McDonald's Innovation Strategy: A Detailed Business Report

This report provides a comprehensive analysis of innovation within McDonald's, exploring its significance and impact on the fast-food industry. It begins by defining innovation and its importance, then delves into how organizational vision, leadership, culture, and teamwork shape innovation and commercialization. The report examines the 4Ps of innovation (products, process, position, and paradigm) and the use of the innovation funnel, along with the concept of frugal innovation. It highlights the importance of the commercial funnel and new product development. The report also discusses tools for knowledge development and intellectual property protection. The report suggests McDonald's innovate its packaging materials to attract a wider customer base. This report offers valuable insights into McDonald's innovation strategies, making it a useful resource for students studying business development.

Unit 8 Innovation

INTRODUCTION
Innovation can be said as process of generating new ideas into business which are
beneficial for the firm. Innovation proves to be more beneficial for company as it involves use of
new technology, new ideas and new suggestions. McDonald's founded on April 15, 1955 is a fast
food company serving hamburger across many parts of the world. In the present study,
Innovation and its importance will be described. Further more, organisational vision and culture
can shape innovation is explained in present report. In the present report, 4Ps of innovation and
use of innovation funnel along with developments in frugal innovation will be determined. Also,
importance of commercial funnel and an innovation business case will be explained in present
study. In this report a innovation for McDonald is to innovate its packaging material in order to
attract wide range of public. Furthermore, the different tools that organisation can use to develop,
retain and protect knowledge and intellectual property will be described.
LO 1
P1 Innovation and its importance
Overview of McDonald's: It is one of the world's largest fast food company who
provide different products to their customer at cheap rates such as Sandwiches, Hamburgers,
chicken, fish and burgers.
Innovation can be said as bringing of new ideas, better solutions in business. Through
innovation new requirements can be achieved and better effective products, services and
technologies can be made available to markets. As environment of business is changing day by
day it becomes necessary to cope up with this changing environment and develop new styles and
new ideas in working of a business. Innovation brought in organisation will generate new profits
and develop better corporate image in the markets. Importance of innovation can be described as
follows-
 It is consider as an important process because it basically penetrates the market faster
and also creates better connection in order to develop new markets. Therefore, it leads to
perform better market opportunities to different nations.
 In McDonald's the company also uses different variety of innovative products in order to
draw attention of many customers towards them. In a quoted company it also assists to
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develop original concepts and proactive confident to take risk and get the things done in
proper as well as appropriate manner.
 While on the other side if the organization have innovative culture then they will
definitely grow their functions in such a creative way that it help to expand its current
business into next further level of success.
Difference between Innovation and invention
Basis Innovation Invention
Meaning It implies to the implementation of an
idea for the product for McDonald as well
as process in very fast period of time
(Differences between Innovation and
invention, 2018)
It refers to the occurrence of an
innovative idea for a product
and process which is never
done before in McDonald's
Applicability It requires practical implementation of an
idea
It is based upon a working
theory as well as original idea.
Focus In McDonald's It mainly focuses on
adding value to an existing products and
develop into new ones.
It is a creation of new
products.
Skills required Marketing, technical as well as strategic
skills are required to get the work done in
McDonald's.
Only required scientific skills
in order to execute the work in
McDonald's.
Obsessed with It required combination of various
products as well as process in
McDonald's.
Only concerned with single
products and process in
McDonald's.
Activities required Spread across all over the world Limited to research and
development department of a
company.
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P2 Organisational vision, leadership, culture and teamwork can shape innovation and
commercialisation
Vision: McDonald's vision is “to move with the velocity in order to drive the profitable
growth and become the best brand in the world by serving the best and delicious food products to
their customers”. In addition to this, in recent years the company wants to become the modern,
progressive burger company who deliver the best and healthy food products to their customers.
This vision power will help to create more new products for their customers demand in order to
provide them more delicious food variety. As the vision power of the company is so strong that
will definitely help to shape up the company's internal as well as external culture.
Leadership: If the leaders of manager of the company has good and strong leadership
skills then it will help to lead the entire team towards the progress. A strong leadership skills will
help McDonald's to run the company in further level of success. Therefore, the leaders should
have autocratic, democratic and participative skills which help to lead a team in better way. Only
leaders are the person who can create new and innovative products or services as they having a
strong vision which helps to take better decision for the welfare of a company.
Culture: Culture is considered as an integral part of the business. Having a diverse
culture will create impact upon the efficiencies of the employees in positive way. Moreover,
diversity can be consider a beneficial for the innovation and by bringing together with different
point of view will help to widen up the pools of ideas. A good working culture of a company will
help to lead a business in further level of success. If the employees of a company will adopt the
right working culture then it will be helpful to creates innovative products and as a result, it can
shape up the innovation and commercialization.
Teamwork: A good team work will also help to run a company in effective way such
that teamwork and cooperation will help to lead a team and easily achieve defined goals of a
company. By putting extra efforts in order to achieve the defined goals of a company will help to
achieve the goals in prescribed way. Therefore, teamwork will also help to shape up the
innovation and commercialisation in McDonald's.
