mcdonalds corporation case study

McDonald's Corporation: The World's Leading Fast Food Chain [Case Study]

Devashish Shrivastava , Anik Banerjee

McDonald's Corporation is an American fast-food organization established in 1940 as a café by Richard and Maurice McDonald, in San Bernardino, California, United States. They rechristened their business as a burger stand and later transformed the organization into an establishment; the Golden Arches logo being presented in 1953 at an area in Phoenix, Arizona.

Ray Kroc, a businessperson, joined the organization as an established operator in 1955 and continued to buy the chain from the McDonald's siblings. McDonald's had its base camp in Oak Brook, Illinois, and moved its worldwide base camp to Chicago in mid-2018.

McDonald's is worth $185+ bn today. It is the world's biggest eatery network by revenue. It was last registered to be serving 69+ million customers each day in more than 120 countries across over 39,000 outlets.

Although McDonald's is best known for its burgers, cheeseburgers, and french fries, its menu also includes chicken items, breakfast things, sodas, milkshakes, wraps, and sweets. In light of changing buyer tastes and a negative backfire on account of the wretchedness of its food, the organization has added mixed greens, fish, smoothies, and natural products to its offerings.

McDonald's Corporation's income originates from leases and charges paid by the franchisees. According to two reports distributed in 2018, McDonald's is the world's second-biggest private manager with 1.7 million representatives (behind Walmart with 2.3 million workers).

Here's bringing you the McDonald's company profile that will present to you McDonald's company overview, when was McDonald's founded, McDonald's growth over the years, about McDonald's, McDonald's owner name, founder of McDonald's corporation, McDonald's history and background, McDonald's case study marketing, and more.

McDonald's - Company Highlights

McDonald's - Startup Story and History McDonald's - Mascot/Logo McDonald's - Business Model And Market Strategy McDonald's - Target And Mission McDonald's - Growth McDonald's - Restaurants And Services McDonald's - Future

McDonald's - Startup Story and History

Richard and Maurice McDonald in 1940, opened the primary McDonald's at 1398 North E Street at West fourteenth Street in San Bernardino, California; however, it was not the McDonald's you know today. Ray Kroc made changes to the siblings' business and modernized it.

The siblings presented the "Speedee Service System" in 1948 by extending the standards of cutting-edge drive-thru eatery that their antecedent White Castle had tried over two decades earlier. McDonald's emerged with a delivery model where it made its food on a supply belt and delivered it within 2 minutes.

It looked like a fantastic and impossible eatery that had:

• Only burgers, fries, and shakes on the menu • No plates or waiters to serve the customers

However, when Ray Kroc came, he was astonished by the never-ending waiting lines that were there waiting for their orders from McDonald's.

Kroc was then 50 already and was selling milkshake mixers door to door. Ray Kroc had earlier tried his hand in many things but never had attained success in his whole life. He already worked as a musical director, pianist, and had also worked as a real estate guy, in the paper cup industry, and as a seller of kitchen appliances, but he couldn't hold on to one thing among them all. Thus, Kroc was a person who lived from paycheck to paycheck.

Kroc came to McDonald's to deliver an absurd order of 8 milkshake mixers for just one area. He wondered "why would someone want to make 40 milkshakes at a time?" This is why he drove to California, at McDonald's to see the place himself.

Seeing the huge demand for McDonald's burgers, fries, and shakes, Kroc sensed a huge opportunity. He soon pushed the founders of the store to embrace a franchise model. The McDonald's brothers who owned the business, were living a comfortable life then, getting rich by the day, and buying Cadillacs as they filled their pockets. They didn't have vision nor they were eager to expand. However, Ray convinced them and rushed to work, as soon as he did that.

He assumed the role by taking 2 major steps back to back:

• Mortgaging his house when he was already 52
• Opening 18 new outlets in the very first year

This has helped the company scale big time, and McDonald's now boasts of:

• Serving 2.3+ billion burgers a year
• Serving 39,000+ restaurants across more than 120 countries
• Being the 4th largest employer in the world
• Being the largest toy distributor in the world

Though it was Ray's idea and the expansion was promising, the McDonald's brothers made an unfair deal with him. Kroc was allowed only 2% of the profits. McDonald's being to scale aggressively but the founders of McDonald's wasn't really happy with Ray and his scaling. This is why Ray borrowed and bought them out for $2.7 mn, thereby becoming the 100% owner of McDonald's.

The organization attributes its success to Ray Kroc. Kroc later bought the McDonald siblings' value in the organization and was responsible for McDonald's overall reach. He was seen as a forceful colleague, driving the McDonald siblings out of the business. Kroc and the McDonald's siblings battled for control of the business, as recorded in Kroc's life account.

The San Bernardino eatery was torn down (1971, as indicated by Juan Pollo) and the site was offered to the Juan Pollo chain in 1976. This zone currently fills in as central command for the Juan Pollo chain, and a McDonald's and Route 66 museum.

With the development of McDonald's into numerous universal markets, the organization has turned into an image of globalization and the American lifestyle. Its unmistakable quality has additionally made it a regular point of open discussions about heftiness, corporate morals , and shopper obligation.

McDonald's - Mascot/Logo

The first mascot of McDonald's was a cooking cap over a burger who was alluded to as "Speedee" . In 1962, the Golden Arches supplanted Speedee as the all-inclusive mascot. The image of jokester Ronald McDonald was presented in 1965. Ronald McDonald showed up to promote amongst children.

On May 4, 1961, McDonald's initially petitioned for a U.S. trademark on the name "McDonald's" with the portrayal "Drive-In Restaurant Services". By September 13, McDonald's, under the direction of Ray Kroc, petitioned for a trademark on another logo—a covering, twofold curved "M" image.

Before the twofold curves, McDonald's used a solitary curve for the design of its structures. Even though the "Brilliant Arches" logo showed up in different structures , the present form was not utilized until November 18, 1968, when the organization was given a U.S. trademark.

McDonald's - Business Model And Market Strategy

The business and revenue model of McDonald's includes almost 37000 outlets which spread to more than 120 nations. Today, McDonald's is the biggest eatery network on the planet in terms of income.

Initially launched as a Drive-In Hamburger Bar, the idea was advanced in 1940 by The McDonald Brothers, Richard James (Dick), and Maurice James (Mac) McDonald. It was after the presentation of the Speedee Service System with shakes, fries, and burgers costing as low as 15 pennies that the McDonald Brothers started the establishment of McDonald's Hamburgers.

In 1954, Ray Kroc turned into the establishment operator of the McDonald Brothers. The main McDonald's eatery was opened by Kroc in 1955 in Des Plaines, Illinois, USA. It was in the year 1961 that the rights to the eating joint of the kin were obtained by McDonald's for a powerful total of $2.7 million.

You may likewise be astonished to realize that when the first McDonald's eatery opened, the extremely well-known McD french fries were eaten with no ketchup! The revenue model of McDonald's, the world's quickest developing food chain, is an interesting one.

McDonald's - Target And Mission

McDonald's endeavours hard to be its clients' "most loved spot and approach to eating". McDonald's plan of action is fixated on the ground-breaking strategy "Plan To Win", which is placed into requests around the world.

With the mission of "Quality, Service, Cleanliness, and Value", McDonald's has clung to each of these characteristics. Client experience is improved by the selection of five fundamentals: people, products, place, price, and promotion.

Additionally, McDonald's plans to give high-review nourishment, at effectively reasonable costs to individuals over the globe. The deals at McDonald's are furrowed through an efficient deals channel which guarantees remarkable consumer loyalty on all occasions.

Astounding Vision

When Ray Kroc opened the Original McDonald's in Illinois, he had a dream of expanding the franchise across the globe with more than 1000 outlets in the States itself. Remaining consistent with its guarantee, McDonald's widened its worldwide handle by opening joints outside the US as early as 1967.

The first international outlets were opened in Canada and Peurto Rico. By January 2018, McDonald's was situated in 120 nations and had about 37200 cafés with 1.9 million workers. It was serving more than 69 million individuals every day. At one point in time, McDonald's was opening a new outlet every 14.5 hours!

Significant Growth Strategy

McDonald's has clutched a promising development technique to serve customers and spread its wings. The presentation of the "Speed Growth Plan" in March 2017 enhanced the development of the business.

