McDonald’s Global Operations
Connor Mcmahon, Ben Roye, Naveen Kumar, Nathan Maedgen
Keys to Success
• Collaboration- The ability to get both store and corporate office
employees to rally together around key principles and strategies.
• Be customer-centric- “The customer is always right.” Always listen
to the customer. What they say they want is choice and value.
• Ability to be locally relevant- The business model must vary by
region. The franchises must be able to adapt and adjust to local
customs. For example, Spam in Hawaii and shrimp in Japan.
Customers want to feel that the company understands them.
• Be a good corporate citizen- Always reducing energy output,
promoting sustainable fisheries, and working to promote
environmentally-friendly supply chain practices.
• Talent management and leadership development- Provide a
leadership institute for top talent to plan their careers and promote
diverse teams.
McDonald’s Structure
• Geographic structure divided into 5 divisions.
• US, EU, Asia/ME/Africa, Latin America, Canada
• Strategic approach involves maintenance of leading positions,
while expanding in emerging markets.
• Geographic structure involves each region being responsible
for producing/marketing within a region.
• This structure in turn allows for localization.
• No central command exists, yet key values dominate all
regions.
Brand Strategy
• 4 objectives for success:
• 1. Widen customer base
• 2. Reinvention of brand image (linger, flexible,
grab and go)
• 3. Stress on value
• 4. Expansion of food items
Paninaro
• Youth movement of the 80’s.
• Met at a new, Italian-owned fast
food chain.
• Obsession with Americana,
fashion, materialism.
• Fostered by Reaganomics,
Thatcherism, deregulation.
• McDonald’s now owns the original
Italian fast-food chain.
• Environment was extremely ideal
and compatible with McDonald’s.
Italian Factors Influencing Strategic Approach:
• Aging population, high amount of pensioners.
• Low-birthrate
• Sluggish economy, high unemployment.
• McDonald’s low-cost leadership strategy fits
perfectly with these.
• Focus will be much less on children than in the
US.
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Beginnings of the Franchise
History
– 1954 Ray Kroc became the first franchisee appointed by the McDonald Brothers
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Original Goal
– 1957 Quality, Service, Cleanliness and Value (Q.S.C. & V.) became the company motto.
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1963 First Billion
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One billion hamburgers sold.
The 500th restaurant opened.
The 500th student graduates from Hamburger University.
Ronald McDonald made his debut.
McDonald's net income exceeded $1 million.
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Stock Market
– 1966 McDonald's Corporation went public.
– 1967 McDonald's listed on the New York stock exchange on the 7th May.
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First Global Store
– 1967 The first restaurants outside of the USA opened in Canada and Puerto
Rico.
Enters Europe
– 1974
– New countries - England, Netherlands, Antilles, Guatemala.
– The 3,000th McDonald's restaurant was opened in Woolwich, England the first in the UK. The
company admitted that NOBODY went in and later decided to target children with TV ads.
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Italy last European Hold Out
– 1986
– McDonalds opens World’s largest McDonald’s in Rome
Locations Across Europe and Italy
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#1 US 12,804
#2 Japan 3,598
#3 Canada 1,154
#4 England 1,115
#5 Germany 1,091
#6 France 857
#7 Australia 701
#8 Taiwan 338
#9 China 326
#10 Italy 290
• By Capita
• #1 USA
• #2 New
Zealand
• #5 Japan
• #28 Italy
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By GDP
#1 New Zealand
#2 Australia
#6 Japan
#34 Italy
McDonald’s Architecture
Menu/Pricing
Medium McDonalds Meal:
Big Mac Fries and Drink
€6.00/$8.03 in Italy
1 Euro Menu
The Last Holdout
• Italy was the last Western European Country to have a McDonalds
– Firs McDonalds opened in 1986 in Rome
• Traditional Italian Eating Habits
– Breakfast is a light meal
• Biscuits, Baked Bread, Coffee
– Snack (10-11am)
• Crackers, Fruit,
– Lunch is normally made of many courses
• Usually if meat is served for lunch wont be for dinner.
– Snack (4pm)
– Dinner is light as well
• Soup, Chicken Stock, Small Pasta
• Italian Family Values
– The family is the centre of the social structure
Italy is no Exception to Change
• Changing Trends
– Global Modernization has affected the family setting
– Launched the first McDonald’s in Rome on 1986
• More and more families have both parents working outside the
home
– meal preparation has become more and more difficult to
schedule into a hectic routine. This has lead to the change of
healthy Italian eating habits.
• Traditional Italian Cooking has changed
– Meals need to be prepared quickly
– Traditionally slow-cooking methods
– Many Families have are abandoning customary eating habits
Changing eating Habits
• Fast-food chains are not as popular in the smaller Italian
towns, but have a clear presence in large cities.
• This is having an impact on one of the world's healthiest
nations.
• Changing customs in order to adapt to the modern world
• More women have careers and work outside of the home
– customary home cooked meals are a lot less frequent. This
leaves the two main courses that Italians gravitate towards
to convenience foods.
