The document outlines a sustainability strategy for McDonald's, detailing its current operations, business segments, and financial performance. It includes analyses such as SWOT, PESTEL, and VRIO to identify strengths, weaknesses, opportunities, and threats, and presents a strategic plan aimed at growth, sustainability, and customer satisfaction. Recommendations focus on cost reduction, enhancing environmental efficiency, improving customer experience, and fostering strong stakeholder partnerships.

1. McDonald’s
Team Members: Monica Czagan, Manpreet Dhillon,
Lionel Ouedraogo, Josephine Pham, Paulina Pisarek
Sustainability Strategy
ENBUS 640: Strategies for Sustainable Enterprises
March 27, 2017

2. Outline
a. Introduction to McDonald’s
b. SWOT, PESTEL, and VRIO
c. Strategic Plan
1. Growth Projection
2. Short-Term
▶ Recommendations
▶ Evaluation and Control
▶ Timeline
3. Long-Term
▶ Recommendations
▶ Evaluation and Control
▶ Timeline
d. Information on Team Members
2
= Course Content

3. Company Introduction
▶ Founded in 1955 in Des Plaines, IL, USA
▶ Headquartered in Oak Brook, IL, USA
▶ Employs 375,000 people in 120 countries
▶ Publicly traded company (NYSE: MCD at U$129/share)
▶ Operates in “Informal Eating Out” (IEO) segment
▶ Restaurants provide substantially uniform menu (burgers,
fries, chicken nuggets, coffee, ice cream, etc.) with
regional variations
3
2016 Sales: U$24.6 Billion
- 3.1% vs. 2015
2016 Operating Income: U$7.7 Billion
+8.4% vs. 2015
2016 Number of Restaurants: 36,899
+1.0% vs. 2015
▶ Underwent restructuring in 2015 and now operates in four
business segments based on growth rates instead of
geographic proximity:
▶ U.S.; International Lead Markets; High Growth Markets;
Foundational Markets & Corporate
▶ Rationale behind choosing McDonalds for ENBUS 640 group
assignment: Assess how a $26-billion company, with
seemingly unlimited resources, can achieve sustainability
internally and externally
Sales from
Company
Restaurants
62%
Rent from
Franchisees
25%
Sales Royalties from
Franchisees
13%
Operating Income
from Company
Restaurants
25%
Operating
Income
from
Franchisees
75%
Company
Restaurants
5,669
15%
Franchised
Restaurants
31,230
85%

4. SWOT Analysis
Strengths Weaknesses
Iconic brand: Worldwide brand recognition.
Standardization and structure: Ability to deliver consistent
brand and restaurant experience in 120 countries, albeit
with different menu offerings.
Operational efficiency: Reduces costs with global supply
chain networks.
Income diversification: Reduces risks with diverse product
offerings and locations in 120 countries.
Negative perception: The fast food industry is associated
with unhealthy eating and obesity.
Franchisee management: McDonald’s success relies on
close collaboration with its franchisee network; it is
paramount that the company continues to improve its
relations with this group of stakeholders.
Opportunities Threats
Leveraging technology: McDonald’s has increased its
emphasis on digital offerings and customer loyalty
initiatives.
Evolving customer preferences: McDonald’s has been
updating its menu through R&D to include: gourmet
burgers, fresh fruit smoothies (for its health-conscious
clients).
Sustainability initiatives: Continue differentiating itself and
improving its brand image through sustainability
initiatives.
Fragmented market: The company faces a wide range
of competitors – local and international.
Environmental pressures: Increased focus from
governments and NGO groups on environmental issues
such as climate change, sustainable beef, etc.
Economic and political climate: Current unstable political
and economic climates can negatively impact business
in certain parts of the world.
4

