McDonald’s Organizational Structure

Analysis
UPDATED FEB 5, 2017 ANDREW THOMPSON

A McDonald’s in
Liberdade, São Paulo, Brazil. McDonald’s organizational structure evolves over time
to facilitate the firm’s management of global operations in the fast food restaurant
market. (Photo: Public Domain)
McDonald’s organizational structure was reformed in July 1, 2015 to improve the
company’s handling of its global operations. A firm’s organizational structure defines
the system through which organizational components coordinate to achieve business
objectives. McDonald’s organizational structure facilitates managing markets based on
performance levels. As the largest fast food restaurant chain in the world, McDonald’s
keeps evolving to address current and emerging market issues. The firm rolls out new
products to maintain its performance in satisfying customers. These endeavors are
supported through McDonald’s organizational structure, which is designed to adapt to
the changing business environment.

McDonald’s organizational structure establishes the arrangement or pattern of

interactions among various business areas. Through its corporate structure, McDonald’s
succeeds in managing efficiency and performance in its operations in the global fast food
restaurant industry.

Features of McDonald’s Organizational Structure

McDonald’s has a divisional organizational structure. Each division handles a specific
operational area. The aim of this organizational structure is to support autonomy and
organizational flexibility. McDonald’s organizational structure has the following
characteristics, arranged according to significance:
1. Global hierarchy
2. Performance-based divisions
3. Function-based groups
Global Hierarchy. McDonald’s has a global hierarchy to cover all its operations
worldwide. This feature of the organizational structure emphasizes corporate control.
For example, McDonald’s CEO directs the activities of all business areas. Mandates are
passed from the CEO down to middle managers, and to the restaurant managers and
personnel. This characteristic of McDonald’s organizational structure is typical of most
global business organizations.
Performance-Based Divisions. The performance-based divisions are the most distinct
feature of McDonald’s organizational structure. The company reorganized its structure
on July 1, 2015. Before the reorganization, the geographic divisions in McDonald’s
organizational structure were (a) U.S., (b) Europe, (c) Asia/Pacific, (d) Middle East and
Africa (APMEA) and (e) Other Countries & Corporate (OCC) including Canada, Latin
America and Corporate. After the reorganization, McDonald’s used performance as basis
for the new divisions in its organizational structure: (a) U.S., (b) International Lead
Markets, (c) High Growth Markets, and (d) Foundational Markets and Corporate. The
U.S. accounts for more than 40% of McDonald’s revenues, and the lead markets for 40%.
The high-growth markets account for 10% of revenues.
Function-Based Groups. McDonald’s maintains function-based groups in its
organizational structure. For example, under corporate operations, the company has a
human resource management group, a supply chain and franchising group, and a legal
group. This characteristic of the organizational structure enables McDonald’s to address
the basic functions in its business.

McDonald’s Organizational Structure Advantages &

Disadvantages
An advantage of the hierarchy in McDonald’s organizational structure is its support for
monitoring and control of global operations. Also, the performance-based divisions
have the advantage of enabling McDonald’s to implement strategies based on market
performance similarities. For example, the firm applies similar strategies for all lead
markets. However, a disadvantage of McDonald’s organizational structure is that it
tends to generalize strategies for the performance-based divisions. The company has
limited flexibility because of this feature of the organizational structure.