McDonald's Globalization Strategy

The assignment provides an analysis of McDonald's globalization strategy, focusing on its exportation of pop culture, franchising, and customization of menus and prices. It discusses how these strategies have been effective and successful in expanding the company's global presence. The document also touches on the challenges faced by McDonald's in adapting to local cultures and currencies, and how it has addressed these issues through strategic planning. The assignment is a valuable resource for students and professionals interested in international business and marketing.

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Runnning head: STRATEGIES FOR GOING GLOBAL
STRATEGIES FOR GOING GLOBAL
(Case Study: McDonald’s Corporation)
Student Name
Institution Name

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STRATEGIES FOR GOING GLOBAL
ABSTRACT
This paper evaluates the strategies multinational corporations apply when going global.
The strategies will be analyzed in terms of their development, formulation and implementation.
This paper will consider McDonald’s Corporation as the case study for a corporation that went
global. The research will investigate McDonalds’ strategies and examine their success rate as
well as provide alternative strategies that would be applicable.

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STRATEGIES FOR GOING GLOBAL
INTRODUCTION
McDonald’s Corporation operates and manages the McDonald’s restaurants and
associated brands across the world. It started as a restaurant in 1940, operated and managed
by McDonald brothers, Richard and Maurice, in San Bernardino located in the state of
California, U.S.A (Rangnekar, 2014).
McDonald’s Corporation was first founded in 1955 as McDonald’s System, Inc. by Ray
Kroc, when he joined the McDonald brothers. Later in 1961, Ray Kroc bought the McDonald’s
name and operating system exclusive rights after purchasing the equity owned by the
McDonald brothers, Richard and Maurice McDonald (Love, 1995). In December 1964 the
business was turned to McDonald’s Corporation.
The corporation has had several brands under it since its incorporation in 1964. The
brands currently under it include consists of McDonald’s Restaurant Chains, Krispy Kreme,
Bruster's Ice Cream, Dairy Queen among others.
The enterprise first went global in 1967 with restaurants in Canada and Puerto Rico. The
McDonalds food chain currently has restaurants in almost all regions of the world, with 37,241
outlets in 120 countries (McDonald’s Corporation Annual Report, 2018). Their global Lead
Markets include Australia, Canada and some of the European markets in Germany, France, and
the U.K. While the corporation’s High Growth Markets include the Asian markets of China and
Korea, Russia, and the European markets in Italy, the Netherlands, Poland, Spain and
Switzerland.
STRATEGIES
McDonald’s Corporation has applied three main strategies in going global. These
strategies are:
1. Culture Exportation.
2. Franchising.
3. Customized Menu and Prizes.
1. CULTURE EXPORTATION

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In the pilot stages of going global, McDonald’s Corporation heavily depended on the
fame of the American culture as a marketing tool. Popular Culture, famously pop culture, “in this
context it is defined as popular music, television, film, video, pulp fiction, comics, advertising,
fashion, home design, and mass-produced food” (Watson, 2006). The entry of the corporation’s
franchises in any international market was followed by the excitement of experiencing pop
culture. The enthusiasm by the potential market served to the advantage of US brands that were
going global during the 1990s, McDonald’s among them, “Popular culture, in this view,
generates a vision of fantasy, of the good life”. McDonald’s therefore presented a piece of the
American good life to other places in the world.
This excitement was further amplified by the American news outlets, James. L. Watson,
2012 notes that the viewpoint that McDonald’s ascendency was evidence that free market values
prevail everywhere, reflected in the news media that tracked McDonald’s and reported on its
every triumph. Most international news outlets also helped in marketing McDonald’s to its new
market, “With the possible exception of Korea, media reports in East Asia tend to be positive.
The Chinese media could barely restrain their enthusiasm for McDonald's during the restaurants
first three years of operations in the People’s Republic; the company was celebrated as a model
of modernization, sanitation, and responsible management” (Watson, 2006).
The reliance on the exportation of pop culture as a tool for marketing meant that
McDonald's not only sold food items but also represented the idea of the American culture. This
resulted in McDonald’s restaurants serving other purposes; Watson explains that of those
interviewed in Yunxiang Yan in China, many said they did not like the food at McDonald’s but
assumed that there was something more profound associated with eating there (Watson, 2006).
2. FRANCHISING
The Corporation has applied various business ownership models for both its American
based businesses and the global businesses. The two main models are franchised and company-
operated ownership. The corporation has, however, increased the number of franchised
restaurant outlets steadily and reduced the number of company-owned outlets. This is illustrated
in the McDonald’s Corporation Annual Report, 2017; where the total number of restaurants
owned by the corporation was 3,133 in 2017, down from 5,669 and 6,444 in the years 2016 and

