McDonald’s product improvement strengths/challenges

Table of Contents


  1. Overview of McDonalds. 3
  2. Product Improvement and Performance. 4
  3. Franchising Strategy and Criteria. 5
  4. Advertising. 7
  5. Pricing Strategy. 8

5.1.     Product Line Pricing: 8

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5.2.     Promotional Pricing: 9

5.3.     Penetration Pricing: 9

5.4.     Value Pricing: 9

  1. Problems and Challenges facing McDonald’s franchises. 10

6.1.     SWOT Analysis McDonald’s. 10

6.1.1.      Strengths. 10

6.1.2.      Weaknesses. 11

6.1.3.      Opportunities. 12

6.1.4.      Threats. 12

Reference List 13

1.      Overview of McDonalds

McDonald’s Corporation is the biggest chain of fast food restaurants with more than 58 million customers visiting each day. The corporation has an important restaurant chain, having held a smaller interest in Pret A Manger until 2008 in which it was the principle investor in Chipotle Mexican Grill till 2006 when it owned the restaurant chain Boston Market till 2007.

The McDonald’s Corporation restaurant is controlled by franchisee, the affiliate or corporation itself. The revenues of corporation come from royalties, rent and fees paid by franchisees likewise to sales in the company-operated restaurants. Its revenues boosted by 27% in the last three years which ended in 2007 to $22.8 billion upon the growth of 9% operating income to $3.9 billion (Alter, 2006).

The McDonald’s Corporation basically sells cheeseburgers, hamburgers, French fries, chicken products, shakes, soft drinks, breakfast and desserts. Responding to Western nation’s trends and criticism over products healthiness, the corporation modified its menu to involve alternatives regard healthier like wraps, salads and fruits. The method of management was sequential to ensure the outlet came with relevant goals and more so those goals to be met as expected. As observed, the kind of management assisted the corporation to build its strategies.

The outlet management knew most to achieve the necessary results, their managers ought to have the capability of coming out with the balance between the operational and strategic tasks. As observed, the strategic tasks needed different skills set for operational duties. This enabled every member of their staff or management to work in their management team, work on their own or even collaborate with the most significant stakeholders. As observed, the managers in this kind of management were able to create the global picture of the outlet and its environment within which it operates.

As observed, the strategic process partly involved prioritizing the events and trends about the outlet’s activities. Out of the management team, the tasks would involve the main stakeholders, change of drive, and communicating with the outlet’s employees upon following up of the overall performance.

2.      Product Improvement and Performance

This report illustrates a McDonald food outlet, observation of the operations in the restaurant from various points of view. The business of McDonald’s Corporation started in 1940 with the restaurant opened by Maurice and Richard McDonald brothers in San Bernardino, California (Barrier & Michael 1997). It introduced the principles system in 1948 of a modern fast-food restaurant and in 1967; the company initially filed the U.S. trademark.

The first McDonald’s restaurants started in United States, Canada, Panama, Costa Rica, Germany, Netherlands, France, Australia, Sweden and El Salvador. The nowadays corporation has its foundation on the opening of franchised restaurant by Ray Kroc in Des Planines, Illinois in 1955. The McDonald’s Corporation feuded over the management of business. The site where the first McDonald’s brother’s originally started is now a monument.

With the growth of McDonald’s in international markets, the corporation has become a globization symbol upon the increase of American way of life. The corporation’s prominence became the frequent topic for public debates regarding consumer responsibility, corporate ethics and obesity. As observed, the planning model plays a significant role of attention towards the naturalistic approaches of the outlet’s development. This management system developed basically depending on specific values instead of particular outlet’s procedures. We observed that was unconventional advance of planning. More so, the model offered a wide range of alternatives in which the outlet selects the approach and starts to build its own strategic planning processes. As observed, the outlet chose to integrate the scenario model to actively identify its goals and issues and also the issues-based models to cautiously strategize in addressing of its issues in achieving its goals. As observed, the approach was likewise used in the outlet in conjunction with other models to make sure the outlet’s managers undertook strategic thinking.

As observed, this management enabled the outlet to come up with flexible permanent plans. The management involved the aspects of outlet’s systems thinking as multiple factors were integrated to create a more comfortable future for customers and staff in the outlet. As observed, this system enabled the inclusion of issues that are hard to sanctify like inventions or unprecedented regulations with the corporation. As observed, the management ensured simulation in the outlet which enabled support and analyze of the outlet business activities on various levels of the corporate. Simulation was applied in operational, tactical and strategic levels in the outlet.


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3.      Franchising Strategy and Criteria

McDonald’s has continued to be identified as the foremost franchising company in the globe. It has more than 75% of restaurants in the world owned and managed by its Franchisees.

