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Q.1 what opportunities and threats did McDonald’s face? How did it
handle them? What alternatives could it have chosen?

Soln.:-
OPPORTUNITIES

1) Lack of organized food retail chain or branded food items-

As McDonald’s was the first food retail chain which started in 1955. At that
time there was no other food retail chain. McDonalds established the brand at
that time to get recognition in the market and started the organized food retail
chain.

2) Vast market availability-

The opportunities for expansion are great. For example, in China, with a
population of 1.2 billion people, there are only 62 McDonald’s restaurants. It has
been realised that 99 per cent of the world population is not yet McDonald’s
customers.

3) New food items-

As McDonald’s has already made a good impression on the minds of the people
there is a good scope for introducing new food items in order to have some
variation in the food item. They have the ability to add healthier lines of food.
They have already gotten rid of super sizing and I think they have made their
fries healthier.

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4) Low competition-

When McDonalds was entered in the market there was very low competition.
There were few players in the market like Burger king, Wendy’s Kentucky fried
chicken etc. This didn’t have the better quality as compared to McDonalds. It
helped the McDonalds to attract the customers and established brand loyalty.

THREATS

1) Franchisee- It is a very big threat for selection of franchisee holders in

various area because it has main responsibility to maintain the image of
McDonald’s. There is one example where McDonald’s revoked the
French franchisees because the franchisee failed to meet McDonald’s
standards for fast service and cleanliness, even though their restaurants
were highly profitable. This may have delayed its expansion in France.

2) Consciousness among people about their health- McDonald’s aimed at

providing a good, fresh & healthy food. McDonald’s largely
concentrated about the fast food selling and most of the people of Europe
and Asia specially think that fast food are not healthy. McDonald’s have
a great challenge in front of it to change the perception of the people.

3) Follow the local laws- - McDonald’s had a very good and pre-planned
strategy to enter in the market. They got very good market in US and
wanted to expand their business, so they made plan according to the local
law of that area, because if they didn’t follow the local law it would hurt
the sentiments the people.

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4) People dining behavior- people of different area having different dining

strategy. Most of the people do not like fast foods especially in Asia and
Europe and must have to convince the people about the fast food
behavior.

5) Threats of Substitutes -Substitutes are the products, which can perform

the same function as the original product can perform. People go to
McDonald's for eating, and entertainment. This makes the list of
substitute products quite long, mainly consisting of local and continental
food, e.g., Karahi, Tikka, Kabab, Burger, etc.

6) Threats of New Entrants -Threat of new entrants will be high in fast

food industries because the entry barriers are very low in terms of low
capital requirement and easy access to the raw materials. No organization
has any kind of exclusive control over resources. Another factor that
increases the threat of new entries is the high profit margins in the
industry. Any how some entry barriers exist in terms of product
differentiation and economies of scale and McDonald luckily holds these
barriers over the others.

How McDonalds handled the opportunities and threats

McDonald’s success was largely dependent on its strategy to handle the
opportunities and threats. The time when McDonald’s came, there were
many opportunities and threats present in the market and McDonald’s
correctly matched its strengths with opportunities and worked on its
weaknesses to eliminate the threats.

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How McDonald’s cashed the opportunities:-

 McDonald’s created the retail chain and brand for its product, as that time
there was no strong brand was present in the market.
 McDonald’s rightly analyzed that food market was very big for its
product and has lots of potential,
 McDonald’s introduced the new product and charged very reasonable
price for it.
 As that time, competition was very low. It was the very big opportunity
for the McDonald’s to create the brand and easily attaining the customers
attention and loyalty.

How McDonald’s handled its threat:- McDonald’s also faced some

threats but very effectively removed them.
 By presenting” QSCV” McDonald’s changed the perception of the people
as people were very conscious about their health.
 Pricing strategy was very tremendous. McDonald’s charged very
reasonable price .it helped in grasping the market share.
 McDonald’s distribution system was very strong. Because of its
distribution system McDonald’s won over the delay.
 By adapting the method of food preparation according to the local laws
McDonald’s didn’t hurt the cultural sentiment of the people.

