Disruptive Innovation by McDonald's in Australia

This article discusses how McDonald's brought disruptive innovation in the fast food sector in Australia and how it has remained successful through glocalisation, brand value, and innovation. It also explores the theory of disruptive innovation and its relevance in the retail context.

Running head: E-BUSINESS APPLICATIONS
E-BUSINESS APPLICATIONS
Name of the Student
Name of the University
Author note:

1E-BUSINESS APPLICATIONS
toc

2E-BUSINESS APPLICATIONS
Introduction
The retail ecosystem of Australia is fast changing. This is in sync with the global business
scenario where business is more about connecting with the customers rather than just selling the
products in a flat commercial objective. The customers are more interested in interacting with the
brand they are using. The system of business of just presenting the product the product to the
customers and they are just paying for it is gone, now it is time to interact and inspire the
customers and this is what is also called by some entrepreneurs as omni-chanel retail. Even if the
customer is sitting at their homes, they must be able to interact or shop or do whatever they may
like with the brand which they prefer. McDonalds is one of the world’s largest fast food chain
and also one of the largest in Australia. McDonald’s is forerunner and pioneer in a large number
of business innovations that are later being adopted by many of the other companies across the
world. In Australia disruptive forces are the future of retail and each company is competing with
each other to bring innovations that will ultimately disrupt the retail sector and be ahead in the
competition.
Discussion
Current Operation of the Selected Retail
McDonald’s is the world’s largest restaurant chain in terms of revenue. Currently the
company is operating more than 40000 restaurants throughout the world. The most lucrative and
profit making business of the restaurant chain happens in USA and more than 15000 of the
company is located in this particular country. In 2017 the global revenue of McDonald’s was
22.82 billion U.S dollars. The highest amount of revenue was collected in the year 2013 when
the company achieved a remarkable 28.11 billion dollars business throughout the globe

3E-BUSINESS APPLICATIONS
(Statista.com 2018). The brand value of the company is presently 88 billion US Dollars. The
nearest competitor is Starbucks with 43 billion US dollar brand value.
The first Australian McDonalds was opened in 1971 in Sydney. The restaurant chain has
come a long way since then in the country presently having more than 970 restaurants in the
country and employing more than 1 lakh people across the various levels of the organization.
The present number of customers daily walking in the various restaurants of Australia are
presently more than 2 million daily and this number is increasing quite heavily with the passing
years. So it can be said that the present operations of the restaurant chain in this particular
country is one of the largest.
The company in Australia is a public company and a franchise business and 80% of the
restaurants of the chain is owned by independent entrepreneurs. The company has presented the
following as the vision and values (Mcdonalds.com.au 2018):
 “We place the customer experience at the core of all we do
 We are committed to our people
 We believe in the McDonald’s System
 We operate our business ethically
 We give back to our communities
 We grow our business profitably
 We strive continually to improve”
Presently the company is having tough competition with the new players in the market and in
the present scenario it is quite possible to forget about the company’s great achievement when it

4E-BUSINESS APPLICATIONS
first opened its doors in Australia and almost changed the fast food experience in the country.
The fast food chain is one of the pioneers in the presently thriving and growing fast food
business in Australia. Australian revenue of McDonald’s is more than 5 billion presently with
near about 1000 restaurants and fast food centers operating within the borders of the country.
The present CEO of McDonald’s in Australia is Andrew Gregory who insists that the company is
still the foremost when it comes to innovation in the fast food sector. The very famous “Extra
Value Meals” can be mentioned in this regard which became very famous in the country and was
well received. According to a report in Business News Australia, the success of the business of
McDonalds in Australia lies in the history of the company and the way in which it conducted
business using innovation as the chief resource to go ahead of the other competitors in the field.
“The simple consistent thing that we did was disrupt the market or lead the market, we didn't
follow,” says Gregory. “We did things that were new for our customers, we listened to our
customer and we did them as one McDonald's system. It is an incredibly powerful part of our
business when 955 restaurants move as one” (Mcdonalds.com.au 2018).
Literature Review
According to Christensen, Raynor and McDonald (2015) the theory of disruptive
innovation in business that was introduced in 1995, has been accepted by many business
innovators and is regarded as a guiding light which changed the course of business process. Intel,
Southern New Hampshire University and Salesforce.com are some of the companies which
started embracing disruptive innovation in the first place. The authors speak that many people
are talking about disruption presently who do not have much idea about the process. They are in
dark about how actual disruption can be brought in the field their company is working in.
However the idea of “disruptive innovation” have become so much popular and integral part of

5E-BUSINESS APPLICATIONS
business thinking that the concept is in the fear of being misapplied and misunderstood (Cortez
2014).
According to Pantano (2014) the three main areas where further attention must be given
in the field of disruptive innovation are “the innovation management approaches in retail
industry, the degree of innovation heterogeneity, and the innovation drivers. Starting from these
evidences.” Among these three factors the factor of innovation driver is the most important and
effective. The innovation drivers are the basic movers and shakers and can be termed as the
reasons behind disruptions in innovation in the retails sector (Raynor and McDonald 2015).
Christensen et al (2016) states “foundational research on disruption has produced
extensive citations and provoked vibrant debates, but empirical research in management has not
kept pace. Such inconsistencies warrant deeper reflection and provide the impetus for evaluating
research on disruptive innovation in management and strategy”. The authors have traced the
historical evolution of the theory of disruptive innovation and how it has played important role in
the field of retail sector. The authors have stated that the disruptive innovation that initially
started in the field of technology mainly has now expanded into the fields of marketing even
more than technology.
Rowley and McMurtrey (2016) points out how McDonald’s has used innovation and
sustainability in order to remain steadfast in the business all over the world. McDonald’s
disrupted the restaurant business in Australia when it first started the restaurant and the concept
of fast food at a corporate level was first conceived in the country. McDonald’s is having a very
well developed supply chain management system. The company has given utmost importance in
maintaining the quality of the food they produce. The “Extra Value Meal” is one of the most
disruptive business innovations brought by the company in Australia.