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LO 2
P3 4Ps of innovation and use of innovation funnel
Innovation Funnel: It is to create the process or products which help to meet the market
needs in manufacturing forms. In this funnel at initial stage of development many ideas are
collected which further go through the refinery system.
Innovation funnel is 4P's model that is used to discover new and innovative process in
order to improve the business condition in bring new ideas for the welfare of a company. This
innovation mix are as follows:
Products Innovation: It is the first innovation 4P's under which different products are
offered to their customers with low and affordable prices. As the company offer variety of
products in order to attract new and wide range of customers. In addition to this, McDonald's can
also change their packing system in order to look it more innovative and further by providing
different innovative products to their customer will also help them to gain high competition in
market. Therefore, in this way the innovation can be done in order to change their current
marketing business.
Process Innovation: It is a way which help to provide the product services to their
customer. Therefore, by changing the ways of product delivered it will help to maximize their
current business. For example, if McDonald's uses 90 percent of the online services in order to
attract wide range of customers which help to maximize their business. In addition to this, the
leader of a company should hire the best employees so that through their critical thinking the
business will automatically achieve the success.
Position Innovation: It is a third process. Which states that if the goals are unique and
specified for innovation and commercialisation process then McDonald's can easily attain the
position which they want to achieve. For example, if the company open new market segments by
targeting new individual person such as old age group people they have to set the menu as per
their requirements. Further, in order to survive in this competitive world, McDonald's has to use
the innovation mix in order to improve several business aspects.
Paradigm Innovation: It is the last step of innovation mix under which the organization
may faces many challenges while innovative new products for their customers. While innovative
new services or products, McDonald's may faces problem such as there are some people who did
not like this new and innovative food products such as Gourmet dishes. Then there are a chance
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that maybe it will decline the profit of a company and at that time they have to make strategies in
order to overcome from those problems.
Return on Investment: It is ratio between the net profit and cost of investment that
actually result from an investment of many resources. Basically, the ROI is used in order to
evaluate the efficiencies of an investment in order to compare the efficiencies of many
investments. Moreover, it is also used by McDonald's in order to calculate the exact profit earn
after innovating new product. The main purpose of ROI is to measure the rates of return of
money for per period and then to decide whether a company needs to invest on it or not.
P4 Developments in frugal innovation
Frugal Innovation: It is a process of invention of new products and services idea for the
development of a company. Moreover, through frugal innovation, McDonald's can reduces their
expenses and maximizes their profit margin. Frugal innovation also provide the importance of
product and services by moving to the lower level of buyers and acts like the reducing the cost of
offered products. Usually, this help to remove the non- essentials features of the products and
also make the product more useful for the company. Such type of services needs not to be
inferior quality but provided in such a cheap rate to their customers. Frugal innovation in
McDonald's is not uses in the terms of technological breakthroughs but it also includes the
incremental process and different products' innovation whose main aim is to maximize the profit
for a company.
For Example: McDonald's offer wide variety of the products for youngsters, but they did
not offer product to their old age group people. Because it has been analysed that old age group
people generally did not prefer to eat fast food. Therefore, McDonald's start introducing gourmet
food services to their young age people where they can enjoy food with good cultural
environment. On the other hand, young age people generally, prefer to eat fast food and enjoy
going in new restaurant while old age people are quite conscious related to their diet. Therefore,
they did not generally prefer to eat those fast food.
Hence, frugal innovation is actually dealt with the changes as per required by the
company's environment. That is why McDonald's also try to use this frugal innovation in order to
expand its current business and which help to maximize their profit as well. It has been analysed
that using frugal innovation into working area will helpful to shape up the innovation process. If
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McDonald's always uses this and creating innovative things then it will help them to maximizes
their current business and also helpful to sustain their brand image in market.
LO 3
P5 Importance of commercial funnel and application of New Product Development for
McDonald's
Commercial Funnel: It is not like other funnel, and if the company have the sales funnel
then it will enhance the capacity of business to operate it at online as well as offline mode. This
also helps to bring customers at large range by developing new strategies into a business. The
importance of commercial funnel is as follows:
 Having a commercial funnel will help McDonald's to gives the visibility and consistent
process which helps to create the best result for the welfare of a company.
 This is an absolute necessity to make sure that the company is taking a regimented,
methodical and well- organized approach in order to build the best relationship with their
customers.
 If McDonald's have the sales funnel then it will help to create the consistent, organized
process in order to evaluate, ranking and sorting the sales leads of a company. Moreover,
by the usage of this funnel, the company will more focus on the right sales and also allow
devoting the time and resources for the working with right sales leads.
 By using the sales funnel in McDonald's, the company can easily monitor the sales lead
during a particular time and it will also help to expand a business as per the requirement
of a company.
Application of New Product Development: NPD is a process of covering the complete
process of bringing them into new market. The main key aspect of using this is product design
with the various business considerations. Further it also refers to the transformation of market
opportunities into a product which is available for a sale. As McDonald's is also wants to
introduce its new product innovation and it is based upon eight process which are described
below:
 Idea Generation: It is the first step of new product development under which the idea
can come from anywhere and by using SWOT analysis, McDonald's can determine the
strength, weaknesses of that new product.