McDonald's development system depends on retaining, regaining, and converting. McDonald's strives to hold on to its old clients, recapture the lost trust, and convert easygoing clients into ordinary ones.

What's more, it has additionally embraced three quickening agents: digital, food delivery, and experience of things to control its monstrous development. It keeps on reshaping cooperation with clients and raising the level of consumer loyalty and experience through innovation and human endeavours.

Decent Variety

Monetarily, McDonald's has affected the world more significant manner than some other organizations. McDonald's adheres to the conviction "Decent variety is Inclusion" and doesn't leave a solitary opportunity to make each person from every network feel regarded. Its suggestion of "Decent variety is Inclusion" has affirmed its situation at the top position.

The McDonald's way of life revolves around the following: customer-obsessed, better together, and committed to lead. These coupled with its conviction has caused the fast-food chain to exceed expectations in the field of business enterprise and showcasing.

McDonaldization

McDonald's can appropriately be named as one of the best organizations to be involved in the worldwide system. The worldwide broadening of the McDonald's is regularly alluded to as "McDonaldization." Its accomplishment in more than 120 nations can be credited to its hierarchical structure.

The hierarchical structure of McDonald's mulls over expanding localization, and in this way, the entire plan of action of McDonald's is normally redone thinking about the mass intrigue in different nations.

Fruitful Acquisitions

The McDonald's Corporation Mergers and Acquisitions (M&A) have, since its inception, entertained itself with cautious acquisitions. Donato's Pizza which is a Midwestern chain of 143 eateries was obtained by McDonald's on 6 May 1999. Aside from securing Donato's, it acquired the Boston Market on 18 May 2000. Boston Market is a drive-through eatery chain that essentially focuses on home-style sustenance.

Supporting Employees

McDonald's doesn't, in any capacity, hamper the development of its workers. It bolsters its representatives in every possible way and empowers them to set up business systems.

At McDonald's, the work environment is brimming with positivity, connections are advanced, professional openings are supported, and business development is sustained.

Coaches, good examples, and backers are accessible at all times to direct the employees on successful initiatives, professional procedures, and prosperous business.

Engagement Of Community And Education

Aside from being one of the best good-quality fast food options, McDonald's investigates every possibility to endeavour for the network it serves. It effectively takes part in network administration and continues to have a critical effect on assorted networks.

The Global Diversity, Inclusion, and Community Engagement Team alongside its key accomplices have fabricated cherished relations with different network-based associations. McDonald's Hamburger University readies its workforce to maintain the multi-billion dollar business and worldwide initiative improvement programs.

McDonald's - Growth

McDonald's eateries are found in 120 nations and serve 69 million customers each day. McDonald's operates 39,000 restaurants/cafés around the world, utilizing more than 210,000 individuals as part of the arrangement. They help operate 2,770 organization possessed areas and 35,085 diversified areas, which incorporates 21,685 areas diversified to regular franchisees, 7,225 areas authorized to formative licensees, and 6,175 areas authorized to remote affiliates.

Concentrating on its centre image, McDonald's started stripping itself of different chains it had gained during the 1990s. The organization possessed a large stake in Chipotle Mexican Grill until October 2006 when McDonald's was completely stripped from Chipotle through a stock exchange .

Until December 2003, it likewise claimed Donatos Pizza, and it claimed a little portion of Aroma Café from 1999 to 2001. On August 27, 2007, McDonald's sold Boston Market to Sun Capital Partners.

Outstandingly, McDonald's has expanded investor profits for 25 back-to-back years, making it one of the S&P 500 Dividend Aristocrats. The organization is positioned 131st on the Fortune 500 of the biggest United States companies by revenue.

In October 2012, its month-to-month deals fell without precedent for nine years. In 2014, its quarterly deals fell without precedent for a long time, when its deals last dropped for the whole of 1997.

In the United States, McDonald's accounts for 70% of sales in drive-throughs. McDonald's shut down 184 eateries in the United States in 2015, which was 59 more than what they wanted to open.

Starting in 2017, the income was roughly $22.82 billion. The brand estimation of McDonald's is more than $88 billion; outperforming Starbucks with a brand estimation of $43 billion. The total compensation of the organization in 2017 was $5.2 billion; this worth saw an ascent of about 11% from the previous year.

McDonald's is, without a doubt, the quickest developing drive-thru eatery chain on the planet. In 2018, McDonald's developed as the most profitable inexpensive food chain with a brand worth nearing $126.04 billion. Also, the all-out resources of McDonald's were almost $33.8 billion.

The world's quickest developing cheap fast food chain partitions its market into four unique areas: U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate.

According to the report set forth by the organization in the year 2017, the market in the U.S. created the biggest measure of income at $8 billion. The International Leads Markets which includes Australia, Canada, France, Germany, and the U.K. created an income of $7.3 billion.

The High Growth Markets which incorporate China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands, and comparative brought in about $5.5 billion in revenue.

The Foundational Markets and Corporate incorporate the rest of the business sectors. Furthermore, it additionally incorporates a wide range of corporate exercises. The income created by this section of the market represented roughly $1.9 billion.

McDonald's - Restaurants And Services

In certain nations, "McDrive" areas close to roadways offer no counter administration or seating. interestingly, areas in high-thickness city neighbourhoods frequently preclude pass-through service. There are likewise a couple of areas, found for the most part in the downtown locale, that offer a "Walk-Thru" administration instead of a Drive-Thru.

McCafé is a bistro-style backup to McDonald's cafés and is an idea conceived by McDonald's Australia (likewise known, and promoted, as "Macca's" in Australia), beginning with Melbourne in 1993. As of 2016, most McDonald's outlets in Australia have McCafés situated inside the current McDonald's eatery.

In Tasmania, there are McCafés in each eatery, with the rest of the states rapidly following suit. After moving up to the new McCafé look and feel, some Australian eateries have seen up to a 60% expansion in deals. There were more than 600 McCafés around the world some time back.

Create Your Taste

From 2015–2016, McDonald's attempted another gourmet burger administration and eatery idea dependent on other gourmet cafés, for example, Shake Shack and Grill'd. It was taken off without precedent for Australia in early 2015 and extended to China, Hong Kong, Singapore, Saudi Arabia, and New Zealand with progressing preliminaries in the US showcase.

In committed "Make Your Taste" (CYT) booths, clients could pick all fixings including a kind of bun and meat alongside discretionary additional items. In late 2015, the Australian CYT administration presented CYT servings of mixed greens.

After an individual had requested, McDonald's prompted that hold up times were between 10–15 minutes. At the point when the nourishment was prepared, the prepared group ('has') carried the sustenance to the client's table.

Rather than McDonald's typical cardboard and plastic bundling, CYT nourishment was exhibited on wooden sheets, fries in wire bushels, and servings of mixed greens in china bowls with metal cutlery. A more expensive rate connected. In November 2016, Create Your Taste was supplanted by a "Mark Crafted Recipes" program intended to be increasingly proficient and less expensive.

McDonald's Happy Day

McHappy Day is a yearly occasion at McDonald's during which a portion of the day's deals goes to philanthropy. The collections on this day go to Ronald McDonald House Charities.

In 2007, it was celebrated in 17 nations: Argentina, Australia, Austria, Brazil, Canada, England, Finland, France, Guatemala, Hungary, Ireland, New Zealand, Norway, Sweden, Switzerland, the United States, and Uruguay. As indicated by the Australian McHappy Day site, McHappy Day brought $20.4 million up in 2009. The objective for 2010 was $20.8 million.

McDonald's Monopoly Donation

In 1995, St. Jude Children's Research Hospital got a mysterious letter stamped in Dallas, Texas, containing a $1 million winnings McDonald's Monopoly game piece. McDonald's authorities went to the medical clinic, joined by a delegate from the bookkeeping firm Arthur Andersen, inspected the card under a diamond setter's eyepiece, took care of it with plastic gloves, and checked it as a winner.

Although game guidelines disallowed the exchange of prizes, McDonald's deferred the standard and made the yearly $50,000 annuity instalments for the full 20-year time frame through 2014, even in the wake of discovering that the piece was sent by an individual associated with a theft plan meant to cheat McDonald's.