5. PESTEL Analysis
Political:
Government regulations are expected on environmental issues like climate change and the nutritional
quality of the food industry. The governments of some jurisdictions, such as Ontario, Canada and the United
States, have begun to require and regulate calorie labelling at major restaurant chains.
Government actions that can have an impact include price, foreign exchange or import-export controls,
increased tariffs, government-mandated closure of suppliers’ operations and asset seizures.
Operations in some developing nations present a higher risk of political instability, economic volatility, crime,
corruption and social and ethical unrest.
Economic:
There exists a large variety of competitors (other fast food chains, sit-down restaurants, coffee shops,
smoothie bars, sandwich shops, convenience stores, etc.) within the informal eating out (IEO) industry, selling
many different products.
Around the world, multinational organizations must comply with changes in exchange rates; various tax laws
and responsibilities; trade regulations and agreements; and constant changes in price of supplies (especially
meat), fuel, infrastructure (rent or land taxes), and more.
Social:
Following the release of the film Supersize Me in the early 2000s, there has been much pressure to provide
healthy alternatives in fast food.
McDonald’s must pay special attention to food safety events, including instances of food-borne illness.
The costs of recruitment and minimum wage vary across the globe. There are also different healthy
workplace policies worldwide, such as those against discrimination and those for occupational health and
safety.
Consumers with nut allergies need a fast food restaurant from which they can feel comfortable buying
convenient and safe food products.
The market for fair trade food products, especially coffee and sugar, continues to grow worldwide.
5
Technological:
It is expected that, with time, the fast food industry will be
innovative when it comes to technology, such as with the
introduction of virtual ordering through mobile apps and
kiosks.
Environmental:
Climate change will increase the likelihood of natural
disasters occurring; these are events that can cause
disruptions in the supply chain or prevent customer access to
restaurants.
In the US, demand for organic food products has been
increasing every year since the mid-2000s, growing at a rate
faster than that of non-organic food products.
Many environmental non-governmental organizations are
calling on individuals and families to eat less meat,
particularly beef, in order to reduce their impact on the
planet. A Global Roundtable for Sustainable Beef was
created to find solutions.
There is pressure from governments and non-governmental
organizations to limit waste from food leftovers and
packaging due to its environmental impact.
Legal:
McDonald’s restaurants can be found in 119 countries
globally, meaning that sometimes a “lack of independent
and experienced judiciary and uncertainties in how local law
is applied and enforced, including in areas most relevant to
commercial transactions and foreign investment”, especially
in developing nations.

6. VRIO Framework 6
Competency 1:
Iconic Brand
Competency 2:
Standardization & Structure
Competency 3:
Economies of Scale
Value &
Rareness
The golden arches is named top
15 best brands in the world by
InterBrand.
McDonald’s has standardization down to
both an art and science – it provides training
to employees, which total 375,000 in 2016, to
ensure a consistent restaurant experience in
120 countries, albeit with different menu
offerings. Without this standardization, it
would be very difficult for the company to
manage the franchisee model.
Its purchasing power is significant and the company is
able to buy in bulk and generate economies of scale to
reduce costs. The company currently prioritizes
sustainable sourcing on six products it purchases the
most: beef, packaging, fish, coffee, palm oil, and
poultry.
Imitability It would be difficult to copy the
power of the brand and it would
require significant marketing
resources and time. McDonald’s
spent $734.6 million in advertising
in 2016 and $832.5 million in 2015,
numbers that would be difficult to
be replicated by competitors.
While other restaurant chains also have a
similar franchisee model which requires rigid
standardization and structure, it would be
difficult to copy it to McDonald’s scale.
While other companies can try to imitate this, few can
purchase ingredients and packaging to the scale of
McDonald’s. The company spent $4.9 billion in food and
paper expenses in 2016 and $5.5 billion in 2015.
Organization The new company structure,
organized around segments that
“combine markets with similar
characteristics and opportunities
for growth”, can take advantage
of this competency by sharing
best practices and strategies with
similar segments.
The company uses this core competency to
create a consistent brand experience
worldwide, and has created working groups
such as the Food Safety Advisory Council to
ensure consistency in quality of products
received.
The organization has significant buyer power in
procurement policies, such as its stringent Supplier Code
of Conduct that focuses on human rights, workplace
environment, environmental management, and
business integrity. Francesca DeBiase is both the Chief
Sustainability Officer and Chief Supply Chain Officer,
and the duality of her role illustrates the company’s
recognition of its vast influence over suppliers and
potential sustainability impact.

