McDonald's Marketing Project

Introduction

McDonald's was founded by Ray Kroc, who built upon the hamburger stand of Dick and Mac
McDonald, which sold bags of hamburgers and fries to customers.
Mr Kroc decided a franchising model was the best way to grow the company, and it turns out he
was right.

Over the 55 years...

GROWTH FIGURES
The company had massive sustained growth, and moved into many territories across the world.

McDonald's was a story of success.

From 2000 onwards, the image of the company was tarnished, becoming an easy target for media
and government for various reasons, and so profits dwindled.
However, the company fought back, with a change in marketing strategy and corporate policy as a
whole, and sought to turn its fortunes around with its 'Plan To Win'.

During the recent recession McDonald's has been in rude health, with profits spiralling due to
people once again prioritising cost and convenience over other values such as sustainable sourcing
and healthy eating. As is discussed later on, the recession won't last forever and so future policies
will again have to deal with the public's changing tastes (excuse the pun).

Strategic management is a key area in business and can help to decide the fate of a company when
analysing where its strengths, and perhaps more importantly, where its weaknesses lie. A company
that can successfully identify these characteristics will certainly have an advantage over its
competitors. One example of such a strategy is PESTEL analysis.

SWOT

STRENGTHS WEAKNESSES

Strong Brand Image & recognizable logo. High employee turnover increases HR costs.
Ranked very highly in Fortune 500's list of most Media and government tend to give the
admired food companies. company a bad image.
Image of Cheap food even though it is not that
well priced.
Global spread of restaurants provides economic
resilience.
Established staff training program.
OPPORTUNITIES THREATS
Organic foods.Untitled 1 Growing concern for obesity and health issues
Healthier foods. Growing concern for animal welfare
More animal welfare concious foods. Major competitors e.g. Burger King, KFC etc.
Growing demand for coffee from McDonald's.

PESTEL Analysis

There are many factors in the macro-environment that will effect the decisions of the managers of
any organisation. Tax changes, new laws, trade barriers, demographic change and government
policy changes . To help analyse these factors managers can categorise them using the PESTEL
model.

When looking specifically at McDonald's we can see that a PESTEL analysis may look like this:

P = Political Factors

McDonald's as a company in the fast food market has taken, both internationally and more
specifically from a UK perspective, most of the blow when it comes to the fast food clampdown
and was under both media and political pressure from various groups to alter both its selection of
food it provides and perhaps more importantly the fat and salt values within the menu it already
offered. The intense political pressure was backed by research into the fat and salt values of
McDonald's meals and together with the rising levels of obesity in the country it pushed
McDonald's to make a significant change.

The result of this pressure led to a few changes in the way the company operated and the most
noticeable change was in the form of a wider menu range and nutritional values being printed on
most meals.

Aside from being criticised for being a typically unhealthy and damaging company to the health
interests, McDonald's has been involved with the new UK health policy that tackles issues such as
obesity. This is a clear example of McDonald's adaptability to pressure from the media and political
parties and this may play a key part of McDonald's marketing strategy.

The role of government concerning McDonald's and its operations is discussed in greater detail in
'The Role Of Government'.

E = Economic Factors

McDonald's economic factors range internationally but in terms of the UK economic outlook
McDonalds is currently strong with high sales and profits resulting from the recession because of its
image of cheap and fast food earning itself a boost in sales from an initial drop a few years ago.
As a result of this boost in sales, McDonald's has emphasised this perceived image of itself and
launched television adverts portraying several images of McDonald's being a convenient food stop
that is both available to everyone and enjoyed by all.

S =Socio-Cultural Factors

McDonald's have aimed to improve their workforce's education and hence their efficiency by
providing a degree accredited by Manchester Metropolitan University. From a socio-cultural point
of view this degree may give access to education to those who would normally just partake in low
level skilled work instead of attending university and complementing the workplace with businesses
theory.

As previously mentioned, the main social factor concerned with McDonald's would be the issue of
obesity and the impact McDonald's has both negatively and its propositions to help combat the
problems.

Time inc (2010) [online]. Available from: http://newsfeed.time.com/2010/11/27/u-k-university-to-offer-mcdonalds-

degree/ [Accessed 3rd December 2010]

T = Technological Factors

McDonald's is very in touch with technology with countless examples from their clever television
adverts to the toys that feature in “happy meals”. McDonald's is clearly a company that lives in the
modern era and puts technology high on its priority list.

