McDonald's Secret Formula:McDonald's Secret Formula: Can McDonalds' Business Model Be Replicated by Other Organizations?
McDonald's Secret Formula:McDonald's Secret Formula: Can McDonalds' Business Model Be Replicated by Other Organizations?
McDonald's Secret Formula:McDonald's Secret Formula: Can McDonalds' Business Model Be Replicated by Other Organizations?
Patrick J. Carpinelli
May 7, 2021
II
Abstract: McDonald’s business model emphasizes a focus on cost, speed, and consistency.
However, it is their attention towards cultural literacy and the application of this literacy that
promotes their domestic as well as global dominance. It is widely known that McDonalds is
one of the foremost experts of both strategy formulation and implementation based on aspects
an in depth analysis of McDonald’s ventures outside their domestic market is explored. This
study will explore McDonald’s strategy formulation and implementation with regard to their
operations in both India and China in the context of approaches to intercultural competence
from Frons Trompenaars and Edward T. Hall. This study poses the question of whether or not
McDonald’s “secret recipe” for success can be replicated to deliver other companies similar
international success.
Business and Business Law, Regulation, and Ethics. He is a New Jersey native with interests in
Table of Contents
1. Title page
3. Table of Contents
4. Introduction
5. What is Culture
a. Menu
b. Promotion
c. Trademarks
d. Restaurants
e. Employees
f. Service
g. External Analysis
8. Conclusion
9. Bibliography
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Introduction
The world is more interconnected in 2021 than at any other time in human history. With
ideas, culture, and so on. Part of this interconnection comes in the form of private enterprises
expanding past their culturally homogenous society and entering markets that may speak a
different language, hold differing religious beliefs, have different forms of currency (if they have
currency at all), etc. This paper will examine the theory that the ability to understand, and more
importantly, adapt to the cultural differences that foreign market’s embody (independent
variable) is a major determinant of high market share (dependent variable). To test this claim,
this study will apply Frons Trompenaars’ cultural dimensions model in order to study how
McDonald’s menu, promotional, trademark, restaurant, employee, and service adaptations relate
business model can and/or should be replicated by other businesses will be answered.
What Is Culture?
McDonald’s has the highest market share of any fast food company in the world at
around 21 percent (Fast Food Market Share 2021) and with locations in more than 100
countries, understanding the cultural factors as well as the risks and opportunities of operating a
business in each region, country, and culture is undoubtably on the mind of the company. In
employee, and service) are the key reason for this success, it is important to understand what
variables make up a culture. Complex culture is an aspect of human life that separates us from all
other living things on Earth. While many animals exhibit signs of learning, it is the ability to
accumulate culture and build upon it though teaching that has elevated homo sapiens to the level
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of dominance that is clear in one’s everyday life (the food humans eat, the homes we live in, etc.)
simultaneously affecting and being affected by every individual despite not always being evident
on an individual level. Globalization has been at the heart of human progress, however it has also
led to conflict and disconnect due to a lack of intercultural competence. Without a proper
understanding of another’s culture, individuals, corporations, and even nations may fail to
effectively communicate, market, sell, and sell to others with differing cultural values, norms,
beliefs, and so on. If one's culture is an ever changing maze, having knowledge of its general
structure, or better yet, a map of its constantly evolving layout would prove invaluable. Several
prominent theorists, including Frons Trompenaars and Edward T. Hall have attempted to build
Trompenaars’ findings, dubbed the “Cultural Dimensions Model” (Barker 2020) outlines
what Trompenaars found to be seven scales on which individuals’ collective culture is made up:
ascription, specific versus diffuse, neutral versus emotional, sequential time versus synchronic
time, and internal direction versus outer direction (The Seven Dimensions Of Culture 2021).