7. Strategic Plan & Measuring Growth
▶ McDonald's large consumer base and consistent returns to shareholders are indicative of their mature stage of business
growth. Mature companies have passed the state of rapid growth and tend to grow at slower pace as the economy. They
have a large consumer base and generate consistent returns to shareholders. Still, the negative perception associated with
the fast food industry could impact McDonald’s future growth plans.
▶ Based on the SWOT, PESTEL, and VRIO analyses, McDonald’s should implement a horizontal growth strategy that focuses on
expansion of operations into other geographic locations and increasing the range of products offered to current markets.
7
Measuring Growth
Economic Objective – Increase market share
▶ Increase sales by 3-5%
▶ Increase franchised restaurant mix from 85% to 95%
▶ Increase operating margin to mid 40% range
▶ Increase earnings per share
Environmental Objective – Reduce environmental footprint
▶ Become an environmental leader in the Informal Eating Out
segment and overall restaurant industry
▶ Retrofit restaurants and increase eco-efficiency
Social Objectives – Customer-centric alignment of products and
services
▶ Improve digital capabilities to increase access for new and existing
markets
▶ Offer healthier menu options to support global healthy lifestyle and
improve customer satisfaction
Defining Growth
▶ 3-5% sales growth: With the change in strategy over the last 2 years, McDonald is ready to
build on its momentum. Markets that have seen the introduction of a new customer
experience have seen consistent sales growth: International Lead Market sales increased by
2.8%; High growth segment sales by 4.7%, and Foundational Markets sales by 11.15%.
McDonald's is redirecting a portion of capital saved from refranchising to modernizing the
U.S. estate. The U.S. will have approximately 2,500 Experience of the Future restaurants by the
end of 2017. McDonald’s research shows a correlation between customer satisfaction and
sales growth. In France, research shows that modernizing the restaurant experience
improves overall customer satisfaction from 70% to 88%. With the modernization of its
restaurants and the innovation in its menu, McDonald’s can achieve its target.
▶ Earnings per share (EPS): While McDonald’s experiences slower growth compared to some
of its competitors (e.g. Starbucks), its 2016 EPS of $5.44 is 2.9 times higher than Starbucks’ EPS
of $1.90. McDonald’s aims to provide EPS growth in the high single digits.
▶ Customer satisfaction index: The American Customer Satisfaction Index (ACSI) is a national
economic indicator of customer evaluations of the quality of products and services
available to household consumers in the United States. As an example, ACSI data has been
used to prove that firms with higher levels of customer satisfaction tend to have higher
earnings and stock returns relative to their competitors. The average customer satisfaction
index within the fast food industry is 79/100 while McDonald’s remains in last place at 69/100.
Improving the ACSI score would be important for the success of the company growth plans.

8. Short Term Recommendations
Internal
Recommendations Evaluation and Control
Reduce G&A Expenses: Continue with initiative to cut $500 million from General and Administrative
expenses. These cost cutting tactics are part of the company’s turnaround plan and include
restructuring/reorganization of the company, increasing number of franchised restaurant (because they
are more profitable than company-owned restaurants).
Behaviour Controls: Implement new procedures and
processes with new company structure
Output Controls: Measure dollar savings achieved
Launch a pilot of Net Zero Energy restaurants and assess engineering feasibility and economic viability of
such an initiative, as well as roll-out plan firstly for Company-owned restaurants, then provide ways for
Franchisee restaurants to be on board. In 2015 , a study on Net Zero Energy restaurant was conducted
with Rocky Mountain Institute and the study identified opportunities to significantly increase “burger
efficiency” in a restaurant. To reach net zero, the restaurants would need to generate its own energy
through solar PV, geothermal, etc. This initiative will increase energy efficiency and reduce utility costs.
Input Controls: Increase employee education and work
experience about net zero energy
Output Controls: Measure energy consumption, required on-
site energy generation to reach net zero, capital dollars
required to improve efficiency and reach net zero
Benchmarking: Compare with best in class net zero buildings
and competitors’ restaurants to learn best practices
Retrofit Company-owned restaurants to improve energy efficiency and reduce GHG emissions. Currently
Company-owned restaurants consume 1.353 kWh/guest and in total produce 193,000 tons of GHG
emissions in 2015. Retrofitting can include installing energy efficient equipment (e.g. Energy Star),
switching to LED lighting, redesigning the heating, ventilation, and air conditioning system to capture
waste heat from the kitchen to heat the restaurant, installing variable frequency drives, using intelligent
fume hood system, etc.
Retrofit Franchisee restaurants: Take best practices from the retrofit and implement them at Franchisee
restaurants. It is in the Franchisees’ interest to increase the energy efficiency of their restaurants.
McDonald’s needs to provide sufficient incentive for Franchisees to participate in this venture.
Output Controls: Measure energy consumption, greenhouse
gas emissions, dollars saved before and after retrofit
Behaviour Controls: Educate and encourage employees and
Franchisees towards energy conservation behaviour
Benchmarking: Compare with competitors’ restaurants to
assess best practices in energy conservation and where
McDonald’s restaurants fall on the energy efficiency
spectrum
Improve water efficiency at Company-owned restaurants through initiatives such as installing low-flow
toilets and aerators in faucets, educating employees and guests about water conservation, installing
water-efficient dishwashers, etc.
Output Controls: Measure water consumption and dollars
saved before and after retrofit
Behaviour Controls: Educate and encourage restaurant
employees, Franchisees and their employees, guests towards
water conservation behaviour
8

