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I. Business Description
a.) About the company

The Company operates and franchises McDonald’s restaurants, which serve a

locally-relevant menu of quality food and beverages in more than 100 countries.
McDonald’s franchised restaurants are owned and operated under one of the following
structures - conventional franchise, developmental license or affiliate. The optimal
ownership structure for an individual restaurant, trading area or market (country) is
based on a variety of factors, including the availability of individuals with the
entrepreneurial experience and financial resources, as well as the local legal and
regulatory environment in critical areas such as property ownership and franchising. We
continually review our mix of Company-owned and franchised restaurants to help
optimize overall performance, with a goal to be approximately 95% franchised over the
long term. The business relationship between McDonald’s and its independent
franchisees is supported by adhering to standards and policies and is of fundamental
importance to overall performance and to protecting the McDonald’s brand.

The Company is primarily a franchisor, with approximately 93% of McDonald's

restaurants currently owned and operated by independent franchisees. Franchising
enables an individual to be his or her own employer and maintain control over all
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employment related matters, marketing and pricing decisions, while also benefiting from
the strength of McDonald’s global brand, operating system and financial resources.

Directly operating McDonald’s restaurants contributes significantly to our ability to

act as a credible franchisor. One of the strengths of the franchising model is that the
expertise from operating Company-owned restaurants allows McDonald’s to improve
the operations and success of all restaurants while innovations from franchisees can be
tested and, when viable, efficiently implemented across relevant restaurants. Having
Company-owned and operated restaurants provides Company personnel with a venue
for restaurant operations training experience. In addition, in our Company-owned and
operated restaurants, and in collaboration with franchisees, we are able to further
develop and refine operating standards, marketing concepts and product and pricing
strategies that will ultimately benefit McDonald’s restaurants.

The Company and its franchisees purchase food, packaging, equipment and
other goods from numerous independent suppliers. The Company has established and
enforces high food safety and quality standards. The Company has quality centers
around the world designed to promote consistency of its high standards. The quality
assurance process not only involves on-going product reviews, but also on-site supplier
visits. A Food Safety Advisory Council, composed of the Company’s internal food safety
experts, as well as suppliers and outside academia, provides strategic global leadership
for all aspects of food safety. We have on-going programs to educate employees about
food safety practices, and our suppliers and restaurant operators participate in food
safety trainings where we share best practices on food safety and quality. In addition,
the Company works closely with suppliers to encourage innovation and drive continuous
improvement. Leveraging scale, supply chain infrastructure and risk management
strategies, the Company also collaborates with suppliers toward a goal of achieving
competitive, predictable food and paper costs over the long term.
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Independently owned and operated distribution centers, approved by the

Company, distribute products and supplies to McDonald’s restaurants. In addition,
restaurant personnel are trained in the proper storage, handling and preparation of food
for customers.

b.) Product offerings

1.) McDonald's Big Mac

The Big Mac is a hamburger sold by international fast food restaurant

chain McDonald's.

2.) French fries

French fries, or simply fries, chips, finger chips, or french-fried

potatoes, are batonnet or allumette-cut deep-fried potatoes.
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3.) Snack Wrap

The Snack Wrap is a menu item available at McDonald's in the United

States, United Kingdom and Canada. It consists of 100% white meat
chicken breast, lettuce, shredded cheddar jack cheese, Monterey Jack
cheese, and sauce, wrapped in a soft flour tortilla.

4.) Happy Meal

A "Happy Meal" is a kids' meal usually sold at the American fast food
restaurant chain McDonald's since June 1979. A small toy is included
with the food, both of which are usually contained in a red cardboard
box with a yellow smiley face and the McDonald's logo.
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5.) McDonald's Chicken McNuggets

Chicken McNuggets are a type of chicken nuggets sold by the

international fast food restaurant chain McDonald's. They consist of
small pieces of processed boneless chicken meat that have been
battered and deep fried.

