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

7/29/2015

McDonald’s International Marketing Strategy

TABLE OF CONTENTSPAGE

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

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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 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.

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II. OVERVIEW

HISTORY

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

reasonable prices. 1 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

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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

Strengths Weakness Opportunities Threats

Brand Recognition

Economies of Scale

Business Structure

Diversified Income

Public Image

Little Differentiation

Changing Menu

Developing Markets

Competition

Health Concerns

(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

percent decrease in consolidated operating income. 9 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

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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

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

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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.

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

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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.

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.

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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

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.

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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

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

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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.

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

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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

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.

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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

from market to market (Vignali, 99) 23. 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

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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

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

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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

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

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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.

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

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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

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.

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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

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 Zealand30, 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

17

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.

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,

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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

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 year9. 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 20149. 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

19

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.

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,

20

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

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

21

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

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

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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

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.

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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

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, 2014http://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

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Appendix I: SWOT Analysis

Strengths

Brand RecognitionWith 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 ScaleMcDonald’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 StructureThe 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

25

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 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 ImageUnfortunately 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 DifferentiationThe 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 MenuMcDonald’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

26

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 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 marketsMcDonald’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

CompetitionAs 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 ConcernsThe 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

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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 IIGraph 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

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Appendix IV:

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)

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Source: 2014 Annual report, Chipotle Mexican Grill

30