Strategic Analysis of McDonald's Corporation: U20467 Portsmouth

This report provides a strategic analysis of McDonald's Corporation, examining its business environment and internal resources. The report begins with a company background, followed by an environmental analysis using PESTLE and Porter's Five Forces models to assess political, economic, social, technological, legal, and environmental factors, as well as competitive forces. A VRIO analysis evaluates McDonald's resources and competencies, including brand image, global presence, human resources, supply chain, and customer loyalty. The report then uses the Ansoff matrix to recommend strategies for future development, focusing on market penetration, market development, product development, and diversification. A review section assesses the suitability, feasibility, and acceptability of these strategies. The report concludes with specific recommendations for McDonald's, such as business expansion, promotion, healthy food options, CSR activities, and centralized franchise management.

RUNNING HEAD: STRATEGIC MANAGEMENT
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Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary:
McDonald’s corporation is a USA based business organisation. This organisation is successful to
maintain its presence in 121 countries. English paper strategic analysis of McDonald’s
corporation is done. For the environmental analysis of this organisation PESTLE analysis and
porter’s five forces model is used. Political stability, economic strength, social factors,
implementation of innovative technologies, legal environment and environmental factors can
influence the business of McDonald’s Corporation. Porter’s five forces analysis refers that the
bargaining power of suppliers for this company is low. Bargaining power of consumers of
McDonald’s corporation is very high. The threat of new entrants and the threat of substitute
product for McDonald’s corporation is moderate. However, the competitive rivalry for this
company is high. To analyse the resource and competence of this company, VRIO analysis is
used. According to this analysis, it can be said that this company can utilise its brand image and
equity, global presence, human resource, HR culture, supply chain, innovative technology,
innovative menu and its loyal customer base. To analyse the recommendation for the future
development of McDonald's Corporation, Ansoff matrix is used in this report. The result of this
matrix refers that the strategy for market penetration of this company is adequate. To gain a
competitive advantage, this organisation has to prioritise market development. By focusing on
the local customer, this company has to emphasize on product development. Instead of vertical
diversification, McDonald’s Corporation emphasizes horizontal diversification. By taking
several risky strategies, this organisation is successful to achieve competitive advantages. In the
review part, market development and product diversification are analysed. Whether market
development and product diversification are suitable, feasible and acceptable for McDonald's
Corporation on not is analysed in this part. This review part refers that McDonald’s Corporation

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can follow market development and product diversification appropriately. In the end, there are
certain recommendations for McDonald’s Corporation. It is recommended that this organisation
has to focus on Business expansion, prioritise promotion, provide healthy food, emphasise on
CSR activities and develop a centralised system to manage its worldwide franchisees.

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Table of Contents
Introduction:....................................................................................................................................4
Company background:.....................................................................................................................4
Strategic analysis of McDonald’s Corporation:..............................................................................5
Environmental analysis:...............................................................................................................5
PESTLE analysis:....................................................................................................................5
Porter’s five forces analysis:....................................................................................................9
Resources and competence analysis:.........................................................................................10
Recommendation for future development:....................................................................................12
Ansoff matrix:............................................................................................................................12
Review:......................................................................................................................................14
Recommendations:....................................................................................................................15
Conclusion:....................................................................................................................................16
References:....................................................................................................................................17

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Introduction:
Strategic management analyses the short term to long term direction and survival of a
business organisation strategic review of an organisation, well-structured procedure, recognises
new value-generating prospects within a business. These report aims to analyse new value-
creating openings for McDonald's. In this report, the environmental analysis, ‘resources and
competence analysis’ of McDonald's will be done. To provide recommendations for the future
development of this organisation on matrix and suitability feasibility and acceptability of
McDonald’s will be done. In the end, there will be recommendations for this company.
Company background:
Richard McDonald and Maurice McDonald opened a restaurant in 1940 in the USA. Ray
Krok join this organisation as a franchise agent in 1954 and transformed the restaurant into
McDonald Corporation. Christopher John Kempczinski is the present CEO of this company. At
present as a leading foodservice brand this organisation cross 36000 restaurants in more than
hundred countries (Mcdonalds.com, 2020). In 2019 the total revenue of this organisation was
21.08 billion US dollars (Lock, 2020). In 2019 the total employee of this organisation was
2005,000 (Statista, 2020). The mission of this company is to become our customer’s favourite
place and way to eat and drink (Mcdonalds.com, 2020). The vision of this organisation is to
become the world’s best quick-service restaurant experience (Mcdonalds.com, 2020). The
worldwide business of McDonald’s Corporation follows a global strategy which is known as
‘Play to win’. The aim of this strategy is to deliver exceptional customer experience. This
strategy prioritises five factors which are people, promotion, products, price and place.

