McDonalds A brief history

The McDonalds Corporation was started by Richard and Maurice McDonald in 1940
based in California. In 1948 they introduced the Speede Service System which laid
the principles for the modern fast food restaurant. The first franchised and the ninth
overall restaurant of McDonalds was owned by Czech American business man Ray
Kroc in Illinois in 1955. He later bought the McDonalds brothers equity in the
company. Kroc also initiated and led its worldwide expansion with its public offering
in 1965. Krocs aggressive business practices forced the McDonald brothers to leave
the business. Ever since then McDonalds has not only become a symbol of
Globalization but also has been popularizing the American way of life across the
world. Today McDonalds has over 35000 restaurants in 118 countries and it serves
over 68 million customers each day. McDonalds also employs more than 1.7 million
people. Because of the scale at which it operates McDonald has not only become one
of the most popular brands among the population, it has also become an iconic figure
in terms of globalization. A prime example of this can be the use of the Big Mac
Index by The Economist newspaper to estimate the purchasing power parity of
different economies across the globe on the basis of the prize of the Big Mac.
McDonalds maintains its American meal context in different counties but also it has
adapted to the local requirement to cater to the need of the consumer particularly in
countries like Germany, India, and Eastern European Nations. As per as the business
model is concerned the sources of revenue for McDonalds corporation are operator
of restaurants, franchiser of restaurants and property investment. The last one is often
ignored but the fact is that McDonalds owns properties in prime locations in all the
major cities in 118 countries.
Mc Donalds Decision to go global

World's largest fast food restaurants chain the McDonald's Corporation is currently
serving in 119 countries across the globe with 35,000 outlets. Journey of McDonald's
started from the headquarter-United State of America, in 1955 when businessman
Ray Kroc joined the company as a franchise agent and subsequently he purchased the
chain from the McDonald brothers (Richard and Maurice McDonald). He oversaw its
worldwide growth and by 1965 McDonalds went public with the companys first
offering on the stock exchange with 700 restaurants. Ray Kroc believed I n business
for yourself, but not by yourself to achieve this vision he started to convince
franchisees and suppliers to join and work together with McDonald's. Finally in 1967
McDonald's opened its first restaurants outside the United States of America at
neighbour country Canada-Richmond, British Columbia. McDonalds entered into the
international markets by three methods- franchising, company owned outlets and joint
ventures. Over the years, the international section of the McDonalds Corporation has
become increasingly more important to the companys overall success and foreign
markets were extremely more profitable for McDonalds than U.S. operations.

There were various reasons to open the new McDonald's outlasts globally-
1. Growth: With consistency of the quick service and good quality of fast food
along with limited menu McDonald's wanted to increase the customer base
and capture the more market share to becoming the leader in fast food
restaurant. To full fill this purpose McDonald's started the food chain in
international market. And continuously invested money on overseas market to
attract more and more new customers.
2. New Ideas: McDonald's went internationally to spread the culture of fast food
in the way of McDonald's doing and learn new strategy, culture, business
practices. The main strategy behind the McDonald's expansion in international
market that-collect the different ideas from the different culture of different
countries, work with different backgrounds of the work force which helped to
grow to MacDonalds.
3. Revenue and Profit: Motivation of the high revenue with high profit
McDonald's believed that investment in the international market will bring
higher returns than additional investment at home market. McDonalds
detected through marketing research and the idea of utilizing the heavily
populated areas of focus to cut costs and increase profits. McDonald's focused
on low margin and high volume, for this purpose McDonald's went outside of
the United State to target big market segment where population growth was
high.

4. Market Saturation: Fear of the market saturation and competitors in the
United State were one of the main reasons behind the go globally, which may
force to MacDonalds to the slash price of the product in the future. As a result
of profit of McDonald's may decrease in future and finally MacDonalds
decided to open new restaurant globally.

