International Business Across Borders: A Case Study of McDonald's

This case study analyzes McDonald's international business strategy, organizational structure, supply chain management, and more. The company's cost leadership, focused differentiation, and intensive growth strategies are discussed. The 'think global and act local' strategy, localization, and franchise strategies are also examined. The study provides insights and recommendations for improvement.

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INTERNATIONAL BUSINESS ACROSS BORDERS
McDonald’s
Student’s Name:
Institution:

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Table of Contents
Executive Summary.........................................................................................................................3
Overview of the Company and Current Operating Position............................................................4
Review of Company’s International Competitive Strategy.............................................................4
Existing Organizational Design Structure and Control Issues........................................................7
Entry Strategies Used To Enter Other Regions/Countries..............................................................8
The Supply Chain Management....................................................................................................10
Management of Human Resources across Borders.......................................................................12
Identify Key Issues or Opportunities for Management.................................................................13
Recommendations to Management for Improvement...................................................................14
References......................................................................................................................................16

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Executive Summary
McDonald’s is an organization that deals with fast food. The company has expanded to the
international market and this is attributed to its cost leadership, focus differentiated strategy and
intensive growth strategy. The organization structure of McDonald’s is arranged in a way that
establishes a pattern of interactions existing between different business sections with the aim of
supporting autonomy as well as organizational flexibility and has a global hierarchy,
performance-based divisions and function-based groups based on their significance. The strategy
of “think global and act local”, localization and franchise strategies gave the organization an
upper hand fast-food industry. They altered their promoting techniques to be in line with social,
economic and socio-political variables depending on the country they enter. The organization has
the biggest supply chain in the world for fast food. It serves approximately 68 million clients in a
day. It is spread on over 119 nations with over 36,000 outlets and is known for being an
extraordinary enterprise as a result of its quality, having the best diversifying opportunities and
makes progress toward high standards in order to maintain its consistency. The human resource
management adjusts to every specific circumstance based in the country, thus one could depict
the procedure as "glocal". The organization is every dedicated to staffing locally and promoting
from within the company in that local area. Irrespective of the success, the organization faces
stiff competition, resistant from franchises, nutrition issues in some of their products and use of
traditional advertising which have to be addressed.

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Overview of the Company and Current Operating Position
McDonald's specializes in fast food having over 35,000 restaurants in over 100 countries
spread all over the globe. The organization has over 70 million customers that it serves in a day.
In the US, it has captured a large market share which is approximated to be 17% and followed by
Yum with a share of 11%. The menu presented by the organization is uniform; however, to
make sure it is in one line with the international market, the organization offer local food that is
relevant to the local customers. The main competitors are Wendy and Burger King (Jones, 2014).
The company value is espoused in the trademark (QSC&V) - Quality, Service,
Cleanliness, and Values with the application of “Plan to Win” strategy. These permit the
organization to deliver the greatest experience to the customers through the use of this strategic
initiative of planning to win in the competitive market (Jones, 2014).
Review of Company’s International Competitive Strategy
Cost leadership
Cost leadership is when the organization devices way of creating their product and selling
to the customers at a lower process different from those of competitors. It is hard to employ
methodology because the administration has to constantly reduce expense at each level to stay
focused (Agyapong and Boamah, 2013). The organization keeps running on low edges where it
is hard for the rivals to contend with a cost leadership promoting technique creating a
competitive advantage. McDonald's has a procedure of offering their products at low costs. They
have a division that enables it to select and prepare fresh food instead of prepared food (Marchi,
Maria, and Micelli, 2013). It likewise depends on a couple of supervisors. These reserve funds in
different procedures enable the organization to offer its sustenance at low costs. The
organization's, wide restaurant network, utilizes an unmistakable recruiting strategy for it to be a

