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STRATEGIC MANAGEMENT OF MC DONALD'S AND FAULTS

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STRATEGIC MANAGEMENT OF
MC DONALD’S AND FAULTS
Author: Sirshadri Mitra

RESERCH BY: SIRSHADRI MITRA

WORD COUNT: 2253
➢ Executive Summary
After reading this report on Food and Beverage Strategic Management, the readers will gain
knowledge and have a fresh view on the Mc Donald’s operational strategies. The report
provides a vast view on the company’s Advertising, Pricing and Marketing strategies as well
as the market segmentations of the organization and how the organization have brought
changes in their menu too meet the local taste. The report also provides a deep analysis about
the company’s short comings and how it could be improved using PESTEL Analysis. The
report also covers other topics such as Operational challenges of the Company, Post covid
impact on it and Competitive advantages of the company. The following study will provide a
thorough understanding to the reader about the current market strategy of the organization
and its key fault areas.

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 Content

S. No. Content Pg. No.

01. Introduction 03

02. Marketing Strategy 03-05

03. PESTEL Analysis of Mc Donald’s 05-06

04. Operational Challenges faced by Mc 06-07

Donald’s
05. Post Covid Impact on Mc Donald’s 07

06. Competitive Advantage of Mc Donald’s 07-08

07. Conclusion 08

08. References 09

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1. Introduction: -
The American fast food franchise McDonald's was established in San Bernardino, California,
in 1940. One of the biggest (QSR) chains in the world, it serves 69 million people every day
across 119 countries. Along with other well-liked menu items including chicken nuggets,
salads, and breakfast items, McDonald's is well-known for its hamburgers, fries, and shakes.
The business uses a franchise system, in which individual franchisees run their own
McDonald's restaurants with the help and oversight of the corporate headquarters.
McDonald's is a well-known brand that has a sizable global following in the fast-food sector.
The following report is going to provide a thorough analysis on the Marketing Strategy of the
company and its different segmentation, Target market of the company and its market
positioning, we will also do a thorough analysis of the Political, Economic, Technological,
Legal and Environmental factors of the company, side by side we will also see various
operational challenges and post Covid Impact on the Organization and lastly we will be
looking into the various competitive advantages of the organization.

➢ Advertisement Strategies of Mc Donald’s: -

✓ Advertising campaigns for McDonald's frequently involve television spots,
billboards, print ads, and online promotion.
✓ For client interaction and product promotion, the chain also makes use of social
media sites like Twitter, Instagram, and Facebook.
✓ The "I'm Lovin' It" commercial campaign, which was introduced by McDonald's
in 2003, is among its most well-known.
✓ The advertising campaign uses upbeat music and taglines to emphasise the joy
and excitement of the McDonald's experience.
➢ Promotion Strategies of Mc Donald’s: -
✓ During the year, McDonald's runs a number of sales campaigns, such as
discounted meals or one-time deals.
✓ Advertisements for these promotions are frequently broadcast on TV, the radio,
and social media. (Borhade, 2016)
➢ Pricing Strategy of Mc Donald’s: -
✓ Their "Extra Value Meals," which provide clients with a bundled meal at a lower
cost than purchasing each item separately, is one of their primary pricing tactics.
✓ Customers are incentivized to buy more goods by doing this since it makes them
feel like they are getting a deal and saving money.
✓ McDonald's also employs "Price Bundling," which is charging less for a combo
meal that includes a burger, fries, and beverage than it would do to buy each
item separately.
✓ With this tactic, the average transaction value will rise and clients will receive
greater value for their money (Baig A,2020).
2. Marketing Strategy
• The company has over 39000 locations in more than 100 countries.