5. Diversification: MacDonalds decided to go global for diversification. Selling
fast food and quick services in multiple countries reduce the MacDonalds
exposure to possible economic and political instability in a single country and
create balance between the home market and overseas market.
The entry strategy adopted by Mc Donalds in its first global
venture

McDonald's had its first international expansion in 1967 on June 1 outside US with its
first restaurant coming up in Richmond B.C, Canada. Being one of the Canada's
largest fast-food restaurant chains, McDonalds had franchisee based entry strategy
and sold food items, including hamburgers, chicken, French fries and soft drinks all
across the country. McDonald's has alternatives such as salads, milk and juices though
it is well known for its high fat and calorie foods. George Cohon founded the
company with the first store opening in 1968 as the Western Canadian franchisee
operating with the U.S. operations. Cohon also opened his store in 1968 as the Eastern
Canadian franchise. In 1971, the two operations merged to one national operation.
Western franchise owners opened the first McDonald's restaurant. Franchise model
was a part of McDonalds strategy which it extended further to most other countries
where it ventured into, both keeping the cost constraints and the cultural differences in
consideration which necessitated it to be high in local responsiveness to sustain.
As a method to keep costs low, McDonalds maintained their production strategies
when they entered new countries but frequently adapted product choices and services
offered to the predominant practices existing in the host country beginning firstly with
Canada. The theory of internationalization has been internalized and adapted, which is
more readily accepted over the theory of standardized globalization. McDonalds has
developed the McLobster on the Canadian east coast, a lobster salad sandwich, where
lobster is readily available.
Mc Donalds entry into French market

France happened to be one of the most dynamic markets for Mc Donalds. In 2011,
after the United States, France was the most profitable country in the world for
McDonalds. In Francophone countries or territories, 1972 saw the first McDonalds
Quebec opening in Montreal; with a new franchise opening every month for the next
18 month span. In France, the land of gastronomy, McDonalds seeing no future sold
a license for 30 years at very favourable terms in 1971 to a French businessman,
Raymond Dayan, living in the United States. Thus, on 30 June 1972 in France, the
first McDonald's opened making France the ninth country which witnessed the
opening of McDonald. After a few years, realizing its grave mistake McDonalds
offered to buy back from George Dayan, the 14 restaurants it had already opened. He
refused to do so. McDonalds in order to terminate the franchise agreement claimed
non-compliance with the rules. The trial that followed failed and lost on appeal to the
Court of Chicago though it won at trial. In 1982, 12 of its restaurants were renamed
by Raymond Dayan. Despite the three companies entering the French market around
the same time Quick, McDonalds and Burger King, Quick had grown to 258 and
McDonalds to 542 restaurants. The management of McDonalds France, at every
turn had been very sensitive to the French consumers preferences, both inside the
restaurants as well as in their daily lives. Since 1979 after opening its first French
restaurant in Strasbourg, McDonalds tailored its menu to the French palate and has
sought to leverage the strength of the global conglomerate. In McDonalds French
entry, overall local market needs and opportunities were not responded by the chain,
although apparently some elements of an international strategy existed. Strasbourg
was chosen to leverage the already existing brand recognition as the initial location
that already existed in Germany, also for France keeping the same restaurant decor
and recipes. From 1980, for the first 15 years, offering people a slice of America was
mainly what was done. In 1995, however McDonalds started using French cheeses as
well as whole-grain French mustard sauce. By changing the recipes in France,
McDonalds started executing a multidomestic strategy and winning the hearts of
French consumers. Besides this McDonalds also demonstrated the zeal of
understanding the cultural particularities across national boundaries of consumers. In,
nearly 40% of meals are eaten outside the home in US and the U.K., compared to
barely 10% in France. French meal times also last longer as a result of having rarely
any snack between breakfast, lunch and dinner by French consumers. And more food
is consumed through multiple courses, clearly for fast-food dining, creating unique
opportunities and challenges. His opportunity was capitalized by McDonalds. The
company installed electronic ordering kiosks freeing up valuable labour rather than
run promotions to change the food habits and encourage snacking. These kiosks were
used by one third of the customers in more than 800 of its restaurants. McDonalds
has capitalized by using surplus labour to provide table-side service, leveraging the
French cultural preference for longer meals
Mc Donalds entry strategy in China
Since 1955, its founding, McDonalds for global success has relied on its franchisees
to play a major role. Among 120 countries all over the world Franchisees account for
80% of the 30,000 McDonalds restaurants and more than70% of the fast food giants
profits are created out of them. Besides since its entry into China, McDonalds is first
time planning to expand franchising in Chinas biggest cities of Shanghai and
Shenzhen. Unfortunately the Chinese market, the franchisee model has not been
successfully replicated. In 1990 when McDonalds first entered China, it chose to
operate its own restaurants, basing its judgement on the assumption that its high
operating costs wouldnt give franchisees much of a profit margin besides the fact that
China also had few regulations about franchising. In 2010, the company in certain
provinces of China began seriously recruiting franchise partners, but still
McDonalds of all its outlets China account for less than 5% franchises located mostly
in smaller cities. McDonalds has planned to change the situation, hoping to double
the number of its Chinese restaurants in the next three years. By 2013, China had
become McDonalds third-largest market in the world. The Porters five forces are-
The Degree of Rivalry: In China McDonalds had a lot of competition, like KFC and
Mom and Pop food stands etc. HIGH
The Threat of Entry: Many new companies like burger king tried to enter the China
but lagged behind due to McDonalds brand awareness and number of outlets. HIGH
The Threat of Substitutes: Many restaurant chains entered the Chinese market like
subway, rainforest cafe etc. but they havent been able to establish themselves due to
poor brand awareness in demanding Chinese market. HIGH
Buyer Power: Customers placed higher expectations on various aspects of restaurants
due to growing income in urban china. HIGH
Business strategy adopted by the McDonalds in the global
market

