McDonald's Australia Holdings Pty Limited

McDonald's Australia Holdings Pty Limited is a foreign-owned proprietary company that operates
and franchises the McDonald's chain of family restaurants. The company employs approximately
6,580 staff across Australia and is headquartered in Thornleigh, New South Wales. McDonald's
Australia is part of the US based McDonald's Corporation.
The principal activity of McDonald's Australia is the establishment and operation of a chain of quick
service family restaurants, operating throughout Australia. Approximately eight y percent of
McDonald's restaurants in Australia are owned by franchisees, who pay the company rent and
service fees. The remaining twenty percent of restaurants are operated by the company.

McDonalds (MCD) is a fast food, limited service restaurant with more than 35,000 restaurants in
over 100 countries. It employs more than four million people. McDonalds serves 70 million
customers per day, which is greater than the population of France. According to IBISWorld, in
2014, McDonalds had the largest share in the fast food restaurant industry of 17% in the U.S. The
closest competitor, Yum! Brands (or YUM), had a market share of 11%.
Industry Overview
The fast food industry provides quick-service food products to consumers. Customers usually pay
before eating. The purchases are usually consumed on-site or taken out for home consumption.
These companies are involved in retail, transport, distribution, and food services. The key
economic drivers for the industry are global consumer spending, consumer sentiment, and world
price volatility of agriculture. The industries that supply the food industry are the global agriculture,
hunting, forestry and fishing industries. 3 According to the National Restaurant Association, the fullservice restaurant segment is projected to post its third consecutive year of real sales growth
during 2013. Total sales are expected to be $208 billion, up 2.9% from $202.2 billion last year.
During the past 5 years, the global fast food industry has expanded despite changing consumer
tastes and the struggling economy. During recessions consumers cut down on luxuries like eating
out, but fast food restaurants like McDonalds were not greatly affected. On the other hand,
increasingly health conscious has hurt the demand for greasy foods provided by these restaurants.
Restaurants have responded by increasing the number of healthy option on their menus. Moreover,
the growing demand from emerging economies boosted the industrys overall performance. In
many developed nations the industry is approaching saturation levels. The reason for this is the
oversupply of fast food businesses and extensive franchising. This results in weaker revenue
growth and intense price-based and product-based competition.
PESTEL ANALYSIS
Pestel is an analysis of the external macro and micro environment in which a business operates.
Pestel stands for political, economic, social, technological, environmental and legal factors

Political Factors Affecting McDonalds Business

McDonalds considers the impacts of the political environment on its industry. This aspect of the
PESTEL/PESTLE analysis refers to the effects of governmental action on the remote or macroenvironment of businesses. In McDonalds case, the most significant political external factors are
as follows:
Increasing international trade agreements (opportunity)
Pending tax reform (opportunity)
Evolving public health policies (threat and opportunity)

McDonalds has the opportunity to expand its business based on improved international trade,
which can enhance global supply chains. McDonalds also has the opportunity to reform its
practices and strategies to lessen the impact of taxation on the business without violating the law.
However, public health policy increasingly tends to discourage people from consuming fast foods
from firms like McDonalds. Nonetheless, the company has the opportunity to address this external
factor by improving the healthfulness of its products. In this aspect of the PESTEL/PESTLE
analysis of McDonalds, the political external factors present opportunities that outweigh threats.
From <http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations>
Source 2:
Generally, McDonalds are affected by government policy on the regulations of Fast Food Company
such as health and hygiene policy. Government realized health problem have been a big concern
for everyone, people are having diseases such as cardiovascular and cholesterol because they are
eating too much fast food. Furthermore, hygiene policy also is a big concern for a fast food
company. Good relationship with government will bring McDonald on a better position to service in
this industry
From <http://rockansussex.blogspot.com.au/2013/11/pestel-analysis-of-mcdonalds.html>

Economic Factors Important to McDonalds

Economic changes around the world influence McDonalds industry environment, considering its
global nature. This aspect of the PESTEL/PESTLE analysis pertains to the effects of economic
conditions and trends on the remote or macro-environment of firms. In McDonalds case, the
following are the most notable economic external factors:

Slow but stable growth of the U.S. economy (opportunity)

Stable but risky European economies (threat)
Slowdown of the Chinese economy (threat)
McDonalds has the opportunity to grow, even slowly, in the American economy, which is the firms
biggest market. However, the current economic conditions in Europe could threaten McDonalds
growth in the region. Also, the slowdown of the Chinese economy threatens the companys growth
in Asia. In this aspect of the PESTEL/PESTLE analysis of McDonalds, the economic external
factors mainly threaten the business.

From <http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations>
Source 2:
The recent economic recession was incredibly disruptive for firms in many industries, reducing
revenues and profits across the board, and decreasing consumer demand for many goods and
services (Kliman, 2012). However notall firms and industries were adversely affected some
actually saw revenue and profit opportunities increase during the economic downturn due to higher
demand - these tend to be firms and industries that are seen to provide value for money, of which
the fast food industry is one (Bems et al, 2010). Fast food restaurants can be seen as imperfect
substitutes for more traditional restaurants; many consumers prefer to eat out at a fast food
restaurant as a cheaper alternative to a more expensive traditional restaurant. In 2008, near the
height of the crisis, the fast food industry in the UK actually saw increased growth in terms of
revenue of 4.5%, with an overall increase in demand for McDonalds products of around 4% (Key
Note, 2009). Other countries that saw similar increases in demand in the fast food industry in
general and McDonalds in particular include Japan, France and Belgium (Economist, 2010).
From <https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-foodindustry-marketing-essay.php>
Source 3:
McDonalds stores have to take a great deal of consideration with reference to their
microenvironment. The company's international supply as well as the existing exchange rates is
merely a part of overall components needed to guarantee success for the foreign operations of
McDonald's. Moreover, it is imperative that the company be cognizant of the existing tax
requirements needed by the individual governments on which they operate .This basically ensures
smooth operations of the McDonald's franchises. In the same regard, the company will also have to
consider the economic standing of the state on which they operate on. The rate at which the
economy of that particular state grows determines the purchasing power of the consumers in that
country. Hence, if a franchise operates in a particularly economically weak state, hence their
products shall cost higher than the other existing products in the market, then these franchises
must take on certain adjustments to maintain the economies of scale.

http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html
Social/Sociocultural Factors Influencing McDonalds Business Environment