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leader in cost cognizant. Additionally, the company uses extensive economies of scale so as to
gain cost advantage (case study, 2017).
Focused Differentiation Strategy
A focused differentiation system requires offering one of a unique product features that
satisfy the demands of a limited market (Becerra, Santaló and Silva, 2013). While a
differentiation system includes offering products that have unique features that interest and
attracts an assortment of clients, the need to fulfil the needs of a tight market implies that the
quest for uniqueness is regularly taken to the "next level" by firm by utilizing a focused
differentiation technique (TheAssociatedPress, 2017). Therefore the interesting features given by
a firm with respect to the focused differentiation strategy are frequently specific. McDonald's is
employing this strategy to differentiate their products from those of competitors (Barin Cruz,
Boehe, and Ogasavara, 2015). Burgers, for example, are produced instantly and the product
comes in different sizes based on the customer needs with affordable cheap pricing (Ray Gehani,
2013).
Intensive Growth Strategies
McDonald's employs market penetration as well as market development strategies to
expand to new emerging markets as well as expanding the customer base. Also, the organization
employ promotion entry as it is an important technique for growth (Grant, 2016). Additionally,
the Company grows by attaining more customers in business segments where it has already
penetrated (McGrath, 2013). The strategic reason that is related to this intensive strategy is a
global extension directly taken over to new areas (Levy, 2014). The non-specific system of
McDonald's supports this strategy since there is ow expenditures and low prices enable the firm
to successfully go into new markets. For example, McDonald's opening new stores in North

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America as well as Europe by differentiating, combined venture or ownership that is commercial
(Panmore, 2017) is easy because they have already created a name in those areas.
Figure 1 and figure 2 illustrate how the organization has leveraged its competitive strategy for
international market.
Figure 1: Leveraging competitive advantage
Source: Sanoni, D. (2018)
Figure 2: Competitive profile matrix
Source: mba-lectures, (2017).

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Existing Organizational Design Structure and Control Issues
The structure of the organization details the system in which the components of the
organization coordinate in order to attain the business objective. The organization structure of
McDonald’s is arranged in a way that establishes a pattern of interactions existing between
different business sections with the aim of supporting autonomy as well as organizational
flexibility (Harper, 2015). The organization has succeeded in the application of its corporate
structure and it is the reason for increased efficiency and high performance in the global fast food
restaurant industry. The organization’s structure has a global hierarchy, performance-based
divisions and function-based groups based on their significance (McDonald's, 2017).
Global Hierarchy
The global hierarchy of McDonald takes care of all the operations worldwide. This
component of the structural stresses company control. For illustration, the organization’s
president directs the tasks of all trade areas (McDonald's, 2017). Instructions are delivered
emanating from the president to the managers in the middle, and to the supervisors as well as
faculty. The organization's hierarchical structure is run and is similar for most international
commerce relations (Daft, 2015).
Performance-Based Divisions
The implementation grounded divisions are the most specific part of McDonald's various
levelled structure. Prior to the rearrangement, the organizational structure was based on
geographic divisions (McDonald's, 2017). After the reorganization, the company used operation
as the purpose for the new dissections in its hierarchical configuration based on marketplaces
like the worldwide principal marketplaces, the high growing markets, and the initial markets and
corporate with different representations (Harper, 2015).

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Function-Based Groups
McDonald's maintains function-based groups in its categorized structure. For illustration,
under corporate activities, the organization has a HRM section, an record supply chain as well as
franchising section, and a lawful section. This structure permits McDonald's to look the
important functions of the trade (McDonald's, 2017).
The figure 3 below illustrates how the structure of the company has been organized.
Figure 3: The organization structure
Source: Dudovskiy,(2016)
Entry Strategies Used To Enter Other Regions/Countries
The strategy of “think global and act local” gave the organization an upper hand fast-food
industry. They altered their promoting techniques to be harmonized with social, economic and
socio-political variables depending on the country they enter (Gereffi, 2014). In the application
of this strategy, the organization is able to change and adjust their items and services so as to fit

