In this paper I examine the context for the internationalization of firm MC Donald’s in the Fast food industry. I firstly gave the introduction to the Mc Donald’s and then examine the degree of globalization of the fast food industry. After that I studied that how the global scope for the fast food a changed over a period of time with the help of the cage framework. Then I discussed about the competitive advantage that Mc Donald’s receives from its operations all over the world by the use of different framework and analysis. Lastly I included the AAA Framework measures taken by Mc Donald’s to sustain in this competitive market.

1. Mc Donald’s Global Strategies
By: Rajat Sharma

2. INDEX
• Abstract
• Introduction to the Firm
• Porter’s Diamond Model of Mc Donald’s
• CAGE Framework for Mc Donald’s
• Competitive Advantage of Mc Donald’s
• AAA Framework for Mc Donald’s
• Conclusion

3. Abstract
• In this PPT I examine the context for the
internationalization of firm MC Donald’s in the Fast
food industry. I firstly gave the introduction to the
Mc Donald’s and then examine the degree of
globalization of the fast food industry. After that I
studied that how the global scope for the fast food
industry has changed over a period of time with the
help of the CAGE framework. Then I discussed about
the competitive advantage that Mc Donald’s
receives from its operations all over the world by
the use of different framework and analysis. Lastly I
included the AAA Framework measures taken by Mc
Donald’s to sustain in this competitive market.

4. Introduction to Mc Donald’s
• McDonald's Corporation is an American fast food
company, founded on 15th April, 1955 as a restaurant
operated by Richard and Maurice McDonald, in San
Bernardino, California, United States.
• CEO: Chris Kempczinski
• Headquarters: Chicago, Illinois, United States
• Revenue: 2,107.6 crores USD (2019)
• Subsidiaries: McCafé, McDonald's France,
McDonald's Canada, MORE

5. Porter’s Diamond Model of Mc
Donald’s

6. Continued…
• Threat of New Entrants: MEDIUM to HIGH
Global fast food chains such as Taco Bell, Wendy’s and Burger King which are
McDonald’s closest competitors in the United States currently operate only in
metropolitans and larger cities and have a relatively lower number of outlets than
McDonald’s. They have yet to expand operations to Tier II and III cities in which
McDonald’s already operates. This poses a great threat to McDonald’s in terms of
future competition. Also, Indian QSRs such as Haldiram’s, Bikanerwala, Goli Vada
Pav also plan to expand operations to Tier II & III cities which have untapped
potential.
• Bargaining Power of Buyers: LOW to MEDIUM
The Quick Service Restaurant Industry is largely based on low product prices and
this is true for all companies operating in this sector. However, Burger King is
experimenting with a higher pricing strategy to differentiate their ‘flame grilled’
burgers from the mass-produced ones of McDonald’s, which poses a different
threat to the industry, but for most consumers in this industry, operating on a
budget, McDonald’s operates an open pricing strategy.

7. Continued…
• Bargaining Power of Suppliers: LOW to MEDIUM
McDonald’s spent six years (1990 to 1996) developing its supply chain. They
worked with farmers and educated them about new technologies to source the
right quality of inputs, especially for lettuce and potatoes. They also worked with
global suppliers to bring international food processing technologies to India,
especially for their burger patties and tied up with local businesses. The company
also set-up its whole cold chain from scratch. Their suppliers are many individual
farmers and suppliers and for many of them McDonald’s is their only/main
customer, therefore, they have relatively low bargaining power. When it comes to
supplier of beverages, Coca-Cola has a favourable relationship with McDonald’s,
however, in case of a disruption other suppliers such as Pepsi are always available.
• Threat of Substitutes: MEDIUM to HIGH
Fierce competition already exists in this sector and substitute products and services
mushrooming are already evident in the market, resulting in McDonald’s losing its
market share. Imitation products are widely available but do not affect the
McDonald’s brand. However, the standardization process which is the reason for
McDonald’s efficiency and profitable operating margins, is being quickly imitated
and pose a high threat.

8. Continued…
• Industry Rivalry: HIGH
McDonald’s operates in the Quick Service Restaurant (QSR) segment of the
Food and Beverage Service Industry and competitors such as Dunkin’
Donuts which operate in the Café segment have introduced burgers and
sandwiches in India only, which means direct competition for McDonald’s.
Starbucks and Costa Coffee are also competing with McCafe for a piece of
the Café market share.
Domino’s introduced its ‘Burger Pizza’ in 2016 to cannibalize McDonald’s
sales and continues to introduce new products and offers on a regular
basis and has approximately 500 more outlets than McDonald’s in India.
Indian competitors such as Goli Vada Pav, Haldiram’s, Jumbo King and
Bikanerwala have successfully standardized their production process and
cater to a wider section of consumers with their purely vegetarian range of
products.