These seven dimensions measure cultures on a range of categories that together form what we
define as culture.
dimensions model. It measures where a culture stands in relation to the two extremes of the
range (universalist beliefs and particularistic beliefs). For explanation, individuals who display
universalistic views tend to believe that what is ethical/just is definable and that their actions or
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lack of action should be enacted in all circumstances and without consideration for external
factors (Trompenaars 1994). This is similar to Emanual Kant’s categorical imperative. On the
other side of the spectrum, individuals who are considered particularistic believe that
circumstances and conditions (often relationships) play a role in the decision making process,
placement of a culture in the range of these two extremes, it allows a business to better address
aspects of both the front end and back-end of business operations. To give an example, employee
and client contracts may be handled differently depending on whether or not a culture is
The second range within Trompenaars cultural dimensions model addresses a culture’s
tendency to favor individualist ideas or collectivist ideas. To expand on this idea, the concept of
individualism implies a focus on one’s self over others, whereas collectivism flaunts a preference
towards common objectives and goals (Barker 2021). The level at which a culture collectively
adheres to either individualist or collectivist ideas is rooted in the level of belief that people are
part of a group or identifies as an individual. Countries such as Canada, USA, and Norway are
stark individualists, whereas countries like China, Egypt, and France generally possess
employee representation, and so on are all in some way affected by the culture’s individualist or
How humans share information among themselves arguably plays just as important a role
as what they communicate. The level at which a culture is neutral or emotional when
pertains to emotion does not necessarily mean individuals in that society “feel” more or less than
another culture, but that its expression is controlled, and maybe even repressed (Barker 2020 ).
On the other end of the spectrum, cultures that exhibit emotional tendencies are more expressive
of their emotions. It’s important to stress that neither of the two extremes is “better” or “worse”
but instead are two opposing themes with various implications. For one, humor, irony, sarcasm,
and other forms of joking are not often met with the intended laugh in neutral societies such as
Japan or Germany; however, this does not mean that one culture is “funnier than another”.
neutral/emotional dimension of culture. The well-known saying “it’s not what you said but it’s
how you said it'' has some relevance when describing the basis for a culture’s emotional
neutrality or expressiveness when communicating. Along with the actual verbal communication
(where a majority of information is conveyed through words), the tone of voice as well as
nonverbal communication (eye contact, positioning, body language, and so on) are aspects of life
that are included in Trompenaars neutral versus emotional dimension (Trompenaars 1994).
neutral versus emotional dimension. Hall's context model, introduced in his 1976 book Beyond
Culture, separates cultures into being either high context or a low context cultures based on,
among other things, the culture’s communication habits. (Hall 1976). As Hall puts it, high
that the issuer and receiver both have as well as in the setting in which the communication is
taking place, with only a small amount of information contained in the transmitted verbal
message, and the opposite being true of low context cultures (Hall 1976). The presence of both
context and information is crucial to conversational meaning; without either implicit or explicit
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elements, conversation loses its meaning (Kittler, Rygl, and Mackinnon 2011). Examples of low
context cultures include Anglos, Germanic and Scandinavian, while Japanese, Arab and French
cultures are considered high context cultures (Rutledge 2011). A visual representation of these
and further cultures is visible in figures 1 and 2. Both Trompenaars and Hall evaluate a culture
based on the features of its communication, however Hall’s context dimension infers an explicit
become evident later in the paper, McDonald’s takes into consideration both of the models put
forth by Trompenaars and Hall when doing business in counties such as China.
The level(s) at which individuals of a society engage with each other determines where a
society falls in Trompenaars’ fourth dimension of culture: specific versus diffuse. If individuals
of a culture maintain significant distance between life spaces, it would be considered a diffuse
culture. For example, in countries like those in the Middle East, China, and Japan, an
individual’s work and private life are closely intertwined, whereas in specific cultured, the roles
of work and that of private life are segregated. Multinational companies that are able to apply
this dimension of culture into their business operations gain an advantage, as many aspects of
both the customer facing part of operations (i.e. advertising, social media etc.) as well as the
business facing operations (i.e. management) involve this aspect of culture to some degree.