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 • The company’s marketing strategy is based on a combination of several key
elements including:-
✓ Brand Recognition
✓ Promotions and Discounts
✓ Sponsorship and community involvement etc.
• To understand the marketing strategies of the company better we need to understand the
market segmentation as described below.
I. Market Segmentation: - The market segmentation of an organization can
be done on the following basis:
✓ Demographic Segmentation.
✓ Geographic Segmentation.
✓ Psychographic Segmentation.
✓ Behavioural Segmentation.
a) Demographic Segmentation: -
✓ McDonald's has a variety of age, gender, and income target markets.
✓ For instance, the business provides value meals for consumers who are
concerned about their budgets and Happy Meals for kids.
b) Geographic Segmentation: -
✓ McDonald's offers eateries in a variety of places, including shopping centres,
airports, and residential neighbourhoods.
✓ Also, the business customises its menu to suit regional tastes and inclinations,
such as by serving McArabia sandwiches throughout the Middle East.
c) Psychographic Segmentation: -
✓ Customers are also targeted by McDonald's depending on their personalities
and lifestyles.
✓ For instance, the business advertises to consumers who are concerned about
their health that it offers salads and fruit smoothies.
d) Behavioural segmentation: -
✓ To appeal to the distinct buying habits and preferences of Indian consumers,
McDonald's has modified its menu and marketing tactics.
✓ Within the Indian market, they identify a number of crucial segments, such as:
o Vegetarians: Due to religious or cultural convictions, a sizable portion
of the population in India is vegetarian. For vegetarians, McDonald's
has created a special menu with dishes like the McAloo Tikki burger
(made with a potato-based patty) and the McVeggie burger (made with
a vegetable-based patty).
o Young urban consumers: For young consumers in India's metropolitan
areas, McDonald's has positioned itself as a stylish, aspirational brand.
The McAloo Tikki wrap and the McChicken Maharaja burger, which
feature regional flavours and ingredients, have been added to the menu
(Agnihotri and Bhattacharya,2015).
• According to the study, McDonald's segmentation tactics increased customer satisfaction
since customers could find menu items that suited their needs and tastes.
• But the survey also made clear how important it is for McDonald's to keep innovating and
updating its menu to meet shifting consumer preferences (Kumar&Lim,2019).

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 II. Target Market of Mc Donald’s: -
•Families with young children are McDonald's main target market.
•McDonald's has adapted its food and marketing strategies to appeal to
families, placing a strong emphasis on its Happy Meals and Play Places.
• by offering late-night hours and its McCafé range of coffee beverages,
McDonald's also caters to teenagers and young people.
• The company's marketing initiatives also take into account various regional,
cultural, and gastronomic preferences, such as the addition of vegetarian and
Halal-certified alternatives in some places.
• McDonald's attempts to appeal to a wide range of demographics while also
meeting the unique preferences and demands of certain groups
(Ramaswamy & Davi, 2016).
III. Market Positioning of Mc Donald’s: -
• McDonald's modified its marketing mix techniques to meet the special
requirements and tastes of customers in India, a market with a sizable
population below the bottom of the pyramid (BOP).
• rather than catering to the BOP population, McDonald's has established
itself as a premium fast-food brand in India.
• McDonald's has used a number of methods to appeal to these customers,
including presenting a wide menu with both local and international
selections, a spotless dining area, and a focus on quality and consistency in
its offerings.
• McDonald's has used its name recognition and reputation to set itself apart
from regional fast-food rivals in India.
• Mc Donald’s has successfully positioned itself as a premium fast- food
brand in India as per the preference of middle and upper middle-class
consumers (Shivani & Sharma, 2019).
3. PESTEL Analysis of Mc Donald’s: -
I Political: -
✓ Changes in taxation policies and import/export regulations can have an effect
on McDonald's profitability.
✓ Regulations and policies relating to food safety and health can have an impact
on McDonald's operations.
✓ Political unrest in some nations can make it difficult for McDonald's to
conduct business there.
II Economical: -
✓ Since McDonald's operates in several different countries, exchange rate
fluctuations can have an effect on its profitability.
✓ Economic downturns can affect McDonald's sales because customers may
choose less expensive dining options.
✓ Since that it employs a sizable workforce, McDonald's may see a negative
impact from rising labour expenses.
III Sociocultural: -
✓ Growing concerns about obesity and health issues can affect McDonald's
reputation and sales.

