AND

ITS COST LEADERSHIP STRATEGY

Lorenzo Palladini ~ F15401049

WHAT IS A COST LEADERSHIP
STRATEGY?
 An integrated set of actions
taken to produce goods or
services with features that are
acceptable to customers at the
lowest cost, relative to that of
competitors.

 It is based on:
 Sell standardized goods or services;
 Process innovation;
 Efficiency;
 Maintain competitive levels of differentiation.
MCDONALD’S COST LEADERSHIP STRATEGY
(1)
 It is based on:
 Product and Service Standardization
(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, and many others).
 Product Differentiation
(McDonald’s develops the business and its products to make them
distinct from competitors. For example, McCafé products).
 Efficiency
(McDonald’s is famous for the speed of customer service without
compromising the quality of the service itself).
MCDONALD’S COST LEADERSHIP STRATEGY
(2)
 Cheaper Products
(McDonald’s offers products that are relatively cheaper compared to
its competitors).

 Vertical integration
(McDonald’s owns facilities that produce standardized mixtures of
ingredients).

 Economies of scale
 Specific Products for Specific Markets (McDonald’s
takes into account local tastes and preferences, when developing its menu and
engaging in marketing efforts).
MCDONALD’S COST LEADERSHIP STRATEGY
(3)
 Product Innovation
MCDONALD’S MISSION
STATEMENT

“Our mission is to be our customers’ favorite place

and way to eat & drink. We’re dedicated to being
a great place for our people to work; to being a
strong, positive presence in your community; and
to delivering the quality, service, cleanliness and
value our customers have come to expect from the
Golden Arches – a symbol that’s trusted around
the world.”
MCDONALD’S VISION STATEMENT
“Our overall vision is for McDonald’s to become a
modern, progressive burger company delivering a
contemporary customer experience. Modern is
about getting the brand to where we need to be
today and progressive is about doing what it takes
to be the McDonald’s our customers will expect
tomorrow. To realize this commitment, we are
focused on delivering great tasting, high-quality
food to our customers and providing a world-class
experience that makes them feel welcome and
valued.”
MCDONALD’S GOALS AND
OBJECTIVES (1)
1st. “Place
the customer experience at the core of all we do” .
McDonald’s is willing to demonstrate its appreciation
regarding its customers by providing them with high quality
food and superior service in a clean, welcoming environment,
at a great value.

2nd. “Committed to our people”.

McDonald’s provides opportunity, nurture talent, develop
leaders and reward achievement. They believe that a team of
well-trained individuals with diverse backgrounds and
experiences, working together in an environment that fosters
respect and drives high levels of engagement, is essential to
reach a continued success.
MCDONALD’S GOALS AND
OBJECTIVES (2)
3rd. “Believe
in the McDonald’s System”.
McDonald’s business model, characterized by their “three-
legged stool” of owner/operators, suppliers, and company
employees, is their foundation, and balancing the interests
of all three groups is their key.

4th.”Operate our business ethically” .

Sound ethics is good business. At McDonald’s, workers hold
themselves and conduct their business to high standards of
fairness, honesty, and integrity. Moreover, workers are
individually accountable and collectively responsible.
MCDONALD’S GOALS AND
OBJECTIVES (3)
5th. “Give
back to our communities”
McDonald’s takes seriously the responsibilities that come
with being a leader. They help their customers build better
communities, support Ronald McDonald House Charities,
and leverage their size, scope and resources to help make
the world a better place.

6th.”Growour business profitably”

McDonald’s is a publicly traded company. As such, they
work to provide sustained profitable growth for their
shareholders. This requires a continuous focus on
customers and an healthy system.
MCDONALD’S GOALS AND OBJECTIVES (4)
7th. “Strive
continually to improve”
McDonald’s is a learning organization that aims to
anticipate and respond to changing customer, employee and
system needs through constant evolution and innovation.
MATCHES & DIFFERENCES IN HYPOTHETIC AND
ACTUAL FUNCTIONAL STRUCTURES (1)
Matches:
 McDonald’s has a functional structure that enable the
company to achieve efficiency ;
 McDonald’s is able to produce goods at lower costs compare to
its competitors thanks to its vertical integration;
 McDonald’s biggest part of revenue comes from standardized
products;
 McDonald’s has relatively few layers in the decision-making
and authority structures;
 McDonald’s workers are specialized in what they do;
 Operation is the main function in McDonald;
MATCHES & DIFFERENCES IN HYPOTHETIC
AND ACTUAL FUNCTIONAL STRUCTURES (2)

Differences:
 McDonald’s pushes maybe too much on new
products’ development;
 McDonald’s does not have a centralized corporate
staff;
IS MCDONALD’S PROPERLY STRUCTURED TO REACH ITS
CURRENT & FUTURE STRATEGIC GOALS?
Because its functional structure follows more than 80% the one that aims to
implement a cost leadership strategy. They are, moreover, already the
cost leaders in their market, which means that their actual structure is
already the best one.

The remaining 20% is focused on other strategies that according to my

personal opinion need to be followed to create a competitive future
company.

Many of their strategic goals are already reached, and many others, in my
opinion, will be reached in the near future such as “operating our
business ethically” (everyone has heard at least ones some stories about
McDonald’s food quality; their aim in the future must be to improve their
ethics when it comes to select their ingredients).

Its structure lacks of centralization and the managers are pushing hard on
new products development, but this is also a result of a needed-not-
completely-following of a cost leadership strategy.