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Strategic analysis of McDonald’s Corporation:
In this part, the environmental analysis and ‘resources and competencies’ analysis of
McDonald’s will be done.
Environmental analysis:
PESTLE analysis:
Political environment  Significance of restaurants and political stability is
important for this organisation (Johnson et al., 2017)
 The success of this company can be affected by
military invasion.
 Interference of the government and bureaucracy can
create a negative impact on this company.
 To run the business successfully, this organisation has
to follow pricing regulations and product labelling.
 Presence of favoured trading partners can boost the
success of McDonald’s Corporation.
 Tensions between governments can create an adverse
impact on this organisation (Ho, 2014).
 As consumers are health conscious now, that is the
reason this company has to prioritise the health and
hygiene regulation.
 This company uses sodium and sugar as ingredients.
That is the reason McDonald’s Corporation has to
manage pressure from the ruling party (Wansink &

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Hanks, 2014).
Economic environment  This company does its business in more than hundred
countries there is a reason type of storage system of
various countries must be analysed by this company.
 Whether the economic situation of a country is stable
or not must be analysed (Johnson et al., 2017).
 Effectiveness of the financial markets can create an
impact on McDonald's Corporation.
 Whether the government intervene in the free market
and related service or not must be analysed (Johnson et
al., 2017).
 The labour cost of a country can affect the profit of
McDonald’s Corporation.
 The inflation rate, economic growth rate,
unemployment rate, and interest rate of a country can
affect the success of this company (Johnson et al.,
2017).
Social environment  Culture, which contains gender roles, social
conventions and others, can affect the business of
McDonald's Corporation.
 Location of the country and demographic situation can
influence this organisation (Ho, 2014).
 The power structure of the society, class structure and

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hierarchy system can influence the growth of this
company (Johnson et al., 2017).
 Education standard of a country can also influence the
success of this company.
 The level of skills of the population of a country,
where this organisation is doing its business, can
influence the growth rate of McDonald's Corporation.
 The entrepreneurial spirit of a specific country and
also influence this organisation (Johnson et al., 2017).
 The success of this organisation depends on a
country’s food habit.
 Based on the food habit of a country in this company
has to promote both healthy foods and junk foods.
Technological environment  As a leading business organisation of this world, the
officials of McDonald’s Corporation has implemented
technological developments to compete with its
competitors like KFC, Burger King and
Subway(Harford, 2020).
 The product offering of this organisation is influenced
by technological developments.
 The impact of cost structure can be managed by
technological developments (Ho, 2014).
 Value chain structure, which is a part of the service

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sector of McDonald’s Corporation, this organisation is
modified by innovative technology.
 The implication of Technology can enhance
productivity and communication which will help this
company to fulfil customer's expectations (Johnson et
al., 2017).
 To attract potential customers this organisation uses
social media like Facebook and Instagram ads.
Environmental factor  Climate change and weather of our country can affect
the business of this company (Johnson et al., 2017).
 This organisation has to follow rules and regulations
regarding the environment, set by the government.
 As a leading business organisation, this company has
to follow recycling and waste management (Ho, 2014).
 Use of renewable energy will help this organisation to
increase its brand reputation and environment-related
regulation (Johnson et al., 2017).
 By producing ecological products this organisation can
boost its good image in the market.
Legal environment  To do business in a host country, this organisation has
to follow employment law, health and safety law,
fixed by the government.
 Presence of antitrust law and data protection law can

