GEORGIA STATE UNIVERSITY

McDonald’s International Marketing Strategy: An

Analysis

Caitlin Cameron, John Chapman, Taylor Fraser, Francesca Massari Figari, Iman Paul,
Tiandra Williams and Tameka Winchester
 McDonald’s International Marketing Strategy

TABLE OF CONTENTS
PAGE

I. EXECUTIVE SUMMARY 2

II. OVERVIEW 3

III. MODE OF ENTRY 4

IV. GLOBAL MARKETING STRATEGY 9

V. EVALUATION & PERFORMANCE 19

VI. RECOMMENDATIONS 20

VII. ENDNOTES 22

VIII. APPENDIX 25

I. EXECUTIVE SUMMARY

This project was designed to examine the strengths, weaknesses, and needs for change of
the international marketing strategy of McDonald’s as a global brand. At a time when this giant

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is at its peak changes in the global market are forcing McDonald’s to adapt to different cultures
and evolving preferences.

The food service industry is very challenging on even a local scale, McDonald’s has
taken this challenge around the world and identified four major components that make up its
mission/vision: Health Consciousness, Sustainability, People, and being a Good Neighbor. It
looks at various aspects of each of these as its keys to continued success.

To enter foreign markets McDonald’s has to use various methods of entry. The primary
focus for the company is to franchise its well-known brand. It utilizes its small subset of wholly
owned stores as test kitchens and market leaders, while utilizing joint venture partnerships in the
more restrictive markets.

McDonald’s has identified four key segments that best fit its marketing strategy, which
are defined by country status/location: U.S. domestic, International Lead Markets, High Growth
Markets, and Foundational Markets with the home market making up roughly 40 percent of the
company’s revenue. These markets are further segmented by demographics and psychographics
to better serve the local customers. Each of these segments and sub-segments drives the
expanded four P’s of the marketing mix.

The primary aspects of the marketing mix contain Product, Promotion, Price and Place.
The expansion of these also include Physical, People and Process. These facets of the marketing
strategy define all the ways that McDonald’s services its customers and adapts to the various
markets.

Recent market trends and changes in customer preference have had adverse effects on
McDonald’s in recent years, specifically in 2014 where the company saw an operational income
decline of 8 percent. This has also been seen in much of the company’s competition with
Wendy’s and Burger King showing steeper declines. Despite this McDonald’s is still the largest
quick service chain worldwide in terms of revenue.

To combat the market trends and assist the company to make up lost ground the
following recommendations are proposed: increase the perceived or real value to the customer by
adapting the product and adding additional offerings, use technology to better adapt to changing
customer tastes and preferences, and to continue expanding the global reach by venturing to new
markets.

II. OVERVIEW

HISTORY

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 In 1948 two brothers, Dick and Mac McDonald, opened a small hamburger stand in San
Bernardino, California.1 The business model behind the family-owned store was simple; the
stand would offer only hamburgers, fries and milkshakes, all of which would be sold at
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reasonable prices. Not only were consumers interested in the simple offerings McDonald’s
provided, but also businessmen such as Roy Kroc saw great expansion opportunities in the
burger shop. 1 Evolving from his role as the company’s milkshake supplier, Kroc became the first
McDonald’s franchise owner by opening a McDonald’s in Chicago in 1955. 1 At that time, the
cost to open a franchise with the company was about $30,000 a number that has since grown
tremendously.1 To become part of the largest, most successful fast food chain in the world today,
one can expect to invest upwards of $1,000,000. 1 There is little doubt Kroc’s vision has since
become a reality, as McDonald’s has grown from a single hamburger shop in Southern
California into a global fast-food chain with locations in over 100 countries, more than 35,000
restaurants and servers roughly 70 million customers daily.2

MISSION & VISION

McDonald’s has created and implemented specific missions and a vision that has merged
into what the company has today named ambitions. As stated on its website, McDonald’s
ambition goes beyond their offerings; the company chooses to focus on being a positive force for
its customers, employees, the communities it operates in and the world as a whole.3
With respect to its mission and vision of providing good food, McDonald’s has tackled a
variety of trends that affect the industry as well as the world in its entirety, including:
 Health Consciousness: Continually searching for new ways to improve the nutritional
value of its offerings, while maintaining their signature taste that is loved worldwide.4
 Sustainability: Leverage the company’s size to improve a variety of sourcing factors
including assurance that direct suppliers align with the company’s “Three Es” –
ethics, environmental responsibility and economic variability. 5
 People: Offer employees opportunities for professional and personal development.6
 Good Neighbor: Implement targets such as increasing energy efficiency by 20 percent
in company-owned restaurants and increasing the amount of in-restaurant recycling to
50 percent7,8

Situation Analysis – General McDonald’s Market Analysis

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 Strengths Weakness Opportunities Threats

Brand Recognition Public Image Changing Menu Competition

Economies of Scale Little Differentiation Developing Markets Health Concerns
Business Structure
Diversified Income
(See more detailed information in appendix 1)

Market Analysis
According to the 2014 Annual Report, McDonald’s has experienced and continues to
experience difficulties with lagging sales and declining guest counts.9 While some of these
challenges were anticipated, others such as unexpected supply issues in Asia, were not. 9 These
factors, among others, have triggered a 2 percent decline in consolidated revenues and a 9
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percent decrease in consolidated operating income. On a positive note, the 2015 forecast
highlights $1.2 trillion in growth opportunities within the informal eating out segment. 9

III. MODE OF ENTRY

McDonald’s has chosen to use three different types of mode of entry (MoE) into various
marketplaces: wholly owned stores, traditional franchises, and foreign affiliate/developmental
licenses. Each of these MoE’s has its own advantages and disadvantages in terms of risk, reward,
time to market, cost, and control.
McDonald’s is represented across 119 countries with approximately 35,000 outlets the
majority of which, are franchises. The company provided a breakdown of their ownership types
as follows:
 Over 57 percent are conventional franchisees
 Approximately 24 percent are licensed to foreign affiliates or developmental licensees,
and
 Over 18 percent are company-operated. 17

Direct Investment – Wholly Owned

        Wholly owned stores that McDonald’s corporate manages makes up only a small portion
of its stores with less than 20 percent, the majority of which are located in the United States and

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the United Kingdom. Interestingly, while the company has a small amount of wholly owned
stores, within their U.K. market, 70 percent are owned and operated by McDonald’s Corporate.
In a recent statement from the current CEO18 the company is aiming to reduce the number of
company-operated restaurants even further to about 10 percent, a trend the industry is seeing as
whole in order to mitigate risks19
While the company is looking to downsize wholly owned stores, there are some benefits
in having them in their company’s portfolio. These stores allow the company to test new
methods and models of doing business, which in turn permits McDonald’s to maintain control
and understand the various markets without relying on feedback from the franchisees.
Additionally, these stores provide a healthy portion of revenue for the company, which comes
not without risks, one being the cost the company incurs through operating these stores.