As per McDonald's CEO, James Skinner, the company's business strategy is Plan to
Win. The business strategy of McDonalds is based on geographic divisions. There
are five geographic regions wherein McDonalds tries to maintain its leading position
and at the same time tries to expand its business to other emerging markets. But the
target audience vastly remains the same- segments requiring fast service, affordable
price and good hygiene.
In the global market, there is a high pressure on McDonalds for both cost as well as
localization. Though in different geographical areas they pursue maximum local
development and they even produce different products and have different marketing
strategies, the customer service, quality, cleanliness and value philosophy remains
unaltered across nations.
McDonalds sells standardized products across the globe which are priced
competitively and caters to the local needs. Adjusting prices and local differentiation
is essential for gaining a competitive advantage. They respond to the new markets
targeting local ingredients, local tastes and local sentiments. One of the examples
could be Halal meat in Islamic nations.
Business strategy-
International growth strategy for McDonalds if to Think Global, Act Local.

Source:
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We say that McDonalds follows Transnational strategy because of the following
reasons-
1. Transnational strategy necessitates continual integration of unique resources
and capabilities. Integration strategy can be seen with respect to the human
resources where the McDonalds managers have special trainings. Also with
respect to innovation and flow of people, McDonalds supports the same across
the geographic regions.
2. Focus on cost management and revenues simultaneously by means of
standardization which can be termed as the companys core knowledge so as
to ensure the consistent food taste on a global scale and innovation in the
product category. This is achieved through detailed developmental plans. This
is also necessary to sustain the brands image.
3. Local responsiveness is termed as high because McDonalds has consistently
introduced newer products and selectively launched some products in selected
markets based on the culture and local preferences of the target nation. For
example, in France, customers did not prefer fast-food chains but McDonalds
by restructuring restaurants and by adding new menu items such as espresso,
brioche and more upscale sandwiches have increased their revenues.
Internet Business model-
The Internet business model types for McDonalds are systematic operations resulting
in consistent customer experience, free wifi service, touch screen at the outlets so that
they are self service centres. The usage of such models encourage McDonalds outlets
to be perceived as a more of hang out spot than a food junction. This strategy attracts
teenagers which in turn increases revenue.
Adoption of strategy-
The strategy adopted by McDonalds is in response to the external environment which
are listed below-
1. With respect to the competitors, industry has a lot of fast foot giants like
Subway, etc which are known for fast service as well as fresher and hotter
product offerings. McDonalds in response to such kind of threats have
introduced a series of products to adapt to the external environment like zesty
chicken in UK. Also, McDonalds is trying to provide more choices with
respect to offers like Happy meal hours and the like. Also re-modelling
stores and providing internet facilities at the outlet aid in establishing larger
consumer base and attract teenagers.
2. Health consciousness- In response to the findings by different health
organizations that consumption of fast food causes obesity and leads to health
problems, McDonalds introduced salads in their menu for lighter meals.
3. Political/Legal factors- Different countries follow different rules and hence a
violation of any would result in significant costs for the company. One such
instance was when McDonalds was accused of incorrect composition in one
of its products.
4. Economic factors- From the point of view of sourcing the raw materials and
currency fluctuation, the cost of products change correspondingly. This will
result in lowering of the margins in case inflation hits the target country.
Focus on children-
McDonalds realized that focussing on children will help them to drive the brand
image of happiness. Also children being the driving engine to encourage the whole
family, targeting children is the best option.
To attract children to the outlets, they have devised novel methods like providing
gifts, etc to the children on their visits to the outlets.
McDonalds uses Franchisee model and direct sales for rapid expansion into different
countries worldwide.


