STRATEGIC MANAGEMENT – 301

Project Based Learning

On
McDonald’s

Submitted to- Submitted by-

Dr. Vandana Bharti Manvendra Tomar (16)
Chahat Batra (09)

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 CONTENTS

PARTICULARS PG. NO.

1. Summary of McDonald’s 3
2. History of McDonald’s 4
3. Strategic Issues faced by McDonald’s 5
4. Analysis 6
i. PESTEL Analysis 6
ii. SWOT Analysis 9
iii. Future Trends 14
iv. Competitor Analysis 17
v. Resources and Capabilities 18
vi. Competitive Advantage 20
vii. Core Competencies 21
5. Alternatives 22
6. Decision Criteria 23
7. Implementation of Strategies 26
8. References 32

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SUMMARY OF MCDONALD’S
McDonald’s Corporation is a “Centralized, International company”, which competes in the fast
food industry supplying hamburgers, french fries and other consumable items using
standardization, heavy expansion and branding as the driving force. McDonald’s operates in
over 121 countries and has over 30,000 restaurants worldwide.
McDonald’s utilized an intense, rapid expansion into foreign countries through three primary
methods, franchising, company owned restaurants, and joint ventures. With the majority of
international restaurants stemming from franchising agreements, McDonald’s management
relied on this method to aid in the acceptance of a new style of eating into unfamiliar markets.
With minimal risk and maximum gains, franchising continues to contribute heavily to
McDonald’s international success5.
With a centralized, international structure, McDonald’s keeps a tight grasp on operations, cost
and quality. With an ethnocentric management strategy, McDonald’s relies on domestic based
logic and attitudes and transfers them to their international outlets and restaurants.
In order to control its overseas operation, McDonald’s uses a combination of two approaches.
The majority of control would fall under the rules approach, meaning that control lies with
headquarters creating procedures and policies for the subsidiaries to follow. However, there is
also a little of the cultural approach that has surfaced and is being utilized judging by the
adaptation that has occurred in some of the overseas restaurants. This has occurred even with
the tight internalized norms that are constantly presented and enforced by headquarters.

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HISTORY OF MCDONALD’S

Siblings Richard and Maurice McDonald opened the first McDonald's at 1398 North E Street
at West 14th Street in San Bernardino, California (at 34.1255°N 117.2946°W), on May 15,
1940. The brothers introduced the "Speedee Service System" in 1948, putting into expanded
use the principles of the modern fast-food restaurant that their predecessor White Castle had
put into practice more than two decades earlier.[22][23] The original mascot of McDonald's
was a chef hat on top of a hamburger who was referred to as "Speedee".[24] In 1962, the Golden
Arches replaced Speedee as the universal mascot. The mascot, clown Ronald McDonald, was
introduced in 1965. He appeared in advertising to target their audience of children.[25]

On May 4, 1961, McDonald's first filed for a U.S. trademark on the name "McDonald's" with
the description "Drive-In Restaurant Services", which continues to be renewed. By September
13, McDonald's, under the guidance of Ray Kroc, filed for a trademark on a new logo—an
overlapping, double-arched "M" symbol. But before the double arches, McDonald's used a
single arch for the architecture of their buildings. Although the "Golden Arches" logo appeared
in various forms, the present version was not used until November 18, 1968, when the company
was favored a U.S. trademark.

The present corporation credits its founding to franchised businessman Ray Kroc on April 15,
1955.[26] This was in fact the ninth opened McDonald's restaurant overall, although this
location was destroyed and rebuilt in 1984.[clarification needed] Kroc was recorded as being
an aggressive business partner, driving the McDonald brothers out of the industry.[27]

Kroc and the McDonald brothers fought for control of the business, as documented in Kroc's
autobiography. In 1961, he purchased the McDonald brothers' equity in the company and began
the company's worldwide reach.[28] The sale cost Kroc $2.7 million, a huge sum during that
time.[27] The San Bernardino restaurant was eventually torn down in 1971, and the site was
sold to the Juan Pollo chain in 1998. This area serves as headquarters for the Juan Pollo chain,
and a McDonald's and Route 66 museum.[29] With the expansion of McDonald's into many
international markets, the company has become a symbol of globalization and the spread of the
American way of life. Its prominence has made it a frequent topic of public debates about
obesity, corporate ethics, and consumer responsibility.

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STRATEGIC ISSUES FACED BY MCDONALDS

1. Win back customers who have fallen out of love with McDonalds :

Once loyal customers have had their heads turned by more upmarket rivals such as
ShakeShack, Five Guys and Chipotle. Easterbrook will have to work out a way to reignite
thecustomer’s love affair with the Big Mac

2. Take on Burger King for low-income customers:

At the other end of the spectrum, McDonald’s needs to make sure it can still attract low-income
customers, rather than losing out to its traditional rival Burger King. Burger King hasserved up
better results recently, which the chain has partly put down to its focus on price andthe success
of its value menu range

3. Tackle the bad PR by paying staff more:

McDonald’s has a reputation for paying its staff poorly. The company has been hit by
protestsfrom workers, many of whom earn the minimum wage despite having been with the
companyfor years. Shareholder activists last year called for the salary of outgoing chief
executive DonThompson to be cut, citing the chain’s poor performance and the massive gap
between hiswages and those of the average McDonald’s worker. At a time when it is losing
customers,the company could really do without the additional PR.

