Attractiveness of McDonald's in Morocco: A Strategic Analysis

This report analyzes the attractiveness of McDonald's in Morocco through strategic tools such as PESTEL framework, SWOT analysis, internationalisation theory, Porter's Diamond, and Porter's five forces model. It discusses the strengths, weaknesses, opportunities, and threats of McDonald's in the Moroccan market. The report also explores the internationalisation process of McDonald's and its brand expansion in Morocco.

Introduction
In the context of full economic swing, amplified by globalisation and international competitiveness, investment
in both aspects national and foreign is a crucial action to address the requirements of economic take-off. In this
environment, Morocco, like other emerging countries, is resolutely engaged in a policy that seeks to make from
foreign investment strategic support for economic and social growth. Several multinationals moved to Morocco
to benefit from land, financial and tax benefits. McDonald's is one of the major multinational groups who
choose Morocco as a host county, active for 20 years, operating in the fast food sector.
The primary ambition of this multinational is to ensure its sustainability and continued growth in Morocco. By
relying on the complementarity between standardisation and the adaptation of its offer. However, since
Morocco is a society in constant mutation, whose consumption habits are changing at high speed, the brand
must adopt the global marketing strategy to keep its rank as the market leader. Part of global marketing is
global advertising where the same basic advertising approach is used in all markets (Belch & Belch, 2001,
p.712).
This report is intended to analyze the attractiveness of McDonald's. This attractiveness is evaluated through
strategic tools such as PESTEL framework, SWOT analysis, internationalisation theory, Porter`s Diamond and
Porter five forces model. This report will entail strengths and opportunities to know the potential of the
organisation to overcome threat and weaknesses. Further, this report will discuss the internationalisation
process of McDonald's through the Uppsala Internationalization model and its brand expansion Morocco.
A. Organisational profile & industry analysis
Background of the organisation
McDonald's is well known as one of the largest food restaurant chain of hamburgers worldwide who serves
nearly 60 million customers in approximately 119 countries regularly. Headquarter of the company is in the US
and the UK, and it operates more than 1200 restaurants. While considering the workforce, it is found that the
company operates through 67000 people that work for both franchises as well as the own branch of the
company. In 1992, Casablanca was the first Moroccan, African and Arab city to host the franchise
Porter’s five forces
Most of the time, it is used to measure competitor companies intensity, profitability and its
attractiveness of a trade or market (Kenton, 2019).
Bargaining power of buyers
The Moroccan customers enjoy a massive range of options available in the market, especially that recently they
aim to better health and healthier eating and have a greater awareness of nutrition and diet. For instance, they
can switch from one restaurant to another without any switching cost especially they are unsatisfied.
Therefore, bargaining power of customers is strong (Eskandari, Miri, Gholami, Reza, and Nia, 2015).
Bargaining power of suppliers
The raw materials orders are massive one a regular bases, such as potatoes and chicken which the company
uses daily to make their menus are available with a vast number of suppliers, what provide McDonald's a high
bargaining power over its suppliers. The company can easily switch suppliers with little switching cost
(Mathooko, and Ogutu, 2015).
Threat of substitutes

Eating in fast food restaurants is becoming part of the Moroccan consumption habits, imposed by the
demands of modern life on the behaviour of Moroccan consumers. Moreover, the substitutes of meals offered
by McDonald's differs from restaurants, healthy bistro, and even cooked meals, and most of them are
competitive while considering the quality as well as customer satisfaction. Switching to other substitutes
generally, do not involve high switching costs. Many health concerns have raised in regards to products of
McDonald's by causing consumers to prefer health products (Mathooko, and Ogutu, 2015). The threat of
substitutes is high.
Threat of rivalry
The fast-food restaurant industry has severe competition today. As there are so many multinationals and local
restaurants who have the same menu and the company is striving to get an appropriate market share. A level
of saturation has developed. Some of the competitors of McDonald's such as Burger King, Brioche Dorée, and
other local food restaurants. The threat of competitive rivalry is high (Mathooko, and Ogutu, 2015).
Threat of new entrants
The threat of new entrants is moderate is a different number of entry barriers. In order to become a successful
leader and compete McDonald's, the new entrant has to create a large number of retail outlets worldwide that
requires massive capital investment and time too which ultimately establish economies of scale so that it can
become profitable only if the company get appropriate suppliers of meat and raw material. Undoubtedly, new
entrants carry out extensive marketing in order to create awareness among consumers.
Situational Analysis
PESTLE

