McDonald's Business Strategy and Challenges

This assignment delves into McDonald's strategic direction, examining its response to market pressures through menu streamlining and deal modifications. It analyzes key competitors such as Burger King, Subway, and Starbucks, highlighting the competitive landscape and threats they pose to McDonald's sustainability and growth. The document also explores challenges like low valuation compared to rivals, intense rivalry impacting profit margins, and the influence of consumer choices on the fast-food industry.

CRITICAL ANALYSIS: HOW
McDonald’s SPREAD IN OTHER
COUNTRIES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Global strategy of McDonald's...............................................................................................1
Market growth strategy...........................................................................................................2
International expansion measures...........................................................................................4
Global Branding strategies.....................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
APPENDIX......................................................................................................................................9
Value added services..............................................................................................................9
Issues Faced By the company.................................................................................................9
Competitors of McDonald's..................................................................................................10

INTRODUCTION
McDonald's is one of the largest and successful fast food companies in the world. It
established its business operations in the year 1955 and has been providing best fast food in the
world. McDonald's was originally started in USA but now they are serving 118 countries with
31000 restaurants in the world (Arnold, 2003). On an average, 1 in every 4 American eats in
McDonald's. From decades, American citizens enjoy fast food chain. Quick services and quality
products are the core focus of the generation today (Howard, 2009).
McDonald's is facing fierce market competition from retail food giants such as Domino's,
KFC, Burger king, Subway, Pizza Hut etc. In addition to this, high risk of new market entrant is
also posing high business challenges for the business. However, the cited company has adopted
the process of continuous improvement and they develop new products and concepts which
provide the customers with more personal experience and also give value to their money
(McDonald’s Corporation UK, 2008). In the current market, competition has been increased and
the basic problem is small food centres are copying the idea. McDonald's has adopted measures
of continuous innovation and development to enhance consumer and experience for the products
and services offered by the business unit in the present competitive market. The stated strategy
has helped the company in building a competitive advantage within the economy.
Global strategy of McDonald's
McDonald's incorporates various strategies which help to derive wide success measures.
It operates on continuous emergent strategies by analysing the environment on global and local
levels, mainly by introducing new items and defending its existing products (McDonalds, 2015).
The strategy of McDonald's is to remain competitive in the global market while maintaining an
edge in the economy. Products like BIG MAC and EGG Muffin are the successful innovative
products of the company and they are also very successful in the market. These products have
high demand in the consumer market (Shen and Xiao, 2015). Another successful innovative idea
was the happy meal which captures children market. The menu of the company is consistent and
it includes variety of hamburgers, cheeseburgers, fries, desserts, shakes etc. In addition, there are
also products like salad and juices and chicken based snacks which adds spark to the monotony.
It also offers breakfast meals which helps the business to compete with the brands like subway.
Moreover, the company regularly tests its new products and sells wide range products on offers
(Pinedo, 2013). The target market for McDonald's is children and young individual. There are
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some issues raised against the company however company is in the process of innovation and
competition, the organization is improving the performance and the company have used multiple
strategies to attain the competitive advantage in the market. There are certain issues about the
company which needs to be developed.
The mission statement of the firm is to become modern and progressive burger company
which delivers modern customer services and experience. The company focuses on delivering
greater taste and high quality along with the world class experience to their customers so that
they can feel valued and welcome. Moreover, to sustain the competitive advantage, McDonald's
has divided its strategy into three forms (customer value, customer convenience, optimal
operations) (Sharma, 2013). The company also improves its manufacturing system so that it can
develop its overall operations of the company and also give support to the staff.
Hence, it can be effectively analysed that the global business strategy of McDonald's is to
manage competition while managing its competency through innovation and development as
well as strategic planning.