The below publications have continuously recognized McDonald’s as the leading franchisor:

  • Entrepreneur Magazine: In each year, the entrepreneur magazine lists over 500 with McDonald’s being listed as amongst the top 10 Franchises.
  • Frachise Times Magazine: It put McDonald’s in top position in the list of leading 200 franchises.
  • USA Today: McDonald’s was selected by National Minority Franchise Initiative as one of the leading top 50 Franchises for those minorities.
  • Black Enterprise Magazine: McDonald’s is listed amongst the top 40 best Frachises within African Americans.

The criteria of opening someone’s McDonald’s begin with buying the McDonald’s franchise. To qualify for the convectional franchise, you must possess $250, 000 of your own. The total expenses to begin the restaurant are however about $685, 750 to $1,504,000 which is used to pay for equipments, building and other expenses. However, 40% of this amount must be your own.

The first franchise fee of $45,000 is paid to McDonald’s and other expenses taken to suppliers and this is the only upfront amount paid to McDonald’s. Then this is followed with nine month duration where someone learns about McDonald’s methods of business operations. These include details like McDonald’s standards of service, quality, formulas, value and specifications for menu details, their functioning methods, and inventory control practices. You must agree to function the restaurant from a particular place mostly for duration of 20 years, as per their guidelines for signage, layout, décor and everything that concerns McDonald’s.

After finishing training, you are ready to start your business and McDonalds will give a place they have already established. The outer part of the building will be finished but someone will take care of other internal additions like the kitchen equipment, landscaping and seating. You will to get continuous support from the McDonald’s filed consultants who advise you on other details upon visiting you regularly. The McDonald’s is paid the monthly fee of 4% from your sales or the flat base rent or the percentage rent of 8.5 % from your sales. The amount of money earned is determined by several things like the locations population, location itself efficiency of operating expenses, capability of management and the business control.

Franchising generally deals with paying someone his or her marketing strategy, business strategy, operating strategy and utilization of his name. Franchising come with a lot of benefits as you build association with successful boniness and then utilize their systems and capitalize on their existing brand awareness to earn higher profits on your investment. This comes with using of the business proven name and system and functioning of its regulations. As still you have to answerable to someone else, and follow his requirements, upon using the business name and strategies you also establish your business.

4.      Advertising

McDonald’s has for long time sustained its extensive advertising campaigns. Upon using the normal media like radio, television, and newspaper, the company utilizes important usage of billboards, and signage likewise to sports sponsoring which ranges from Olympic Games to Little League. McDonald’s more so makes coolers of orange drinks with their logo accessible for local activities of all kinds. However, television has performed a crucial duty within the company’s advertising programs. Currently, the McDonald’s has utilized 23 various slogans within the United States in advertisement, likewise for a few other slogans of the selected regions and countries.

Within the years, the McDonald’s has established TV advertising programs resembling its culture and lives. The company’s business has focused on its products and also the entire McDonald’s experience which shows its real slice and warmth for daily life. Its reputation and image in advertisement has become the trademark of the business operations and formed its majority for memorable television themes and moments.

The McDonald’s brands are within 122 countries in the whole world. It has 30,000 locations which serve 51 million customers every day. McDonald’s business has 70% of its restaurants being operated in the entire globe and functioned by self-governing local business people. Moreover, McDonald’s functions the Boston Market, and the subsidiary Redbox which started as 18 foot wide automatically as convenience stores in 2003 though it has focused on DVD rental machines.

Majority of the standalone McDonald’s restaurants give both the drive-through and counter services with outdoor and indoor seating. The Auto-Mac, Drive-Thru and McDrive as it is referred in most countries usually have different stations for paying, placing and picking orders although the other two steps are often combined. In some countries, McDrive locations near highways give no counter or sitting services. Contrary in locations with high density city neighbouring hood usually avoid the drive –through services.

5.      Pricing Strategy
  • Product Line Pricing:

McDonald’s has the unique pricing plans that rely only on their various product lines. They have the Value Meals which fall into the class of Product Line Pricing. Whenever there is a variety of a product or services, the prices reflect its advantages of its parts. For instance, customer can order a two cheeseburger Value meal which comes along with medium drinks and fries for some little more money or rely on other value meal which could involve various items of dissimilar price.

  • Promotional Pricing:

Someone who drives past the McDonald’s notices on their property a building or banner or spelled on their sign, where the y offers some kind of promotional pricing. For instance, currently the Maine McDonald’s is advertising ‘the two sausage McMuffin’s for $3.’ The promotion is usually seen as a big banner wrapped in the hanged on the building on other several restaurants of Maine. This kind of promotion alters weekly and can consist of various menu items which are packaged together.

  • Penetration Pricing:

The first time McDonald’s penetrated into the coffee market they conducted a wide marketing campaign to gather the market share of that industry. For a small time frame, customers could earn the small coffee each morning from 4 to 7 am. This was aimed to boost their new coffee partnership with the Green Mountain Coffee and assisted extend the knowhow that McDonald’s was at the time offering coffee.