Political
factors
 The stability and confidence of the country
 Increasing international trade agreements
Economic
factors
 Strong, stable economic fundamentals
 Skilled and efficient human capital
 Favourable business environment
 Agreement of Association Morocco European Union (EU ) [9] (The market of the EU
absorbs more than two-thirds of the Moroccan food-processing exports [12])
 The Development and promotion of local products
Social factors
 changing tastes and preferences of the customers increases the opportunity for the
company to grow.
 The population composition of Morocco is 27% who are under the age of 15, which is
equal to around 18% of total population, people in age from 15 to 24 is 18%, and
people between 25-54 is 42% (Digital Journals, 2019).
 Youngster`s lifestyle increases the consumer`s daily dining in restaurants such as
McDonald's rather than cooking at home.
Technological
factors
 Morocco has undertaken rapid technological changes that can help the organisation
to drive the development of commercial activities. The country had severe reforms in
regard to information and communication technology. (Digital Journals, 2019).
 These potentials in Morocco helps the neighbouring countries to enhance their
productivity too. The company will have to use research and development activity in
the organisation that lead to increased business automation and increase in sales
with the help of mobile devices (Better, 2018).
Environmenta
l factors
 domestic demand and fast-growing urbanisation 11]
 Improvement of the living standards conjugated to the change of the food habits [10]
and the work of women [9]
 The development of the national activities of restoration (catering) and tourism, [9]
Rising disposable incomes (opportunity)
 Busy lifestyles in urban environments (opportunity)
 Increasing cultural diversity (threat and opportunity)
 Healthy lifestyle trend (threat & opportunity)
Legal factors
 Halal certification is a concern to Muslim consumers.
 Increasing health regulations in workplaces and schools (threat)
 Increasing animal welfare regulations (threat & opportunity)
 Rising legal minimum wages (threat)
Pestle analysis of McDonald's evaluates the key external factors where political factor can favour the business if
the government is stable. Legal factors must favour the international legislation for the organisation.
Environmental factors affect the raw materials of the company as it uses fresh beef and other fresh vegetables
for their production. Economic factors include recession and growth that reflects GDP and inflation rate. In

order to summarise every factor, it can be said that favourable external factors will provide an opportunity for
business to grow (Yap, & Tan, 2017).
SWOT
Opportunities
 The company can expand its business by considering that it will create employment.
 The country has rich ecological diversity that promotes organic food line for the people who are very
much health conscious (Journey Beyond Travel, 2018).
 In 1995, the government opted "investment Character". This decision has exempt VAT and corporate
tax for the next five years in some condition that favours FDI (Santander, 2019).
 Low labour cost.
 The location of the country lies between Saharan Africa and Europe
 young and well-trained population

Threats
 Low prices for fossil fuels may slow down the push for renewable resources. Relative licencing with
the advancement of RES manufactures that can deter the transfer of certain parts in the value chain
(Journey Beyond Travel, 2018).
 Increased health consciousness
 Intensifying competition
 Corruption, the country suffers from a lack of transparency in public procurement and Low
productivity (Gadsden, 2014).

Well-known brand name
in fast food industry
Strong position
domestically and globally
Market leadership
Strong financially
power over suppliers
Lack of product
innovation
unhealthy meal with high
fat calories
Dissatisfied franchisees
Strengths
Weaknesses