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help this company to do its business in a host country
smoothly (Johnson et al., 2017).
 Consumer Protection law, set by the government, is
used to protect the consumer. This organisation has to
follow the consumer protection law to do its business
in that country (Ho, 2014).
 In a host country, the presence of Intellectual property
law can be beneficial for McDonald’s Corporation
Porter’s five forces analysis:
Bargaining power of
suppliers
 Bargaining power of suppliers for McDonald’s
corporation is low. The size of suppliers is small and
scattered throughout the world this organisation
collects the raw material throughout the world
(Dobbs, 2014).
Bargaining power of
customers
 Bargaining power of consumers is very high for this
organisation. McDonald’s Corporation has to do its
business in an intensely competitive market.
Customers are health-conscious and tech-savvy.
The threat of new entrants  The threat of substitute products for McDonald’s
corporation is moderate. Though several business
organisations offer same products like McDonald's
Corporation yet the brand image and huge market

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share of this organisation can manage the threat of
substitute products.
The threat of substitute
product
 The threat of new entrants for McDonald’s
corporation is moderate. Any business organisation
can enter in this industry (Dobbs, 2014). However, it
is not easy for any business organisation to grow like
McDonald’s Corporation. McDonald’s Corporation
has a brand reputation, skilled workforce, the ability
to implement technological innovation in
infrastructure.
Competitive rivalry  The label of competitive rivalry for McDonald’s
corporation is high. There are several other business
organisations like Burger King, Dominos and KFC
are competitors of this organisation (Harford, 2020).
Resources and competence analysis:
VRIO Analysis of McDonald’s Corporation will be done to analyse the resource and
competence of this organisation. Value, rarity, imitability and organisation will be analysed
through VRIO analysis (Knott, 2015).
Brand image and equity  Brand image and brand equity of McDonald’s
corporation is the major resource of his company. This
organisation appropriately utilizes its strong brand
image to generate trust among the consumers. To

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derive better outcomes, this organisation utilizes brand
images and equity for the marketing of this company.
International presence  This organisation is present in more than hundred
countries. Through franchisees, McDonald’s
Corporation controls 90% of its restaurant
(Corporate.mcdonalds.com, 2020). By using its global
presence, this organisation is generating its customer
base, profits, revenue and global sales.
HR & culture  HR management policy and culture of this
organisation are important resources for McDonald’s
Corporation. In 2019 total employees of this
organisation we’re 200500 (Statista, 2020).
Supply chain and
technology
 The Global Business of this organisation is operated
by an effective supply chain which is a major strength
for McDonald’s Corporation. To improve the supply
chain this organisation has implemented technological
innovations. By using technology, this organisation is
improving internal and external communication and
customer service.
Innovative menu  To align with the taste of the local consumers, this
organisation includes small variations in the menu
over the globe. This strategy is helpful for McDonald’s
Corporation to attract customer.

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Customer loyalty  A loyal customer is a string for this organisation. A
very high level of customer loyalty helps McDonald’s
Corporation to boost its sales, profits and revenues.
Loyal customer base supports this organisation in
economic uncertainty.
Recommendation for future development:
Ansoff matrix:
By using Ansoff Matrix, four factors will be analysed which are market penetration,
market development, product development, and diversification. While developing a strategy, the
official of McDonald’s Corporation can use this.
Market penetration  Several strategies followed by McDonald’s Corporation to
attract potential customers of existing markets. Various types
of meals, home delivery system, discount on group
purchasing, quick delivery and good customer service are
utilised by this company for market penetration. To attract the
customer a good pricing strategy is followed by this company.
Besides that, for promotions, this company utilizes several
media of advertisement newspaper, billboards, television,
YouTube, the official channel of this organisation, and social
media (Harford, 2020). The aim of every campaign,
conducted by this organisation, is to influence the customer to

