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1. NIK NUR FARAH WAHEDA BINTI NIK MUSTAPA (KBJ210210428)

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2. NURUL NABILA BINTI MUHD RUSLI (KBJ210210033)
3. NOR AUNI SOFIA BINTI AMRIZAN (KBJ210210470)

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4. NUR THAQIFAH BINTI AMRI (KBJ210210461)
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PUAN NORALIZA BINTI AWANG 2

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DIPLOMA IN BUSINESS MANAGEMEN (AB101)

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 INTRODUCTION

The first McDonald’s restaurant was opened in 1940 by brothers Maurice (“Mac”) and Richard McDonald in San
Bernardino, California. It originally was a drive-in that offered a wide selection of items. However, in 1948 the
brothers decided to revamp the business, and after a three-month renovation, a newly envisioned McDonald’s
opened. The small restaurant was designed to produce huge quantities of food at low prices. To achieve this, the
brothers limited the menu which only featured hamburgers, potato chips (later replaced by French fries), drinks, and
pie and developed a simple, efficient format that they named the Speeded Service System. This included a self-
service counter that eliminated the need for waiters and waitresses, and customers received their food quickly
because hamburgers were cooked ahead of time, wrapped, and warmed under heat lamps.
These innovations allowed the brothers to charge just 15 cents for a basic hamburger, about half the price of
competing restaurants. McDonald’s was a huge success, and the brothers began a franchise program.

Appliances for McDonald’s were purchased from a salesman named Ray Kroc, who was intrigued by their need for
eight malt and shake mixers. In 1954 he visited the restaurant to see how a small shop could sell so
many milk shakes. Realizing there was great promise in their restaurant concept, Kroc became a franchise agent for
the brothers. In April 1955 Kroc launched McDonald’s Systems, Inc., later known as McDonald’s Corporation, in Des
Plaines, Illinois, and there he also opened the first McDonald’s franchise east of the Mississippi River. In 1961 Kroc
bought out the McDonald brothers.

McDonald's predominantly sells hamburgers, various types of chicken, chicken sandwiches (chicken
burgers), French fries, soft drinks, breakfast items, and desserts. In most markets, McDonald's
offers salads and vegetarian items, wraps and other localized fare. On a seasonal basis, McDonald's offers
the McRib sandwich. Some speculate the seasonality of the McRib adds to its appeal. During March of each year,
McDonald's offers a Shamrock Shake to honor Saint Patrick's Day.

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Products are offered as either "dine-in" (where the customer opts to eat in the restaurant) or "take-out" (where the
customer opts to take the food off the premises). "Dine-in" meals are provided on a plastic tray with a paper insert
on the floor of the tray. "Take-out" meals are usually delivered with the contents enclosed in a distinctive
McDonald's-branded brown paper bag. In both cases, the individual items are wrapped or boxed as appropriate.

McDonald is one of the world’s leading fast-food restaurants. They are mainly known for their burgers and
beverages. Products play an important role in making the brands image good or bad. McDonalds is known for its
burger. For a business to compete with its competitors they have to be innovative and come up with the new product
line to attract more customers. The company has to take risks as they can’t be depended on a single product, so
they have to introduce new products of different varieties. As fast food isn’t healthy, so McDonalds have also started
making salads and fresh juices. Basically, the company must satisfy the market demand and they have to study the
market in terms of beating their competitors.

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 CHAPTER 7: The strategy of International Business

Mcdonald is mainly known for their burgers and sandwiches. For the burgers, they have hamburger, cheeseburger,
triple cheeseburger, bigmac etc. McDonald's burgers are made of 100% ground beef, formed into hamburger patties,
and then quickly frozen at their suppliers to seal in great fresh flavour. They add salt and pepper to their burgers when
they are cooked on the grill at the restaurants to bring out all that great beef taste. Every one of McDonald's burgers is
made with 100% pure beef and cooked and prepared with salt, pepper, and nothing else no fillers, no additives, no
preservatives. They use the trimmings of cuts like the chuck, round and sirloin for our burgers, which are ground and
formed into hamburger patties. Other than that, McDonalds also offer more than 3 types of chicken sandwiches.
McChicken is their most famous menu in this category, McChicken is a mildly spicy breaded and seasoned chicken
sandwich which is also offered in a spicier variant (the Hot n' Spicy) in some markets. The sandwich is made from
100% ground white meat chicken, mayonnaise, and shredded lettuce, on a toasted bun. A full-size version was
introduced in 1980, later removed, and reintroduced in 1988. In some markets, it is not spicy, and in others, a cajun
spiced version is also offered. It remains one of the biggest sellers, just behind the Big Mac. The larger sandwich
was replaced with the Crispy Chicken Deluxe in 1996, and brought back in 1998 in the current smaller size, and
marketed as the Cajun (Style) McChicken. In Australia, the average serving size for a McChicken is 185 g (6.5 oz).
In Canada, it remains a full-size sandwich, while the US' smaller version is sold there as the Junior Chicken.