McDonalds must respond to sociocultural changes in its remote or macro-environment. This

aspect of the PESTEL/PESTLE analysis refers to the social conditions that support or limit
businesses. In McDonalds case, the most significant sociocultural external factors are as follows:
Widening wealth gap (opportunity)
Increasing cultural diversity (opportunity)
Healthy lifestyle trend (threat & opportunity)
Based on the external factor of the widening wealth gap, McDonalds has the opportunity to grow
because the companys target consumers are mostly from medium and low-income households.
Also, McDonalds has the opportunity to improve its products mix to satisfy a more diverse target
market. However, the healthy lifestyle trend is a threat because many of McDonalds products are
often criticized for their negative health effects. Nonetheless, the company has the opportunity to
improve the healthfulness of its products. In this aspect of the PESTEL/PESTLE analysis of
McDonalds, the social external factors create mostly opportunities for business development.
Source2:
Articles on the international strategies of McDonald's seem to function on several fields to
guarantee lucrative returns for the organisation. To illustrate, the organisation improves on
establishing a positive mindset form their core consumers. McDonald's indulge a particular variety
of consumers with definitive types of personalities. It has also been noted that the company have
given the markets such as UK, an option with regards to their dining needs. McDonald's has
launched a sensibly valued set of food that tenders a reliable level of quality for the respective
market where it operates. Additionally, those who are aged just below the bracket of thirty five are
said to be the most frequent consumers of McDonald's franchises.
http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html
Source 3
While McDonalds and the fast food industry in the US has manage to dodge most proposed
regulation aimed at reducing the unhealthiness of many of their products, they have been perhaps
less successful in dodging the negative public opinion over the same issue. Fast food in general
has seen its public image decline as society in general becomes more health conscious the
preceding decades have seen a rise in many societal health-based food initiatives, such as
increased demand for unprocessed and organic foods, and a growing public awareness of obesity
and heart disease and its links to high-fat foods.
In 2004 Morgan Spurlock, an American social-commentary filmmaker in the same vein as Michael
Moore, created the documentary Super-Size Me (2004), where he ate only McDonalds for 30 days,
for 3 meals a day (breakfast, lunch and dinner). He did not allow himself to have any other food

during that time, and had to upgrade to a super-size meal whenever asked, which had double the
amount of fries of a medium sized meal, and also came with a 42 ounce coke. After the 30 day
period, he had gained 1 stone and 10.5 pounds of extra weight which represented a 13% body
mass increase, had a cholesterol level of 230 (where levels below 200 are considered healthy) and
had developed cirrhosis of the liver (Spurlock, 2004).
There have also been many damaging reports made about the fast food industry in general and
McDonald in particular, including a number of studies that have suggested fast food addiction
shares many of the same characteristics as drug addiction (Garber and Lustig, 2011; Volkow and
Wise, 2005). A paper by Johnson and Kenny (2010) found that high-fat food triggered many of the
same dopamine receptors in rats as those triggered by cocaine or heroin, and can override
standard eating responses and lead to bout of compulsive, addictive-like eating
In response to this, McDonalds has phased out the super-size option for all of its US meals (the
UK supersize meal option had been phased out in 2001 due to very low demand, and had not
been introduced in any other countries) and began offering more healthy menu options, including
fruit smoothies, salads, milk, water and fruit (Pompper and Higgins, 2007). They have also
launched a number of innovative marketing campaigns aimed at highlighting the new range of
healthy alternatives, a policy that is estimated to cost an additional $35million in marketing costs
(Vizard, 2013). Such an approach appears to have been effective, with no sales decline reported in
any month over the last 10 years (Vizard, 2013).
From <https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-foodindustry-marketing-essay.php>
Technological Factors in McDonalds Business
McDonalds success partly depends on technological applications. This aspect of the
PESTEL/PESTLE analysis pertains to the impact of technologies and related trends on the remote
or macro-environment of companies. McDonalds must address the following technological external
factors:
Moderate R&D activity in the industry (opportunity)
Increasing business automation (opportunity)
Increasing sales through mobile devices (opportunity)
McDonalds has the opportunity to increase its research and development investments to improve
business effectiveness and efficiency. Also, McDonalds can apply more automation to maximize
productivity, based on the external factor of increasing business automation. Furthermore,
McDonalds can improve its mobile services to tap more consumers via its website or mobile app.
In the technological aspect of the PESTEL/PESTLE analysis, McDonalds has major opportunities
for growth.

From <http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations>

Source 2:
The advent of the internet has opened up many opportunities for low-cost, high-impact marketing
across a range of firms and industries. Increasingly, firms are being judged more and more strongly
on their online presence and perceived technological savvy it can seriously harm a business
image if they are seen as out-of-touch with the modern technological world (Chaffey, 2009).
Marketing opportunities using the internet are many and varied and can range from intricate,
involved, multi-layered viral campaigns, through website design and functionality to a simple social
media presence. While the fast food industry was slow to catch on to the benefits of internet
marketing in the beginning, most firms have now embraced its potential, and McDonalds is at the
forefront.
As well as taking the (now somewhat standard) step of establishing a strong social media
presence, with the creation of both a Facebook page and twitter account in 2009, McDonald have
also run a number of successful online marketing campaigns, including an Ask McDonalds
Youtube campaign in 2012, where over 20,000 questions from the public were answered, with most
being based around the quality and supply chain of McDonalds food and burgers. Many of the
questions were answered through short Youtube videos, some of which have gathered over 10
million views, and most of which were received very positively (Macmillan, 2012).
However, as with most other firms, the internet has proved to be a double-edged sword in terms of
marketing success for McDonalds. There have also been a number of negative articles posted on
Facebook and Twitter about the company and its products, including an obvious hoax post that
claimed a batch of McDonalds hamburgers in Oklahoma had been found to have been
contaminated with human meat (Hooton, 2014, p1). Despite the obvious falseness of the claims
(the posts were taken from a joke news site, satirising the Tesco horse meat scandal of 2013)
many people online believed the stories, claiming to be sickened by them, and declaring they would
boycott McDonald products from now on (Hooton, 2014). Such false information is easily spread
online with little to no information regulation; firms can be at the mercy of false accusations and
internet pranks. Also, in direct contrast to the successful Youtube campaign was a perhaps less
successful Twitter campaign, where McDonalds promoted the #Mcdstories hashtag for twitter
users to post their stories and positive experiences with the firm. However, as there was no ability
to either control or properly interact with the responses as with the Youtube campaign, the
campaign collapsed almost immediately with a glut of negative anti-McDonalds tweets,
outweighing the positive responses by around 10 to 1 (Kolowich, 2014). Careful monitoring of the
companys online presence and quick response to such incidents will go some way to mitigating
the potential damage.

From <https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-foodindustry-marketing-essay.php>

Ecological/Environmental Factors
Ecological external factors affect McDonalds consumers and, thus, the companys performance.
This aspect of the PESTEL/PESTLE analysis refers to the environmental issues in firms remote or
macro-environment. In McDonalds industry, the following are the most significant ecological
external factors:
Rising interest for corporate environmental programs (opportunity)
Increasing emphasis on sustainable business strategies (opportunity)
Climate change (threat)
McDonalds can expand its corporate social responsibility strategies to reach even high
performance in addressing environmental concerns. However, climate change remains a threat
because of its negative effects on farms and, thus, McDonalds supply chain. In this aspect of the
PESTEL/PESTLE analysis, the ecological external factors highlight corporate social responsibility
opportunities, although McDonalds also needs to further diversify its supply chain to address the
effects of climate change.