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 ✓ Changing consumer preferences towards healthier and sustainable food
options can also have an impact.
✓ The perception of the McDonald's brand in some markets may be impacted by
changes in cultural norms and values.
IV Technological: -
✓ Technological developments, such as the introduction of self-service kiosks or
mobile ordering, may have an impact on McDonald's operations.
✓ McDonald's may have chances to boost productivity and enhance customer
satisfaction as a result of technological advancements in food manufacturing
and delivery.
✓ Operations at McDonald's and the security of consumer data may be impacted
by cybersecurity threats.
V Environmental: -
✓ There is growing pressure on McDonald's to address its environmental effect,
including its usage of single-use plastics and its role in deforestation.
✓ McDonald's revenues may be impacted by consumer concern over
sustainability and environmental issues.
✓ The supply chain and ingredient availability for McDonald's may be impacted
by changes in weather patterns.
VI Legal: -
✓ The laws and rules governing employment, food safety, and advertising all
apply to McDonald's.
✓ Lawsuits involving intellectual property or product responsibility, for
example, may have an effect on McDonald's profits and reputation.
✓ Changes in the laws governing food labelling and marketing may have an
effect on McDonald's marketing and sales plans.
4. Operational Challenges faced by Mc Donald’s: -
I Supply Chain Management: -
✓ McDonald's relies on a convoluted supply chain whereby ingredients are
sourced from several vendors all over the world.
✓ This can be difficult since there is a possibility of supply chain disruptions,
problems with quality control, and price fluctuations.
II Labour Management: -
✓ It can be difficult to manage such a massive workforce, but McDonald's is one
of the biggest employers in the world.
✓ Low wages and unfavourable working conditions at the corporation have
drawn criticism, which can result in high turnover rates and difficulty filling
restaurant positions.
III Food Safety: -
✓ High food safety requirements are always being pressed upon fast food
restaurants like McDonald's.
✓ In the past, the business has dealt with a number of high-profile food safety
incidents, including the E. coli outbreak in 1993, which was connected to
tainted beef used in McDonald's hamburgers.
IV Menu Complexity: -

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 ✓ McDonald's has a vast selection of menu choices, and keeping up with the
complexity of this menu can be difficult.
✓ The business must strike a balance between the needs of consistent, efficient
operations and the desires of customers for novel and exciting menu offerings.
V Sustainability: -
✓ McDonald's has come under fire for its effects on the environment, especially
in light of how much waste packaging the business produces.
✓ For the corporation, managing these sustainability issues while preserving
revenue can be difficult (Schlosser,2006).
5. Post Covid Impact on Mc Donald’s: -
• Like other fast-food restaurants, McDonald's suffered a great deal as a result of the
pandemic.
• Sales fell as a result of closing dine-in locations and reducing hours of operation,
forcing the company to act rapidly to stay afloat.
• To retain sales and provide customers contactless options, McDonald's and other fast-
food restaurants moved to drive-thru, delivery, and mobile ordering options.
• To retain sales and provide customers contactless options, McDonald's and other fast-
food restaurants moved to drive-thru, delivery, and mobile ordering options.
• However, the move to delivery and mobile ordering was not without extra
expenditures, such as delivery service fees from third parties.
• McDonald's employees and other fast-food workers were disproportionately affected
by the pandemic due to their greater rates of exposure to the virus and lower pay as
compared to other crucial professions (Jayne R., Et al, 2020).
6. Competitive Advantage of Mc Donald’s: -
A. Brand Recognition: -
✓ With its distinctive golden arches and memorable jingles, McDonald's is
among the most recognised brands in the world.
✓ It has a competitive edge thanks to this awareness in terms of client trust
and brand loyalty.
B. Standardization: -
✓ McDonald's has mastered the art of standardisation; the company's food,
operations, and customer service are the same everywhere it operates.
✓ This guarantees that customers, regardless of location, are aware of what
to expect when they visit any McDonald's restaurant.
C. Economies of Scale: -
✓ McDonald's enjoys substantial economies of scale thanks to its more than
38,000 locations worldwide.
✓ This enables it to negotiate advantageous terms with suppliers, save
expenses, and boost profitability.
D. Efficient Supply Chain: -
✓ McDonald's is able to deliver the right ingredients to the right place at the
right time because to its extremely effective supply chain.
✓ As a result, waste is reduced and quality standards are maintained.
E. Innovation: -
✓ With menu staples like the Big Mac and the Happy Meal becoming
cultural icons, McDonald's has a history of innovation.

