McDonald's Strategic Analysis: Global Expansion and Challenges

This report provides a strategic analysis of McDonald's, covering its overview, current performance, and international competitive strategies. It examines the company's organizational structure, SWOT analysis, entry strategies, and supply chain management. The report also discusses the management of human resources across borders, highlighting opportunities and challenges faced by McDonald's in its global operations. Key aspects include the company's franchising model, focus on quality and cleanliness, and adaptation to local market needs. Challenges such as competition, changing consumer preferences, and cost management are also addressed, concluding with recommendations for sustained growth and market leadership. Desklib offers a range of similar reports and study resources for students.

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Mc Donalds competitive analysis 1
Executive Summary
The report will cover the overview and the current performance of Mc Donalds. It will cover
the international strategy adopted by the company and the organizational structure of the
company. It depicts the strategies adopted by the company to effectively manage the human
resource across borders and the opportunities and challenges faced by the company.

Mc Donalds competitive analysis 2
Contents
Overview of the company..........................................................................................................3
Mc Donalds current performance...............................................................................................3
Review of Company International competitive strategy............................................................3
Organizational design structure and control issues....................................................................4
SWOT Analysis of the Company...............................................................................................5
Entry strategies adopted by the company...................................................................................5
Supply chain management adopted by the company.................................................................6
Management of human resource across borders........................................................................8
Opportunities and challenges faced by the company.................................................................9
Challenges for the company.......................................................................................................9
Conclusion................................................................................................................................10
Recommendations....................................................................................................................10
References................................................................................................................................11

Mc Donalds competitive analysis 3
Overview of the company
Mc Donalds was founded in the year 1940 in California, United States. It is considered as the
premier franchising company and has the unique franchising model that empowers the local
entrepreneurs. The company states that strategic partnerships will allow them to share their
visions and growth and increase their growth by applying continuous innovation and
enhancement in the delivery of services. The company is committed towards responsible
actions and effectively contributes to the sustainable environment. The company is a highly
inclusive and universal brand. It welcomes all types of customers with a different culture, age
groups and makes all the possible efforts to serve the community. It focuses on forming local
integration and responds to the local needs of the community of a specific country (Brumley,
2014).
Mc Donalds current performance
It is analyzed that Mc Donalds is able to quickly increase its footprints by adopting the
franchising model and is able to increase its global sales by 5.5% The Company focuses on
applying all the deliberate efforts to increase the sales and become the market leader. The
company is now becoming more recognizable by meeting the changing needs of the
customers. The company has more than 35000 outlets in more than 100 countries (Mc
Donalds Newsroom, 2018).
Review of Company International competitive strategy
To maintain the international competitive advantage the company focuses on quality, speed,
nutrition, and cleanliness. The company focuses on adopting the continuous change to deliver
valuable services to its customers. It ensures that the quality of the product is not

Mc Donalds competitive analysis 4
compromised and cleanliness at the workplace is the main priority of the company. The
company has appointed a global advisory council to train the employees over the importance
of nutrition in the food and the company provides the option from burger to salads in their
meal. The speedy delivery of the service is the main competitive advantage of the company.
The company ensures that there is no delay in service delivery and employees make the
delivery with a smile on face. Adoption of the franchising model helps the company to
expand its business operations and the company provides a wide variety of choices to its
customers according to the changing taste and preferences of the customers (Mc Donalds
Newsroom, 2018). The company provides the food at the lowest rate to attract more
customers and become the market leader by gaining the trust of the customers. It fosters to
adopt the best marketing strategies to create more brand awareness and recognition among
the customers.
Organizational design structure and control issues
Mc Donald adopts the divisional organizational structure where the whole functioning of the
company is divided according to the performance of the employees. The company has
segmented into various departments, which includes marketing, finance, sales, research, and
development. The employees are divided according to their performance and the company
adopts the global hierarchy system in which the CEO manages all the management areas and
then it is transferred to the middle managers and in the last to the personnel and the restaurant
managers. It covers all the operations of all the areas. The company reorganized its corporate
structure and makes the division based on the performance of the employees. The company
has also made the function based groups, which include the franchising group, human
resource management group, supply chain and the legal group (O'Neil et al,2016).