Franchising
While wholly owned restaurants represent 20 percent of the company’s food operations,
franchises make up almost triple that amount with approximately 57 percent of McDonald’s
restaurants operated through franchising. In fact, the company is so well known for its franchises
that the term is often synonymous with McDonald’s. Franchises are operated by third parties, but
McDonald’s corporate performs the majority of promotional advertising as well as decision
making in terms of menu selection and brand direction. Similar to most franchising operations,
corporate asses marketing and franchising fees to be paid by the owner, however, as a
corporation, McDonald’s has the ability to collect rent on the property on which the building sits,
an additional fee the company receives. Another unique aspect of the McDonald’s franchise
operations is that corporate does not sell food products directly to franchises, but rather organizes
the supply of the food through a third party logistics provider. Franchising is a low risk MoE
option when entering foreign areas, and comes with its own set of advantages and disadvantages
listed below:

Advantages:
 Low Risk: Franchises allows for quick expansion into new markets with a much lower
risk to McDonald’s financially being that franchise owners assume the majority of the
financial burden in hopes of seeing a higher return.

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  First-Hand Host Country Knowledge: Franchises allow the company to have people on
the ground who are knowledgeable about host country factors including economic
factors, geographic and political factors.
 Corporate Financial Gain: With the franchisee acquiring a large amount of the financial
burden, McDonald’s corporate is able to take in fees from franchises without worrying
about the costs associated with rent, property taxes and other factors that increase overall
cost. To that end, the return McDonald’s corporate receives is high in relation to the
small amount of risks it takes to allow franchising to occur.
Disadvantages:
 Loss of Control: While McDonald’s may see gains in terms of a low involvement revenue
stream, the company has little control over the day to say activities of franchises.
Although there are standard practices and guides franchises must follow, the actual
implementation rests upon franchisees.
 Increased Cost and Involvement in Specialized Markets: In markets that require special
adaptations when it comes to menu offerings, ensuring that the franchisee and
McDonald’s corporate are on the same page can be a daunting task for the company. For
example, McDonald’s is primarily known for hamburgers in the U.S., but in countries
such as India where the majority of the population does not eat beef and will not even
visit a restaurant that serves it, normal methods must be altered to meet demands.
Exclusions like these have caused the retail fast food chain to increase different
franchising models that can be implemented. While these models have been beneficial,
and increase in cost and involvement still remains.
 Franchise Impact on How Overall Company is Perceived: Franchise operations can
impact how the McDonald’s brand as a whole is seen. A mishap or an incident garnering
bad press as a result of one franchise will most likely resonate across McDonald’s stores
around the world and cause backlash by the consumer as a result. Situations such as these
can further limit corporate ownership’s control and often times requires corporate to step
in and do the necessary damage control to lessen the overall blow.

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 As a whole, franchising poses a variety of advantages and disadvantages to McDonald’s as a
whole. Due to the large amount of franchises the company has, the advantages are currently
outweighing the disadvantages.

Global Impacts of Franchising in the Host Country:

 Political / Legal: McDonald’s as a global franchising leader is a success that often places
them in a position to be one of the first to encounter various political and legal issues of
the world. While this can potentially be difficult to deal with on a corporate scale, have
franchises can decrease the burdens of dealing with said political and legal issues.
Through utilizing local ownerships, the company can deal with legal and political issues
more strategically than the home company can. For example the Chinese government
passed regulations in 2004 that clearly defined foreign operations in China. These
regulations assisted in ease of entry, while simultaneously making franchising a more
beneficial opportunity in the country. Despite regulations similar to China’s there is a
constant risk of negative political and legal factors that can hinder entry modes, such as
franchising from performing well.
 Environmental: Due to the lack of control that McDonald’s has with franchises and third
party providers, the company is susceptible to a variety of environmental regulations that
may not be met as a result of franchising. One example is in China when the company
was presented with a HK$4.9 million water pollution fine that was the result of third
party potato provider’s failure to comply with local environmental regulations. Issues
such as this must be taken into account when partnerships and franchises are taking place.
 Technological: Overall, technology has made global franchising more manageable since
it is easier than ever to communicate and disperse information quickly between franchises
and corporate headquarters. The technological level of a country plays a major role in the
success of a company’s franchises.
 Infrastructure: A country’s infrastructure is an integral part in the success of franchises.
By comparison, the U.S. has a large, advanced transportation network that is relatively
easy to use and one that McDonald’s is adjusted to. When seeking to enter a new
market, McDonald’s must take into account the ways in which franchises will acquire
their products. Due to the fact that McDonald’s manages the supply of its products, the

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 corporate entity is heavily involved in designing and implementing this supply-chain
process; a process that can be challenging when expanding to emerging markets.
 Cultural: Around the world McDonald’s is known as an American company that has
American values and ideals. This can be problematic when the company expands to
areas in which the culture is drastically different than that of the home country.
Franchises offer a window into understanding cultural norms and are a way in which
McDonald’s corporate can ensure they are sensitive to the needs, wants, and desires of
the host country’s culture.

Affiliate
The remaining McDonald’s operations are made up of joint ventures (JV). While this
mode of entry is uncommon for the company, the most well-known JVs in recent memory are
those in India and China, which were a result of regulations that made them more beneficial for
companies such as McDonald’s. Unlike franchising, joint ventures require much more input as it
relates to cost, time, and complexities. While JV’s are less risky than wholly owned chains, they
provide less potential rewards due to their shared nature with other companies. Although the
return may be less, JVs provide more brand security than franchises since McDonald’s still
maintains a large portion of control. Though JVs have advantages and disadvantages, this
venture requires a great deal of trust between the home company and the host country/affiliate in
order to be successful. When McDonald’s first expanded into China the JV team was tasked with
creating a supply network, finding local growers to contribute to the network of suppliers, hiring
local contractors to build restaurants, and locating local staff to run the outlets.