6.) Apple pie

An apple pie is a pie in which the principal filling ingredient is apple. It

is often served with whipped cream, ice cream, or cheddar cheese. It is
generally double-crusted, with pastry both above and below the filling;
the upper crust may be solid or latticed.
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7.) Cheeseburger

A slice of melted processed cheddar cheese on a juicy, 100%

Canadian beef patty with tangy pickles and onions, ketchup and
mustard on a freshly-toasted bun.
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II. Organizations’ Channel Environment

a.) Government

Governmental intervention can determine the rate and path of business

development. In McDonald’s case, the most significant political external factors in the
fast food restaurant chain industry environment are as follows:

Increasing international trade agreements

Governmental guidelines for diet and health

Evolving public health policies

McDonald’s Corporation has the opportunity to expand its multinational business based
on improved international trade, which can enhance global supply chains. This
PESTEL/PESTLE analysis also identifies governmental guidelines for diet and health as
a threat and an opportunity for the restaurant chain business. For example, this political
external factor is a threat because it puts pressure on McDonald’s, which has been the
subject of criticism regarding the effects of its products on consumers’ health.
Nonetheless, this same external factor creates an opportunity for the company to
improve its products. Corresponding changes in McDonald’s generic competitive
strategy and intensive growth strategies can address this external factor. In relation,
governments have evolving public health policies, which present a threat and an
opportunity for the restaurant chain business. For instance, this external factor threatens
the company through policies that change public schools’ food programs for students.
Still, the business can improve through adjustments to provide more healthful options to
consumers. McDonald’s marketing mix or 4P already includes healthful options, such as
salads, but the company can add more to improve its status in addressing this political
external factor.
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b.) Competitors

Taste and preference of target market changes rapidly due to which time
to time new products are added in the existing range and this supports
business in performing better. Further, healthy food is being offered to
customers at an affordable price and this influences buying behavior of
customers.

Jollibee

Jollibee is the largest fast food chain in the Philippines, with over 1,150
stores nationwide. A dominant market leader in the Philippines, Jollibee
enjoys the lion’s share of the local market that is more than all the other
multinational brands combined. The company has also embarked on an
aggressive international expansion plan in Vietnam, Brunei, Hong Kong,
Singapore, Macau, Malaysia, US, Canada, Saudi Arabia, UAE, Qatar,
Kuwait, Bahrain, Oman, Italy and the United Kingdom.
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KFC

KFC is also known as Kentucky Fried Chicken. KFC is an American based

fast food restaurant chain having its headquarters in Louisville, Kentucky.
KFC specializes in fried chicken.
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c.) Market

Economic changes directly and indirectly influence business performance. The

global economy, regional economies, and local economies influence McDonald’s
industry environment through the following economic external factors:

Slow but stable growth of developed countries

Slowdown of the Chinese economy

Rapid growth of developing countries

The slow but stable economic growth of developed countries is an opportunity for
McDonald’s to grow and increase the stability of its restaurant chain business. The U.S.
market remains the biggest contributor to the company’s revenues, but the business
also benefits from the stable recovery and growth of European markets. On the other
hand, the slowdown of the Chinese economy is considered a threat. This external factor
is a strategic issue because the Chinese market is a major contributor to McDonald’s
revenues. Nonetheless, the company has the opportunity to grow through expansion in
high-growth developing markets, such as in Asia.

d.) Technologies

McDonald’s Corporation’s success depends on business adaptation to maximize

the benefits of technological trends and resources. The company needs to address the
following technological external factors:

Moderate Research & Development activity in the industry

Increasing business automation

Increasing sales through mobile devices

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McDonald’s has the opportunity to increase its research and development investments
to improve business effectiveness and efficiency. In this PESTEL/PESTLE analysis
case, the strategic objective is to reach a higher level of R&D activity compared to
competitors. Also, the company can apply more automation to maximize productivity,
based on the external factor of increasing business automation. Such automation
requires changes in McDonald’s operations management and productivity approaches.
Furthermore, the business can improve its mobile services to reach more consumers
via its mobile apps. Based on the technological trend of increasing sales through mobile
devices, the company can expect revenue growth through mobile channels. In this
technological aspect of the PESTEL/PESTLE analysis, McDonald’s has major
opportunities to grow its fast food restaurant business.

e.) Socio-cultural

Social trends influence consumer behaviours and, in turn, affect the remote or
macro-environment of the business in terms of revenues. In this case of McDonald’s
Corporation, the most significant sociocultural external factors are as follows:

Rising disposable incomes

Busy lifestyles in urban environments

Increasing cultural diversity

Healthy lifestyle trend

Based on the external factor of rising disposable incomes, McDonald’s has the
opportunity to grow based on the increasing tendency of consumers to buy fast food
instead of cooking at home. This tendency is also linked to busy lifestyles in urban
environments. These lifestyles increase consumers’ likelihood of dining in restaurants
like McDonald’s instead of cooking food at home. On the other hand, the increasing
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cultural diversity is perceived a threat and an opportunity in the context of this