From <http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations>
Source 2:
In recent years, environmental issues have come to the forefront of public consciousness with the
rise of many green initiatives and movements. In response, many businesses now include some
form of environmental damage mitigation to counteract the negative environmental aspects of their
typical business production methods; typical methods include the replanting of trees to offset
carbon emissions caused by the transportation of goods, a reduction in the amount of paper used
in the administrative side of the business, energy-saving initiatives such as the turning off of lights,
electrical appliances and computers when facilities are not in use, and a reduction in the amount of
packaging used in the production process (Satya, 2002).
Environmental concerns about a business operations are particularly pronounced in the food
industry, as food production techniques are often associated with poor environmental controls,
particularly in emerging third world economy producers, and budget meat suppliers (Foster et al,
2007). Indeed, a number of protests have been levelled at many fast food firms in general, and
McDonalds in particular on 19th July 1985, Greenpeace in the UK declared an anti-McD Day of
Action (Veggis, 2014, p1) which involved demonstrations, protest marches and pickets of many
McDonalds stores across the UK. The Day of Action has been repeated every year on the same
date, and protests against the promotion of junk food, the unethical targeting of children,
exploitation of workers, animal cruelty, damage to the environment and the global domination of
corporations over our lives (Veggis, 2014, p3). In 1997, two of the protestors were sued by
McDonalds for libel, after repeating some of these claims in many McDonalds restaurant. The
judge found in favour of McDonalds for some of the allegations of libel, but found others had some
truth to them and could not be considered libellous, including claims that they falsely advertise

their food as nutritious, risk the health of their long-term regular customers and are culpably
responsible for cruelty to animals reared for their products (Justice Bell, 1997, p13).
In response to this, McDonalds have initiated a number of Corporate Social Responsibility (CSR)
policies centred on reducing the environmental impact of the business; they currently participate in
Earth Hour, an initiative that encourages many businesses to turn off their lights and unused
equipment on a specific hour each year, to reduce their carbon footprint. They have also sought to
reduce the environmental impact of their packaging, seeking out more biodegradable packaging in
many markets; they have initiated paper-reduction policies in many of their administration centres,
and they have also instigated investigations into the care and management of the animals reared
for their product supply, with a view to ensuring no unnecessary cruelty or inhumane treatment is
taking place (McDonalds, 2014c)

From <https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-foodindustry-marketing-essay.php>

Legal Factors
McDonalds must follow legal requirements imposed on its remote or macro-environment. This
aspect of the PESTEL/PESTLE analysis pertains to the impact of laws or regulations on firms. The
most significant legal external factors for McDonalds are as follows:
New legal minimum wage levels in the U.S. (threat)
Local health regulations in workplaces and schools (threat)
Animal welfare regulation (threat & opportunity)
McDonalds faces the threat of higher minimum wages, which lead to higher costs and prices. Also,
local health regulations impacting food service in workplaces and schools could reduce the
companys revenues from these areas. In addition, McDonalds must address animal welfare
regulatory effects on its supply chain. For example, the company can implement new policies to
ensure animal welfare among meat producers. McDonalds faces mainly threats based on legal
external factors in this aspect of the PESTEL/PESTLE analysis.

From <http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations>
Source 2:

The specific legal environment in which McDonalds operates is highly dependent on the specific
country and market in question; however, most of the markets that McDonalds operates in have
some form of a Health and Safety legal framework, particularly with regard to food preparation.
Many, if not all of the countries McDonalds operates in has some form of public health inspection
system with regard to food producers - in the UK, it is the Food Standards Agency, while in the US,
it is the Food and Drug Administration (Campbell et al, 2008). In both markets, any employees with
food-handling capabilities must take part in food-hygiene training at the companys expense.
McDonalds has implemented a system that adds additional controls to those required by either
health agency, and as their customer-facing website states, there are at least 70 safety checks on
beef and chicken every day. In fact, McDonalds rigorous standards have been used by
government agencies as models for their own regulations (McDonalds, 2014d, p1). In this way,
their dedication to food safety over and above that required by law can be used as a marketing tool,
to emphasise their commitment to quality (Campbell et al, 2008).
There are also a number of employment laws to consider in each market, including those
regulating the maximum length of an employees daily and weekly working hours, the requirements
for employee breaks and facilities, tax and payroll requirements, business registration and
accountancy standards for reporting profit and loss (Jones, 2013). McDonalds tends to adhere to
the same legal standards across markets for each of these areas, even in markets with less
stringent regulations or legal requirements than those of the UK or US markets (McDonalds,
2014a)

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Industry environment (5 forces)

McDonalds Five Forces Analysis
In this Five Forces analysis, McDonalds experiences the effects of external factors at varying
intensities. The company must implement strategies to meet these external factors and minimize
negative impact. In summary, McDonalds Five Forces analysis yields the following intensities of
the five forces:
Competitive rivalry or competition (strong force)
Bargaining power of buyers or customers (strong force)
Bargaining power of suppliers (weak force)
Threat of substitutes or substitution (strong force)
Threat of new entrants or new entry (moderate force)
Competitive Rivalry or Competition with McDonalds (Strong Force)

McDonalds faces tough competition because the fast food restaurant market is already saturated.
This element of the Five Forces analysis tackles the effect of competing firms in the industry
environment. In McDonalds case, the strong force of competitive rivalry is based on the following
external factors:
High number of firms (strong force)
High aggressiveness of firms (strong force)
Low switching costs (strong force)
The fast food restaurant industry has many firms of various sizes, such as global chains like
McDonalds and local mom-and-pop fast food restaurants. Also, most medium and large firms
aggressively market their products. In addition, McDonalds customers experience low switching
costs, which means that they can easily transfer to other restaurants, such as Wendys. Thus, this
element of the Five Forces analysis of McDonalds shows that competition is among the most
significant external forces on the business.
Bargaining Power of McDonalds Customers/Buyers (Strong Force)
McDonalds must address the significant power of customers. This element of the Five Forces
analysis deals with the influence and demands of consumers. In McDonalds case, the following
are the external factors that contribute to the strong bargaining power of buyers:
Low switching costs (strong force)
Large number of providers (strong force)
High availability of substitutes (strong force)
Because of the ease of changing from one restaurant to another (low switching costs), customers
can easily impose their demands on McDonalds. In relation, because of market saturation,
consumers can choose from many fast food restaurants other than McDonalds. Also, there are
many substitutes to firms like McDonalds. These substitutes include food outlets, artisanal
bakeries, as well as foods that one could cook at home. Based on this element of the Five Forces
analysis, McDonalds must develop strategies to increase customer loyalty.
Bargaining Power of McDonalds Suppliers (Weak Force)
Suppliers also influence McDonalds. This element of the Five Forces analysis shows the impact of
suppliers on firms. In McDonalds case, the weak bargaining power of suppliers is based on the
following external factors:
Large number of suppliers (weak force)
Low forward vertical integration (weak force)
High overall supply (weak force)
The large population of suppliers weakens the effect of individual suppliers on McDonalds. This is
especially so because of the lack of regional or global alliances among suppliers. In relation, most
of McDonalds suppliers are not vertically integrated. This means that they do not control the

