more companies are concerned with social responsibility and environmentally friendly policies.
The industry environment is usually analyzed by Porter’s five forces model. Firstly, it is the Threat of New Entrants. The threat of new entrants in the fast food industry is high because there are no legal barriers which would keep them from entering the industry. The major barriers in which a firm faces in the industry are the economies of scale and the access of the distribution.
In order for a firm to enjoy success in the industry, they must spend a large amount of capital on advertising and marketing. The industry is very competitive because firms are always attempting to steal customers from each other. Access for distribution is crucial in the restaurant industry because if the customer can’t see you or access you easily it’s possible that they won’t go
out of there way to eat there. Franchise options also make is easier to enter the market, for example Subway has built their strategic plan around franchise options. Therefore, initially the only cost to enter the market is the starting capital required to open a restaurant. However, it can cost upwards of millions of dollars for all the equipment, licensing, and the property. This costly barrier is the most probable reason that people do not enter this business. The food-service industry doesn’t have any exit barriers, which allow firms to easily leave the industry if they’re not successful, at virtually only the cost incurred.
The second force is Bargaining Power of Buyers. McDonald’s, and the industry, has attempted to gain market capitalization, by keeping the customer satisfied, due to the fact there are relatively no switching costs. For this reason, they have adopted the slogan, “the customer is always right.” The industry must try to maintain a hold on the market by conforming to a changing society as well as maintaining high quality. One of the industry’s most recent concerns is that of creating a healthier society and prevention of obesity. McDonald’s corporation has faced previous law suits on being held accountable for obesity, similarly following the litigation process of cigarettes and tobacco companies.
The courts ruled against this issue in McDonald’s favor, making this a remote future risk factor. McDonald’s has had to paid legal fees in order to defend itself in this type of litigation; however, even with this incremental cost they are still achieving a significant rate of earnings growth. In addition, McDonald’s, in it’s effort to be a more socially responsible corporate citizen by supporting a healthier society, has developed “light” and healthy menu items in order to give customers additional eating options and in doing so, broadening the array of its customer base while offering it’s existing customer base with healthier menu options. Thirdly, it is Bargaining Power of Suppliers.
It can be said that McDonald’s has a large bargaining power because of the fact that they spend 4.852 billion dollars in food and paper in 2004. This can be argued that the companies that McDonald’s buys from could be largely dependent on McDonald’s business. Although in recent years the industry has had a small problem with beef, because of the outbreak of the mad cow disease. This problem raised the cost of beef in Europe tremendously but the cost actually went up around the world because of the beef shortage in Europe.
In this case it can be argued that the suppliers of beef have a strong voice as well. The suppliers that sell to McDonald’s have a strong voice also because of the fact that the switching cost for McDonald’s as a whole would be so tremendous that they would not want to make that change, so any problems or disputes would be worked out with there suppliers. Also, with the competition and the number of buyers in the market place, losing a large company like McDonald’s could destroy any supplier but there are other prospects out there to buy that product like Wendy’s, Jack in
the Box, Burger King and a few others that they may be able to salvage there losses. As for the paper goods that McDonald’s buy from the manufacturers, if McDonald’s were to change manufacturers the supplier could easily change there manufacturing to note book paper by just readjusting the machines but it would come at a great cost. The fourth force is Threat of Substitute Products. McDonald’s is known for their famous French Fries, Big Macs, and Happy Meals. Competitors of the industry also try to compete with similar products; therefore, leading to price wars.
McDonald’s created a Dollar Value Menu, in response to competitors such as Wendy’s 99 cent menu. Overall, the industry has tried various product differentiations in order to accumulate greater market share, but most consumers are drawn to the classics for which the establishment is known for. However, growing concern to achieve a healthier society has led McDonald’s, as well as other competitors, to make extensive menu changes, in order to conform to a more concerned society. McDonald’s is doing more and more to compete with health focused restaurants like Subway.