McRefugees are destitute individuals in Hong Kong, Japan, and China who utilize McDonald's 24-hour cafés as transitory lodging. One out of five of Hong Kong's populace lives underneath the destitution line. The ascent of McRefugees was first archived by picture taker Suraj Katra in 2013.

McDonald's - Future

The reported objective is to source all visitor bundling from inexhaustible, reused, or ensured sources, reuse visitor bundling in 100% of eateries, and overcome framework challenges by 2025.

McDonald's turned into the principal eatery organization on the planet to set an endorsed Science-Based Target to lessen ozone-depleting substance emanations. It also joined the "We Are Still In Leader's Circle", driving activity to relieve environmental change.

McDonald's USA completed five years as the sole worldwide café organization to serve MSC-ensured fish in each U.S. area. It united with Closed Loop Partners to build up a worldwide recyclable and additionally compostable cup arrangement through the NextGen Cup Challenge and Consortium. Official pioneers called for atmosphere activity and offered arrangements at the primary Global Climate Action Summit (GCAS).

McDonald's co-facilitated the "Way to Greenbuild" occasion with Illinois Green Alliance at its new worldwide home office. The structure, a collaboration among Sterling Bay, McDonald's, and Gensler Chicago, got USGBC LEED Platinum accreditation.

McDonald's is establishing the tone for other inexpensive food organizations to pursue. Given the present want by numerous buyers to spend cash on organizations that are doing great on the planet, where McDonald's leads, others will pursue.

Who is the founder of McDonald's?

McDonald's was founded by Richard McDonald and Maurice McDonald on 15 April 1955 in California, United States.

Who is the CEO of Mcdonald's?

Chris Kempczinski is the CEO of Mcdonald's since Nov 2019.

Who is the owner of McDonald's in India?

In India, McDonald's is a joint-venture company managed by two Indians- Amit Jatia (M.D. Hardcastle Restaurants Private Ltd) and Vikram Bakshi ( Connaught Plaza Restaurants Private Ltd).

When was the fast-food chain McDonald's founded?

Mcdonald's was founded in 1940 in San Bernardino, California.

How much does a Mcdonald's franchise owner make?

An average Mcdonald's franchise generates $150,000 annually.

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McDonald’s and the Challenges of a Modern Supply Chain

Three lessons.

Recently, McDonald’s, the world’s iconic largest food service provider, has been (forgive the cliché) through the grinder. Poor performance has led to the departure of its CEO and plenty of critical attention in the business pages . Part of this story relates to the provenance, or origins, of its products: Chains that provide more upmarket “fast casual” dining such as Panera, Chipotle, and Shake Shack have brands that speak of freshness, health, and trustworthy sourcing.

• Steve New teaches operations and supply-chain management at the University of Oxford’s Saïd Business School and is a fellow of Hertford College.

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Jun 7, 2023

McDonald’s: Through the Golden Arches to Global Dominance

• Customer Experience (CX)
• Digital Management and Leadership

Written by Conor Ward

In marketing theory and analysis, we often stress that a brand is much more than just a logo. There are many factors involved when it comes to developing one that’s instantly recognizable (product offering, mission, tone, messaging and customer experience ). 

But, McDonald’s is a brand that’s inextricably linked to one particular brand element: its Golden arches logo. It’s a powerful and meaningful image, built up over decades that evokes familiarity and a sense of fun for many customers.

Let’s look at how McDonalds used marketing and innovation to become a leading brand in a competitive market. We’ll also look at some of the challenges faced and consider  how the company continues to modernize and adapt to embrace the changing digital landscape including artificial intelligence .

The Origins of Empire

Brothers Richard and Maurice McDonald  opened the first McDonald’s restaurant in San Bernardino, California in 1940. The restaurant’s early years’ success led the brothers to franchise their concept to further locations, and the Golden Arches logo was first introduced in 1953 in Phoenix, Arizona.

Ray Kroc, a Chicago native and distributor of a milkshake mixing machine, visited the McDonald brothers in 1954, which led to him becoming their franchise agent. Kroc  ended up buying the rights to expand McDonald’s throughout the US.

How McDonald’s Built a Global Brand

Kroc’s ambition was to bring the company to a larger scale which he did largely through clever and creative marketing. 

Kroc - subject of the 2017 film The Founder - established a partnership with Coca-Cola in 1955 to be the McDonald’s beverage supplier, a key alliance which has endured to this day and helped drive both companies to global expansion.

One standout piece of marketing to drive this growth was the “Look for the Golden Arches!” campaign, introduced in 1960. With the logo gaining increased prominence and traction, this message was genius in its simplicity.

Ronald McDonald was introduced in 1965, and the character began appearing in advertising to target their audience of children, adding that all-important element of fun: albeit one that hasn’t continued so well into this century, despite going through a 2012 makeover.

The company ramped up its advertising campaigns during these years, involving major spending on media – TV, radio and newspapers – with billboards and outdoor signage also playing a role in building brand awareness. The emergence of McDonald’s as a major brand coincided with the golden era in TV advertising, and the company leveraged the medium to its advantage.

Another arena for brand exposure is McDonald’s ongoing sponsorship of sporting events, such as the FIFA World Cup, although their 41-year partnership with the Olympic Games ended in 2017 due to heightened competition, the need to fund menu changes and tech improvements along with bad press for selling ‘junk food’.

McDonald’s Braves Stormy Waters

The company has often been the focus of controversy over the years. As its power and prominence have grown, its business practices, environmental record, working conditions, and health issues have come under the microscope.

In 1990, activists from a small group known as London Greenpeace distributed leaflets entitled ‘What’s wrong with McDonald’s?’, criticizing its environmental, health, and labor record. The company sued them for libel and the case turned out to be the longest running legal action of all time in the UK, referred to as the ‘McLibel’ case .

Morgan Spurlock’s 2004 documentary ‘Super Size Me’ claimed that McDonald’s food was contributing to the increase of obesity in society, and the company was failing to provide nutritional information to its customers. Just weeks after the film premiered, McDonald’s announced that it was eliminating the super-size option from its menu, and creating the adult Happy Meal. Aside from nutritional and health issues, McDonald’s has been a key target of the “Fight for $15” movement which started in the U.S in 2012 as a ground-level push from fast-food workers who started to walk off the job in an effort to raise the minimum wage. Their efforts have had some effect, with 22 million workers seeing raises, and the issue is expanding  into other sectors, like the “gig economy” and ride-share workers.

Modernization and Improving Image

Coming into the 21st Century, the company worked on addressing its deficiencies, improving its image and keeping up to speed with technologies. McDonald’s published its first ever Social Responsibility Report in 2002.

The tagline “I’m lovin’ it”, launched in 2003, has been a success, enduring in marketing campaigns ever since. Menu items continue to change according to health and environmental trends. The brand’s charity work is well known, like the ‘McHappy Day’ annual event and the Ronald McDonald House Charities. The corporate website highlights many areas of the company’s corporate and social responsibility , like climate action, beef sustainability, packaging, diversity, recycling and more.

Most recently—under the leadership of current CEO Chris Kempczinski—the brand rolled out its pivotal “Plan For Change”: an engaging and informative piece of content that outlines key objectives surrounding its revamped net zero emissions, sustainable food sourcing, efficiency, and inclusion and diversity initiatives.

Digital Transformation and Investment

“How do you transition from mass marketing to mass personalization? To do that, you’ve really got to unlock the data within that ecosystem in a way that’s useful to a customer.” McDonald’s CEO Steve Easterbrook

McDonald’s is in the midst of a digital transformation , adapting to new trends and leveraging technology to its advantage.

Pioneering AI decision technology

In 2019, McDonald’s purchased big data start-up Dynamic Yield Ltd, becoming one of the first global restaurant brands to integrate decision technology into its restaurants. 

By leveraging its AI technology, McDonald’s enabled personalization in its drive thru menu and in-store kiosk displays by showing relevant items based on factors such as the weather, time of day or regional preferences. While Dynamic Yield was sold to Mastercard in 2022, McDonald’s will continue to scale and integrate the technology to further enhance customer experience. 