6E-BUSINESS APPLICATIONS
King and Baatartogtokh (2015) has weighed the various usefulness of the theory of
disruptive innovation and how it is relevant in the retail context. The theory of disruptive
innovation by Christen has been regarded as “one of the most influential modern business ideas”.
The author has argued that in spite of such sudden popularity of the theory there has not been
much academic research into the area which is required. In the retail sector each of the
companies are in great competition to bring offers and products that revolutionize the particular
field.
Disruptive Innovation by McDonalds in Australia
Australia first opened in 1971 in Australia and immediately revolutionized the fast food
sector in Australia. The Australian people at once embraced the idea of tasty and faster food on
the go. This was the reason of success of the fast food chain in Australia.
According to Erica Berchtold, Managing Director, Rebel Sports, presently the customers
are more informed and they have clear idea about what to select and what to reject (Trent Duvall
2018). This is mainly because of the globalization aspect of the market where the global
consumer base display similar type of interests across genres. This is the reason behind a
particular brand being successful all over the world (Pisano 2015). Apple iPhone has been one of
the disruptive innovation product which changed the world of mobile phones. One of the most
recent examples of disruptive innovation is Jio Telephone network introduced by Reliance in
India. It affected drastically all other telecommunication networks across the country.
A few of the reasons that McDonald’s has been successful in Australia are Franchising,
International expansion, Glocalisation, Brand Value, Lower prize more food, Free Wi Fi,
Younger workforce. All these have worked together with the innovative zeal of the management
in making McDonald’s one of the most successful fast food chains in Australia. McDonald’s is a

7E-BUSINESS APPLICATIONS
multinational brand however it adopts the local flavors and cuisines in order to entice the local
population. This is also known as glocalisation, the concept of glocalisation is also one of the
disruptive innovation that has allowed many multinational companies in becoming locally
successful. McDonald’s has picked up local flavors and cuisine and merged them with the
international flavors (Businessnewsaus.com.au 2018). This has resulted in the glocalisation of
the brand which is yet another disruptive innovation in the field of retail in Australia. The
company has launched various offers that has helped the Australians in getting better value for
lesser money. MacDonald’s also appoints young people who are enthusiastic and full of ideas
and innovative changes within the company, this has allowed for bringing in more young
customers for whom new offers and dishes are rolled out by the company.
Conclusion
It can be concluded that disruptive innovation is one of the most relevant and effective
theories that has affected the organizations lately. Whether or not the organization can implement
and adopt disruptive innovation effectively is dependent on the management of the company.
McDonald’s started its journey with a disruptive innovation by revolutionizing the fast food
sector in Australia by bringing in good quality fast food in pocket friendly amount. However
presently there are various other brands that are giving tough competition to McDonald’s and the
only way to keep ahead is to constantly innovate and adopt change. Innovation is the only way
through which disruption is possible in the field of retail. Retail sector is a fast growing and
changing sector where the requirements of the customer is also changing regularly. The
companies must keep up with the changing needs of the customers.

8E-BUSINESS APPLICATIONS
Reference:
Businessnewsaus.com.au., 2018. HOW MCDONALD'S AUSTRALIA REDISCOVERED ITS
INNOVATIVE SPIRIT. [online] Business News Australia. Available at:
https://www.businessnewsaus.com.au/articles/how-mcdonald-s-australia-rediscovered-its-
innovative-spirit.html [Accessed 12 Sep. 2018].
Christensen, C.M., McDonald, R., Altman, E.J. and Palmer, J., 2016. Disruptive innovation:
intellectual history and future paths. Harvard Business School.
Christensen, C.M., Raynor, M.E. and McDonald, R., 2015. What is disruptive
innovation. Harvard Business Review, 93(12), pp.44-53.
Cortez, N., 2014. Regulating disruptive innovation. Berkeley Tech. LJ, 29, p.175.
King, A.A. and Baatartogtokh, B., 2015. How useful is the theory of disruptive innovation?. MIT
Sloan Management Review, 57(1), p.77.)
Mcdonalds.com.au., 2018. Organisation | McDonald's Australia. [online] Mcdonalds.com.au.
Available at: https://mcdonalds.com.au/about-maccas/organisation [Accessed 12 Sep. 2018].
Pantano, E., 2014. Innovation drivers in retail industry. International Journal of Information
Management, 34(3), pp.344-350.
Pisano, G.P., 2015. You need an innovation strategy. Harvard Business Review, 93(6), pp.44-54.
Raynor, M.E. and McDonald, R., 2015. What is Disruptive Innovation?. Harvard Business
Review, 93(12), pp.44-53.

9E-BUSINESS APPLICATIONS
Rowley, B. and McMurtrey, M.E., 2016. McDonald’s and the Triple Bottom Line: A Case Study
of Corporate Sustainability. Journal of Strategic Innovation and Sustainability, 11(1), pp.33-37.
Statista.com., 2018., McDonald's - Statistics & Facts. [online] www.statista.com. Available at:
https://www.statista.com/topics/1444/mcdonalds/ [Accessed 12 Sep. 2018].
Trent Duvall, B., 2018. Future of retail in Australia. [online] KPMG. Available at:
https://home.kpmg.com/au/en/home/insights/2018/04/bernard-salt-next-5-years-retail-future-
australia.html [Accessed 12 Sep. 2018].