Nutritionist and other leading experts have been hired to join the McDonald’s team in order to ensure that the correct items are added to the menu, while still keeping and improving the classics that they are famous for. For example, the chicken nuggets that we all grew up on are now 100% white meat. McDonald’s is flexible in their menu to conform to the changing tastes of society, but they always serve with a smile! The fifth and final force is Competitive Rivalry within an Industry. Currently in the fast food industry, there is intense competition for growth in the market. The market growth is rising because of the convenience factor and busy consumers not having enough time to cook a meal.
The restaurant industry is also growing rapidly due to opportunities in other global markets. In McDonald’s case, they actually have a competitive advantage because they have already entered many different countries and are succeeding in these countries. Each firm within the food-service industry is susceptible to losing customers because there are relatively no switching costs for consumers, therefore the industry has to rely heavily on their brand image and quality of products. McDonald’s has a number of competitors; however they are currently the leader of the industry in market capitalization with a cap of $39.31 billion.
It is almost vital to know the competitors in your industry in order to be able to overtake and surpass them. The top competitors of McDonald’s are Burger King, Wendy’s, KFC and Subway.
Burger King is the second largest hamburger fast-food chain in the world and is the number one competitor for McDonald’s. Burger King has 11,400 locations in 58 countries and derives 55 percent of its revenue from the drive-through window. Burger King reported 1.72 billion in 2002 in revenue which is a 17 percent increase compared to a 4 percent increase reported by McDonald’s over the same period. Burger King’s distinct assets include the unique Whopper with its one of kind charbroiled taste and the company policy of preparing the hamburger any way that the customer wants it.
Burger King has distinguished itself over the years in many ways including being the first in the fast-food industry to enclose its patio seating in 1957 thereby offering customer indoor dining experience. Burger King also differentiated itself when it installed the drive-through window in its restaurants in 1975. In addition to the Whopper Burger King also offers a few set items on its breakfast menu that differs it from it competitors including the Croissan’wiches and french toast sticks. The rest of the menu also offered the unique veggie burger and chicken Caesar salad.
Wendy’s is the third largest fast-food chain with 9,000 stores in 33 countries world wide. In 2002 they reported 2.73 billion in revenue which is up 14.2 percent from the previous year. Wendy’s offers several unique items including the Frostys and Spicy Chicken Sandwiches as well as healthier items such as salads, baked potatoes and chili. Wendy’s has also distinguished itself through the creation of the special value menu with all items on it under a one dollar.
Wendy’s also owns several small companies including Tim Horton’s and Baja Fresh Mexican Grill. It plans on increasingly using acquisitions of smaller brands to further growth. In next decade Wendy’s plans to add between 2 and 4 thousand new stores worldwide. One important weakness of Wendy’s is the lack of easily recognizable product compared to McDonald’s Big Mac of the Burger King Whopper.
KFC has the strategic objectives of expansion along with profits and sales growth. KFC has also been applying its strategies at improving services and making them more and more customer friendly. It has not only been customizing its menu according to the countries that it has been operating in, it has also been trying to cater to different ethnic groups like African Americans and Hispanics. Such types of strategies are focused on increasing the customer base by better customization of products. Other than the traditional eat-in restaurants, KFC has also been
expanding into non-traditional facilities like shopping malls, hospitals, universities, stadiums; office buildings etc and a number of strategies have been formulated to aid this kind of expansion. Competitive Advantage:
A very strong financial background is one of KFC’s competitive advantages. KFC has been functioning as a multinational corporation for several decades. As a result, the company is familiar with the logistical and quality problems which accompany operating an international food operation, and has demonstrated that it can work with host countries and businesses within the host country to develop a strategy which works in the most cost effective way. With the passage of time, KFC has developed another very important competitive advantage for itself — Environmental Friendliness.