  • Value Pricing:

The approach is utilized when external issues like recession or added competition target companies offer the value services and products to retain sales. The most known and recent example is the McDonald’s dollar menu. The Dollar Menu was formed due to McDonald’s being recognizing that the financial status was dropping hence it increased the force against competitors. Introduction to Dollar Menu is currently the most economical offering line that McDonald’s has ever given. You can receive other various products outside their menu for 1 dollar only which is practical and efficient.

6.      Problems and Challenges facing McDonald’s franchises

6.1.   SWOT Analysis McDonald’s

6.1.1.      Strengths

  • The business of McDonald’s has thrived since 1955 and 20 of its top 50 corporate staff employees commenced as the restaurant level employees. Moreover, 67,000 of McDonald’s restaurant managers and their assistants got promotion from restaurant staff. The Fortune Magazine of 2005 listed McDonald’s as the best place in which to work for minorities. McDonald’s spends more than 1 billion dollars yearly in training of its staff and each year more than 250,000 employees enrol from the McDonald’s training facility of Hamburger University.
  • The McDonald’s business is listed number one in the Fortune Magazine’s of 2008 as the most admired food service organization.
  • McDonald’s is known as one of the globe’s recognizable logos and spokes character. As per the Packard Children’s Hospital’s Center, children aged at 3 to 5 were offered with food in McDonald’s packaging and thereafter given the similar food without packaging; hence they preferred the McDonald’s packaged food.
  • The McDonald’s is a community socially, oriented and accountable organization. The business runs Ronald McDonald House facilities and offers room and board, sibling and food support at the only cost of $10 daily for those families with children in need of widespread hospital attention. The houses of Ronald McDonald’s are based in over 259 local communities within the globe and the programs of Ronald McDonald’s care Mobile given the cost affordable to dental, medical and education services to its children. They more so sponsors the Olympic athletes.
  • McDonald’s is a world company functioning over 23,500 restaurants within 109 countries. McDonald’s having located in several locations; it gives them the capability of weather economic changes as localized in various countries. They more so function effectively in the financial downturn because of the social requirement to get the comfort foods.
  • The business has easily and successfully adapted their global restaurants appealing to their cultural differences. For instance, the cater for lamb burgers in India and also the Middle East, where they offer different entrances for single women and families.

6.1.2.      Weaknesses

  • The test marketing for pizza never yielded the required product. This left them not capable to finish with the fast food pizza chains.
  • Great employee turnover in McDonald’s forced to more money spent on training.
  • The restaurant is yet to capitalize on its trends of organic foods.
  • McDonald’s have challenges with problems of functioning and net benefits which lastly effected the investor relations.

6.1.3.      Opportunities

  • The current health conscious societies have the big chance of healthy hamburger introduction.
  • The McDonald’s has industrial and Formica restaurant settings which offer more upscale business settings like that in New York City.
  • Offers optional free allergen food items like the peanut free and gluten free.
  • The business inserted efforts at chicken, breakfast, beverage and convenience categories.

6.1.4.      Threats

  • McDonald’s are the benchmark for coming up with cradle to grave marketing. The business has been condemned severally by most of parent advocate groups for marketing exercises of children usually considered as marginally ethical.
  • McDonald’s has been sued many times for having unhealthy food stuffs with addictives which contributed to obesity. This is more so when they don’t push for the super size option/
  • Sometimes there is the contamination of food suppliers particularly the e-coli.
  • There are main competitors like Starbucks, Burger King, Taco Bell and other medium range restaurants.

Reference List

Alter, S 2006, The Work System Method, Connecting People, Larkspur, CA: Work System Press.

Barrier, Michael 1997, Ties that Bind, Nation’s Business.

Brown, Stanley E 2000, Customer Relationship Management, Wiley, 2000.

Checkland, P 1999, Systems Thinking, Systems Practice, Chichester, UK: John Wiley & Sons.

Friedman, J. Roger, 1997, Quality Service Is Key to Earning Repeat Customers, Nation’s Restaurant News.

Lee, Dick 2000, Customer Relationship Management, High Yield Marketing Press, 2000.

Levinson, Jay Conrad 1997, Ways to Show Your Customers Care, Entrepreneur. October 1997.

Lynn, Jacquelyn, 1997, Good Riddance, Entrepreneur, October 1997.

Maynard, Roberta, Are Your Technicians Customer-Friendly? Nation’s Business.

Paajanen, George, 1997, Customer Service: Training, Sound Practice, and the Right Employee, Discount Store News.

Reichheld, Frederick F 2006, the Loyalty Effect, Harvard Business School Press.

Stewart, Thomas A 1997, Satisfied Customer Isn’t Enough, Fortune.

Sumner, M & Ryan 1994, Critical success factors, Journal of Systems Management. Tschohl, John 1997, Succeeding in Business, Canadian Manager.

Wilhelm, Wayne, and Bill Rossello 2004, the Care and Feeding of Customers, Management Review.

Zemke, Ron, and John A 1999, Best Practices in Customer Service, AMACOM.









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