IV. GLOBAL MARKETING STRATEGY

Segmentation, Targeting, Positioning, and the Value Proposition

For McDonald’s, a variety of segments are utilized from geographic segmentation, to
demographic segmentation, and finally, psychographic segmentation, all of which are listed on

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the company’s corporate website. Primarily, the company segments geographically by
separating markets into four different categories, the U.S. domestic market, International Lead
Markets, High Growth Markets, and Foundational Markets. The U.S. domestic market makes up
more than 40 percent of the company’s global revenue which is similar to the international lead
markets that include areas such as Australia, Canada, Germany and the UK and rake in a total of
40 percent of the global revenue as well. The next segment are the high growth markets which
include China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands this
high growth market that is characterized by the steady increase of retail stores being opened
equates to 10 percent of the company’s global revenue. The final geographic segment used are
the foundational markets. These markets include the areas in which the company has outlets but
are not domestic, international lead or high growth markets. Over time, these markets may grow
and expand, but currently they are in the foundational stages and account for the reaming 10
percent of revenue.
The next segmentation base the company uses is demographic segmentation, through
which they segment by age, income, and ethnicity. When segmenting by age, the company
strives to target younger consumers by offering “Happy Meals” that come with a toy and are
characterized by a clown looking “mascot” of sorts. In doing this, the company hopes it will be
so enticing that kids will desire it and in turn pressure their parents to purchase the meal. After
getting the parents to the store through children, the company offers a variety of options
including the McCafe for those who enjoy specialty coffee beverages or gourmet hamburgers for
those who want a hearty hamburger. Additionally, the company targets the young adult and
mothers segment by offering a drive-thru that is meant to be efficient and quick for those people
who are on the go. This option assures the mothers and young-adults target who are on the go,
that getting their McDonald’s is not going to be too time consuming, a characteristic often
associated with eating out.
A final demographic segmentation used by McDonald’s is segmenting based on ethnicity.
More specifically, the company uses this segment to target African-American, Latino, and Asian
families differently. In a video curated by McDonald’s US Marketing Director, the company
discusses how they target each of these ethnicities differently through promotional strategies
such as creating three different television advertisements that focus on each ethnicity’s direct
needs and wants.

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 An additional segment the company utilizes is psychographic segmentation. By
separating its large customer base into smaller groups based on psychographic characteristics,
McDonald’s is able to provide its customers with offerings that suit each small psychographic
base’s desires. For instance, McDonald’s has taken note of those individuals who seek to lead
healthy lifestyles and as such now has a line of offerings that are lower in fat, sugar, salt and
calories. Specifically, McDonald’s now provides egg-white McMuffin’s which are low in fat and
healthier and their premium wraps are offered in a grilled chicken option rather than fried for
those who enjoy McDonald’s but want to eat healthier.
As described above, McDonald’s uses a differentiated marketing strategy to
simultaneously pursue several key market segments and manage multiple unique offerings to
each of their different segments.
Overall, the company ties their segmenting and targeting strategies together through their
global marketing strategy, which influences their value proposition. On the company’s website
their value proposition is clearly stated as “quality, service, cleanliness, and values.” For the
company, this value is delivered through their relationships with owners and operators, service
providers, and employees in order to offer quality, service, cleanliness, and strong ethical values
to their customer all of whom lead into the company’s overall positioning statement.
While the positioning statement was not explicitly stated by McDonald’s one that
encompasses their STP strategy and is derived from their value proposition is:
McDonald’s is the leading customer-focused global food retailer, because they stress the
importance of creating value for the consumer by successfully incorporating a geocentric
business and marketing model.

International Marketing Strategy: 4Ps and Technology

Product
When it comes to product, the McDonalds’ menu is at the core of their global successes.
Their product strategy embodies the ideals of global localization. For the company, global
localization is implemented by offering their key domestic menu options across every market,
while adapting specific menu offerings for different markets. While some large companies are
just beginning to understand and roll out strategies that express global localization, McDonald’s
has been implementing it for years. Mahmood Khan discusses the McDonald’s “think global, act

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local” product strategy in his 2002 journal entry, Internationalization of Services: The Global
Impact of U.S. Franchise Restaurants22. In his writing, he explains the McDonald’s
standardization strategy as offering major menu items with similar tastes across different global
markets. For the customer, this standardization has an impact upon their life, eating habits and
food preferences (Khan, 273). This “Think Global” portion of their product strategy allows the
company's overall key offerings to stay consistent across a variety of heterogeneous markets,
while developing unique a taste and a world-renowned brand. These ideals have held consistent
over the years and in the company’s 2014 Annual Report, the newly appointed CEO briefly
touches on their overall menu uniformity as a key driver in the company’s success over the
years. For McDonald’s this standardization and taste have been integral in making the company
a multi-million dollar one.
While standardization is one of the key drivers in McDonald’s international marketing
strategy, the “Act Local” portion may arguably be the most crucial aspect of their strategy. This
adaptation is not only necessary for McDonald’s to maintain and grow their position within the
fast-food industry, but it is also a requirement to operate in a multitude of markets across the
world. McDonald’s must consider the overall differences that impact their offering mix such as
differing consumer tastes, religion, laws and certain customs of the area. 23 Cladiuo Vignali
explains different menu offerings that the company has implemented to adapt to cultural changes
of their markets in his article in the British Food Journal: McDonald’s: “think global, act local”
- marketing mix. For example, the journal speaks to a situation in Israel where the Big Mac was
adapted, after protesting by consumers, to be served without cheese according to kosher
requirements that states that meat and dairy products must be separated. In India, they serve
vegetable McNuggets and a mutton-based Maharaja Mac (Big Mac), innovations that are
necessary to implement in a country where a large majority of the population does not eat meat
(Vignali, 99). These adaptations or offering modifications are unique menu items in addition to
the more standardized menu the company offers such as their famous french fries or
refreshments.
Whereas specific macro-factors play an important role in McDonald’s customizing their
menu items, differing customer needs and wants are another reasons why the company adapts
their menu offerings. For example, Vignali mentions areas such as Germany where beer is sold
in restaurants or in Italy where cold pasta dishes are available. These menu offerings are
additions to their offering mix and are implemented in order to meet consumer desires that differ

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 23
from market to market (Vignali, 99) . Although implementing this strategy is costly, the
investment by the company has allowed them to gain their footing in new markets and become a
frontrunner in the fast-food industry.
In addition, as previously mentioned, McDonald’s adapts some areas of their product
offerings.  This been said, the company also adapts their communication strategies as each
market has different conditions, preferences and a different receptivity towards their
advertisement. While promotion is discussed in further detail below it is important to note that
when expanding into a new market, McDonald’s uses a dual adaptation strategy, meaning they
adapt both, their communications and their product strategies, in order to address individual
markets in the most effective manner.
Moreover, as competition continues to get stronger, and consumers preferences continue
to change while their tastes are becoming more sophisticated, it is imperative that McDonald’s
be on a constant quest to innovate its products and fulfill the consumer’s changing needs and
wants. Due to this continuous change, McDonald’s has participated in extensive marketing
research that allows them to strategically introduce new products and eliminate others from its
menu offerings each year. In doing this, it is important to keep a close watch on the sales effect
these items have to avoid any potential cannibalization new offerings may have on existing
products. The product life cycle (PLC) plays a key role in ensuring cannibalization is avoided
and an analysis of this cycle must be fully integrated into the product strategy. This integration is
key because it assesses the ability to generate profits that will vary at different points of the PLC.
As a global company, the stage of a product varies within their markets of operation, so it is
necessary to observe and track each market separately. In the case of Australia for example, the
Big Mac is in its maturity stage, because of this, the company has introduced the “Grand Angus”
and the “Mighty Angus” burgers into their offering mix to coexist with the Big Mac offering
while addressing customer wants and needs. These offerings do not cannibalize the Big Mac
because it is steady in profits at maturity and is purchased and eaten mainly though the late
adopter category. The new offerings on the other hand, are usually purchased by those willing to
try new things including early adopters, to this end profits are steadily increasing without
encroaching on the Big Mac offering.
Finally, because McDonald’s is a global company with offerings at differing stages of
market penetration and development all around the world, it can also be said that each of their
markets are in different stages of the PLC. As previously, the company segments their markets

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into four clusters depending of their level of development and full potential. Graph 1 in the
Appendix II illustrates where in the PLC each of these markets are located.