However, some customers were not fans of this new software, Ren Adams (@resinsbiren) made a drive thru order only to have the passenger’s order who pulled up beside her also included! Other users have reported mishaps with the AI technology adding multiple orders or misinterpreting requests. 

Customer Loyalty

Its ‘My Rewards’ app is so successful that in 2021 alone it earned 100% more downloads than its main loyalty competitor, Starbucks.

By developing a cohesive eco-system based on automated technologies, the brand plans to drive extra loyalty from its existing customers while creating a far more bespoke experience by tracking key insights from digital menus, food collection points, and mobile app interaction.

Speaking on the initiatives, McDonald’s President and CEO Chris Kempczinski, explained:

“Digital changes everything. So today, with 90% of the customers coming into my restaurant, I don’t know who they are. I don’t know their prior purchase. I don’t know what their buying pattern is. As I get better and better visibility into that customer, I can actually track and identify their preferences over time.”

The idea here is not only to drive an immense level of personalization , but to also improve operational efficiency in a way that improves output as well as speed of service.

Driving centralization

McDonald’s has centralized its digital strategy for its social media accounts, simplifying their entire social operation, and allowing them to respond to customers in a personalized manner. 

The launch of McDonald’s global brand hubs , a series of offices around the world, employs a ‘follow the sun’ model of engagement to track and interact with customers in real-time, on a constant basis. With thousands of brand mentions a day to deal with, this forms a key part of the digital strategy.

Inspiring communications and campaigns

Recent advertising campaigns have focused on advances in customer experience and digital innovations, highlighting how the brand is making life easier for customers. 

The brand’s most recent forward-thinking campaigns include its artistic ‘McDelivery Pins’ print billboards, its star-studded influencer-led ‘Wanna Go To McDonald’s?’ initiative, and its quirky ‘Raise Your Arches’ campaign.

Spearheaded by British filmmaker, Edgar Wright, this stand-out video ad likens raised eyebrows to the famous Golden Arches.

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Amplified by the hashtag #raiseyoureyebrows, the campaign has earned droves of engagement from various channels.

By partnering up with trending celebrities for its Famous Orders collaborations - including its Travis Scott Meal and J Balvin Meal - McDonald’s has tapped deep into the consciousness of Gen Zers while boosting in-app loyalty exponentially in recent years. In fact, the app installs skyrocketed by 23% during the initial week of its big BTS Meal promotion. No small feat in such a saturated industry.

However, McDonald’s has reprioritized its advertising budget in a bid to get more value and efficiency from its spending. A reduction in overall ad spend (a drop from $98.7 million in 2014 to $63.8 million in 2022) as well as more focused campaigns has proved to be a winning approach.

Tapping into community

The lion’s share of McDonalds’ traffic comes from organic search, direct engagement, and paid advertising—but what’s particularly interesting is the fact that community platform Reddit is one of the brand’s most engaged social channels.

It appears that the colossal impact of its various marketing initiatives, irresistible consumer deals, and commitment to making change has resulted in an ever-growing online community where fans share thoughts, opinions, and insider McD’s hacks. 

This Subreddit provides the brand with access to no end of consumer insight for future marketing initiatives while offering an opportunity to connect with its audience on a personal level.

This video ad showcases McDonald’s ability to tap into memorable everyday moments to position the brand as a fast food purveyor for the people. With a wealth of content, from the funny and inspirational to the enlightening and educational, McDonald’s also earns healthy levels of engagement from its YouTube channel .

McDonald’s: Analysis and Final Thoughts

The digital revolution represents a major challenge for McDonald’s, a brave new world where it needs to adapt to remain strong and profitable. The company is showing that it’s up for that challenge, however, making some smart moves in order to stay ahead of the chasing pack. 

“Long-term vision and commitment to staying the course goes a long way. Too many digital transformation projects are launched with the flawed expectation of jam tomorrow. McDonald’s is chasing the digital secret sauce over a far more pragmatic time frame,” according to digital commentator Stuart Lauchlan.

Millions of people continue to engage with, and buy from, the company daily. It’s an incredible success story, and it will be interesting to see how this powerful brand will continue to evolve.

Published 2019, updated 2023

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McDonald's Corporation

By: Frank T. Rothaermel, John Kim

The case is set in 2023; the protagonist is Chris Kempczinski, CEO of McDonald's Corporation. McDonald's is the world's largest hamburger fast-food restaurant chain, with 40,000 restaurants in over…

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• Publication Date: Mar 8, 2023
• Discipline: Strategy
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The case is set in 2023; the protagonist is Chris Kempczinski, CEO of McDonald's Corporation. McDonald's is the world's largest hamburger fast-food restaurant chain, with 40,000 restaurants in over 100 countries, $23 billion in annual revenue, and a net income of $6 billion. Since being appointed CEO in 2019, Kempczinski launched the Accelerating the Arches strategic initiative (MCD, also the ticker symbol): maximize our Marketing, commit to the Core Menu, and double down on the 4 Ds of delivery, digital, drive-thru, and development. Although McDonald's has significantly outperformed the broader stock market for most of the past decade, Kempczinski wonders how long this can last. McDonald's faces significant headwinds, including recessionary pressure, high inflation, supply chain problems, rising wages, and significant labor shortages.

Learning Objectives

Strategic leadership (purpose-driven vision); stakeholder strategy; diversity, equity & inclusion (DEI); strategic intent; external and internal analysis; core competencies; creating shared value; tech and platform strategy; business model innovation; business strategy (positioning); corporate strategy (geographic diversification, product-market and service diversification, economies of scale and scope); incentive alignment (franchisee and franchisor); organizational culture and structure (implementing strategic initiatives)

Mar 8, 2023

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Asia, Europe, United States

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Beverage industry, Food industry, Real estate industry, Restaurants and food service industry

McGraw-Hill Education

MH0081-PDF-ENG

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Fast and Pluribus: Impacts of a Globalizing McDonald’s

The expansion of McDonald’s in the twentieth century brought the fast food chain to more than 100 countries. But how well did it integrate into its new home(s)?

The connection between globalization and McDonald’s is a tale of scholarly metonymy. There’s no textual shortage of evidence that references the now-global fast food chain’s success in other countries , often linking it to themes of self-sufficiency, post-industrial stability, and democracy-formed capitalism.

Among these chunks of research is a more endogenous angle that examines the impact McDonald’s has had within offshore cultures; namely, how the American fast food model has been diffused across different countries. Such case studies, which look at individual cultural phenomena and their direct applications to globalization activity, refines not only the framework of McDonald’s in theories, but overall globalization processes and strategies as well.

Japan’s stylish renditions of fast food practices, for one, existed long before McDonald’s came to the country. Given the existing popularity of convenient and on-the-go meals—including conveyor belt sushi and street vendor meals—American fast food chains were bound to succeed. Scholars John W. Traphagan and L. Keith Brown investigate this supposition by employing an ethnographic model of research, building the argument that Japan not only assimilated—but basically swallowed whole—the McDonald’s dining model , to the point that younger people especially believe McDonald’s is a Japanese company.

Traphagan and Brown emphasize that, rather than “styles of preparation or ingredients,” fast food is defined by “a style of selling food.” Essentially, McDonald’s brought no real paradigm shifts to Japan—but rather constructed a space in which already-formed Japanese cultural practices could continue.

Their case study contrasts with that of geographers Ray Oldakowski and John McEwen, who similarly investigate McDonald’s and its cultural assimilation—but in Ecuador. Their evidence shows that the integration of American fast food dining followed a different path , and McDonald’s remains an obviously foreign establishment in the cityscape. McDonald’s didn’t attempt to adapt to Japanese or Ecuadorian culture (for McDonald’s, “the strategy has been one of consistency, i.e. McDonald’s prefers not to change its way of doing business to adapt to foreign cultures, rather, it changes local cultures to meet its own needs,” they note), but Ecuadorians clearly viewed the fast food chain as a deviation from local tastes, unlike Japanese consumers.

“[A] comparison of exterior designs revealed that the McDonald’s in Guayaquil [Ecuador] were very similar to the typical McDonald’s restaurants in the United States,” write the authors. Moreover, the menus were also similar. Only 2 percent of those polled considered the food served at McDonald’s similar to Ecuadorian food. In contrast, very few interviewees considered Kentucky Fried Chicken—another American fast food establishment—different from Ecuadorian food. Eighty-four percent reported that KFC was the most similar to Ecuadorian food, and 68 percent said it was actually where they dined regularly.