4. Slim down the menu

In a bid to be all things to all men and offer healthier alternatives to burgers and fries,
someargue the menu has got too complicated. Bigger menus have made kitchen operations
morecomplex, giving some customers a longer wait for their fast-food fix

5. Get ready to take on investors:

Easterbrook will be under pressure from investors to turn things around quickly.
Activistinvestors alarmed by the company’s poor performance are likely to give
the new chiefexecutive a hard time from the word go. Activist fund Jana Partners
took a stake inMcDonald’s in November, while the shares jumped a month later on
speculation that one ofthe most determined activists, Bill Ackman, intended to buy a stake and
shake things up

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ANALYSIS

PESTEL ANALYSIS

Political Factors:

The political factors in the McDonald's PESTLE Analysis can be explained as follows:

McDonald's is a world leader in fast food. Fast food companies are always at the risk of being
targeted by the government as their primary concern is the safety of the people. So, if
McDonald's doesn’t comply with health and safety regulation, then the government will shut
it down. Moreover, the growing concern that their food contains high sodium and sugar which
leads to health issues like diabetes and hypertension. So McDonald's is now adding healthy
options in its menu. Many countries are less open to western culture and foods. Iran which has
some animosity with America has banned McDonald's in its country. Bermuda also banned the
McDonald's as it is against the fast food.

Economic Factors:

Below are the economic factors in the PESTLE Analysis of McDonald's:

McDonald's operates in around 120 countries.

It needs to source its materials internationally and due to change in currency exchanges, the
price of materials keeps changing. So, it needs to constantly strategize how to procure material
at low price. The recent recession in many parts of the world has decreased the demand for fast
food among the people. The employment turnover rate of McDonald's is very high, that is, its
employees left the job at McDonald's very frequently and McDonald's has to hire constantly.
A lot of money and time are wasted to hire new people and train them.

Social Factors:

Following are the social factors impacting McDonald's PESTLE Analysis:

McDonald's is known for adapting itself according to the consumer demands. Initially it opened
up its restaurants across the world by bringing the sense of ‘American way of life’. In the later
years, it started serving to different countries according to its local demands. e.g. In India, it
introduced options like McVeggie burger, McAloo tikki. For japan, its menu is completely
different. It introduces green tea ice cream, rice burger, teriyaki burger and shrimp burgers

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keeping in mind the taste and preference of Japanese people. In many other countries, it
tweaked its menu to give local flavor to its customers. The demand of fast food has increased
significantly in developing countries with the changing lifestyle of people.

Technological Factors:

The technological factors in the PESTLE Analysis of McDonald's are mentioned below:

Keeping the pace with the today’s fast changing technologies, McDonald's is continuously
introducing new technologies to improve the customer service. It has recently setup self-order
kiosks across its restaurants so that the customers do not require to stand in queue at the order
counter. People tend to add more items to their order when they select on their own rather than
ordering at the counter. McDonald's in 2019 acquires a tech company ‘Dynamic Yield’ to better
personalize menus. The electric menu of the McDonald's restaurants now show different items
depending on the factors like weather, time of day or regional preferences. Through its app,
people can order their favorite items and add-ons and get the food delivered at their home.

Through all such technologies McDonald's is constantly enhancing the satisfaction level of its
customers.

Legal Factors:

Following are the legal factors in the McDonald's PESTLE Analysis:

In India, McDonald's is facing legal issues with entrepreneur Vikram Bakshi for control of
Connaught plaza restaurants. They are in joint venture which controls 185 McDonald's
restaurants in north and east but after removing Vikram Bakshi as managing director of the
venture in 2013, Bakshi has filed a legal suit accusing McDonald's of mismanagement. This
lawsuit is helping its competitors to grow in these parts while negatively affecting McDonald's.
In Quebec, McDonald's was sued for the toys it gives along with the happy meals. It was alleged
that it advertises the toys to woo the children, while it is banned in Quebec to advertise products
to children under 13 years of age.

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Environmental Factors:

In the McDonald's PESTLE Analysis, the environmental elements affecting its business are as
below:

McDonald's is continuously working towards achieving sustainability in all its activities.

McDonald's has set a target to have 100% of its packaging material come from renewable or
recycled sources and recycling will be done in its every restaurant by 2025.At present only
50% of packaging comes from sustainable sources while only its 10% restaurants are doing
recycling. McDonald's now instead of shipping orange juice in ready to serve container,
shipping frozen concentrate which helps in reducing orange juice packaging by 75 percent.
McDonald's is also committed to install energy efficient kitchen equipment and led lightening
in all its restaurants to save energy.

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SWOT ANALYSIS

Strengths :

Strengths are usually the easy factors to consider because not only are they very obvious, they
are very exciting to talk about as well because this is how a company sets itself apart from all
other competitors. Here are some of the biggest strengths McDonald’s currently can boast.

1. Global Presence

There are hardly any countries in the world that don’t have a local McDonald’s chain in their
vicinity. Currently, there are over 120 countries in the world that have McDonald’s. Pretty
impressive for a brand to be able to achieve such success!

2. Brand Equity

McDonald’s has some of the best branding practices. Their marketing efforts have paid off
because as soon as you see those wonderful golden arches, you instantly know what to think
of.

Their logo is recognized by everyone in the world and even their staple food items such as their
fries and the all-mighty Big Mac are easy to spot.

3. Transnational Expansion

It is one thing for a brand to be global, it is another for the same brand to be locally adaptive.
Very few companies are able to achieve both successfully.

