McDonalds

Ray Kroc opened the first McDonalds restaurant in

1955. He offered a limited menu of high quality,
moderately priced food served fast in spotless
surroundings. McDonalds QSC&V (Quality, Service,
Cleanliness, and Value) was a hit.
The chain
expanded into every state in nation. By 1983, it had
over 6000 restaurants in United States.
In 1967, McDonalds opened its first restaurant outside
the United States, in Canada. By 1985 international
sales represented about one-fifth of McDonalds total
revenue. Yet fast food had barely touched many
cultures. While 90% of Japanese in Tokyo had never
eaten McDonalds Hamburger, in Europe, McDonalds
maintained a very small percentage of restaurant sales
but command a large share of fast food market. It took
the company 14 years of planning before it opened a
restaurant in Moscow. But the planning paid off.
People stand in line up to 2 hours for a Hamburger.
After waiting for such a long time they had to pay
$14.40 (at the official rate) for a Big Mac and French
Fries. Despite the high prices, McDonalds restaurant
in Moscow attracts more visitors on the average
27,000 daily the Lenin mausoleum (about 9000
people), which used to visit the place.
The taste of American Fast Food is growing more
rapidly in countries abroad than at home. McDonalds
international sales have been increasing by a large
percentage every year. Every day more than 18
million people in over 40 countries eat at McDonalds.
Its traditional menu has been surprisingly successful.
People with diverse dining habits have adopted
burgers and fries wholeheartedly. Before McDonalds
introduced the Japanese to French Fries, potatoes
were used in Japan only to make starch. The
Germans thought Hamburgers were people from the
city of Hamburg.
Now, McDonalds also serves
chicken, sausages, and salads and sandwiches.
The fast, family oriented service, the cleanliness and
the value accounted for much of McDonalds success.

McDonalds was one of the first restaurants in Europe

to welcome families with children. Not only are
children welcomed, but in many restaurants they are
also entertained with crayons and papers, a play land
or may be even Ronald McDonalds who can speak
twenty languages.
McDonalds golden arches promise the same basic
menu and QSC&V in every restaurant. Its products,
handling and cooking procedures, and kitchen layout
are standardized and strictly controlled. McDonalds
revoked the first French franchise because the
franchisee failed to meet its standards for fast service
and cleanliness, even though their restaurants were
highly profitable. This may have delayed its expansion
in France.
The restaurant is run by the local manager and crews.
Owners and managers must attend the Hamburger
University near Chicago to learn how to operate a
McDonalds restaurant and maintain QSC&V. The
main campus library and modern electronic class room
(which include simultaneous translation system) are
the envy of many universities. When McDonaldss
opened in Moscow, a one page advertisement
resulted in 30,000 inquiries about the job; 4000 people
were invited, and some 300 were hired. The pay is
about 50 % higher than the average soviet salary.
McDonalds ensures consistent products by
controlling every stage of distribution.
Regional
distribution centers purchase products and distribute
them to individual restaurants. The centers will buy
from local suppliers if the suppliers meet the detailed
specifications. McDonalds has had to make some
concessions to available products. For example, it is
difficult to introduce the Idaho potato in Europe.
McDonalds uses essentially the same competitive
strategy in every country: Be first in the market, and
establish your brand as rapidly as possible by
advertising heavily. New restaurants are opened with
a bang.

So many people attended the opening of Tokyo

restaurant that police closed the street vehicles. The
strategy has helped McDonalds develop a strong
share in the fast food market, even though its US
competitors and new local competitors likely enter the
market.
The advertising campaigns are based on local themes
and reflect the different environments. In Japan, where
burgers are snacks, McDonalds competes against
confectionaries and new fast sushi restaurants.
Many of the charitable causes McDonalds supports
abroad have been recommended by the local
restaurants.
McDonalds have been willing to
relinquish the most control to its Far Eastern
operations, where many restaurants are joint ventures
with local entrepreneurs, owning 50% or more of the
restaurant.
European and South American restaurants are
generally company-operated or franchised (although
there are many facilities- joint venture-in France). Like
the U.S.
Franchises, restaurants abroad are allowed to
experiment with their menus. In Japan, Hamburgers
are smaller because they are considered a snack. The
Quarter Pounder did not make much sense to people
on a metric system, so it is called a Double Burger.
Some of the German restaurants serve beer; some
French restaurants serve wine. Some of the eastern
restaurants offer oriental noodles. But these new
items must not disrupt existing operations.
Despite success, McDonalds faces tough competitors
such as Burger King, Wendys, and Kentucky Fried
Chicken, and now also Pizza Hut. Fast food in reheat
able containers is now also sold in super markets,
delicatessens and convenience stores, and even gas
stations. McDonalds has done very well, with a great
percentage of profits coming now from international
operations.

Aiming to be the world's best quick service restaurant,

McDonalds opened first store in Pakistan in
September 1998. Since then they have opened
seventeen new stores throughout Pakistan. Today
millions of Pakistanis place their trust in McDonald's
every day to provide them with food of a very high
standard as well as good service. In the past five
years, the response to McDonalds coming to Pakistan
has been overwhelming. Today Lakson Group of
Companies has taken over McDonalds Corporation,
USA and a local partner making it a 100% owned and
operated Pakistani company. McDonalds located in
Pakistan are currently employing about 1,000
Pakistanis and each store is managed by Pakistani
managers. They have also contributed in other ways
than food service. McDonalds has investment of over
Rs.300crore in the country and payment of taxes and
duties amounting to more than Rs.100crore.
McDonalds is operating, presently in 6 cities of
Pakistan Karachi, Hyderabad, Lahore, Faisalabad,
Rawalpindi and Islamabad, in future, very soon
planning to expand in many cities in Pakistan.
Questions
1. What opportunities and threats did McDonald's
face? How did it handle them? What
alternatives could it have chosen?
2. Before McDonald's entered the European
market, few people believed that fast food
could be successful in Europe. Why do you
think McDonald's succeeded? What strategies
did it follow? How did these differ from its
strategies in Asia?
3. What is McDonald's basic philosophy? How
does it enforce this philosophy and adapt to
different environments?
4. Should McDonald's expand its menu? If you
say no, then why not? If you say yes, what
kinds of products should it add?

But can this success continue?

5. Why was McDonald's successful in Moscow?