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(solution) 30 PART 1 INTRODUCTION I l &, df!;':t;:'1;,., CASIE 1-2

Using the following guidelines and attached file, write a 2-3 page case study in APA format.

Case Study Guidelines

Please adhere to the following guidelines when you prepare and submit your written case assignments.

1. Provide a top-line/executive summary as the introductory section of each case assignment (i.e.,

summarize the case situation, identify the main issues covered). This summary should be no longer than two to three paragraphs).

2. Answer the case questions provided in the text. Questions are listed at t he end of the written case. Do answer each question separately, number them correctly, and answer them in sequence. Take care to point out the pros and cons of the main topics before you justify your answer. This approach demonstrates critical thinking and problem-solving skills.

3. Identify and discuss issues that you consider to be important or relevant to the case, but are not

covered in the case questions.

4. The case analysis should be 2 - 3 pages in length (i.e ., double spaced, 12 point Times Roman).

5. Please use APA format and in-paper citation (i.e., see syllabus).

6. Be sure to include outside reference sources (and cite them) beyond the text. A reference section is considered additional support material which is not included include references as a 4th page).

7. Be careful not to plagiarize from the case text or other published outside sources of information about the case.



df!;':t;:'1;,., CASIE 1-2 i: ~~~tr)J} ·,1· il McDonald's Expands Globally While Adjusting Its Local Recipe M cDonald's Corporation is a fast-food legend whose famous


golden arches can be found in 118 different countries. The


company is the undisputed leader in the quick-service restaurant


(QSR) segment of the hospitality industry, with more than twice the


system-wide revenues of Burger King. McDonald's built its reputation


by promising and delivering three things to customers: inexpensive


food with consistent taste regardless of location; quick service; and a


clean, familiar environment.


The company was also· a pioneer in the development of convenience-oriented features such as drive-through windows and indoor


playgrounds for children. Today, thanks to memorable advertising and


intensive promotion efforts, McDonald's is one of the world's most


valuable brands. The golden arches are said to be the second most


recognized symbol in the world, behind the Olympic rings. In the


United States alone, McDonald's typically spends about twice as much


on advertising as Burger King and Wendy's.


Today, however, the company faces competitive attacks from


several directions. During the 1990s, a wide range of upscale food


and beverage purveyors arrived on the scene. For example, consumers


began flocking to Starbucks coffee bars where they spent freely on


lattes and other coffee-based specialty drinks. The "fast-casual"


segment of the industry that includes companies such as Panera


Bread, Casi, and Baja Fresh is attracting customers seeking higherquality menu items in more comfortable surroundings. Meanwhile,


Subway overtook McDonald's as the restaurant chain with t he most


outlets in the United States. Some industry observers suggested that,


in terms of both food offerings and marketing, McDonald's was losing


touch with modern American lifestyles.


Until recently, the picture appeared brighter outside the United


States. Thanks to changing lifestyles around the globe, more people


are embracing the Western-style fast-food culture. McDonald's


responded to the opportunities by stepping up its rate of new unit ': i


·' Source: Hasan Jama Ii/AP Wide World Photos. openings. McDonald's International is organized into - three


geographic regions: (1) Europe; (2) Asia/Pacific, Middle East, and


Africa (APMEA); and (3) Other Countries. In 2005, the offices of the


country heads for Europe and Asia were moved from headquarters to


their respective regions; now, for example, the head of APMEA


manages his business from Hong Kong. Commenting on the change,


Ken Koziol, vice president of worldwide restaura nt innovation,


explained, "McDonald's was built on a strong foundation of a core


menu that we took around the world but we need to make sure we


are more locally relevant. Taste profiles and desires are changing." Asia-Pacific


The Indian market appears to hold huge potential for McDonald's. In


fall 1996, the company opened its first restaurants in New Delhi and


Bombay. In Delhi, McDonald's competes with Nirula's, a quick-service


restaurant chain with several dozen outlets; in addition, there are


hundreds of smaller regiona l chains throughout India. The U.S.-based


Subway chain opened its first Indian location in 2001; Pizza Hut, KFC,


and Domino's Pizza have also entered the market The Pizza Hut on


Juhu Road in Bombay is housed in a three-story-tall building with large


plate glass windows and centra l air conditioning. On most nights a


long line of customers forms outside.




Indian demand for meals from the major food chains is growing


at a double-digit rate; annual total sales exceed $1 billion. With those


Donald's identifies strategic locations in areas with


trends in mind, mf


heavy pedestrian traffic, such as the shopping street in Sandra in the


Bombay suburbs. Other restaurant locations include a site near a


college in Vile Parle and another opposite the Andheri train station; in


all, McDonald's India operated 208 locations at the end of 2010. Plans


ca ll for opening another 40 outlets in 2011. Prices are lower than in


other countries; most sandwiches cost about 40 rupees (less than $1 ).