McDonald’s has mastered the art of formulating a transnational strategy of entering into other
countries. They have a franchising model of business which makes it possible for all of their
chains to be sensitive to the cultural and traditional requirements of the countries they operate
in.

For example, McDonald’s in India also offers vegetarian options on the menu which aren’t
available anywhere else. This strategy has made it very easy for McDonald’s to become a
success in so many regions around the globe.

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4. Technologically Sound

McDonald’s has successfully adapted with the times to be very aware of technological
advancements in the world.

They offer a lot of innovative solutions to customers globally. Their self-service kiosks make
it possible for customers to not only select their order but also to pay for it without getting into
queues.

Moreover, their delivery time in the drive-through portions also is very impressive. In 2021,
they formed a strategic partnership with IBM to develop technology enabling the drive-through
to be automated.

5. Market Share

They have the highest market share when it comes to the fast-food industry. This isn’t too hard
to believe because we already know that they are literally everywhere in the world.

As of February of 2022, they have a market cap of $186.40 Billion! It is because of this
achievement they are currently one of the world’s most valuable organizations.

Weaknesses

No matter how successful a brand may appear to be, they always have certain weaknesses that
humble them down or rather motivate them to be even better. Here are some of the current
weaknesses the brand should be mindful of.

1. Their Food

Whilst people love to eat McDonald’s and they enjoy the taste as well, it is still an undeniable
fact that fast food is very bad for health.

This type of food only gives consumers excess calories and no actual nutritional value. Since
McDonald’s has the biggest chunk of the market share, they are automatically the biggest
contributors to obesity in people, especially children and teenagers who have a greater love for
fast food.

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2. The Business Model

Whereas the franchising strategy has helped them spread around the world in so many
countries, it also has downsides.

It makes it very difficult for business owners to keep a check on how operations are being
conducted when they sell to franchisees. The degree of standardization in terms of quality and
the overall brand experience is also compromised.

So this is why in some countries, people love McDonald’s whereas in others the brand does
not do exceptionally well.

Even in certain regions of the same country, some franchises are better in service and in quality
than others. This is a big flaw with the franchising business model.

3. Employee Dissatisfaction

Employees in the company’s franchises have been known to not be satisfied with their wages
over the years.

They believe the number of hours they put into work is not being rewarded adequately. Because
franchisees are independently owned and most of them are not owned by the company itself,
wages also vary.

As a result of this backlash, McDonald’s has decided to eradicate the wage issue in all of their
restaurants by the year 2024. This tells us that there is still a lot of time before employees are
happy with their wages and not to think that even more people will have been employed by
then.

4. The Menu Doesn’t Have Many Options

For a fast-food lover, the menu is perfect. But for people who like to indulge with healthier
snacking options, McDonald’s, unfortunately, serves nothing.

They should include more options in their menu as well.

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Opportunities

McDonald’s still has many opportunities they can capitalize on to grow even bigger and
stronger as a brand. We are going to address some of the most promising ones here.

1. Menu Expansion

One of the weaknesses they currently are facing can easily be terminated by taking this
opportunity. McDonald’s is all about food as a brand; they have countless options to include
in their menus all around the globe.

The biggest trend that they can take advantage of is healthy eating alternatives. They should
have options for people who are wary of what they consume either for weight loss or just for a
better lifestyle.

They can also introduce organic and fresh varieties of their food for those people who only
consume organic.

2. Expansion

They are currently in more than 120 countries. Their goal can be to be in all of them on earth.
The franchising model has worked splendidly for them up till now as far as expansion is
concerned.

However, they can look at other business models to fix the quality assurance problem at hand
as well.

Threats

Threats exist for McDonald’s as well. Threats should never be taken lightly by any brand and
they should be neutralized or mitigated as soon as possible so that there is very little irreversible
damage done. Here are some of the biggest ones in this case.

1. Competition

Yes, McDonald’s currently is the market leader in the fast-food industry because they are ahead
of all of their competition. This certainly doesn’t mean that competition should be ignored or
worse, underestimated.

Although McDonald’s is very successful on their own, they still have many competitors to give
them a tough time.

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Two of their biggest direct competitors are Burger King and Wendy’s. They are always
engaged in marketing wars with each other because all 3 places serve fast food consisting
mainly of fries and burgers.

If we venture out into the indirect competition, KFC is also a rival brand because fried chicken
also falls into the fast-food category. Speaking of fast food, Chipotle is also very popular with
people and they also serve Mexican fast food to customers.

These are only some prominent mentions; there are thousands of smaller and local fast food
and burger chains all across the world which also offer the same category of food.

2. Emerging Consumer Tastes and Preferences

Consumer trends are the driving force of every business’s life cycle. The ones that learn to
evolve with the trends continue to survive, whereas others become obsolete.

As we know, many people are leaning towards clean and healthy eating to have a better quality
of life. How long will fast-food chains survive in the market if more and more people choose
to move away from junk food towards cleaner alternatives?

McDonald’s should be very careful because, in the matter of the upcoming decade, things
might be very different for the brand and their actual need in the market.

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FUTURE TRENDS OF MCDONALD’S

• McDonald's In The Metaverse

Metaverse is the term used to describe “next level” virtual platforms where users will interact
with each other – and with brands like McDonald's – in immersive, persistent environments.
Many global brands are seeing it as the next big thing in both marketing and customer
experience, and McDonald's is no exception.

