Linh Chi Nguyen

101133319

McDonald’s is undoubtedly one of the leading quick-service restaurants with over

36,000 locations (including franchisees) worldwide (Our Business Model, n.d.). Despite the

rise of multiple similar concept restaurants like Burger King, Wendy’s, Subway, Taco Bell,

Popeyes, etc.; McDonald’s has still been able to maintain its stable standing in the fast food

market. This is due to the long history of service and the many food inventions since 1940 till

now, together with its business-level strategy to gain competitive advantages in the industry.

A business-level strategy can be defined as a general way a firm positions itself and

competes within a particular industry (Edwards, 2014). According to Michael Porter’s

framework for generic strategies, there are two key dimensions to the strategies which are the

company’s competitive advantage (low-cost or differentiation model) and the company’s

scope of operations ( a general market or a niche market) (Edwards, 2014). This framework

will be used to look into McDonald’s generic strategy.

McDonald’s is known to almost every single person in the world, and it is one of the

most consumed fast food internationally and locally as the firm caters to the general market

with a low-cost strategy. Their general market is a broader scope of customers with a general

need for quick-served meals, which could be segmented into occupied parents, children and

young adults. Moreover, currently, with the rising awareness in one’s health and well-being,

more and more consumers are shifting to healthier food options and McDonald’s made effort

to satisfy that customer market as well.

 In a low-cost approach, McDonald’ s “standardize its offerings in order to manage

costs” and limit special and complicated requests to keep costs down (Baldwin, 2014).

McDonald's is typically viewed as “ a quick, easy and affordable meal for families on the

go”(Rotharmel & Arthaud-Day, 2015) as well as a casual hang-out spot for teenagers so the

pricings are placed more on the low-cost side. “As a low-cost provider, McDonald’s offers

products that are relatively cheaper compared to competitors like Arby’s” (Gregory, 2017).

McDonald’s is aiming to provide customers a wide range of products at relatively low prices

for cost-conscious customers. For example, a Sausage McMuffin is only CAD $1.99, 2

Breakfast Burritos for CAD $4.49, a Double Hamburger is $1.89 and many more choices.

Together with the low-cost strategy, McDonald’s also incorporated the didderentation

approach to their strategy. “Differentiation involves being perceived by the market place as

having a relatively higher value to the customer or user than the offerings of its competitors”

(Baldwin, 2014). Besides lower priced items, McDonald’s also targets a bigger consumption

market with a diversified burger and wrap menus from Fish (for pescaratian) to chicken to

beef as well as other side options and combos like salads, hotcakes, poutine, etc. There has

been a change in customer demands for healthier food in the market so instead of fried food

like McDonald’s traditional items, they are looking for less calories and healthier options.

With an aim to serve more customers, McDonald’s adapted itself to including healthier

choices like salads, wraps, no-meat burgers, etc. And this added menu doesn’t seem to slow

down McDonald’s service significantly and has proved to be meeting consumer’s new

demand yet delivering quick-service so far. Moreover, McDonald’s seeks to provide

customers with more choices and variety by offering “locally relevant menu items such as

chorizo burritos in Texas and Midwest, mozzarella sticks in New York and New Jersey”

(Rotharmel & Arthaud-Day, 2015) or poutine across Canada. Another example is in India,

“cow‘s meat is not allowed so McDonald’s don’t have beef dishes. However, they have some
popular dishes a potato-based patty in burger buns; the Big Mac in chicken; McAlooTikki,

the Big Mac is replaced by the Maharaja Mac, there is also the paneer cottage cheese

McVeggie burger” (Shabbir, 2018). McDonald’s is differentiating itself as a brand in different

countries by letting franchisees put in the local flavours to serve more people around the

world and this tactic is highly valued by consumers worldwide.

McDonald’s main generic strategy is focusing on a broader general market and

providing them with low-cost products while maintaining food and service quality. That is

how the company gains competitive advantage over the years. However, McDonald’s also

adopts differentiation as a secondary focus in their strategy to gain more value and attract

more consumers as it aims to reach more and more customers in the future. The company’s

strategy seems to be performing efficiently over the past years and it is able to maintain its

original core values with all the new auditions to the menu, which pleases customers

worldwide.

References:

Baldwin, D. (2014, February 07). Strategy: Low Cost or Differentiation. Retrieved November

03, 2020, from https://www.cssp.com/strategy-low-cost-or-differentiation/

Edwards, J. (2014). Mastering Strategic Management – 1st Canadian Edition. Victoria, B.C.:

BCcampus. Retrieved from https://opentextbc.ca/strategicmanagement/.

Gregory, L. (2017, February 05). McDonald's Generic Strategy & Intensive Growth

Strategies. Retrieved November 04, 2020, from

http://panmore.com/mcdonalds-generic-strategy-intensive-growth-strategies

Our Business Model. (n.d.). Retrieved November 04, 2020, from

https://corporate.mcdonalds.com/corpmcd/about-us/our-business-model.html

Rotharmel, F. T. & Arthaud-Day, M. L. (2015, September 14). McDonald’s Corporation.

McGraw Hill Education. Retrieved on November 1, 2020 from

https://hbsp.harvard.edu/download?url=%2Fcourses%2F756043%2Fitems%2FMH0037-PDF

-ENG%2Fcontent&metadata=e30%3D

Shabbir, M. S. (2018). Innovation Strategy of McDonald Business from Historical

perspectives. International Journal of Global Business, 11(2), 9–28.