Critical Analysis of McDonald's Entry and Expansion Strategies

This case study critically analyzes the entry and expansion strategies of McDonald's, a multinational corporation. It begins with a background of McDonald's, highlighting its evolution from a private to a public company and its global presence. The core of the paper examines the entry strategies, primarily joint ventures and foreign direct investment (Greenfield investment), and expansion strategies, focusing on franchising. It then delves into the critical factors driving the adoption of these strategies, including resource-based factors such as financial and human resource capabilities, and institution-based factors like cultural considerations. The study assesses the outcomes of these strategies, acknowledging both positive results like increased revenue and global market share, and negative impacts such as the introduction of unhealthy diets. The paper concludes with recommendations for future international ventures, including the optimal timing and approach for market entry and expansion.

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Entry and Expansion strategies of McDonalds
Entry and Expansion strategies of McDonald's
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Entry and Expansion strategies of McDonalds
1.0 Introduction
The main aim of the paper is to provide critical analysis of entry and expansion strategies of
the McDonalds corporate. The analysis of entry and expansion strategies is essential for an
organization as it allows it to build brand loyalty in local and international perspectives as well as
setting rules of a market. Furthermore, upon assessment of the available entry and expansion
strategies in market, a company is able to select expansion or entry mode that fits into the micro
and macro environment of a market in which an organization intends to venture. Thesis, the
paper examines the expansion and entry mode strategies adopted by McDonald's to venture into
global markets, factors that drive adoption of entry and expansion strategies and provide a
recommendation of suitable strategies that company could use to successfully venture into
international markets.
2.0 Background of McDonald's
McDonald's is a multinational company which was founded in 1940 by Richard and Maurice
McDonald (Gheribi, 2017). The corporate started as a private but late transformed to public
company in 1965. Since it became a public company, the company announced its first-ever
quarterly loss of $343.8 million in January 2003. With McDonald encountering losses, the
company decided to change its business model and all approaches to growing the business. The
company changed its models of increasing number of restaurants to increasing number of sales in
its existing restaurant. The strategy worked well as the company announced that the sale of the
company has increased in 2004 as compared to 2003 (Germar, (2018). In 2018, McDonald's
shifted its international headquarters to Chicago from Oak Brook, Illinois. The main source of
McDonald’s corporation revenues is believed to be generated from sales in company-operated
restaurants, fees raised by franchisees, royalties and rent. The corporate is famously known for

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Entry and Expansion strategies of McDonalds
its high-end products such as hamburgers, French fries, desserts, wraps, milkshakes, soft drinks,
cheeseburgers, breakfast items and chicken products. Currently, the corporate has added to its
menu fruits, salads, smoothies and salads to response to changes in consumer patterns and tastes
and the current trend and negative criticism of unhealthiness of their products from different
countries around the world. Furthermore, McDonald's is the second-largest private employer
around the world after WalMart with reports showing that by 2018, the company employed over
1.7 million workforces behind 2.3 million’s Walmart (Rodrigues, Nikhil and Jacob (2016).
3.0 Discussion of the strategies
3.1 Entry strategies
Entry strategies are techniques which are used by companies to successfully enter into
new markets regardless of location, competition and the nature of market. Diverse companies use
different entry strategies such as licensing, direct exporting, franchising, joint ventures,
partnering, buying a company, piggybacking and Greenfield investment in order to venture into
new markets successfully.
Direct exporting involves a company selling its products and services directly into the
market using its own resources. Licensing involves a company transferring the right to service
and product use to another company. Franchising which can be categorizes as either entry or
expansion strategy involves a company transferring or distributing its services and products
through franchisees (affiliated dealers). Partnering involves a company merging with other
companies and sharing the profits and losses equally or under agreed portion by the partners.
Joined venture involves creation of a third independently managed company either in local or
international markets. Buying a company involves a company acquiring another company that
has substantial market share. Greenfield investments involve a company buying land in a foreign
market, building a facility and starting its operation.

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Entry and Expansion strategies of McDonalds
Out of the mention entry strategies, the main strategy used McDonalds Company is Joint
venture. However, the company also uses other market entry strategy like foreign direct
investments (Greenfield investment) and franchising has been used by the company to penetrate
into diversified new markets. McDonalds Company has managed to penetrate in different
continents using joint venture strategies. For example, McDonald's managed to venture into the
Japan, China and Indian markets through joint venture with diverse local entrepreneurs and
companies. The Joint venture strategy seemed to work well in all the countries McDonald's has
used to penetrate as the company uses knowledge of the local partners to build an effective
relationship with governments and further develop strategies that could cater for the market. For
example, the use of joint venture strategy to penetrate into Indian market shows that the company
considered focusing on local adaptability rather than global integration. For example, after the
company realized that Muslims or Hindus do not eat beef or pork, the company introduced
customized menu that introduced vegetarian and mutton-based burgers (Yeu, Leong, K, Tong,
Hang, Tang, Bashawir & Subhan (2012). The nature of these products offered by McDonald's
being perishable, it makes it difficult for the company to use direct exporting strategy to
penetrate into new markets. Macdonald’s Company also uses Greenfield investment to penetrate
into new markets. For example, McDonalds Company has penetrated Indian and Saudi Arabia
markets where the cost of rent is very costly using direct investment strategy.
3.2 Expansion strategies
Expansion strategies are techniques that are used by a company to expand its business to
diverse markets upon the successful entry. The main expansion strategy that is used by
McDonalds Company is franchising. Through the franchising expansion strategy, McDonald
Company has been able to expand its business to most of global food markets. The company
trains its franchisees in Illinois Chicago and Hamburger University in Oakbrook. All the

