McDonald’s Global Operations

Naveen Kumar, Ben Roye, Connor Mcmahon, Nathan Maedgen

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.

The Last Holdout• Italy was the last Western European Country to have a McDonalds• 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

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.

• Not everyone is happy about the collaboration between the government and McDonalds– But even Slow Food President Carlo Petrini, is willing "to give 'McItaly' a chance”

Mc Donalds in Italy - Challengeshttp://www.youtube.com/watch?v=K3r0fbydNWA

Controversies:criticism that Italy’s agriculture minister is selling out to a multinational corporation and sacrificing Italy's culinary reputation in the process

Mc Donalds in Italy - ChallengesWhy it took so long?• country that prides itself on four-course culinary extravaganzas

– some called it “death of Italian cuisine”

• citizens protested its presence and asked the government to close the restaurant

• C. Ronald Petty, executive vice president of Burger King's international division, said one reason Burger King does not want to enter the Italian market is the "tremendous backlash' to American fast food by many Italians.

• Slow Food movement a quarter century ago — the international movement that embraces local, organic food and home cooking over fast food and the industrialized food chain.

Mc Donalds in Italy - Issues• According to Wendy's and Burger King executives in Europe, finding

and operating property in a "tightly controlled' environment such as Italy is a difficult undertaking.

• Other American fast-food executives said that Italy simply was a difficult country to do business in.

• frequent labor problems.

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.

• sued Edoardo Raspelli, a critic and commentator for the Italian newspaper La Stampa, after he compared its burgers to rubber and its fries to cardboard

• burgers to add $4.8 million monthly to the Italian economy due to its use of local produce.

McDonald’s Competitors

• In the fourth quarter of 2002, McDonald’s disclosed its first-ever quarterly loss

• Consumers began to switch to its competitors, such as Burger King, Wendy’s, and Subway. These companies emphasized on offering fresher, hotter, high-quality foods at lower price with faster service.

• At the same time, McDonald’s decided to close 719 poorly performing restaurants around world

The Health Issue

• The World Health Organization issued a report detailing how fast food causes obesity in children and is a factor in some cancers

• Trans fat is formed when liquid vegetable oils go through a process called hydrogenation. This trans fat becomes solid at room temperatures

• In 2002, Mickey Ds announced a tremendous cut in the amount of trans fat used and the introduction of improved cooking oil. In 2003, they went to court and it was proved that McDonalds had not switched oils

• In 2004, Jim Cantalupo, the guy credited with turning McDonald’s around, dies of a heart attack

Super Size Me

• In 2004, Morgan Spurlock directed and starred in a documentary in which he ate only McDonald’s food for 30 days

• One of the rules was that he would have to “super size” meal every time if the employee asked him

• He ate an average of 5000 kcals a day, gained 24.5 lbs., experienced mood swings, sexual dysfunction, and fat accumulation in his liver

Continued Focus on Kiddos

• Children are one of McDonald’s biggest consumer groups

• By building brand loyalty with children, McDonald’s believes that it can build stable business

Benefits?

• The effect of McDonald’s entry has been to introduce some positive changes in its host countries and one may therefore consider McDonald’s an agent of economic development.

• McDonald’s provides management training, encourages entrepreneurship, creates backward linkages that develop the capabilities of suppliers, promotes exports, and generates positive externalities in the form of productivity levels and service standards in the countries in which it operates

Looking Forward

• In 2006, McDonald’s was still ranked as the 8th most valuable brand in the world by Interbrands with a market value of $29.4 bn

• How do we get past the public’s malign towards fast food and continue into the future?

The Future

• In 2004, Guy Russo, CEO of McDonald’s Australia, convened the first ever Global Restaurant Managers convention, to “…create an opportunity for restaurant managers across the globe to come together to share ideas, engage in new experiences and make great friends.” Some 3500 store managers from McDonald’s stores worldwide converged on Sydney

• Keep franchising… Franchises make up 59% of the stores worldwide. Bottom up innovations have included the Big Mac, Fillet-o-Fish, and Egg McMuffin

• McDonald’s will continue strong no contract “handshake” relationships with suppliers

• Hamburger University