The chain has filed patent applications indicating that it is in the process of developing "virtual
restaurants." As we are spending more and more of our time online, McDonald’s is betting that
just as teenagers like to meet and hang out in burger restaurants today, tomorrow, they will log
into virtual reality (VR) equivalents where they can talk to friends in entertaining
environments, as well as order food and drink deliveries to their homes.

It also plans to sell virtual goods – this might take the form of branded clothing and other items
that can be used to decorate avatars or customers’ virtual homes in the metaverse.

And its patent applications reveal that it is also interested in developing NFTs that would allow
digital items it creates for the metaverse to be unique, limited edition, or one-of-a-kind,
indicating that it may be interested in creating collectibles or personalized promotional items.
It has already created and launched one such NFT, celebrating the return of the much-loved
McRib to its menu in November 2021 – a sandwich that itself became an internet meme!

• Supply Chain

Another area where McDonald's is rolling out AI and other fourth industrial
revolution technologies is driving efficiencies within its own internal operations and supply
chain.

Easterbrook, who was credited with launching the digital transformation initiative, said that the
ultimate aim was to connect all of the AI, data, and analytics systems in order to create an end-
to-end intelligent business.

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He said “As you start to link the predictive nature of customer demand all the way through
your stock levels in the restaurant and kitchen, you can flex it back down through the supply
chain.”

This will allow the company to more accurately predict widespread trends in consumer
behavior – such as the growing demand for meat-free or healthier menu options – as well as
the impact of global issues such as the ongoing disruption to food distribution caused by the
Covid-19 pandemic or Russia's invasion of Ukraine.

• McDonald’s strategies to increase footfalls in their restaurants by adding new products,

increase seating, add birthday party areas, home deliver the products, and penetrate
across India. McDonalds has launched their new breakfast menu, McSpicy and McEgg
among new products and also extended the restaurant timings from morning to night
than the earlier noon to night.
• Besides the Metros and the Class I towns, McDonald’s is expanding in smaller cities as
well. McDonald’s plans to open more vegetarian only restaurants near the Vaishno Devi
shrine near Jammu and the Golden Temple in Amritsar. It already has restaurants in
cities close to these shrines, so the supply chain is in place for the region. The
indigenously developed popular McAloo Tikki burger accounts for 25% of the
company’s total sales and is also gaining popularity in other countries. .

• Future plans are to target drive-throughs by tying up with petrol pumps on highways, where
the current 40 outlets are to be expanded to 100. McDonald’s currently operates over 250
restaurants across 50 plus cities in India, attracting close to 400,000 consumers daily.
Among the JV partners Hardcastle operates 130 restaurants and Connaught Plaza operates
120 restaurants, which would be doubled to 500 restaurants in the next 3 years. • It is
surprising that even after twenty three years of entry none of the organized players have
been able to cover 100 Indian cities. McDonald’s plans to accomplish this target by large
scale expansion of supply chain and operations. All McDonald’s restaurants are drawing
huge footfalls from the youth, a sign of the growing acceptance and westernization of food
and culture in India.
• 'Experience of the Future' (EOTF) : As part of a brand transformation, McDonald's India is
launching a series of concept restaurants with enhanced digital capabilities to improve
customer experience, and expects to open 5-10 outlets in the city in the next 18 months.

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 Called 'Experience of the Future' (EOTF), the McDonald's outlet in Mumbai features self-
ordering kiosks, table service, and has also introduced several healthy options on the menu.
The company has enhanced its efforts in the area of sustainability by installing smart hand
wash systems that will help save about 4 lakh liters of water a year. It has also used power-
saving LED lighting, and is using reusable cups and bio-degradable cutlery in these stores.
McDonald's has also refreshed its delivery application, and says about 50 per cent of sales
comes from online ordering, through its app and website.
• MFY (Made for You) food preparation platform – MFY is a unique concept (cooking
method) where the food is prepared as the customer places its order. All new upcoming
McDonald’s restaurants are based on MFY. This cooking method has helped McDonald’s
further strengthen its food safety, hygiene and quality standards. McDonald’s has around
10 MFY restaurants in its portfolio.

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COMPETITOR ANALYSIS ( PORTER’S FIVE FORCES )

1. Rivalry among existing competitors – Strong

McDonald’s main source of competition stems from many other fast food chains in the
industry. The direct competition includes places such as Burger King, which sells
approximately the same product (cheap hamburgers and fries) to the same customer group.
However, Domino’s, for example, would be an indirect competitor, due to its cheap pizza
specialty that targets the same customer group (What is indirect competition, para. 4).

2. Bargaining power of suppliers – Weak

There are many suppliers that sell raw materials such as chicken or meat that McDonald’s could
work with (Adamski, 2017). For that reason, the supplier is in no position to bargain or raise
prices of products since McDonald’s can change suppliers easily.

3. Bargaining power of buyers – Strong

There are many options in the fast food industry today. As a result, buyers have a wide range of
selections to choose from. Customer loyalty is harder to attain nowadays, and McDonald’s
must keep its prices at a good level for buyers to return. Hence, buyers have great
bargaining power if McDonald’s wants to keep its customers (Adamski, 2017).

4. Threat of new entrants – Moderate

Internationally, another company’s outlets would have to grow swiftly in many areas around
the globe to compete with McDonald’s fast food chain. A great investment, a lot of time, and
a great number of customers could realize this success; however, it is difficult to achieve and
raise awareness of such a project (Adamski, 2017).