Promotion
McDonald’s promotions represent a “brand globally, advertise locally,” 23
communications strategy, meaning that more often than not, McDonald’s adapts their
communication strategies for different markets.
In looking at the aspects of standardization within McDonald’s marketing mix, the
infamous golden arches are at the pinnacle of the McDonald’s standardization and have become
a primary reason that Business Insider has stated that overall, the company has a high brand
equity. While this branding symbol is known worldwide, it is still imperative that as a brand,
McDonald’s relays their overall communication message in an appropriate and effective manner.
Much like the golden arches, which are known around the globe, the infamous slogan
“I’m Lovin’ It,” is another part of the McDonald’s promotional strategy that is completely
standardized.   This slogan is used in almost every campaign and market and is directly
translated into languages around the world. The goal of this is to convey the same overall
message that McDonald’s equals happiness. While this slogan is directly translated and
standardized, the promotional strategy associated with the slogan is adapted for different cultures
in order to make the messages as impactful as possible. One example is the vast amount of
sporting sponsorships and endorsements the company utilizes. The types of events sponsored and
endorsers used change depending on the location, making it the portion of this promotional
strategy that is adapted for each market.
In addition to the global brand image and standardized promotional slogan, McDonald’s
has begun to make use of integrated marketing communication (IMC) strategies that merge the
lines of traditional and digital campaign strategies. As consumers have become more
technologically savvy, the company has responded by rolling out localized apps or digital
campaigns to advertise to different markets. One campaign the company used IMC for is the
widely known U.S. Monopoly sweepstakes. While the sweepstakes make use of traditional sales
promotion strategies, the company has recently incorporated digital aspects into the promotion to
capitalize on tech savvy users.
In the same way that sales promotions are transitioning towards digital, the use of online
platforms such as social media suites have also become more prevalent and a transition that

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many companies have made. McDonald’s makes use of digital advertising through social media
channels including: Facebook, Instagram, Twitter, YouTube, Tumblr and music applications
such as Spotify and Pandora.  These platforms allow McDonald’s to reach their consumers
quickly and provide a means to make a personal connection with consumers. These platforms
also give consumers a way to interact with one another and in turn this interaction has since
created a cult-like community following of the restaurant. In addition to the speed and
interaction these platforms give McDonald’s it also provides the company with a unique and
simple way to adapt and localized their online promotions for different markets.
Finally, good public relations (PR) can positively affect a brand’s image when done
properly. For McDonald’s, community involvement is a key aspect of their corporate values and
is something they take very seriously. While the company genuinely uses this to reach out to the
communities it operates in, this outreach has also become part of their PR strategy.

Price
In conjunction with the other strategic marketing factors that must be considered when
entering the international marketplace, deciding on the proper price for the offering is crucial for
the financial stability of the company. Offering a product for too little can potentially devalue the
product while pricing the product too high by market skimming may cause the company to lose
business. Continuing with a similar international marketing strategy the company has
implemented in other portions of their international marketing strategy, McDonald’s utilizes an
invention or geocentric pricing strategy. This strategy takes into account unique market factors
including local costs, income levels, competition and local marketing strategy objectives.
Postelnicu Dabija24 discusses McDonald’s pricing policies in Romania in 2015, which are similar
to the company’s pricing strategies in other international markets. The author states that
McDonald’s pricing is based on the principles of population affordability, competitors pricing
and their continuous pursuit to offer the highest quality product at the lowest possible price
(Dabija, 9)24. This idea of pricing holds true when reviewing the Big Mac Index published but
The Economist in 1986 25. While the index points more towards currency exchanges it does speak
to a larger point that in every country the company is in, the Big Mac is their cash cow product.
This is one standardized product offered worldwide, but is however priced differently in every
market and takes into account the purchasing-power parity of each market.

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 Over the years, this geocentric pricing strategy has seen few, if any changes. In 1999,
Claudio Vignali speaks to a similar strategy hinging on six points (Vignali, 102)23, a strategy that
has overall led the company to be competitive globally, rather than looking to maximize products
in one market.

Place
For a company with over 35,000 stores worldwide, developing a supply chain strategy
that can be adapted and used worldwide is crucial to the company’s overall success. In the
company’s 2014 Annual Report, the company discusses their strategy stating that their food is
delivered from quality assured independent suppliers. These suppliers own and operate
distribution centers globally, which then, after being approved by the company distribute
products and supplies to franchises and company-owned restaurants. The company leverages
scale-economies in this way in order to mitigate risks and deliver upon a portion of their value
proposition of quality assurance (2014 McDonald’s Annual Report) 9. Through this benefit and
organization of the supply chain, the company’s value is maximized and allows them to stay
competitive internationally.

Technology
McDonald’s has previously leveraged digital media within its integrated marketing
communications strategy and has expanded through the use of digital media, to the use of
technology within their stores and through their international marketing strategy campaigns.
One aspect of technology the company utilizes is within physical aspect of retail outlets.
When the company first began to use Wi-Fi there was a charge to use it, today in order to
compete with their coffee competitors, the outlets offer free Wi-Fi. David Grooms, McDonald’s
CIO stated, “[While] McDonald’s is traditionally known as a quick stop, it has become more of a
destination with new products and new look and feel at many of its restaurants.  McDonald’s is
about value-value of food, value in our service, and convenience of all kinds- so, [it is] a natural
fit. 26” In offering the free Wi-Fi, the company is increasing their benefits within their value
equation in hopes of encouraging customers to linger inside and potentially purchase more26.
Other technological advances the company has rolled out include a Digital Pay Option
and a new “create your own taste” machine. Although McDonald’s was an early adopter of
Apple Pay, a digital pay option in the domestic market, the company has decided to forgo