In March 2009, the first eco-friendly green KFC was opened in Northampton USA. The restaurant is designed according to environmental goals that include cutting energy and water consumption by 30 percent and reducing CO2 emissions. Operations at the new site are also expected to reduce waste and the amount of rubbish sent to landfills; the restaurant composts and recycles other waste, grease and used cooking oil. Other than this, in an effort to reduce its packaging by 1,400 tons, KFC is now switching from cardboard to recyclable and biodegradable paper wrapping for some of its products.
The strategic objectives of Subway focus on creating a global strategic plan to enable Subway restaurants to succeed internationally. Other than this subway is intent upon introducing the concept of ‘healthy fast food’. Sandwiches of Subway have been included in diet plans by experts. Subway’s stand regarding obesity in children is not new to its customers. Strategies at Subway are not only about a really ambitious increase in franchises all over the world but they are also about making the food more and more appealing to the health conscious customers because health conscious attitudes, according to the experts, are here to stay now. Competitive Advantage:
One of the greatest competitive advantages that Subway was born with is its healthy menu. The salads and sandwiches appeal much more to the people as compared to fried chicken, burgers, fries and pizzas. With its advertising and promotion, Subway has long been highlighting its healthy food in advertising and promotions and with the passage of time, it has established itself as a healthy brand. Another competitive advantage that subway enjoys is the fact that along with traditional locations, Subway restaurants can be found in more than 4,000 non traditional locations such as
food courts, health clubs, hospitals, universities, amusement parks or just about anywhere. In fact, Subway restaurants can even be found in automobile showrooms and Laundromats! This global presence is indeed a sustainable advantage for Subway and needs to be managed properly. Subway’s fresh food is also a competitive advantage because unlike its competitors like McDonald’s it allows its franchisees to choose their own food suppliers, to ensure they can access the freshest ingredients.
Resources, Capabilities and Core Competences
• Human resources
McDonald’s is does its best to reward outstanding employees for exception work. It is also putting more emphasis on its hospitality training to ensure a friendlier and customer focused support staff.
• Brand loyalty
The long queues to McDonald’s in food courts is the best illustration of high level of brand loyalty, that company continues to develop. In advertising campaigns McDonald’s uses the slogan “I’m lovin’ it” which it there attempt to make McDonald’s an easy choice for families. They have also started using popular music to appeal to youth population. • Real estate
It may be surprising, but real estate ownership is one of the significant Mcdonalds resources. It is estimated that McDonald’s generates more money from its rent than from its franchise fees. One of the ways in which McDonald’s receives funds from its franchises is in rent money. McDonald’s owns all property in which a McDonald’s outlet was built regardless if the location is a franchise or company owned.
McDonalds used to have several capabilities, among them hiring process and employees training and product innovation. • Hiring process It is complicated and systematic. It comprises of 3 main stages. 1. Initial interview and psychometric evaluation. On this step the candidates undergoing simple interview and tests evaluating their verbal and critical reasoning
2. Job evaluation. On this step candidates have 2 days practice in a restaurant that allows them to look at McDonalds as a future employees and HR team to assess candidates performance 3. Final interview. The last stage of hiring process includes overall interview and decision about the candidates is made.
Taking into consideration staff training, McDonalds has many training programs on every level of restaurant. Training forums are made for basic workers and they start from the very beginning of working in the restaurant. They are designed to help employees with their communicational skills and encourage growth in the company. Other programs are created for managers of the restaurants, such as Basic Shift Management, Advanced Shift Management, and Systems Management Course .
Their main objectives are: providing information about internal standards and procedures, teaching data analyses and strategies of identifying and solving different problems. For higher levels employees McDonalds has internship programs for students and recent graduates. Programs let them practice in different spheres of companies performance such as Information technologies, Marketing, Finance and others. Other McDonald’s project – Leadership Development program is based career planning, Individual Development plans, career maps, succession planning, learning activities and others.