B. Models & theories:
Internationalisation theory
In order to enter the Morocco market, the company has to evaluate its legal requirements and check
whether the government encourages FDI or not. Below are the dimensions of internationalisation-
(Source: scpolteksby, 2007)
Uppsala theory of internationalisation
 This theory is encouraged from the concept of internationalisation. It is the process founded from
evolutionary and series build-up of international commitments. Mainly it identifies certain steps in the
process that is distinguished by those organisations who is entering the international market. The
steps are no regular export actions, export activities through independent agents, establishment of
the overseas subsidiary and overseas production of manufacturing unit. McDonalds should enter
Morocco through FDI lonely or through a combination of merger and joint venture. The acquired
company will help McDonalds to meet the legal compliances of Morocco and understand the research
reports undertaken to understand the perception of the customers. Moreover, there are several
factors that supports and encourages business as regulated by Moroccan government. In 2016, the
country was among the tenth largest economy in the North Africa and Middle East.
Porter’s Diamond
Factor conditions: These factors are closely linked to the competitiveness of other industries in the same
country. They are grouped into human resources, labour costs, infrastructure, and material assets. In the case
of Morocco, the company can take advantage from a skilled, cheap labour force.
Demand Conditions: this factor is a detrimental key, especially that demand for healthy food is growing In
Morocco and taking that demand McDonalds must adapt and sell products that meet the requirements of
customer (price, quality, quantity) and focus more on kids as target and working people who usually have no
choice apart from having fast food, due to long uninterrupted hours at work.
Related and supporting industries: government plays an essential role in the development of international
industries. Finance and infrastructure are in principal as well in order to enhance the FDI. The constitutional
and parliamentary government of Morocco supports foreign relations.

Related and supporting industries can generate critical inputs for internationalization. These industries provide
cost-effective inputs, but do also participate in the upgrading process, thus stimulating the company through it
supply chain. By working together with these firms McDonald can enhance its national competitive advantage
Firm strategy, structure & rivalry: Industry rivalry for McDonald's is slightly high in no matter what part of the
world it operates in. In Morocco it faces threat of competition from local brands like bistro burger restaurant
and international brand like quick and Burger King.
C. Marketing Activities
Segmenting
The company uses different types of segmentation in order to break such a big market into smaller customer
groups. In Morocco, the company target young people and kids. The segmentation is based on age and income
(Management paradise, 2011).
Targeting
The company primally, target kids with a happy meal product as it remains uncommon for today`s parents to
say no to their children. Besides, by making promotional operations and games with immediate winnings,
McDonald`s also attracts the young people between 15-25. Finally, by opening mcafe the target this time is the
adults looking for a quick snack.
Positioning
McDonald`s is creating a positioning profile for every product then creative teams use some profiles in order to
create feasible advertisement targeted to relevant segment (Yap, & Tan, 2017).
Branding
The brand name of the company is "McDonalds" everywhere in the world, with a slogan “all I love”, The logo is
symbolic of arches which were the substance of newly-constructed architecture of firstly franchised restaurant.
The logo looks like the letter "M" in yellow colour. However, in order to follow the home's values and traditions
during Ramadan, McDonald's offer to consumers specific and local menus that are customised to local culture
and needs. In fact, Harira with dates, milk, and Moroccan cookies, plus different menu as McArabia.
Customer trends
Youngsters often prefer fast food restaurants on weekends. The main focus of McDonald`s is to spend budget
and trial some more products and innovation (Takata, 2016).
Online activities
The company in Morocco, has no online activities apart from home delivery service through another company
that can be compared to Uber Eat in the UK.
Recommendation
McDonalds capture a huge market share when comparing to its competitors but in order to expand the
company in different countries, the report has chosen an African country named “Morocco”. To establish its
fast food restaurant in Morocco, the company has to understand the culture values of the country. The
company has to conduct as research report on the taste and preferences of the customers. Company should
target kids and youngsters as their target audience. Working professionals, and students often visit McDonalds
to conduct short meetings so the company should maintain a good ambience. For kids, the company can invent
pancakes with decorated packaging and decorations to attract them towards toys. The company must utilise
the liberal policies of the government of Morocco so that it can pace up its growth.

Conclusion
The above discussion has analysed the market position of MacDonald’s in order to expand it in Morocco. This
global marketing and digital business report has analysed the external and internal environment of Morocco
that can support the internationalisation of the organisation. As a recommendation, the company understand
the taste and preferences and also the culture of the country. In order to analyse the external environment, the
report has undertaken PESTLE framework, porter`s five forces model and diamond five forces model to identify
the potential of Morocco to favour growth and profitability. Marketing activities include segmentation,
targeting and positioning that segments youngsters and finally target them through effective promotional
activities.
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