Mcdonald’s-Case Study

MCDONALD’S
SERVING FAST FOOD AROUND THE WORLD
Prepared by: Jay H. Shah, Department of Technology Management, CSPIT, CHARUSAT
1

WHAT IS QSC&V?
• “If I had a brick for every time I’ve repeated the
phrase Quality, Service, Cleanliness and Value, I
think I’d probably be able to bridge the Atlantic
Ocean with them.” —Ray Kroc
• The secret of McDonald’s success lies in its QSC&V
• That is Quality, Service, Cleanliness & Value and limited menu of high quality,
moderately priced food served fast in spotless surroundings
• Adopting different ways of promoting own products, welcoming people of different
culture with people’s choice of food helped McDonald to grow rapidly all over the
world.
2

McDONALD’S CORPORATION
Name McDonald's Corporation
Industries served Restaurants, Food
Geographic areas
served Worldwide
Headquarters Oak Brook, IL, United States of America
Current CEO Don Thompson
Employees 1,800,000 (2013)
Main Competitors Burger King Worldwide, Inc., Yum! Brand Inc., Subway, Wendy’s
Company.
3

MISSIONS AND VALUES
1) We place the customer experience at the core of all we do. Our customers are the
reason for our existence. We demonstrate our appreciation by providing them with
high quality food and superior service in a clean, welcoming environment, at a great
value. Our goal is quality, service, cleanliness and value (QSC&V) for each and every
customer, each and every time.
2) We are committed to our people. We provide opportunity, nurture talent, develop
leaders and reward achievement. We believe that a team of well-trained individuals
with diverse backgrounds and experiences, working together in an environment that
fosters respect and drives high levels of engagement, is essential to our continued
success.
3) We believe in the McDonald’s System. McDonald’s business model, depicted by our
“three-legged stool” of owner/operators, suppliers, and company employees, is our
foundation, and balancing the interests of all three groups is key.
4

