McDonalds Corporation

by
Dominic Doria
Management 222
December 18, 2002
1
Table of Contents
McDonalds Background4
nternational !perations "igni#icance$%
nternational &'pansion ()roug) *ranc)ising+
,dministrati-e .eritage$$8
McDonalds "tructure and "trategy/
Company Control and Coordination$10
0roduct De-elopment and Marketing11
*uture ssues$$1%
Bibliograp)y$$12
,ppendices
2
Executive Summary
McDonalds Corporation is a 3Centrali4ed, nternational company5, 6)ic)
competes in t)e #ast #ood industry supplying )amburgers, #renc) #ries and ot)er
consumable items using standardi4ation, )ea-y e'pansion and branding as t)e dri-ing
#orce$ McDonalds operates in o-er 121 countries and )as o-er 10,000 restaurants
6orld6ide$
McDonalds utili4ed an intense, rapid e'pansion into #oreign countries t)roug)
t)ree primary met)ods, #ranc)ising, company o6ned restaurants, and 7oint -entures$
8it) t)e ma7ority o# international restaurants stemming #rom #ranc)ising agreements,
McDonalds management relied on t)is met)od to aid in t)e acceptance o# a ne6 style o#
eating into un#amiliar markets$ 8it) minimal risk and ma'imum gains, #ranc)ising
continues to contribute )ea-ily to McDonalds international success
%
$
8it) a centrali4ed, international structure, McDonalds keeps a tig)t grasp on
operations, cost and 9uality$ 8it) an et)nocentric management strategy, McDonalds
relies on domestic based logic and attitudes and trans#ers t)em to t)eir international
outlets and restaurants$
n order to control its o-erseas operation, McDonalds uses a combination o# t6o
approac)es$ ()e ma7ority o# control 6ould #all under t)e rules approac), meaning t)at
control lies 6it) )ead9uarters creating procedures and policies #or t)e subsidiaries to
#ollo6$ .o6e-er, t)ere is also a little o# t)e cultural approac) t)at )as sur#aced and is
being utili4ed 7udging by t)e adaptation t)at )as occurred in some o# t)e o-erseas
restaurants$ ()is )as occurred e-en 6it) t)e tig)t internali4ed norms t)at are constantly
presented and en#orced by )ead9uarters$
1
McDonalds Background
8it) operations in o-er 121 countries and o-er 10,000 restaurants around t)e
globe, McDonalds Corporation is t)e largest #ast #ood ser-ice and supplier in t)e 6orld$
(o ser-e all o# t)e t)eir customers and demonstrate t)e incredible si4e o# t)e company,
McDonalds )as more t)an one and a )al# million employees and ser-es more t)an
ninety:si' percent o# t)e 6orlds population at least once a year$ McDonalds operates in
t)e #ast #ood industry and its core product lines include )amburgers and #renc) #ries, but
t)e c)ain also sells c)icken, salads, and #is) products among ot)ers
1+
$
"ince t)e #irst restaurant operations in t)e early nineteen #i#ties, McDonalds )as
gro6n at an incredible pace t)roug) an internal p)ilosop)y o# 3e'pand at all costs$5
8)at t)is p)ilosop)y means is open as many stores as possible as #ast as possible$ ,t t)e
peak o# t)e companys gro6t), t)is rapid pace )ad a ne6 McDonalds outlet opening
e-ery #our )ours e-eryday o# t)e year$ Management instilled t)e idea t)at as more
restaurant locations are opened t)e more customers 6ill be ser-ed, and t)is leads to
)ig)er pro#its t)at 6ould be reali4ed across t)e board$ "ince t)e beginning, t)is intense
e'pansion plan )as been success#ul, bot) in t)e domestic and #oreign markets abroad
%
$
.o6e-er, recently t)ere )a-e been issues de-eloping 6it) saturation across t)e globe t)at
)a-e )ad an impact on sales, 6)ic) 6ill be discussed later in t)e paper$
()e company )as al6ays utili4ed #our ma7or principles t)roug)out its )istory to
e'pand rapidly, increase sales and remain t)e market leader$ By le-eraging t)eir
enormous cas) #lo6, brand po6er, real estate and customer spending )abits, McDonalds