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Adoption of such divisional structure creates the control issues for the company, which
includes conflicts among the different departments of the different countries and resistance of
the employees to adopt the strategy adopted by the locations at the different countries. This
organization structure creates limited flexibility for the different departments to adopt the
changes. Adoption of the divisional structure creates a delay in decision-making as the
company adopts the long hierarchical chain, which can create a hurdle for the company
(Harrington, Ottenbacher and Fauser, 2017).
SWOT Analysis of the Company
Strengths
 Strong brand image and
recognition
 Specialized training for employees
 Low-cost menu and speedy
delivery of food
Weakness
 Employee turnover rate is high
 Dissatisfied franchises due to high
fees structure paid by the company
 Food quality perceptions
developed by customers
Opportunities
 Expansion into the vegetarian
market
 Development and expansion
through licensing and franchising
 Expansion leads to increasing
The growth of the company
Threats
 Potential competitors
 Customers getting health conscious
 New Entrants
 Playing in a mature and saturated
industry
Entry strategies adopted by the company
The company has adopted the localization strategy by collaborating with the Evergrande
group in China to increase its footprint quickly in the three and the four-tier cities. To attract

Mc Donalds competitive analysis 6
the international market the company adopts the continuous innovation in its taste according
to the changing taste and preferences of the customers. It focuses on targeting the middle-
class Chinese customers who are ready to pay the price for the product (Rowley and
McMurtrey, 2016).
The company adopts the transnational strategy in which it is focusing on being responsive to
the local needs of the specific country and aims to get global by expanding its business
operations. The company is highly inclusive and focus on being highly responsive to the local
needs of the customers. It takes into consideration the legal, political and economic
environment in expanding its business in different countries (Christiansen et al, 2017).
The company adopts the franchising and the licensing model to expand its business
operations and adopts the different pricing strategies based upon the location of the country.
Adoption of the franchising model will help the company to expand its business within a
short span of time. Prior to entry in another market, the company makes the extensive
research in understanding the local culture of the particular country and understand the local
needs of the target market. It adopts the changes in the taste and the preferences to deliver
higher value to its customers and achieve maximum satisfaction of the customer (Badal,
2017).
Supply chain management adopted by the company
The company makes effective control over brand management and the entire process of
logistics. The company makes the deliberate efforts to ensure that the right product is
available at the right time and focuses on providing the product at the lowest prices. It
ensures that the supply chain must be effective and do not create hurdle in the success of the
company (Srinivas, 2015).

Mc Donalds competitive analysis 7
 Markets and purchasing
The company purchases the raw material, ensures that there is proper availability of
the resources required in changing the raw material into finished product, have the
effective storage capacity to store the raw material, and avoids the spoilage of the
material. It purchases the quality material and considers cleanliness as their main
priority (McDonalds.com, 2018).
 Preparation and consumption
The company focuses on not changing the menu on a regular basis so that the workforce can
produce efficiently and ensures the proper availability of the finished goods at the desired
place. It strives to provide the same taste in all the countries and meet the demands of the
customer (Srinivas, 2015).
 Resource and water recovery
The company ensures and takes the action to be responsible towards the
environmental issues and focuses on maximum utilization of the resources and

Mc Donalds competitive analysis 8
recovery of the water. It ensures that the food is protected by availing proper storage
facility. The company contributes towards protecting the environment by reducing the
poisonous gas emissions (McDonalds.com, 2018).
 Distribution and aggregation
The company focuses on establishing long way relationship with its suppliers and
attracts them by providing various types of incentives. The company mainly
collaborated with McCain, Bimbo, and Coca-Cola. It ensures that there is a proper
distribution channel to make the products available. The food is processed properly
keeping the cleanliness as the main priority of the company (Ebert, 2016).
 Marketing
The company invests a huge amount in advertising and adoption of the other
promotional tools to make the brand more recognizable and popular. It focuses on
creating real virtual campaigns that help in promoting the brand and making it more
inclusive by responding to the local culture of the specific country (Zhu,
Anagondahalli and Zhang, 2017).
Management of human resource across borders
The Company considers the human resource as their main asset in providing the best services
to its customers. The company recruits the best candidates for its company and provides the
training to ensure that the employees maintain cleanliness at the workplace and achieve
expertise in providing services to the customers. The company focuses providing the flexible
working hours for the employees and focuses on developing the long way relations with its
workforce by providing them with the attractive incentives (Elegbe, 2016).
It provides the training to the employees to get inclusive to the local culture and adopt the
changes required to maintain the competitive advantage of the company. The company

Mc Donalds competitive analysis 9
scrutinizes and recruits the employees by conducting the cognitive skills test to select the best
candidates for the company and consider employees as the main asset of the company. It
involves the employees in taking the important decision for the company and rewards the
employees for providing constructive suggestions (Talwar, 2018).
The company makes the huge investment in providing training to the employees so that the
employees can develop the skill to make the speedy delivery of the food and does not lead to
the creation of an ambiguous situation. The company delivers value to the employees and
ensures that the employees receive the maximum benefit by providing them with attractive
incentives (Hao, Houser, Mao and Villeval, 2016).
Opportunities and challenges faced by the company
Adoption of the franchising and the licensing model provides the opportunity to the company
to expand its business operation and increase its growth opportunity. It provides the
opportunity to the company to the company to expand its business in China because the
middle-class consumers are increasing in China and the company gets the opportunity to
expand its potential customers. The company receives the opportunity to expand its fast food
category to meet the changing demands of the customers and increase its profit. Its gets the
opportunity to achieve higher brand recognition and become the market leader by competing
with its closest competitors (Kasim and Altinay, 2016).
Challenges for the company
In the international expansion, the company faces the challenge of increasing competition
with the market leader of China .i.e. KFC. The company faced the challenge of acceptance of
the Chinese culture because the consumers in China are loyal towards Chinese cuisine and do
not prefer fast food. They believe to follow their traditional taste and drinks. The resistance of