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offering this option in every market. There are however markets where this option is thriving.
For example, McDonald’s is currently testing the digital pay option in China where the company
is in fierce competition with Yum! Brands for market share. Interestingly this digital pay option
in China is faring relatively well in comparison to U.S. domestic markets, which is likely the
result of cultural differences. While the Chinese enjoy this option because their negative views
on credit card usage, Americans are the opposite, usually enjoying the ability to use a tangible
exchange of funds, in turn this more difficult to encourage domestic use of the digital pay
option27.
With consumer tastes ever changing, McDonald’s has begun to utilize technology in
order to keep up with these taste changes. In doing this, the company has rolled out “Create Your
Taste” campaign in Australian markets and is now being tested at approximately 2,000 U.S.
locations28. The company feels that this campaign can effectively appeal to millennials,
technology savvy buyers, and the do-it yourselfers that enjoy self-serve options, while continuing
to offer value to convince-driven consumers. Create Your Own Taste will allow the consumer to
construct their own burger online or by using in-store kiosks which in turn will eliminate the
typical cashier exchange. In appealing to increasing consumer sophistication and the consumer’s
desire for control, the campaign has the potential to improve not only sales, but also consumer
engagement. Customers can share their “burger genius,” on social media and encourage friends
to try it for themselves. While this campaign allows McDonald’s to compete with large
competitors such as Subway and Chipotle, it also showcases the company’s desire to stay
relevant in the minds of consumers by using technology.

International Marketing Strategy: Expanded 7Ps

McDonald’s has designed a restaurant system that can be set up virtually anywhere in the
world through the company’s use of the expanded 7Ps model which includes Physical, Process,
and People. The company’s international marketing mix as previously stated is based upon both
localization and globalization marketing strategies.
Physical
Physical place is an element of McDonald’s expanded international marketing mix. The
company’s drive-in and drive through options make McDonald’s products conveniently
accessible to the consumers. Although a norm in the U.S., it differs from market to market in
other countries. For example, in Jakarta, Indonesia, McDonald’s is positioned as an upscale

16
dining location. Unlike the usual tables and chairs seen at domestic and even other international
outlets, Indonesia stores boast six-inch-high tables fashioned with floor mats that customers eat
on a typical mode of eating in the country29. In adapting this, McDonald’s is able to better serve
that market by adapting physical elements to suit the cultural norms of Indonesia.
Another way that McDonald’s adapts their physical appearance is by making their stores
more attractive in countries where this is extremely important and necessary to entice customers
to enter. At the McDonald’s store located in New Zealand 30, customers can enjoy a McDonald’s
café called “The Corner,” where diners can enjoy unique menu offerings, while soaking in the
feeling that they are not in fact at a typical McDonald’s but in fact they are eating in an actual
street side café.
While adapting stores to match a fine dining norm in some countries, there are some
countries such as China where a conservative “Less is more,” approach is an important factor to
consider and implement. In China, the company has adapted to this cultural norm by offering
softer colors and cushioned seats.

People
Another aspect of the expanded 7 Ps includes the people, which often times refer to a
company’s employees. For a global company looking into standard hiring practices and
employee benefits is crucial to its overall success. Recently, McDonald’s in the U.S. has
received less than favorable press surrounding issues with minimum wage and other employee
relations’ issues. In this situation, employees argued that minimum wage was not enough to pay
bills or provide for their families. Employees felt that even though they are a large part of
helping bring in the company’s profit, the company continues to earn billion s in revenue while
they are struggling. Employees also voiced additional concerns hinging on the fact that the
company did not provide adequate health insurance or paid time off benefits similar to employee
benefits offered by other companies. As a result of this uproar, McDonald’s announced that
employees at company-owned restaurants would see a wage increase of one dollar over the
minimum wage amount in addition to receiving opportunities to earn paid time off. While
company-owned store employees were delighted by this news, the public faulted the company
stating that the majority of their stores were independently owned and operated and therefore
this wage and benefit increase by the company did not have an impact millions on employees
nationwide who will still be paid minimum wage without benefits.

17
 Although the company is dealing with the ongoing employee issue in domestic markets,
McDonald’s as a brand claims to place emphasis on its people. According to the company, they
pride themselves on enriching employees by offering education, job and leadership training as
well as workshops to enrich employees who wish to make their careers at McDonald’s a life-
long career. Though this is an immense contrast to the arguments of domestic employees
standing against the company’s employment practices, McDonald’s states that as a company,
they care about the overall wellbeing of its employees who are direct representations of their
brand.

As part of the company’s desire to enrich the lives of employees who desire to stay with
the company as a life-long career, McDonald’s offers an opportunity for managers and
prospective franchisees to nurture and enhance their management skills through a program
known as Hamburger University (HU) 31, which has campuses, located worldwide. The goal of
HU is to create a vibrant working environment for the store’s staff and managers, which will in
turn positively improve customer interactions in store. HU also offers McDonald’s the ability to
standardize recruitment and training processes that ate based upon friendly and prompt service
worldwide.

Process
McDonald‘s maintains a high degree of process standardization when it comes to their
kitchen set up and food preparation. Each restaurant has an almost identical kitchen blueprint
that consists of visible food preparation areas where customers can observe hygienic food
preparation standards.
In regards to food preparation, from the company’s inception having a standard food
preparation strategy was an aspect the McDonald’s brothers saw as a key to the company’s
overall success. Today this standardization continues with the food being packaged and stored
until an order is placed. Once ordered, the food is heated to the proper safety temperature,
toppings are added if necessary and then it is packaged for delivery to the customer. Regardless
of the unique menu offerings available worldwide, this procedure is standard everywhere.
In addition to kitchen and food standardization, McDonald’s has also standardized the
point of sale (POS) at its stores. This standardization of the POS refers to the standard code of
conduct for orders placed. For example, the company has established corporate goals that include
walk-in order completion within 90 seconds and 3.5 minutes at drive through windows. The goal

18
of stores is to not only be prompt with delivering the food to customers, but also to ensure that
product consistency is kept which in turn drives customer satisfaction. (Vignali,108) 23