)as not only emerged as t)e 6orld:6ide leader, it )as also c)anged t)e 6ay t)e 6orld
eats$ ,s t)e means to rapid e'pansion are not t)e #ocus o# t)is paper, altering t)e eating
4
)abits around t)e 6orld represent a -ery signi#icant topic and 6ill also be addressed later
in t)e paper$
International Oerations Significance
McDonalds #irst international e'pansion occurred in 1/+2 6)en t)e company
opened in Canada$ ()e companys international di-ision 6as #ormed s)ortly a#ter in
1/+/ and )as continuously gro6n since$ !-er t)e years, t)e international section o# t)e
McDonalds Corporation )as become increasingly more important to t)e companys
o-erall success$ ,s o# t)is past year, non:;" based restaurants account #or o-er )al# o#
t)e companys <40 billion in re-enues =,ppendi' ,>
1+
$ &-en more critical t)an t)e
amount o# sales to t)e company is t)e amount o# pro#its o# t)e o-erseas operations$
*oreign restaurants no6 account #or about +0? o# McDonalds total pro#its
4
$ ()e
di##erence bet6een re-enues and pro#its o# international operations is credited to
McDonalds immense market s)are in o## s)ore outlets$ Currently, McDonalds is t)e
market leader in /+? o# t)e markets t)ey do business in around t)e 6orld and it is -ery
common #or McDonalds to )old o-er %0? o# t)e #ast #ood market in #oreign markets$
;nlike t)e ;$"$, competitors in t)e past )a-e not cut into McDonalds market s)are as
easily in #oreign markets, alt)oug) t)at is beginning to c)ange$
()ere are a #e6 ma7or reasons 6)y McDonalds not only c)ose to in-est o-erseas
originally, but also continuously since$ n t)e last ten years, almost /0? o# McDonalds
e'pansion occurred in countries ot)er t)an t)e ;nited "tates$ During t)at time, t)e
1//0s sa6 an increase in international units #rom 1,+00 in 1//1 to more t)an 11,000 by
1//8, largely in @apan, Canada, Aermany, Areat Britain, ,ustralia, and *rance$
%
,dditionally, t)e number o# international countries nearly doubled #rom %/ in 1//1 to
114 in 1//8 =,ppendi' B>
14
$ ()e rationale be)ind t)ese important decisions stemmed
#oremost #rom t)e increasing amount o# saturation t)at )ad e-ol-ed in t)e ;nited "tates$
()is saturation 6as in t)e past, and is currently, #orcing McDonalds to slas) prices and
as a result pro#its in its domestic market$ (o counter t)is trend, international restaurants
6ere #ranc)ised and in-ested in$ ,s 6as mentioned earlier, #oreign markets are
e'tremely more pro#itable #or McDonalds t)an ;$"$ operations$ McDonalds detected
t)is trend early as an opportunity t)roug) marketing researc) and t)e idea o# utili4ing t)e
)ea-ily populated areas o# #ocus to cut costs and increase pro#its$ "econd, e'pansion in
t)e ;$"$ )as been taking place #or t)e last 4% years, 6)ere it )as only been occurring
)ea-ily o-erseas #or about 20 years, so t)ere is more business opportunity$ McDonalds
ser-es o-er 41 million people a day, but t)at is still less t)an one percent o# t)e 6orlds
population, so you can see )o6 McDonalds management could be so optimistic$
(o reiterate t)e importance o# McDonalds international restaurants to t)e o-erall
core business plan o# McDonalds, a closer look at a #e6 #acts is re9uired$ *irst, t)e
busiest McDonalds in t)e 6orld is located in 0us)kin "9uare in Mosco6$ ()e restaurant
ser-es o-er 41,000 customers a day and is only one e'ample o# t)e -olume t)at some o#
t)e larger #oreign restaurants are capable o#$ n #act, eig)t o# t)e ten largest McDonalds
outlets in t)e 6orld are located outside o# t)e ;nited "tates
1+
$
International Exansion t!roug! "ranc!ising
Bo6 t)at t)e international operations )a-e been con-eyed as an increasingly
important part o# McDonalds o-erall sales, it is -ital to analy4e )o6 McDonalds entered
+
into t)e #oreign markets$ McDonalds entered into t)e international markets utili4ing