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the inclination of local customers. This is the reason of contrast seen in the different branches
worldwide in terms of costs, environment, and the promotion of products (Arregle et al., 2013).
The localization strategy is gainful for foreseeing the altering requirements and
dispositions of clienteles in the trade. It also makes functioning efficiency, which allows
applying variations habitually. As it happened that any alteration happens in one state –
McDonald's changes that nation's particular strategy as opposed to whole system and branches
globally (Xu and Meyer, 2013).
The franchise business model facilitated structure as well as organizational togetherness
as it contributes a phase to trade chances for individuals in emerging markets. It creates new job
openings as well as self-growth for local persons (Nielson, 2013). The local staffs support with
set up a friendly and company image plus addition to the achievement of the group. This model
similarly provides crucial assistance with the explanation of promotion plan for that marketplace
locally (Najafi, Dubois and Hulthén, 2013). The organization adopted this model because there is
the rapid expansion with the use of low capital investment and benefit from the local knowledge
that is demonstrated by the menu differences in different countries (Peterson, 2015). Excellence
is the consideration of relationship; clienteles could evaluate the company with respect to the
quality of products. Subsequently, the first step to pull customers is via superiority goal which
they ensure that they come for the products again in future. McDonald's used its amazing items
and services to acquire clients’ fulfilment and to make the task simpler for the staff
(Businesswire, 2018). The pie chart of figure 4 shows the operational formats selected by the
organization.

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Figure 4: Operational formats adopted by the organization
Source: Dudovskiy,(2016)
The Supply Chain Management
A fantastic supply chain includes the whole procedure of coordination and management
of the brand, keeping control and delivering products dependably on time, to the correct place
and at the most ideal cost with the least cost (Vitasek, 2017).
The organization has the biggest supply chain in the world for fast food. It serves
approximately 68 million clients in a day. It is spread on over 119 nations with over 36,000
outlets. The organization is known for being an extraordinary enterprise as a result of its quality
and having the best diversifying opportunities (Vitasek, 2017). The organization makes progress
toward high standards in order to maintain its consistency. The organization offer products that
are mostly dealing with entertainment for kids and their items comprises of toys as well as
merchandise which is the most recent products in the market for youthful clients (Kiger, 2016).

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The organization in the last ten years has been concentrating mostly in the optimization
as well as maintenance of the supply chain with specialization in cultivated organization that
follow the guidelines needed by the suppliers in the provision of raw material and also food
items (Vitasek, 2017). Additionally, in the distribution of their products, the organization adheres
to ethical sustainability, environmental as well as economic principles (Seuring, 2013).
In the storage of their products, the organization has separated it into three areas as frozen
food, dry and refrigerated sustenance. In order to ensure that there is no spoilage of products, the
keeping section that is set for each category of products is retained at a specific temperature
because of varieties of climate and atmosphere (Dekker et al., 2013).
The distribution also have separate sections for the three remarkable groupings of
products keeping in mind the objective to effectively transport to food at the same time keeping
up amend the temperature of the product(Kiger, 2016).
The menu is reserved and let to be in control with no changes in a frequent manner. This
has led to the making of profit owing to the fact that the customer is very comfortable with the
company’s products (Kiger, 2016). When there is the menu of such manner, the staff in the
kitchen gets to handle the clients in hours when customers are many with the application of
known procedures. They know the requirements of the products which clients are favourable of
like the chunks as well as fries because they can are before they are requested as well as
delivered to the client in a short period (Jacobs, Chase and Lummus, 2014).
The company considers matters of the environment very seriously and hence they
extremely conscious of the implication of observing the surroundings and the consequence those
suppliers can effect whereas delivering raw resources. They collaborate with actions that hunt for
methods to guarantee environment protection and preserve environments healthy. They reduce