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“Those results suggest that McDonald’s might gain new customers, and more visits from existing customers, if they also offered menu items more typical of Ecuadorian food,” conclude the authors.

In neither Japan nor Ecuador did McDonald’s actively work to adapt itself to the tastes of the host countries, but the depth of integration into local dining customs differed between the two nations. Such observations could prompt additional nation-specific analyses and possibly reveal additional adaptations to the “strategy of consistency” associated with McDonald’s. However, the study of the globalization of fast food from a micro-cultural angle requires challenging assumptive attitudes around American businesses and classical theories, with one of the most popular—and infamously controvertible—examples being the Golden Arches Theory of Conflict Prevention , built on tropes of democratic peace through development. Globalization and its effects could also be examined in light of McDonald’s cultural impacts on its origin country of America, opening a conversation on socio-economics and class .

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Case Analysis: McDonald's Corporation

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McDonald’s Five Forces Analysis (Porter’s Model) & Recommendations

This Five Forces analysis of McDonald’s Corporation examines the external factors in the industry environment influencing the company’s strategies for international business expansion and growth. Michael E. Porter’s Five Forces analysis model provides valuable information to support strategic management, especially in addressing competitive issues in the external environment of the food-service business. These issues are based on factors external to McDonald’s, representing the degree of competitive rivalry in the industry, the bargaining power of customers or buyers, the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants. In this Five Forces analysis of McDonald’s, the five forces are mainly in the fast-food restaurant industry, although the company also sells McCafé coffee products for home use and other consumer goods. As the leading restaurant chain business in the world, the company is an example of effective strategic management, especially in dealing with competition in different markets worldwide. This status shows that McDonald’s operations management and strategic direction are appropriate to the external factors identified in this Five Forces analysis.

In addressing the external factors determined in this Five Forces analysis, McDonald’s Corporation ensures that its strategies are appropriate to combat external forces. The company faces pressure from various competitors, including large multinational businesses and small local restaurants. Considering the context of this Five Forces analysis, McDonald’s generic competitive strategy and intensive growth strategies satisfy business goals in competing with Burger King , Wendy’s , Subway, and Dunkin’, as well as other food-service businesses that compete with McCafé, such as Starbucks Coffee Company .

Summary: Porter’s Five Forces Analysis of McDonald’s

In this Five Forces analysis, McDonald’s faces the effects of external factors at varying intensities, based on the variations among markets around the world. For example, the U.S. fast-food market presents a competitive landscape different from that of the European fast-food market. The restaurant chain company implements strategies to meet these external factors and minimize their negative impacts. Considering the combination of market conditions, this Five Forces analysis of McDonald’s establishes the following intensities of the five forces:

• Strong competitive rivalry or competition
• Strong bargaining power of buyers or customers
• Weak bargaining power of suppliers
• Strong threat of substitutes or substitution
• Moderate threat of new entrants or new entry

Recommendations . This Five Forces analysis shows that McDonald’s Corporation needs to prioritize the strategic issues related to competition, consumers, and substitutes, all of which exert a strong force on the company and its external environment. The other forces (bargaining power of suppliers and threat of new entrants) are also significant to the food-service business, although to a lesser extent. In this regard, a recommendation is to strengthen the business by building on the competitive advantages and strengths enumerated in the SWOT analysis of McDonald’s Corporation . This Five Forces analysis also indicates that the fast-food company’s managers must focus on reducing the effects of competitors and substitutes on revenues and market share.  McDonald’s marketing mix (4Ps) partly supports efforts for mitigating the effects of competition. Also, it is recommended that McDonald’s make its product innovation process more aggressive. Although the food-service market is saturated, new menu items can attract more customers to the company. Furthermore, based on this Five Forces analysis, McDonald’s can implement higher quality standards to address the forces of competition and substitution.

Competitive Rivalry or Competition with McDonald’s (Strong Force)

McDonald’s experiences tough competition because the fast-food restaurant market is saturated. This element of Porter’s Five Forces analysis model considers the effects of competing firms in the food-service industry environment. In McDonald’s case, the strong force of competitive rivalry is based on the following external factors:

• High number of food-service firms – Strong Force
• High aggressiveness of firms – Strong Force
• Low switching costs between restaurants – Strong Force

The industry has many firms of various sizes, such as global chains, like McDonald’s, and local mom-and-pop fast-food restaurants. This external factor strengthens the force of competitive rivalry in the fast-food restaurant industry. Also, the Five Forces analysis model considers company aggressiveness a factor that influences competition with McDonald’s. In this business case, most medium and large firms aggressively market their food and beverage products. In this context of the Five Forces analysis, such an external factor increases the intensity of competitive rivalry with McDonald’s Corporation. In addition, low switching costs are an external factor that makes it easy for consumers to transfer to other restaurants, such as Wendy’s and Burger King, thereby adding to the force of competition. Thus, this element of the Five Forces analysis of McDonald’s shows that competition is among the most significant external forces for consideration in the strategic management of the business.

Bargaining Power of McDonald’s Customers/Buyers (Strong Force)

McDonald’s marketing strategies address the power of customers in influencing business performance. This element of the Five Forces analysis deals with the leverage of consumers, and how their decisions impact food-service businesses. In McDonald’s case, the following are the external factors that contribute to the strong bargaining power of buyers:

• Low switching costs – Strong Force
• Large number of food and beverage providers – Strong Force
• High availability of substitutes – Strong Force

The ease of changing from one restaurant to another (low switching costs) enables consumers to easily influence McDonald’s business performance. In the Five Forces analysis framework, this external factor strengthens the bargaining power of customers relative to the influence of food-service firms on the market. Low switching costs are also linked to the ease of finding online information for comparing food-service providers and alternatives. Moreover, because of market saturation, diners can choose from many fast-food restaurants other than McDonald’s. In this Five Forces analysis, such a condition makes the bargaining power of buyers a strong force that affects competition and the fast-food company’s external environment. Furthermore, the availability of food and beverage substitutes is relevant in this external analysis, adding to customers’ bargaining power over McDonald’s. For example, substitutes include food kiosks and outlets, artisanal bakeries, microwave meals, and foods that consumers can cook at home. Based on this element of Porter’s Five Forces analysis, business strategies must increase customer loyalty to address the identified external factors in combination with sociocultural trends, like consumers’ increasing preference for healthy lifestyles, outlined in the PESTEL/PESTLE analysis of McDonald’s Corporation .

Bargaining Power of McDonald’s Suppliers (Weak Force)

Suppliers influence McDonald’s in terms of the company’s production capacity based on the availability of materials. This element of the Five Forces analysis model shows the impact of suppliers on firms and the fast-food restaurant industry environment. In McDonald’s case, the weak bargaining power of suppliers is based on the following external factors:

• Large number of suppliers – Weak Force
• Low forward vertical integration of suppliers – Weak Force
• High overall supply for food-service businesses – Weak Force

The large population of suppliers weakens the effect of individual suppliers on McDonald’s Corporation. In the context of this Five Forces analysis, such a weakness is partly based on the lack of strong regional and global alliances among food and beverage suppliers. Also, most of McDonald’s suppliers are not vertically integrated. This means that they do not control the distribution network that transports their products to fast-food restaurant firms. In Porter’s Five Forces analysis model, low vertical integration weakens the bargaining power of suppliers over McDonald’s Corporation. Moreover, the relative abundance of ingredients, like flour and meat, reduces individual suppliers’ influence on the company. Thus, this element of the Five Forces analysis shows that external factors combine to make supplier power weak and a minor issue in the restaurant company’s strategic management. Still, McDonald’s stakeholder management and strategy for CSR, ESG, sustainability, and corporate citizenship help in addressing this force coming from suppliers.