Alternatives available for McDonald’s:-

McDonald’s at the time of the entry had chosen the traditional menu.
Instead of this McDonald’s should had introduced the some new food
products to completely grab the market share. McDonald’s should done
there advertising not only by targeting the young and children but also
focused on aged people.as McDonald’s had set its quality standard but

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most of the franchisee holder didn’t follow that, so McDonald’s should

had controle on them.
So according to me these above are some alternatives that
McDonald’s could have chosen.

Q.2 Before McDonald’s entered the European market, few people

believed that fast food could be successful in Europe. Why do you
think McDonald’s has succeeded? What strategies did it follow?
How did these differ from its strategies in Asia?

Soln.:- It is true that European market has a huge scope of fast food because
there was no any branded fast food chain available in Europe. European
people have different food behavior and think that they can easily follow such
change. McDonald’s prepared foods accordance with the local laws. It have
different price rate of materials according to their people behaviors as well as
there make different menu according to the dining habits.
For example- The prices vary considerably around the world ranging from
$5.20 in Switzerland to $1.05 in China for the Big Mac that costs in the United
States $2.32. The Economist magazine even devised a ‘Big Mac Index’ to estimate
whether a currency is over or undervalued. Thus, the $1.05 Chinese Mac translates
into an Implied Purchasing Power Parity of $3.88.
McDonald’s introduced the Japanese to French fries, potatoes were
used in Japan only to make starch.

I think McDonald’s has succeeded because McDonald’s have a great

strategy to come in European market. It took the company 14 years of planning
before it opened a restaurant in Moscow in 1990. But the planning paid off. After
the opening, people were standing in a very huge amount. It has been said that

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McDonald’s restaurant in Moscow attracts more visitors—on an average 27,000

daily—than Lenin’s mausoleum (about 9,000 people). The Beijing opening in 1992
attracted some 40,000 people to the largest (28,000 square-foot) restaurant at a
location where some 8,00,000 pedestrians pass by every day.
McDonald’s have following strategies given below-
 Be first in the market
 Well planned for 14 years time period
 Worked according to local laws
 Different pricing behaviour
 Different menu according to the dining habits.
 McDonald’s was one of the first restaurants in Europe to welcome
families with children.

European strategy is different with respect to Asian strategy by following

reasons-
 In case of Europe they take larger time as compare to Asian strategy.
 They don’t know the customer behaviour of Asian countries but they well
familiar about the European customer behaviour.
 Generally European are prepare to adopt the new things as compare to the
Asian. So they may have some extra afford specially in Asia.
 In Europe the McDonald’s ensures consistent products by controlling every
stage of the distribution. Regional distribution centers purchase products and
distribute them to individual restaurants. The centers will buy from local
suppliers if the suppliers can meet detailed specifications. McDonald’s have
had to make some concessions to available products. For example, it is
difficult to introduce the Idaho potato in Europe.

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Q.3 What is McDonald’s basic philosophy? How does it enforce this

philosophy and adapt to different environments?

Soln:- McDonald’s have a very great strategy and philosophy. The main
philosophy of its success is to cover mainly four golden arches- quality, service,
cleanliness and values........
 Quality- McDonald’s concentrated on quality of product. Better the quality
better will be the selling, and ultimately increase the profit.
 Service- The main power of McDonald’s is provide better service to the
customer. They make good service for customer and keep in mind to become
the best service provider.
 Cleanliness- McDonald’s sell product in an healthy environment so that they
give force on cleanliness.
 Values- The value of the customer is important and well known by each and
every worker as well as to the managements.

Its products, handling and cooking procedures and kitchen layouts are
standardized and strictly controlled. McDonald’s revoked the first French
franchises because the franchise failed to meet its standards for fast service and
cleanliness, even though their restaurants were highly profitable. This may have
delayed its expansion in France.

These basic four strategies make to provide an image regarding the

freshness of food material. Quality of product is the most important strategy to
make a good image in front of the customers. Service, cleanliness and values of
the customers is awesome in the greater extend. These provide a good image of
company as well as customer satisfactions.

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Q.4 Should McDonald’s expand its menu? If you say no, then why
not? If you say yes, what kinds of products should it add?