McDonald’s keeps this dimension in mind when operating abroad, as will become evident later
on.
individual status. Achievement based cultures assign status based on how well an individual
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fulfills their role in society (their function). On the other of the spectrum, status/importance in
ascription based cultures is given based on naturally invoked roles (elderly, males, and so on)
(The Seven Dimensions Of Culture 2021). An adept comparison would be status is either rooted
in ones actions (achievement) or who an individual “is” (ascription) (Trompenaars 1994). The
implications of this dimension of culture extend in several directions. For one, the role of rank
and title in the eyes of one culture compared to another varies; achievement cultures assign value
due to one's rank in a company, government, armed service branch, etc. while ascription based
cultures may not. Furthermore, ones rank within a company for example may not be viewed as
equally as important for ascriptive thinking individuals compared to that of achievement centric
culture, although having reasonable authority to speak on behalf of the company, may not be
seen as having proper authority since they are not at the metaphorical helm of the organization;
this would be categorized as being in the back-end of business operations. Companies such as
McDonald’s might utilize this dimension in front end operations as well and will be examined
further.
relationship with time; this is determined by whether a culture views time as sequential or
synchronic. Cultures that view time as sequential often have stricter measures of time and treat it
as a commodity, living by the minute, hour, day, quarter, etc. Synchronic cultures on the other
hand depict time as continuous, believing that the past, present, and future are
interconnected. How a culture views time is vital to many aspects of business; punctuality for
sequential cultures, for instance, is seen as important and showing up late is frowned upon. The
concept of punctuality for synchronic cultures, while still important, is viewed less strictly than
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in sequential cultures (Trompenaars 1994). This is relevant to McDonald’s and other fast food
companies in many ways, two of which are in the management of employees (i.e. in a 40 hour
work week) as well as in the time available for customers to eat. For a fast food business for
example, a culture that leans towards sequential time management (U.S.A.) often eats their meals
very quickly and leaves the establishment shortly after finishing, whereas in synchronous
cultures (France), patrons take their time eating and on average spend more time in the
restaurant.
The last of Trompenaars seven dimensions of culture is internal direction versus outer
direction. In essence, how one interacts with their environment is the basis for this dimension. If
individuals in a culture believe that they are part of their environment and that they have to go
along with what their environment imposes on them, that culture would be considered as an outer
Trompenaars as believing they control their surroundings and therefore seek to change their
environment. This factor of culture has major implications for businesses, including motivation
and success of its employees based on their locus of control to name one (Trompenaars 138).
This is relevant to McDonald’s in a variety of ways, one of which is through conflict resolution,
both internally and in the public eye. An instance of McDonald’s understanding this cultural
dimensions of culture model is to help improve managerial cohesion for companies employing
internationally and not to gage consumers’ preferences, beliefs, tendencies, and other cultural
factors. For the purpose of this examination however, the use of Trompenaars’ model has been
used to analyze where consumer’s cultures lie on the scales he put forth.
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The ability for a company to understand the cultural underpinnings of the market(s) they
operate in is emerging as being crucial to achieving high market share. This is especially true for
multinational businesses, as cultures outside their native market often vary drastically in one or
more dimensions. Therefore, having low intercultural competence or not putting in cultural due
diligence can lead to low market share or even complete failure of that business. Home Depot,
one of seemingly countless multinationals that have maintained low market share or failed when
expanding their business operation abroad, did not clear the cultural hurdles of China when
entering the Chinese market in 2006. Home Depot failed to, among other things, grasp that
Chinese culture did not possess the same “do it yourself” (DIY) attitude that was present in their
home market (Gao 2013).Furthermore, a majority of Chinese live in condominiums that do not
have garages or much extra space to store tools, wood, or other products that Home Depot sells.
On top of this, the price of labor was low, supporting the preference of hiring someone to do a
job rather than buying the needed goods and doing the project themselves (Gao 2013). With less
than sufficient demand for DIY goods (tools, wood, paint, etc.), revenue was under the
operational limit. After less than three years after opening its first store, Home Depot closed all
of its then twelve locations in 2009 (Gao 2013). Seeing as a DIY attitude is typical of an internal
direction culture and China is clearly an outer direction culture, It is evident that Home Depot
failed in China because a lack of cultural competence and failure to adapt effectively.
This particular case is strong evidence that a multinational which fails to understand the
cultural underpinnings of its customers, sets themselves up for failure. To clarify, this is not to
say that expanding into new markets outside their home culture will end in failure. On the
contrary, there are many benefits that are achievable through expanding globally. Proper
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expansion can yield benefits such as spreading fixed costs, pooling purchasing power, reducing
operating costs, leveraging market power, and many others (Gupta and Govindarajan 20001).