distribution network linked to McDonalds facilities. Also, the relative abundance of materials like
flour and meat reduces suppliers influence on McDonalds. Thus, this element of the Five Forces
analysis shows that supplier power is a minimal issue for McDonalds.
Threat of Substitutes or Substitution (Strong Force)
Substitutes are a significant concern for McDonalds. This element of the Five Forces analysis
deals with the potential effects of substitutes on firm growth. In McDonalds case, the following
external factors make the threat of substitution a strong force:
High substitute availability (strong force)
Low switching costs (strong force)
High performance-to-cost ratio (strong force)
There are many substitutes to McDonalds products, such as products from artisanal food
producers and local bakeries. Consumers can also cook their food at home. It is also easy to shift
from McDonalds to these substitutes (low switching costs). In addition, these substitutes are
competitive in terms of quality and consumer satisfaction. In this element of the Five Forces
analysis of McDonalds, substitutes are a major issue that the company must address through
approaches like product quality improvement.
Threat of New Entrants or New Entry (Moderate Force)
New entrants can impact McDonalds market share. This element of the Five Forces analysis refers
to the effects of new players on existing firms. In McDonalds case, the moderate threat of new
entry is based on the following external factors:
Low switching costs (strong force)
Moderate capital cost (moderate force)
High cost of brand development (weak force)
Because of the low switching costs, consumers can easily move from McDonalds toward new fast
food restaurant companies. Also, the moderate capital costs of establishing a new restaurant
makes it moderately easy for small or medium-sized firms to affect McDonalds. However, it is
expensive to build a strong brand that could match the McDonalds brand. Thus, this element of the
Five Forces analysis shows that the threat of new entrants is a considerable issue for McDonalds.

From <http://panmore.com/mcdonalds-five-forces-analysis-porters-model>

Source 2:
Bargaining power of McDonalds suppliers is low.

McDonalds works with a number of large suppliers such as Coca-Cola Company, Clorox
Company, Dr. Pepper Snapple Group Inc. McCormick & Company Inc., International Paper
Company, Sealed Air Corporation and others.[5] McDonalds Corporation and its affiliates and
subsidiaries generally do not supply food, paper or related items to any McDonalds restaurants.
The Company relies upon numerous independent suppliers, including service providers for the
supply of food and other related items.[6] A set of important factors such as an abundance of
potential suppliers, low level of uniqueness of products provided by suppliers and the importance of
volume of order for each supplier reduce the bargaining power of McDonalds suppliers. Rivalry
among existing firms is fierce. McDonalds faces competition from quick-service eating
establishments, casual dining full-service restaurants, street stalls or kiosks, cafs,100% home
delivery/takeaway providers, specialist coffee shops, self-service cafeterias and juice/smoothie
bars[2] According to Euromonitor International, the global informal eating out segment comprised
about 8 million outlets and generated USD 1.2 trillion revenues in 2013. McDonalds outlets
accounted for0.4% of those outlets and 7.5% of the sales.[3] As it is illustrated in Figure 2 below,
McDonalds also maintains a leadership position in terms of the brand value among its major
competitors.
Rivalry among existing firms is fierce. McDonalds faces competition from quick-service eating
establishments, casual dining full-service restaurants, street stalls or kiosks, cafs,100% home
delivery/takeaway providers, specialist coffee shops, self-service cafeterias and juice/smoothie
bars[2] According to Euromonitor International, the global informal eating out segment comprised
about 8 million outlets and generated USD 1.2 trillion revenues in 2013. McDonalds outlets
accounted for0.4% of those outlets and 7.5% of the sales.[3] As it is illustrated in Figure 2 below,
McDonalds also maintains a leadership position in terms of the brand value among its major
competitors
Threat of new entrants is moderate. On one hand, fast-food market is near the point of saturation in
many locations and the economies of scale derived by major market players such as McDonalds,
Starbucks Coffee, Burger King, KFC and Subway can be a significant barrier for new entrants. On
the other hand, opening a fast-food restaurant does not involve huge capital requirements
compared to many other types of businesses and there are no legal or regulatory barriers to start a
business in this industry. Moreover, a new fast-food restaurant may have a descent chance of
becoming successful if it adopts product differentiation as its competitive advantage in an efficient
manner
From <http://research-methodology.net/mcdonalds-porters-five-forces-analysis/>

Source 3
Threat of Competition High The competition in the fast food industry is high and the trend is
increasing. Operators compete on the basis of price, location, food quality and consistency, style
and presentation, and food range. New products are constantly being introduced because variety
greatly affects consumer demand. Service is also expected to increase in quality. Restaurants are

constantly implementing strategies such as drive-thru. The competition between franchises and
locally operated fast food restaurants adds to the competition. Even though the single-location fast
foods account for a small share of restaurants their share of industry revenue is larger. They have
successfully established their restaurants in high traffic locations and at the same time in marketing
their brands.
Threat of New Entrants Low The fast food industry is made up of large chains that already count
with economies of scale, distribution channels, and technological advances. On the other hand, low
start-up costs make it easy to compete in the industry. Although there are many competitors
entering the market, on the global scale the giants like McDonalds are still in advantage. It is very
unlikely that the new entrants will take any significant market shares. Fast food giants like
McDonalds count with brand loyalty that makes it hard for new entrants to pose a threat.
Threat of Substitutes High Fast foods are discretionary items that are easily substituted by other
types of meals. These might include meals prepared at home, dine-in restaurants, deliveries, and
meals supplied at convenient stores. Since customers have become more aware of the health
effects of fast foods other substitutes are becoming more and more attractive. Vast amounts of
money have been spent on marketing and promoting healthier fast foods to be able to compete
with healthier options. Restaurants need to change the image customers have and at the same
time increase brand awareness.
Supplier relations are very important to this industry. The prices charged by suppliers are the major
factors that affect net income. Although the supplies are commodities and suppliers do not have
the ability to charge more than the market, operators do not have the chance to bargain for cheaper
products or large quantity discounts. Good relationships are crucial to this particular industry so
that large quantities of supplies are available when needed. Lastly, although there are many
suppliers, location is extremely important. So suppliers closer to the operators substantially
influence transportation costs. The fact that suppliers do not have the ability to increase prices but
operators do not have the ability to bargain makes supplier power moderate in the fast food
industry
Power of Buyers Moderate Although customers do not have the power to influence price directly,
they influence it greatly. With the social media and health concerns customers can readily supply
opinions and influence others with these. All companies in the fast food industry must adhere to
social regulations; spend in enhancing their brand reputation, and promoting quality standards so
that customers feel safe and content when consuming their products.
https://www.google.com.au/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=12&cad=rja&uact=8&ved=0ahUKEwju2rjvju_MAhVF2KY
KHbBTA9IQFghUMAs&url=http%3A%2F%2Fwww.neeley.tcu.edu%2FAcademics
%2FEducational_Invest__Fund%2FPDFs
%2FMcDonalds_MCD.aspx&usg=AFQjCNHapZa3WNDndU9YwdAwvgAEIUDduQ&sig2=OfDmsa_
lipBLSKk5_gcAKQ&bvm=bv.122676328,d.dGY