Soln:- McDonald’s should expand its menu. The reason behind it is that, as of
now, it is facing a fierce competition from many companies like Burger king,
Wendy’s Kentucky fried chicken, pizza hut etc. In ordered to have an edge over
others, there is need to introduce variety in eatables and some additions could be
made in terms of products which have not been introduced by any of the
competitive firms.
Some of these products that should be added to the company are-

 PIZZA
 MOMOS
 NOODLES
 SEA FOOD
 HOT DOGS
 ICE CREAM
 MOCKTAILS/BEVERAGES

Q.5 Why is McDonald’s successful in many countries around the

world?

Soln.:– Ray Kroc opened the first McDonald’s restaurant in 1955 with its
QSCV (Quality, Service, Cleanliness and Value) model which was a hit. By
1983 it had 6000 restaurants in US and by 1985 it reached on its 18000
restaurant in 89 countries. The success McDonald’s achieved in this span was

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tremendous. Following has some points that was behind this outstanding
success of McDonald’s -

1. McDonald’s was the first one in organized food retail chain . It had no
competition in the beginning , that helped in creating its brand image in
the mind of people.

2. McDonald’s put so much stress on QSCV (Quality, Service, Cleanliness

and Value) MODEL, which helped in serving the people in the best
possible way.

3. McDonald’s established its brand quickly with heavy advertising.

Advertising campaigns were based on local themes that best captured the
attention of the people.

4. McDonald’s gave training to its employees in Hamburger University and

taught them 22 languages with the aim of providing 100% customer
satisfaction around the world.

5. McDonald’s prepared food according to the local laws of the countries.

For Example, menus in ARAB countries comply with Islamic food
preparation.

6. McDonald’s planned very well before entering any market as it took 14

years of planning before it opened a restaurant in Moscow, Europe in
1990 and this planning worked very well as it was able to attract on an
average 27000 people daily.

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7. McDonald’s targeted different countries with different prices of the same

products. Hence good Pricing strategy was followed by McDonald’s.

8. McDonald’s targeted people of every age group. As in Europe

McDonald’s welcomed families with children. Not only were children
welcomed, but also in many restaurants they were also entertained with
crayons and papers, a play land, and the clown Ronald McDonalds who
can speak 20 languages.
McDonald’s aimed at the adult market as well as it introduced
Arch Deluxe on a potato-flower bun with lettuce, onions, ketchup, tomato
slices, American cheese, grainy mustard and mayo sauce. McDonald’s
over- 50 adult burger was a huge success.

9. McDonald’s focused on employee satisfaction as well. For example, in

Moscow, the pay given to employee was about 50% higher than average
Soviet salary.

10. McDonald’s excellent distribution network was one of the biggest

strengths of the company as it believed in prompt service, which
prevented the company from delay. With its expansion it started relying
on various franchisees but it also kept an eye on those franchisees to
follow McDonald’s QSCV Model properly.

11.McDonald’s time to time adapted the new items in its menu but never
disrupted existing operations. Hence it shows that McDonald’s
introduced new items in the market carefully.

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Because of these strategies adopted by McDonald’s, it is able to

survive successfully in many countries and is still dominating the market
irrespective of the presence of its competitors.

METHODOLOGY

FACTS OF THE CASE:-

 Ray Kroc opened the first McDonald’s restaurant in 1955.

 In 1967 McDonald’s opened its first restaurant outside the United States,
in Canada. Since then, the international growth accelerated.
 By 1983 it had more than 6000 restaurants in the United States and by 1995
it had more than 18,000 restaurants in 89 countries, located in six continents.
In 1995 alone, the company built 2,400 restaurants.
 In 1995, the “Big Six” countries that provide about 80 percent of the
international operating income are: Canada, Japan, Germany, Australia,
France and England. In the same year, more than 7000 restaurants in 89
countries generated sales of $14 billion.
 McDonald’s “QSC&V” (quality, service, cleanliness, and value) was a
hit.
 Food is prepared in accordance with local laws. For example, the menus
in Arab countries comply with Islamic food preparation laws. In 1995,
McDonald’s opened its first kosher restaurant in Jerusalem where it does
not serve dairy products
 Every day, more than 33 million people eat at McDonald’s around the world
with 18 million of them in the United States.
 The McDonald’s Corporation operates about 21 percent of the
restaurants. McDonald’s has been willing to relinquish the most control