PESTEL/PESTLE analysis. For example, this sociocultural external factor creates a
diverse set of consumer preferences based on various local and regional markets that
McDonald’s must account for in product development. Inability to do so can reduce the
company profits. The fast food business has the opportunity to increase its flexibility in
product design to satisfy consumers’ preferences in different markets around the world.
Furthermore, the healthy lifestyles trend is a threat against McDonald’s, based on
criticisms about the adverse health effects of many of the company’s products. The
company has the opportunity to increase the healthfulness of its menu items. Thus, the
social external factors in this aspect of the PESTEL/PESTLE analysis of McDonald’s
Corporation create major opportunities for business development. These effects of
external factors influence consumers’ perception about the company. McDonald’s
corporate social responsibility strategy and stakeholder management initiatives partially
counteract the negative effects of such social trends on the business.

III. Profile of the company’s channel flow

a.) Business model framework

Sales
Owned by the company
Franchises

Franchise Model- Only 15% of the total number of restaurants is owned by

the company. The remaining 85% is operated by franchises. The company
follow a comprehensive framework of training and monitoring of its
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franchises to ensure that they adhere to the quality, service, cleanliness

and value propositions offered by the company to its customers.

IV. Inventory management

a.) Lead time

Inventory management in McDonalds: McDonalds follows a Just in Time system

of inventory management. JIT, as the name suggests, is the system of supplying
products to customers as soon as they have ordered for it, with minimal delay between
placing the order and getting it in hand. McDonalds doesn’t begin to cook or assemble
or preheat their stuff until they receive a customer order. They had a different approach
to inventory management wherein they used to pre-cook a batch of hamburgers and sit
under heat lamps.

It used to keep them under the lamps for as long as possible and eventually
discard whatever they couldn’t sell. Hence customers couldn’t enjoy freshly made food.
The only way it could happen was by the customer giving a special order. Hence
McDonalds moved to the JIT system of inventory management. This shift was possible
because of the new burger making technology that enabled them to make burgers
faster and keep the time between placing an order and receiving it as miniscule as
possible. This results in the finished product sitting in the inventory for as little as
possible.

b.) Manufacturing Facility

McDonald’s does not manufacture anything. They require the owner/operators to

purchase approved products from approved suppliers. So there is no conflict of interest
in pricing of products.
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They have a book of specifications, which are not published but taken by people to
possible suppliers, either those who have expressed an interest or we think could be
good suppliers, based on their own line of products.

That person checks out the plant or plants, and if conditions are right, begin
negotiations and share the specs after they sign a non-disclosure agreement.

As many products as possible are produced in the local country, as long as they meet
the specs and are priced cheaper or equal to imports from a neighbouring country.
Trade barriers sometimes affect the source, as some things, even as simple as butter,
have different legal requirements in different countries.

The purchasing department monitors quality and negotiates pricing, but never touches
money, again, avoiding conflict of interest.

c.) Inventory techniques

Between the central restaurant supply planning manager and individual

restaurants, there is constant communication which helps to manage the inventory more
accurately. A central team, including employees who have worked in the individual
restaurants as well as stock control specialists, serve as the regional planner. Each
regional planner works with 100 restaurants and communicates with them on a daily
basis via emails and teleconferences. Any factors that would influent the inventory level
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need to be discussed within the team. Regional planners also work with the new ICT
stock control system called Manugistics to ensure enough raw materials such as beef,
potato and bread.

The regional planner include a range of ad-hoc factors in calculation of the

forecast for inventory, so that they can predict future demand based on both past
performance and future sales campaigns. For example, the sales of Big Mac will
increase during the “Buy one Get one Free” campaign.

A stock control chart shows the balance of orders for new inventory against sales.
The system is heavily dependent on figures for expected sales.  For example, if sales of
McFlurry are running out of the system, then stocks of ice-cream would need to be
coming into the system. The Manugistics system uses a couple years’ worth of product
sales history to generate time series forecasts for each restaurant. The regional planner
team applies a specific factor (the blue blocks in the graph above) to the time series
analysis for the forecast. After calculation, the graph can generate a forecast for future
inventory level.
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V. Channel member behaviour and coordinating mechanism

a.) Channel conflict

McDonald’s has recently faced growing conflict with its corporations of almost
3,000 independent franchisees. Based on rising customer complaints that service isn’t
fast or friendly enough, McDonald’s told its franchisees that their cashiers need to smile
more. At the same time, franchise owners reflected growing franchisee discontent with
the corporation. Much of the conflict stems from a recent slowdown in system wide
sales that has both sides on edge. The most basic conflicts are financial.