The competitive environment

For businesses to understand adequately the nature of the competition they face, they must define
their market accurately. This involves recognising a broad base of competitors. McDonald's has
thousands of competitors, each seeking a share of the market. McDonald's recognises that it is up
against not only other large burger and chicken chains but also independently owned fish and
chips shops and other eat-in or take-out establishments. A company like McDonald's therefore, has
to develop competitive strategies that differentiate it from its rivals
All organisations need to be in touch with their business environment in order to make sure that
what they do fits with customer expectations. These expectations change over time. Moreover, the
IEO market in which McDonald's operates is becoming increasingly competitive, as the chart below
illustrate

Recently, in this crowded market place, McDonald's competitive lead came under pressure largely
because many fast food outlets have either:
copied the trail-blazing ideas that previously set McDonald's apart and put it ahead of the field
promoted new ideas of their own e.g. urban supermarkets and petrol stations that sell convenient,
portable mealtime replacements
McDonald's recognises the need to respond. It is looking to increase the competitive gap by:
adding greater value through innovation
making the process of visiting a McDonald's less routine and controlled
enhancing the overall in-house experience.
http://businesscasestudies.co.uk/mcdonalds-restaurants/staying-ahead-in-a-competitiveenvironment/the-competitive-environment.html#axzz49RREBqRB
Source 2
Quick-service eating establishments
Casual dining full-service restaurants
100% home delivery or takeaway providers
Street stalls or kiosks
Specialist coffee shops
Juice or smoothie bars
Self-service cafeterias
From <http://marketrealist.com/2013/12/mcdonalds-compete-poses-biggest-threat/>
The IEO segment excludes establishments that primarily serve alcohol and full-service restaurants
other than casual dining.

Based on data from Euromonitor International, the global IEO segment was composed of
approximately 7.0 million outlets and generated $1.05 trillion in annual sales in 2011, the most
recent year for which data is available. McDonalds companywide 2011 restaurant business
accounted for approximately 0.5% of those outlets and about 8% of the sales.
Management also on occasion benchmarks McDonalds against the entire restaurant industry,
including the IEO segment defined above and all other full-service restaurants. Based on data from
Euromonitor International, the restaurant industry was composed of approximately 14.8 million
outlets and generated about $2.11 trillion in annual sales in 2011. McDonalds companywide
restaurant business accounted for approximately 0.2% of those outlets and about 4% of the sales.
On a broader basis, we could include Starbucks Corporation, Yum! Brands, Burger King, Panera
Bread, Wendys, Chipotle Mexican Grill, Whitbread, Darden Restaurant, Tim Hortons., and
Bloomin Brands as McDonalds competitors.

From <http://marketrealist.com/2013/12/mcdonalds-compete-poses-biggest-threat/>

Broader competitive dynamics

On a broader basis, McDonalds restaurants compete with international, national, regional, and
local food product retailers. The company competes on the basis of price, convenience, service,
menu variety, and product quality in a highly fragmented global restaurant industry. The companys
primary competition, which management refers to as the informal eating out (IEO) segment,
includes the following restaurant categories defined by Euromonitor International.

From <http://marketrealist.com/2013/12/mcdonalds-compete-poses-biggest-threat/>

Internal Analysis
Resources and Capabilities
A firms resources and capabilities can be measured through identifying its tangible and intangible
resources and capabilities within. Tangible and intangible resources are significant in implementing
firms strategies. It ranges from financial, physical, technological and organizational; while
intangible can be human, innovation and reputational assets. In case of Macdonalds, is the worlds
largest chain of hamburgers fast food restaurants, serving nearly 47 million customers daily. The
restaurants are found in 119 countries and territories around the world. McDonald's operates over
31,000restaurants worldwide, employing more than 1.5 million people. Looking at the increasing

popularity especially in South-Asian region it is predicted Macdonalds would expand even further
in new countries and unexplored territories.
https://www.scribd.com/doc/35419896/Internal-Analysis-on-Mcdonalds

Source 2:
Tangible Resources
Tangible resources are the easiest to identify and evaluate: financial resources, human resources,
physical resources and organizational.
Tangible Resources
Physical
The physical resources of McDonalds include the restaurant location which will be at UCTI building
with an average sitting capacity of 50 persons. The restaurant is equipped with the latest cooking
and storing equipment. The restaurant has the facility of Play Place for students and has one
television.
Human resource
Human resource is most important resource of any business unit wherever in the world. The
strength of any organization is not the machine, equipment or its cash flows; rather these are
employees that make an organization great and competitive.
McDonald's recognizes that employee satisfaction is a critical component in its goal of achieving
100 percent customer satisfaction. Its employees are offered world-class, award-winning training
and the opportunity for career development.
Hiring Personnel
There is no criterion as such for the selection of employees, what is important is integrity,
motivation and some educational qualifications.
In the workforce, qualities, which are sought, are anatomy, motivation and ability to work more
hours. While for manager the characteristics required are leadership, energy and attraction
Financial
McDonald's is concerned, now information is available about its financing activities. McDonald's is
working with two banks namely CIMB and MayBank. These two banks are taking care of any

financial activity for McDonald's inside and outside the country and also provide short-term loans to
the company.
Organizational
McDonald serve as training center where day-to-day coaching and shoulder-to-shoulder interaction
between managers and crew are emphasized. Training begins with one-on-one instruction before a
crew-person cooks the first French fries and for new entrants to the workforce, the company offers
an important foundation:
Teaching interpersonal and organization skills.
Crew-members can also learn the importance of teamwork.
Discipline and responsibility.

From <https://www.ukessays.com/essays/business/study-into-growth-and-resources-in-mcdonaldscorporation-business-essay.php>
Core competencies
Core competencies are all about providing increase customer value. This numerous opportunity to
the company; it can be about innovative new products or exploring the new market niche.
Same is the case with McDonalds selling burger is not their core competence instead providing
convenience and customer oriented policy is their strongest point.
Following are the McDonald's core competencies which makes it stand ahead among its
competitors in industry:
McDonald's play area: McDonald's introduced the play area of students, like playing chess titans
till.
Product variety: McDonald's keeps on changing a bringing innovation in to burger, salads,
desserts, drinks and sandwiches variety.
For growth McDonald's have to experiment with new product line. It is suggested that McDonald's
should rely on test marketing to check new menu if it wants to maintain a constant growth.