9. Short Term Recommendations
Internal (cont.)
9
Recommendations Evaluation and Control
Review various environmental standards and certifications such as ISO 14001, Environmental
Management System, LEED, and assess if they should be implemented at the restaurant level. At the very
least, the company should review LEED and WELL standards for its new head office in downtown
Chicago. These standards can lead to cost savings and reduction in GHG emissions.
Input Controls: Enhance knowledge of McDonald’s Engineering
team, sustainability team, and external consultants about
environmental standards
Benchmarking: Review competitors’ environmental standards
and certifications
Reduce food and packaging waste in stores, drive-throughs, and delivery through employee training
and guest education. Food and paper currently account for $4.9 billion, or 39% of company owned
restaurants’ expenses. Reducing food and paper waste can contribute positively to net income.
Output Controls: Track dollars spent on food and packaging
purchases and correspond that to sales for an estimate of waste.
Behaviour Controls: Provide procedures to educate guests and
employees about food and packaging waste
Increase recycling and consider composting initiatives through employee training and guest education. Output Controls: Weigh recycling bins to measure the amount of
recycling completed
Behaviour Controls: Provide procedures to educate guests and
employees about recycling
Improve inventory management system with suppliers and distribution companies (who transport
McDonald’s ingredients and packaging from independently owned distribution centres to the
restaurants) to minimize inventory waste (through spillage or spoilage) and increase efficiency.
Input Controls: Educate employees about latest Enterprise
Resource Planning software to improve inventory management
Output controls: Track dollars spent on food and packaging
purchases and correspond that to sales for an estimate of waste
Benchmarking: Compare performance with competitors
Continue close collaboration with suppliers, particularly of the six priority products: beef, packaging, fish,
coffee, palm oil, and poultry, to reach objectives of sustainable sourcing in a cost-effective manner.
Continue to demand more of suppliers through the supplier code of conduct and raising the bar,
incenting suppliers to provide more sustainable offerings.
Output Controls: Working with suppliers, measure metrics such as
percentage of packaging from certified or recycled sources,
percentage of coffee from certified sustainable production, etc.