Now that low market share has been shown to be the outcome of a lack of cultural competence
and adaptation, the case of McDonald’s, an industry leader in market share (Fast Food Market
Share 2021) will be examined to further support the claim that high market share is the result of
McDonalds has succeeded in more than 100 countries, with over 36,000 locations around the
Research International survey, the “golden arches'', a staple of McDonald's brand recognition,
were recognized by 88 percent of those that participated in the survey, meanwhile, only 54
percent recognized the Christian crucifix (Schlosser 2001). McDonalds earned this type of global
prominence for the most part by providing value through exploiting and expanding its front-end
(customer facing) resources. Exploiting a company’s front-end resources includes (but is not
limited to) expanding its customer base and better serving its customers by providing more and
better products such as new menu items. Furthermore, expanding a company’s resources
includes (but is not limited to) acquiring new market knowledge, adding new brands (such as
McDonald’s early history was centered around adding value through expanding
resources, (i.e. improving quality, efficiency, and consistency) (Ritzer 2015) and to a lesser
extent exploiting back-end components of the business. Although this garnered them domestic
prominence, their global value add strategy, encompassing both exploitation and expansion of
resources is related to cultural competence and is what has been their success defining feature.
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There are countless cases of McDonald’s creating value through its customer-facing part of the
business when operating internationally, however the cases of India, France, Japan, China, and a
few others will be referenced for evidence of this; the first of which will be that of McDonald’s
(Crawford and Humphries 2015). The way in which McDonalds actually executes its
While McDonald’s consistently maintains certain menu items such as their French fries
which are sold in every single one of their locations, many locally offered items are carefully
selected to cater to target populations (Baack, Harris, and Baack 2016). Examples of these
locally targeted menu items include cases of both standardization (a major brand point of
expansion is consistent with its learning about the propensity of local fast food consumption”
(Shen, and Xiao 2014). There are countless cases of McDonald’s doing this when operating
internationally, however the cases of India, France, Japan, China, and a few others will be
referenced for evidence of this; the first of which will be that of McDonald’s in India.
The most recent census results (published in 2011) put India’s population at just over 1.2
billion people; of those 1.2 billion, about 960 million identify as Hindu ("Religion Data 2011).
Because Hinduism practices outline abstaining from meat products as well as elevating the cow
(whose meat is used in many of McDonalds’ conventional menu items) McDonalds changed
much of their menu to appeal to India’s massive population (both Hindu and non-Hindu). Beef
patties were converted to chicken and vegetarian friendly patties, McDonalds’ infamous Big Mac
was changed to the Maharaja Mac, made with lamb and eventually chicken patties instead of
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beef patties (Kannan 2014). The difference in taste preferences was also taken into consideration,
and multiple spices were incorporated into their offerings to appeal further to Indian’s taste
preferences (Kim 2021). Although the adaptation of McDonalds menu items have been altered to
appeal to the Indian cultures preferences, McDonalds maintains its successful strategy of
consistency.
“McDonald's has managed to balance the need to maintain a core identity with making changes
to fit local markets” (Baack, Harris, and Baack 2016). They even preserve a similar layout of its
menu as well as the types of meals they offered is apparent when looking at figure 3 below,
which is taken from a McDonalds location in the Karnataka state capital of Bangalore, India and
Other cases of localized menu offerings include the Greek Mac in Greece, the McMelt in
Brazil, buyram rice porridge in Indonesia, kao fan burger in Hong Kong, and countless more
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(Crawford and Humphries 2015). The sheer number of these adaptations further exemplifies the
extent to which McDonald’s focuses on local culture as a model of globalization (Clark 2021).
