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The McDonald's Corporation is the world's largest chain of hamburger fast food

restaurants, serving around 68 million customers daily in 118 countries. Headquartered in


the United States, the company began in 1940 as a barbecue restaurant operated by
Richard and Maurice McDonald; in1948 they reorganized their business as a hamburger
stand using production line principles. Businessman Ray Kroc joined the company as a
franchise agent in 1955. He subsequently purchased the chain from the McDonald
brothers and oversaw its worldwide growth. A McDonald's restaurant is operated by a
franchisee, an affiliate, or the corporation itself. McDonalds Corporation revenues come
from the rent, royalties, and fees paid by the franchisees, swell as sales in companyoperated restaurants. In 2012, McDonald's Corporation had annual revenues of $27.5
billion, and profits of $5.5 billion. McDonalds primarily sells hamburgers,
cheeseburgers, chicken, French fries, breakfast items, soft drinks, milkshakes, and
desserts. In response to changing consumer tastes, the company has expanded its menu to
include salads, fish, wraps, smoothies, and fruit. McDonalds restaurants are found in 118
countries and territories around the world and serve 68million customers each day.
McDonald's operates over 32,000 restaurants worldwide, employing more than 1.7
million people. The company also operates other restaurant brands, such as Piles Caf.
Focusing on its core brand, McDonald's began divesting itself of other chains it had
acquired during the 1990s. The company owned a majority stake in Chipotle Mexican
Grill until October 2006, when McDonalds fully divested from Chipotle through a stock
exchange. Until December 2003, it also owned Donates Pizza. On August 27, 2007,
McDonald's sold Boston Market to Sun Capital Partners. Notably, McDonald's has
increased shareholder dividends for 25 consecutive years, making it one of the S&P 500
Dividend Aristocrats. In October 2012, its monthly sales fell for the first time in nine
years.

BUSINESS STRATEGIES ADOPTED BY MC DONALD


MCD has diversified its locations by operating over 32,500 restaurants in 118
countries, which decry eases

the

companys

Exposure to the intensely competitive fast food industry in the United States.
Also, MCD serves an average of 68 million consumers each day. This per day figure has
Increased
By $14 million (30%) since 2001 and $2 million over the past year. MCD currently
divides its revenues into four segments: the United States, Europe, the APMEA(Asia,
Pacific, Middle East, and Africa segment), and other countries (i.e. Canada and
Latin America and corporate sales). Almost 65% of MCD sales are derived
internationally. MCD focuses both on penetrating emerging markets and expanding in
developed markets
But just being McDonald's isn't enough. Its doing a lot, domestically and globally, to stay
ahead. Here are ten strategies that are keeping McDonald's barreling forward:

Focusing heavily on emerging markets

McDonald's may seem like it's already everywhere, but it hasn't quite saturated the world
yet. Over the past few years, McDonald's has made a heavy push toward emerging
markets. And not just trendy markets like China and India, but places previously devoid
of the Golden Arches, like some African nations. Sales are up 8.1% from last year in
Asia/Pacific, Africa and the Middle East. Still, China is McDonald's most important
international

front,

where

it's battling Yum brands whole heartedly. It plans to have a whopping 2,000 stores there b
y2013.

McCafe has been a big win

The McCafe has been demolishing expectations ever since the company started revving
units marketing machine for it in 2002. Now, there are 1,300 McCaf's worldwide in
dozens of countries, and it just keeps growing. Its latest moves have been to Ukraine,

along with national rollout in Canada. The McCaf menu has been growing as well,
adding non-coffee items like smoothies over the past couple years.

Offering a wider variety of food to attract more segments

It's not just snack foods and desserts that it's expanding into Theres a whole lot more.
McDonalds is trying to get more consumer segments to chomp up its offerings by
expanding on-traditional menu items, while keeping its core base of burgers-and-fries
eaters. Many of the new items help combat McDonald's ever-present negative image of
unhealthiness, thought will likely never shake it fully. For instance, oatmeal has been a
big hit for McDonalds, serving as a replacement for high-calorie breakfast sandwiches.
Additional types of salads have worked too, for people looking for a somewhat healthier
option.

Delivering food to customers in places that demand it

Though not traditional in the US, McDonald's delivers in many markets around the
world, and the company cites it as one of the reasons it has been so successful in those
markets. Delivery is a common practice, even for fancy restaurants, in many Asian and
Middle Eastern cities, so McDonald's is just meeting the cultural norms of its
surroundings.