Threat of Substitutes or Substitution (Strong Force)

Substitutes are a significant concern for McDonald’s Corporation. This element of Porter’s Five Forces analysis model deals with the potential effects of substitutes on the growth of the restaurant chain business. The following external factors make the threat of substitution a strong force against McDonald’s:

• High substitute availability – Strong Force
• Low switching costs for consumers – Strong Force
• Low cost to performance ratio of many substitutes – Strong Force

There are many substitutes for McDonald’s food and drinks, such as products from artisanal food producers and local bakeries. Also, consumers can cook their own food at home. In the Five Forces analysis model, this external factor contributes to the strength of the competitive threat of substitution in the fast-food industry. In addition, it is easy to shift from McDonald’s to substitutes because of the low switching costs. For example, shifting from the company’s hamburger meals to substitute meals typically involves insignificant or minimal disadvantages, such as additional time consumption for food preparation, or slightly higher costs per meal in some cases. Moreover, this Five Forces analysis of McDonald’s highlights the fact that many substitutes are competitive in terms of quality and customer satisfaction with affordable prices (low cost to performance ratio), and consumers’ satisfaction with the health benefits of home-cooked meals. In this element of the Five Forces analysis of McDonald’s Corporation, external factors make substitutes a major strategic issue that requires competitive approaches, like product quality improvement. Such approaches need to be included in the company’s current efforts to encourage people to eat in fast-food restaurants instead of resorting to substitutes. Such efforts are evident in the business goals based on McDonald’s mission statement and vision statement .

Threat of New Entrants or New Entry (Moderate Force)

New entrants can impact McDonald’s market share and financial performance. This element of the Five Forces analysis refers to the effects of new players on restaurant businesses. In McDonald’s case, the moderate threat of new entry is based on the following external factors:

• High variability of capital costs – Moderate Force
• High cost of brand development for food-service companies – Weak Force

The low switching costs allow consumers to easily move from McDonald’s toward new fast-food restaurant companies. In Porter’s Five Forces analysis model, this external factor strengthens the competitive threat of new entrants against existing players in the food-service industry. Also, the high variability of capital costs in establishing a new restaurant business only partially limits the entry of new businesses into the market. This external factor leads to the moderate threat of new entry against McDonald’s. However, a major consideration in this context of the Five Forces analysis is that it is costly to build a strong brand in the fast-food industry. Many small and medium-sized businesses lack the resources to create a strong brand that rivals McDonald’s brand. Thus, the external factors in this element of the Five Forces analysis of McDonald’s show that the competitive threat of new entrants is moderately considerable but not the most important strategic issue for the multinational restaurant chain business.

• Daradkeh, F. M., Hassan, T. H., Palei, T., Helal, M. Y., Mabrouk, S., Saleh, M. I., … & Elshawarbi, N. N. (2023). Enhancing digital presence for maximizing customer value in fast-food restaurants. Sustainability, 15 (7), 5690.
• Mackenbach, J. D., Widener, M. J., van der Gaag, E., & Pinho, M. G. (2023). Survey-derived activity space-based exposures to fast food outlets and their cross-sectional associations with use of fast food outlets, diet quality and BMI. Health & Place, 79 , 102966.
• Martinez-Contreras, R. M., Hernandez-Mora, N. C., Vargas-Leguizamon, Y. R., & Borja-Barrera, S. M. (2022). Pestel Analysis and the Porter’s Five Forces: An Integrated Model of Strategic Sectors. In Handbook of Research on Organizational Sustainability in Turbulent Economies (pp. 292-314). IGI Global.
• McDonald’s Corporation – Form 10-K .
• McDonald’s Corporation – Food Quality & Sourcing .
• McDonald’s Corporation – Our Growth Pillars .
• McDonald’s Corporation’s Website .
• U.S. Department of Agriculture – Economic Research Service – Food Service Industry Market Segments .
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McDonald’s Corporation Case Study Analysis

Overview of the case, definition of the problem, alternative solutions, selected solution to the problem, expected results and rationale for the solution, positive and negative results.

McDonald’s, the first food chain known for its strong performance in a very competitive industry is facing stiff competition from other firms. The firm’s breakfast offerings are not as competitive as they were before due to strong performance by products from other market players such as Taco Bell, White Castle, Dunkin Brands Group, Burger King and Starbucks.

These firms have new breakfast products which have been received well by consumers in different areas they are operating in. As a result, these firms’ improved performance in the industry has negatively affected McDonald’s market share (Jargon, 2014, p. 1).

McDonald’s poor competitive position can be seen through its declining sales and profit revenues in the past six months. This paper is going to discuss the main marketing issues that McDonald’s faces in its operations and how they can be improved to help the firm regain its competitive position in the industry.

McDonald’s weakening position in the industry is due to its failure to come up with effective marketing strategies that respond to the needs of young consumers. In the past, the firm’s breakfast offerings performed well in the market but it has been losing customers gradually to new firms.

Low innovation in the firm has made it difficult for the firm to attract new consumers who are willing to try out the product it sells in the market (Jargon, 2014, p. 2).

The firm has also failed to come with an effective product development strategy to help it sell new high quality products that satisfy consumers’ expectations. As a result, this has affected the company’s competitive position in the market because it has failed to keep up with modern market trends that are crucial for its long term performance.

The firm also needs to improve the relationships it has with its franchisees. They feel that the firm’s marketing strategies are not effective and fresh ideas are needed to help the firm regain its footing in the industry. In addition, they insist that more needs to be done to improve the quality of the firm’s operations in the industry.

The main actors that need to be analyzed are: McDonald’s, its competitors and franchisees. McDonald’s has not been able to come up with important strategic changes to help it maintain its market share in the industry. Other fast food firms have developed efficient market processes that are responsive to current consumer trends in the market.

Therefore, McDonald’s competitors have been able to institute higher operational standards that position them well in the industry (Jargon, 2104, p. 3). The firm has also been unable to develop beneficial partnerships with its franchisees. They feel that it needs to come up with innovative promotional strategies to attract new customers to sample its products.

McDonald’s faces various problems such as: a weakening brand, low sales, ineffective promotions and the inability to keep up with its competitors. The main problem the firm needs to address to solve all these issues is its marketing mix functions. The company needs to review the four P’s of the marketing mix which are: products, prices, promotions and place.

This will help the firm to improve the value of its internal systems of operations to help it attain high standards of performance in the long run (Bradley, 2010, p. 75).

In addition, the firm needs to understand issues related to the quality of service it offers that need to be improved to help it attain its objectives in the industry. This approach will help the firm to focus on priorities to regain its market share in the industry to help it register good performance in the long run.

Product improvements and developments are a crucial part of any marketing strategy. McDonald’s needs to carry out research to find out specific types products that customers prefer to consume for breakfast. This approach will enable the firm to stay in touch with its customers to anticipate their needs and expectations by providing products that satisfy them.

At the moment, the firm has failed to create appropriate menus that attract customers to make them more willing to try out its product offerings (Bradley, 2010, p. 79).

The pricing of products should be maintained at current levels to make customers have positive perceptions about the quality of products they are purchasing. This requires the firm to develop effective customer relationship management systems that increase the value of its products in the market.

Promotional aspects of operations need an overhaul to enable the firm to regain its competitive position in the market. The firm needs to rethink its strategy of offering customers give away products because this is likely to increase its costs of operations in the long run.

The current strategy of offering give away products has caused disagreements between the firm and its franchisees, a situation that is likely to have a negative effect on the firm’s operations in the long run.

In addition, the firm needs to look at the internal atmosphere in its outlets to find out if it is suitable for consumer’s eating patterns (Rue & Byars, 2003, p. 43). It may be compelled to redesign its restaurants to enable them to offer a memorable service experience to customers.

The firm needs to carry out market research to find out new products which can be introduced to improve its performance in the industry. The firm needs to test some of its product concepts in some franchises to find out how they are likely to be received by customers. This approach will enable the firm to evaluate how they are likely to perform in the firm in the long run.

The main benefit the firm will get out of this strategy is that it will be able to create new revenue streams for its operations and this will help to increase its profits in the industry.

The firm will also be in a position to establish relationships with new customers to make them more interested in consuming its products (Rue & Byars, 2003, p. 49). However, the main disadvantage associated with such a strategy is that the firm may end up experiencing losses especially if the new products do not appeal to customers’ interest effectively.

The firm needs to improve the quality of service it offers to its customers. It needs to come up with new ways of engaging with its customers to make them understand the benefits they can get from its services.