McDonald's also incorporates a sophisticated inventory system together with its international supply
chain help McDonald's to us technology as a means to add value to their products and provide a low
cost system which then passes these costs down to the customers.

E = Environment

McDonalds is very keen to promote its attitude towards helping the environment by drawing up a
comprehensive environmental policy that states that its aims to reduce energy emissions, reduce
odour and noise pollution and minimise the solid waste produced by the company.

All of these help to market McDonald's as a company that is not only helping to reduce its impact
on the environment but to be proactive in showing that it wants to do as much as it can.

McDonalds (2010) [online]. Available from: http://www.mcdonalds.co.uk/ourworld/environment/policy.shtml

[Accessed 3rd December 2010]

L = Legal Factors

The legal factors surrounding McDonald's tend to link to its social responsibilities and the issue of
fast food and obesity in general, although no specific legal action has been formally made against
McDonald's its clear that the pressure put on the company has certainly had a clear effect on the
way in which it operates and the response it has given to show that it is proactive in its social
responsibilities.

IvyThesis (2010) [online]. Available from:http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-

mcdonalds.html [Accessed 3rd December 2010]
Relevance of Michael Porter.

Porters 5 Forces:

Michael Porter provided a framework that models an industry as being influenced by five forces.
Companies can use this model to better understand the industry context in which the firm operates
and identify the areas in which it needs to

QuickMBA (2010) [online]. Available from:

http://www.quickmba.com/strategy/porter.shtml [Accessed 3rd December 2010]

Diagram of Porter's 5 Forces

SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
BARRIERS
TO ENTRY
Absolute cost advantages
THREAT OF
Proprietary learning curve
SUBSTITUTES
Access to inputs
-Switching costs
Government policy
-Buyer inclination to
Economies of scale
substitute
Capital requirements
-Price-performance
Brand identity
trade-off of
Switching costs
substitutes
Access to distribution
Expected retaliation
Proprietary products
BUYER POWER DEGREE OF
Bargaining leverage RIVALRY
Buyer volume -Exit barriers
Buyer information -Industry
Brand identity concentration
Price sensitivity -Fixed costs/Value
Threat of backward integration added
Product differentiation -Industry growth
Buyer concentration vs. industry -Intermittent
Substitutes available overcapacity
Buyers' incentives -Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes

Degree Of Rivalry

The degree of rivalry in the fast food and restaurant industry is very high especially within the UK
and the economic climate. To help ensure that McDonald's has an advantage over its competitors
McDonald's has diversified itself into broader food markets. These range from offering breakfast
items to competing with sandwich companies such as Subway by offering a deli sandwich meal.

These decisions by McDonald's help to make it a dominant force by directly competing with a wide
range of company's and such offering a low price to keep its sales high.

Barriers To Entry

Barriers to entry in the fast food and restaurant market is extremely difficult, especially for larger
companies that are in national competition with McDonald's and other well established fast food
chains.
However, on a small scale small restaurants or cafes may be able to compete on a local basis and
may draw away some of the consumers from the larger chains but in terms of the regional and
national markets there are huge barriers to entry simply because of McDonalds excellent supply
chain, very low cost production and massive marketing budgets.

Threat Of Substitutes

There are various substitutes in the industry because of the sheer number of fast food chains and
smaller restaurants. These include small fast food vendors, sandwich shop, coffee shops, and other
large chains.

Supplier Power

The power of suppliers will be quite low in the industry because the products needed by the
industry are in abundance and often the fast food chains can simply select the cheapest suppliers
available to them.

Buyer Power

Similarly the buyer power is low in the fast food industry as the volume of buyers are so high and
the prices of the meals so low that buyer power does affect the market that much. In consideration
of the vast number of buyers in the fast food industry together they possess strong buyer power but
individually they have very weak buyer power.

References:

1. Time inc (2010) [online]. Available from: http://newsfeed.time.com/2010/11/27/u-k-university-

to-offer-mcdonalds-degree/
[Accessed 3rd December 2010]

2. McDonalds (2010) [online]. Available from:

http://www.mcdonalds.co.uk/ourworld/environment/policy.shtml
[Accessed 3rd December 2010]

3. IvyThesis (2010) [online]. Available

from:http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html
[Accessed 3rd December 2010]

4. QuickMBA (2010) [online]. Available from:

http://www.quickmba.com/strategy/porter.shtml
[Accessed 3rd December 2010]
Business and Strategic Philosophy

The business strategy of a company is intrinsically linked to its marketing strategy. This section
assesses the business strategy of McDonald’s and compares it to the way in which products are
marketed. Marketing is not just advertising: it is an assessment of consumer preferences and views
too, which means that the link between marketing and business strategies is a two-way link.