McDonalds Marketing Strategy
Marketing Strategy of a firm is one of the most vital elements of a firms strategy
mix. The absence of this makes it difficult for a business to attract and maintain its
customer base. It is a set of strategies that is aimed at increasing the growth and
development of a business.
The first McDonalds restaurant was opened in California in 1948. It has come a long
way since then opening more than 30,000 outlets worldwide. Its sales figure is
approximately $40 bn. This has been achieved through a clever mix of marketing
strategies.
Analysis of 5Ps

PRODUCT
McDonald's keeps the product offering dimensions constant. Its packaging is
also standardized across countries to maintain uniformity.
Changes product ingredients depending on country of operation. Has helped
gain widespread acceptance and popularity.
Eg: In India, Beef products are not served and non halal, and pork items are not
served in Islamic countries.
PLACE
Includes distribution outlet and channel of the business.
Follow JIT system. Just In Time system guarantees serving customers almost
immediately as they place their order
Outlet themes are standardised across the world, in terms of layout, colours, etc.
so customers are never surprised rudely and can expect a certain value, quality
and standard.


The punch line of McDonalds Im lovin it is an attempt to show that the
employees are loving their work and put customers before anything else.

The main underlying theme in all of McDonalds marketing strategies is uniformity
and standardization.
Marketing strategy in the home country (USA)
McDonalds main focus is the US, where they spend most of their budget and
trial more new products and innovations. The American audience is their
largest Americans spend more money at McDonalds than any other fast food
restaurant in the country. They concentrate mostly on children to achieve this
loyalty base. As per a study by the restaurant, this is what emerged:
PRICE
McDonalds restaurant has specific value pricing as well as bundling strategy
like combo meal, happy meal, family meal and happy price menu in order to
improve total sales of the service and product.
PROMOTION
The endorsement activities implemented by the Company aids communicate
effectively with the potential consumers. Ad targeted to catch the interest of
the people it reaches to massive number of customer at a time.
Mascots like Ronald Mcdonald have achieved tremendous recognition and mind
recall, and have helped developed a loyal consumer base, especially children.
PEOPLE
McDonalds lays equal emphasis on both customers and employees. Its credo
lies in the fact that happy employees can help generate happy customers.
Internal Marketing drives, to achieve this.


Therefore, the STP Segmentation, Targeting and Positioning is done based on the
influencing capabilities of children.

The main target segments are children, youth and the young urban family. Children
are more attracted towards toys and delicious meals. As a result, McDonalds started
its Happy Meal programme wherein, a toy was gifted along with each meal. This led
to sales soaring up astronomically.


Co Branding strategy:
This is a very effective strategy to boost customer mind share and loyalty. It is tying
up with another firm that can add value and serving with the offerings from both the
firms. The two brands enter into an agreement and later share their earnings from the
deal.
Some examples are:
Mcdonalds and Cocacola
Mcdonalds and Walt Disney
McDonalds and Cadbury
McDonalds and Hot Wheels

ADVERTISING STRATEGY
McDonalds is one of the most aggressive advertisers. McDonalds American and
Canada website say that the advertisements focus and try to popularize the Overall
McDonalds experience rather than just the product. Another important point is,
McDonalds has never tried to do negative publicity for any of its competitors or done
any comparison, all focus is on McDonalds itself. In addition to conventional media
like TV, newspapers, etc. The firm also uses signage, billboards as well as
sponsorship to gain widespread footage. Eg: Olympics, etc.


WORLDWIDE GROWTH STRATEGY
It comprises of three major components:
1. Addition of new branches
2. Maximizing sales and profits at existing restaurants
3. Improving international profitability
These can be achieved through better operations, innovation and development.
International profitability can be achieved with economies of scale and as the
company benefits from global infrastructure.

Mc Donalds global HR strategy: Managing cultural differences

McDonalds serves fast-food ranging from soups to nuts in 35000 restaurants in 119
countries. This is an organization which knows the key to successful global growth.
The cardinal reason for its success worldwide is its ability to translate its winning
people and employment practices into different cultural formats. Their careful
planning processes are a lesson for everyone. McDonalds respects cultural
differences and is always focused on localization of its offerings. For example, it runs
its stores in India which do not offer any beef products. In Saudi Arabia, the company
has restaurants which have two dining rooms, one for males and another for females
and children. Getting the right employees is only the first step in McDonalds HR
practices. The important part is their training. McDonalds has set up Hamburger
University, which is head quartered in Oak Brook, Illinois, but it provides training in
22 different languages and can even provide training in 2 languages at a time.
"One of our guiding principles is that our restaurants should always be a reflection of
the communities they serve-not only the individuals we employ and the culture and
ethnicity of those communities, but also the employment practices," says Rita
Johnson, staff director in international human resources with responsibility for Central
Europe.
HR issues answered before entering any country
Before entering any country, McDonalds first tries to answer questions like, the labor
laws in the country. Would the company be able to establish part-time and flexible
work schedules? Are there a specific number of hours employees are allowed to
work? Can the company employ youth under the age of 18? What other services must
the company provide?
HR policies and the Org structure in the US
The company is headquartered in US. It has the below shown organization structure in
the US.