The firm needs to rely more on innovative technology solutions to market its offerings and attract young consumers in the industry. As a result, this will enable the firm to understand new market trends and how they affect its long term operations in the industry (Panda, 2008, p. 37).

The benefit of this approach is that the firm will be in a position to satisfy the needs of its customers because it will sell appropriate products that conform to specific market conditions. The disadvantage the firm is likely to experience from this approach is that it may take a long period of time before it yields positive results.

Another solution the firm needs to use is to change its promotional strategies. The firm needs to engage with people in their communities to make them have positive perception towards its operations. It needs to go out and conduct promotions in schools, colleges and other places to encourage young people to try out some of its breakfast products (Panda, 2008, p. 43).

This approach is likely to yield positive results in the long run because the firm will be able to understand how to elicit positive consumer sentiments that favor its products in the market.

The advantage of changing its promotional strategy will enable the firm to attract new consumer segments that are willing to sample its products. On the other hand, the main disadvantage associated with this strategy is that it may increase the costs incurred by the firm in its operations.

New product concepts will enable the firm to regain the market share it has lost to its competitors. The firm should consider using popular accompaniments with its products to make them more appealing to customers. As a result, this will help the firm to increase the value of its brand in the market to take advantage of new opportunities which exist.

In addition, the firm needs to develop new menus that attract consumers to make them more interested in various products that are on offer.

Customers should be given more consideration when new product concepts are developed to enable them to satisfy their needs and expectations (Salisbury, 2014). This approach will help the firm to increase the value of its brand in the industry making it well prepared to capitalize on various opportunities that exist.

The firm needs to differentiate services offered to customers who consume breakfast in its outlets. It needs to come up with new ways of appealing to their lifestyles. Moreover, the firm needs to find out conditions that exist in its restaurants to find out if they satisfy the high standards it has set for itself in its operations.

Customers’ perceptions towards a particular product are influenced by the quality of service they get whenever they consume it. Therefore, the firm needs to come up with ways of ensuring that its customers have positive experiences whenever they visit its outlets to consume breakfast (Salisbury, 2014).

This entails retraining its employees to ensure they offer prompt and high quality services to customers in different outlets. As a result, the firm needs to empower its employees to make them more willing to satisfy customers who visit its restaurants.

The firm needs to rebrand its breakfast service offerings to differentiate them from other products that are sold during the day. This approach will help the firm to direct customers’ attention to new quality improvements in its operations that make it stand out in the market. As a result, this will improve customers’ perceptions towards the firm’s products because they will feel that they connect with them on a personal level.

The firm needs to use focus strategies to increase the value of its important products in the market. In addition, the firm needs to redefine specific customer segments it will target with its new breakfast products. This will enable the firm to find out specific methods it can use to attract them. Consequently, the firm will be in a position to turn around its operations to by increasing its profit revenues (Vrontis & Pavlou, 2008, p. 299).

There has been an increase in the number of customers who are interested in consuming healthy diets that have low sugar and fat content. The firm needs to engage young people and make them aware about healthy diets it is going to offer for breakfast as part of its menu. As a result, the firm will be in a position to diversify its product offerings to enable it to attract new customer segments in the industry.

In the long term, this will help the firm to increase various sources of incomes for its operations to increase its competitive edge in the industry. Many people are conscious about what they eat due to the high increase in lifestyle diseases which are mainly caused by poor eating habits revenues (Vrontis & Pavlou, 2008, p. 301).

Therefore, this approach will help the firm to demonstrate that it takes seriously the health and wellbeing of its customers and as a result, it will be in a position to turn around its operations.

McDonald’s new product development strategy will help it take advantage of future opportunities in the industry. This will allow the firm to appeal to younger consumers to make them more loyal. As a result, the firm will be in a better position to grow its revenues to overcome the challenges it has been facing in the industry.

The firm’s business model will focus more on adapting to market conditions to increase its competitive advantage in the long run. As a result, this will enable the firm to use efficient methods to respond to external market conditions that have caused it to lose its market share to competitors (Marder, 1997, p. 47).

For a long time, the firm has focused more on standardizing processes in different markets where its operations are based. However, this strategy will enable the firm to be more flexible in its operations to enable it to achieve higher levels of service excellence in the industry.

An effective product development strategy will enable the firm to improve quality perceptions that are associated with its products in the market. As a result, the firm will be in a position to increase the value of its brand in the industry by ensuring that its operations focus more on customer service excellence.

More importantly, the firm will be able to institute learning processes that enable its staff to acquire new skills to make them satisfy customers’ needs and expectations (Marder, 1997, p. 52). This will increase revenues obtained by the firm from its operations in the industry. In addition, this will help the firm to share information with its franchisees regarding specific improvements that need to be made.

The rationale for this solution is due to the fact that the firm is losing its competitive edge in the industry. Therefore, this requires the firm to make its external and internal processes more innovative so that it can be well prepared to satisfy the needs of its customers in different markets. In addition, the firm’s current strategy has the potential of causing conflicts with its franchisees who are important stakeholders.

As a result, this solution will enable the firm to improve the relationships it has with its stakeholders to ensure that they understand the importance of its new strategies.

The firm needs to review the manner in which it conducts its operations by coming up with new ways of engaging young consumers (Kotler & Armstrong, 2007, p. 72). As a result, this will enable the firm to develop strong and reliable relationships with them and this will help it attain good long term performance in the long run.

The firm needs to implement effective brand management strategies to safeguard the product life cycle of their current and potential new products in the market. This approach will enable the firm to find out how to regulate the growth of its new products in the market to maintain high levels of interest from consumers.

The firm needs to be careful about fads that are driven by high levels of customer excitement which do not last for a long period of time. Therefore, the new product development processes must be guided by information obtained from the targeted customer segments in the market (Kotler & Armstrong, 2007, p. 75). This will to find out how its new products are likely to fare in the market in the long run.

Therefore, the firm needs to rely on forecasting tools to predict expected changes in consumer behavior that are likely to impact on the performance of new products which are sold in the market.

The firm also needs to be careful about becoming complacent in the industry after it starts to register good results from its operations. The firm should institute learning processes that make all employees and other key stakeholders aware about constant trends in the industry that have an impact on its operations.

As a result, this approach will help the firm to focus its attention on organizational priorities that affect the manner in which it performs its functions in the industry. Therefore, this will help the firm to come up with proactive solutions to various challenges it is likely to face in the industry in the long run (Kotler & Armstrong, 2007, p. 82).

Moreover, it is important for the firm to adopt risk management strategies to protect it against situations that are directly caused by poor financial performance. This will increase the stability of its operations in the industry in the long run.

McDonald’s needs to take urgent measures to protect its market share in the industry. The firm needs to develop new products that can satisfy the needs of its customers in the industry. In addition, the firm should come up with new service improvements to help its clients obtain high quality services from its operations. This approach will improve the firm’s advantage over its competitors in the industry.

Bradley, N. (2010). Marketing research: Tools and techniques. New York, NY: Oxford University Press.

Jargon, J. (2014, Apr. 20). McDonald’s faces sharper competition in breakfast battleground. The Wall Street Journal.

Kotler, P., & Armstrong, G. (2007). Principles of marketing. Upper Saddle River, NJ: Pearson.

Marder, E. (1997). The laws of choice: Predicting customer behavior . New York, NY: Simon and Schuster.

Panda, T.K. (2008). Marketing management. New Delhi, India: Excel Books

Rue, L. & Byars, L. (2003). Management: Skills and applications. New York, NY: McGraw Hill.

Salisbury, P. (2014, Feb 20). The globalization of “fast food”. Behind the brand: McDonald’s. Global Research. Retrieved from https://www.globalresearch.ca/the-globalization-of-fast-food-behind-the-brand-mcdonald-s/25309

Vrontis, D., & Pavlou, P. (2008). The external environment and its effect on strategic marketing planning: A case study for McDonald’s. J. International Business and Entrepreneurship Development, 3 (3/4), 289-307.

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IvyPanda. (2022, July 31). McDonald’s Corporation Case Study Analysis. https://ivypanda.com/essays/mcdonalds-company-analysis-2/

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1. IvyPanda . "McDonald’s Corporation Case Study Analysis." July 31, 2022. https://ivypanda.com/essays/mcdonalds-company-analysis-2/.