The marketing strategy of McDonald’s is shaped by four major inputs:

1. Organisational objectives and resources
2. Attitude to change and risk
3. Competitor strategies
4. Market structure and opportunities
Brassington, F & Pettitt, S (200x) p.846

1. McDonald’s is driven by its Mission Statement: ‘Our worldwide operations have been
aligned around a global strategy called the Plan to Win centering on the five basics of an
exceptional customer experience – People, Products, Place, Price and Promotion. We are
committed to improving our operations and enhancing our customers' experience.’
Student Research [online] Accessed 17/10/10. http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html

When people talk about company resources they often only consider cash and assets but it in
fact ‘They include skills and expertise...any area of the organisation that can help to add
value and give a competitive edge.’ Brassington, F & Pettitt, S (200x) p.845. These resources can lead to
intangible assets such as a loyal workforce, good customer services and a good brand image.
McDonald’s introduced qualifications for its employees to work towards which initially
received bad press, being called the ‘McJob’. It has soldiered on and now they state ‘96%
of our people think the skills they’ve gained at McDonald’s will be useful to any future
employer, and that 8 out of 10 employees see the job as a long term career.’ Learn how we work
[online] Accessed 2/12/10 http://www.mcdonalds.co.uk/static/pdf/aboutus/education/mcd_prospectus.pdf
The company also has many employment-related accolades including being in The Times’
Top 100 employers list for 10 years in a row.

2. McDonald’s is a company which is now well practised at changing its image and taking
risks when need be. The company has 32,000 outlets in around 117 countries and so is
always risking money by trying out new markets. McDonald’s over the years has endured a
lot of criticism and bad press, most notably the 2004 documentary ‘Supersize Me’ and the
‘McLibel’ trial which started in 1994 and ended two and a half years later. The company
markets itself as a much more progressive company these days with recent TV adverts
focusing on the British weather and its benefits to the British and Irish Farmers and the
‘Just Passing By’ campaign [Accessed 2/12/10 www.youtube.com] which looked at the broad spectrum
of customers. Junk food is a hot topic in the British Press so McDonald’s have moved away
from advertising it, which goes to show that they are very capable of adapting to changes in
food fashions.

3. McDonald’s is the dominant force in fast food in Britain today and it is a market leader in
terms of business and marketing strategies. The original competitors such as Burger King
and KFC follow in McDonald’s footsteps. McDonald’s does not expand into making
chicken products as much as it could because KFC is the most popular choice and so the
market is saturated in this respect.

4. New competition arises in the form of Subway and also coffee shops such as Costa and
Starbucks. McDonald’s has introduced new marketing strategies and product lines to
compete in these alternative and arguably more upmarket sectors. Further opportunities for
 expansion can be sought abroad as growth is limited in established markets due to people
being able to only eat so much! Both points will be discussed later on.

The Role of Government

McDonald’s is affected a lot by governmental organisations such as the Food Standards Agency, the
Department of Health, and OFCOM. The main issue is the advertising of junk food or HFSS (High
Fat, Salt & Sugar) foods to children. Pressure had been mounting throughout the 2000s for the
advertising regulator OFCOM to restrict the marketing of HFSS foods to children. The Children’s
Food Aact 2004 states that ‘The Appropriate Authority shall by regulation prohibit any person...
from marketing to children any foods and drinks which contain content which
the FSA has decided... is detrimental to the health of children.’ Children’s Food Bill [online] Accessed
2/12/10http://www.publications.parliament.uk/pa/cm200304/cmbills/110/2004110.pdf
These rules were introduced for under 10s in April 2007, by January 2008 covered under 16s and
by January 2009 the advertising of HFSS foods on children’s channels was also banned. The ban
included the use of celebrities, licensed characters, health claims and promotional offers aimed at
under 16s.