Making its stores more attractive to get customers in

McDonald's is improving its physical locations to make them more appealing to


customers, and it seems to be working. In China, it's trying out a "Less is more" concept
design, which goes with softer colors and cushioned seats. Also, over 95% of McDonald's
locations have extended their hours now, and it has several thousand stores that are open
24/7. Free Wife now available in McDonald's restaurants across the world, and lately it
has made a big pushto get flat screen TVs in the stores. It's even starting up its own TV
channel with original programming, called McTV

Increasing its offering of snack items

Americans love to snack on stuff, and McDonald's has recognized that demand and
answeredwith a plethora of new products. Smaller items like wraps, along with an
expansion intodesserts (which it plans to ramp up soon), have made their way onto the
menu and have donewell.

Shortening its menu cycle

The most prominent example of this is the McRib, making an unprecedented second
nationalappearance in two years. It took front and center this fall and was incredibly
successful,driving a 4.9% gain in same store sales. Special edition McFlurries have been
in and out ofmenus too, along with limited time smoothies. This sort of menu cycle is a
move toward amore European model, which swaps out new menu items every six-toeight weeks, reports Nation's Restaurant News.

Importing more of its successful niche products internationally

McDonald's has an incredible variety of culture-specific food items across the planet,
andmost wouldn't stand a chance internationally. But some are winners, and the company
hasstarted to test them out in other markets. One example is Australia's Chicken McBites
(think popcorn chicken), which are now being tested in Detroit, Michigan. Then there
are full-sizewraps, common in Europe, which are being tested in new markets like the
U.K. They have so many of these products that some are bound to be hits, it just has to
find the correct area toexpand them to.

Expanding its dollar menu to breakfast

McDonald's fired up a breakfast dollar menu in 2010 as the economy continued to


slump,which supplemented its existing dollar menu for its usual fare. It has been working
well thusfar, capitalizing on Americans' attraction to the super-cheap in times like these.
But even before that, its breakfast business was growing, just at a lower rate than normal.
Competitorslike Burger King and Dunkin' Donuts have made their own types of dollar
menu, but nobodyhas had the widespread success that McDonald's has enjoyed.

And it hasn't been scared to take anybody on

Many of these expansions drew looks from brand new competitors, because McDonald's
wasencroaching on their territory. In most cases, McDonald's leveraged its size and brand
toattack head on. McCaf is the most obvious example, and it has performed admirably
againstStarbucks and Dunkin' Donuts. Its upcoming expansion into desserts is likely to
concernDunkin' even more, along with niche dessert chains like Dairy Queen. But there's
plenty ofrisk in doing this. As it opens itself to more fronts than ever, it has more big,
powerful brands breathing down its neck, and even more complexity to worry about in its
internal operations.

The new strategy


In 2003 McDonalds switched to generating more sales from its existing restaurants. In
2013 around 90% of the companys growth is expected to come from incremental sales at
its existing restaurants. Capital expenditures for new restaurants decreased $544 million
in 2013 because the companyo pened fewer restaurants and focused on growing sales at
existing restaurants including reinvestment initiatives such as restaurant reimaging in
several markets around the world.

How it reached to the every corners of the world


In 1940, McDonalds operated only one QSR but today has restaurants at 33,000
locations in 118 countries. McDonalds utilizes a variety of international market entry
modes for rapid expansion:sole ventures, franchising, master franchising and joint
ventures. 15% of McDonalds branded restaurants are operated as sole ventures. This
involves a significant capital commitment but allows the highest degree of control. Most
restaurants are operated as franchises, allowing rapid expansion without high capital
requirements. Franchising has also allowed McDonalds to benefit from local knowledge,
demonstrated by the menu differences by country. The combination of the master

franchisees local knowledge and McDonalds brand and model has been a successful
formula,allowing expansion whilst maintaining significant control. McDonalds has also
expanded internationally through joint ventures. Again, this allows for rapid expansion
and utilizes theknowledge of firms in closely-linked markets. Since 14 both firms invest
equity in the project, thereis a lower financial risk for both parties.
Using the 7Ps of marketing mix, McDonald earned business success at every part of the
globe.
Product
McDonalds strives to offer a standardized service worldwide. However, the company is
embedded with an entrepreneurial spirit giving franchisees some local control and
creativity, providing the service offering is of a high standard. Some of the most famous
products including the Fillet o Fish, the Egg McMuffin and the Big Mac were created
through franchisee innovation. Franchisees are given autonomy to adapt the
productswhilst the corporation maintains a high degree of standardization through quality
control.The majority of well-known products are usually offered in all markets unless
they do notsuit local customs and religion. For instance, Big Macs are not sold in Indian
outlets as the population is primarily Hindu. However, even iconic products are
adjusted to local taste such as providing spicier food in most Asian countries, allowing
the company toovercome a variety of cross-cultural barriers.
Price
McDonalds has positioned itself as a fast-food outlet offering low-cost food and
drink.The affordable menu has been adapted worldwide whilst maintaining their core
goal ofquality assurance. Ongoing innovation has allowed new pricing strategies such as
the Dollar Menu or its equivalent Saver menu in the UK. In response to increasing
foodcosts, McDonalds opted to increase prices by less than 1%, adopting the change
gradually to the menu in order to retain price-sensitive customers
Place (International Distribution and Supply Chain)
Although McDonalds product offerings differ between countries, they operate a

standardized global supply chain. This lean operation is 100% outsourced with no backupsystem. The chain comprises of two tiers. Tier 2 suppliers are primarily food
producers,whilst Tier 1 suppliers are processors. For example, a Tier 2 potato farm
supplies

