International Business

Strategy ofMc onalds

Dick and Mac McDonald opened their eponymous burger stand in 1948 in San Bernardino, Calif.

Under the guidance of Ray Kroc, McD created a worldwide success story. The first international franchise opened in 1967 in British Columbia, and was followed by another in Costa Rica later that year.Over a six-month period in 1971, Golden Arches popped up on three new continents, as stores launched in Japan, Holland and a suburb of Sydney.A Brazilian McDonald's opened in 1979, bringing Ronald McDonald to South America for the first time.

McDonald's reached its sixth continent in 1992, with the opening of a restaurant in Casablanca, Morocco.

Four years later, the company heralded the expansion into its 100th nation, Belarus.By the end of 2012, McDonald's had grown to 34,480 locations in 120 countries.The Economist publishes a global ranking of currencies' purchasing power based on the prices charged at the local Mickey D's, dubbed the Big Mac Index.

McD’s History

Russia (1990)• Russia debut accomplished after thirteen years of difficult

negotiations and an investment of $50 million. • On the first day of operations, customers lined up outside in

frigid February temperatures and waited up to four hours just to enter the Pushkin Square restaurant. A total of 30,000 people went on the first day.

• High glocalization• 50% of the profits need to be paid to the government. Currently

McD is reinvesting the profits that is made in the country.

China (1992)• McDonalds has grown to 2,200+ restaurants in 20 years. • China perceive McDonalds as being scientifically prepared in a

clean environment. McD has positioned itself as a family restaurant through marketing including having family slogans on their walls, and hiring people from different generations.

• McDonald’s is high on glocalization in China.India (1996):• Sensitivity to Local practices(Discontinued beef and pork), Family

dining experience, Home delivery, Lower prices and 40% market share.

Major Global Ventures

•BUT not everyone in the world has been happy to greet Ronald McDonald when he moves to town. •Seen as a symbol of American economic and cultural chauvinism, and European nations in particular have viewed American-style fast food as an insult to their cherished national cuisines. •Bermuda banned all fast-food restaurants to stop a McDonald's planned for the island. •A French farmer, Jose Bove, became a national hero in 1999 after he and a band of activists destroyed a McDonald's under construction to protest globalization and "bad food." •The next year, a bomb detonated in a French McDonald's, killing a 27-year-old employee. No one claimed responsibility.

•Columnist and author Thomas Friedman has asserted that nations with McDonald's locations do not go to war with each other — Golden Arches Theory of Conflict Prevention — although that thesis notably collapsed in the case of the 2008 war between Russia and Georgia.

•BUT AGAIN, McDonald's is still widely seen as one of the true vanguards of peaceful globalization. After 14 years of discussions with the Kremlin, the Soviet Union's first McDonald's opened in Moscow in 1990 — a move credited with helping thaw Cold War tensions.

Flipping The Coin..

1.Glocal (Global + Local)2.International Expansion3.Franchising4.Pricing5.Brand Equity6.Intense Training7.P.E.S.T. Analysis8.Corporate citizenship9.Customer Loyalty10.Innovative Practices

Success Factors (McDonaldization)

Ingredients of McD’s ‘Secret Sauce’:• Franchisee Partners: 80% of McDonald’s restaurants are

franchised.• Economies of Scale.• Contracts with local suppliers: Use agricultural raw

materials that originate from certified sources by Forward Price Agreements.

• Contracts with companies: Coca Cola, Nestle, Quaker, Renee’s etc

• Recruiting young workers: Helps to keep wage bills down.

• International expansion: Presence in over 120 countries.• Cost-efficient techniques.

Comparative advantage exists when a firm or individual has a margin of superiority in the production of a good or service i.e. where the opportunity cost of production is lower.

Comparative Advantage

Suppliers in America

Lettuce California

Coffee Rainforest

Beef Oklahoma

Potatoes Washington

Fish Alaska

Thank You