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2015 respectively. The number of restaurants franchised by the corporation on the other hand
was 34,108 in 2017, up from 31,230 and 30,018 in the years 2016 and 2015 respectively. As of
2017, under the franchised arrangements, the commercially franchised restaurants numbered
21,366 up from 21,559 and 21,147 in the years 2016 and 2015 respectively. The number of
developmental licensed franchised restaurants went up from 5,529 and 6,300 in 2015 and 2016
respectively to 6,945 in 2017. And the foreign affiliated franchised restaurants also increased in
numbers to 5,797 in 2017 from 3,317 and 3,405 in 2016 and 2015 respectively.
” Franchising is a concept whereby independent entity embark upon cooperation, as a
part of which the franchisor (as the system’s organizer) transfers onto the franchisees, in
exchange for an appropriate fee, the recipe for a particular business activity and how it should be
operated.” (Matejun, 2013). McDonald’s has applied different forms of franchising for its global
restaurants successfully, by letting the franchises use its brand, recipes and menus. McDonald’s
uses three forms of franchising: Conventional franchised, Developmental licensed and Foreign
affiliated.
In the agreement for Conventional franchised outlets, either, the land and the building are
owned by McDonald’s Corporation, or it has leased the location of the restaurant on a long-term
basis. The franchisee invests the initial capital required for set up of the restaurant. The
franchisee also reinvests capital into the restaurant, although McDonald’s Corporation may also
reinvest in the business as well with the aim of accelerating certain initiatives. In this form of
franchising, rent payments royalties based on agreed sales percentages provide McDonald’s
Corporation with the revenue, this is along with fees that are paid when the new restaurant is
opened (McDonald’s Corporation Annual Report, 2018). “For instance, the company decided to
establish two joint ventures with two local entrepreneurs in New Delhi, who were selected to
manage the fast food restaurant.” (Mujtaba, 2007).
In the Developmental Licensed arrangement, McDonald’s Corporation does not invest
any capital into setting up and running of the restaurants and the real estate interest, all these is
provided for by the licensee. It gets revenue from initial fees paid when a new restaurant is
opened and royalties that are based on an agreed percent of sales. This form of franchising is
used by the Corporation in approximately 6900 restaurants in 80 countries with the largest