b.) Channel cooperation

McDonald’s business model is based on the “Three-legged stool” model. In order

for McDonald’s to manage its suppliers and franchisees, the Three-legged stool
business model ensures that McDonald’s, suppliers and franchisees all work together.

c.) Channel control

Control is an important part in management, because the purpose is to make the

management and control strategies to be executed, so that the organization’s objectives
are achieved. Managers in McDonald’s set a goal they want, then, according to the data
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to take precautions to avoid bias continue to develop or exist. This belongs to feedback
control. Feedback control for the implementation of the plan administrator provides real
information, but also can increase employee motivation. Feed-forward control is
designed to prevent or reduce the performance deficiencies before they occur. Feed-
forward control can greatly improve the company’s chances of success, if managers
can predict in advance the problem and fix it.

VI. Assessment of channel performance

McDonald's distribution channel and the way in which this fast-food restaurant
chain gets its products to the market. In the theory of the Marketing Mix, place
determines where the product will be sold and how it will get there. McDonald's is the
leading global foodservice retailer, with more than 30,000 local restaurants serving
nearly 46 million people each day in 121 different countries. Approximately 80 percent
of all McDonald's restaurants company wants to be the first in the market and establish
the brand as rapidly as possible by advertising very heavily. This effective distribution
strategy (place) has helped McDonald's develop a strong market share in the fast-food
market around the world. Moreover, according to Kotler stores must have a planned
atmosphere that suits the target market and moves customers to buy. In addition,
McDonald's has pre-determined the locations for many of its stores to help reach a
variety and diverse population. The company has an intensive distribution process
which is a credit to their Marketing department.
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VII. Company’s current distribution strategy

Many of McDonalds restaurants are open 24 hours per day which satisfies the
customers’ needs and wants, especially for exists their hunger. This kind of distribution
strategy is called “intensive distribution”, means marking the product available for sale
through all possible channels of distribution.

VIII. Role of their Suppliers

McDonald’s is responsible for service of thousands of guest everyday that’s why

quality is the company’s main priority. Their menu is based on products which you
usually use at home like vegetables, chicken meat, beef, pork, potatoes, fish, eggs,
bread and dairy.
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The company’s quality control and quality assurance department regularly carries
out inspection of the suppliers’ production facilities in order to guarantee fulfilling of
McDonald’s requirements. Ingredients used in McDonald’s restaurants comply with
quality and safety standards of the European Union and the Republic of Belarus, and in
some cases our standards are higher than the official ones.

McDonald’s suppliers pay much attention to forage and seeds. A program on

improvement of animal management at feeding farms has been developed and
introduced.

Products are delivered to the restaurants by special transport equipped with

temperature readers during transportation. Also measurement of product core
temperature is made at place. They accept only products which have been transported
in ideal conditions.

An independent diesel generator provides products freshness in their distribution

center under any conditions. In emergency situations it continuously supplies electric
power to storage facilities till complete external network accident control.

IX. Role of their Manufacturers

One of the most important reasons McDonald’s has been so successful is that they
do not manufacture their own products, either food products or equipment. That way,
there is no conflict of interest between the company and its franchisees. McDonald’s
Corporation publishes the required specifications and ingredients, and any independent
supplier or manufacturer is more than welcome to submit samples and a proposed
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business plan, and make a request to be considered to be named an “approved

supplier” to the corporation and to franchisees.

X. Role of the Retailers

In the case of McDonalds, they are on a business-to-consumer basis. Their primary

consumers are final consumers. McDonalds do not manufacture their own products,
either food products or equipment. The retailers are the one who will keep track of the
quality of the product. They are the one ensuring the final consumers that the product
has still the quality and effectiveness. McDonalds stores its products in a factory. This is
to assure the company to fulfil their legal duty to protect the health and safety of those
affected by their business, the right approach to storage can also help you reduce
pollution, unnecessary wastage and other costs.

XI. Role of the Consumers

The main target customer for McDonald's includes parents with young children,
young children, business customers, and teenagers. Perhaps the most obvious
marketing for McDonald's is its' marketing towards children and the parents of young
children. Ronald McDonald was first introduced in 1963 and marked the beginning of
their focus on young children as a critical part of their ongoing business. Parents like to
visit McDonald's because it is a treat for the kids, and the kids enjoy the cartoon like
atmosphere. McDonald's also targets business customers as a part of their core
business. Business customers may stop during the workday and can count on fast
service, and consistently good food. Another major target of McDonald's marketing is to
teens. Teens find the value menu especially appealing and McDonald's markets their
restaurants as a cool place to meet with their friends and to work.
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XII. Primary and Secondary Research

McDonalds uses primary research through surveys, questionnaires and face to

face interviews which has increased their customer feedback. By using the primary
research McDonalds has managed to improve on their products and services by good
promotional offers that are attracting more customers.

