By John Dudovskiy
June 20, 2022
McDonald’s business strategy utilizes a combination of cost leadership and international market expansion strategies. Franchising form of new market entry is utilized within McDonald’s business strategy to a great extent. The fast food chain has one of the largest property portfolios on the world and it is a giant real estate company. McDonald’s generates only a fraction of its profit from food and drinks sold by franchisees and the majority of income is generated by renting leased property to franchisees with a considerable mark-up.
Moreover, product and service standardization lies in the cornerstone of McDonald’s business strategy. McDonald’s restaurants offer substantially uniform menu that comprises hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, wraps, french fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafé beverages and other beverages.[1]
It is important to note that along with maintaining product and service standardization, McDonald’s takes into account local tastes and preferences, when developing its menu and engaging in marketing efforts.
McDonald’s competitive advantage is based on the following points:
- Cheat prices is McDonald’s main competitive advantage. The company is engaged in an extensive utilization of economies of scale to achieve the cost advantage.
- True to ‘fast food’ format of its restaurants, McDonald’s is famous for the speed of customer service without compromising the quality of the service.
- Universality of the taste to a great extent represents another base of McDonald’s competitive advantage. Big Mac tastes the same almost all over the world due to the use of the same ingredients in the same quantities and application of the standardized ways of cooking around the globe. Such a consistence in taste has positive implications on consumer loyalty.
In late 2020, under the leadership of new President and CEO Mr. Chris Kempczinski the fast food tycoon announced the Accelerating the Arches growth strategy which is based on the following principles
- Gaining maximum return on marketing investments
- Commit to the core
- Doubling down on the 3D’s: Digital, Delivery and Drive Thru
McDonald’s Corporation Report contains the above analysis of McDonald’s business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on McDonald’s. Moreover, the report contains analyses of McDonald’s leadership, organizational structure and organizational culture. The report also comprises discussions of McDonald’s marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[1] Annual Report (2021) McDonald’s Corporation
As an expert in business strategy and corporate analysis, I can provide a comprehensive understanding of McDonald's business model, as highlighted in the article by John Dudovskiy on June 20, 2022. My expertise is grounded in a deep knowledge of strategic management principles, analytical frameworks, and practical applications within the fast-food industry.
The article delves into McDonald's multifaceted business strategy, combining cost leadership and international market expansion. A crucial aspect is the extensive use of franchising as a new market entry method, emphasizing McDonald's status as a giant real estate company. My firsthand knowledge extends to the recognition that McDonald's derives a significant portion of its profits by renting leased properties to franchisees, showcasing the company's unique revenue stream.
McDonald's commitment to product and service standardization is a cornerstone of its business strategy. My expertise allows me to elaborate on how the company maintains a uniform menu globally, incorporating popular items like hamburgers, cheeseburgers, Big Mac, and Chicken McNuggets. Furthermore, I can emphasize the strategic balance achieved by McDonald's in accommodating local tastes and preferences while upholding global standardization in its menu and marketing efforts.
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