Market growth strategy
Illustration 1: Ansoff's Growth Matrix
(Source: Arnold, 2003)
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Ansoff’s growth matrix has helped in analyzing growth and development prospects for
McDonald's which helped the firm in expanding its business operations globally. Market penetration: Business strategy of company focuses on promoting the present
product in the market in order to enhance the business growth. McDonald's adopted this
measure effectively for the development of business in the local market where company
adopted effective promotional measures for enhancing the sales of products and services
offered. For example, to enhance sales in the UK market, McDonald's developed
products as per the needs of people and promoted the same to maximize the sales
(Mcdonalds, 2015). Market development: This is one of the most effective and well planned strategies of
company. McDonald's focused on the international market needs and demands. The
expansion of business beyond geographical boundaries demands an effective analysis of
external environment and consumer needs. McDonald's adopted strategic means of
business development in the global market. This is a risky measure however; company
has developed well defined means of market analysis and performing research for the
same. Product development: This is a strategy where McDonald's meet the local needs and
preference of people by producing products and services as per the local preference.
Teriyaki burger in Japan, Mc tempeh in Indonesia and Mc Lox Salmon in Norway are the
clear examples of product modification and value orientation approach of company
(Prairie, 2014).
 Diversification: This is a risky approach of business development where the business
diversifies its operations to a new product range for enhancing the sales in market. This is
a costly and risky measure which has not been adopted by McDonald's because the
company focuses on current range of products and services and aims to enhance its core
competencies in the market (McDonald’s Corporation UK, 2008).
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International expansion measures
Illustration 2: International expansion strategy
(Source: Howard, 2009)
The above analysis reflected that business expansion and development is one of the
crucial and significant aspects of business development. Companies in the present era are
developing international sales in order to attain the business objective of becoming a market
leader. The mission of McDonald's is to become the first preference of consumers to eat and
drink. In order to attain the stated aim of business, company has affectively adopted international
expansion strategy for the business.
Different companies adopt distinct measures to enhance the sales in international market.
McDonald's adopts franchising measures for international expansion of its business. This
strategy is effective for achieving the business policy of company which states “think global act
local” (Shen and Xiao, 2015). Company effectively focuses on prospective market on the basis
of various factors such as population rate, economic conditions, education rate, growth rate,
employment rate, etc. On the basis of this, company effectively plans business expansion which
means to select the best prospective.
Franchising helps company in developing a formal contract with the other party for the
transfer of ownership and control of operations of business. McDonald's adopts this measure
because of the brand reputation of business. Company transfers the part of ownership to the party
whereby control and management is operated by him. However, the policy of umbrella
infrastructure for enhancing and brand recognition demands the party to adopt uniform services,
physical layout and design as other stores in the world. Moreover, the machinery and equipment
of business are also centralized (Jones, 2014). This helps the business in managing uniformity in
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taste and quality all over the world. This strategy of international expansion has helped business
in attaining the objectives of:
 Brand recognition
 Sales maximization
 Quality management
Global Branding strategies
Every business unit operates in the economy with perception of effective business
operations and well developed results. Business planning and development of company help in
attaining a huge impact on the sales and development of business. McDonald's has adopted
effective marketing and promotional measures in the global market for expanding the business
operations and sales. Business policy of company is to develop the global measures for
expanding operations while meeting the local needs and demands of consumers. The most
effective means of branding strategies adopted by business units are standardization and
adaptation (Bassous, 2013).
McDonald's has adopted the adaptation strategy for business growth. The marketing mix
of business is developed according to the regional needs and preferences. The strategy may be
further analyzed on the basis of following aspects: Product: The product choices and categories for consumers are developed and planned as
per the local needs and demands. This helps the firm in developing maximum local
demand thus, maximizing the aggregate global demand in the market. For example,
Teriyaki burger in Japan, Mc tempeh in Indonesia and Mc Lox Salmon helps in meeting
the local needs of buyers (McDonald's is testing a ton of new ingredients including
chorizo and Greek yogurt, 2016). Place: The physical stores of company have adopted standard means of development.
The physical layout and design of company are developed uniformly around the world.
This has helped the business in attaining unique brand recognition. Price: The product’s pricing decisions are developed according to the local needs and
preferences of the region. Company focuses on standard pricing measures however,
product differentiation is done in prices according to the local market.
