STRATEGIC ANALYSIS OF McDonalds

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Analysis of McDonald’s Renovation Strategy
ShahnamTaheri
April 2012
1-Introduction:
McDonald’s Corp. is the largest fast foods retailer in the world. McDonald’s
corporation has dominated the fast food sector for over five decades. McDonald’s operates 32,737
restaurants in more than 117 countries on six continents. Its historical growth in revenues was
amazing. The average number of customers served per day was 64 million people in 2010.The
company’s net income within 5 years from 2005 ($2,602 million) almost became doubled in 2010
($4,946 billion).The sales volume in global level had 5 %( $16,233) and EPS had 11 %( $2.4 billion
dollar cash dividends) growth accordingly. (10, 6)
Although this company is well managed and organized but we believe that there are some important
issues against the sustainable growth of company which will level off over long run if it doesn’t make
right strategic decision.
The company faces three strategic issues: (A) How to deal with growing fierce competition in fast
food market like Burger King, Wendy’s, KFC, Taco Bell and new competitors such as Tim Horton in
Canada (B) How to deal with financial problems such as high franchise fees in contrast with
geographical expansion goals, and (C) How to deal with worldwide economic crisis when everyone is
hurting from recession and fighting to remain profitable as it has been.
In order to achieve and sustain its competitive advantage, McDonald’s Corp.Burger chainis pumping
$1 billion into renovating its Canadian restaurants. The changes, including enlarging the drive

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through, installing fireplaces and flat-screen TVs, will create "more inviting and relevant" restaurants.
Dining rooms will be divided to accommodate for large groups and those who want to linger over the
free Wi-Fi access. The company will be using new color schemes, stone and tile accents and wood
tones. (1)
The purpose of this report is to examine the link and relation of the of renovation strategy in
McDonald’s restaurants in Canada with strategic definitions and investigatingthat if that strategy is in
alignment to the organization’s vision and mission.
2- Renovations Strategy and Strategy Concepts
Mintzberg, in his article, presents five definition of strategy – as plan, ploy, pattern, position, and
perspective – and considers some of their interrelationships.(2,11) We will examine the McDonald’s
Renovation strategy specifically and other strategies implicitly mentioned in the newspaper with
those five definitions of strategy concept.
(A)Strategy as Plan
“Strategy is a plan- some sort of consciously intended course of action, a guideline (or set of
guidelines) to deal with a situationor something equivalent- a direction, a guide or course of action
into the future, a path to get from here to there.”(2, 11)In McDonald case, spending $1 billion
(financial resources) for renovation is an intended course of action for keeping the current customers
and attracting potential customers to McDonald’s restaurants in response to sever competition in the
fast food industry.“The stores which are renovated so far in “Toronto and Montreal succeeded in
bring more customers as well as doubling sales” (1, 1)
(B) Strategy as Ploy

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“As plans, a strategy may be a ploy; too, really just a specific manoeuvre intended to outwit an
opponent or competitor.”(2, 11) The secret of McDonald’s is its willingness to innovate. For example
its breakfast menu, salads, Chicken McNuggets and Mclean Deluxe sandwich are example of ploy
against its traditional competitors like Burger King, Wendy and KFC.“McDonald’s has given away
50 million free cups of coffee in the last two and half years in an attempt to steal away market from
Tims which Yarbrough said dominates 45 percent of breakfast sales.”(2, 1) Giving free cups of coffee
is a strategy as a ploy againstTim Horton in Canada’s coffee and breakfast market. Internet access,
and comfortable sofa and cosier environment, and a special place for children play could also be are
exampleof ploy againstBurger King, Wendy, Starbucks and Tim Hortons.
(C)Strategy as Pattern
Strategy is also a pattern that is constantly in behaviour over time. McDonald’s perpetually markets
new products and styles to attract its customers.Egg McMuffin and McCoffee and renovation
restaurants plusquick service and friendly environment so that customers can linger longer, can attract
more customers to stay longer and buy more are the examples of McDonald’spattern as a strategy.
“For McDonald’s, consistency of hamburger and French fry quality is important as its taste and
portion size.”(146, 9) McDonald’s coordinates all its restaurants inthe entire world according to a
consistent pattern. “Coordination encompasses the setting standards in global level to achieve
competitive advantage with consideration cultural differences. (113, 5)
(D)Strategy as Position
“Strategy is a position-specifically, a means of locating an organization in what organization theorists
like to call an environment.”(13, 2)