From then to Now
• What had been a family event is now about convenience and
speed
• What had been about quality and the skill of cooking is now
about fitting a meal into the schedule of the family
• Types of Meals have changed
– Meals in the past often did not use meat as a center of the meal.
– Meals were served in courses which increased family time and was
considered a stress reliever
• Now fast food is in modern society
– Most meals use meat as the center
– Fast food is served Fast
– This new habit leads us to the success of McDonalds and other Fast
Food Restaurants
McCafe Showing Great Success
• Food/Beverage outlet observers have proclaimed
McCafe is the most important McDonalds innovation
since its breakfast line.
• McDonalds Europe has flatly stated it sees itself in
time via the McCafe concept becoming the largest
coffee retailer in Europe.
• Some McCafes even have separate seating areas.
Many variations are being tested for success in varying
national markets.
• The European Division is proclaiming it will soon have
1,200 McCafes in its theater of operations.
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For Europe, McCafes have been a feature in Irish outlets
for the past few years, and have spread to Germany,
France, Italy and other national markets.
McDonald’s Meeting Cultural Needs
• McDonald’s latest effort to “go Italian” The McItaly Menu
– Items on the McItaly menu are 100% Italian Products
– Italians have always supported locally grown and homemade
products. Now Italy’s government has allied itself with McDonalds
to source food locally.
• Italy’s Agriculture Ministers supported the new “go Italian”
wearing McDonald’s apron at the launch of the ‘McItaly’
– Two new sandwiches and a salad featuring all-Italian produce.
– The new sandwiches will use 1,000 tons of Italian agricultural
products a month
– Will help Italian farmers grappling with tough economic times.
– The McItaly menu offers various types of locally grown fruits and
salads as well.
Mc Donald’s Challenges
• Global Issues
– Target of anti-globalization protests
– It is often blamed for obesity and excessive packaging waste
– Franchising problems
• Criticisms
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seen as a symbol of American domination of economic resources.
allegations of exploitation of entry-level workers
selling unhealthy food, production of packaging waste,
exploitative advertising (especially targeted at children, minorities, and low-income
people),
– contributing to suffering and exploitation of livestock.
Mc Donald’s Challenges
• Legal cases
– McDonald's took two anti-McDonald's campaigners, Helen Steel and Dave Morris, to
court for a trial lasting two and a half years the longest in English legal history
– criticized for its approach to preserving its image and copyrights. It has threatened many
foodservice businesses with legal action unless they drop the Mc or Mac from their
trading name.
– 26-year legal action against an Illinois restaurant owned by a man named Ronald
McDonald
– McDonald's sued a restaurant in Kingston, Jamaica, because of trademark infringement,
although it had opened in 1971, before McDonald's entered the Jamaican market
– In July 2001, McDonald's was fined £12,400 by British magistrates for illegally
employing and over-working child labor in one of its London restaurants
Mc Donald’s Challenges in Italy
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When world's largest McDonald's opened in Rome in 1986. Some called the new
425-seat unit the "death of Italian cuisine‘
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many irate citizens protested its presence and asked the government to close the
restaurant.
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"tremendous backlash' to American fast food by many Italians
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labor laws made it difficult to hire part-time workers for split shifts at noon and
night shifts
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Famous Italian designer Valentino sued the McDonalds, charging that the smell of
their fries were ruining his clothes. A long battle ensued, which resulted in
McDonald's fixing venting and airflow
Mc Donald’s Challenges in Italy
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Italy’s slow-food movement, led by a non-profit organization that opposes fast
food, criticized the government’s endorsement of McDonald’s Corp.’s new line of
McItaly burgers in early 2010.
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When Italian agriculture Minister Luca Zaia endorsed Mcdonalds , some critics said
that he was selling out to a multinational corporation
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Zaia responded by saying that the McItaly campaign would prompt McDonald’s to
spend 3.5 million euros ($4.8 million) a month buying food from Italian farmers
which will be a boost to the Italian economy
Mc Donalds in Italy – Success factors
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McDonald's bought out their competitor, Burghy, a chain that belonged to Italy's
largest meat producer, Cremonini. McDonald's took over all Burghy restaurants
and in exchange Cremonini became the sole meat supplier for McDonald's in Italy
and parts of Europe
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Turning the young into McDonald's fans was easy, but convincing older
generations was quite difficult. To win over the parents McDonald's introduced
healthier food options like salad and pasta bars
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Business agreement with Italian oil giant Agip. This agreement allowed the
opening of many more restaurants in Agip gas stations, giving those on the road a
one-stop shop-and-gas option
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Introduction of franchising, moving away from a controlled corporate
environment. Franchising led private citizens and small businesses to invest and to
spread the chain.
Mc Donalds in Italy – Success factors
• McDonald's Teamed Up With Italian Government – political influence
and support
•Focused on locally grown and homemade products , to source food
locally – helped convince Italian people.
•McDonald’s to add $4.8 million monthly to the Italian economy due
to its use of local produce.