Other than that, McDonald’s also have different type of categories for their menu such as breakfast, drinks, desserts
and etc. McDonald's offers a line of breakfast sandwiches: bagels (introduced in 1999), biscuits, and a special type
of maple flavored pancake called McGriddles. All can all be ordered with sausage, ham or bacon, with an optional
choice of cheese and/or egg. Regional meat offerings include fried chicken, steak, spam and bacon. They are an
internationally famous sandwich and as such have been well received. The McDonald's Hamdesal is a new
breakfast sandwich which consists of a slice of ham on pandesal, which can be ordered plain, with eggs or with
cheese. All U.S. restaurants had expanded their all-day menu to add Biscuit sandwiches, Egg McMuffins and
McGriddles in late September 2016. Move to drinks, McDonald main drink is CocaCola but other than that, they also
have milkshakes. Shakes are available in all U.S. McDonald's and many global markets.Permanent flavors are
vanilla, strawberry, and chocolate; regional or seasonal flavors include eggnog (during Christmas), honeycomb,
Arctic Orange (sherbet), orange cream, Shamrock Shake (a green, spearmint limited-time offer shake for St.
Patrick's Day), chocolate mint, and Rolo (available only in Canada and the UK.

This flavored milkshake was also available in the Republic of Ireland during the summer of 2007 for a limited time
only). In June 1975, 13 months before the celebration of the United States Bicentennial, McDonald's introduced a
blueberry-flavored shake in order to advertise "Red, White, and Blueberry Shakes" for independence day
celebrations, which were available through August of that year. The run was repeated in summer 1976, but not
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since. In the U.S., starting in February 2010, Triple Thick Shakes were rebranded under the McCafe name, along
with the addition of whipped cream, and a cherry on top, and a significant reduction in size. In Canada, McDonald's
milkshakes are still sold under the Triple Thick name.

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The Breakfast menu is offered by McDonald's during the morning. Currently the breakfast hours are 5:00AM to
10:30AM on weekdays, 5:00AM to 11:00AM on the weekend in most markets. The company pioneered breakfast
fast food with the introduction of the Egg McMuffin in 1972 when market research indicated that a quick breakfast
would be welcomed by consumers. Five years later McDonald's added a full "Deluxe Breakfast" line to the menu,
and by 1987 one-fourth of all breakfasts eaten out in the United States came from McDonald's restaurants. In test
market locations, such as New York City, McDonald's added a full breakfast line to its menus in 1975.

McMuffin is a family of breakfast sandwiches sold by the international fast food restaurant chain McDonald's. The
Egg McMuffin is the signature sandwich, which was invented in 1972 by Herb Peterson to resemble eggs benedict,
a traditional American breakfast dish with English muffins, ham, eggs and hollandaise sauce. In the US and Canada
the standard McMuffin consists of a slice of Canadian bacon, a griddle-fried egg, and a slice of American cheese on
a toasted and buttered English muffin. The round shape of the egg is made by cooking it in a white plastic ring
surrounded by an outer metal structure.

