McDonalds Global Strategy

Group One Nov. 2, 2009

Benny
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Sonny
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Christina
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Nadia
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Huy

Rachel
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Febby
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McDonalds Global Strategy

Brief History of McDonalds
The first McDonald's was built in 1940 by the McDonald brothers (Dick and Mac) . Started off as a hot dog stand in CA [1937] The McDonald brothers realized that hamburgers were their most profitable menu item, and changed their business to serve a limited menu. Employing car hops the McDonald brothers became the first restaurant to offer speedy service to people while they stayed in their cars.

McDonalds Global Strategy

Ray Kroc discovers McDonalds [1954] Kroc became the first franchisee appointed by Mac and Dick McDonald in San Bernardino , California.

McDonalds Global Strategy

In 1955 , Ray Kroc opened his first restaurant in Des Plaines , Illinois (near Chicago) , and the McDonald's Corporation was created .

McDonalds Global Strategy

McDonalds has over 30,000 local restaurants in more than 120 countries 70 percent of our restaurants worldwide are owned and operated by independent, local businessmen and businesswomen McDonalds serves nearly 50 million customers each day McDonalds has its own Hamburger University in Illinois, and the first batch graduated in 1961 12 classes offered at Hamburger University are college accredited In 1963, McDonalds sold its one billionth hamburger

McDonalds is listed on the New York, Frankfurt, Munich, Paris and Tokyo stock exchanges

McDonalds Global Strategy

The first McDonalds Drive-Thru opened in Sierra Vista, Arizona in 1975 Happy Meals were added to McDonalds menu in 1979 McDonalds launched the new worldwide Balanced Active Lifestyles public awareness campaign in 2005 McDonalds celebrated its 50th Anniversary on April 15, 2005

McDonalds Global Strategy

1971 McDonalds really starts going global Asian: Tokyo Ginza District, Japan European: Netherland, Munich, Germany
1967 - Canada & Puerto Rico (first restaurants outside the U.S.) 1971 - Tokyo, Japan, Amsterdam, Netherlands & Sydney, Australia 1979 - Rio de Janeiro, Brazil 1990 - Moscow, Russia & China

McDonalds Global Strategy

McDonalds, still the dominant player in the fast food restaurant business, is being challenged by Subway, a smaller company that has been rapidly expanding since 1965.

McDonalds Global Strategy

Founded by Fred DeLuca in 1965. Subway is one of the fastest growing franchises in the world with approximately 31,949 restaurants in 91 countries as of November.

McDonalds Global Strategy

Many restaurant analysts attribute Subway's fast growth to the growing health concerns by restaurant customers, a trend that Subway has taken advantage of in its marketing.

McDonalds Founded Industry

Revenue

Subway 1965 Fastfood

US$ 9.0305 billion (FY 2008 )

1940 Restaurants
US$ 22.6 billion (FY 2008 )

McDonalds Global Strategy

Subway, riding high on the marketing message of healthy fast food, will overtake McDonalds in American store locations by the end of 2009, with a shocking total of more than 32,300 outlets. That's something few consumers could imagine before the sandwich chain piggybacked on huge weight loss of Jared Fogle -- who lost 245 pounds by exercising and eating only its sandwiches, in contrast to Super Size Me's Morgan Spurlock, who got fat and sick eating McDonald's food. In the process, Subway has managed to expand its business and profits. Now, Subway has emerged as a healthy alternative in the market place, partially because its modest business model allows it to open businesses in smaller locations that cannot sustain stand-alone restaurants like McDonald's, which depend heavily on drive-through business for its earnings.

McDonalds Global Strategy

PEST ANALYSIS
To analyze the current status of McDonalds corporation, we chose to use the PEST method to evaluate the following categories P E S T Political Economic Social Technological

Political Challenges
Health and Safety Guidelines
The director of the obesity program for the Children's Hospital Boston, David Ludwig, claims that "fast food consumption has been shown to increase calorie intake, promote weight gain, and elevate risk for diabetes" Center for Science in the Public Interest, a long-time fast food critic over issues such as caloric content, trans fats and portion sizes

Political Challenges
Ecological/environmental issue
Fast food industry giants such as Wendy's, Pizza Hut, and
McDonalds are some of the largest consumers of paper products in the US. "Every year millions of pounds of food packaging waste litter our roadways, clog our landfills and spoil our quality of life.

Home market pressure-groups International pressure-groups

Pushing for increased regulations to make companies more responsible

Political Challenges
Wars and conflicts
war between countries where the company operates. They have also become a symbol of capitalism and Americanism meaning that they have now become the target of terrorist group and attack.

Economic Challenges
McDonalds must consider economic challenges when expanding internationally.
Low set up costs = rapid expansion One of the challenge for fast food industry is that to keep the price is low for the customer. Franchising facilitates set ups McDonalds corporation provides financing assistance and training for new franchise owners to manage cash flow and keep businesses profitable.

Social Challenges
From the research plan McDonalds profits dropped from $1.977 million dollars 2000 to $893 million dollars in 2002. The main reason is the consumers worries had greatly increased with health fears of increasing obesity so customers now opted for more healthier options like subway which offered more of a variety for health conscious customers.

