McDonald's business model is based on franchising, where franchisees pay licensing fees to operate McDonald's restaurants using the company's branding, training, and standards. This franchise model has been highly successful for McDonald's, with over 31,000 locations globally generating $22.6 billion in annual revenue. McDonald's competitive advantages include its strong brand recognition for fast service and cleanliness, standardized menus, and large global scale and real estate holdings compared to competitors like Burger King. However, McDonald's still faces competition and needs to continuously improve through strategies like advertising, expanding locations, training investments, pricing reviews, and making menu options healthier.

1. BUSINESS MODEL VS
COMPETITIVE ADVANTAGE

2. What is a business model?

3. The proprietary method used to
acquire, service, and retain
customers

4. Let’s examine McDonalds

5. Their business model is
Franchise model
- It’s a fast food chain catering to the masses
- Franchisee buys license to operate business
- Franchisee income derived by (Revenue – royalty)
- Franchisor provides branding, training, etc. in exchange for
royalty fees
- The network spans all over the world

6. Clearly, their model is working VERY well
Network
- 31,000+ locations worldwide
Employees (2008)
- 400,000 worldwide
Financial (2008)
- Net Income US$4.3bn
- Revenue US$22.6bn
Brand Equity (InterBrand 2009)
- 6th
top brand worth US$32bn

7. What about competitive advantage?
- What you do BEST and BETTER than others
- Two types of competitive advantage(s)
according to Michael Porter
a) Cost Advantage
b) Differentiation Advantage

8. What’s McDonalds competitive advantage?
Key Competitive Advantages
- One the world’s top brand TODAY
- Earned reputation for fast service
- Earned reputation for cleanliness
- Standardized menu thus easier to manage
- Located almost anywhere in the world
- World’s largest owner of corner lots
- Scale
- 31,000 locations vs. Burger King’s 12,000

9. McDonalds is not alone though…

10. Thus, McDonalds need to continuously
compete
Possible Strategies include
- Continue to out-advertise
- Open more branches to gain market share
- Invest heavily in training and development
- Review pricing to continuously attract customers
- Make their menus “HEALTHIER”