Furthermore, McDonald’s often sources raw materials locally based on its locations. For
example, 100% of both angus beef as well lamb that are used in menu items in New Zealand are
sourced from within the country (Crawford and Humphries 2015). Furthermore, “100% British
and Irish beef burger patties, 100% British pork, and even 100% British milk, all locally sourced
foods from British and Irish farms” (Crawford and Humphries 2015), further exemplifying their
Not only does McDonald’s menu offerings take into consideration the target market’s
culture and sourcing of raw materials, but also its marketing and promotional strategies. With
such a wide scope of markets it is present in, Macdonald’s keeps the local culture in mind when
such as partnerships with the Olympics and World Cup, ensuring their brand is seen and
recognized by a majority of world nations. "The Olympic Games has reinforced our reputation as
a truly global brand." Meanwhile, they also promote their brand through locally popular
franchises, and so on. As for the company’s marketing strategy, further culturally specific
targeting is clearly used and is a major reason why their market share is so large. Marketing
campaigns that exemplify this are many, some of which are campaigns in Hong Kong, Indonesia,
and many more. In Hong Kong, McDonald’s recognized the attention and importance the
population places on public welfare and environmental awareness (Crawford and Humphries
2015) and therefore has utilized marketing campaigns to position themselves as a company that
values and works to achieve these goals. In East Asian countries such as Indonesia, McDonald’s
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target audience is the youth (as is also true of most McDonald’s target audiences); therefore
through local market research, they identified that the best way to advertise to the youth target
audience was through television advertising and therefore invested in ads accordingly. This is
because “30% of Malaysian children watch over 8 hours of television per day during holidays
and are exposed to over 2.5 hours of advertisements per day” (Hastings et al. 2007). The reason
for this is appealing to children builds lifetime brand loyalty and they do this through targeted
“songs, jingles, toys, gifts, collectibles, “lovable characters,” and a clown” (Kincheloe 2011).
Despite operating advertising campaigns that portray similar notions that McDonald’s is a
neighborhood restaurant, (Crawford and Humphries 2015) the makeup and methods used vary
In a similar way, McDonald’s alters its trademarks depending on the target market. In
Europe, for instance, McDonald’s has altered its logo and opted to replace the classic red
backdrop with a green backdrop (Crawford and Humphries 2015) This seemingly small change
was meant as a sign that McDonald’s is an environmentally conscious company, a factor that has
become important to consumers with the rise of environmental sustainability support, both an
ecological and sociocultural factor of their general environment that has been addressed by the
company. Albeit a different advertisement than most of the world is used to, the Japanese
advertisement campaign shown below targeted the adult population of their Japanese market.
This is because the trend of costume play is popular among the adult Japanese population, which
McDonald’s identified and adapted their trademark mascot accordingly, exhibiting sociocultural
competence.
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As for McDonald’s restaurants ownership and operation, the company often shifts away
from its company-owned store model when dealing with cultures that differ significantly with
American cultural dimensions. In Asian countries for example, McDonald’s operates many
locations that are run jointly in a 50/50 relationship (Crawford and Humphries 2015). In a way,
the joint partnership reflects the level of glocalization, where more of the company’s localization
strategy is left to the location owners than in say a 100 percent company owned location in
Europe. This model also reflects an understanding of the theoretical approaches of Frons
Trompenaars and to an extent Edward T. Hall. The method of placing cultural underpinnings of a
population on a scale aids in the comparison of cultures to one another. For instance, in countries
Arabic countries, restaurants are 100% owned and operated by local businesses (Commercial
Real Estate Lessons From McDonald’s 2020). In other words, McDonald’s found it more
effective to leave restaurant operations in the hands of the owner, favoring an “act locally”
approach. As for the buildings themselves, McDonald’s does not maintain a standard design
layout for all of their locations, but instead alters them based on a variety of preferences
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(Racoma 2019). “In France, the purpose of food is pleasure, and even a home cooked meal or
something diners savor for a long period” (Rapaille 2006). Therefore, McDonald’s models their
French locations to reflect a sense of comfort and modernity and to appease the French
consumer’s view on food as a means for pleasure. Rapaille, a famous French marketing
consultant, would classify this adaptation as “on code” with the French dining culture. This also
reflects McDonald’s cultural competence as it relates to French synchronous views on time (past,
McDonald’s employees, totaling more than 200,000 as of 2019 (Securities and Exchange
Commission 2020)are also conduits through which the company adapts to different markets.