On the contrary, on a local level, if a few restaurants were to dominate a small town against a
few McDonald’s restaurants, it could overrun McDonald’s popularity quickly, making it a
plausible threat to consider (Adamski, 2017).

5. Threat of substitute products – Strong

There are many substitutes on the market that compete with McDonald’s: homemade
cooking, bakeries, and more. These pose a threat to McDonald’s, especially in customer
satisfaction and quality (Sengco, n.d.). Customers are leaning towards healthier options on
the market; as a result, McDonald’s may have to rethink its product quality and make
improvements.

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RESOURCES AND CAPABILITIES

For the company, the strategy is concerned with matching a firm’s resources and

capabilities to the opportunities that arise in the external environment. The resources

and capabilities of a company are considered as a strategy. The increasing emphasis

on the role of resources and capabilities as the basis for strategy may come in to two

factors. First, the industry where the firm belongs became unstable and so the internal

resources and capabilities of the firm are given more focus in formulating strategies.

And second, the combination of the resources and capabilities of the firm became the

superior competitive advantage and profitability (2007).

The connection between the resource and capabilities of a firm in the area of

business makes a competitive advantage. It is because the capabilities and resources

allow the organization to create value and gain some form of advantage from the rivals.

The capabilities and resources may include the degree of business cycle literacy of the

top of management team; deployment of various forecasting resources; a facilitative

organizational structure that facilitates timely acquisition, processing, and dissemination

of macroeconomic information as well as timely decision making relative to rivals; the

observable application of a set of business cycle-sensitive management principles; an a

supportive organizational culture that supports the firm’s management activities

Capabilities as Routine

McDonald applied an essential step in translating directions and operating

practices into capabilities. The idea of routine in every McDonald such as operating

manuals that provides precise directions for the conduct of every activity. In the

continuous practice or repetition, the operating manuals are referred in the course of

day-to-day operations, the tasks become a routine. In addition, this allows the

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McDonald’s outlets worldwide to produce the standard fast food products. The

successful firms used the knowledge as part of the fundamental transformation in their

enterprises. Moreover, the McDonald’s and other companies pioneered the

transformation through systematization which is appropriate in their processes ( 2007).

If the routines develop learning by-doing, and this was supported by the

knowledge, then, the idea of systematization is easy. The idea of systematization

underlies in the capability of the standard operating procedures of one company to

disseminate in all over the outlets or branches the McDonalds may have. The business

system that the company has is guided by the operating procedures and training

manuals that governs the operation and maintenance of each restaurant. The idea of

systematization presumes that the firm can more fully articulate the processes as part of

its capabilities.

With concern of knowledge management, McDonald’s companies are primarily

implementing the McDonald’s system. The essence of systematization of knowledge is

followed by every outlet with a detailed set of rules. Therefore, the operating practices

became part of every employee and given a thorough attention from the management

through the training programs.

Resource-Based View

Corporations are different; most of them have the ability to undergo the risk of

rapid changes. And in their recognition to the human resources and investments,

corporation still have the ability to create cooperative and productive behavior, despite

of the massive agency and organizational costs. The resource-based view approach

enables the firm to have unique resources and capabilities and used as an advantage to

excel in the marketplace. This influential approach defines the capabilities as the firm’s

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core resources, which makes the firm as a whole. The capabilities lie within a firm’s

infrastructure, reflect both the firm’s human resources and routines which is most of all,

difficult to duplicate or replicate by the competitors

COMPETITIVE ADVANTAGE

McDonald’s competitive advantage is based on the following points:

• Cheat prices is McDonald’s main competitive advantage. The company is engaged in an

extensive utilization of economies of scale to achieve the cost advantage.
• True to ‘fast food’ format of its restaurants, McDonald’s is famous for the speed of
customer service without compromising the quality of the service.
• Universality of the taste to a great extent represents another base of McDonald’s
competitive advantage. Big Mac tastes the same almost all over the world due to the use of
the same ingredients in the same quantities and application of the standardized ways of
cooking around the globe. Such a consistence in taste has positive implications on
consumer loyalty.

In late 2020, under the leadership of new President and CEO Mr. Chris Kempczinski the fast
food tycoon announced the Accelerating the Arches growth strategy which is based on the
following principles

• Gaining maximum return on marketing investments

• Commit to the core
• Doubling down on the 3D’s: Digital, Delivery and Drive Thru

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CORE COMPETENCIES

Some of the main core competencies of McDonalds include :

– brand image

– food variety and quality

– global presence

– customer service

– Economies of scale

McDonalds’ brand image is one major competence that gives the brand extra leverage in terms
of marketing as well as sales. It has a strong brand image in the market that it has built over
the years and continues to strengthen through new campaigns and a smart strategy. It is one of
the fast food brands that serves the largest variety. However, still it serves a rather uniform
menu globally with minor local variations to suit the local taste. Moreover, the brand is present
in around 120 countries which also allows the brand access to a very large customer base. Its
global parsec is major competence that has led to growth in sales and profits. McDonalds is
already known for customer service. However, to make such large scale operations possible as
profitably one must have economies of scale as in the case of McDonalds. McD has some
important competencies including a well managed supply chain and a pool of talented
employees. All these competencies have enabled it to grow its market share and customer base.

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ALTERNATIVES

The principle objective of strategic management is to boost an organization’s competitive

advantage. It enables the management to establish plans to address current and future needs of
an organization . Fast food industry has attracted many players that try to address various
customer needs.