This bad press became a significant problem for McDonald’s which, in 2003, recorded its first ever
loss in the UK. The Government intervention, along with media criticism, meant the consumer body
as a whole were turning away from McDonald’s. McDonald’s started to change its image and set
out
Figureits ‘Plan
shows to Win’
McDonald’s which
stock has
price over pastbeen
decadediscussed earlier
. Accessed 2/12/10 on.http://quote.morningstar.com/stock/chart.aspx?
[online]
t=MCD&region=USA&culture=en-US

Note the very low stock price around 2002/2003, when the press attention for McDonald’s was
particularly bad. The change in the advertising laws in the UK did not have a massive effect on the
stock price, meaning that the company must have found alternative ways of marketing, for instance,
online advertising to children was still permitted though frowned upon; ‘Health campaigners have
warned that fast food giants are increasingly turning to the internet to circumvent moves designed to
curb advertising aimed at children.’ Johnson, B & Gibson, O (2006) Internet used to push fast food to children, say campaigners
[online] http://www.guardian.co.uk/uk/2006/mar/27/advertising.digitalmedia

1. http://www.mcdonalds.co.uk/people/schools-and-students/schools-and-students.shtml [14th
November 2010]
LEARN HOW WE WORK. PDFs finance, marketing, customer services from here.

2. http://www.aboutmcdonalds.com/mcd/csr/report/looking_ahead.html [14th November 2010]

LIVING OUR VALUES. PDF of 2009 Report from here

3. http://www.aboutmcdonalds.com/mcd/csr/report/overview.html [15th November 2010]

Doing the right thing is important to us.
4. Marketing Guidelines in Nutrition and Wellbeing
http://www.aboutmcdonalds.com/mcd/csr/report/nutrition_and_well-being/promotions.html

5. www.mcdonalds.co.uk/about-us/franchise/overview.shtml
COMPANY PHILOSOPHY

6.
http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations0.Par.17264.File.
dat/2009%20AR%20Report%20-%20Print.pdf
[2nd December 2010] 2009 REPORT PDF

7. http://www.aboutmcdonalds.com/mcd/our_company.html
[2nd december 2010] GETTING TO KNOW US

8. http://www.mcspotlight.org/case/trial/story.html
MCLIBEL 2/12/10

9. http://www.mcdonalds.co.uk/static/pdf/aboutus/education/mcd_prospectus.pdf
PROSPECTUS 2010/2011 2/12/10

10. http://www.youtube.com [2/12/10]

FAVOURITES, WEATHER, BREAKFAST adverts.

11. http://quote.morningstar.com/stock/chart.aspx?t=MCD&region=USA&culture=en-US

12. http://www.publications.parliament.uk/pa/cm200304/cmbills/110/2004110.pdf

13. http://news.bbc.co.uk/1/hi/business/4665205.stm

14. http://www.guardian.co.uk/uk/2006/mar/27/advertising.digitalmedia

15. http://news.bbc.co.uk/1/hi/health/6515245.stm

16. http://en.wikipedia.org/wiki/Fast_food_advertising

17.
http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/d
h_089123.pdf

18. Principles of Marketing Third Edition (2002)

Brassington, F & Pettitt, S
Financial Times/ Prentice Hall
Corporate and Operational Marketing Issues

Corporate Issues

As one of the largest restaurant chains in the world McDonald’s spends massive amounts of money
on marketing campaigns and advertising.

The main target of their advertising campaigns is children, which has proven highly controversial
with stakeholder groups – mainly the parents of these children.
The problem is that children are bombarded by McDonald’s’ marketing, and due to their susceptible
nature, are convinced into buying McDonald’s products repeatedly, which could be leading to
health implications for them.

McDonald’s argue however that “their advertising is no worse than anyone else's and that they
adhere to all the advertising codes in each country.” (http://www.mcspotlight.org/issues/intro.html)
While this may be true, there is no question that a large proportion of children are influenced by
McDonald’s’ advertising campaigns and that over-consumption of fast food can lead to obesity and
health problems.

As the population becomes more aware of the direct link between fast food and health problems,
including obesity, (there has even been talk of the NHS refusing treatment to obese patients,
) problems may arise for the company.
There is already a drive towards healthy eating at McDonald’s, including a range of fruits and
salads, but this may not be enough to cope with the increasing demand for healthy food, therefore
marketing strategies to change the corporate image may have to be built upon.