• Product innovation
The main resource developing product innovation strategy are full-time chief working in studios in Munich, Hong-Kong and Chicago. Moreover, localization of products also plays important role in development of innovative products. For example, in India Beef and pork products are not offered due to Indian religious beliefs. What is more, meat and vegetarian meals are prepared in separate areas of the restaurant again as a result of religious laws about preparation of food for vegetarians and meat-eaters.
There is an Indian version of the Big Mac in India is called
the Maharaja Mac and made with two grilled chicken slices, onions, tomatoes, cheese and a spicy mayonnaise. In Taiwan company introduced kao fan (literally “baked rice”), that resembles a burger with rice patties in place of buns. Finally, in Philippines McDonalds serves even spaghetti with in sweet tomato sauce, topped with cheese.
• Produce quick cheap food to large number of customers
With this concept, they are able to expand into many countries be the largest fast-food chain in the world. The process of production is the company core competence. Initially it was designed in such way as to be fast and very effective. There is precise guidance of how to do every activity.
Mcdonalds pioneered in the systematization of its processes.
Efficiency of operations and
synchronization is the basis for success of the company.
Also, it may be said, that burgers and fries are themselves McDonalds core competences. McDonald’s classic burgers has always taste the same in any outlet in the world. This consistent quality assures customer’s trust and loyalty to the product. It also provides an assuring brand experience.
Some specialists consider the unique organizational structure of McDonalds as its core competence. McDonalds never used rigid hierarchical organizational structure, that company managed to sustain over the years. It uses “freedom with framework” mantra, keeping structure decentralized. It allows local managers to make decisions by themselves. It also plays significant role in localization of menu due to local needs.
The business level strategy McDonald’s uses integrated cost leadership and differentiation. It means the products of mcdonalds is the cheapest on the market and more over McDonalds does its best to make them absolutely different from what others produce, using localization and launching new products almost every year.
So the target of its strategy is to meet the needs of buyers whose preferences are distinctively different from others. So MD deals with the costumers who want very fast service with good quality. And it is different from the visitors of not fast food restaurants. The product line is customized to meet their needs. The marketing emphasis is put on communication and market analysis again to satisfy their needs. Finally the way to sustain strategy is remaining dedicated to serving one niche and be better than competitors in everything and do not dilute the brand image entering other niches.
Corporate-level strategy is a strategy which is aimed at the long term position of a business. A corporation or business can use plenty of methods to develop a corporate level strategy, however, basically, there are four main strategies that almost all businesses use which are: • Concentrate on a single business, other words, business stays on the same industry on purpose to create a strong competitive position within the industry.
• Diversification; which is to move to a new business to provide a new good or service. There are two kinds of diversification, related diversification which is to compete in similar area/industry of activities to build a synergy and unrelated diversification which is to enter a new industry to compete and build a portfolio strategy.
• International Expansion. This means some competition in more than one market to serve the needs of the other markets/countries. • Vertical Integration. This is a way to cut costs by providing your own ways of inputs, backward vertical integration and your own channels of distribution and selling outputs by forward integration.
Therefore, now let’s move directly to McDonald’s corporate-level strategy. Nevertheless, before we start to consider all the main points of this particular type of strategy, some overview details will be given.
Mc Donald’s is a fast food restaurant operating on a global basis. It is operating on 119countries world wide. Mc Donald’s was opened for the first time in Cyprus in June 1997 and by now there are 16 Mc Donald’s restaurants in Cyprus.
So, Mc Donald’s uses corporate level strategies like all other global basis corporations in order to reach corporate goals to be cost effective. MC Donald’s is a business which only concentrates on a single task which is the fast food business industry as stated by Dr. Weber, (2000). This special issue someday will help a lot the business to concentrate directly on one single task and get not only more power and market share, but consumer loyalty also in result.
This happens because of the fact that they will run many strategies to find the best solutions of the consumer needs and preferences. However this can be very risky if the business fails to meet the right needs of consumers and therefore will not be profitable and as a result will close down due to the possible bankruptcy.