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The McChicken is a chicken sandwich sold by the international fast food restaurant chain McDonald's. In some
countries, such as Australia, India, New Zealand, and the UK, it is considered to be a chicken burger, especially
given it is not a sandwich as that word is understood in some of those non-American varieties of English. It consists
of a toasted wheat bun, a breaded cutlet, shredded lettuce and mayonnaise. The sandwich, originally introduced in
1980, proved to be a sales disappointment and was later replaced with the highly successful Chicken McNuggets.
But following the success of McNuggets, the McChicken was reintroduced in 1988. But again, McDonald's removed
the McChicken from its menus in the United States on September 26, 1996, and it was replaced with the Crispy
Chicken Deluxe, which was part of McDonald's ill-fated Deluxe line of sandwiches. But once again, the McChicken
was brought back gradually in the later months of 1997, due to overwhelming letters and petitions. Additionally, in
the United States, the sandwich is somewhat smaller than it was previously, as it is now on the Dollar Menu & More
(previously just the Dollar Menu), which offers various food products starting at US$1.00.

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Chapter 8: McDonald’s Foreign Market Entry Strategy.

McDonald’s is one of the most successful global fast-food restaurants around the world, their foreign entry market
strategy involves franchising and direct investments. These two entry strategies have proven to be a
successful way for McDonalds to reduce many of the costs and risks of opening a foreign business on its own.

Franchising involves a business model where an individual operates their own location of a much larger
established company. To this date, McDonald’s operates 36,899 restaurants in the world (McDonald’s Website).
To make sure the Franchisees operate in a similar manner and follow all the restaurant’s policies to maintain the
brand, McDonalds trains its Franchisees at its training facility in Hamburger University in Oak Brook,
Illinois Chicago. Even though international Franchisees need to follow McDonald’s operational policies,
they can tailor the food menu to their local area.

Now that the international operations have been conveyed as an increasingly important part of McDonald’s overall
sales, it is vital to analyse how McDonald’s entered the foreign markets. McDonald’s entered the international
markets utilizing three methods; franchising, joint ventures and company owned outlets. Where McDonald’s had a
choice, franchising was not only favoured, but it also dominated how the company expanded. Currently, 73% of all
McDonald’s restaurants across the globe are franchised. When entering some of the countries, McDonald’s had to
abandon its philosophy of franchising and use the other methods. For instance, when McDonald’s first entered
Mexico, the government did not allow franchising from foreign countries. To work around this, McDonald’s utilized
company owned restaurants to enter the market until the laws changed. In 1990, when the legislation went through
legalizing franchising, McDonald’s Corporation sold the company owned outlets to franchisees. Similarly, joint
ventures were used as an early entry method where franchising was not feasible. Although this option was not
McDonald’s priority, it was not a far second behind franchising, and the company’s most prosperous international
success to date stems from an initial joint venture in Japan.

To grasp a better understanding of how important franchising was to McDonald’s rapid international growth, the very
concept of franchising must be analysed. McDonald’s restaurants have crossed international borders easily
compared to other retail sectors and it is attributed directly to franchising. However, the idea of franchising was not
a new one to McDonald’s. In fact, McDonald’s expansion in the United States began very early in the company’s
first years utilizing a method that was relatively new to the industry, franchising.

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It was the fast-food industry, and McDonald’s specifically, that turned franchising into a business model that would
transform the retail economy of the world. At the heart of a franchise arrangement is the desire by two parties to
make money while avoiding risk. The franchiser wants to expand an existing business without spending its own
funds. The franchisee wants to run a business without going at it alone and risking everything on a new idea. One
provides a brand name, a business plan, expertise, and access to equipment and supplies. The other puts up the
money and does the work. In the case of McDonald’s, they wanted an international presence without the incredible
risk associated with entering foreign countries and altering eating habits. McDonald’s knew that entering foreign
markets would be very difficult for an American fast-food company and needed the aid of local partners to ease the
transition. That is exactly what franchising allowed McDonald’s to accomplish. By franchising, McDonald’s could be
marketed as a local country business instead of an American company strong-arming their way in. What they had
to offer was the fastest growing fast-food business in the world. Not to mention an extensive supplier line, industry
leading technology and a very prosperous business history for anyone willing to accept the terms and pay the
franchising fees.

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Direct Investment – Wholly Owned

Wholly owned stores that McDonald’s corporate manages makes up only a small portion of its stores with less than
20 percent, the majority of which are in the United States and the United Kingdom. Interestingly, while the company
has a small amount of wholly owned stores, within their U.K. market, 70 percent are owned and operated by
McDonald’s Corporate. In a recent statement from the current CEO the company is aiming to reduce the number of
company-operated restaurants even further to about 10 percent, a trend the industry is seeing as whole to mitigate
risks.