As awareness for animal welfare increases in society, along with the increase in demand for free
range food, McDonald’s may find that demand for their products decreases.
McDonald’s is the “world’s largest user of beef” and are “responsible for the slaughter of hundreds
of thousands of cows per year.”
Half a million chickens who suffer cruelty and pain in factory farms are used by McDonald’s every
week in Europe alone. (http://www.mcspotlight.org/issues/intro.html)
Although McDonald’s abide by the rules set out for them by governments, and act probably no
worse than any other fast food chain (other than the volume of animals killed), the public will soon
realise that animals are not cared for enough during the rearing and slaughter process.
This is likely to affect the whole market, but nevertheless, to resolve this situation it is likely that
profits may be lost due to higher costs of raw materials coupled with McDonald’s elastic
relationship between price and demand (that is, if prices are pushed up, demand is likely to fall.)

A possible solution to both of these issues could be to move towards adults rather than children as a
target market (the introduction of the gourmet “Angus Burger” may be a possible step towards this.)
This would be beneficial as adults are more likely to pay higher prices for better quality, more
animal welfare conscious foods which could lead to, at worst, unchanged profits from different
sources or possibly even increased profits.
By aiming adverts at adults rather than children, McDonald’s would receive less bad publicity from
their marketing campaigns, which would essentially make their marketing more successful.

Operational Issues
As McDonald’s is mainly a franchise, there are minimal operational financial issues for the
company itself, they merely provide the training and tools for the franchisee to set up and run their
restaurant.
This is also true of operational marketing. Franchised restaurants themselves do not need to
advertise themselves in their local area extensively, other than billboards alerting potential
customers that they are within close proximity of a restaurant.

The bulk of marketing is handled corporately, with large scale television adverts.
Most customers are likely to already know they want a McDonald’s, or simply pick the first burger
chain or fast food restaurant they find.
There are product variations between countries, but rarely between restaurants nationally.
Perhaps this is a problem; maybe more profits could be gained by identifying different market
segments (by geographical locations nationally), and using promotional strategies to extract as
much profit from each group.
For instance, if the Big Mac is less popular in one city than another, lower the price slightly and
advertise it more using local means.
This however may prove difficult on the financial side, as McDonald’s tend to advertise and charge
a standard price for each item it sells nationally, and customers may not react well to price changes.

Current Human Resource Issues

One of the main human resource issues that faces McDonalds’ is that they constantly associated
with the term “McJob” – which basically is a slang term for a job which requires low skills, is not
paid well and does not offer future opportunities for workers.
(Google Define: McJob)

Unfortunately, due to the nature of the market, this is hard to avoid. It would be unsuitable to pay a
till worker a high wage, and admittedly, it does not require great skill to perform this job.
It could be argued that McDonald’s provides jobs for those who need part time work or do not have
the skill sets needed to gain higher level employment.
McDonald’s also offers employees the chance the gain qualifications which would help them
progress, not only in their company, but in any other company they may work for in the future.
Employees can be trained in skills such as human resources, shift management and marketing.
However, some argue that McDonald’s, on the whole, is a “net destroyer of jobs”
(http://www.mcspotlight.org/issues/intro.html).

It has been put that they use these “McJobs” with their low wages, coupled with low product prices
funded by the vast company size, to undercut and destroy local competition.
As a bi-product of the “McJob”, some workers seem to care less about the service they give whilst
working.

If you search any web search engine for McDonald’s complaints, you will find thousands of hits,
where people have vented their frus
Future Business Environment

In October 2010, McDonalds launched a variety of new advertisements in the UK highlighting its new coffee
range (Marketing Week, 2010), A marketing campaign designed at helping the company to gain a greater
hold on the high street coffee market which is predicted to grow to £2 billion by 2012 (Belfast Telegraph,
2010). This, a normal trend for McDonalds, is the company’s attempt at trying to capture the next big thing
and become a dominate force in the market before any rival companies attempt to do so themselves. By
doing so, McDonalds has established itself as one of the leading players in several markets and has
managed to target different market segments successfully as well as keeping their dominating image within
the fast food market. Coffee on the high street is in no way new, with big stores such as Starbucks and Costa
already having a big presence, but by getting in there before coffee becomes the next big thing, McDonalds
ensures that it establishes itself as a worthy rival to other competitors instead of a portraying a “me too”
image.
Evidence of this is seen in one of McDonald’s more established products, the Deli of the Day. Initially
launched back in 2005 to capture a segment of the market which stores such as Subway made popular
(Brand Republic, 2005), the Deli of the Day has become a prominent feature of the market offering
customers with a healthier lunchtime alternative. Years later, we see the sub/baguette market saturated with
many stores and shops offering subs, baguettes and alternative offerings but due to impressive marketing
research and fast introduction of products, McDonalds remains as one of the main stores people think of for
fast, healthy lunchtime food.