Firstly, as it was stated in Washington post (2005) MC Donald’s diversifies its operations in many ways. Thus, the company uses related diversification in order to produce the same products which are burgers and salads basically, but they provide just an enormous number of choices, such as: Big Mac or Mac chicken, different kinds of salads.
Moreover, McDonald’s operates in more than one geographical area but still performing the same task. Also it has opened MC cafes all around the world. McDonald’s gets many advantages by doing related diversification, firstly, if there are two Mc Donald’s restaurants in a city, then the two firms can build a synergy by co-operating with the right to use some special facilities such as the advertisements, suppliers and sometimes events, for instance, charity events. Secondly, as stated
by Ricky, W (2003), the firm depends less on a single product, so it’s less vulnerable to competitive or economic threats. Other words, Mc Donald’s having variety of products like burgers, salads, ice creams and drinks is not being threaten of competition because this particular company has diversity in its products, for instance, Mc Donald’s Greek Mac makes it more stable and steady than such rivals as Burger King because the rivals do not have such product.
Thirdly, it allows the firm to use technology or expertise developed in one market, for example, fast food to enter a second market more cheaply and easily e.g. MC Café. However, the only disadvantage that Mc Donald’s faces, is the cost of coordinating the operations of the related divisions. In 2001, McDonald’s launched a new venture by opening two hotels in Switzerland (Zurich and Lully) under the name “Golden Arch Hotel” Stefan, M (2005).
This is a good example of an unrelated diversification because of the fact that Mc Donald’s is taking risks of its business from a single activity to many others like taking part in the Hotel industry. Unrelated diversification provides a portfolio for Mc Donald’s because it is operating on two absolutely different industries and the risk is reduced because if one of the two markets that the business has activity in fails to grow successfully, then the growth of the other market will cover the costs of it.
Secondly, such strategy is less vulnerable to competitive threats because any given threat from a competitor is likely to affect only a portion of its total operations. However, unrelated diversification is very difficult to manage since the company has to deal with two markets and their strategies, plans and organization and coordination of each specific market which it is dealing with. McDonald’s has introduced the American concept of fast food to many foreign Markets as stated by, Francine L, (2005). Moreover, the firm has by now, expanded throughout most of the world by operating on 119 countries.
• Thus, Mc Donald’s is known globally today because it is expanded internationally. • Mc Donald’s is using multi-domestic strategy to serve each nations needs. It is customizing the fast food menus for each specific country/nation to suit the people’s wants. For instance there is Greek Mac in Cyprus and Greece.
• The advantage of this strategy is that the company is targeting a nation very effectively and gains market share by attracting the customers whereas, the cost of production will increase in order to add a new feature to the firm and the prices will rise to cover the costs. As stated in “Getting the Facts Straight” leaflet of Mc Donald’s, the firm is working with top suppliers and independent experts on health and safety.
The Cyprus Mc Donald’s restaurants’ inputs such as meat, is ordered regularly from Italy with the highest quality and when they enter the island, it is supplied to all the franchise branches on the island by Mc Donald’s vans and trucks. This shows that Mc Donald’s owns its inputs and has its farms to breed cattle and grow vegetable and potatoes. Therefore, this allows the company to diminish costs by doing vertical backward integration. Moreover, it maintains a guaranteed time, quality and amount of supply to the restaurants when required.
The drawback of vertical integration is that, at the beginning of the integration huge amounts of capital should be invested in to the backward integration. Mc Donald’s business has been working since 1956 till now successfully and still operates under these corporate level strategies.
A cooperative strategy means interaction between two or group of companies which work together to achieve a shared objective. By measures which are included in cooperation, companies can create value for the customer at a lower cost or with more benefits than it is able to do by itself. The primary type of cooperative strategy used is strategic alliances.