Most of these competitors exploit customers’ needs and concerns not well served in
McDonald’s. McDonald’s therefore needs to put more effort to maintain its market share in the
industry. Some of strategic actions that McDonald’s should take include:

• Enhance promotion and advertisement in order to overcome negative publicity

• Progressively expand its menu in order to accommodate increased customer needs and
tastes, including health concerns
• Invest more on product development in order to come up with competitive products for
different cultures

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DECISION CRITERIA

ANALYSIS OF THE PROBLEMS

McDonald’s entered the Indian market in 1996 as a joint venture (JV) between Oak Brook III.
and 2 local partners – Hardcastle Restaurants Private Ltd. in western India, and Connaught
Plaza Restaurants Private Ltd. in northern India. To enter a market where consuming beef is
“off limits” was very challenging and ambitious. McDonald’s objective was to be inspired by
the culture of India and to deliver the greatest of food experiences to the customers in India
bringing in the splice of life. They were aiming for to change the local perception of the new
product being “American” and remove the fear of unknown, where family “dining in” was a
custom for centuries. The management wanted to advertise McDonald’s as a stimulator and
advocate of family and culture values. The diversity in language and communication is one of
the greatest components of the culture. Until 2000, McDonalds advertised their brand mainly
by putting the main focus on the outlet design and tailor made food menu for the needs and
desires of the diverse Indian population. McDonald’s entry into India was met with stiff
opposition. Members of the Hindu organization, the Bajrang Dal, the militant arm of one of the
dominant fundamentalist political parties in India, the Bharatiya Janata Part (BJP) openly
protested against the company by attacking it’s branches across India on May 4th, 2001. The
members of the Bajrang Dal demolished the restaurant in Thane, a northeastern Bombay
suburb. In southern Bombay, a McDonald’s store was besieged by protestors from the leading
Bharatiya Janata Party, who shouted slogans and stained the restaurant’s mascot with cow
dung. SHIV SENA – another Hindu alliance also threatened to protest outside the McDonald’s
corporate office after reports of a lawsuit being filed against McDonald’s in Seattle. The biggest
problem McDonald faced was during the launch of its product in India was the public image it
was carrying as an International food chain and not matching Indian standards. There were
concerns raised about how the burgers are made in McDonalds. Offering the cheapest burger
in the world was not easy. In India, McDonald’s offered a menu that did not had any beef or
pork items as well as special product formulations for accommodating Indian culture and
palate. Furthermore, all the vegetarian products, even the mayonnaise in vegetable burgers,
were egg-less and 100% vegetarian. Additions to the menu have been a regular feature of
McDonald’s in India. The company in India conducted regular qualitative as well as
quantitative studies, which tracked the target consumer lifestyle in India, a practice that had
followed internationally as well.

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It was under these circumstances that McDonald’s India went about creating the cold chain
infrastructure for its restaurants in the country. As McDonald’s always considers the quality of
all its products to be of primary importance, it sets high standards for its suppliers that are
amongst the biggest in the food industry. World over, McDonald’s always believed in
development of close relationships with suppliers and this is precisely what it has done in India.
As India being a very ancient country and one of the lands of the ancient river valley
civilizations, McDonald’s had to consider the cultural, economic and sociopolitical factors in
India. The Indian population is very diverse and complex as nation is split between different
communities, religions (e.g. Hinduism, Buddhism, Sikhism, Islam, Jainism and Christianity),
beliefs and value systems. All these factors play a significant role in nations’ preference for
food and dining in general. 80% of the entire population of India practice Hindu which forbids
non-vegetarian food (Indian Mirror, no date). Because of this, McDonald’s initially only
offered a vegetarian menu. Later they understood that this wasn’t the correct approach. To
honor the cultural differences between religions, the company categorized the cooking tools as
well as employees in vegetarian and non-vegetarian category. The cultural factor had to be
taken into consideration in such market, as any omission can destroy the reputation globally
which may limit the chances of business expansion (Rappa, A., 2007). The change in menu
came also because of competitors like KFC, whom entered the market first with non-vegetarian
products. McDonald’s formulated a suitable pricing strategy that can facilitate the high volume
of consumers, targeting mainly the lower and middle class. The majority of the Indian
population falls into this category. The market share in India is totally different from that of
the USA. Here the family dining concept works. This led to concept of breakfast combos. The
restaurant was also projected this as a fine dining restaurant. This became the USP of
McDonald’s in India. The television commercials of ‘Toh Aaj McDonald’s Ho Jaye’ and
‘McDonald’s Mein Hai Kuch Baat’ and the happy price menu is what attracts Indian people to
McDonald’s. The new advertising of Prices of the Yesteryears, attracted the teenager crowd
too. In order to capitalize on the highly price sensitive economy, and the Indian mentality of
liking anything that is foreign, McDonald’s strategy was market penetration and the three
circles strategy. This led to localization ND branding of the company. The entry of almost all
the international brands into India happened at the same time, while others closed down due to
various strategies. McDonald’s survived only due to keen understanding of the Indian
economy. The massive and aggressive expansion strategies that McDonald’s took up in India
was with the sole objective of establishing its presence indelibly in the sub-continent and to
prove to the world that if anything can sell in India it can sell anywhere. Today McDonald’s
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has become a household name and finds its kiosks in almost many schools colleges and
corporate. It can be said that there is no food court without a McDonald’s and almost every \
Indian has tasted McDonald’s fast food. This is indeed a great breakthrough for a very orthodox
community that has very rigid and fixed eating habits and traditionally very Indian.
McDonald’s had to make it clear to the authorities that their products in India neither contain
beef nor pork in it. They had to suit their burgers to Indian taste and Indian market which was
a hyper price sensitive market. The introduction of breakfast combos and budget meals made
market penetration possible. “Aloo Tikki Burger” was McDonald’s priced product in India.
Their quick turnaround times made new inroads into the fast food industry. As providing value
to the customer is the key, price sensitivity studies are conducted before determining the
pricing. The rate of inflation is also reviewed. McDonald’s definition of value was far broader
than of most of the restaurants in its competition.