t)ree met)odsC #ranc)ising, 7oint -entures and company o6ned outlets$ 8)ere
McDonalds )ad a c)oice, #ranc)ising 6as not only #a-ored, it dominated )o6 t)e
company e'panded$ Currently, 21? o# all McDonalds restaurants across t)e globe are
#ranc)ised
1+
$ 8)en entering into some o# t)e countries, McDonalds )ad to abandon its
p)ilosop)y o# #ranc)ising and use t)e ot)er met)ods$ *or instance, 6)en McDonalds
#irst entered into Me'ico, t)e go-ernment did not allo6 #ranc)ising #rom #oreign
countries$ (o 6ork around t)is, McDonalds utili4ed company o6ned restaurants to enter
t)e market until t)e la6s c)anged$ n 1//0, 6)en t)e legislation 6ent t)roug) legali4ing
#ranc)ising, McDonalds Corporation sold t)e company o6ned outlets to #ranc)isees$
"imilarly, 7oint -entures 6ere used as an early entry met)od 6)ere #ranc)ising 6as not
#easible$ ,lt)oug) t)is option 6as not McDonalds #irst priority, it 6as not a #ar second
be)ind #ranc)ising, and t)e companys most prosperous international success to date
stems #rom an initial 7oint -enture in @apan
%
$
(o grasp a better understanding o# )o6 important #ranc)ising 6as to
McDonalds rapid international gro6t), t)e -ery concept o# #ranc)ising must be
analy4ed$ McDonalds restaurants )a-e crossed international borders #airly easily
compared to ot)er retail sectors and it is attributed directly to #ranc)ising$ .o6e-er, t)e
idea o# #ranc)ising 6as not a ne6 one to McDonalds$ n #act, McDonalds e'pansion in
t)e ;nited "tates began -ery early in t)e companys #irst years utili4ing a met)od t)at
6as relati-ely ne6 to t)e industry, #ranc)ising
%
$
t 6as t)e #ast #ood industry, and McDonalds speci#ically, t)at turned #ranc)ising
into a business model t)at 6ould trans#orm t)e retail economy o# t)e 6orld$ ,t t)e )eart
2
o# a #ranc)ise arrangement is t)e desire by t6o parties to make money 6)ile a-oiding
risk$ ()e #ranc)iser 6ants to e'pand an e'isting business 6it)out spending its o6n
#unds$ ()e #ranc)isee 6ants to run a business 6it)out going at it alone and risking
e-eryt)ing on a ne6 idea$ !ne pro-ides a brand name, a business plan, e'pertise, and
access to e9uipment and supplies$ ()e ot)er puts up t)e money and does t)e 6ork
10
$ n
t)e case o# McDonalds, t)ey 6anted an international presence 6it)out t)e incredible risk
associated 6it) entering #oreign countries and altering eating )abits$ McDonalds kne6
t)at entering into #oreign markets 6ould be -ery di##icult #or an ,merican #ast #ood
company and needed t)e aid o# local partners to ease t)e transition$ ()at is e'actly 6)at
#ranc)ising allo6ed McDonalds to accomplis)$ By #ranc)ising, McDonalds could be
marketed as a local country business instead o# an ,merican company strong:arming
t)eir 6ay in$ 8)at t)ey )ad to o##er 6as t)e #astest gro6ing #ast #ood business in t)e
6orld$ Bot to mention an e'tensi-e supplier line, industry leading tec)nology and a -ery
prosperous business )istory #or anyone 6illing to accept t)e terms and pay t)e
#ranc)ising #ees$
#dministrative $eritage
8)en comparing and contrasting t)e past and present organi4ational )istory o#
McDonalds, t)e re#lection in a mirror becomes top o# mind$ McDonalds is one o# t)e
6orlds most insular large companies, 6it) a management team more typical o# a pri-ate
company t)an a global po6er)ouse$ ()e a-erage top e'ecuti-e started 6orking at t)e
company 6)en Dic)ard Bi'on 6as 0resident and t)ere are no #uture plans to s)u##le top
management$ ()e 1%:member board o# directors )as a-oided t)e corporate:go-ernance
8
re-olution t)at )as attacked a large ma7ority o# t)e *ortune %00 companies$ By adding
directors 6)o do not )a-e a direct stake in t)e company, s)are )olders, consumers, and
employees can be reassured t)at actions made are #or t)e good o# t)e company$