MISSIONS AND VALUES
We operate our business ethically. Sound ethics is good business. At McDonald’s, we
hold ourselves and conduct our business to high standards of fairness, honesty, and
integrity. We are individually accountable and collectively responsible.
We give back to our communities. We take seriously the responsibilities that come with being
a leader. We help our customers build better communities, support Ronald McDonald House
Charities, and leverage our size, scope and resources to help make the world a better place.
We grow our business profitably. McDonald’s is a publicly traded company. As such,
we work to provide sustained profitable growth for our shareholders. This requires a
continuous focus on our customers and the health of our system.
We strive continually to improve. We are a learning organization that aims to
anticipate and respond to changing customer, employee and system needs through
constant evolution and innovation.
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PESTEL ANALYSISPoliticalFactors:
The policies of
governments affect
business of
McDonald’s in various
ways; in how their
products are
produced, promoted,
and sold.
Price margin
regulation is the factor
that McDonald’s
need to focus when
launching in
international market
EconomicFactors:
The difference exists in
countries in different
stages of economic
development has an
influence on price
variations. People in
different countries
may have different
power to spend
money.
Specially, in India
more than half of the
population have low
purchasing power. The
McAloo Tikki (INR
25.00) is one the
examples.
Socio-CulturalFactors:
Sociocultural
demographic trends
will also affect
McDonald’s business,
hence, analysis of
culture and
modification of menu
is also important.
When McDonald’s
entered in India,
company decided
not to launch its Big
Mac Burger as a
result of deferring to
the Hindu prohibition
against beef
consumption.
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PESTEL ANALYSISTechnological
Factors:
The systematic
substitution of
equipment for
people and the
carefully planned use
and positioning of
technology have
helped each
franchise to be of
the same high
standard.
As Soviet machinery
lagged 15-20 years
behind Western
technology, new
machinery from
Holland was used to
harvest potatoes.
Environmental
Factors:
It is very important for
McDonald’s to
consider the physical
terrain and climate in
the appraisal.
The climatic
conditions can affect
products in foreign
market.
Being environment
friendly is also
another important
factor.
Environmental groups
force to reduce use
of plastic bags and
Styrofoam packing to
reduce pollution.
LegalFactors:
As discussed above,
political and legal
forces are highly
important as they
cover the main
aspects of the
company.
Legal issues occurred
in many places
around the world. A
legal issue in Russia
for McDonald’s when,
in 1993, a law passed
in Moscow requiring
all stores to have
Russian names or at
least names
translated into the
Cyrillic alphabet.
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SWOT ANLALYSIS
Strenghts:
1) Largest fast food market share
2) QSC&V
3) Locally adapted food menus
4) Children targeting
Opportunities:
1) Increasing demand for fast food
2) Home meal delivery
Weaknesses:
1) New innovations
2) Unhealthy fast food
3) Negative publicity
Threats:
1)Trend towards healthy eating
2) Local fast food restaurant chains
3) Currency fluctuations
4) Lawsuits against McDonald’s
SWOT
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SWOT - STRENGHTS
• Largest fast food market share: It is the largest fast food chain in terms of total world’s
sales serving more than 70 million people around the world in more than 120
countries. McDonald’s traditional menu has been surprisingly successful. People with
diverse dining habits have adopted burger and fries wholeheartedly. The very nicely
prepared menus for different people have been McDonald’s biggest strength.
• QSC&V: QSC&V also has been its key strength, which it maintains time by time, by
training employees through Hamburger University and maintains quality standards
by opening quality assurance centres.
• Locally adapted food menus: Preparing various menus according to people’s
choice in different countries adds to McDonald’s strength. For Example, In India
McDonald does not serve beef as Hindu culture does not accept it. Whereas it
serves chicken in India.
• Children targeting: The business successfully targets very young children through
offering playgrounds, toys with its meals and advertisements.
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SWOT - WEAKNESSES
• New innovations: McDonalds has been around for a long time. Customers
want new things very frequently and they switch to new products very easily
if they are attractive. So McDonalds need to be very innovative to hold their
stake of customers.
• Unhealthy fast food: Fast food is not even healthy, so it is not accepted
everywhere on the earth. So, they also need to practise on this factor to
stand in all markets maintaining the regional taste.
• Negative publicity: McDonald’s is heavily criticized for offering unhealthy
food to its customers, stimulating obesity and strong marketing focus on very
young children.
10

SWOT – OPPORTUNITIES
• Increasing demand for fast food: In the technological era the life style of
people has changed. People are more and more demanding fast food,
which is served fast, friendly and good in quality. Demand from people can
be McDonald’s opportunity. It can grow its food chains wisely to win the
markets.
• Home meal delivery: Nowadays, the trend is to order food by telephone to
the places where we want. Providing free home delivery service for
customers can be a large opportunity for McDonalds.
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SWOT – THREATS
• Trend towards healthy eating: Due to government and various organizations attempts to
fight obesity, people are becoming more conscious of eating healthy food rather than
what McDonald’s has to offer in its menu.
• Local fast food restaurant chains: Local fast food restaurants can often offer a more local
approach to serving food and menu that exactly represents local tastes. Although
McDonald’s does a great job in adapting its own menu to local tastes, the rising number
of local fast food chains and their lower meal prices is a threat to McDonald’s.
• Currency fluctuations: The business receives a part of its income from foreign operations.
The profits that are sent back to US have to be converted into dollars and may be
affected by the exchange rates, especially when the dollar is appreciating against other
currencies. In 2012, McDonald’s profit was largely affected by appreciating dollar.
• Lawsuits against McDonald’s: McDonald’s has already been sued for many times and
lost quite a few lawsuits. Lawsuits are expensive as they require time and money. And as
McDonald’s continues to operate more or less the same way, there is high probability for
more expensive lawsuits to come.
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PORTER’S FIVE FORCE ANALYSIS
The entry of new competition to the
market.
The threat of substitutes or
replacement products.
The bargaining power of buyers.
The bargaining power of suppliers.
The rivalry between firms of the
same sector.
13