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try other products of this organisation (De Wit & Meyer,
2010).
Market development  This organisation develops its markets by producing existing
products in new markets. McDonald’s corporation is present
in 121 countries. However, this organisation is interested to
expand its business further at international level. At present
this organisation is expanding its business in Nigeria, Tunisia,
Armenia and other countries, where this organisation was not
present. This strategy will help this organisation to boost its
market share, revenue and profit. Trough franchise, this
organisation expands its business at the global level
(Corporate.mcdonalds.com, 2020). It can be said that the
strategy, followed by this organisation, will help McDonald's
Corporation to enter a new market.
Product
development
 This organisation does its business more than a hundred
countries. To get an idea about the local taste, customer’s
need, this organisation analyse the local market appropriately
(Harford, 2020). For product development, this organisation
relies on the local consumer’s food habit and taste.
Diversification  Instead of vertical diversification, McDonald’s Corporation
emphasizes horizontal diversification. A new venture is
established by this organisation named McStops (McGrath,
2017). A hotel in Switzerland, named The Golden Ark Hotel,

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is established by this company. By taking these risky
strategies this organisation is successful to gain competitive
advantages. For diversification part, it can be said that the
officials of this organisation have developed several
diversification strategies to muscle out its competitors (Clegg
et al., 2011).
Review:
Suitability Feasibility Acceptability
Market
development
Yes Yes Yes
Product
diversification
Yes Yes Yes
Market development strategy for McDonald’s Corporation is suitable, feasible and
acceptable. As a leading business organisation of industry McDonald’s Corporation has the
ability to expand its business in the new market. The executives of this organisation have enough
experience because they are operating the business of this company in 121 countries. The
financial strength of this company will support the market development strategy of this company.
So it can be said that the market development strategy is suitable for this organisation. Besides
that, the strategy is acceptable and feasible for McDonald’s Corporation.
Product diversification as a strategy is suitable feasible and acceptable for McDonald's
Corporation. This organisation has to analyse the local market trend, preference of the customer
regarding food, and needs of the customer. Based on these three factors, McDonald's Corporation

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can utilise its product diversification strategy to attract local customers as well as to increase
market share, sells, profit and revenue.
Recommendations:
 The officials of McDonald’s Corporation has to continue its expansion at the
international level. Competitors of this organisation like Burger King, KFC, and Wendy
have started expanding their business at the international level. To compete with its
competitors, this organisation has to focus on emerging markets which have the ability to
buy products from this organisation. Through franchisees, this company can expand its
business in emerging markets.
 Though for the promotion purpose this company spends a huge amount of money yet it
can be recommended that this organisation has to boost its presence in social media to
attract potential young customer.
 In the 21st century, consumers are very much health conscious. By providing healthy
food, this organisation can attract health-conscious consumers throughout the world.
 This organisation has to emphasize its CSR activities. It will help this organisation to
generate brand reputation. By using recycling, appropriate waste management, and green
packaging materials, this company can reduce the negative impact of business on the
environment.
 A centralised system must be developed by the officials of this company to manage the
franchisees strategically. The number of franchisees of McDonald’s Corporation has been
increasing. An appropriate strategy will help this company to manage the worldwide
franchisees strategically.

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Conclusion:
Thus this report concludes that the officials of McDonald’s Corporation should prioritise
its global expansion procedure and product diversification. It will be beneficial for this company
to enhance market share, worldwide sales, revenue and profit. To muscle out its competitors like
KFC, Burger King, this company has to utilise its strengths and ability of technical innovation.
An appropriate system will help this company to control its worldwide franchisees. To become
the largest business organisation in this industry, this company has to follow a definite strategic
plan.

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References:
Clegg, S. R., Carter, C., Kornberger, M., & Schweitzer, J. (2011). Strategy: theory and practice.
Sage Publications.
Corporate.mcdonalds.com. (2020). Overview | McDonald's. Retrieved 31 March 2020, from
https://corporate.mcdonalds.com/corpmcd/franchising/overview.html
De Wit, B., & Meyer, R. (2010). Strategy: process, content, context: an international perspective.
Cengage Learning EMEA.
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analysis templates. Competitiveness Review.
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https://www.bbc.com/news/business-51208592
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), 6478-6492.
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March 2020, from https://www.mcdonalds.com/us/en-us/about-us.html

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McGrath, M. (2017). World's Largest Restaurant Companies, 2017: McDonald's Slips While
Darden Makes Gains. Retrieved 31 March 2020, from
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Wansink, B., & Hanks, A. S. (2014). Calorie reductions and within‐meal calorie compensation in
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