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BUSINESS, MANAGEMENT

McDonald’s Organizational Structure

Analysis
UPDATED FEB 5, 2017 | ANDREW THOMPSON

McDonald’s organizational structure was

reformed in July 1, 2015 to improve the
company’s handling of its global
operations. A rm’s organizational
structure de nes the system through
which organizational components
coordinate to achieve business
objectives. McDonald’s organizational
structure facilitates managing markets
A McDonald’s in Liberdade, São Paulo, Brazil. McDonald’s based on performance levels. As the
organizational structure evolves over time to facilitate the largest fast food restaurant chain in the
rm’s management of global operations in the fast food
restaurant market. (Photo: Public Domain)
world, McDonald’s keeps evolving to
address current and emerging market
issues. The rm rolls out new products to maintain its performance in satisfying
customers. These endeavors are supported through McDonald’s organizational
structure, which is designed to adapt to the changing business environment.

McDonald’s organizational structure establishes the arrangement or pattern of interactions

among various business areas. Through its corporate structure, McDonald’s succeeds in
managing ef ciency and performance in its operations in the global fast food restaurant
industry.

Features of McDonald’s Organizational Structure

McDonald’s has a divisional organizational structure. Each division handles a speci c
operational area. The aim of this organizational structure is to support autonomy and
organizational exibility. McDonald’s organizational structure has the following
characteristics, arranged according to signi cance:

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3/15/2018 McDonald’s Organizational Structure Analysis - Panmore Institute

1. Global hierarchy
2. Performance-based divisions
3. Function-based groups

Global Hierarchy. McDonald’s has a global hierarchy to cover all its operations
worldwide. This feature of the organizational structure emphasizes corporate control.
For example, McDonald’s CEO directs the activities of all business areas. Mandates are
passed from the CEO down to middle managers, and to the restaurant managers and
personnel. This characteristic of McDonald’s organizational structure is typical of most
global business organizations.

Performance-Based Divisions. The performance-based divisions are the most distinct

feature of McDonald’s organizational structure. The company reorganized its structure
on July 1, 2015. Before the reorganization, the geographic divisions in McDonald’s
organizational structure were (a) U.S., (b) Europe, (c) Asia/Paci c, (d) Middle East and
Africa (APMEA) and (e) Other Countries & Corporate (OCC) including Canada, Latin
America and Corporate. After the reorganization, McDonald’s used performance as
basis for the new divisions in its organizational structure: (a) U.S., (b) International Lead
Markets, (c) High Growth Markets, and (d) Foundational Markets and Corporate. The
U.S. accounts for more than 40% of McDonald’s revenues, and the lead markets for 40%.
The high-growth markets account for 10% of revenues.

Function-Based Groups. McDonald’s maintains function-based groups in its

organizational structure. For example, under corporate operations, the company has a
human resource management group, a supply chain and franchising group, and a legal
group. This characteristic of the organizational structure enables McDonald’s to address
the basic functions in its business.

McDonald’s Organizational Structure Advantages &

Disadvantages
An advantage of the hierarchy in McDonald’s organizational structure is its support for
monitoring and control of global operations. Also, the performance-based divisions have
the advantage of enabling McDonald’s to implement strategies based on market
performance similarities. For example, the rm applies similar strategies for all lead
markets. However, a disadvantage of McDonald’s organizational structure is that it
tends to generalize strategies for the performance-based divisions. The company has
limited exibility because of this feature of the organizational structure.

References

Child, J. (1972). Organizational structure, environment and performance: The role of

strategic choice. Sociology, 6(1), 1-22.
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3/15/2018 McDonald’s Organizational Structure Analysis - Panmore Institute

Markides, C. C., & Williamson, P. J. (1996). Corporate diversi cation and

organizational structure: A resource-based view. Academy of Management
journal, 39(2), 340-367.
Martin, R., Muuls, M., de Preux, L. B., & Wagner, U. J. (2012). Anatomy of a paradox:
Management practices, organizational structure and energy ef ciency. Journal of
Environmental Economics and Management, 63(2), 208-223.
McDonald’s Corporation (2015). Company Pro le.
McDonald’s Corporation Form 10-K 2014.

TAGS:
CASE STUDY & CASE ANALYSIS, MCDONALD'S CORPORATION, ORGANIZATIONAL STRUCTURE, 
RESTAURANT INDUSTRY

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