From <https://www.ukessays.com/essays/business/study-into-growth-and-resources-in-mcdonaldscorporation-business-essay.php>
Source 2:

Secret Recipe
McDonalds has got a unique recipe which cannot be easily imitated by its competitors. Only very
few people knows the secret recipe of McDonalds. Strict confidential contracts are signed while
handing out the secret information to the concerned people. This recipe accounts to its core
competence.
Core intellectual assetsThe experienced and well trained staffs are the strength of McDonalds. The operating practices are
systematically internalized within the workers' cognition and attitude through high level training
standards. Formal training programs are conducted at Hamburger University and individual training
is done within the restaurant outlets itself. Quick service is one of their strength in the fast food
industry.
Product line enhancementsThe McDonalds exhibits a long range of product varieties and segmentations are made on the
basis of demographics too. The company recipes vary from country to country based on the
cultural and social factors. This is the source of their competitive advantage as they are able to
market their products by blending with the cultural differences while maintaining the international
standards. Example- Lamb burgers are served in India and separate entrances are provided for the
families and single women in the Arabian countries.
Economies of large scale and cost leadershipAs the company enjoys economies of large scale, it is successful in large scale operations and
reducing the per unit cost by making the product cheaper while maintaining its quality.
Market leadership and unique brand recognition across different geographical locationMcDonalds is one of the top multinational companies the world has ever seen. Its partnership with
the industrial giant coca cola made it more reputed. It has made its presence in more than 122
countries with thousands of outlets. Competitors are few having the same advantage and it reigns
as the market leader.
Replication of capabilitiesReplication essentially requires systematization of the knowledge through standard operating
procedures. Distillation of business system is done in McDonalds through functioning procedures
and training manuals which help to control all aspects of the restaurants.
Appraising resources and capabilities through assessing the relative strengthThe strength to circulate millions of burgers from vast number of outlets around the world with
remarkable uniformity in the production quality and customer satisfaction accounts to its relative
strength.
Technological, financial and physical assets-

McDonalds posses huge assets that makes it even more powerful in extending its presence across
the globe. Area managers use modern technological innovations to communicate, motivate and
make comparisons in order to improve the performances of each outlet.
9. Good locationsMcDonalds outlets are mainly located in the very crowded city centres, airports, theme parks etc.
This gives the opportunity to attract lot of customers during peak hours. Location itself account to
its competitive advantage.
10. Strong value chainValue chain primarily deals with the development of maximum value for customer as a result of
series of activities which includes logistic operations and services. McDonalds' value chain is
strong as it meets its objectives which fortify its competency.
11.FranchisingTo get the products to be leveraged to international and national markets, franchising is the best
tool which aids the rapid business growth.

Threats that exist which undermine McDonald's success are as follows;

Growing health conscious customersThe modern people are becoming more health conscious which results in reducing the intake of
sugar and the foods which contains saturated fats. They are switching to healthier options. Change
in consumer preference has a negative impact on profitability.
Growing foreign and local competitorsThe company is facing intense competitions from the retail food structures like 'subway' which
market themselves over fresh vegetable and other healthy food options. Though the McDonalds
recipe is unique, the company has got rivals who makes up the identical products and increase
their market share.
Sued for unhealthy foodsMcDonalds was sued couple of times for serving unhealthy foods allegedly with additive addictives
which gave birth to a possible threat of losing loyal customer base.
Contamination of foodFood can be contaminated at anytime with the presence of e-coli, bacteria etc. It is a possible
threat associated with any retail food industry.
Negative impact of global economic turndown-

Consumer confidence has been driven down by the global economic downturn. The spending
began to limit which resulted in profit fluctuations for McDonalds. The money for discretionary
purchases was dramatically declined due to job losses, bankruptcies and very weaker access to
credit.
Outbreaks of avian fluMany countries in the world have experienced the outburst of dangerous avian flu which was
capable of affecting the availability of poultry across the world. As the people has got a tendency to
eat less chicken due to awareness of flu company was affected negatively. Moreover in the
countries like India where a greater population are not consuming beef products, chicken is very
important to be in production. So such unanticipated outbreak remains as a threat.
Criticism from parents of small childrenThe McDonalds have been criticized by many parent advocates for their focus upon the children as
a part of their marketing strategy. It was analysed to be marginally ethical.
Social and Cultural barriersThe attitude a country holds for United states can also influence an American based company's
performance while extending their business globally. In Pakistan, the anti-American sentiments
gave birth to many protests when McDonalds was first introduced. Beside this, if a country's
religious and cultural setups will not allow any particular McDonalds product to be marketed,
McDonalds will be subject to threats.
Weak relationship with franchisee dealersThe McDonalds' lack of control over the widespread geographical locations gave way to weaker
bonding of control with the franchisee which resulted in weaker performance.
Contributions to health issueConsumer activist and fitness experts accuse McDonalds for their part in various health issues
which includes cholesterol, heart attacks, diabetes etc. (McDonalds and health issue 2011)
Examine the fast-food burger industry with reference to the Product Life Cycle model. What does
your answer tell you about McDonald's future business strategy?
The fast food burger industry passes through different stages of product life cycle in different
countries. The food consumption trend depends upon location based social and economic factors.
Even globalisation has influenced the idea of fast food burger to be propagated across different
geographical locations. Thus product life cycle can be explained mainly in context of developing
and developed countries.
Fast food burger industry in developed countriesFast food burger industry is in maturity stage in the developed western European countries. The
burger is one of the favourite fast foods of America. The competition is intense and the demand is
more or less levelling in these locations now. The industry in the developed countries is now
struggling to meet the consumer expectations on the grounds of a healthy life style. The

necessities of re-invention or product development are unavoidable as the business cycle has to
start again.
The maturity stage is characterised by the market saturation and sales remains to enhance in a
slower pace. The main concentration is put forward to increase the market share. All distribution
outlets are filled and the identical producers are competing intensively on the basis of price to meet
its profit targets. Producers are focusing up on its distribution outlets as maintenance of sales is
very important at the stage. No more considerable intense effort is put forward in the expansion of
new outlets as the take aways are densely distributed in almost all areas. The producers are
competing with each other to get others customers through various sales promotion techniques.
(Harvard Business Review)

McDonald's future business strategy

The business strategy which is to be framed to retain their market share is as follows;
Future strategies to be framed in specific to developed countries
The strategic goal should be defending the market position from the rivals and making more out of
the existing product. Product line and product differentiation should be enhanced to include more
healthy and environmental friendly products. Price should be decreased as competition is intense.
Defensive price policy is the best strategy that can be adopted to withstand the competition.
Future strategies to be framed in specific to developing countries
The strategic goal should be maintaining the existing market share and promoting the brand more
intensively to attract more consumers. More pressure should be placed on the distributions and
value chain should be systematically developed. The pricing policy should be re-estimated and
price can be maintained high for some period if the product demand tends to be high. The products
should be developed to ward off the competitors' pressure. More service enhancement and menu
innovations should be made according to the developing countries' cultural and social food
preferences.
Some other common future business strategies that can be implemented are as follows;
Inclusion of low-calorie meals and reduction of trans fats can eliminate the unhealthy food provider
image of McDonalds among the public. A health tag should be provided to regard its quality.
To ward off the franchisee problems arising out of mismanagement and lack of quality
preservation, it is recommended that regional managers should be more intensively trained and
placed.
McDonalds should capitalise on hot drink market as it is booming out at present and it will continue
its growth in future too.