SOLUTIONS

McDonalds found the solution to most of its problems;they went Local. They promised that
there would be no beef or pork on the menu. Nearly half of Indians are vegetarian so choosing
a vegetarian to run their outlets here makes sense. Across the world the Big Mac beefburger is
the company's signature product. Amit and his partners had to come up with their own signature
product for India, so the Chicken Maharajah Mac was born. They introduced a 20 rupees (20p)
burger called Aloo Tikki Burger, a burger with a cutlet made of mashed potatoes, peas and
flavored with Indian spices.Something you would find on Indian streets, it was essentially the
McDonald's version of street food. The price and the taste together, the value we introduced,
was a hit. It revolutionized the industry in India, Localized menu, delivered with precision
quality at a price that works. One other trick they have used very effectively was the entry level
ice cream which fuels the ability for consumers who might not ordinarily be able to afford to
become a customer.

Another very important thing they did was that all the machinery,infrastructure, and other
storage related equipment used to prepare the products were being produced locally to maintain
the hygiene standards and retain the trust of the customers as faras the quality was concerned.

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Implementation Strategies

The implementation plan does include so many things which can turn around any

organization. “Implementation is as important as excellence” (Chiyson, 2008). In this writing

we are considering McDonalds. Their implementation plan is given below:

Objectives: The Company should promise to provide good food globally in a fun and friendly

environment. It would make them socially responsible and through this they can also provide

good returns to the stakeholders. The company mainly focuses on sales growth, profit and

customer satisfaction so serve their main objective.

Functional Tactics: Functional tactics are more of like the daily activities to serve the

customer around the globe. As Lehner (2004) argued that the tactics is nothing but a genuine

organizational behavior, we should provide importance to these tactics. McDonalds use a

speedy service system to serve their customer. The most outrageous tactics used by the

company is the customer response they get from their customers. They have always tried to

maintain the brand image and this has allowed the company to present themselves to the

customers in a more convenient way. They also use the marketing mix strategy for the

functional tactics. They are very much focused about what marketing mix they are using such

as product, price, promotion and place. Overall, their functional plan is well established to keep

focus on the customer and serve them globally.

Action Items: Moreover, the company depends on its action plan a lot to serve their product

in a friendly manner. Their motto and action item is based on the word ‘Good’. The very first

thing is to provide ‘good’ food. Here good food is defined as great taste with different choices

and real ingredients. The company aims at finding out new ways to maintain a good nutrition

profile to maintain the great taste as per customer’s expectation. The next action item is ‘good

sourcing’. The impact of large global supply chain can be a very helpful way of getting source

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(Jeffs, 2008). The company is ought to maintain a relationship with the direct suppliers who

are committed and will do business responsibly. The next thing will bring about a ‘good’ planet.

As a company, McDonalds believe to operate in a more environment friendly way. With the

current development around the world, the company should seek more efficiency, crave for

more management of usage and cost and of course recycle wastage in a proper manner. The

very next thing the company can maintain is to provide education and training opportunity for

the good of the people

Milestones and a deadline: The Company has achieved a lot of milestones in the recent years.

But the company might need some more to add to its directions. One of them might be to set a

goal of expanding the business in many of the developing countries such as Bangladesh. The

target goal is set for 2020. The company will try to spread through the world within 2020. The

menu and price offerings will be arranged according to the geographical location of the

countries. Another target is to set up small stores of the company in small places to grab more

customers. This can be completed around the world within 2022.

Task & Task Ownership: Task ownership is a great way of motivating employees (Jeffs,

2008). It ensures accountability and motivates the employees to work properly. The task

ownership should belong to one and only person who can motivate and accelerate the flow of

the work. This should consist of the admin panel who will be in charge. The team members

have different roles but the task should be done by the active member of the team. The higher

level managers should play an important role in this scenario.

Resource allocation: It is very much important to match the resources with the outside

opportunities to make better use of its capabilities. According to Moch (1976), resource

allocation can be defined by the adaptation of innovation. So the company must innovate. The

most important resource for the company is its human force. According to the company’s

27
strategic goals, it is important emphasize on the human resource of the company. The

employees should be allocated according to the understanding of upcoming outlet’s

geographical location. The company has largest capacity of cooking and storing equipment.

An intangible resource for the company is its capabilities. McDonalds has used systematization

which presumes that the company can fully articulate all the process as a part of capabilities

The company has had a long reputation of maintaining good food and good

communication with the customers but some management strategies in management action

might be changed to get the full use of implementation. They are given below:

• The very first one is to cut the administrative cost around the organization. There is an

opportunity for the company to reduce the admin cost. But this will be biggest challenge

for the new CEO. Because it will difficult to make insufficient and unnecessary changes

in different bold areas. Some of the cuts might fall down to the bottom and in this case

allocation of human and financial resource can be a great help. Maximizing these will

help the company not to fall.