Tier

1 processing firm who turn the potatoes into French-

fries and potato wedges. Produce istransported to distribution centers before allocation
and delivery to individual restaurants.
Promotion
McDonalds achieved 6th position on Best Global Brands 2011 as a result of continuous
promotional activities. The iconic Golden Arches are used in promotions globally. The
im lovin it campaign, launched in 2003 used celebrity endorsement to increase their
appeal to younger consumers. Justin Timberlake was used for vocals and thecampaign
was launched in 86 English-speaking countries and was adapted for non-English
speaking countries. Recently, the what were made of campaign increased
transparency and was used to fight against negative publicity regarding ingredients
People
At

McDonalds,

service

employees

represent

the

brand at the frontline where customershave their first interaction with the organization. It
is important that staff give a goodimpression and therefore, training is of paramount
importance. Employees undergorigorous on-the-job training in customer service, food
handling and preparation. In addition, McDonalds provides opportunities for managers
and would -be franchisees todevelop and hone their management skills through a
dedicated facility - the HamburgerUniversity (HU).
Process
McDonalds prepares and serves food rapidly. Strict guidelines and regulations
arefollowed in food preparation to ensure high standards of hygiene and food
safety.Customers can usually see the kitchen while being served, allowing transparency,
socustomers can eat in confidence. Food is mass-cooked and hot-held until
service.However, due to the continual stream of customers, it does not deteriorate before

consumption. To maintain its foothold as market leader, McDonalds maintains a high


degree of process standardization across all outlets to increase efficiency. This ensures
thatthey have high standards of hygiene and food safety in all outlets.
Physical Evidence
McDonald's has a homogenous look across their outlets from dcor to staff uniform.
Their global re-branding strategy furthers standardization, allowing consumers to
areas,there are indoor playgrounds to satisfy customers. The company ensures that al
franchisees comply with regulation regarding hygiene to maintain their reputation for
cleanliness. Staff training is standardized globally to ensure customers are treated
consistently

Advantages of a franchise business and its impact on McDonald


Franchising requires less capital than other growth methods
Franchising permits your company to grow with capital invested by individual
franchiseowners. For the majority of Fran Source clients, the investment required to
franchise their business is recouped through the sale of the first two to three franchises.
Rapid Expansion
In todays marketplace, the window of opportunity for a new or unique business concept
closes very quickly. Franchising permits multiple units to be opened simultaneously,
gaininga foothold over would-be competitors.
Market Dominance
Multiple locations increase the companys competitive advantage over similar type
businesses.
Franchising puts a "business owner" in charge

Franchising ensures that qualified "managers" are operating additional locations rather
thanemployees. A new business demands a great deal of time, effort and sacrifice.
Franchiseesare motivated by their ownership of the business and the capital they have
invested.
Greater Buying Power
Franchisors that purchase products and services for their franchise network
can oftennegotiate volume discounts from vendors and suppliers. Sharing a portion of the
saving with franchisees provides higher operating margins and a competitive advantage
over othersimilar businesses.
Increased Name Recognition
As additional locations are opened, name recognition increases. In the United
States,customer loyalty towards recognized brands is at an all-time high. Consumers
typically feelmore secure frequenting a business they recognize by name. Franchising
permits anindividual to benefit from the collective power and growth of the franchise
network, which inturn leads to greater name recognition and competitive advantages for
each individualfranchisee.
Increased Advertising and Marketing Budget
Franchisees may be required to contribute a percentage of their gross sales (or a set
fee) to anadvertising fund administered by the franchisor. This enables the franchisor to
advertise inregional and/or national media for the benefit of the franchise network.
New revenue streams are created
Franchisors earn revenue from many sources, including:

The external environment and its effect on strategic marketing planning of


McDonald

Political/legal factors
Political environment consists of the government activities covering the economy and
itssubdivisions. Ecological regulation, business margins, tariffs, income tax policy, labor
ruleand political constancy are some of the main components of it. The safety, schooling,
andinfrastructure of a nation are also the concern of government. While operating
globally, different types of taxes cover up a significant company obligation.Countries
with strong consumer protection laws may associate great costs if there is aviolation in
product quality or service through litigations and lawsuits.
Economic factors:
Economic expansion, the rates of interest, exchange and inflation comprises the overall
economic environment. They extremely affect a businesss function and core decisions.
Cost of capital is the main determinant of a business escalation and growth. This cost of
capitaloften fluctuates with the movement of interest rates whereas exchange rates affect
the cost ofexporting and price of imports
Product lines and pricing:
McDonald's first and foremost sells hamburgers, french fries, soft drinks, breakfast
items,various types of chicken sandwiches and desserts. In most markets, McDonald's
also offerssalads and vegetarian items, squashing and other unique local products. Soup
type productsare served only in some selected countries like Portugal etc. And for this
special deviation from its standard menu helps McDonalds to be popular among the
countries other than its homeland. Sometimes this difference is employed either for
regional food taboos andreligious prohibition like the one in India as no beef is served
there. In India, non-vegetarianmenu contain s chicken and fish items only.
Customers preference:
With a brand value of $49.5 billion, McDonalds has grown 49 percent in worth and now
is the most favored brand in the fast-food group. McDonalds innovative choice and
givingimportance to the peoples ever-changing demand with due progress, technology

and development is the key to McDonalds present situation. Now a day fast food cafes
are becoming the dining hall of the majority for superior child-size menus, playing
grounds andimpulsive branding crusades.
Competitors:
One of the environmental factors surrounding McDonalds is the fierce competition from
thecompetitors. There is an intensive price war, extreme battle of innovations,
breakthrough andserious promotions and advertisements. Different competitors in the
global fast food industryare now just going mad about increasing competition that led to
aggressive pricing strategiesamongst the large brands. Competitions also pushed them to
increased menu diversification, product developments for increasing sales and market
share and at least maintaining currentmarket share.
Social factors:
Population growth, career opportunity, cultural distinctiveness, health of the masses and
social security build the ground of societal factors. McDonalds food products demand
andits operational strategies differ greatly to cope with the movement of these factors
Technological factors:
Technological factors main elements are R&D, computerization, technology motivation
andtechnological change rate. Technological movements affect expenditures, excellence,
and innovation and machine made food is more hygienic. McDonald's employees quick
serviceand quality food standards are the result of its high-tech operating procedure.
Customizeddatabase management system and computers and smart cashiers are used in
McDonald's tospeed up serving and operating excellence.
McMommy Blogging Society:
In December 2007, McDonald's opened up its kitchens to the group of mother bloggers
toreport allegedly unedited findings on McDonald's website and on blogs in the
Internet.McDonald's goal was to make their cooking processes more transparent. It kicks
out storiesof fattening, unhealthy food rumors in books like "Fast Food Nation" and

movies i.e. "Super-Size Me. "McDonald's equipped six mothers chosen from 4000
applicants with laptopcomputers to record their impressions of its operations over the
next few months. Nothinglike this has ever been done on the internet by a fast food
company before.
Hamburger University:
Hamburger University was founded in 1961 at a McDonald's restaurant in Elk Grove
Village,Illinois. Now it stands in a suburb of Chicago at 2815 Jorie Boulevard in Oak
Brook, Illinois.It has 30 resident professors and more than 70000 managers have
graduated from here.Today Hamburger University has 19 full time intercontinental
coaches to educate apprenticesof more than 119 countries. It comprises 13 teaching
rooms, 12 interactive group rooms, a300 seats lecture theater, and 3 kitchen labs. It has
professional translators who can lecture in28 different languages.

CHAPTER 5
CONCLUSION

McDonald

s is one of most successful companies in the world today. With its rapid embracement
ofglobalization, the firm has been able to expand and retain numerable growth; as well as
continuing toexplore with its growth potential in the coming years. From the beginning of
the company

sdevelopment in the United States, to its spread in England, Australia and more recently
India andChina, the firm has been able to provide a variety of hamburgers and other
foods to its consumers.From the Big Mac, to the Maharaja, the company

s successive strategies, specifically with heavyresearch and development have allowed it


to fulfill the tastes of locals in every country it operates.Its leaders in all of its major
departments have established prices worldwide in all types ofcurrencies, making its foods
affordable for customers of all classes. McDonald has adopteddifferentiation and cost
leadership strategies. In terms of differentiation, the firm attempts to bediverse from its
competitors by adding something to its product that will provide a unique value toits
customers, achieved through well-designed and managed marketing activities resulting in
a perceived superior quality product and high brand image and recognition. Further, cost
leadership isachieved, not only through economies of scale but also through learning,
knowledge and experiencein production and operational processes and through
effective/efficient distribution networks andmanufacturing systems.