.o6e-er, McDonalds )as elected not to take part in t)is trend$ Currently, more t)an
t6o t)irds o# t)e board o# directors is #illed 6it) current and #ormer e'ecuti-es, -endors,
and ser-ice pro-iders
4
$
McDonalds )as basically been t)e same #or #i#ty years, and c)ange does not seem
to be a top priority$ ()e company #ocus )as al6ays been publicly stated as being
directed to McDonalds customers and employees, alt)oug) bot) )a-e been debated
e'tensi-ely o-er t)e years$ !ne topic t)at )as remained constant t)roug)out t)e
companys )istory is t)e emp)asis on management training$ Management centers are
no6 located in Munic), (okyo, "ydney and Eondon 6)ere pro#essors instruct
management students in 22 languages$ ()ese centers are replicas o# t)e .amburger
;ni-ersity t)at )as become #amous in t)e ;nited "tates, not only #or t)e in#ormation
taug)t, but also #or t)e large number o# managers t)at )a-e been trained at t)e #acilities$
McDonalds Structure and Strategy
McDonalds is a 3centrali4ed, nternational Di-ision5 company composed o#
#ranc)isees and 7oint -enture partners$ McDonalds utili4es a broad approac) and
initially gre6 o-erseas by relying on trans#erring ne6 products, processes, and strategies
#rom t)e ;nited "tates to less de-eloped markets
1
$ ()e idea )as al6ays been to trans#er
t)e ,merican tradition o# #ast #ood to ot)er counties using t)e same real estate principles,
cost ad-antages, and ne6 tec)nologies t)at 6ere so success#ul in t)e ;$"$ McDonalds
/
)as al6ays e'ploited t)e corporate company kno6ledge and transported and di##used it to
#oreign markets$ "tarting 6it) t)e concrete supplier c)ain, all t)e 6ay do6n to t)e store
design and implementation, di##erentiation is not encouraged nor is it allo6ed$
8it) an &t)nocentric mentality, McDonalds )as constantly based t)e companies
international operations on 3)ome:gro6n5 ideas and concepts$ Corporate #irst places t)e
#ocus t)e domestic market, and t)en #ilters t)e #unctions to t)e o-erseas operations$
n#ormation #lo6s #rom corporate to t)e #ranc)isees based on 6)at is 6orking in t)e
;nited "tates markets, 6it) t)e e'pectation t)at it 6ill be implemented in t)e #oreign
markets$ 8)en analy4ing McDonalds corporate structure =,ppendi' C>, it is e-ident
t)at t)e top do6n approac) is not only used it is en#orced$ ,ll in#ormation starts 6it)
corporate and is disbursed to t)e #oreign markets
1
$
Comany Control and Coordination
n order to control t)e t)ousands o# #ranc)ises in t)e system, McDonalds
corporate utili4es a combination o# met)ods$ Bot) t)e Dules ,pproac) and t)e Cultural
,pproac) are applied by management in order to ensure t)at t)e international outlets
ma'imi4e t)eir potential 6it)out disrupting t)e o-erall corporate plan$ ()e reason #or t)e
combination o# control approac)es stems #rom t)e nature o# )o6 t)e McDonalds system
6as built$ By relying and building around #ranc)ising, a #ine line )as to be dra6n
bet6een keeping t)e #ranc)ises moti-ated and accomplis)ing t)e company ob7ecti-es$
()e elements o# t)e Dules approac) are -ery e-ident 6)en magni#ying t)e
re9uirements o# t)e #ranc)isees$ Management re9uires continuous lines o# reports and
paper6ork to #ollo6 e-ery mo-e o# t)e #ranc)ises$ ()e e'tent o# t)e re9uirements can be
10
seen in t)e #ollo6ing e'ample$ ()e McDonalds operation:and:training manual is a
roug)ly se-en )undred and #i#ty:page document t)at 6eig)s about #our pounds$ t is
kno6n t)roug)out t)e company as 3t)e Bible5 and contains precise instructions on )o6
-arious appliances s)ould be used, )o6 eac) item on t)e menu s)ould look, and )o6
employees s)ould greet t)e customers$ ,n e'ample o# t)e e'tent o# detail t)at is
contained in t)e manual are )amburgers are al6ays to be placed on t)e grill in si' neat