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Entry and Expansion strategies of McDonalds
franchisees of McDonald's are trained in management of McDonald’s restaurants across the
globe. The first franchised outlet of McDonald's was opened in UK in 1986. Through the
franchising strategy, the company has expanded to reach approximately 31,000 restaurants
outlets across the world. Currently, through the franchising strategy McDonald's has grown to
become the largest restaurant chain by revenue around the world operating over 120 countries,
serving over seventy million customers on daily basis and operating across 37,855 outlets across
the world as of the year 2018 (Schmid & Gombert,2018). Furthermore, over 75 percent of
McDonald's operates through franchise meaning the type of business the company operates is
guided by its performance and aim of reducing costs to attract wide customer segmentation.
4.0 Critical factors driving adoption of Entry and Expansion Strategy
4.1 Resource-based factors
Resource-based factors which include McDonald’s assets, capabilities and processes are
some of the factors driving adoption of Entry and Expansion strategy. With McDonalds
Company having financial and human resource capabilities such as competent and skilled
employees, the company is able to offer high-quality services to diverse markets. The high-
quality services offered by the equipped and skilled manpower has boosted the profile of an
organization and created positive reputation around the world which helps the company to attract
customers around the world. In addition, the company also conducts identifies learning needs of
franchisees and trains annually to improve its service delivery and create customer awareness to
other regions the company intends to expand. McDonald Company also has a high revenue
generation which enables it to finance an expansion of the company to other regions.
4.2 Institutional based factors
Institution-based views such as cultures that exist between countries are some of critical
factors driving McDonalds Company to adopt the entry and expansion strategies. With China

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Entry and Expansion strategies of McDonalds
having a population of 1.4 billion and India 1.3 billion, McDonald’s company has identified the
population growth trend and high consumption rates in the country and opted to use Joint venture
and franchisees strategies to venture or expand into these markets. Furthermore, with these
companies having a high context culture, the company has been forced to use joint ventures and
franchise strategies to penetrate and expand respectively. Joined venture and franchisees break
the existing collectivism culture in the country as the company is associated with locals.
5.0 Outcomes / results
The use of Joint venture and Franchising strategy has contributed to McDonald’s entry,
dominance and expansion to other countries. The international entry and expansion strategies
have seen the company expanded and entered in over 120 new markets. Positively, the entry and
expansion strategy used by McDonald's has also boosted its revenues of the company as it gains
revenues and incomes from the monthly fees and rent paid by its franchisees. The expansion has
grown economy of different countries where it has entered or expanded successfully. The entry
and expansion strategies have also grown the company’s brand, market shares and identity.
Negatively, the expansion and entry of McDonald's in some countries have been criticized for
bringing monopoly market structures and introduction of unhealthy diets which has resulted in
the contemporary growth of lifestyle diseases like cancer and obesity.
Conclusion and recommendations
The joint venture has been the most successful market entry strategy used by McDonalds
Company to penetrate into diverse markets with different cultures and perceptions. The entry
strategy has enabled McDonald to penetrate into countries with high collectivist cultures such as
India and China. The franchising has also been the most successful expansion entry strategy that
the company uses to expand its operations to other countries. Currently, franchising represents
76% of McDonald’s global business. Through the franchising strategy, McDonald's has

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Entry and Expansion strategies of McDonalds
expanded its operation into other regions. Furthermore, through the entry and expansion
strategies, McDonald's did not venture into international markets as a result of domestic
saturation although it takes opportunities of foreign markets such as low level of competition and
increased in demand.

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Entry and Expansion strategies of McDonalds
References
Germar, D. (2018). Critical Analysis of McDonald’s Internationalisation Process. Competitors,
Challenges, International Markets. GRIN Verlag.
Gheribi, E. (2017). The Activities of Foodservice Companies in the Area of Corporate Social
Responsibility–on the Example of International Fast Food Chain. Journal of Positive
Management, 8(1), 64-77.
Rodrigues, J., Nikhil, S., & Jacob, S. (2016). Promotional Strategies of McDonalds and Market
Effects. Journal of Management Research and Analysis, 3(1), 53-55.
Schmid, S., & Gombert, A. (2018). McDonald’s: Is the Fast Food Icon Reaching the Limits of
Growth?. In Internationalization of Business (pp. 155-171). Springer, Cham.
Yeu, C. S., Leong, K. C., Tong, L. C., Hang, S., Tang, Y., Bashawir, A., & Subhan, M. (2012).
A comparative study on international marketing mix in China and India: The case of
McDonald's. Procedia-Social and Behavioral Sciences, 65, 1054-1059.