It can provide allergen free products so that company can reap the benefits from the concerned
segment too.
Trend towards organic foods should be encouraged as a part of healthy diet style.
More focus should be concentrated in developing the brand image in the developing countries by
identification of strong value chain. More outlets should be opened and promotional activities
should be given room for brand acknowledgement.
Junk food tag of the McDonalds products should be strategically wiped out through imparting more
research on the existing products leading to new healthy product innovations. The need of research
and development has to be essentially included in the strategic planning of McDonalds.
(McDonalds and health issues 2011)
Identifying the BCG growth matrix, the company should invest more on the product which has got
high demand as the market share grows over it. Thus for future cash generations star has to be
sorted out and proper product differentiation should be done to reach the top line. (Thinking
Managers 2010)
Examine the advantages and disadvantages of the modes of entry adopted by McDonald's in order
to internationalise their business.
McDonalds' international strategy is propelled with expansion of production through franchising. An
agency relationship is been created associated with expansion of business in an amalgamated
manner which runs the company to top line in international market. McDonalds sells the right to
other company to use the trade name along with the process techniques. The company to which
McDonalds sell their right should meet some criteria which is set up by the McDonalds itself and a
contract will govern the agency relationship.
The advantages of mode of entry adopted by McDonalds are as follows;
McDonalds gets the benefit of the fees or royalty from the franchisee. Benefits can also be derived
from sourcing specialized McDonalds machines or products to franchisee. They are unique in the
way that the cooking materials used itself determine the product standard McDonalds possess.
Franchising helps in significantly faster growth in the brand identity across various geographical
locations. The company can use the franchisees' assets, talents and location advantage to prosper
its brand image.
As more and more outlets are opened by franchising, McDonalds can gradually reap the benefits of
economies of scale.
By maintaining a healthy relationship with the franchisee, firm will get more ideas or inputs into the
necessary menu innovations needed in concerned areas. This will help in the proper blending and
adaptation of cultural and social trends which prevails in the particular market.

As the company can start a venture with small investment, McDonalds can facilitate more funds
towards the promotional activities. This will in turn contributes towards driving the brand name to
the top line of the business (business link 2008).
The research and development can be propagated as there is reduced operating and distribution
cost. McDonalds is giving more importance to product innovations and the research and
development happens to be the unavoidable part of business strategy.
Quality control is expected to maintain while in the operation of a reputed brand's business as the
franchisee has invested lot of money and much time in it. So the franchisee is expected to be selfmotivated to work hard in escalating the financial and organizational results.
By multiplication of locations, McDonalds can spread the risk through the franchisees' investment.
If one location is not doing well the benefit can be derived from some other good going location.
One of the most important advantages of the franchising is that the franchisees' initial capital is not
needed to be repaid.
As the operations are done by the franchisee itself, McDonalds doesn't impart much time in the
routine management of the small workforce in an outlet but just close observation and superior
supervision.
McDonalds' income depends upon the gross sales and not upon the profitability of the firm. As in
this case it is very much convenient to monitor as monitoring profit is a hard job to be done.
Disadvantages of mode of entry adopted by McDonalds to internationalize their business are as
follows;
There is a greater risk associated with franchising as it breeds the possibility of getting the
McDonalds brand image to be spoiled by inefficient management and lack of quality.
As the secret recipe of McDonalds accounts to its competitive strength, the disclosure of the
confidential information can comprise risk to the business.
Lack of control over each outlet as there is geographical boundaries in facilitating supervision.
Brand name has to be taken care all the time as the issues will erupt out at any one outlet can
adversely affects the performance of McDonalds all over the world.
Laws and rules can differ from country to country. The laws associated with the franchising are also
subject to change across the world. McDonalds can confront many legal formalities while
implementing the international strategies.

The peripheral work force is not maintaining the original work standard expected by McDonalds in
some outlets. The lack of control in franchising might be the probable reason for this.
There are chances that the franchisees learn the production techniques and set up a business of
their own by acquiring the knowledge of production. When the franchisees are not loyal to the
McDonalds, it will give raise to serious of problems.
Lower performance of outlets leads to lower gross sales which ultimately affects the profit of
McDonalds.

From <https://www.ukessays.com/essays/marketing/mcdonalds-most-important-corecompetences-marketing-essay.php>

Value Chain of McDonalds (Michael Porter)

Primary Activities

1. Inbound Logistics

1) McDonalds purchases raw vegetables and other raw materials from its fixed, pre- defined
suppliers only, therefore by increasing capital and labor, their production will increase
proportionately.
Source and further information:
McDonalds has practiced a backward vertical integration,
by replacing most of its suppliers. It has done so for two reasons, 1) To reduce
costs, and 2) To ensure that its products are of top quality. These supplies
include beef and milk to be used in its products, which it gets from its farms.
Other suppliers include local grocery stores that supply McDonalds with fresh
vegetables. Soft drinks are supplied exclusively by Coca-Cola, which is also its
ally. McDonalds supplies also include raw material such as flour, sugar, yeast,
etc.
2) McDonalds own information:

We import some beef raw materials from Australia and New Zealand. And those plants have to
meet all our same requirements that we hold our U.S. plants to; which includes animal welfare and
food safety, testing everything.

2. Operations :
McDonalds Backgrouds for Operation Management
Before the McDonalds brothers invented their fast-food operations system, some restaurants did
make food pretty quickly. These restaurants employed short-order cooks, who specialized in
making food that didnt require a lot of preparation time.
Being a short-order cook took skill and training, and good cooks are in high demand. These
speedee system, however, was completely different. Instead of using a skilled cook to make food
quickly, it used lot of unskilled workers.
The McDonalds Brothers changed the design of restaurant kitchen. Instead of having lots of
different equipment and stations for preparing a wide of variety food, the Speede kitchen had:

A very large grill where one person could cook lots of burgers simultaneously

A dressing station where people added the same condiments to every burgers

A fryer where one person can made french fries

A soda fountain and milkshake machine for desserts and beverages

A counters where customers placed and received their orders.