It’s fairly obvious that this trend is something that McDonalds is going to want to keep doing due to its
success in recent years. Therefore, for the future McDonalds will look at keeping the trend alive by analysing
the market and reacting in accordance to that. McDonalds has recently enjoyed its best profits in 4 years
(Daily Mail, 2010) due to the recession which has affected the global economy and customers looking to
ditch expensive restaurants for cheaper fast food outlets. Of course, the global recession can’t last forever
and McDonalds will be trying to keep a hold of the massive surge in customers it has received as a result of
this. In South California, McDonalds has introduced a “gourmet” Angus burger in a bid to ditch the quick and
cheap image the brand of McDonalds is tarnished with (Weston, 2007). This is perhaps the direction
McDonalds will soon start to take in the UK, introducing gourmet beef and chicken with high quality
ingredients and fresh buns in order to make the brand look more expensive, and to retain the many
customers they have previously gained who will in no doubt look for a more premium brand of restaurants to
eat at as Britain comes out of the Recession.

Another step that McDonalds may use to further itself in the Future is to source all meat from British farmers
in humane ways. With a growing amount of consumers in the UK preferring British meat and British produce
over meat imported from other countries, McDonalds has for several years had an on-going campaign
highlighting how all beef in its burgers is sourced from British farms and how all milk is organic, eggs are free
range (Farmers Guardian, 2005). What McDonalds currently do not do however, is get Chicken from British
farms instead favouring importing Chicken from Brazil, Thailand and Holland. They do this in order to keep
the price of Chicken Dishes (all of which include Chicken Breast Meat) to a minimum (Rawstorne, 2010). As
Britain sees itself moving out of the recession, McDonalds may want to think about revising their meat
sources to make everything 100% British. This may encourage a lot more people to eat at the restaurant as
well as marketing a positive image of how they support British Farmers. It will also help to improve their
corporate image, farmers will be more willing to work with McDonalds as they are dedicating themselves to
supporting British Farms and bringing as much revenue as possible to British Farmers.

Another future strategy that McDonalds will almost certainly choose to adopt is to expand into more
countries. McDonalds currently operates in 125 countries (Wikipedia) however still remains non-existent in
the majority of Africa
Currently there are 115 countries in the world without a McDonalds (5 of these are countries who previously
had McDonalds Restaurants present but were withdrawn for various reasons). The continent with the least
amount of countries with McDonalds Restaurants is Africa with 46 out of 53 African countries without
McDonalds Restaurants. Although Africa is on the whole a developing and a majority third world continent,
McDonalds may want to consider opening restaurants in the more developed countries such as Nigeria or
Madagascar. The profile of many African countries would suit the McDonalds restaurant perfectly; such
countries often contain people with very little disposable income or on small wages. McDonalds may find
itself prospering over in many African Countries because of it’s cheap, fast and well liked food making it
accessible to many citizens, just like the recession has bought out a surge in McDonalds profits over in the
U.K.

Whichever country McDonalds decides to expand its franchises to in the future, their track record suggests
they have a high probability of success with McDonalds operating successfully in 76 countries over 70 years
with only a small amount of 7 failures, 2 of which were due to government pressure.
“McDonaldization” of society – a term used by sociologist George Ritzer – it explains how sometimes culture shapes
the characteristics of a fast-food chain. McDonald’s venture into the international market has been that of any typical
service firm where they have entered a foreign market with a small number of locations and then expanded their
geographic coverage with time to grow their franchise even further. Along with their expansion, they have managed to
individually cater to the needs of many culturally diverse customers in other countries. In countries like India, where
cows are seen as sacred, beef is forbidden for consumption. With a huge part of the population being vegetarian,
McDonald’s has introduced alternative options such as vegetarian burgers. In the Middle East, where pork is forbidden,
any such option containing this is taken off the menu so as not to offend anyone. There is also a trend to introduce food
that is specific to that region of the world. For example, a very popular concept that had a tremendously positive
reaction was the company’s Sichuan Menu, also known as the China Mac, which was introduced at the Beijing
Olympics. Establishing these specific items on their menu, along with the introduction of the breakfast menu, the
extension of some of the store working hours to 24 hours a day, and building many “drive thrus”, has contributed
heavily to an increase in revenues.