Drinks cost 15 rupees, and a packet of French fries is 25 rupees.


A complete meal costs the equivalent of about $2.


Because the Hindu relig ion prohibits eating beef, McDonald's


developed the Chicken Maharaja Mac specifically for India. Despite


protests from several Hindu nationalist groups, the first McDonald's


attracted huge crowds to its site near the Victori a railway terminal;


customers included many tourists from across India and from abroad as


well as locals commuting to and from work. In short order, however,


Hindu activists renewed their protests, this time accusing t he company


of using beef tallow in its cooking. Management responded by posting


signs reading "No beef or beef products sold here," but the doubts


raised by the controversy kept many potential customers away.


Since that time, McDonald's has worked steadily to prove that it


is sensitive to Indian tastes and traditions. As is true throughout the


world, McDonald's emphasizes that most of the food ingredients it


uses-as much as 95 percent-a re produced locally. In addition, to


accommodate vegetarians, each restaurant has two separate food


preparation areas. The "green" kitchen is devoted to vegetarian


fare such as the spicy McAloo Tikka potato burger, Pizza McPuff,


and Paneer Salsa McWrap. Meat items are prepared on the 'red side.


Even the mayonnaise is made without eggs. Some of the new menu


items developed for India are being introduced in Europe and the


United States.


China is currently home to the world's largest McDonald's; China


is also the fastest-growing market in terms of number of new store


openings. The first Chinese location opened in mid-1992 in central CHAPTER 1 ? INTRODUCTION TO GLOBAL MARKETING


Beijing, a few blocks from Tiananmen Square. Despite having a


20-year lease for the site, McDonald's found itself in the middle of a


dispute between the central government and Beijing's city government. City officials decided to build a new $1.2 billion commercial


complex in the city center and demanded that McDonald's vacate the


site. McDonald's was forced to abandon the location. Despite the


turbulent start, McDonald's now has more than 1,000 restaurants in


China. Plans call for opening 600 new locations by 2013. The restaurants purchase 95 percent of their supplies, including lettuce, from


local sources. "The tastes of the urban, upwardly mobile Indian are evolving,


and more Indians are looking to eat out and experiment. The


potential Indian customer base for a McDonald's or a Subway is


larger than the size of entire developed countries." 31 yellow, and the golden arches are displayed more subtly. Overall, the


restaurants don't look like McDonald's elsewhere. The first redesigned


store is located on the Champs Elysees on a site previously occupied


by a Burger King; called "Music," the restaurant provides diners with


the opportunity to listen to music on iPods and watch music videos on


1V monitors. In some locations, lime green Danish designer armchairs


have replaced plastic seats. As McDonald's locations in France


undergo style makeovers, some franchisees report sales increases of


10 to 20 percent. Encouraged by these results, McDonald's has


embarked on an ambitious program to refurbish several thousand


outlets in various countries. Central and Eastern Europe January 31, 2010, marked the 20th anniversary of McDonald's arrival


in the Soviet Union. The first Moscow McDonald's was built on


Pushkin Square, near a major metro station just a few blocks from the


Sapna Nayak, food analyst at Raobank India


Kremlin. It has 700 indoor seats and another 200 outside. It boasts


800 employees and features a 70-foot counter with 27 cash registers,


In Asia and elsewhere, McDonald's protects itself from currency ·


equivalent to 20 ordinary McDonald's rolled into one. For its 20th


fluctuations by purchasing as much as possible from local suppliers.


birthday celebration, the Pushkin Square location offered customers a


For example, the company's Singapore locations now buy chicken


"buy one, get one free" hamburger promotion; accordion-wielding


patties from Thailand rather than from the United States. However,


musicians provided background music.


French fries must still be imported from Australia or the United States .


Khamzat Khazbu latov was selected to manage the first store;


. To help offset higher costs, McDonald's offers customers the choice of


today, he is director of McDonald's operations for all of Russia.


rice as a side dish at a lower price.


At present, there are 235 McDonald's restaurants in Russia, and the


company employs more than 25,000 people. To ensure a steady supWestern Europe


ply of high-qual ity raw materials, the company built McComplex, a


huge $50 million processing facil ity on the outskirts of Moscow.