ro6sC #renc) #ries )a-e to be e'actly 0$28 inc)es t)ick$ ()e regimentation and
standardi4ation o# McDonalds restaurants determines e'actly )o6 e-ery task is done and
imposes rules about pace, 9uality and tec)ni9ue$ ()e McDonalds Corporation insists t)at
its operators #ollo6 directi-es on #ood preparation, purc)asing, store design and countless
ot)er minute details$ !perators 6)o disobey t)ese rules can lose t)eir #ranc)ises and t)is
)as occurred in t)e past$
10
()e control #rom corporate can be e'tensi-e at times and #ranc)ises are constantly
t)reatened$ 38e )a-e #ound outt)at 6e cannot trust some people, 6)o are
noncon#ormists,5 declared Day Froc, one o# t)e #ounders o# McDonalds, angered by
some o# )is #ranc)isees$ 38e 6ill make con#ormists out o# t)em in a )urry()e
organi4ation cannot trust t)e indi-idualC t)e indi-idual must trust t)e organi4ation5
4,10

*rom t)e beginning o# time, McDonalds management )as created and pus)ed an
operating system o# unusual t)oroug)ness and attention to detail$ n order to en#orce t)is
style o# management, McDonalds )as strategically placed local and regional o##ices
t)roug)out t)e 6orld =,ppendi' D>$
,s mentioned be#ore, t)e nature o# #ranc)ising )as led to t)is pattern o# control
and #urt)er discussion on t)e topic is 6arranted to clari#y it$ ()e #ranc)ising relations)ip
11
)as its built:in tensions$ ()e #ranc)iser gi-es up some control by not 6)olly o6ning eac)
operation and t)e #ranc)isee sacri#ices a great deal o# independence by obeying t)e
company rules$ &-eryone is )appy 6)en t)e company is succeeding and pro#its are
rolling in, but 6)en re-enues #all, t)e arrangement o#ten degenerates into a mismatc)ed
battle #or po6er$ ()e #ranc)iser almost al6ays 6ins$ n t)e global 6orld o# McDonalds,
t)at e'act scenario is currently taking place$ ()e last t)ree years, McDonalds )as seen
lagging sales in t)e domestic market and booming sales in t)e international markets$ ,s a
result, corporate is trying to tig)ten t)e reigns on #oreign operations e-en tig)ter t)an
t)ey )a-e in t)e past
10
$ ()e key to a success#ul #ranc)ise, according to many te'ts on t)e
sub7ect, can be e'pressed in a single 6ordG uni#ormity$ *ranc)ises must reliably o##er t)e
same product or ser-ice at numerous locations$ ()is is t)e case 6it) McDonalds$ ()ey
must continue to pro-ide a )ig) 9uality core product line at t)e lo6est possible cost
a-ailable$ Customers are dra6n to #amiliar brands by an instinct to a-oid t)e unkno6n$
, brand o##ers a #eeling o# reassurance 6)en its products are al6ays and e-ery6)ere t)e
same$ ,t t)e same time, a little control must be sacri#iced to keep moti-ation and
creati-ity among t)e #ranc)ises blossoming$ ()is concept is 6)y McDonalds
management also utili4es some o# t)e Cultural ,pproac) to control t)e international
markets$
()roug) t)e years, McDonalds management )as reali4ed t)at in t)e #ast #ood
industry, more #reedom is needed in order to prosper in #oreign countries$ ()ere are t6o
ma7or business #unctions t)at are dictated by t)e countrys local in#luence and symboli4e
t)e Cultural ,pproac) #reedomC product de-elopment and marketing$ ()ese #unctions
are not only locally de-eloped t)ey are operational a6ay #rom )ead9uarters and are
12
represented in McDonalds structure c)art accordingly =,ppendi' C>$ By allo6ing t)e
#oreign markets t)e autonomy to de-elop and market geograp)ical speci#ic menu items,
management is not compromising or de-iating #rom internali4ed company norms or
standards$ nstead, t)ey are allo6ing #or local adaptation t)at 6ill not only bene#it t)e
#ranc)ise, but t)e corporation as 6ell$ Bot) product de-elopment and marketing 6ill be
discussed in detail belo6$
%roduct Develoment and Marketing
,s mentioned pre-iously, product de-elopment and marketing can and do occur at