• Another strategy should be make some connection between the owners. Though

marketing strategies have changed the business for the company but the new CEO must

know how to make the cooperative owners of the company more efficient. The

voluntary owners will invest in advertising of the firm which will give it a new way of

getting the business going.

• McDonalds is not use the mobile ordering system properly. It should ramp up this

system. Is this case, it lacks innovation. As a part of innovation, the mobile app should

be launched immediately to ramp up the mobile operation of the company. This can be

pointed as a management’s dilemma. So it should be looked with more emphasize.

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 McDonalds have also been successful in providing good food around the nation. It does

have some success factors. Success comes in handy if they can minimize the cost. According

to Walker (2014), if someone makes the right decision regarding opportunity cost, then the

business will be successful. The success factors for the company are given below:

Customer Range: One of the prime focus behind the success of the company is its customer

range. The company has a wide range of customers.

Nutrition: The Company ensures the well-being of the customers. They focus on the nutrition

by providing the best quality product to the customers.

Availability: Another factor is the availability of the the outlets and foods around the globe

has made the company successful. One can easily go to a McDonalds shop by car of even foot

within a short range of distance.

Consistency: The Company is quite consistent in case of providing good food around the

globe. No matter someone is vising a shop in Asia or Europe, he will find the same taste and

consistency in the quality of the products.

These might be some of the key success factors for the company, but the company has great

reputation for affordability, reliance, innovation and maintaining goodwill.

The forecasted financials are estimated on various assumptions. They are estimated for

the year 2015, 2016 and 2017. They are given below:

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 2012 2013 2014 2015 2016 2017
Actual Estimated
Sales 27567 28106 27441 24976 24288 23186
Operating Income (EBITDA) 10093 10349 9594 8737 9151 9569
Operating Profit (EBIT) 8605 8764 7949 7199 7662 8244
Pre-Tax Profit (EBT) 8079 8205
Net Income 5465 5586 4758 4485 4733 5160
EPS 5.36 5.55 4.82 4.77 5.17 5.79
DPS 2.87 3.12 3.28 3.46 3.67 3.89

A Break even chart in given below for identifying the break even quantity and dollar

amount break even.

Break Even Chart

$25,000

$20,000

$15,000

$10,000

$5,000

$0
0 50 100 150 200 250 300 350 400

Total Cost Sales

The company will break even at 200 unit of sales. All the figures and estimates are shown in

millions.

As a globally recognized company, it faces many obstacles and risk factors around the

globe. Risk should be maintained by its nature. Gibbons (2015) said that it is more important

30
to understand the psychology of risk rather that the mathematics. Here are some risk

management plans for the company:

Operational Risk: The Company has faced several strikes and protest by the labors because

of lower payment in hourly wages. For mitigating such types of operational risk, some skilled

managers should be appointed at the management level for maintaining good relationship with

the labors to understand and communicate properly. The company might also give a second

thought of changing the policy.

Currency Risk: In 2013, the company had almost 40% of debt denominated in foreign

currency. Sometimes it may surpass the operating income of the company. It has also affected

the EPS and other financials. For dealing with this types of risk the company develop new

operational plan which will make the adjustment and fluctuation of the currency.

Legal Risk: It is always difficult to operate in the developed markets as legal risk is severe in

these countries (Sadler, 2003). Some regulations regarding the changes can be nutrition

contents, packaging and taxation which lead to higher cost. The company should enforce legal

environment around the organization to deal with these difficulties. Cutting cost at the

manufacturing level can be very helpful.

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References

Chiyson, A. (2008). The Sagacity of Sage. New York: Enaz Publications.

Gibbons, P. (2015). The Science of Successful Organizational Change: How Leaders Set
Strategy, Change Behavior, and Create an Agile Culture. New York: Pearson FT Press.

Jeffs, C. (2008). Strategic management. Los Angeles: SAGE.

Lehner, J. (2004). Strategy Implementation Tactics as Response to Organizational, Strategic,

and Environmental Imperatives. Management Revue, 15(4), 460-480. Retrieved from
http://www.jstor.org/stable/41783488

Moch, M. (1976). Structure and Organizational Resource Allocation. Administrative Science

Quarterly, 21(4), 661. doi:10.2307/2391722

Sadler, P. (2003). Strategic management. Sterling, VA: Kogan Page.

Walker, J. (2014). Launch: An Internet Millionaire's Secret Formula to Sell Almost Anything
Online, Build a Business You Love, and Live the Life of Your Dreams. New York: Morgan
James Publishing.

Chiyson, A. (2008). The Sagacity of Sage. New York: Enaz Publications.

Gibbons, P. (2015). The Science of Successful Organizational Change: How Leaders Set
Strategy, Change Behavior, and Create an Agile Culture. New York: Pearson FT Press.

Jeffs, C. (2008). Strategic management. Los Angeles: SAGE.

Lehner, J. (2004). Strategy Implementation Tactics as Response to Organizational, Strategic,

and Environmental Imperatives. Management Revue, 15(4), 460-480. Retrieved from
http://www.jstor.org/stable/41783488

Moch, M. (1976). Structure and Organizational Resource Allocation. Administrative Science

Quarterly, 21(4), 661. doi:10.2307/2391722

Sadler, P. (2003). Strategic management. Sterling, VA: Kogan Page.

Walker, J. (2014). Launch: An Internet Millionaire's Secret Formula to Sell Almost Anything
Online, Build a Business You Love, and Live the Life of Your Dreams. New York: Morgan
James Publishing.

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