Controversies Still Exist
• Former McDonald’s Italia head is appointed Italy’s
Cultural Director
– Mario Resca was the head of McDonald’s Italia for 15
years. Recently, he was appointed as the director of
museums and archaeological sites for all of Italy. Fears
quickly arose that he would “McDonaldise” precious Italian
culture. MP Manuel Ghizzoni, an opposition spokesman
on cultural affairs, said “I’m lost for words… What's the link
between hamburgers and the extraordinary cultural
heritage of Italy?” Mr. Resca came back and said, "I don't
want to 'McDonaldise' Italy's culture but we want
multinational companies to choose Italy to launch
products like the iPod. It would be a fantastic opportunity
for the company and good for Italy's image."
Competition in Italy
• Burger King
– Burger King sponsors local concerts to try to get
their name in the public eye. This is an innovative
way to advertise and is something that
McDonald’s is not currently doing.
– This isn’t much information available about
McDonald’s second biggest rival, Burger King, in
Italy. McDonald’s third largest competitor,
Wendy’s, hardly has a presence in Italy.
Competition in Italy, cont.
• McDonald’s innovative advertising
– McDonald’s renews their UEFA EURO sponsorship
until 2012. Upon doing this, they became the
sixth global partner for the flagship national team
competition. This sponsorship includes integrated
broadcast rights in Europe as well as the exclusive
rights to a number of marketing and promotional
campaigns across the restaurant chain in Europe
giving fans a chance to compete for relevant
sports tickets.
Local Competition
– In 2006, McDonald’s was met with defeat in the city of Altamura. It
turns out that the local residents of Altamura, a small town in
southern Italy, were very proud of their local food and the culture that
was threatened by the introduction of a McDonald’s in early 2001.
Luca Digesu, a fourth generation baker, opened Antica Casa Digesu, a
small bakery right next to the McDonald’s. He opened the store with
the intention of stealing some customers away with the more
preferred local tastes. “’What took place was a small war between us
and McDonald’s,’ said Onofrio Pepe, a retired journalist who founded
an association here devoted to local delicacies. ‘Our bullets were
focaccia. And sausage. And bread. It was a peaceful war, without any
spilling of blood.’” The McDonald’s didn’t do well but was able to stay
open for five years. When the McDonald’s realized that their local
competition was going next door, they started offering school field
trips to visit their kitchens, free rentals for children’s birthday parties,
coupons for the children, and a large-screen television for customers
to watch football. In the end, the local competition won out.
McDonald’s closed its doors in 2006.
McDonald’s Moves Forward in the 21st
Century
• Responding to Health Issues
– In 2001, CEO Jack Greenberg responded to health issues by
stating the following: “We’re selling meat and potatoes
and bread and milk and Coca-Cola and lettuce and
everything else you can buy in a grocery store. What you
choose to eat is a personal issue. Every nutritionist I’ve
talked to says a balanced diet is the key to health. You can
get a balanced diet at McDonald’s. Nobody’s mad at the
grocery store because you can buy potato chips and
pastries there. Nobody wants a full diet of that either.”
– At the same time, McDonald’s released a low-fat burger
substitute, the McLean Burger hamburger, which proved
highly unpopular with customers. It was pulled from the
menus shortly thereafter.
• In 2004, McDonald’s introduced the “Go Active!
Adult Happy Meal” which included a Premium
Salad, bottled water, and a pedometer. Despite
McDonald’s efforts, if consumers go to
McDonald’s, they prefer to eat unhealthy.
Furthermore, the community still backlashes by
questioning whether McDonald’s really cares
about the long-term health effects of their other
menu items. The societal effects of using a
product such as this are called externality costs.
New Menu Items
– In 2001, McDonald’s Big Mac was selling well.
McDonald’s took this as a good sign and rolled out
the “Pizza Mia” and the “McToast.” They also
introduced fresh squeezed red orange juice from
Sicily. This was an attempt to “take the plunge
into pizza” products. The toast comes with Italian
cheese.
– At the same time, Burger King added “Spizzico
Pizza” made by Italy’s own Autogrill chain.
• From March 9 to May 24,
2010, McDonald’s offered
kiwi-on-a-stick at select
stores across Italy. This was
the first time that Italian
fruit was offered at a fast
food chain. McDonald’s is
directing this new offering
at women since kiwi is rich
in vitamin C and has good
nutritional value. This was
also an alternative to the
apple currently offered in
the Happy Meal
combination.
Where McDonald’s is Now
– McDonald’s, as well as other fast food chains, have
become more accessible in the 21st century as heavy
traffic and changing working hours no longer allow
the time for elaborate home-cooked meals.
– Despite McDonald’s lackluster sales in the United
States, its global sales continue to climb. Since the
late 1990s, more than half of McDonald’s sales have
come from abroad. In 2008, more than 60% of
McDonald’s’ $23.5 billion sales came from outside the
United States. Specifically, McDonald’s attributed a
lot of these out-performances to sales in Europe.
McDonald’s Europe Interview
• Procurement and business solution manager at McDonald’s Europe Ltd.
(Paris office)
• Education: L'Institut de la Francophonie pour l'Administration et la Gestion
• Key challenge for developing business is regionalization.
• Southern Italy has higher logistics cost, but lower optimal price
points=tighter margins.
• McDonald’s Europe is extremely worried about bailout impacts on their
business.