McDonalds uses secondary research to find out about their competitors, they use
old reports, surveys and questionnaires to help them promote their business in a way
that their competitors may not have used.

XIII. Recommendation and improvement on its channel strategy

McDonald’s needs to focus on service differentiation strategy in order to position the

restaurant as a superior service restaurant in the minds of the target consumers. The
service differentiation strategy implies that McDonald’s shall offer superior services at
each step of the customer touch points right from the placement of order through the
delivery of the products. The availability of well-trained staff is also essential for delivery
of high quality service to the customers. McDonald's should continue to invest in the
training and development of its employees to ensure high service quality. Well-
structured training programs shall ensure the long term growth of the organization.

The company can implement an integrated promotion mix that has a balance of both
traditional and modern digital media for brand promotions. McDonald’s must recognize
the importance of digital media in the promotional mix for organizations, and should
devise digital marketing strategies to engage with the online customer base.

McDonald’s can offer additional product and service features such as food on
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demand and home delivery so as to provide convenience to customers.  Product quality

can be further enhanced with fresh ingredients. The company should continue to invest
in menu customization and menu standardization strategies to attract and connect with
target customers in diverse geographical markets.
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XIV. References
https://www.quora.com/What-is-McDonald%E2%80%99s

https://www.google.com/search?
q=French+fries+mcdonalds&stick=H4sIAAAAAAAAAOOQU-
LQz9U3MKo0y4uSLSjKzE0sqlQoKMpPKU0uKVbIT1PITU7Jz0vMSSk-
xQhXeYqRE8Q0LCo0Nj_FyKufrm9omJGcZZJSlgyTM0o3zKqAqTOJr7KEso0
rC02NoUalF5UbPmL05RZ4-
eOesJTLpDUnrzHacXGFpyY55hWXpxYVCxlwcQWWphZVOuckFhcLKXEJS
PH4eAaHxAe7unp7-
rlrMErxcaGI8PxiFHNMTs4vSsnMS1coyVcoLM0vStRLzs_9xSQU7-
oX4hkSGY_w0yRmp4ySkoJiK3398vJyPbhi_fCMxBLdxKJUXd9kF4hS3ZLUP
N3c_OIS3YL8gtKcxCJdWCgtYhVzK0rNS85QSCvKTC1GmA4AAPyiAl0BAA
A&sa=X&ved=2ahUKEwih75ygo_bnAhUj8XMBHR0IAU0QxA0wAHoECAoQB
A&biw=1920&bih=920

http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations

https://www.google.com/search?
q=mcdonalds+business+model+framework+&tbm=isch&ved=2ahUKEwiJr5Lq
l_bnAhWyi0sFHag7C4oQ2-
cCegQIABAA&oq=mcdonalds+business+model+framework+&gs_l=img.3...20
1785.206583..206710...1.0..0.120.1312.10j4......0....1..gws-wiz-
img.......0j0i30j0i5i30j0i8i30.7n3bVRRyWOQ&ei=twtaXsn3DbKXrtoPqPes0Ag
&bih=969&biw=1920&hl=en#imgrc=_gWog11cUAla0M

https://businessays.net/mcdonalds-inventory-management-practice-and-its-
advantages/
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https://www.quora.com/Where-does-mcdonalds-manufacture-its-products

http://cmuscm.blogspot.com/2014/11/how-mcdonalds-manage-its-
inventory.html

https://www.coursehero.com/file/p4cfidbp/Vertical-conflict-occurs-between-
different-levels-of-the-same-channel-Channel/

https://mpk732t12016clusterb.wordpress.com/2016/05/14/distribution-and-
logistics/

https://studymoose.com/channels-of-distribution-mcdonalds-essay

http://www.managementparadise.com/forums/elements-logistics/217308-
distribution-strategy-mcdonald.html

https://mcdonalds.by/en/our-suppliers.html

https://www.quora.com/Where-does-mcdonalds-manufacture-its-products

https://www.quora.com/How-does-McDonalds-collect-primary-market-
research

https://managementofmcdonald.wordpress.com/controlling/

https://www.jollibee.com.ph/about-us/
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https://ifeedkfcback.com/about-kfc/

https://www.123helpme.com/mcdonalds-case-study-view.asp?id=166353