McDonald’s cannot export their product, although this is something to be given considerable
thought, they choose among different modes of operation. Overseas, McDonald’s tends to prefer
franchising to third parties than have the restaurant as company-operated. Based on statistics from
late 2009, over 25,975 (80%) of its 32,278 restaurants around the world were franchises; where as
only 6,303 (20%) restaurants were company-operated. This is because franchising provides the
initial capital needed for building the restaurant and then maintaining it by constant reinvestment.
However, operating a branch on its own requires a significantly larger amount of capital and will
hence lower the revenues generated. This would explain why McDonald’s are leaning more and
more towards becoming entirely franchise based.

Current Business Issues

The most significant of all the issues and a popular target for criticism, nutritionists argue that the
high fat content in the food promoted by McDonald’s is linked to critical diseases such as heart
disease, cancer, diabetes an obesity - all of these diseases which are very common among the
public. There is a huge question as to why sports events are sponsored by a firm that promotes
unhealthy products, and also why there are sometimes McDonald’s branches in hospitals.

Another issue is the role and contribution of McDonald’s towards the environment. There must be
more pressure placed on creating more environmentally friendly packaging, as millions of tons of
packaging are produced, only to be thrown away after a few minutes when the meal is finished.
Tropical forests are also cleared to make room for ranches to stock the cattle, which again,
contributes towards the destruction of the environment.

McDonald’s spend an average of two billion dollars each year on advertising their products. Some
people, mainly parents, object to this as they feel it has a strong influence over their children.
McDonald’s sponsor many school events and programmes, however, there is doubt over whether
this is genuine philanthropy or an attempt once again to maximise profits, as a large part of their
target audience are actually children.

McDonald’s employ over 1.5 million young people around the world. This can be seen as creating a
huge base for job opportunities however, it creates a threat for local food chains, as being such a
huge brand name, it is likely to be a more popular choice for jobs which could put local food places
out of business. There have also been a range of complaints from employees about discrimination,
lack of rights, few breaks, long working hours, unsafe conditions, understaffing, sale of food that
has fallen on the ground, kitchen floors flooding with sewage, etc. However, all these complaints
have been dismissed by McDonald’s, claiming that their staff are happy and content with their jobs.

Being among the world’s largest users of beef, McDonald’s slaughter millions of cows every year
meaning they are once again targets by vegetarians and animal welfare activists. There have also
been issues regarding the treatment of chickens and regarding them being kept indoors with no
access to clean fresh air and sunlight.

The concept of McDonald’s opening in countries like India could mean wealth is taken out of the
local economy only to benefit the rich. This directly affects farmers and such foods are slowly
replacing sustainable farming.

Although McDonald’s is constantly among controversies, debates and criticism there is an issue of
free speech as there are rumours that McDonald’s use their financial and legal power to influence
the media.

As of January 2009, McDonald’s reported that same store sales continued to rise by 7.1% globally.
The figure could have been potentially higher at 9.1% if not for the American Dollar becoming
stronger.
enormous presence in developed countries like United Kingdom, Canada, Australia and South
Korea, they have also expanded into countries with fast – growing, emerging markets such as India,
China, Russia, Eastern Europe, etc. The market potential in such countries affects the company’s
decision to enter and grow its business - as they also have to consider other factors involved such as
expansion post entry. However, aside from promoting and marketing themselves abroad,
McDonald’s continue to exhaust opportunities within their home market and optimize profits.

The globalization of McDonald’s is so tremendous that it is sometimes referred to as the tration at

the poor service they received at a McDonald’s restaurant. Although complaints are inevitable when
any company deals with the public, McDonald’s are likely to feel the pressure of the complaints
they receive probably more than most companies, mainly due to the large scale of operations and
the already established “McJob” theory.

The International Export Dimension

McDonald’s is the world’s largest food industry operating 31,000 restaurants in over 119 countries,
serving 58 million customers daily and employing more than 1.5 million people. A firm that started
in California – USA, McDonald’s has now expanded throughout most of the world.
The majority of the sales made by McDonald’s are outside the United States of America.
Geography and location give the most basic grounds for diversification and growth. With an

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