14
The entry of new competition to the market:
•The barriers to entry are quite high for new entrants, as the size of McDonald’s means
they have achieved economies of scale and have preferential access to raw
materials and distribution channels. New entrants may find that a high cost of
investment is required in securing plant and machinery.
The threat of substitutes or replacement products:
•A substitute product is one that can be used as an alternative to a company’s own. It
could be argued that the threat of substitutes to McDonald’s comes from pizzas and
other domestic kebab and fast food houses. However, most of the above do not have
the same level of convenience that McDonald’s offers, in having a number of outlets
in big cities and also through the use of multiple drive-through outlets.

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The bargaining power of buyers
• This area is perceived to be fairly low risk for McDonald’s as consumers have little control over the
variations in the product offerings, price and place of distribution. The company should keep customers
satisfied, as switching cost is low and the possibility of switching to another brand in case of
dissatisfaction is relatively low.
The bargaining power of suppliers
• This ranges from the threat of forward integration to the threat of cutting off supplies. As McDonald’s
has a great deal of influence over their suppliers, due to the fact that it aids them and trains them, the
threats from suppliers are low. Due to the scale of McDonald’s operations, suppliers are keen to retain
their contracts with the firm. McDonald’s internationalisation could also mean greater sales potential
for suppliers.
The rivalry between firms of the same sector
• The concentration of firms within the fast food industry is low due to the established presence of
McDonald’s, Burger King and KFC. However, in certain markets, McDonalds will face competition from
established domestic fast-food outlets.

IMPORTANT TO DISCUSS
Before McDonalds entered the European market, only few people believed
that fast food could be successful in Europe. Why McDonalds succeeded?
What strategies it followed? How did it differ strategies in Asia?
• Despite global operations, McDonalds stay in close contact with its
customers, who want good taste, fast & friendly services clean surroundings,
and quality. It is interesting that McDonalds was one of the first restaurants in
Europe to welcome families with children. Not only the children are
welcomed but in many restaurants they are also entertained with crayons
and paper, a playland, and clown Ronald McDonald, who can speak 20
languages.
• Whereas in Asia, the trend is different. The people in Asia want food as per
their taste, which McDonalds served them. They prepared their menus,
which included regional taste of people.
16

Should McDonalds expand its menu? If no, than why not? If
yes, what kinds of products should it add?
• McDonalds do not need to expand its menu. McDonalds has been famous
and liked for its very short and well prepared traditional menu, which people
loves to have in their day to day life. Even expanding the menu requires
more resources for varieties and more skilled persons. Though it can add
some items according to regional taste but it should not change its
traditional menu of burgers.
17

Why is McDonalds Successful in many countries around the
world?
• We can point out following points for McDonald’s success story
around the world.
• Quality, Service, Cleanliness & Value.
• Innovative way of presenting itself among people.
• Welcoming all category’s people.
• Regional taste and menu.
• Various kinds of ventures in market.
• Increasing demand of fast food over the world.
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CONCLUSION
• McDonald’s effectiveness and profitability is obviously well supported by
their strong competitive position and market share in their primary product
market.
• Its’ international success is achieved by the company’s strategy and tactics,
which complement each other and work in harmony, providing the
optimum return bounded by efficiency.
• The company is thriving as it is both effective (doing things right) and
efficient (doing the right thing).
• McDonald’s portfolio of products is well managed and ensures the best fit
between the company’s strengths and weaknesses and for offsetting the
threats found in its competitive environment. In considering the strong
competitive position of the firm in a highly attractive market.
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“
”
IF YOU WORK JUST FOR MONEY, YOU'LL NEVER
MAKE IT, BUT IF YOU LOVE WHAT YOU'RE DOING
AND YOU ALWAYS PUT THE CUSTOMER FIRST,
SUCCESS WILL BE YOURS.
-Ray Croc
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Mcdonald’s-Case Study

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