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Globalisation of McDonald’s

Written by Anna D.

Introduction

McDonald's is one of the world's largest chains of fast food restaurants, which is well-known for its hamburgers. It serves nearly 68 million customers each day in 120 countries all over the world. With its headquarters in the United States, McDonald’s began its operations in the year 1940 as a barbecue restaurant, which was operated by Richard and Maurice McDonald. However, in the year 1948 the restaurant reorganised its business as a hamburger stand by incorporating production line principles. Further in 1955, Ray Kroc became a franchise agent in the company. He later purchased the restaurant chain from the McDonald brothers and managed to expand it on an international level.

McDonald’s Operations

Every McDonald's restaurant in the world is either operated by a franchisee, an associate or the corporation itself. Apart from regular sales through the operated restaurants, McDonald's Corporation collects income through rents, fees and royalties paid by the franchisees. The company primarily specialises in selling cheeseburgers, hamburgers, chicken products, french fries, soft drinks, breakfast items, milkshakes and desserts. However, due to changing consumer tastes, the company has effectively included items such as fish, wraps, salads, fruits and smoothies to its menu. In the financial year 2018, the net earnings of McDonald’s reached US$5.9 billion, and total sales amounted to US$21 billion. Operating more than 32,000 restaurants worldwide, the company employs an impressive number of 1.7 million people (McDonalds, 2018).

Business Model

The company currently holds all the land on which its restaurants are built in the US and earns revenue from rental payment from its franchisees. Interestingly, in the United Kingdom and Ireland, less than 30 percent of the McDonald’s restaurants are franchised and 70 percent are directly owned by the company. However, other countries, McDonald’s operates its restaurants through joint ventures.

Global Operations

With its presence in almost every country, McDonald's has become a significant symbol of globalisation (Potrafke, 2015). This wave of McDonald’s globalisation is often referred to as the ‘McDonaldisation’ of society. Since the start of McDonald’s Corporation, the main aim of the company was to spread its operation throughout the United States and get recognised as a hamburger brand (Miljkovic et al., 2015). While it initially started advertising by directly targeting middle-class and upper-class citizens, it later started offering bargain deals on food items to cater to the needs of people from different sectors. The company also used different entry modes, such as franchising, master franchising, solo ventures and joint ventures, to set its foot in the international market and for its rapid expansion. Depending on the country of operation, the restaurant finalises the menu and selection of meats to suit the culture and palate of the host country (Yeu et al., 2012).

Additionally, the company has been successful in efficiently operating all its restaurants with the help of its unique McDonald’s globalisation strategy, which is based on the four main elements to perfect the business strategy. These elements include pricing, marketing strategies, thinking globally but acting locally and social responsibility.

 

References

McDonalds (2018) Annual Report, Available at: https://corporate.mcdonalds.com/content/dam/gwscorp/investor-relations-content/annual-reports/McDonalds_2018_Annual_Report.pdf#MCD-12312018X10K_HTM_SC1088762024556CFBE18A4A1A544A0C0 [Accessed on 18 May 2019].

Miljkovic, D., Shaik, S., Miranda, S., Barabanov, N. and Liogier, A., (2015) Globalisation and obesity. The World Economy38(8), pp.1278-1294.

Potrafke, N., (2015) The evidence on globalisation. The World Economy38(3), pp.509-552.

Yeu, C., Leong, C., Tong, L., Hang, S., Tang, Y., Bashawir, A. and Subhan, M. (2012) A Comparative Study on International Marketing Mix in China and India: The Case of McDonald's, Procedia – Social and Behavioural Sciences, 65(1), pp.1054-1059.