V. EVALUATION & PERFORMANCE

After a successful run which raised the firm’s share price from $12 in 2003 to more than
$100 at the end of 2011, McDonald’s had a tricky 2013 and a much harder 2014. Sales in 2014
declined overall by 1 percent and the company’s operating income declined by 8 percent. (See
Table 1 and 2 in Appendix III). Additionally, in the last quarter McDonald’s revenue fell by 11
percent due to across the board sales declines. The most difficult part of these numbers is the fact
that they were not seen only within the domestic marketplace, the company’s decline was
noticed across most major markets including Asia, the Pacific, Middle Eastern and African
regions, where same store sales fell by 8.3 percent over the last year 9. In an effort to turnaround
the bleak company forecast, McDonald’s is faced with determining and analyzing the key
reasons for these declines. According to market experts and company executives alike, the top
problems that McDonald is currently facing are: its large menu, deteriorating relations between
the franchise owners company management, a value proposition that is no longer being
delivered, and the consumer trend shift that is moving towards healthier eating choices.
Despite this downturn in sales revenue, McDonald’s is still the largest quick service chain
in terms of revenue worldwide, with $27.4 billion in sales in 2014 9. This number, compared to its
nearest competitor Subway is hefty with Subway raking in $19.5 billion as reported by a market
research firm (Subway is privately held and does not generally report its US sales but it
informed Technomic that is 2014 US sales were 19.5 billion). Other fast food chains such as
Wendy’s and Burger King reported steeper loss of sales in 201432. (See Graph 2 in Appendix IV)
Most of the U.S. fast food chains have steadily been losing market share over past few
quarters. In contrast to this steady decline, there are new restaurants coined ‘fast casual’
restaurants that have seen healthy market share and profit increases. These restaurants have
recently become McDonald’s strongest competition as a result of their value offerings, which
include healthier menu options, the convenient ability to customize orders, and a more distinctive
quick serve system. Chains such as Shake Shack and Chipotle Mexican Grill (See Table 3 and 4
in Appendix V) have seen their sales grow rapidly on a year over year (YOY) basis for the last
few years. According to Mintel, the combined sales of American ‘fast-casual’ outlets rose by
10.5 percent in 2014, in comparison to a 6.1 percent growth in fast-food chains.

19
VI. RECOMMENDATIONS
 Evaluate Overall Value: McDonald’s should continue to periodically evaluate their value
offering in terms of greater benefits and lesser prices. By focusing on the potential
benefits offered to consumers on a continuous basis, it is possible to increase value, based
on the fact that on average, McDonald’s already offers low prices to customers. Potential
benefits include continuing to push their McCafe options, revamping their physical
locations and continuing to concentrate on consumer psychographic trends. Additionally,
ensuring that the customer’s front line experience is second to none is an important part
to increasing the benefits offered in order to increase value.
 Focus on Improving International Brand Perceptions: Overall, Chinese consumers are
becoming more concerned about wealth and status. McKinsey & Company reported that
Chinese consumers are increasingly driven by their perceived social statues and are
searching for ways in which they can improve upon their current standing. 33 For
McDonald’s this trend provides an area of opportunity within the Chinese market. By
upgrading the physical look and feel of stores while improving upon the overall brand’s
perception there is an opportunity to capitalize on these status-seeking individuals. While
this connects directly to Chinese markets, consistently analyzing brand perceptions in
every market and subsequently making the necessary changes will allow McDonald’s to
maintain its global dominance.
 Meet the customer at their turf: McDonald’s should continue to blend technology and
their physical locations to capitalize on mass consumption of technology and potential
create McDonald’s “communities.” An example of this is creating communities in the
domestic market that are based around health conscious trends. This would offer
McDonald’s the opportunity to not only tap into the minds of health conscious consumers
but it also will allow the company to sponsor health related events such as 5Ks,
additionally it would allow the company to create apps that track workouts or send users
updates on new healthy McDonald’s menu options. Internationally, McDonald’s should
research specific trends that are currently untapped, but are trends the consumer is
looking to see. In China for instance, Forbes 2012 suggests that approximately 44 percent
of consumers under 30, use technology to make purchasing decisions34. Developing

20
 capabilities on top of the already implemented technological applications offered would
allow McDonald’s to reach a market at a level their competition is not currently reaching.
 African Market Expansion: Over the past decade many U.S. companies have focused on
expanding their Latin and Asian market reach, a risk that has since paid off. The next area
global companies should focus on expanding in is Africa. With wealthy countries such as
China investing in Africa, it will not be long until Africa becomes the next gold mine.
Currently, McDonald’s has approximately 200 locations in 9 Providence in South Africa,
which affords them the opportunity of having current stores on the ground. While
expansion is key to tapping into new market share opportunities, there are significant
risks that must be considered including the hundreds of different languages, a lack of
communication and power infrastructure, various political instabilities, as well as health
and safety issues. Although there are significant risks, with continued research and
utilization of the now 10,000 trained employees in South African locations, McDonald’s
could successfully tap into African markets, a feat not many have successfully done in
the past

VII. ENDNOTES

1. Quintanilla, C. (2007). “Big Mac: Inside the McDonald’s Empire.” CNBC. Retrieved July 11,
2015 from https://www.youtube.com/watch?v=Ln2P2bUmsRU

2. McDonald’s Corporation. (2015). “Our Story.”

http://www.mcdonalds.com/us/en/our_story.html

21
3. McDonald’s Corporation. (2015). “Our Ambition.”
http://www.aboutmcdonalds.com/mcd/our_company/our-ambition.html

4. McDonald’s Corporation. (2015). “Good Food.”

http://www.aboutmcdonalds.com/mcd/sustainability/food.html

5. McDonald’s Corporation. (2015). “Sustainability.”

http://www.aboutmcdonalds.com/mcd/sustainability.html

6. McDonald’s Corporation. (2015). “Good People.”

http://www.aboutmcdonalds.com/mcd/sustainability/people.html

7. McDonald’s Corporation. (2015). “Good Neighbor.”

http://www.aboutmcdonalds.com/mcd/sustainability/planet.html

8. McDonald’s Corporation. (2015). “Climate and Energy.”

http://www.aboutmcdonalds.com/mcd/sustainability/planet/climate-and-energy.html

9. McDonald’s Corporation. (2015). “Annual Report.”

http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/McDonald's
%202014%20Annual%20Report.PDF

10. Forbes. (2015). “The World’s Most Powerful Brands.”

http://www.forbes.com/pictures/fell45elff/no-7-mcdonalds/

11. Forbes. (2015). “McDonald’s Faces Declining Sales in Asia After China Food Scandal.”
Retrieved from http://www.forbes.com/sites/greatspeculations/2014/09/11/mcdonalds-faces-
declining-sales-in-asia-after-china-food-scandal/

12. Greenhouse, S. (2014, March 13). “McDonald’s Workers in Three States File Suits Claiming
Underpayment.” Retrieved from http://www.nytimes.com/2014/03/14/business/mcdonalds-
workers-in-three-states-file-suits-claiming-underpayment.html?_r=0

13. Kaufman, A. (2015, April 1). “McDonald’s is Raising Wages for Some Workers.” Retrieved
from http://www.huffingtonpost.com/2015/04/01/mcdonalds-wages_n_6987542.html

14. Jacobsen, M. (2011, April 15). “McDonald’s: Taxing Americans for 56 Years.” Retrieved
from http://www.huffingtonpost.com/michael-f-jacobson/mcdonalds anniversary_b_849299.html

