Case Executive Summary

McDonalds Corp.

Nadine Bleienheuft | Adrian Cabrera | Varun Jain | Julio Lorenzo |

Mariana Martins | Tetiana Revun

Nowadays, companies face increasing pressures from consumers, regulators,

shareholders and even their own employees to operate in a more sustainable
way. However, companies often encounter the difficulty of being truly sustainable
if their own suppliers, such as raw material producers, component providers,
transport and logistics services are not. Furthermore, supply chains tend to be
much more volatile as a consequence of huge expansions, which were needed
due to globalization.
Prioritization seems to be necessary to solve the issue related to the trade-off
between long-term benefits and short-term costs. The challenge lies in the fact
that executive managers are paid based on a companys short-term performance
and therefore care more about their competitiveness than sustainability. In
addition, customers seem to be struggling between caring about sustainability
issues while at the same time being price conscious. Since McDonalds cares still
about staying competitive, prioritizing customers over sustainability seems to be
reasonable. However, it appears to be important to get customers involved and to
make them aware of the effects of their choices. Therefore, increasing educational
initiatives is crucial.
Moreover, even though customers play a major role, activists and communities
nowadays have a lot of power. Due to advanced technologies and the Internet,
information about any bad behaviors can spread around the whole world within a
short time, which can tremendously damage a companys reputation. Therefore,
to stay profitable over the long run priority should be given to sustainability
initiatives.
It is all about finding the right balance. Engaging in sustainability practices while at
the same time involving and educating customers seems to be essential. In
addition, advertising budget could be used for sustainability initiatives, which could
keep the cost structure the same, while using it as a form of advertisement.

OPPORTUNITIES
McDonalds could see this process as a big opportunity for them, as it could bring
them many benefits. They can look at these sustainability costs as an investment,
in the short term it might decrease their competitiveness but in the long term it
could improve it.
Consumers will see the company as the market leader in sustainability awareness
and that could increase their sales, especially in markets like Europe. It could also
be an opportunity to strengthen the relationships with suppliers, by working in a
close partnership over these issues and giving them help so they do not put all the
effort themselves.
Not only they could improve their image and long term market position but, and
most importantly, they could become the agent of change and actually make the
world a better place. As we saw in the soya example, even though they had a

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relatively low percentage of market share over this product, they were able to
make a big contribution.
Nevertheless, it will not be easy for them to engage all the different stakeholders
into this way of thinking. It is important that they make them understand that it
could bring benefits to all parties involved. McDonalds should invest in helping
suppliers change their habits and give them financial benefits to do so, like
extending the length of the contracts if they agree to do it. This could benefit their
long-term relationships.
Activists will be easier to convince to join the projects, as many of them will want
to help to create more sustainable food supplies, but McDonalds has to make
sure that they work in close partnership with them and that they feel important in
the process.
A harder task will be to engage competitors to do this too. If these more
sustainable processes are more costly and competitors do not engage in them,
McDonalds will be less competitive on pricing. As many consumers are price
sensitive, they might not carry out these projects due to fear of loosing customers.
However, it might be the case that competitors are thinking in a similar way. If this
is the case, McDonalds could act as the market leader and try to influence on the
competitors. If everyone engages on these new processes no one will loose
competitiveness.
Consolidation in the food industry could also help in order to have more power
when talking with suppliers. The more market share a company has, the more
negotiating power it will have, which will make it more likely that suppliers will
have to agree to their requirements.
One other issue that needs to be addressed is the high interdependency between
local practices and their effect on the global brand. Even if those local practices
might comply with local laws and standards, they might not be acceptable on a
global basis. Even though one might not be able to expect the highest European
standards for sustainable practices in some developing countries, it is of high
importance take it into consideration. There should exist some global standards
that everyone, no matter where, should comply with. In addition, local practices
should be improved/adapted to an acceptable level. Further, internal auditors
should, on a regular basis, control for the participants compliance with these rules
and standards.

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