Marketing Review of

McDonald’s
Corporation
Introduction to Marketing 07 02662
Assessed Group Assignment
Dave Hancock: 1035651
Samuel Harvey: 1021352
Ross Patman: 1036883
Steve Dhalai: 944125
Hannah Muhammad: 954417

Submission Date: 14th December 2010

Contents
1. Title Page

2. Contents

3. Introduction
Swot Analysis

4. Pestel Analysis

5. Relevance of Michael Porter

7. Business and Strategic Philosophy

8. The Role of Government

9. Corporate and Operational Marketing Issues

10. Current Human Resource Issues

11. Future Business Environment

13. Current Business Issues

14. The International Export Dimension

15. Conclusion

17 – 19. Reference List

Introduction

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McDonald's as we know it was founded by Ray Kroc, who built upon the
hamburger stand of Dick and Mac McDonald, which sold 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. The company has grown from its
first franchise in 1954 to having 32,000 restaurants in 117 countries by 2010
and employing 1.7 million people. 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 value 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. We
looked at McDonald’s using the SWOT, PESTEL and Michael Porter methods.

SWOT Analysis
This is an initial assessment of McDonald’s performance.

Strengths Weaknesses

Strong brand image & recognisable High employee turnover increases HR

logo.
Ranked very highly in Fortune 500's
list of most admired food companies.
Image of cheap food even though it is
not that well priced.
Global spread of restaurants provides
economic resilience.
Established staff training program.
Opportunities
Organic foods.
Healthier foods.
More animal welfare conscious foods.
Growing demand for coffee from
McDonald's.
costs.
Media and government tend to give
the company a bad image.
Growing concern for obesity and
health issues.
Threats
Growing concern for animal welfare
and ethical sourcing of ingredients.
Major competitors such as Burger King
& KFC.
Upmarket chains such as Eat,
Starbucks & Pret.

3
PESTEL Analysis
There are many factors in the macro-environment that will affect the decisions
of the managers of any organisation. Tax changes, new laws, trade barriers,
demographic and government policy changes. To help analyse these factors
managers can categorise them using the PESTEL model.

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
the company’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' section details the effects the government has had
on McDonald’s.

Economic Factors
McDonald's economic factors vary internationally but in the UK it is strong with
high sales and profits resulting from the recession. McDonald’s image of cheap,
fast food has served it well here with people returning to the company from
more upmarket alternatives. McDonald’s has seen that its position is
particularly strong in the recession and so has marketed itself both as an
upmarket brand but also as a down-to-earth company with its ‘Pound Saver’
menu.

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.
McDonald’s often brings its American-style branding with its restaurants.
America has become less popular with the English over the past decade for
reasons such as the occupation of Iraq and Afghanistan among others.
McDonald’s has altered its marketing to reflect this; a clear example being the

4
change is colouring of the restaurants from a brash red to a more conservative
green.
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]

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. Advertising is more targeted these days due to the internet and
McDonald’s have made full use of it by having adverts, games, etc.
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 savings down to the customers.

Environment
McDonalds is very keen to promote its attitude towards helping the
environment by drawing up a comprehensive environmental policy that states
its aims to reduce energy emissions, odour and noise pollution and also to
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] http://www.mcdonalds.co.uk/ourworld/environment/policy.shtml
[Accessed 3rd December 2010]

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

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

Degree of Rivalry
The degree of rivalry in the fast food and restaurant industry is very high. To
help ensure that McDonald's has an advantage over its competitors it has
5
diversified, straying into broader food markets by offering breakfast items and
coffees to competing with sandwich companies such as Subway with the deli
sandwich meal.
McDonald’s stays competitive by offering a broad range to suit all tastes and at
a varied price structure.

Barriers to Entry
On a small scale small restaurants or cafes may be able to compete with
McDonald’s and may draw away some of the consumers from them 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. McDonald’s itself can deal with opening new
restaurants in established markets easily but it sometimes has problems
opening in new countries as tastes are different and the American image it
brings is sometimes unwelcome.

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

Threat of Substitutes
6
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. Rivals need to offer a
better product or a lower price in order to compete with McDonald’s.
McDonald’s is a very efficient company so cannot be easily beaten in terms of
value. A large threat is more upmarket products; the company counters this by
bringing out premium or special edition products such as the Chicken Legend
and the Terry’s Chocolate Orange McFlurry.

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
In consideration of the vast number of customers in the fast food industry;
together they possess strong buyer power as they ‘vote with their feet’, but
individually they have very weak buyer power.

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 (2002) 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.’

7
 Student Research [online]
http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html [Accessed 17th October
2010]

When people talk about company resources they often only consider
cash and assets but 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 (2002) 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] http://www.mcdonalds.co.uk/static/pdf/aboutus/education/mcd_prospectus.pdf [Accessed 2nd
December 2010]
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 Favourites, Weather and Breakfast adverts
[online] www.youtube.com [Accessed 25 November 2010] which looked at the broad spectrum of
th

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
8
OFCOM to restrict the marketing of HFSS foods to children. The Children’s Food
Act 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] http://www.publications.parliament.uk/pa/cm200304/cmbills/110/2004110.pdf [Accessed 2nd December 2010]
These rules were introduced for under-10s in April 2007, by January 2008
covered under-16s. 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 its ‘Plan to
Win’ which has been discussed earlier on.