Such kind of cooperations means that companies partly share their resources and capabilities between each others to produce new resources and capabilities, e.g. gain shared objectives. Such corporations as McDonald’s, Coca-Cola and Disney are the biggest multinational corporation with outstanding profits.But how can they enlarge their profits with the same amount of resources? The answer to this question is cooperation.
Let’s look through some strategic alliances formed by McDonald’s.
Alliance with Coca-Cola
McDonald’s alliance with Coca-Cola has «no piece of paper to fall back on—just «a common vision and a lot of trust», according to Mr Ivester (Coke’s chairman)». On setting up in the burger business in the 1950s, one of Ray Kroc’s first successes was persuading a Coke executive Waddy Pratt to provide him with their drink.
Coke’s relationship with McDonald’s goes far beyond than just a supplier – It has helped McDonald’s to go to the new markets all over the world, because Coke is sold in almost twice as many countries as McDonald’s. Michael Quinlan, McDonald’s chairman, «runs off a long list of areas of cooperation, from banking relationships to equipment design». There is also very close relations between the members of this alliance at board level. When Coke’s chairman Robert Goizueta died, flags flew at half-mast at McDonald’s around the world.
Alliance with Disney
The alliance between McDonald’s and Disney has moved “way beyond doing only movie promotions with Happy Meal toys.” Nowadays this alliance has made enormous amounts of progress, for example McDonald’s being a sponsor of Dinoland, one of Disney’s attraction in Animal Kingdom, has built its restaurant outside this attractions park. This new “smart McDonald’s” is decorated in DisneyWorld style. The staff wear uniforms which is approved by Disney, which demonstrates McDonald’s characters.
Alliance with Master Card and Visa
McDonald’s has announced an alliance with MasterCard and another alliance with Visa USA to bring cashless payment options to McDonald’s restaurants in the US. By this cooperation with MC and Visa, a company has provided more comfortable system of payment in McDonald’s which attracts customers.
Alliance with Malls and Gas Stations
McDonald’s latest expansion targets call for approximately 3,000 new restaurants world-wide both 2008 and 2009. Two-thirds of new restaurants will be built outside the USA. On the other hand, in the US approximately 600 new restaurants will be so-called satellite units mini-McDonald’s found in malls and especially in nationwide retailer. McDonald’s has formed alliances with Amoco Oil Co. and Chevron Corp. in the US to built restaurants in tandem with gas stations to cover more and more destinations all over the country.
McDonalds has initially expanded to international markets in the conditions of strong regulations and overcrowded market in the USA. In the very beginning they offered a standardized products and attracted new clients with clean environment policy and brand equity. Recently the company adapt to new conditions by providing new product line and redesigning retail space in order to meet local needs and tastes.
This strategy has allowed McDonalds to adapt quickly to new countries, but at the same time it created a long-term threat of diluting the brand and loosing its association with American culture. For instance, in Europe McDonalds becomes going beyond fast-food conception. In order to compete with coffee shops, McDonalds started offering more comfortable conditions, such as WI-FI and iPods for rent. Moreover, they created new healthier and locally adopted foods.
Some specialists suggest, that if the company continue to expand with this strategy, it will be quite difficult to remain recognizable and meaningful brand. Now it is time to consider McDonalds global strategy in more detail, taking China, South Africa, Brazil and Saudi Arabia as examples of strategy realization. But firstly, it is worth mentioning a few background facts.
There is an incredible opportunity to expand in the world. McDonalds annual growth rate is about 1000-1500 restaurants and by 5-10 countries. According to the statistics, the company employed about 2 million people worldwide in 2000. The company adapts easily to new customers preferences by incorporating in the menu pommefrite sauce in Belgium and Holland and special mayonnaise based sauce in Iceland.
The McDonalds strategy in China is vary specific and it is aimed for adaptation to local culture. In comparison with the US, it was important for Chinese clients to focus not only on the food, but also on the restaurants’ atmosphere. That is why in China McDonalds restaurants are very similar to the American coffee houses with comfortable conditions for conversation and meetings. An other part of McDonalds strategy is introducing national tastes in its menu, such as the teriyaki burger.