9. CAGE Framework for Mc
Donald’s

10. Continued…
• Cultural Distance:
According to Mr. Ghemawat’s culture aims “to help businesses
cross borders profitably by seeing the world as it really is,
rather than in idealized terms”.
In India majority of people follow Hinduism and cows are
considered. Hence, beef was not tolerable (Alderman, 2012).
The second largest population is of Muslims for whom pork is
a taboo and they only prefer to eat halal meat. The population
of vegetarians in the country is largest in the world and twice
the whole population of US. This became a big socio- cultural
challenge for McDonald’s and it faced a big tough time trying
to survive in different cultures and religions. McDonald’s now
have the biggest presence in India and plan to open more
vegetarian outlets nationwide

11. Continued…
• Administrative Distance:
In CAGE framework, Administrative/ political distance represents
the historical and political connections between the nations.
In McDonald’s case to enter Indian market was feasible because of
past strong trading relation between US and India. Political distance
also impacts the selection of mode of entry and the future
performance. Political issues eventually have an impact on revenue
growth of the business.
For instance, in 2001, BJP one of the dominant political parties in
India came forward and protested against McDonald’s by attacking
various outlets around the city
In lieu of overcome hindrances, risks and uncertainty of doing
business overseas, the best strategy for the firm is to tie up with a
local partner

12. Continued…
• Geographical Distance:
According to the CAGE framework, Physical Distance between the
nations remains a very important factor in shaping up of the diverse
business strategies. Priority of a business is to enter countries that
are less distant because of the lower risk and cost associated with it
(Ghemawat, 2001) .The greater the physical distance the higher will
be the cost associated with transportation and communication.
McDonald while establishing itself in Indian market developed
standard technology and communication for promotion across the
nation and as the ways of reducing distance with the customers and
suppliers .
McDonalds used “demographic segmentation strategy” which
means dividing the market into various groups depending on various
parameters like gender, age, sex, race, religion and nationality. The
primary segment it targeted was youth and the children

13. Continued…
• Economic Distance:
CAGE framework puts emphasis on the economic variations
between the countries in terms of varying income levels,
purchasing power and the inflation rate.
When McDonald’s made an entry in India the economy was
inflation stuck. McDonald often has to vary its pricing strategy
as the currency varies across the world and same approach it
applied in India. In India the Big Mac is undervalued $.60 over
the U.S. Company tries to maintain a valid price range
depending upon the location it is serving.
McDonald’s introduced the cheapest burger in the world
which was priced at 20Rupees by applying cost reduction
strategy. To increase the revenue growth, the company slowly
targeted the lower middle class citizens.

14. Competitive Advantage of Mc Donald’s
• Market Analysis:
ASSOCHAM has estimated the overall market for QSR
(2017) at ₹8,500 crores (approx. US$ 1.25 billion)
They also estimate this figure to triple in the next five
years to nearly ₹25,000 crores (approx. US$ 3.70
billion)
This provides a Compounded Annual Growth Rate
(CAGR) of: {(25000÷8500) ^ (1÷5)} – 1 = 24.08%

15. Continued…

16. Continued…
• Market Share:
According to a report published by Grant Thornton for FICCI
(Federation of Indian Chambers of Commerce and Industry),
the QSR sector (in which McDonald’s operates) that
constitutes 45% of the total Indian Food & Beverage Service
Industry has been a key segment and has Grown over the
years.
The QSR segment has a ratio of 70:30 when comparing
unorganized and organized sector. McDonald’s has a market
share of 11% in the organized sector, whereas its major rival
Domino’s Pizza has 19% of the market share

17. Continued…

18. Continued…
• SWOT Analysis:

19. Continued…
• VRIO Framework.

20. AAA Framework for Mc Donald’s

21. Continued…
• Adaptation Strategies:
These strategies increase market share and revenue by
adapting some components in a business model of a
company such that it is suitable to suffice local
preferences and requirements.
McDonald's has included various items such as Paneer
Salsa Wrap, the Chicken Maharaja Mac, the Veg
McCurry Pan to suit Indian customers instead of
hamburgers made of beefs, etc. which are less
preferred by Indian consumers.

22. Continued…
• Aggregation Strategies:
These strategies seek to achieve economies of scale/scope by
generally creating global efficiencies. These usually involve
standardization of the part of the value proposition which could
further lead to the assemblage of production and development
processes. To create substantial cost advantage by centralizing
purchasing of raw materials, producing end products, etc. in few
places where the relative cost incurred in labor and other
resources is less, some organizations although globalized, use to
follow aggregation strategies instead of adaption.
In Mc Donald’s, its uniform menu offerings can be mass
produced and thus lowering production costs to achieve
economies of scale.

23. Continued…
• Arbitrage Strategies:
These strategies neither include bridging the different
markets nor adapting the local demands. Rather these
inculcate the strategy of creation of global value by
exploiting the difference between the markets itself, usually
by profiting by the margin of difference in the separate
supply chain’s parts in different places. One could buy from
a cheap market place and sell where the price is higher.
Mc Donald’s use to sell products worldwide which have
been bought from Coca- Cola and earn from the differences
in the prices.

24. Conclusion
• McDonald’s is losing its market share and Domino’s Pizza has
overtaken them as it has captured 19% share of the organized
QSR market. It has done so by constantly evolving and upgrading
its menu, strategically pricing its products and adding new
outlets. McDonald’s needs to be in to touch with changing
customer preferences and needs to target Tier II (population
between half & five million) & III (population less than half
million) cities and strategically located outlets. A recent step
taken in this direction is by introducing its breakfast-menu, which
is something that none of its competitors currently have. But this
is limited to only selected outlets and they need to tap the
potential it has.