CEO
COO CFO CIO HR
Supply Chain
and
Franchise
Presidents
USA, APAC
MEA &
LATAM
CSR
There are presidents below CEO for each of the geographies APAC & MEA and
LATAM. The hierarchy below the president in US is as shown below.


Meeting the expectations of the employees in the home country
Education is everywhere in McDonalds. A person receives crew training in the
beginning. After crew training there is Management Development Program. The
Hamburger University has several resident professors offering various courses related
to management and restaurant operations. This way McDonalds is constantly
building a cadre of future leaders. More than 60% of McDonalds managers started
their carriers as crew members. McDonalds addressed their basic need for skill
development, higher education by giving them opportunity to go through the
Management Development Programs, hence, enhancing its retention ratio as well as
making them future McDonalds restaurant owners.
HR policies in Other Countries
China
In terms of revenue, china is the largest subsidiary of McDonalds. McDonalds in
china follows a two pronged strategy of owning the restaurants and following a
President
COO
Central
Division
East
Division
HR Marketing SCM
Menu
Innovation
Communic
ation
franchise model. Unlike US where 85% of revenue comes from the franchise in china
the company prefers owned restaurant model.
Org structure in China


The organization structure in china is quite similar to the one followed in other
subsidiaries where geography president/CEO is the head of the organization and all
other division heads report to him.
Managing the Cultural Differences
There may be some difference in local labor laws of various countries but
McDonalds philosophical approach to employment is the same irrespective of the
country of operation. The company always tries to employ most people positive
practices and tries to exceed the expectations of the employees. And the company
does it very well.
For example, when McDonalds entered Central European countries like Romania,
Slovakia, Latvia and Poland, it provided the employees with facilities like shower and
lockers. This is required by law in some but McDonalds anyway provides these
services to its employees in many countries where these facilities are very expensive
or difficult to obtain, even when it is not required by law in that country.
There are many countries where the only practice to hire employees is to hire them as
full time employees. In such instances, McDonalds tries to convince the local labor
CEO
Product
Development
CIO
Information
Systems
Marketing and
Communication
Operations Supply Chain Fianace
Human
Resources
ministries by providing fact based rationale that they can employ more individuals
by adopting a part-time employment practice because some of the people have
children at home or are students and hence arent able to be employed full time.
McDonalds also tries to maintain the image of a choicest employer. They do this by
paying top wages in the industry and providing benefits packages which exceed the
minimum required by law. Also, the organization believes in promoting people from
within, throughout all levels of the company. This helps in attracting people because
they know they can work hard and move up.

United Kingdom (UK)
In 1991, the author Douglas Coupland used the phrase McJobs in his book
Generation X to describe a low-pay, low-prestige, low-dignity, low-benefit, no-future
job in the service sector. Since, then the label become embedded in the minds of the
public and also resulted in lower employee satisfaction rate and hence higher turnover
ratio at McDonalds.
McDonalds ran a campaign to focus on its people to build confidence and pride
associated with jobs at McDonalds. The strategy focused on
1. Independent research to identify level of satisfaction among employees
2. A campaign to put forward irrefutable evidence in favor of the fact that
McDonalds offer valuable, highly skilled jobs and careers.
3. Active campaigning on behalf of McDonalds workforce to transform the
perception of jobs and careers at McDonalds
4. Celebration of the employment opportunity available at the company.
Employee satisfaction level
Since the strategy was set in place the number of employees who felt proud to work at
McDonalds increased from 60% to 79%. 83% employees said they would
recommend the jobs to their friends. According to research conducted by Professor
Adrian Furnhams nine out of 10 young McDonalds employees showed high levels
of satisfaction and commitment to their jobs substantially higher than other
workplaces where comparable studies were undertaken. Two-thirds believed their
opportunities for promotion were better than their friends, with the average among
their peer group only 25%."





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