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McDonald’s introduced a new product called Egg McMuffin- the American breakfast in abun. This
was to encourage the use of the restaurant facilities in the morning of day in another word it was as a
strategy of a new position of McDonald’s in its existing perspective of fast food industry.
(E)Strategy as a perspective
“Strategy is a perspective. Its content consisting not just of a chosen position,but of an ingrained way
of perceiving the world” (16, 2)
McDonald’sperspective concentrates on sheer productiveefficiency as a fast food industry to serve the
customers quickly. McDonald’s senior managers see franchising as the best way for global expansion
and growth.” We view ourselves primarily as a franchisor and believe franchising is important to
deliverin great,locally relevant customer experienceand driving profitability” (9,10)
3- Renovation Strategy and McDonald’s Vision and Mission .
“McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best
means providing outstanding quality, service, cleanlinessand value, so that we make every customer
in every restaurant smile.”(11)
“McDonald’sMission is:
 Be the best employer for our people in each community around the world.
 Deliver operational excellence to our customers in each of restaurants and achieve enduring
profitable growth by expanding the brand and leveraging the strengths of McDonald’s system through
innovation and technology.
“McDonald’svalue is to be our customers’ favourite place and way to eat out with inspired people
who delight each customer with out matched quality, service, cleanliness and value every time”(13)

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With situation (SWOT) analysis, McDonald’s implemented a strategy that they titled “Plan to win”.
McDonald’s focused on making a deeper connection with customers through five business drivers of
people, products,place,price,and promotion. (8, 10)
Have a cleanliness environment when customer enjoys the meal and renovation of restaurants make
McDonald’s restaurants a friendlier and cozy environment along offering new menu items such as
salads and healthier food and McCafe(smoothies,pastries and higher –end coffee was in direction to
McDonald’s vision and mission to be the world’s best quick service restaurant in the world.
4-Summary
Attracting more customers to McDonald’s remains its goal for growth. Annual report shows
McDonald’s has been successful during the five past years although world economy has been in
recession. Newmenus, offering healthier foods, making restaurants and facilities as a cozy places by
renovationswith internet access Wi-Fi, staying open longer,accepting all credit and debit cards were
among a comprehensive and related parts of execution a comprehensive strategy aligned with the
mission and vision of the company to satisfy customer demand with quick service,choice and variety,
and friendly environment with maintaining its consistency of its core strengths- affordable and good
service-with carefully experiencing new menu and aggressive marketing are the keys to success of
McDonald’s in future

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Works Cited
Newspaper
1-The Canadian Press. “McDonald’s earmarks $1 – billion for Canadian renovations.” The Globe
and Mail7Sep.2011.Print.
Journals
2-Mintzberg Henry. “The Strategy Concept I: Five Ps For Strategy.” California Magazine
Review(2001):11-24. Print.
Books
3-Beamish Paul W. and C.Patrick Woodcock. Strategic Management. Canada, McGraw-Hill
Ryerson Limited, Fifth Edition, 1999. Print.
4-Berkowitz, Crane, Kerin, Hartley,Rudelius.Marketing. Canada, McGraw-Hill Ryerson Limited,
Fifth Edition, 2003.Print.
5-Fahey Liam and Robert Randall,The Portable MBA in Strategy, Canada, John Wiley &Sons,
Inc.1994.Print.
6-Hitt, Ireland,Hoskisson,Rowe and Sheppard. StrategicManagement: Competitiveness and
Globalization-Concept.3rd
Canadian Edition. Toronto, Nelson, 2009.Print.
7-Kaplan Robert S. and David P. Norton, The Strategy- Focused Organization, Harvard Business
School Publishing Corporation, 2001.Print.
8- Kaplan Robert S. and David P. Norton, Strategy Maps, Harvard Business School Publishing
Corporation, 2004.Print.
9-Porter Michael E. Competitive Advantage, New York, The Free Press: A Division of Macmillan,
Inc.1985.
Websites
10-McDonald’s Corporation. Annual Report 2010.Web. 25 Sept. 2011.
http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations3.Par.56096.File.
dat/2010%20Annual%20Report%20(print).pdf
11-McDonald’s Corporation, mission, Web. 26 Sep.
2011.http://www.mcdonalds.com.my/abtus/corpinfo/mission.asp
12-McDonald’s mission and vision statement, Web.26 Sep.2011. http://www.samples-
help.org.uk/mission-statements/mcdonald-vision-statement.htm
13-McDonald’s mission and vision statement, Web.23 Sep.2011.
www.mcdonalds.com.my/abtus/corpinfo/mission.asp