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to its Far Eastern operations, where many restaurants are joint ventures
with local entrepreneurs, who own 50 percent or more of the restaurant.
 European and South American restaurants are generally company-
operated or franchised (although there are many affiliates—joint ventures
—in France).
 Every day, more than 33 million people eat at McDonald’s around the
world with 18 million of them in the United States.
 For the Big Mac, The prices vary considerably around the world –
Switzerland $5.20, China 1.05, US $2.32 , Britain, $2.80, Denmark
$4.92, France $3.85, Germany $3.48, Hong Kong $1.23, Japan $4.65 and
Russia $1.62.

Identification of problems and issues :-

 Delayed expansion of restaurants in france due to the failure of franchises in

meeting their standards for fast sevice and cleanliness.
 Training issues of local managers.
 Strenuous and fierce competition from other fast food companies like burger
king, Wendy’s, Kentucky fried chicken, pizza hut etc.
Factors:-

1) Internal Factors
 QSC&V strategy
 Employee satisfaction
 Training managers
2) External Factors
 Local laws of countries
 Traditional menus

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 Advertising
 Population
 Franchisees

SWOT analysis

Strengths

 “QSC&V” (quality, service, cleanliness, and value)

 Food is prepared in accordance with local laws.
 McDonald’s international sales have been increasing by a large percentage
every year. Every day, more than 33 million people eat at McDonald’s
around the world with 18 million of them in the United States.
 It has quality assurance centres(QACs),located in Europe, US and asia in
order to fulfil the quality attribute.
 teach the skills in 22 languages with the aim of providing 100 percent
customer satisfaction
 Not only are children welcomed, but also in many restaurants they are also
entertained with crayons and paper, a playland, and the clown Ronald
McDonald’s who can speak twenty languages
 With the aging population, McDonald’s takes aim at the adult market
 Its products, handling and cooking procedures and kitchen layouts are
standardized and strictly controlled
 McDonald’s ensures consistent products by controlling every stage of the
distribution.
 McDonald’s uses essentially the same competitive strategy in every country:
Be first in a market, and establish its brand as rapidly as possible by
advertising very heavily

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 The advertising campaigns are based on local themes and reflect the
different environments
 Like the U.S. franchises, restaurants abroad are allowed to experiment with
their menus.
 McDonald’s has done very well with a great percentage of profits coming
now from international operations.

Weaknesses

 In Moscow, McDonald’s entered the market with a bang but they were
unable to handle the customer effectively..
 According to Big Mac Index, McDonald’s was unable to set the price
according to purchasing power parity of the countries.
 Less number of retail outlets in 1995.

Opportunities

 Yet fast food has barely touched many cultures. The opportunities for
expanding the market are great when one realizes that 99 percent of the
world population is not yet McDonald’s customers. For example, in China,
with a population of 1.2 billion people, there are only 62 McDonald’s
restaurants (1995). McDonald’s vision is to be the major player in food
services around the world.
 Any new venture is risky and can be either a very profitable addition or a
costly experiment.

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Threats

 Franchisee
 Consciousness among people about their health-
 Follow the local laws-
 People dining behaviour
 Threat of Substitutes
 Threat of New Entrants

FORMULATIONS OF CORPORATE STRATEGY

Operative decisions:-
 Well planned
 Good advertising
 Work according to local laws
 Traditional menu
 Making family restaurant
 Employee satisfaction
 Customer satisfaction
 Bringing new items & taking initiatives

Strategic decision:-
 QSC&V
 Pricing
 Different age section concentration
 Family restaurant
 Making good brand image

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Recommendation:-
 McDonald’s should provide 24 hour service.
 New food items should be introduced.
 More kids can be attracted with the help of more toys in the form of
happy meal.
 Some new stores should be opened for the convenience of the customers.

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