10. Short Term Recommendations
External
10
Recommendations Evaluation and Control
Conduct a stakeholder analysis to determine primary and secondary
stakeholders: franchisees, suppliers, employees, customers,
governments, investors, media, etc.
Balanced score card: McDonald’s public relations and/or corporate responsibility teams track
the impact of the identified stakeholders over time to judge the accuracy of the analysis, and
their selection as primary or secondary stakeholders.
Continue successful partnerships with existing stakeholders like the
Global Roundtable for Sustainable Beef, Ronald McDonald House
Charities, and others.
McDonald’s public relations and/or corporate responsibility teams track the number of
partnerships and judge the stakeholders’ satisfaction with the company’s engagement
processes.
Conduct a product life cycle impact assessment for the top selling
products in various categories (sandwiches, sides, desserts,
beverages, etc.).
Input and output controls: Use activity-based costing to determine the cost of externalities from
the product life cycle. McDonald’s procurement team analyzes the impact assessments and
adapts them to procurement guidelines.
Behaviour controls: McDonald’s operations team analyzes the assessments to improve product
production life and waste recovery.
Return to having one corporate sustainability report instead of
dividing it between coffee, beef, and packaging. Decide on one
format and frequency that will remain consistent to allow for
transparency and comparison.
Input controls: McDonald’s adopts a popular global reporting standard, such as GRI, and follows
its guidelines. Evaluation will come from reader feedback and comments from GRI. Third parties
will be used to confirm the accuracy of the information.
Participate in government consultations on legislation that can have
an impact on operations.
McDonald’s legal team judges when there is an opportunity to get involved in government
consultation processes, and tracks and follows up on participation.
Develop a process to strengthen communication lines between
McDonald’s and suppliers to improve supply chain management.
Benchmarking: McDonald’s communications and/or procurement teams study how competitors
manage their supply chain and relations with suppliers, then create an action plan based on the
best practices found.
Design an education campaign to teach customers to responsibly
dispose of waste (leftover food, packaging, etc.).
Behaviour controls: McDonald’s conducts regular waste audits at select restaurants to determine
the amount of waste that is being properly sorted by customers at McDonald’s restaurants.

11. Short Term Recommendations
Timeline
11
Month 1-6 Month 7-12 Month 13-18 Month 19-24 Ongoing Initiatives
Review environmental
standards
Reduce food waste
Increase recycling
Improve inventory
management
Net Zero Energy Pilot
Retrofit Company
restaurants
Improve water
efficiency of Company
restaurants
• Retrofit Franchisee
restaurants
Continue with G&A cost
savings
Continue close
collaboration with
suppliers
• Stakeholder
determination and
analysis
• Begin planning change
to sustainability report in
time for the next report
• Begin life cycle impact
assessment
• Design education
campaign about waste
management
• Complete life cycle
impact assessment
• Prepare roll-out of
waste management
campaign
• Use life cycle impact
assessment to influence
procurement processes
• Implement waste
management campaign
• Evaluation of
waste
manageme
nt education
campaign
(adaptive)
• Continuing relationships
with stakeholder groups
• Participation in
government
consultations (as-
needed basis)
• Supply chain
management and
improvement of
communication lines
(adaptive)
InternalExternal

12. Long Term Recommendations
Internal
12
Recommendations Evaluation and Control
Develop healthy image
• Continue to develop the company’s healthy image
• Moving away from the negative perception of fast food by
focusing on providing good quality, sustainably sourced food
with a focus on monitoring its suppliers while maintaining the
image of a low cost family friendly restaurant
Output Controls: Measure consumer satisfaction and engage the help of
focus groups. Consult ACSI score for U.S. market
Benchmarking: Assess competitor activity around healthy food offerings
Implement a consumer–centric approach
• Focus on generating more appeal in fully penetrated markets
(ex. through continuing modernization of restaurants with a
focus on the consumer experience) to regain customers lost
while retaining loyalty among current customers
Behaviour/Input Controls: Deploy training strategy for front line employees
as well as for back end staff to ensure both the utmost quality of customer
service and food preparation
Output Controls: Conduct employee performance evaluations and
evaluate the condition of restaurants yearly
Improve product offering
• Expand the line of specialty beverage offerings to offset losses
from value menu items, continue development of customizable
menu items
Output Controls: Measure consumer response - examine which menu items
are most popular and why – focus on product quality and development
Encourage participation through prizes and giveaways
Invest in technology
• Lower operational costs through self-serve kiosks and to
increase consumer loyalty through ease of access and
convenience (ex. McDonald’s app, table service, delivery
service)
Output Controls: Monitor and track the costs of day-to-day business