Social Considerations
To ease customers concern about health issues, McDonalds has made changes to the following;
McDonalds changed its image vastly by evaluating the current menu and making changes to it from using organic products to revising the whole menu entirely by offering salads and vegetarian burgers. McDonalds serves a range of high-quality foods that can fit into a balanced diet. The accurate and accessible nutrition information help guests make informed menu choices.

Social Considerations
Emphasis on food safety:
Mcdonalds suppliers have food safety management systems in place, including Good Manufacturing Practices (GMP), a verified Hazard Analysis Critical Control Point (HACCP) plan and crisis management, food security and other applicable programs

Technological Advantages
McDonalds has taken advantage of technology to streamline their processes and improve efficiency. Through technology enhancements such as FPI's
Help Desk Service, network and application consolidation, and other technology implementations, operations of the company are greatly improved.

Technological Advantages
Touch Order Allows You To Place Order At McDonalds Via Handset

Technological Advantages
The customers can place their order directly from their tables, dubbed as Touch Order. Its the first self-ordering system in the world to use RFID*
Technology Spotlight: McDonald's tests Speedpass cashless payment system

Technological Advantages
McDonalds has also implemented technology to improve supply chain management, and allows customers to access this information to make more informed decisions about what they eat.

STRATEGY RECOMMENDATIONS

Recommendations for McDonalds

More Healthy Choices
McDonalds should develop menu choices that are healthy and socially acceptable.
It is possible to develop a menu that people will enjoy and that also fits into the original Speedy Service model the company introduced in the 1950s. Use local food sources where possible. Using local sources decreases the time to market, and also decreases the use of fuel to transport goods.

Recommendations
Locally focused menu choices
McDonalds in India has specific menu items
For the vegetarian market;

Recommendations
Increase presence in Asian countries
McDonald's has most certainly had a profound effect on China. When the first McDonald's opened in Beijing more than a dozen years ago, 40,000 people lined up to observe a Big Mac and get their picture taken with the infamous Ronald McDonald. McDonald's is growing faster in China than in the United States. McDonalds owns & operates more than 600 stores across 105 cities in China. More than 100 more McDonald's stores will be added annually to Chinese cities within the coming years.

Recommendations
While offering the basic burger and fries, McDonalds in China also offers:
Szechuan-style spicy chicken wings Seafood Soup Rice Oriental Sauces Taro and Red Bean Dessert

Discussion Questions
What do you consider to be the definition of globalization? What forces are driving its development?
An ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and exchange. The forces driving it are: Economic, Technological, Socio-cultural, Political, and Biological

Discussion Questions
Identify the reasons why global strategies sometimes fail in their objective to achieve a global marketing advantage.
Lack of understanding about local cultures Unaware of current issues Cannot compete with global competitors

Discussion Questions
Companies that has failed doing global strategies:
Coca-cola has been banned by Venezuela, because the company didnt declare the use of harmful sweetener. www.reuters.com Imports of beef from Brazil has banned by several countries, due to the outbreak of a foot-and-mouth disease. www.reuters.com French, Denmark and Norway have banned Red Bull because of its high levels caffeine and other stimulants. www.medicalnewstoday.com

Discussion Questions
What is the rationale behind mega mergers and major acquisitions? How will they lead to global competitive advantage?
Mega mergers have the effect of reducing cost and complexity of doing business in other countries. To try and establish a business from the ground up in another country, you can face many challenges; political, social, and economic. Often, the best choice is to simply buy a similar company and reduce overlap where possible.
Competitive advantage can be realized when merging with a successful company in a similar business.

Discussion Questions
What are the critical success factors in developing a global brand? What additional factors would you consider to be necessary in developing a successful global ebusiness brand?
A global brand must be universal in that it appeals to basic human wants and needs without being specific to a country or culture. Some exceptions exist, but in our opinion, a successful global brand needs to be identifiable without identifying where it originated from. For an e-business, a company must display value to all consumers. Example: E-bay

Discussion Questions
What are the main challenges that are faced by international managers in managing and controlling a global marketing strategy? What advice would you give to a manager with this responsibility?
Global marketing strategies require in-depth knowledge of the communities they are trying to reach. The better the understanding of the demographics of the market, the better chance you have of understanding their specific wants and needs. Advice: Get local help! You cannot expect to do this from a distance using Google. Find people you can trust in the area and utilize their knowledge and connections.

Conclusion
McDonalds should continue to expand internationally, but be mindful of the local dietary needs and desire of people to eat a healthy balanced diet.
The competition from Subway is important to consider, but there is still a large gap between store earnings. McDonalds stores earn around $2 Million each, while Subway stores earn around $445,000. As people begin to understand that the healthy alternative offered at Subway can be had at McDonalds, there are few reasons to go elsewhere.

Questions for the Class

Do you feel that McDonalds food is unhealthy and toxic, or is it more like a treat to be enjoyed on occasion?

Questions for the Class

Is there anything specific you would like to see added to the McDonalds menu in your countries to appeal to your specific tastes?

Questions for the Class

With the current Mad Cow scare, are you more afraid of eating beef?

Thank You!