Mc Donalds competitive analysis 10
the Chinese customers brings the challenge for the company to bring the culture of fast food
and expand its business. In China, adoption of the franchising model was very costlier and
created the challenge for the company to expand its business operation. In China, the
youngsters and the old age group were getting health conscious, which leads to decrease in
the sales of the company as a created barrier in the expansion of the business (Keegan and
Green, 2015).
Conclusion
From the above discussion, it is concluded that Mc Donalds adopts various entry strategies to
expand its business operations in the international countries. The company adopts the global
hierarchical structure to control the actions of the management and ensures the application of
efficient supply chain management to provide the right product at the right place. It focuses
on providing the expertise training to the employees to sustain the competitive advantage of
the company. The Company receives the opportunity to expand its business and increase
sales by adopting the franchising model.
Recommendations
 The company must focus on targeting the older age group in China and must focus on
adding a healthy menu to its profile to target more customers and increase the sales of
the company. The company must focus on the development of automation services,
which includes barcode labeling, computerized systems for asset management and the
adoption of enterprise resource planning to handle the complex data. The company
must focus to perform the activities in an ethical manner and must make the deliberate
efforts to contribute to the community.

Mc Donalds competitive analysis 11
 The company must focus on applying its strengths to explore the opportunities and
must deliver value to its customers to increase the market share and become the
market leader.

Mc Donalds competitive analysis 12

Mc Donalds competitive analysis 13
References
Badal, A. (2017) McDonalds Corporation–2015 (MCD). Academic Journal of Business.
Administration, Law & Social Sciences, 3(2), pp.27-40
Brumley, J. (2014) Mc Donalds is about to tap into a huge growth opportunity [Online].
Available from: https://www.businessinsider.com/mcdonalds-expanding-international-2014-
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Christiansen, L.C., Biron, M., Farndale, E. and Kuvaas, B. (2017) The Global Human
Resource Management Casebook. London: Routledge
Ebert, M. (2016) French Fries, Franchisees, and the FMLA: Understanding the McDonald's
Decision and What It May Mean for Expanding Franchisor Joint Liability. J. Corp. L., 42,
pp.239
Elegbe, J.A. (2016) Talent management in the developing world: Adopting a global
perspective. London: Routledge
Hao, L., Houser, D., Mao, L. and Villeval, M.C. (2016) Migrations, risks, and uncertainty: A
field experiment in China. Journal of Economic Behavior & Organization, 131, pp.126-140
Harrington, R.J., Ottenbacher, M.C. and Fauser, S. (2017) QSR brand value: Marketing mix
dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks. International
Journal of Contemporary Hospitality Management, 29(1), pp.551-570
Kasim, A. and Altinay, L. (2016) How do technology orientation, organizational learning,
market conditions, and firm growth connect? A preliminary analysis of small and medium-
size hotels in Peninsular Malaysia. International Review of Management and
Marketing, 6(7S), pp.121-126

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Keegan, W.J. and Green, M.C. (2015) Global marketing. Upper Saddle River, NJ: Pearson
Mc Donalds Newsroom. (2018) Mc Donald’s reports third-quarter 2018 results [Online].
Available from: ps://news.mcdonalds.com/news-releases/news-release-details/mcdonalds-
reports-third-quarter-2018-results [Accessed 25/1/19]
McDonalds.com (2018) Sustainable supply chain [Online]. Available from:
https://corporate.mcdonalds.com/mcd/sustainability-old/our_focus_areas/
sustainable_supply_chain.html [Accessed 25/1/19]
O'Neill, J.W., Beauvais, L.L. and Scholl, R.W., 2016. The use of organizational culture and
structure to guide strategic behavior: An information processing perspective. Journal of
Behavioral and Applied Management, 2(2), pp.816
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),
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Srinivas, S. (2015) McDonald’s to axe deforestation from its global supply chain. The
Guardian, pp. 24
Talwar, J. (2018) Fast food, fast track: Immigrants, big business, and the American Dream.
London: Routledge
Zhu, L., Anagondahalli, D. and Zhang, A. (2017) Social media and culture in crisis
communication: McDonald’s and KFC crises management in China. Public Relations
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