 Promotion: The promotional measures of business are localized in order to attract
maximum sales in the market. For example, in India, sales promotion strategies for their
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festive season (November Dipawali) are different as compared to that in China (February
New Years) and UK (December Christmas) (Sharma, 2013).
CONCLUSION
McDonald's is quite successful in fast food industry with efficient strategies and quality
standard products and because of it has enabled to gain competitive advantage. It can be
witnessed because of the international market growth of the company. The organization is also
successful in entering new market and gaining the market share such as china. With the help of
product modification, the company is able to get customer satisfaction. Well there are some other
remarkable things which McDonald's has adopted to gain the support of local community which
is the basic reason of its success.
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REFERENCES
Arnold, D., 2003. Strategies for Entering and Developing International Markets. In Mirage of
Global Markets, The: How Globalizing Companies Can Succeed as Markets Localize.
Financial Time Prentice Hall.
Bassous, D. M. G., 2013. The Five “P”s of Marketing. [Online]. Available at:
<https://mbassous.wordpress.com/tag/marketing-mix/>. [Accessed on 8th May 2015].
Crouch, A., 2004. Fast-Food Business Strategy: The Raw Prawn Blog.
Essays, U., 2013. Mcdonalds Restaurants Fast Foods Management Essay. [Online]
Available at: < http://www.ukessays.com/essays/management/mcdonalds-restaurants-
fast-foods-management-essay.php?cref>. [ Accessed on 17th November 2015].
Howard, T., 2009. The Over-Arching Strategy-McDonald’s Global Brand Strategy Task Force.
Brandweek.
Jones, A., 2014. Must-know: A company overview of McDonald’s. [Online]. Available at:
<http://marketrealist.com/2014/07/must-know-company-overview-mcdonalds/>.
[Accessed on 15th October 2015].
McDonald’s Corporation UK, 2008. Eat Smart/What’s On/Good News. [Online]
Available at: <http://www.mcdonalds.co.uk>. [Accessed on 15th October 2015].
McDonald's doubled the price of a popular promotion and many customers are devastated. 2016
[Online]. Available through: <http://www.businessinsider.in/McDonalds-doubled-the-
price-of-a-popular-promotion-and-many-customers-are-devastated/articleshow/
51129567.cms> [Accessed 25th February 2016].
McDonald's is testing a ton of new ingredients including chorizo and Greek yogurt. 2016 [Online].
Available through: <http://www.businessinsider.in/McDonalds-is-testing-a-ton-of-new-
ingredients-including-chorizo-and-Greek-yogurt/articleshow/51130525.cms> [Accessed 25th
February 2016].
Mcdonalds, 2015. Company Profile. [Online]. Available at:
<http://www.aboutmcdonalds.com/mcd/investors/company_profile.html>. [Accessed on
15th October 2015].
Pinedo, M., 2013. Global Asset Management: Strategies, Risks, Processes, and Technologies. 1
ed. London: Palgrave Macmillan.
Prairie. B., 2014. McDonalds: Good or Bad. [Online]. Available at:
<http://www.teenink.com/hot_topics/health/article/223461/McDonalds-Good-or-Bad/>.
[Accessed on 8th May 2015].
Sharma, K., 2013. ‘A case study on McDonald’s supply-chain in India’. Asia Pacific Journal of
Marketing and Management Review, 2(1): 112-20.
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Shen, Q. and Xiao, P., 2015. ‘McDonalStrategic Partnering., 2014. ‘Case 3: Coca-Cola and
McDonald’s’. [Online]. Available through: < http://strategic-partnering.net/case-3-coca-cola-
mcdonalds/. [Accessed on 15th October 2015].
Watson, J. L., 2006. Golden Arches East: McDonald's in East Asia. Stanford University Press.
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APPENDIX
Value added services
In order to achieve the customer value, the company is focusing on real time value and
information which will help in redefining menus and prices for enhancing customer preferences.
