McDonaldʼs Generic Strategy & Intensive Growth Strategies - Panmore Institute 4/25/19, 9)05 AM

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McDonald’s Generic Strategy & Intensive Growth

Strategies
UPDATED ON FEBRUARY 5, 2017 BY LAWRENCE GREGORY

McDonald’s generic strategy determines its basic

approach to developing its business and competitive
advantage. As the biggest fast food restaurant chain in the
world, McDonald’s uses its intensive growth strategies to
support continued business development and expansion.
The related strategic objectives dictate the company’s
operational activities, especially in responding to economic
changes and the actions of competing firms. Variations in

A McDonald’s in Oporto, Portugal. McDonald’s generic strategy, market conditions impose pressure on the business to
based on Porter’s model, is effectively supported through the adapt or reform its strategies. As such, McDonald’s generic
firm’s intensive strategies for growth. (Photo: Public Domain) strategy and intensive growth strategies change over time
to ensure long-term business viability.

McDonald’s generic strategy defines the firm’s overall business approach for competitiveness. The intensive
strategies determine McDonald’s approach to growing its business in the global fast food restaurant industry.

McDonald’s Generic Strategy (Porter’s Model)

McDonald’s primary generic strategy is cost leadership. In Porter’s model, this generic strategy involves
minimizing costs to offer products at low prices. As a low-cost provider, McDonald’s offers products that are
relatively cheaper compared to competitors like Arby’s. However, the company also uses broad differentiation as a

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secondary or supporting generic strategy. This secondary generic strategy involves developing the business and
its products to make them distinct from competitors. For example, through McCafé products, McDonald’s applies
the broad differentiation generic strategy.

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Vertical integration is a strategic objective linked to McDonald’s cost-leadership generic strategy. For example,
McDonald’s owns facilities that produce standardized mixtures of ingredients. Also, cost minimization is a financial
strategic objective based on the cost leadership generic strategy. In addition, product innovation is related to
McDonald’s broad differentiation generic strategy.

McDonald’s Intensive Strategies (Intensive Growth

Strategies)
Market Penetration. McDonald’s uses market penetration as its primary intensive strategy for growth. In applying
this intensive strategy, McDonald’s grows by reaching more customers in markets where it already has operations.
For example, McDonald’s opens new restaurants in North America and Europe by franchising, joint ventures or
corporate ownership. A strategic objective connected to this intensive growth strategy is global expansion
through new locations. McDonald’s generic strategy supports this intensive growth strategy because low costs
and low prices empower the firm to easily penetrate markets.

Market Development. In its early years, McDonald’s used market development as its primary intensive strategy
for growth. However, market development is now a secondary intensive growth strategy because McDonald’s
already has restaurants in most regions around the world, except Mongolia, some parts of the Middle East and
west Asia, and the majority of African countries. A strategic objective for this intensive growth strategy is to
establish new locations in new markets, such as new McDonald’s restaurants in African or Middle Eastern
countries where the company currently has no operations. Based on its generic strategy of cost leadership,
McDonald’s supports this intensive growth strategy by using low prices to compete in new markets.

Product Development. McDonald’s uses product development as its tertiary or supporting intensive strategy for
growth. In applying this intensive growth strategy, McDonald’s develops new products over time, such as new
McCafé products. These new products may be variations of existing products, or entirely new products. The
strategic objective for this intensive growth strategy is to capture more consumers by attracting them to new
products. This intensive growth strategy agrees with McDonald’s broad differentiation generic strategy in terms of
new products that make the company distinct.

Strategic Analysis and Recommendation for McDonald’s

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McDonald’s generic strategy of cost leadership enables the company to sustain its market leadership. The
company’s broad differentiation strategy also helps. However, a possible strategic direction for McDonald’s
continued growth is to establish more locations in developing economies and in countries where the firm has no
market presence. The recommended strategic goal is to fuel business growth through a combination of the
market penetration and market development intensive strategies.

References

Gargasas, A., & Mugiene, I. (2012). Intensive growth strategy development trends in logistics services for
agricultural organization providing companies. Management Theory and Studies for Rural Business and
Infrastructure Development, 34(5), 47-53.
McDonald’s Corporation (2015). International Franchising.
McDonald’s Corporation (2015). McCafé.
McDonald’s Corporation Form 10-K 2014.
Merchant, H. (2014). Configurations of governance structure, generic strategy, and firm size. Global Strategy
Journal, 4(4), 292-309.
Miller, D. (1992). The generic strategy trap. Journal of Business Strategy, 13(1), 37-41.
Parnell, J. A. (1997). New evidence in the generic strategy and business performance debate: A research
note. British Journal of Management, 8(2), 175-181.
Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer examination. Journal of Business
Research, 10(4), 503-522.

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