13. Long Term Recommendations
External
13
Recommendations Evaluation and Control
Lead industry: Engage Industry peers and share success of
sustainability initiatives at company-owned and net-zero energy
restaurants.
Market value added - measure the difference between the market value
of McDonald’s prior to acting as a sustainability leader and after based on
capital contributed by shareholders and lenders.
Raise supplier expectations: Require suppliers to share company
commitments to environmental standards, energy efficiency and
waste reduction by including these requirements in supplier
qualification and competitive procurement processes.
Behavioural control - measure costs of supply through reduced supplier
overheads from energy efficiency and reduced waste handling.
Elevate stakeholder partnerships: Create a social compact with
stakeholder partners that have a collaborative vision with the
company to focus on further product sustainability improvements.
Balanced scorecard - Assess earnings per share, customer satisfaction and
internal process improvements to gauge success of stakeholder
partnership model based on the key initiatives identified through the
recommendation.
Localize supply chain: Expand growth and reach in emerging
markets through leveraging local delivery services by incentivizing
local businesses and resources.
Activity based costing - Determine indirect benefit to community through
employment and contracting opportunities and direct cost savings of
leveraging local distribution channels to determine success of growth in
emerging markets.

14. Long Term Recommendations
Timeline
14
Initiatives Year 3 Year 5 Year 10
Healthy image Gather data on consumer perceptions, analyze trends in
regards to health conscious decision making, explore
sustainable food options and suppliers , develop a strategy
to immediately take advantage of any “low-hanging fruit”
if the data so indicates
Integrate sustainable choices on to the McDonald’s menu while
slowly phasing out processed/modified ingredients
Ensure that all restaurants are serving
sustainably sourced menu options
Consumer-centric approach Launch a mandatory customer service training for all front
line staff and a more intense food safety module for back
end staff, commit to a re-training timeline, develop a
timeline for how often each restaurant building will be
evaluated on the basis of consumer appeal
Launch an education plan for the changes coming to the
McDonald’s menu – educate on sustainability and encourage
personal sustainability plans to encourage ideas and feedback
Monitor and evaluate employee
performance , ensure that 100% of
restaurants have had the minimum
number of inspections in the last 10
year period
Product offering Survey the consumer base to identify which products are
most popular/unpopular
Begin to phase out the most unpopular menu items while
enhancing customizable components
Continue to monitor and adjust as
necessary
Investment in technology Survey the technology in all restaurants and compare to
that of competitors
Invest in replacing old technology, introduce more virtual ordering
options for ease of access
Ensure that all restaurants have the
same level of ease of access for
consumers
Lead industry Identify interested industry peers and jointly develop
industry peer engagement model
Lead sustainability conferences, industry synergy meetings and
manage initiatives
Showcase industry peers
demonstrating success in sustainability
with awards and recognition in industry
Raise supplier expectations Develop qualification standards and policies for supplier
qualification. Initiate sustainability training for preferred and
strategic suppliers
Embed requirements in competitive processes for evaluation.
Require flow through savings from preferred and strategic
suppliers that have embedded eco-efficiencies in processes
Maintain existing supplier qualifications
through performance management
and re-qualification
Elevate stakeholder
partnerships
Identify interested stakeholder partners and jointly develop
engagement model
Announce social compact and identify key areas for
improvement and Initiative leaders.
Invite industry peers that have been
showcased to engage in social
compact
Localize supply chain Identify key emerging markets and appropriate tools for
engagement. Develop and launch pilot program
Expand local opportunities beyond delivery services and offer
business development training to further expand supplier
competencies to support regional growth
Potentially develop self sustaining
regional operations for key logistics
and warehousing functions.
InternalExternal

15. 15
Team Members
Monica Czagan is a pension analyst in the HR department at the University of
Waterloo. She has a Bachelor of Arts in Economics and Business (Honours) from the
University of Waterloo. She currently lives in Waterloo, ON.
Manpreet Dhillon is a Senior Contract Specialist at TransCanada PipeLines. She has a
Bachelor of Commerce from Simon Fraser University. She currently lives in Calgary, AB.
Lionel Ouedraogo is a Financial Advisor at RBC. He has a Bachelor in Business
Administration from Université Sainte-Anne. He currently lives in Halifax, NS.
Josephine Pham is a Marketing Manager at Ecosystem Energy Services. She has a
Bachelor of Commerce and a minor in French from the University of British Columbia.
She currently lives in Toronto, ON.
Paulina Pisarek is an Environmental Officer at Public Services and Procurement
Canada. She has a Bachelor of Arts in Environmental Studies and a minor in Spanish
from the University of Ottawa. She currently lives in Ottawa, ON.