Figure shows McDonald’s stock price over past decade [online] http://quote.morningstar.com/stock/chart.aspx?
t=MCD&region=USA&culture=en-US [Accessed 2nd December 2010]

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 [Accessed 25th November 2010]

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 company
spent $745.5m in the USA alone in 2009.
McDonald’s annual report. Page 32. [online]
http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations0.Par.17264.File.dat/2009%20AR
%20Report%20-%20Print.pdf [Accessed 10th December 2010]

The main target of their advertising campaigns is children, which has proven
highly controversial.
9
The problem is that children are bombarded by McDonald’s’ marketing, and are
convinced into buying McDonald’s products habitually, which could lead 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 [Accessed 5th December 2010]

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 which suffer cruelty and pain in factory farms are used
by McDonald’s every week in Europe. http://www.mcspotlight.org/issues/intro.html [Accessed 5th
December 2010]
Although McDonald’s abide by the rules set out for them by governments, and
act 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.)
In 2007, Burger King announced that it would begin to buy pork and eggs from
suppliers who do not confine their animals in cages or crates, and who use
“controlled atmospheric” or gas stunning.
This was a bold move by the company: one that would affect the whole
industry, forcing both competitors and other suppliers to adopt similar
practices so they do not get left behind.
http://www.nytimes.com/2007/03/28/business/28burger.html, [Accessed 9th December 2010]

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. This strategy is likely to work as upmarket
burger restaurants have been seen, note The Handmade Burger Co.
10
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. People generally don’t like
change!

Current Human Resource Issues

One of the main human resource issues that McDonald’s faces 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 search: ‘Define: McJob’ www.google.com [Accessed 5th December 2010]

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.
http://news.bbc.co.uk/1/hi/magazine/5052020.stm [Accessed 10th December 2010]

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 [Accessed 1st December 2010]

It has been said 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.
11
As a by-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 frustrations 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. It is very rare you hear
something positive about people working at McDonalds. We think this is an
area that the company can improve in, turning around the negativity
associated with working at McDonald’s.

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 £2bn by 2012 (Belfast Telegraph, 2010).
This, a normal trend for McDonald’s, 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 raising awareness that they make good coffee before it
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 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
12
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, how all milk is organic and the 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
(McDonald’s www.wikipedia.org [Accessed 2010]) 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
13
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 its 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. McDonald’s would have to work
diligently to ensure that it does not exploit the people or farmers like it was
once seen to do in the UK and USA. Introducing similar altruistic schemes to
those we have here, though they may reduce profitability in the short term,
would get McDonald’s off to a good start, with an instant positive image in
Africa. This is a goal which it still hasn’t fully achieved here.

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 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
opening hours to 24 hours a day, and building many ‘drive thru’s, 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;
whereas 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 therefore lower
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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
and 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 (for consumption in the USA. This issue does not apply to the UK market)
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 sponsors 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.

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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.
McDonald’s has 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 International Export Dimension

McDonald’s is the world’s largest food company, 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 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.

Conclusion
To help evaluate the performance of McDonald’s, we think it is easiest to show
a revised SWOT table that accounts for the new research we have discussed.

The SWOT table below is very different to the one shown initially, which was
based on our first impressions of the company as part of the general public.

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 Strengths Weaknesses

Strong brand image & recognisable Media and government tend to give
logo. the company a bad image.
Image of cheap food even though it is Growing concern for obesity and
not that well priced. health issues.
Global spread of restaurants provides International dislike for America or
economic resilience. Americanisation of cultures.
Established staff training program and
a top 100 employer ranking.
Coffee.
Opportunities Threats
Upmarket food for adults. Bad image such as the ‘McJobs’ tag.
Healthier and organic foods. Waste packaging produced – this can
Ethical sourcing. be fairly easily solved.
More animal welfare conscious foods.
Working with UK government to form
health policies

McDonald’s has been working very hard over the past decade to change
peoples’ opinions of the company. This is very hard to do as there are always
people who cynically dismiss the news of improvements as ‘spin’. What we
would suggest is that McDonald’s tries to give itself a more down to earth
image still. The website shows lots of beautiful, happy people working at
McDonald’s (see image below) and it just seems too good to be true. Although
we can see these people working at McDonald’s, they are not the most
common employee and so people do not relate to them.

We think the policy of marketing to

Image: [online] http://www.mcdonalds.co.uk/people/join-the-
team/join-the-team.shtml?dnPos=0 [Accessed 7th December
2010]
adults is a good one. They generally
have more disposable income than
teenagers and so further expanding
into the premium market is a plan
we recommend. With expansion into
the premium market, a focus is
required on not just quality but also
ethical sourcing and health. As we
start to move out of the recession,
people will again start to focus on
where their food has come from, if
the animals had a good life, and if the farmers
get a good deal. People buy into ethics as an
ideal, no-one wants to eat a ‘McGuilt burger’.

Convincing the cynics that McDonald’s is a

good place to eat is nearly impossible so we
may as well not bother anymore. A lot of
money could be saved by ‘preaching to the
converted’ the benefits of eating at
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McDonald’s. If they have a good experience they will tell people and the good
image will spread by word of mouth. People are more likely to believe the
message McDonald’s sends if they hear it from friends rather than through
adverts.

In terms of threats, we do not think any of the competitors hold a candle to

McDonald’s. We do not expect them to come out with a new product which
significantly dents McDonald’s popularity any time soon. UK trends should be
watched more closely than we watch the competitors as we can almost always
match the trend before any competitor. However, new competitors come along
in new market sectors fairly often so McDonald’s should keep an eye for them.

We hope that you find our research and suggestions for future business and
marketing strategies helpful.

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