3/15/2018 McDonald’s Generic Strategy & Intensive Growth Strategies - Panmore Institute

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BUSINESS, MANAGEMENT

McDonald’s Generic Strategy & Intensive

Growth Strategies
UPDATED FEB 5, 2017 | LAWRENCE GREGORY

McDonald’s generic strategy determines

its basic approach to developing its
business and competitive advantage. As
the biggest fast food restaurant chain in
the world, McDonald’s uses its intensive
growth strategies to support continued
business development and expansion.
The related strategic objectives dictate
the company’s operational activities,
A McDonald’s in Oporto, Portugal. McDonald’s generic especially in responding to economic
strategy, based on Porter’s model, is effectively supported
through the rm’s intensive strategies for growth. (Photo:
changes and the actions of competing
Public Domain) rms. Variations in market conditions
impose pressure on the business to adapt
or reform its strategies. As such, McDonald’s generic strategy and intensive growth
strategies change over time to ensure long-term business viability.

McDonald’s generic strategy de nes the rm’s overall business approach for competitiveness.
The intensive strategies determine McDonald’s approach to growing its business in the global
fast food restaurant industry.

McDonald’s Generic Strategy (Porter’s Model)

McDonald’s primary generic strategy is cost leadership. In Porter’s model, this generic
strategy involves minimizing costs to offer products at low prices. As a low-cost
provider, McDonald’s offers products that are relatively cheaper compared to
competitors like Arby’s. However, the company also uses broad differentiation as a
secondary or supporting generic strategy. This secondary generic strategy involves
developing the business and its products to make them distinct from competitors. For

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3/15/2018 McDonald’s Generic Strategy & Intensive Growth Strategies - Panmore Institute

example, through McCafé products, McDonald’s applies the broad differentiation

generic strategy.

Vertical integration is a strategic objective linked to McDonald’s cost-leadership generic

strategy. For example, McDonald’s owns facilities that produce standardized mixtures of
ingredients. Also, cost minimization is a nancial strategic objective based on the cost
leadership generic strategy. In addition, product innovation is related to McDonald’s
broad differentiation generic strategy.

McDonald’s Intensive Strategies (Intensive Growth

Strategies)
Market Penetration. McDonald’s uses market penetration as its primary intensive
strategy for growth. In applying this intensive strategy, McDonald’s grows by reaching
more customers in markets where it already has operations. For example, McDonald’s
opens new restaurants in North America and Europe by franchising, joint ventures or
corporate ownership. A strategic objective connected to this intensive growth strategy
is global expansion through new locations. McDonald’s generic strategy supports this
intensive growth strategy because low costs and low prices empower the rm to easily
penetrate markets.

Market Development. In its early years, McDonald’s used market development as its
primary intensive strategy for growth. However, market development is now a
secondary intensive growth strategy because McDonald’s already has restaurants in
most regions around the world, except Mongolia, some parts of the Middle East and
west Asia, and the majority of African countries. A strategic objective for this intensive
growth strategy is to establish new locations in new markets, such as new McDonald’s
restaurants in African or Middle Eastern countries where the company currently has no
operations. Based on its generic strategy of cost leadership, McDonald’s supports this
intensive growth strategy by using low prices to compete in new markets.

Product Development. McDonald’s uses product development as its tertiary or

supporting intensive strategy for growth. In applying this intensive growth strategy,
McDonald’s develops new products over time, such as new McCafé products. These new
products may be variations of existing products, or entirely new products. The strategic
objective for this intensive growth strategy is to capture more consumers by attracting
them to new products. This intensive growth strategy agrees with McDonald’s broad
differentiation generic strategy in terms of new products that make the company
distinct.

Strategic Analysis and Recommendation for McDonald’s

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3/15/2018 McDonald’s Generic Strategy & Intensive Growth Strategies - Panmore Institute

McDonald’s generic strategy of cost leadership enables the company to sustain its
market leadership. The company’s broad differentiation strategy also helps. However, a
possible strategic direction for McDonald’s continued growth is to establish more
locations in developing economies and in countries where the rm has no market
presence. The recommended strategic goal is to fuel business growth through a
combination of the market penetration and market development intensive strategies.

References

Gargasas, A., & Mugiene, I. (2012). Intensive growth strategy development trends in
logistics services for agricultural organization providing companies. Management
Theory and Studies for Rural Business and Infrastructure Development, 34(5), 47-53.
McDonald’s Corporation (2015). International Franchising.
McDonald’s Corporation (2015). McCafé.
McDonald’s Corporation Form 10-K 2014.
Merchant, H. (2014). Con gurations of governance structure, generic strategy, and
rm size. Global Strategy Journal, 4(4), 292-309.
Miller, D. (1992). The generic strategy trap. Journal of Business Strategy, 13(1), 37-41.
Parnell, J. A. (1997). New evidence in the generic strategy and business performance
debate: A research note. British Journal of Management, 8(2), 175-181.
Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer
examination. Journal of Business Research, 10(4), 503-522.

TAGS:
CASE STUDY & CASE ANALYSIS, 
GENERIC STRATEGY (PORTER'S MODEL) & INTENSIVE GROWTH STRATEGIES, 
MCDONALD'S CORPORATION, RESTAURANT INDUSTRY, STRATEGY

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