a local le-el in McDonalds international countries$ ()ese are t)e only t6o ma7or
business #unctions t)at McDonalds Corporate allo6s some #le'ibility by de-iating #rom
t)e tig)t grasp t)at t)ey )old o-er international restaurants$ Bo6, t)at is not to say t)at
t)e countries and local markets )a-e complete #reedom to add to t)e menu and promote
t)eir products )o6 t)ey 6is)$ McDonalds prides itsel# in t)e consistency o# its products
and taste around t)e 6orld and 6ould not allo6 complete autonomy$ nstead, it means
t)at some o# t)e lengt)y, tedious, and idea crus)ing control t)at corporate normally )olds
o-er its #ranc)ises is li#ted slig)tly and can occur at t)e country le-el as opposed to
corporate le-el =,ppendi' C>$ (o look at t)e impact t)is )as on t)e international outlets,
a closer look at product de-elopment and marketing 6ill eac) be analy4ed$
&ac) local country )as t)e autonomy and aut)ority to de-elop its o6n products to
address uni9ue tastes t)at t)eir consumers )a-e$ t is t)e sole responsibility o# t)e
indi-idual country to complete t)e marketing researc) and de-elop ne6 menu items$
!nce t)at )as occurred, t)e in#ormation is t)en studied and appro-ed or re7ected by t)e
11
corporate o##ices depending on t)e e'tent o# #a-orable data a-ailable$ 8)ere t)ere is
limited in-ol-ement #rom corporate in t)e de-elopment process, t)ere is still )ea-y
in-ol-ement in t)e acceptance process$ ()is in-ol-ement #rom corporate is only
increasing, as t)e international markets become more important to McDonalds o-erall
business$ .o6e-er, according to Den *u7ita, 0resident o# McDonalds @apan, 6)en
McDonalds #irst entered @apan, corporate 6as relati-ely accommodating to t)e ne6
menu items t)at 6ere presented to t)em, and as a result, acceptance in @apan 6as
e'pedited
%
$
()ere are many e'amples o# item ad7ustments t)at )a-e been made around t)e
6orld o-er t)e years to address local tastes and pre#erences =,ppendi' &>$ ()e menu
c)anges resulted #rom many di##erent reasons suc) as cultural, religious, taste pre#erences
and translation reasons$ "ome speci#ic e'amples are in ndia, t)ere are no bee# items
ser-ed t)roug)out t)e country, so McDonalds added t)e 3Ma)ara7a Mac5, a lamb -ersion
o# t)e standard 3Big Mac5$ !t)er e'amples include Aermany, 6)ere McDonalds ser-es
beer 6it) meals and in Cyprus, t)e McBistisima menu 6as adopted #or t)e lent period
bet6een &aster and C)ristmas and consisted o# -eggie burgers, country potatoes, and
s)rimp and spicy rolls
14,1+
$ !ccasionally, ne6 local menu items mig)t not seem like a
logical c)oice #or a country and are protested accordingly like 6)en McDonalds 6as
going to recently add meat bo6ls o-er rice$ .ea-y protesting occurred until t)e launc) o#
t)e items$ .o6e-er, on t)e #irst day t)e bo6ls 6ere a-ailable, t)ey sold out entirely
pro-ing t)at local marketing researc) and #le'ibility can bene#it t)e company
11
$
()e marketing o# international restaurants is )andled 6it) t)e same process as
product de-elopment$ Eocally, t)e countries de-elop and test market ideas t)at di##er
14
#rom t)e corporate 6orld6ide message$ ,ny di##erences in t)e core message are t)en
presented to t)e corporate o##ice #or appro-al$ Marketing o-erseas, like product
de-elopment, is mostly )andled a6ay #rom t)e corporate o##ice$ ()ere are many reasons
6)y t)e core marketing message 6ould c)ange, includingC translation reasons, cultural
di##erences, customer target di##erences and t)e #act t)at t)e product itsel# being marketed
mig)t not e-en e'ist in t)e companys core message$ , speci#ic e'ample o# a country
di##ering t)e marketing message #rom corporate took place in di##erent countries t)at use
t)e metric system$ nstead o# calling t)eir burger t)e 3Huarter 0ounder5, t)e &uropean