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 Idea Screening: The idea of new product is may be good and it also involves some
feasible ideas that includes company's strength, weaknesses, needs of customers.
 Concept development and testing: all the ideas are passes and the testing is done
whether the new product is helpful or not.
 Business strategy analysis and development:Through marketing, McDonald's can
decide different methods to promote the product into market.
 Product development: In this stag the product concept is actually transformed into an
tangible product.
 Test Marketing: Under this, prototype is introduces in market for test and taking
feedback for further improvements.
 Commercialisation: Under this stage, the product is ready and final decision is taken to
introduce it into market.
 Introducing: its time to introduces the product into market.
P6 Innovation Business Case
Technological Innovation in McDonald's: To deliver the fast food of the company
through digital mode is considered the technological innovation in McDonald's. As the company
have high brand image and it can be sustain by using new technological innovation, company
also record their turnover and as a result the company maximizes their profit as well as sales.
Business case is a systematic approach which is done step by step process which help to
build or expand a business into next further level of success. As McDonald's innovate its current
packaging material which a company used at the time of delivery in order to attract more number
of customers. It is the most clear and advance technique which is actually provide all
stakeholders of McDonald's an essential information with clear and transparent process. This
business case generally includes:
 It offer different creativity tools in order to start the business process. Also provide
different suggestion as well as guidelines in order to make the case more strong and
effective .
 Next step is case preparation and cost benefit analysis in which the employees or
stakeholder of McDonald's can clarify the doubts or uncertainties.
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 Next step is to develop new marketing strategies that also outlines the different tactical
moves.
 Last step is to check the entire format and the USP also needed to translate the case into
winning commercial prospects.
Positive impact of innovation bring by McDonald's:
 As McDonald's changes its current packing material because a new packaging of their
products helps to creates positive impact upon company in order to attract large
customers towards them.
 As innovation is actually done to bring changes in their existing material and in the same
way, McDonald's is also uses this strategy to raise their current sales and enhances the
level of profit margin. By using new packaging style will help to drew attention of many
customers towards them and as a result, it will further maximizes the profit margin.
Ways of access funding: There are different methods of funding and some of them are
as follows:
 Bootstrapping: It means that McDonald's can uses their own personal saving which they
saved for their personal usage. It is one of the best and simple method to get the fund.
 friend or family: It is another method where a company can manage the fund through
their family or friends. Even they also inviting their family or friends to invest some
amount for the company's expansion.
 Crowdfunding: It is a process which provide small amount of money from different
range of peoples through Internet. Nowadays this method is considered the most common
way of assessing fund.
 Angel investors: It refers to this person who invest some amount for the company. They
are the person whose main aim is to provide the necessary help to those who wants to
expand their business into further level of success.
Calculation of ROI:
Particular Amount ($)
Research and development 80000
Infrastructure 250000
I.T. Expenses 50000
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Total 380000
As per the table, if McDonald expected ROI is approx 25,00,000 per annum then its
increasing sales is also raised up to 40 percent and hence the profit is also raised up to 25 percent
per annum.
LO 4
P7 Different tools to develop, retain and protect knowledge and intellectual property
Intellectual Property is a category of property that basically includes the copyrights,
patents and trademarks. This property help to encourage the creation of a large variety of
intellectual goods. In order to achieve this, law of a country also provide different legislation for
the company and some of them are as follows:
Patents: It is a right which is granted for an invention or provides to those who innovate
new products and also offer new technical solution for a problem. Patent also provide its owner a
right in order to exclude others from making, using, selling the product. If McDonald's have this
right then entire logo and products are protected from any unnecessary deeds. Moreover, in many
countries, patent rights are fall under civil law and the holder needs to take action if any person
infringes this. For many companies, this patent law is as essential as to gain competitive
advantages.
Copyrights: Copyrights protect literary, artistic and musical work. The main use of
copyright is to protect company's brochures, annual report and many other documents.
Therefore, it is also essential for McDonald's to use copyrights as an intellectual property so that
it will help to protect the brochure of a company from any unnecessary result. If a person uses
the important document of a company and uses those into their own personal benefits then it is
against the law and they are liable for any miss- happening.
Trademarks: This is the most common law which is used by many companies and this
help to protect the words, names, symbols and devices which are used in the connection with
goods and services in order to identify their source. Through this law, McDonald's also protect
their brand image and also saves their logo from any mischiefs. If the company uses trademark in
order to protect their logo, labelling and make them differ from other companies, then it will be
helpful for them to use this into the working area.
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CONCLUSION
By summing up above report it has been concluded that innovation and
commercialisation plays an important role in McDonald's. As the company wants to introduce
new product in order to expand their business and maximizes their profit. Report also concluded
that innovation and invention are two different things and also states that vision, culture,
leadership and teamwork help to shape up the innovation. Report further concluded that by using
innovation mix 4 P's, the company can easily innovate their new ideas. Report also describe the
use of commercial funnel which is used for the development of the new products into the
working area. It also describes the application of new product development and through business
case, this new product is introduced in a market. Report also evaluates different intellectual
property tools such as trademarks, copyrights and patent which should be used by McDonald's.
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