Although all managers that work for the company follow a development program, various
programs, training programs, and qualifications are used by the company for their employees
based on a few factors. Because France is McDonald’s largest European market by number of
locations (1,485 locations as of year-end 2019), the company has a major stake in the market’s
success (Securities and Exchange Commission 2020). As previously mentioned, the French
view food as a means of achieving pleasure, and as such, prefer a meal prepared by highly
accredited chefs, evident by the French word “chef” being synonymous with a conductor of an
orchestra (Rapaille 2006). With this in mind, McDonald’s supports chefs of their French
country’s qualifications (Crawford and Humphries 2015). This adaptation can be categorized as
adding value through back-end expansion and the result of regulatory as well as sociocultural
Service is another aspect of McDonald’s model for success and is locally adapted. In
countries like China, the relationship between employee and customer is seen more in the
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numerous more employees whose job it caters to the customer’s needs (questions, playing with
customer’s children, etc.) While such a level of service is not as important to customers in the
United States, it is crucial to achieving success in ….. cultures, as can be seen in the following
case.
China was the world’s largest economy as of 2019 (using the purchasing power parity
(PPP) metric) with a GDP over $24 trillion compared to the United States’ 2019 GDP of just
under $21 trillion ("How Big Is China’s Economy? Let The Big Mac Decide" 2020). )
McDonalds opened its first Chinese location in October of 1990 and has expanded its operations
in the country to over 3,300 locations as of 2019 (Securities and Exchange Commission 2020).
So what aided in their seemingly exponential growth in the Chinese market? Their utilization of
distance, etc.) in order to implement certain business strategies based on those underpinnings.
Frons Trompenaars’s cultural dimensions in the context of Chinese culture was referenced many
times over their time in China and was a driving factor in their high market share in the country.
In March 15, 2012, China Central Television(CCTV), a state operated television station,
aired a half hour show aimed towards ousting the McDonald's location in Sanlitun, China for
selling food past their expiration dates. McDonalds, only thirty minutes after the broadcast was
aired, announced the suspension of all operations at the Sanlitun location, but more importantly,
posted an apology on a microblog shortly after their announcement. The apology was forwarded
more than 17,000 times and more than 13,000 comments were left on the McDonald's account,
with one comment reading, “The response speed is impressive! This crisis management! It [is a
model] for learning” (Zhu 289). In the aftermath of the broadcast, McDonald’s management of a
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major crisis became the “gold standard” for crisis management (Zhu 489).McDonald’s social
media response to the crisis is a model for other companies to aim towards and utilizes aspects of
Trompenaars’s seven cultural dimensions model as it relates to the Chinese population. Besides
getting in front of crisis situations early, the use of microblogs as a method to reach the
maximum amount of the Chinese customer market takes into account the strong collectivist as
well as high power distance typical of the Chinese culture. To elaborate, McDonalds understood
how the Chinese are likely to trust information sent (and therefore endorsed) by a friend and due
to the quick spreading nature of social media, trust was restored and even strengthened due to
McDonald’s methods of managing the crisis. The level of service by McDonald’s public
relations staff was also evident of the diffuse culture of China as well.
External Analysis
McDonald’s “formula for success” can be replicated by another firm(s). The first decision that
must be made in order to discover this is in which industry McDonald’s competes in. According
to the company’s stock categorization, it is listed as being in the restaurant industry, more
specifically, the quick service restaurant (QSR) genre of the industry, commonly referred to as
the fast food restaurant industry (Celentano 2019). It is important to note that McDonald’s is not
just a fast food restaurant company; it is also a real estate company, with 36,521 out of their
39,198 locations being operated as franchises (Securities and Exchange Commission 2021).