countries market t)eir burger as eit)er t)e 3Doyal .amburger5 or t)e 3Burger Doyal$5
"uture Issues for McDonalds
n order #or t)e international di-ision o# McDonalds to continue t)e impressi-e
success t)at it )as ac)ie-ed in t)e past, t6o ma7or areas o# concern must be addressed$
()e increasing le-el o# saturation in most o# t)e ma7or markets around t)e 6orld and t)e
struggle o-er autonomy bet6een corporate and t)e #ranc)ises must be addressed 6it)
e'treme urgency and by allocating t)e resources necessary$
,s mentioned earlier, competition in t)e #ast #ood industry is becoming incredibly
saturated$ 8)en McDonalds #irst began e'panding into international markets, t)eir main
#ocus 6as altering eating )abits$ ()is 6as primarily because t)ere 6as an absence o#
ma7or competitors o-erseas$ .o6e-er, o-er t)e last decade, t)e international market is
beginning to mirror t)at o# t)e )ea-ily saturated ;nited "tates market$ 0ro#its are
s)rinking, same store sales are do6n, and t)e o-erall market gro6t) )as slo6ed
tremendously$ ()is )as prompted McDonalds to continue to cut costs by announcing t)e
1%
closing o# 12% under per#orming outlets in 10 countries$ ,s t)e international markets
become more competiti-e and saturated, McDonalds must continue to analy4e and make
ad7ustments accordingly$
,lt)oug) saturation is a gro6ing issue o-erseas, it 6as noted earlier t)at #oreign
operations are no6 more t)an e-er, a ma7or element o# t)e McDonalds Corporation
business$ ,s a result t)ere is a constant battle o-er autonomy$ ()e #ranc)ises, especially
t)e e'perienced outlets 6it) o-er a decade o# success, 6ant more autonomy to adapt to
local tastes and pre#erences$ ()e #ranc)ises #eel t)at as t)e market becomes more
competiti-e, it 6ill be -ital #or alterations and adaptations to occur #aster and easier t)an
t)ey e-er )a-e in t)e past$ .o6e-er, McDonalds corporate is on t)e opposite side o# t)e
issue and is not budging$ Corporate #eels t)at control must be at an all time )ig) because
o# t)e importance o# t)e international di-ision and t)e #act t)at i# it #ails, t)e 6)ole
company could su##er as a result$ Corporate )as tig)tened t)e reigns consistently t)e last
#e6 years and 6ill continue to do so to stay a#loat by turning t)e losses into gains
2
$
Bibliogra!y
1$ Bartlett, C)ristop)er ,$ and A)os)al, "umantra$ (ransnational Management$ Be6
1+
Iork, BIG r6in McAra6:.ill, 2000$
2$ Aorodesky, Don$ 3(rends in t)e Huick:"er-e Destaurant ndustry$5 Destaurant Deport
Marc) 2001$
1$ .o#stedes Cultural Dimensions,5 do6nloaded on Bo-$ 24, 2002 #rom
666$marketing$byu$edu
4$ Eeon)ardt, Da-id$ 3McDonaldsG Can it Degain its Aolden (ouc)J5 Business8eek
*eb 1//8$
%$ Eo-e, @o)n *$ McDonalds Be)ind t)e ,rc)es$ Be6 IorkG Bantam Books, De-ised
&dition 1//%$
+$ MacDonald, Aayle$ 3.ig) "takes in Burger Bargains$5 ()e (oronto Alobe and Mail
28

*ebruary 1//2$
2$ McDonalds Corporation summary ,nnual Deport 2001, McDonalds Corporation
8$ Dock6ell, .$ Ele6ellyn$ 3Capitalism and t)e Burger 8ars$5 ()e Mises nstitute
Mont)ly @uly 1//2, Kol$ 1%, Bumber 2$
/$ "apsted, Da-id$ 3Burger 8ars !pen 6it) a Mac ,ttack$5 ,0 8ire *ebruary 1//2$
10$ "c)losser, &ric$ *ast:*ood BationG ()e (rue Cost o# ,mericas Diet$ 0rinted in
Dolling "tone Magi4ine "ept$ 1//8$
11$ (eale, Debecca$ 30rice 8ars Eea-e 0atrons .ungary$5 ()e Minnesota Daily
*ebruary 1//8$
12$ (oncar, Mark$ 3Cultural Determinants o# nternational *ranc)isingG ,n &mpirical
&'amination o# Di##erent ,pproac)es$ Be6 Iork, Be6 Iork, 1//8$
11$ ;nko6n ,ut)or$ De#erred by Dut) 8ang, 0)D

14$ 666$global linksconsulting$comLAlobal?20ncLpgsLrecorpLmcdLmcds$)tml
1%$ 666$)oo-ers$com, re#erenced McDonalds Corporation,
1+$ 666$mcdonalds$com
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