The Process
The mass-production process requires each restaurants chain to have a distribution network to
carry the food to every restaurant. Warehouses store enormous amounts of everything a restaurant
needs. Including foods, paper products and cleaning supplies. The warehouses the ship supplies
to each restaurant by truck. Warehousing and distribution, just like the management of chain, is
centralized rather than handled by each restaurant.
In some chains, managers track the restaurantss inventories of food, wrappers, cups, and other
necessary items. They often order everything the restaurant need from the distribution center,
which ships it to them.

In other chains, it is automated, which means, a computer keeps track of what the restaurants
have and should have on hand, or the distribution center ships the necessary items on a regular
schedule instead of waiting a request from the restaurant.
McDonalds is always keen to take the charge of crucial task of turning the company around to
meet customer demands. One of thefirst steps that it prposeshas been to inovate the process of
manufacturing and logistics.
This had been done with the view to increase efficiency of the supply chain in terms of capacity,
technology selections, and buying policies.

3. Outbound Logistics
McDonalds is committed to providing the highest quality food and superior service, at a great
value, in a clean and welcoming environment. Thats why we work with our employees,
franchisees, and suppliers to serve a balanced array of food choices and provide the nutrition
information needed for customers to make sound decisions.
At the restaurant level, McDonalds is focused on energy conservation, sustainable packaging, and
waste management. We are dedicated to innovation and improving our operations in order to build
an even more sustainable, environmentally friendly, and profitable business. And we will continue
to reoptimize our menu, modernize the customer experience, and broaden accessibility to our
brand, so that consumers will always enjoy the maximum McDonalds experience.(

4. Marketing and Sales

McDonalds restaurants are found in 119 countries and territories around the world and serve 58
million customers each day. McDonalds operates over 31,000 restaurants worldwide, employing
more than 1.5 million people. The company also operates other restaurant brands, such as Piles
Caf.
Focusing on its core brand, McDonalds began divesting itself of other chains it had acquired during
the 1990s. The company owned a majority stake in Chipotle Mexican Grill until October 2006,
when McDonalds fully divested from Chipotle through a stock exchange. Until December 2003, it
also owned Donatos Pizza. On August 27, 2007, McDonalds sold Boston Market to Sun Capital
Partners.

Notably, McDonalds has increased shareholder dividends for 25 consecutive years, making it one
of the S&P 500 Dividend Aristocrats In October 2012, its monthly sales fell for the first time in nine
years.
McDonalds Competitive Advantage
1. Cost Leadership

Supply chain: McDonalds buys supplies in bulk and, to get lower prices

Real Estate: McDonalds leases land and property they own to franchises

Marketing: McDonalds is such a well known brand name and Ronald McDonald such a well
known mascot McDonalds has to do much less advertising than many other chains to maintain
awareness of their brand.

Strategic/predatory customer selection (see Supersize Me) Mc Donalds purposefully aims

their brands at kids who can be taught to over-eat fast food and, in addition, serves things like ultrafatty sauces with salads and fatty foods in general with sugar baked into breads and often sodaonly drink selections, all designed to make McDonalds customers unhealthily addicted to
compounds in their food.

2. Differentiation
McDonalds does no t believe in opening its restaurant without any knowledge of the local culture
and tastes.
The company caters to a large customers market with varying tastes and thus cant afford to
introduce products without familirizing itself with provincial prefences in food. For this reason,
McDonalds distributes its products in foreign locations with the hel of franchises who are well
aware in of that works in their country.
This is an exremely inteligent distribution method because on the one hand, it doesnt create rifts
between governments and McDonalds official, and on the other hand, it helps in providing people
with the kind of products they desire. It is important to understand that Mcdonalds doesnt change
its basic product range for any country but tries to introduce certain changes in secondary products
in order to make them suitable for local tastes.
McDonalds predominantly sells hamburgers, various types of chicken sandwiches and products,
French fries, soft drinks, breakfast items, and desserts. In most markets, McDonalds offers salads
and vegetarian items, wraps and other localized fare. On a seasonal basis, McDonalds offers the
McRib sandwich. Some speculate the seasonality of the McRib adds to its appeal.Various

countries, especially in Asia, are currently serving soup. This local deviation from the standard
menu is a characteristic for which the chain is particularly known, and one which is employed either
to abide by regional food taboos (such as the religious prohibition of beef consumption in India) or
to make available foods with which the regional market is more familiar (such as the sale of McRice
in Indonesia). In Germany, McDonalds sells beer.

Types of restaurants
Most standalone McDonalds restaurants offer both counter service and drive-through service, with
indoor and sometimes outdoor seating. Drive-Thru, Auto-Mac, Pay and Drive, or McDrive as it is
known in many countries, often has separate stations for placing, paying for, and picking up orders,
though the latter two steps are frequently combined; it was first introduced in Arizona in 1975,
following the lead of other fast-food chains. The first such restaurant in Britain opened at
Fallowfield, Manchester in 1986.
In some countries, McDrive locations near highways offer no counter service or seating. In
contrast, locations in high-density city neighborhoods often omit drive-through service. There are
also a few locations, located mostly in downtown districts, that offer Walk-Thru service in place of
Drive-Thru.
To accommodate the current trend for high quality coffee and the popularity of coffee shops in
general, McDonalds introduced McCaf, a caf-style accompaniment to McDonalds restaurants in
the style of Starbucks. McCaf is a concept created by McDonalds Australia, starting with
Melbourne in 1993. Today, most McDonalds in Australia have McCafs located within the existing
McDonalds restaurant. In Tasmania, there are McCafs in every store, with the rest of the states
quickly following suit. After upgrading to the new McCaf look and feel, some Australian stores
have noticed up to a 60% increase in sales. As of the end of 2003 there were over 600 McCafs
worldwide.
Some locations are connected to gas stations/convenience stores, while others called McExpress
have limited seating and/or menu or may be located in a shopping mall. Other McDonalds are
located in Wal-Mart stores. McStop is a location targeted at truckers and travelers which may have
services found at truck stops.
Since 1997, the only Kosher McDonalds in the world that is not in Israel, is located in the Abasto
mall, in Buenos Aires, Argentina.

From <https://fagansusanto.wordpress.com/2012/11/22/value-chain-and-competitive-advantage-ofmcdonalds/>

McDonalds Competition
McDonalds (MCD) is a global company facing national and international competition form other
restaurant operators. The management has identified its competitors to be quick-service eating
establishments, casual dining, full-service restaurants, street stalls or kiosks, cafes, 100% home
delivery or takeaway providers, specialist coffee shops, self-service cafeterias, and juice or
smoothie bars.
From <http://marketrealist.com/2014/07/must-know-mcdonalds-competition/