Introduction
It is important to note that multinational corporate entities conduct their international business by deploying a wide range of strategies and approaches with main products or services at their cores. The given assessment will primarily focus on McDonald’s Corporation, which is one of the largest fast-food chains with a massive international presence. The most critical elements of the analysis include supply chain and distribution outsourcing, product quality assurance, franchising system, competition and IEO segment, human capital management, financial performance, and strategic management.
Overview
McDonald’s was founded in 1940 by two McDonald brothers, Richard and Maurice. In 1955, Ray Kroc purchased the chain and turned it into a large enterprise by setting a core foundation for its future international success. Currently, McDonald’s is the largest restaurant chain in the world, with approximately 38000 outlets (McDonald’s Corporation, 2020). Internationally, McDonald’s operates in more than 100 nations across the globe (McDonald’s Corporation, 2020). It should be noted that more than 80% of all McDonald’s restaurants are owned and operated by independent franchisees, and the goal is to increase the given proportion up to 95% (McDonald’s Corporation, 2020). The remaining outlets are owned and operated by the company itself. It is stated that “under a conventional franchise arrangement, the Company owns the land and building or secures a long-term lease for the restaurant location and the franchisee pays for equipment, signs, seating and décor” (McDonald’s Corporation, 2020, p. 3). However, under a developmental license or affiliate arrangement framework, real estate is not provided by the company, and such formats are only present in Japan and China.
Supply Chain and Quality Assurance
In the case of McDonald’s international supply chains, both the company and franchisees rely on independent suppliers for equipment, packaging, food, and other goods. Quality assurance is determined and enforced through a wide range of strict standards. It is stated that “the quality management systems and processes involve not only ongoing product reviews but also on-site and virtual supplier visits” (McDonald’s Corporation, 2020, p. 4). The company’s supply chain is also reliant on independent distribution centers, which strictly adhere to McDonald’s handling and storage standards (McDonald’s Corporation, 2020). Therefore, it is evident that McDonald’s utilizes outsourcing in the case of many of its international operations but focuses on collaboration with both suppliers and distributors.
Products and Marketing
Both products and marketing efforts at McDonald’s adhere to the principle of glocalization. The latter term refers to a strategy “where global trends are adapted to local markets” (Duong, 2017, para. 2). It is stated that “McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes” (McDonald’s Corporation, 2020, p. 4). In other words, despite the adherence to strict standards and practices, the company is adaptable enough to be able to identify and appeal to taste differences between its various markets. In the case of marketing, the entirety of the company and its franchisees are dependent on the company’s marketing expertise and strength. Franchisees pay a specific fee for general marketing but can also ask for local or national marketing, which costs more (McDonald’s Corporation, 2020). However, considering the strong brand image of McDonald’s, it is evident that the marketing strategies utilized at the company are highly effective.
Customers and Competition
McDonald’s Corporation does not have a specific demographic or customer group, and thus, all consumers of all markets where the company operates are considered potential customers. In the case of competition, the company operates in a highly competitive market with a wide range of competitor types. The competitors include “international, national, regional and local retailers of traditional, fast casual and other food service competitors,” and it competes “on the basis of price, convenience, service, experience, menu variety and product quality in a highly fragmented global restaurant industry” (McDonald’s Corporation, 2020, p. 5). The industry in which McDonald’s operates can be summarized as informal eating out or the IEO segment (McDonald’s Corporation, 2020). According to data from m Euromonitor International, the IEO segment consists of 20 million outlets, and “McDonald’s Systemwide restaurant business accounted for 0.2% of those outlets and 3.8% of the sales” (McDonald’s Corporation, 2020, p. 5). In other words, the industry of the company is vast, and despite being the leader in the segment, it still has a tiny market share.
Human Capital Management
Since McDonald’s Corporation is present in many markets and associated with numerous outlets, the total size of employees is equal to 200000 and 2000000 for company-owned restaurants and franchisees, respectively (McDonald’s Corporation, 2020, p. 6). Therefore, human capital is an integral part of the business, which is why the company takes the matters of inclusion, workplace health and safety, and a respectful workplace environment seriously. The company has a strict set of policies, which prohibit discrimination and non-inclusion in both company-owned and franchisee-operated outlets. In order to ensure a respectful workplace environment, the company imposes standards on both its suppliers and employees. For example, the Standards of Business Conduct has a set of strict rules of behavior in order to eliminate any form of workplace incivility, whereas the Supplier Code of Conduct has a list of human rights requirements for global suppliers. In other words, the company will not work with or buy from organizations that utilize child labor or other inhumane practices. McDonald’s also has the Business Integrity Line, which provides a communication channel to report any form of violation of human rights abuse (McDonald’s Corporation, 2020). Therefore, the company puts a massive effort into supporting its workers across the globe due to its reliance on its human capital for both performance and success.
Financial Performance
The financial performance of McDonald’s Corporation for 2020 was reduced by the pandemic. Throughout 2020, it is stated that “global comparable sales decreased 7.7% primarily as a result of COVID-19. Comparable guest counts were negative across all segments for the year” (McDonald’s Corporation, 2020, p. 8). The US market was not affected by the lockdowns significantly, but the majority of international markets experienced a substantial downturn in sales by 10-15% (McDonald’s Corporation, 2020). Despite the overall weakened performance, the company opened nearly 1000 more restaurants during the year 2020 (McDonald’s Corporation, 2020). In other words, the international market resulted in losses during the pandemic, but the company was still resilient enough to continue its expansion.
Strategic Management
Due to the economic impact of COVID-19, the company announced its new strategic direction, which focuses on marketing and 3Ds. The Corporation wants to maximize its marketing, especially on digital platforms, by finding the highest value offered without losing the factor of affordability (McDonald’s Corporation, 2020). The 3Ds include drive-thru, delivery, and digital, which became highly critical for the business’s survival during the pandemic. The company learned that these three channels of product supply were the most resilient and effective during COVID-19, which is why it seeks to bolster them in order to ensure a higher degree of resilience in the future. Another advantage of these 3Ds is the fact that they will remain relevant and utilized even after the pandemic is over because the delivery market is growing as well (McDonald’s Corporation, 2020). Drive-thru and digital systems complement the given growth since delivery personnel can acquire the product through a drive-thru more efficiently. Digital presence enables McDonald’s to facilitate its online presence even more and enhances the other two Ds. Therefore, the 3Ds of the novel strategy is not only critical on their own but also complement and bolster each other.
Conclusion
In conclusion, McDonald’s is the largest multinational Corporation, which operates in more than 100 countries. All business aspects are based on its international presence, and the company is highly demanding of both its employees and suppliers. McDonald’s prefers outsourcing when it comes to supply chain and business operations since it seeks to have the majority of its outlets as franchisees, and its suppliers are mostly independent organizations. The company is highly aware that its human capital is a key driver of its success and performance, which is why it puts significant effort into creating a safe and respectful workplace environment. Although the company was impacted by the pandemic, it was resilient enough to continue its growth. The recent change in its strategy showcases that the company will bolster its digital presence and delivery elements, drive-thru, and maximize its marketing.
References
Duong, V. (2017). Glocalisation: Why is McDonalds different everywhere? Woroni. Web.
McDonald’s Corporation. (2020). Form 10-K. United States Securities and Exchange Commission. Web.