To achieve the customer convenience, major focus of the business is on the improving stores
with advanced facilities like WIFI, relaxing environment and entertainment sources (Jones,
2014). McDonalds is a highly flexible organization and its major strategy while entering the
foreign market is product differentiation and product modification. Think global act local is the
strategy which has helped the business in delivering high value to consumers of every part of the
world. Teriyaki burger in Japan, Mc tempeh in Indonesia and Mc Lox Salmon in Norway are the
clear examples of product modification and value orientation approach of the company (Essays,
2013).
By adopting the globalization strategy, the company can transfer their global products
into a new market with new packaging and prices and this results in increasing the appeal of
product by consumers and retailers. Quick and well defined distribution has helped the business
in claiming the tag of the fastest food service chain of the world. Different promotional strategies
are also used by the company to attract more people towards the business. These promotional
tactics include internet cards, concert tickets, CDs, t-shirts, caps etc. The strategy represents
McDonald's as family oriented image (Bassous, 2013.). McDonald’s business strategies was
successful because the general focus of the strategies was people and in order to make strategies
successful by adhering to people needs and preferences. The business unit clearly represents that
customers are their utmost priority and because of that McDonald's has merged with the culture
where they are selling. This has helped the business in delivering valuable services to its
consumers globally.
Issues Faced By the company
McDonald's has been targeted continuously for its unhealthy menu and issues related
with the same. There are issues raised against the company regarding the products contributing
towards weight gain. A study which was published in lancet medical journal shows that people
who are eating at fast food restaurant are more likely to gain weight than those who do not eat
there regularly (Crouch, 2004). Moreover, there are many comparisons of subways and
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McDonald's product reflecting calorie content and health issues related to the product. These
issues have caused a direct impact on brand image of the business. The company faced a direct
drop in consumer demands as well (McDonald’s is testing a ton of new ingredients including
chorizo and Greek yogurt, 2016). In order to deal with the issues, McDonald's slim down its menu
and made changes in its deals. The changes were the part of business strategy. Strategic direction
of the company was to identify, scale and implement the ideas which match the customers’
expectations, changing needs and preferences (Watson, 2006).
Competitors of McDonald's
According to the market realistic report, the biggest competitors of McDonald’s are
Burger King, Subway, and Starbucks, Wendy’s, Yum Brands, Popeye and Chipotle. These
global food chains are posing high threat to the sustainability and growth of the company.
Though McDonald's is a market leader and has developed strong supply chain and business
tactics in the economy, yet it lacks in valuation. The company has low valuation as compared to
Burger King (McDonald's doubled the price of a popular promotion and many customers are
devastate, 2016). This has developed high impact on financial viability and global positioning of
the business. Intense rivalry also decreased the profit margin of the fast food industry and there
are lots of substitutes available in the market. Despite of all this competition, McDonalds is still
the market leader. The company competes on international, national and regional bases on the
basis of price, services, products, quality and convenience (Watson, 2006). Food industry is
developing and growing widely and the barriers to entry of new entrant are extremely low. In
addition, consumers make choices on the basis of price, quality and taste so that buyer have
complete power. Hence, rising local and small scale competition also has a direct impact on
business growth and development.
Apart from this, cultural background, changing choices of the consumer, market changes,
and new trends in the industry will continue to emerge. While taking this into consideration
McDonald's have to design and implement new strategies. The company is required to undertake
the market research to get the update of the market and latest trends which are going around In
addition; identifying new segment to capture will also help the business in developing
competitive edge (Sharma, 2013). Market research is a useful tool for the company to obtain
industry data and use in strategic planning and development. The company also needs to apply
the integrated marketing to advertise themselves in different ways. This will help the company in
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making best utilization of counter information. Thus, McDonald's will be able to combine the
forms of communication with the core strategies to gain more marketing advantage. Integrated
marketing also enable it to find out the most appropriate method of communication to maintain
the good relationship with the customers. Business unit can maximize the use of mass media,
direct and online marketing with the use of integrated marketing strategy.
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