Bibliography

IvyPanda . "McDonald’s Corporation Case Study Analysis." July 31, 2022. https://ivypanda.com/essays/mcdonalds-company-analysis-2/.

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Mcdonald's corp (mcd) q1 2024 earnings call transcript highlights: strategic adjustments and ....

Global Comparable Sales Growth: Nearly 2% in Q1 2024.

Adjusted Earnings Per Share (EPS): $2.70, a 2% increase in constant currencies.

Adjusted Operating Margin: Nearly 45% for the quarter.

Restaurant Margin: Generated nearly $3.5 billion, up about 4% in constant currency.

Adjusted Effective Tax Rate: 19.9% for the quarter.

Store Development: On track to reach 50,000 restaurants by end of 2027, with significant openings in China.

Warning! GuruFocus has detected 4 Warning Sign with MCD.

Release Date: April 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

Q & A Highlights

Q : What is the current outlook for McDonald's comp sales in the U.S. and IOM markets given the tougher climate? A : Ian Frederick Borden, Executive VP & Global CFO, noted that 2024 has brought significant macro headwinds, likely resulting in comp sales below the previously indicated range. U.S. comp sales are expected to start Q2 roughly flat, with industry traffic either flat or declining in major markets.

Q : Is there a need for a more aggressive value approach in the U.S. to achieve the comp sales targets? A : Christopher J. Kempczinski, President & CEO, emphasized the importance of improving awareness of McDonald's value offerings in the U.S., where there is no unified national value platform, unlike competitors. The focus is on aligning the system around a strong national value proposition.

Q : Can you discuss the timing and expectations for implementing the new value plan in the U.S.? A : Kempczinski mentioned learning from the quick implementation and success of a national value program in France, which significantly raised consumer awareness and positively impacted business trends. The U.S. team is working to define and implement a similar strategy.

Q : What are the key drivers beyond affordability that can support U.S. sales growth in the current environment? A : Kempczinski highlighted operational excellence, including improved service times and customer satisfaction, as well as menu innovation and impactful marketing as critical drivers. These elements are crucial for engaging customers and encouraging repeat visits.

Q : How does McDonald's plan to address the varying consumer perceptions of value across different income cohorts in the U.S.? A : Kempczinski pointed out that while low-income consumers are most affected, all consumer groups are seeking value due to widespread inflation. The strategy involves broadening the appeal of McDonald's value propositions to encompass all income levels, ensuring relevance and competitiveness.

Q : What is the approach to national value platform development, considering regional cost variations across the U.S.? A : Kempczinski explained that despite regional cost differences, a national value platform is essential for unified marketing and consumer perception. The strategy involves balancing local and national needs to optimize transaction growth and profitability.

These insights from McDonald's Q1 2024 earnings call highlight strategic adjustments in response to current economic pressures, with a significant focus on enhancing value perception and operational efficiency to drive growth and customer satisfaction.

This article first appeared on GuruFocus .

That's Viral Now

Starbucks and McDonald’s Hit Hard with $20 Minimum Wage Rollout

Posted: April 27, 2024 | Last updated: April 27, 2024

Challenges With Diversification

Diversification would have been a reasonable go-to option to combat the present financial hit. But as it stands, Starbucks and McDonald's cannot easily expand the variety of offerings on their menu. This is due to logistical and operational complexities.

Also, there is the issue of skyrocketing prices of ingredients. Bringing more menu options to the table means a significant increase in operational costs, posing financial challenges to the establishments. 

Coffee As A Case Study

The cost of coffee is a classic example of the sharp rise in the prices of ingredients. Earlier in the year, the price fell from a hike in 2021 and 2022. It's on its way back to the upside again, from $154 per pound in January to $213 now.

In the end, adaptation to their menus will demand proper planning. This will involve strategic adjustments to address the price surge, while equally meeting and satisfying the needs of consumers.

Beef Price Surge

Data provided by the Federal Reserve of St. Louis has an insight into the price progression of beef. The prices have also shot up considerably, reaching a new peak in more than 30 years.

At the beginning of 2021, the cost per pound was $4.00. However, at the time of writing, it is $5.15. This is an insane price compared to the $1.5 or under that people paid in the ‘90s to get a pound of ground beef.

Starbucks Hit With A Mug Recall

Recently, Starbucks was forced to recall over 400,000 holiday mugs. They were partly made of metals and could melt in microwaves, causing burns. This is among the recent setbacks the coffee giant faces.

Prior to the recall, the U.S. Consumer Product Safety Commission reported that 12 mugs broke, injuring 10 individuals. The different gift sets were sold from November last year until January 2024. Buyers were instructed to return them to retailers and request a refund.

Starbucks Recent Bad Publicity

Starbucks has kept its immaculate image until it tainted it lately with how it treated its workers. It was charged with violating the rights of union members. And the corporation pays its frontline workers as little as $15 per hour.

Coincidentally, this bad PR happened when Starbucks lost its position as a growth stock. Investors have had to battle with a stock decline of 9% while the market has shot up by 30%.

America's Wage Increase Demand

At McDonald's and Starbucks, most expenses have fixed prices. This also includes their hourly wages. However, there is a rising demand for increased wages among hourly workers in America.

California has enacted new rules in that direction. This new law ensures that factory workers are paid $20 per hour. However, employers say having to pay their workers more will depend on the customers. In other words, they'll raise their menu prices to meet up with the pay demands.

San Diego's Remarks

NBC's San Diego says fast food workers earn a minimum of $16.60 hourly. But the state has increased that to $20.00. California's minimum wage of $15.50 per hour is among the highest in the United States.

NBC also clarifies further that “The new $20 minimum wage is just a starting point. The law creates a Fast Food Council that has the power to increase that wage each year through 2029 by 3.5% or the change in averages for the U.S. Consumer Price Index for urban wage earners and clerical workers, whichever is lower.”

Food Companies To Increase Price In The Face Of Increasing Minimum Wage

Following the new law in some states, large food chains are set to follow suit with an increase in menu prices. Companies like McDonald's, Starbucks, and Chipotle will need to do this to compensate for the new development.

Meanwhile, other food business owners have relayed to do the same to keep up. However, in California, there is an exception. For a fast-food spot to be required to give the raise, it must be active in at least 60 locations in the country.

Skepticism With Large Food Chains As Investment Options

Starbucks and McDonald's are less catchy options for investments for savvy business minds. Not because of their revenue streams. Their escalating costs at present and in the future prompt skepticism.

Some of the surging operational expenses include ingredient and labor costs. Ultimately, these pose challenges to profitability. And oftentimes, investors scrutinize these factors to evaluate long-term viability and potential ROI.

A Look At McDonald's ROI And Operating Margin

Return on investment capital (ROIC) hints at how a company allocates its funds to profitable projects. McDonald's ROIC has been above 15% and continues to trend higher since 2015. Presently, it is 22% and quite higher than that of Starbucks.

McDonald's operating margin is presently at 41%. It has also been an upward trend since 2010’s 30%. The pandemic had a significant impact on the company's revenue growth. However, it experienced a bounce back post-pandemic as sales jumped 20%.

Starbuck's Stock Slip

Around late December 2023, Starbucks’s shares declined almost daily for two weeks. According to experts, this has not happened since the store's first public offering in 1992.

This event affected its long-term stock performance. It has also knocked $10 billion off the market cap of Starbucks since the start of December 2023.

The Challenge With Overbuilt Chains

One of the estimates concerning Starbucks’s sales slump since late last year is the decline in same-store sales. This has kept the company's stock crawling behind its rival, McDonald's.

Meanwhile, the problem might be that the company's strength is built solely on endless expansion. Starbucks has over 20,000 stores in 2023 and has been assumed to have overbuilt in the United States.

How Big Of An Issue Is Inflation Still?

Even though different data report the cooling of inflation, food prices seem to be rigid. Inflation has come down from its 2022 crazy high, yet many Americans are being hit hard at the grocery store.

Food outlets also complain bitterly about inflation. However, experts endorse the minimum wage increase as a way to allow workers to get more money to deal with their expenses.

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