The golden arches are a familiar sight in turope, particularly in


France, Germany, and the United Kingdom. There is even a four-star


McDonald's also worked closely with local farmers to boost yields and


quality. Now th~ facility has been turned over to private companies


Golden Arch hotel in Zurich . Overall, Europe contributes about


that today prO'vfae 80 percent of the ingredients used in Russia . For


40 percent of both revenue and operating income, mak ing it a key


world region.


example, W imm-Bill-Dann supplies da iry products to McDonald's; in


France's trad ition of culinary excellence makes it a special case in


2002, it became the first Russian company to be listed on the New


Europe; dining options rang~ from legendary three-star Michelin


York Stock Exchange. Overall, 100,000 people are employed by comrestaurants to humble neighborhood bistros. From the time


panies in McDonald's supply chain .


Ukra ine and Belarus are among the other members of the


McDonald's opened its first French outlet in 1972, policymakers and


media commentators have voiced concerns about the impact of fast


Commonwealth of Independent States with newly opened restaurants. The first Ukrainian McDonald's opened in Kiev in 1997; by


food on French culture . Even so, with nearly 1,000 outlets, France


today represents McDonald's third-largest market in Europe.


2007, the cha in had expanded to 57 locations in 16 cities. Plans call


However, controversy has kept the company in the public eye. For


for up to 100 restaurants, for a total investment of $120 million.


example, some French citizens objected when McDonald's became the


McDonald's has also set its sights on Central Europe, where plans


official food of the World Cup finals that were held in France in 1998.


call for hundreds of new restaurants to be opened in Croatia,


Slovakia, Romania, and other countries. In 2010, McDonald's Czech


In August 1999, a sheep farmer named Jose Bove led a protest against


Republic restaurants featured a specia l lineup of New York-themed


construction of the 851 st French McDonald's near the village of


Millau. The group used construction tools to dismantle the partially


sandwiches that were promoted with the iconic "I Heart NY" logo.


finished structure. Bove told the press that the group had singled out


Advertisements promised "Another burger each week"; the offerings


included Wall Street Beef ("grilled beef, cheese, crispy bacon, fresh


McDonald's because, in his words, it is a symbol of America, "the


place where they not only promote globalization and industrially


'lettuce and onion with BBQ sauce on an oval bun topped w ith sesame


seeds"); Broadway · Chicken; SoHo Grande; Manhattan Grilled


produced food but also unfairly penalize our peasants." In 2002,


Chicken; and Brooklyn Classic.


executives at McDonald's France even ran an ad in Femme Actuelle


magazine suggesting that children should eat only one meal at


"McDonald's comes off as uncool. If you want to be chic, you


McDonald's per week.


eat sushi. Indian food is even more cutting edge. McDonald's is


McDonald's French franchisees experience some of the same


like white bread."


competitive pressures facing the U.S. units; there are also key differences. For example, local bistro operators have enjoyed great success


Daniel, a 26-year-old architectural draftsman in San Francisco


selling fresh-baked baguettes filled with ham and brie, effectively


neutralizing McDonald's advantage of fast service and low prices.


Refocusing on the U.S. Market


In response, executives hired an architecture firm to develop new


Disappointing financial results led to a management shakeup in


restaurant designs and reimage the French operations.




2002, and Jim Cantalupo became CEO. Cantalupo was a retired vice


A total of eight different themes were developed; many of the


redesigned stores have hardwood floors and exposed brick walls.


:hairma~ whose 28~year career at McDonald's included considerab~le ,;


? '_··_::


international experience. He vowed to get the company back on · .,_:;-:


Signs are in muted colors rather than the chain's signature red and . ;~


i 1 I


I 32 PART 1 ? INTRODUCTION track by focusing on the basics, namely customer service, clean


restaurants, and reliable food. Unhappy with the company's recent


"Smile" advertising theme, Cantalupo took the extraordinary step of


calling a summit meeting of sen ior creative personnel from 14 advertising agencies representing McDonald 's 10 largest international


markets. Foremost among them w as New York-based DDB


Worldwide, the lead agency on the McDonald's account that handles


advertising in 34 countries, including Australia, the United States,


and Germany. In addition, Leo Burnett is responsible for ads targeting


children. McDonald's marketing and advertising managers from key


countries were also summoned to the meeting at company


headquarters in Oakbrook, Illinois.


As Larry Light, then-global chief marketing officer for McDonald's,


noted :


Creative talent is a rare talent, and creative people don't belong


to geographies, to Brazil or France or Australia. We're going to


challenge our agencies to be more open-minded about sharing


between geographies.