Therefore, much of the revenue and value to McDonald’s stems from its ownership of either the
building or the land on which the location is built on or both (Jeon et. al. 2016). Its categorization
as a fast food/restaurant company will be used for the industry analysis. Michael Porter’s “five
forces',' outlined in an article in Harvard Business Review, describe five external forces that
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affect a firm inside a given industry: Threat of new entrants, threat of substitutes, bargaining
power of suppliers, bargaining power of buyers, and rivalry among existing competitors,
Threat of new entrants is a fact of Porter’s that affects all businesses; the ability to
account for the ease of entry into an industry through barriers of entry directly affects an
industry’s internal rivalry and components of business such as profit, market share, and so on
(Porter 1979). Potential fast food businesses looking to break into the industry require little
capital to do so. Although the initial cost of opening a location(s) varies depending on a number
of factors such as location, building costs, labor costs, etc., in general, the capital requirement is
relatively low. Furthermore, the learning curve is relatively low; someone looking to open a fast
food location does not require a prerequisite of a degree or particular expertise in order to open a
fast food business. The fast food industry also has high product differentiation, varying
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governmental policy dependent on size, moderate economies of scale factors, and so on. For
these reasons, the general threat of new entrants in the fast food industry is high. (Kasi 2020)
The next of Porter’s five forces is that of the threat of substitutes. Substitute
products/services can be defined as goods that serve a similar function and can replace the
original product or service. The fast food industry operates on the principle that all humans have
to eat, however, food can more often than not be substituted by that of another type of food or
from another source, resulting in a low switching cost for consumers of fast food. What is more
is that substitute products can affect a business like McDonald’s rather quickly, furthering the
need to stay ahead of those looking to cut into business quickly and drastically. If a firm does not
take into consideration this factor, a reduction in prices and/or performance improvements by a
competitor could negatively impact McDonald’s market share (Porter 1979). The fast food
examined carefully by McDonald’s and other firms within the industry and acted upon
accordingly. Taking these aspects of the fast food industry into account, it can be concluded that
What Porter refers to as the bargaining power of suppliers is the third factor that affects
business has either by adjusting their product’s prices, quality, and/or availability (Porter
1979). Fast food companies for the most part have a wide variety of options when it comes to
acquiring the raw materials needed to operate their business (i.e. meat, vegetables, buns, cheese,
etc.) regardless of their region of operation, thus lowering the bargaining power of suppliers of
fast food establishments. Another aspect that contributes to fast food supplier’s bargaining power
comes from the lack of differentiation possible in goods/services supplied to buyers such as
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McDonald’s. There exists relatively low opportunity for fast food suppliers to innovate or
differentiate their product in any meaningful way, lowering their bargaining power over fast food
firms like McDonalds. Furthermore, service differentiation does not make a drastic impact on
supplier power either (Kasi 2020). As a result of the generally high number of suppliers and low
innovation/differentiation levels, the bargaining power of suppliers to the fast food industry is
The bargaining power of buyers in the fast food industry mirrors the bargaining power of
suppliers in a few regards (Porter 1979). Due to the high number of possible suppliers to any fast
food firm, which causes low switching costs for buyers, buyers in the fast food industry
experience higher bargaining power. Another related factor comes in the form of the low levels
of innovation and differentiation typical of fast food suppliers. Suppliers to fast food firms are
also typically not large enough to be in a position to bargain as effectively with large fast food
corporations such as McDonald’s, whose account would most likely by the largest of whichever
supplier the fast food corporation chooses to source its supplies from. In conclusion, it is clear
that buyer power is high in the fast food industry (Kasi 2020)
The final, and arguably most influential factor of Michael Porter’s five forces as it relates
to the fast food industry comes in the form of rivalry among existing firms. Competition in the
fast food industry is extensive; multiple large corporations engage in fierce competition on a
global scale (Balaizs 2016). These tactics include price wars, product/service differentiation,
advertisements, etc. to coax consumers to purchase their products over their consumers, and with
low switching costs for consumers, the rivalry grows. As of 2019, McDonalds clearly holds the
title of the firm which has the highest market share, as evident in figure 6, however others
advertising, product and service differentiation, and so many more. In addition to these factors,
the industry’s high number of small fast food firms, coupled with industry specific factors
contribute to a very high level of rivalry within the fast food industry (Kasi 2020).