In South Africa McDonalds decided to focus on high populated cites. The point is to serve people where they eat, shop or play. The companies survey figured out that drive thru facilities are much effective then restaurants themselves, that is why there was made a decision on improving retail spaces. Moreover, McDonalds marketing strategy was concentrated on potential customers with different income level.
In South Africa McDonalds has 90 branches spanning all nine provinces. It has 3 000 staff in just 39 restaurants, most working for franchisees. Each new restaurant opening creates as many as 80 new jobs, which is really important in current conditions.
The eighth largest McDonalds market is concentrated in Brazil. Management team here is mostly focused on quality improvement and customer satisfaction and it was awarded for these efforts with Franchising Hallmark of Quality.
Furthermore, McDonalds Brazil is one of the best employers and fifth among most admired companies in the country.
Saudi Arabia and India
The most characteristic feature of McDonalds in Saudi Arabia is that it closes five times a day for muslim prayers. McDonald’s India offers aloo tikki and paneer. And it doesn’t serve beef or pork at all. The Big Mac becomes Maharaja Mac in India. The company created special conditions for vegetarians with separate kitchen, cook and utensils. Moreover, in Ahmedabad the company decided to open an all-vegetarian outlet. Holding in respect Muslim tenets of belief, the company does not serve pork in all Islamic countries.
There are two absolutely unique restaurants in the Holy City of Makkah, where Moslem customers are exclusively served by the staff, fully consists of Moslem employees, from the Service Crew to the Restaurant Manager level . And finally, McDonalds efforts have improved the local industries and national economy due to the fact that more than 50% of the products used are manufactured locally and in the gulf regions.
For Business-Level Strategy
The main recommendation in terms of business-level strategy is to remain in the same niche. McDonald’s pioneered the whole concept of the fast food restaurant, that is why it should go to some other businesses, such as higher-level restaurant, because it can dilute their image of best fast food restaurant.
For Corporate-Level Strategy
Due to the fact that not every family has a direct access to McDonald’s cafes or just their place is too far from the restaurants, the idea to provide fast food to supermarkets. The products will be sold in the special vacuum package, so that it would have their original taste. This way the restaurant will loose nothing because there are only advantages which consist of making extra profit and gaining customer loyalty through spreading their production into the farplaced (far located) regions.
For Cooperative Strategy
As we have seen in the examples of McDonald’s alliances – cooperation is very efficient way of development. In my opinion, McDonald’s can cooperate with greater amount of companies. However, it should be very selective in choosing partner not to dilute its image. For example McDonald’s can cooperate with Apple: McD’s can provide free rechargers to Apple gadgets in its restaurants, while apple spread some apps by the AppStore. I think that McDonald’s also should
create alliance with some attraction park companies, as they’ve made with Disney. Of course it would be more profitable for McDonald’s because of the amount of clients concentrated in one place. On the other hand, ones park logo and symbolic in MacDonald’s is worth it.
For Global Strategy
In spite of the fact, that McDonalds has great expansion opportunities, it is essential for the company to remember about its strength and to prevent brand dilution by means of concentrating on traditional American fast-food menu and including no more then 30% of specific dishes. Talking about the company’s pros, it is essential to continue developing and improving marketing campaign towards children and adults in foreign countries. In addition, such fresh ideas as creating vegetarian restaurants should be adopted in more countries in order to give customers alternative choice. Moreover.
It would be a great idea to install Internet access terminals in each restaurants in order to reduce the amount of lag time between a customer’s orders and pick up of the order. This will show the innovative company level and improve its brand image for customers.
In the conclusion it is worth mentioning that the best prove of fantastic effectiveness of McDonald’s strategy is the fact that it’s competitors trying to copy its standards and processes to become more competitive at the market where McDonald’s still remains the leader.
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