15. Food and Drug Administration. (2015). “Overview of FDA Labeling Requirements for
Restaurants, Similar Retail Food Establishments and Vending Machines.: Retrieved from
http://www.fda.gov/Food/IngredientsPackagingLabeling/LabelingNutrition/ucm248732.htm

16. Richards, W. (2013, July 29). “The Secret Behind McDonald’s Coffee.” Retrieved from
https://www.mainstreet.com/article/secret-behind-mcdonalds-coffee

22
17. McDonald’s Corporation. (2015). “Company Profile.”
http://www.aboutmcdonalds.com/mcd/investors/company_profile.html July 2015

18. McDonald’s Press release, http://news.mcdonalds.com/Corporate/Press-Releases/Financial-

Release?xmlreleaseid=123065 July 2015

19. CEO Easterbrook Webcast Address, Global Turnaround message

https://mcdonalds.webcasts.com/viewer/event.jsp?ei=1063465 July 2015

20. McDonald’s Corporation. (2015). “Education”

http://www2.mcdonalds.com/static/pdf/aboutus/education/mcd_franchising.pdf

21. ‘McDonald’s Chinese joint venture given ‘record fine’ for water pollution’
http://www.scmp.com/news/china/society/article/1781559/mcdonalds-chinese-joint-venture-
given-record-fine-water-pollution July 2015

22. Khan, Mahmood A. "Internationalization Of Services: The Global Impact Of Us Franchise

Restaurants." Journal Of Services Research (2005): 187. Advanced Placement Source. Web. 28
July 2015.

23. Claudio Vignali (2001), McDonald’s: “Think Global, Act Local” - The Marketing Mix,
British Food Journal, Vol 103 Is. 2 p 97-111

24. DABIJA, Dan-Cristian, and Cătălin POSTELNICU. "MCDONALD's - ÎNTRE

INTERNAŢIONALIZAREA ŞI REGIONALIZAREA VALORII RESTAURANTELOR SALE.
(Romanian)." Review Of Management & Economic Engineering 14.1 (2015): 205-219. Business
Source Complete. Web. 28 July 2015.

25. The Economist: The Big Mac Index.

http://www.economist.com/content/big-mac-index

26. n/a. “McDonald’s to offer free wifi.”CBS Money Watch. 15 Dec. 2009. Web 10 July 2015.
<cbsnews.com/new/mcdonalds-to-offer-free-wifi/>

27. Burkitt, Laurie . “McDonald’s, KFC Look to Get Faster In China by Adding Digital Pay
Option.” Wall Street Journal. 5 July. 2015. Web. 10 July 2015.

28. Peterson, Haley. “ McDonald’s Austrailias reveals how the US is doing it all wrong.”
Business Insider Austrailia. 7 May.2015. Web. 10 July 2015.

39. Keegan, Warren J. Author interviews and Mark Moxon. Global Marketing Management, 8th
ed. New York: Pearson, 2014. Print.

30. Angus Whitley. “The McDonald's of the Future Is ... in Australia?” Bloomberg. Bloomberg,
n.d. Web. 5 May 2015

23
31. McDonald’s Corporation. (2015).“Education”
http://www.aboutmcdonalds.com/mcd/corporate_careers/training_and_development/hamburger_
university.html

32. Patton, Leslie. “Have We Reached Peak Burger?” Bloomberg, September 04, 2014
http://www.bloomberg.com/bw/articles/2014-09-04/fast-food-chains-growth-in-u-dot-s-dot-may-
have-peaked

33. Astmon, Yuvai, and Magni, Max. "Meet the Chinese Consumer of 2020." Meet the Chinese
Consumer of 2020. McKinsey & Company, 1 Mar. 2012. Web. 28 July 2015.
http://www.mckinsey.com/insights/asia-pacific/meet_the_chinese_consumer_of_2020

34. Wang, H Helen . “Five Trends of Chinese Consumer.” Forbes, 17 Dec. 2012. Web. 28 July
2015. http://www.forbes.com/sites/helenwang/2012/12/17/five-new-trends-of-chinese-
consumers/2/

35. Hagerty, R. James, and Connors, Will. “U.S. Companies Race to Catch Up in Africa.” Wall
Street Journal. 6 Jun. 2011. Web. 28 July 2015.
http://www.wsj.com/articles/SB1000142405274870384190457625723334289173

36. N.A. “Africa a Top Global Business Expansion Destination.” CNBC Africa, 12 Feb. 2015.
http://www.cnbcafrica.com/news/special-report/2014/02/12/africa-a-top-global-business-
expansion-destination/#

IX. APPENDIX

Appendix I: SWOT Analysis

Strengths

Brand Recognition

24
 With over 35,000 restaurants in more than 100 countries, McDonald’s has an undeniable
global presence.1 To support its expansion, McDonald’s has chosen to implement a global
business and marketing strategy that highlights uniformity amongst the restaurants. Through this
McDonald’s has created tremendous brand recognition, which in turn has greatly strengthened its
brand equity. The golden arches, a unique marketing feature, has made McDonald’s instantly
recognizable. This sort of visibility has enabled the McDonald’s brand to be valued at roughly
$37.4 billion.10 With such high brand recognition, McDonald’s is more easily able to attract and
serve a variety of consumer segments. McDonald’s, through its brand recognition, is able to
connect to consumers on a number of different levels, including convenience, low cost,
reliability, and cleanliness.

Economies of Scale
McDonald’s is able to leverage its massive size to reap the benefits of its economies of
scale. In being so large, McDonald’s is able to use it size to buy in bulk. The benefits of buying
in bulk are twofold; the price of an item is often reduced when it is purchased in larger quantities
and larger purchases increases the buying power of McDonald’s as compared to its suppliers. For
instances, McDonald’s may be able to use its size and buying power to negotiated better terms
for things such availability, exclusivity, price, and delivery. This increased buying power
resulting from economies of scale also works hand in hand with brand recognition. Supplier will
be more willing to make concession for a globally recognized brand because of the value the
supplier will gain by working with such a company.

Business Structure
The McDonald’s business structure is one of franchise. With this structure McDonald’s is
able to leverage the individual experiences and cultural knowledge of the individual franchisees,
all while expanding its presence. It takes an incredible amount of resources to grow a company.
Countless analyses need to be performed in order to decide if there is a market for the offering.
However, the quality of certain analyses, specifically cultural influences, is not always
guaranteed. As a result of this risk, having an individual who has grown up in or become very
familiar with a certain culture is a valuable asset when expanding into new and different markets.
The franchise model allows McDonald’s to expand into culturally diverse markets through
locals. The locals will have a much better understanding of the cultural influence in his or her
particular market than most individuals sitting in a corporate office.
In addition to the cultural benefits, the franchise structure also offsets some of the
investment costs. As mentioned previously, today’s cost to open a franchise is roughly
$1,000,000, which means that is $1,000,000 McDonald’s does not have to spend to open a new
restaurant.1 That savings is magnified given the percentage of McDonald’s restaurants that are
owned and operated through joint ventures and independent franchises. Again, this structure
works hand in hand with the brand recognition of McDonald’s. To take advantage of the brand
recognition McDonald’s enjoys, a franchisee will want to make sure his or her restaurant is in
uniform with all other McDonald’s locations. A franchisee’s desire to operate a restaurant that is
identical to all other McDonald’s restaurant reduces the risks associated with loss of control
through franchising.