In order to survey the landscape that a firm competes in, it is not enough to solely focus
and understand the five forces that directly affect an industry. It is also necessary to understand
the general environment, as it can affect firms in a variety of ways, including, but not limited to,
affecting the shape of each of the five industry forces. An easy way to think about the general
environment can be achieved by breaking it down into eight categories: complementary products
ecological/natural environment, global competitive forces, political, legal, and regulatory forces,
and social/cultural forces (Roseman 2020). Along with any other business, McDonald’s
experiences most, if not all of these general environmental factors, however in the sake of
since they apply more directly to fast food industry firms such as McDonald’s. In their annual
within and among the more than 100 countries where McDonald’s restaurants operate,
and our ability to achieve our business objectives depends on the system's success in
Although the factors included (cultural, regulatory, geopolitical and economic) do in fact pose
threats to their business, they simultaneously provide opportunities for the firm and, as
previously mentioned, the ability to achieve McDonald’s, as well as other firms, business
objectives relies on the understanding and addressing of the relevant categories of their general
The rate at which technological change both within the fast food industry and outside it,
engagement and delivery services (Securities and Exchange Commission 2020) are being made
to address and stay ahead of the curve when it comes to efficiency, brand awareness through
advertising, and overall satisfaction (Baruah 2020). It is the result of McDonald’s continued
appreciation and addressing of this external factor that is important to their maintained
competitive advantage.
both increased risk as well as increased possible reward when it comes to economic factors
unemployment rates, price of raw materials, and so on vary drastically depending on location
(Frue 2018). With operations in over 100 countries, each, if not more than one of these economic
factors could affect the company (and others in the industry) simultaneously. This aspect of a
firm’s general environment directly affects the ability for a company such as McDonald’s to
effectively maintain high market share and also needs to be taken into consideration.
taken lightly. Climate change in general, greenhouse gases, energy and water resource reduction
are all factors that have become on the forefront of consumers’ minds and has affected their
purchasing preferences (Crawford and Humphries 2015). With such a large corporation,
McDonald’s must address their impact on the Earth by reducing their greenhouse gas emissions,
water waste and energy waste. Although not as prominent factor as the others, it remains an
Operating in more than one country, let alone more than 100, carries with it political,
legal, and regulatory factors (especially in the 21 st century) that need to be taken into
consideration. Political instability, such as in the case of the United Kingdom’s withdrawal from
the European Union, affected McDonald’s and is an important factor to address. In a similar
way, laws and regulatory forces pose challenges to both multinationals like McDonald’s as well
as smaller businesses (Frue 2018). Business operations can be adversely or positively affected
depending on the status of regulation standards (i.e. health and hygiene), litigation, taxes, etc.
and are also necessary to account for (Securities and Exchange Commission 2020).
The final, and arguably most relevant factor of McDonald’s general environment is the
social/cultural forces affecting their business. Consumer lifestyle changes such as health
conscious consumption are a major factor that is effecting McDonald’s and the fast food industry
as a whole (Frue 2018). Other sociocultural factors such as religious beliefs, attitude towards
foreign businesses, demographics, and so many more also are vital to its general environment,
and therefore how a company can operate in order to accomplish their goals. As will become
evident later on, McDonald’s focus on this factor is heavily important in how they operate their
business through adaptation to local markets and is a major reason why McDonald’s
continuously accomplishes their goals and maintains a high market share. It is clear that
McDonald’s is the world’s largest fast food company in the world by market share (Fast
Food Market Share 2021). The aspect of their business model that separates them from their
competition is their capability to adapt depending on the market they are serving. This comes in
the form of altering their menu, marketing/promotion, trademarks, restaurants (both the building
itself and the ownership agreements), employee training, and service based on the customer’s
26
understanding the forces that act on its business (and the industry as a whole) as well as the
cultural dimensional underpinnings of the individuals that make up the market they are trying to
(Trompenaars/Hall’s models), they are able to adapt the previously mentioned aspects of their
business to culturally unique preferences, norms, customs, values, etc. while still delivering
superior quality, taste, and service to their customers. It is the combination of these business
practices that has led to McDonald’s to achieve their goal of global market share.
Conclusion
So can this model be replicated and deliver similar success to other businesses? The
answer is yes and no. Although McDonald’s model of using cultural dimensions and adaptation
populations may find trouble utilizing the same model. Furthermore, firms which are situated
outside of the quick service/fast food industry cannot utilize McDonald’s general environment
model specifically. With that being said, a step in the right direction would be for the company to
adapt/modify McDonald’s business model to suit their needs, just as McDonald’s has done with
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