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 ✓ Customers are interested in visiting its stores because of its ongoing
product innovation.
F. Global Presence: -
✓ McDonald's has locations in more than 100 countries, making it a global
brand.
✓ It has a competitive edge because to its global reach in terms of market
share, brand recognition, and scale efficiencies.
7. Conclusion: -
In conclusion, by employing excellent management techniques, McDonald's has been able to
sustain its status as a global fast-food juggernaut. Offering standardised goods and services,
investing in technology, establishing effective supply chain management, emphasising
personnel training and development, and adjusting to local market conditions are a few of these
techniques. Also, the business has actively participated in CSR efforts, which have improved
the company's reputation and brand image, but on the other side it has been seen via the
PESTEL Analysis how Mc Donald’s have faced and how it can face challenges due to different
Political, Economic, social, Legal and other factors, such as Political unrest in some nations
can make it difficult for McDonald's to conduct business there, McDonald's revenues may be
impacted by consumer concern over sustainability and environmental issues, There is growing
pressure on McDonald's to address its environmental effect, including its usage of single-use
plastics and its role in deforestation etc. All these factors can affect the company’s reputation
adversely for which the company might incur huge loss. The report also covers other topics
such as Market segmentations of the company and how the company has adopted their menu
as per the country’s taste, Operational challenges faced by the company, Post covid impact on
the Organization and lastly the competitive advantage of the company. Overall McDonald's
management techniques have enabled the company to overcome obstacles and maintain its
competitiveness in the extremely dynamic fast-food sector.

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 8. References: -

• Arpita Agnihotri and Saurabh Bhattacharya, (2015), "McDonald's in India: Balancing

Growth and Sustainability" published in the Journal of Business Research.
• Baig, A. (2020). The impact of pricing strategies on McDonald's sales. Journal of
Business and Management, 12(3), 45-56.
• Grant, R. M. (2016). Contemporary Strategy Analysis: Text and Cases Edition. John
Wiley & Sons.
• Hill, C. W. L., Jones, G. R., & Schilling, M. A. (2014). Strategic Management: Theory:
An Integrated Approach. Cengage Learning.
• Jayne R. Beker and David U. Himmelstein (2020), "COVID-19 and the Fast Food
Industry: Implications for Workers, Wages, and Public Health" published in the Journal
of Public Health Policy.
• Khosrow-Pour, M. (Ed.). (2019). Encyclopaedia of Organizational Knowledge,
Administration, and Technology. IGI Global.
• Kroc, R. J., & Anderson, R. (1987). Grinding it Out: The Making of McDonald's. St.
Martin's Press.
• Kumar, S., & Lim, H. (2019). McDonald's segmentation, targeting and positioning: An
introduction. International Journal of Innovation, Creativity and Change, 8(4), 47-58.
• Latham, J. R. (2018). Leadership for Quality and Innovation: Challenges, Theories, and a
Framework for Future Research. Journal of Leadership and Management, 1(1), 12-24.
• McDonald's Corporation. (2021). Annual Report 2020. Retrieved from
https://corporate.mcdonalds.com/content/dam/gwscorp/investor-relations-content/annual-
reports/MCD-2020-AR-Final.pdf
• McDonald's Corporation. (n.d.). Our Company. Retrieved March 15, 2023, from
https://www.mcdonalds.com/us/en-us/about-us/our-company.html
• Mulligan, C. B. (2002). Parental responses to regulation: Evidence from a "shock to the
system" in Chile. American Economic Review, 92(4), 957-980.
• Sandhya Ramaswamy and Dr. V.R. Davi (2016), "Consumer Behaviour in the Fast Food
Industry: The McDonald's Perspective".
• Schlosser, E. (2006). Fast food nation: The dark side of the all-American meal. Houghton
Mifflin.
• Shradha Shivani and Amrendra Kumar Sharma (2019), "Marketing Mix Strategies
towards the Bottom of the Pyramid: A Study of McDonald’s in India" published in the
International Journal of Management Studies.

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