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the utilization of non-inexhaustible materials and non-reusable material (Kiger, 2016). They
endeavour to retain their assistants for the long-run giving inspiration makes them to stay.
Keeping in mind the goal to serve over 200 million clienteles per year, they ought to get stuffs
from various suppliers from different locations globally. The major suppliers are McCain,
Bimbo, and Coca-Cola (Stadtler, 2015). Thr figure below illustrate how the company’s value
chain has been arranged.
Figure 5: The McDonalds’ value chain analysis
Source: Dudovskiy,(2016)
Management of Human Resources across Borders
McDonald's in human resource management adjusts to every specific circumstance based
in the country, thus one could depict the procedure as "glocal". The organization is every
dedicated to staffing locally and promoting from within the company in that local area. This
implies that the organization has managers who comprehend both the corporate and the local
societies (Vance and Paik, 2014).

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The accentuation while staffing is that the candidates are customer‐oriented; they have
the correct attitude that is seen more critical than specialized capability. The organization trusts
that the ideal approach to emerge from the group is to fulfill the majority of the clients’ needs.
This is accentuated in staffing, promoting and screening; this is a standard strategy in the globe
and is another case of the globalization technique (Binder, J., 2016). The organization offers
training opportunities to its staff. The company through the hamburger university offers training
in advance operations which is specifically meant for managers, operators, assistant managers,
and prospective franchisee. In order to gather for different people from different cultures
globally, the training at the university is offered in 22 languages (Brewster, Chung and Sparrow,
2016).
Identify Key Issues or Opportunities for Management
The market erosion that is experienced due to heightening competition is compelling the
company to reduce the labor force for the creation of operational efficiency. These are skilled
employee and the adopted strategy of reducing off is a self-defeating strategy because the
competitors are getting employees with standardized training.
There is increasing resistant from franchises due to the move by the organization to have
a uniform pricing strategy as well as high fees of franchising. Additionally, the expanded
international market demand payments from franchises which are higher. This is forcing
franchises to sell their businesses. On the other hand, there are challenges in competing in the
foreign market due to rival businesses that have local appeal to the local customers. Also, there
are challenges in the management of franchises because some units may opt to do business in
their own ways which erode the conformity needed in the delivery of services.

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There are issues concerning the nutrition level of the products, junk food that may cause
health problems to young children. This has created skepticism by the health practitioners and
there are threats of lawsuits that target the company’s strategy. This may affect the young market
segment leaving consumers to a limited choice of meals.
The opposition is creating inclination for other tastier items offered by competitors. At
the same time, its entrance technique to other markets with profound culture qualities has created
an irreconcilable situation, for example, Italy's moderate food culture. The organization is still
using the traditional form of advertisement which in most cases fails as compared to the
emerging technology which has given rise to social marketing given that the taste of the clients'
changes with time.
Recommendations to Management for Improvement
The organization still has the capability of keeping the market share irrespective of the
stiff competition that is rising if only they employ and maintain competitive differentiation at a
higher level beyond those of its rivals. The first approach that the company has to take is the
internationalization strategy. Under this strategy, the organization has to take and hold the
majority in organizations where they are working together such as Chipotle Mexican Grill. This
is going to assist the organization in serving the international taste in the local markets mostly in
the US where most of its outlets are situated thus saving the domestic market and fight
competition.
The organization has to redesign the menu and consider including nutritious meals while
doing away with products that are under scrutiny in matters health and make the meals to be
flexible. Additionally, the company has to change fast to the changing customer lifestyle so as to
be at speed with the growing international market. Moreover, the company needs to stretch the

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financial muscle and invade the emerging markets and carry out buyouts of subsidiaries as a way
of repressing on the competitors. This has to incorporate social, digital and mobile marketing.
In order to penetrate deeply into the market, the organization must go a step further and
build outlets in places near the bus, train stations as well as airport terminuses.
Despite the stiff competition, the organization must be patient in laying-off of the
employee who has the right skills and expertise because these employees are going to be hired by
the rivals and will compete favorably given that the company trained them well to be above
standards. The franchisee’s fees must be reduced to a level that is manageable to both parties and
the management have to be providing strategic evaluation for the changes in the environment.

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