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developmental licensee being in Latin America and the Caribbean where it operates over 2,200
restaurants in 19 countries in the region (McDonald’s Corporation Annual Report, 2018).
In the foreign affiliated agreement, the corporation owns equity investment in the
affiliated market. It earns its revenue from the royalty agreements on a percent of sales and in the
earnings of unconsolidated affiliates recorded as its share of net results in Equity. An example
being the company completion of the sales of its businesses which were in China and Hing Kong
while at the same time retaining 20% ownership in the business that currently operates the sold
enterprises. Currently there exist approximately 5,800 restaurants in affiliated foreign markets,
the largest of which are Japan and China with over 500 restaurants in total.
Franchising has helped McDonald’s Corporation in global expanding by reducing capital
input, where the franchisee incurs more of the cost of setting up the restaurants. Franchising has
also helped the corporation in maneuvering tough business policies by foreign governments that
favor local brands, by partnering with the franchise the corporation assumes a more local look
that meets the local government policies. Through franchising, the corporation has also gained
market confidence, with local franchisees running the restaurants, McDonald’s no longer feels
foreign, and this therefore makes it as attractive to the customers as any local brand.
3. CUSTOMIZED MENUS AND PRIZES
The cultural differences across various world regions mean that there would be a
difference in taste preferences in these regions (Luthans F. and Doh, 2015). McDonald’s
Corporation has had to think globally and move away from its famed menu which consisted of
hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese (McDonald’s
Corporation Annual Report, 2018) to menus incorporating more local cuisines. These new menus
have included products such as The Maharaja Mac which replaced the beefy Big Mac. On the
other hand, the McAloo burger and vegetarian Salad Sandwich was designed special for India.
Special Indian sauces like McMasala and McImli were designed to satisfy the Indian tastes, in
this regard the garlic free and the eggless sauces were meant to accommodate vegetarians
(Rangnekar, 2014).
This change in menus has made it more adaptable and more appealing to the foreign
markets, thereby making it easier for them to penetrate and expand in such markets.

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McDonald’s has also had to rethink its pricing policy to accommodate all the regions in
which it operates due to variation value of currencies globally. “In Switzerland, the Big Mac is
valued $.60 over the U.S. (price base of the product). However, in China, it is undervalued by
$0.60 in comparison to the price of the Big Mac in the U.S.” (Mujtaba, 2007). This makes it
more convenient for the customers, as exchange rates are no longer a barrier (Porter, 1986).
CONCLUSION
In conclusion, the strategies applied by McDonald’s Corporation in going global have
generally proven to be effective and successful.
Exportation of the pop culture has however been overtaken with time. The corporation
can no longer present itself as the representation of pop culture due to cultural imperialism and
foreign policies in the regions in question. Watson observes that the Chinese leadership has
raised concerns at the growing influence of the McDonald’s and other foreign food firms on the
Chinese population (Watson, 2006). The strategy of using enthusiasm for pop culture as a tool
for marketing can now only be applied selectively to regions which lean towards American
ideals and not applied across the board (Dretler, 1998).
Franchising has shown to be both a cost-effective and conscientious market ways of
going global. It reduces significantly the investment capital required by McDonald’s Corporation
to expand overseas whilst giving the target market a sense of ownership of the food chain.
Franchising also provides a bridge in bureaucracy structures, “This strategic move allowed the
company to gain easy access to the bureaucracy associated with the country’s government.”
(Mujtaba, 2007). Massive franchising like on the scale McDonald’s Corporation, presents a
problem of management. The McDonald’s Corporation Annual Report, 2017 puts the Company
franchising at more than 90%. A decision affecting all global outlet would be difficult to
implement as each franchise has a different agreement with the corporation (Crawford, 2015).
The customization of menus and prizes is the best strategy to address the diverse nature
of its customers and the ever-changing currencies exchange rates.

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References
A. Crawford, S. A. (2015). McDonald's: A case study in globalization. Journal of Global Business Issues,
11-18.
Dretler, R. M. (1998). Global strategy and its impact on local operations. The Academy of Management
Executive, 60-68.
Love, J. F. (1995). McDonalds: Behind the Golden Arches.
Luthans F. and Doh, J. P. (2015). International Management: Culture, Strategy and Behavior. McGraw
Hill.
McDonald’s Corporation Annual Report. (2018, April 14). Retrieved from
http://corporate.mcdonalds.com/corpmcd/investors-relations/financial-information/annual-
reports.html
Mujtaba, B. G. (2007). McDonald's Success Strategy and Global Expansion Through Customer and Brand
Loyalty. Journal of Business Case Studies-– Third Quarter. 3, 55-64.
Porter, M. (1986). Competition in Global Industries. Harvard Business School Press.
Rangnekar, A. (2014). McDonald's India Entry Strategy. Vidyalankar Institute of Technology.
Watson, J. L. (2006). Golden Arches East. McDonald’s in East Asia.