Diversified Income
McDonald’s also enjoys the benefits of diversified income. This strength stems, in part,
to its business structure and business strategy. With its global presence, McDonald’s operates in

25
and receives profits in a large number of currencies. Dealings with large number of currencies
helps offset risk because the diversification often offsets risk. For instance, when one currency is
weak in comparison to another it is likely that McDonald’s deals in both of those currencies. The
weakness of one currencies is offset by the strength of the other. From a shareholder’s
perspective, offsetting risks related to currency exchange is a strength because it insulates the
company from external factors, thereby possibly increasing the value of the company’s stock.

Weakness

Public Image
Unfortunately for McDonald’s, it has been the subject of negative press. McDonald’s has
received negative press from everything ranging from poor quality offering to employment
issues.11, 12,13 As a result of negative press McDonald’s has repeatedly scored poorly on consumer
perception indexes.10 Recent public relations issues include reports that claim the quality of the
products offered in certain Asian markets were below grade. 11 Public perception in China and
Japan were greatly influenced in late 2014 when news broke that McDonald’s was selling tainted
meat in those markets. 11

Little Differentiation
The number of offerings a fast food restaurant can provide are somewhat limited. Given
customer expectation and operational requirements, only certain foods can be provided in a
“fast” manner. Though there may be some variation with regards to its offerings, the
McDonald’s menu is similar to that of its competitors, including Burger King and the Yum! line
of restaurants. When there is little differentiation between offerings McDonald’s must rely on
other aspects to maintain or increase it market share. In some instances, company often resort to
price wars in order to compete. The market that McDonald’s competes in is already price
sensitive, so a price war only decrease its margins. As an alternative to a price reduction strategy,
McDonald’s can place more emphasis on marketing. Through marketing, McDonald’s will be
able to convey its benefits and value proposition to its customers.

Opportunities

Changing Menu
McDonald’s is constantly looking for ways to better serve its customers. In doing so,
McDonald’s has created a taste institute where it employees highly trained, world renowned
chefs to come up with unique and appealing menu items.1 There are a number of opportunities
that result from a menu focused approach; McDonald’s can be on the leading edge of new
offerings and it has the ability to create growth out of what many see as a weakness or threat.
        The palate of consumers is constantly evolving. Though it is important that McDonald’s
continually serve its foundational items, hamburgers, french-fries, and milkshakes, it is important
that McDonald’s look towards the future so it can continue to grow. McDonald’s ability to
implement menu changes has previously resulted in success. For instance, the addition of
McCafe items to the McDonald’s menu brought an entirely new market segment into
McDonald’s.16 The quality product with lower cost, as compared to other coffee restaurants such
as Starbucks, caused an increase in revenue of $2.1 billion in 2011.16
        A changing menu is also an opportunity to offset some of the areas that might be
perceived as threatened or weak. Specifically, introducing health conscious items has the ability
to counteract areas that were previously thought of as negative. For instance, the negative press

26
received for the unhealthy options available at McDonald’s has led to the creation of such things
like the McWrap. These items not only address areas of weakness, but also have the ability to
draw in the more health conscious consumer markets.

Developing markets
McDonald’s has tremendous areas of opportunities because of expanding markets. Due to
the increased buy power of some of the world’s most populous countries, including China and
India, there is great potential for continued expansion in those areas. In order to capitalize on the
increased purchasing power of these countries, McDonald’s must again leverage its strengths to
increase the likelihood of success. Specifically, McDonald’s should focus on the benefits offered
through its franchise business structure to really tap into and maximize the market opportunities
in foreign countries. It is important McDonald’s listens to the input provided by franchisees in
areas where the consumer tastes and cultural identities are so different.

Threats

Competition
As with most industries, threat to a specific company comes in the form of competition
from others who have similar offerings. McDonald’s faces competition on a local, regional,
national, and international level. In almost every area of the world food is being offered to
consumers. McDonald’s faces direct competition from companies like Yum!, who has a large
presence in Asia. Yum! Is the company behind fast food chains like KFC and Pizza Hut and
although they do not directly compete with McDonalds because they do not offer hamburgers,
they have a significant hold on Asia because Yum was the first American style fast food chain to
enter that market

Health Concerns
The future success of McDonald’s is threatened by recent health concerns related to its
product offerings. Health concerns stem not only from the health-conscious consumer who wants
to make better eating choices for him or herself and his or her family, but also from increased
government regulations.14,15 Health issues, specifically obesity, has been on the rise and is most
noticeable in western cultures. 14 As a result, a great deal of attention has been placed on the
health choices people make.  Grassroots efforts as well as government regulations has attempted
to help facilitate individuals to make better choices. For instance, an independent film called
“Supersize Me” showcased the health complications that can result after consuming fast food for
a month. Though eating only fast food for long periods of time is not the typical consumption
pattern for most individuals, it did heighten the public’s awareness of the risks associated with a
poor diet.
        Other entities, such as the United States government, are also working toward helping
consumers make more informed decision.15 As mentioned above, regulations have recently been
passed that require the caloric information be posted on menus and menus boards in chain
restaurants.15 McDonald’s has previously posted health information on the back of its tray liners,
but that may no longer be enough to meet the requirements of this new regulation. 1 An important
aspect of the newly enacted rule is that the information must be posted clearly and conspicuously
so that all consumers are put on notice.15

Appendix II

27
Graph 1: McDonald's Product Life Cycle by International Markets

Appendix III
Table 1: McDonald’s Yearly Net Income Summary

Source: 2014 Annual report, McDonald’s Corporation.

Table 2: McDonald’s Consolidated Operating Results

Source: 2014 Annual report, McDonald’s Corporation

Appendix IV:

28
Graph 2: Year-Over-Year Change in Numbers of U.S. Restaurants

Source: Bloomberg.com

Appendix V:
Table 3: Shake Shack Inc. Condensed Consolidated Statements of Income (In thousands)

Source: Form 10, Quarterly report, Edgar online

Table 4: Chipotle Mexican Grill Growth Revenue 2014. (In millions)

Source: 2014 Annual report, Chipotle Mexican Grill

29