While the company is looking to downsize wholly owned stores, there are some benefits in having them in their
company’s portfolio. These stores allow the company to test new methods and models of doing business, which in
turn permits McDonald’s to maintain control and understand the various markets without relying on feedback from
the franchisees. Additionally, these stores provide a healthy portion of revenue for the company, which comes not
without risks, one being the cost the company incurs through operating these stores.

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Advantages:

 Low Risk: Franchises allow for quick expansion into new markets with a much lower risk to McDonald’s
financially being that franchise owners assume the majority of the financial burden in hopes of seeing a
higher return.
 First-Hand Host Country Knowledge: Franchises allow the company to have people on the ground who are
knowledgeable about host country factors including economic factors, geographic and political factors.
 Corporate Financial Gain: With the franchisee acquiring a large amount of the financial burden, McDonald’s
corporate can take in fees from franchises without worrying about the costs associated with rent, property
taxes and other factors that increase overall cost. To that end, the return McDonald’s corporate receives is
high in relation to the small number of risks it takes to allow franchising to occur.

Disadvantages:

 Loss of Control: While McDonald’s may see gains in terms of a low involvement revenue stream, the
company has little control over the day to say activities of franchises. Although there are standard practices
and guides franchises must follow, the actual implementation rests upon franchisees.
 Increased Cost and Involvement in Specialized Markets: In markets that require special adaptations when it
comes to menu offerings, ensuring that the franchisee and McDonald’s corporate are on the same page can
be a daunting task for the company. For example, McDonald’s is primarily known for hamburgers in the U.S.,
but in countries such as India where most of the population does not eat beef and will not even visit a
restaurant that serves it, normal methods must be altered to meet demands. Exclusions like these have
caused the retail fast food chain to increase different franchising models that can be implemented. While
these models have been beneficial and the increase in cost and involvement remains.
 Franchise Impact on How Overall Company is Perceived: Franchise operations can impact how the
McDonald’s brand is seen. A mishap or an incident garnering bad press because of one franchise will most
likely resonate across McDonald’s stores around the world and cause backlash by the consumer as a result.
Situations such as these can further limit corporate ownership’s control and often require corporate to step in
and do the necessary damage control to lessen the overall blow.

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How do people perceive McDonald's?

The perception of quality of McDonald's among participants was obtained using seven statements: “The food
presentation is attractive”; “The restaurant serves tasty food”; “The restaurant's menu offers a wide range of
choices”; “Food presentation is appropriate”; “The food is satiating.

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Conclusion

McDonald's did become one of the world's most profitable franchises overnight. They were able to incorporate
several key success elements, which propelled the growth of the brand to what it is today. The development of a
consistent menu and retail concept became one of McDonald's unique selling points, which invokes a sense of
familiarity whenever one steps into their restaurants, no matter where they are in the world. Customers are aware of
what to expect when considering places to dine at, be it in terms of food options or service, and McDonald's
becomes a place where people are able to seek solace and comfort in, especially when they are in a foreign place.

Ray Kroc also created the Hamburger University to serve this purpose - by training all franchises in the same way
for uniformity, and also to ensure that they will run the restaurants as he envisioned. As a QSR business owner,
think of how you can make your business consistent, be it in terms of products or experience. These will act as the
unique selling point of your brand, which makes it recognizable and memorable in the eyes of the consumers, which
will help in top of mind recall.

While maintaining consistency, McDonald's is able to keep customers on their toes with constant product
innovations. Franchisees were largely behind these innovations, through observations of customer trends and
behaviors, and this is what led to the birth of many of McDonald's now-iconic menu items. From the Happy Meal to
Big Mac and even McFlurry, these were all developed through franchisees to increase McDonald's range of product
offerings. Localization is another key element in their pursuit of innovation. By producing limited-time or seasonal
menu items catered to the tastes of the locals, they can motivate customers to return to their stores. Furthermore,
this promises a unique experience which you can only get in a specific country, thus captivating the interests of
tourists too.

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Appendix

Replica of Ray Kroc's first McDonald's restaurant

Ray Kroc

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Mcdonald's menu

Mcdonald’s franchies

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References

 https://www.workstream.us/blog
 https://en.wikipedia.org
 https://www.studocu.com
 https://www.britannica.com

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