Charlie Bell, a former executive at McDonald's Europe who was


promoted to chief operating officer, didn't mince words about the


company's advertising. "For one of the world's best brands, we have


missed the mark," he said before the summit meeting. In June 2002,


the company announced that it had picked t he phrase "i'm lovin' it"


as its new global marketing theme; the copy w as proposed by Heye


& Partner, a DDB Worldwide unit located in Germany. Tragica lly,


within a few months, both Cantalupo and Bell died unexpect edly.


Jim Skinner, the company's current chief executive officer, instituted a "Plan to Win" initiative to increase McDonald's momentum.


The core idea was to make McDonald's "better, not just bigger. "


Skinner identified f ive main drivers of McDonald's: people, products,


place, price, and promotion.


Even as McDonald's executives attempted to come to grips with


the problems facing their company, various business experts were


offering advice of their own . lr;i the mid-1990s, one market analyst


said, "McDonald's is similar to Gaea-Cola 10 years ago. It's on the


verge of becoming an international giant, with the United States as a


major market, but overseas as the driving force." Adrian J. Slywotzky,


a'uthor of Value Migration, noted, "McDonald's needs to move the


question from 'How can we sell, more hamburgers?' to 'What does


our brand allow us to consider selling to our customers?"' Mark


DiMassimo, chief executive of a New York-based company that


specializes in brand advertising, called McDonald's "a large lost


organization that is searching for a strategy." In his view, " The


company must focus, focus, focus, and st and fo r one thing."


There is ample evidence that, 10 years after its implementation,


the Plan to Win strategy has been a success. Consumer Reports


lauded the company's efforts to upgrade its coffee program.


Consumers have embraced "better-for-you" menu items such as


· salads and sandwiches. The company is also seeking ways to be


more environmentally conscious by using Jess plastic packaging and


recycling more. Denis Hennequin, the executive in charge of European


operations, is pleased w ith the results of his reimaging campaign. He


said, "I'm changing the story. We've got to be loyal to our roots, w e


have to be affordable, we have to be convenient ... but w e have to


add new dimensions."


Despite the challenging economic environment, McDonald's total


stock return for the 3-year period 2007 through 2009 was the highest


among the 30 companies th at comprise the Dow Jones Industrial Average. The company's strong financial res ults have given it the


resources to move forward with a remodeling initiative for stores in


the United States. The price tag: A whopping $1 billion. Th e upgrades


are partly a response to the positive results from revamped European


operations; the makeover also reflects an appreciation for retail design


principles used by Apple, Starbucks, and other trendsetters. By 2015,


most of McDonald's 14,000 U.S. stores will be updated.


McDonald's executives intend to create a modern, streamlined


environment that will encourage customers to stay longer and spend


more. Some of the changes are dramatic: Gone are the red roofs and


splashes of neon yellow that many associate with iconic spokes-clown


Ronald McDonald. The new color palette includes subtle shades of


orange, yellow, and green. Also on tap: softer lighting and comfortable, stylish new furniture. As Jim Carras, a senior U.S. executive,


noted, "McDonald's has to change with the times. And we have to do


so faster than w e ever have before." Discussion Questions


1. Identify the key elements in McDonald's global marketing strategy. In particular, how does McDonald's approach the issue of


standardization? Does McDonald's think global and act local?


Does it also think local and act global?


2. Do you think government officials in developing countries such


as Russia, China, and India w elcome McDonald's? Do consumers


in these countries welcome McDonald's? Why or why not?


3. The Plan to Win initiative is built around five factors that drive


McDonald's business: people, products, place, price, and promotion . As a student of marketing, what can you say about these .




4. Is it realistic to expect that McDonald's-or any well-known company-c~


pand globally without occasionally making mistakes


or generating controversy? Why do antiglobalization protesters


around the world frequently target McDonald's? s') l, Su..r{M(:,'( ~ Visit the Web Site




for a directory to country-specific sites. Sources: Bruce Horovitz, "McDonald's Revamps Stores to Look More Upscale,"


USA Today (May 8, 201 1), pp. 18, 28; Andrew E. Kramer, "Russia's Evolution, as


Seen Through the Golden Arches," The New York Times (February 2, 2010), p. 83;


Janet Adamy, "As Burgers Boom in Russia, McDonald's Touts Discipline," The Wall


Street Journal (October 16, 2007), pp . A 1, A 17; Jenny Wiggins, " Burger, Fries, and


a Shake-Up," Financial Times (January 27, 2007), p. 7; Steven Gray, " Beyond


Burgers: M cDonald's M en u Upgrade Boosts M eal Prices and Results," The Wall


Street Journal (February 18-19, 2006), pp. A1, A7; Jeremy Grant, " Golde n


Arches Bridge Local Tastes," Financial Times (February 9, 2006), p. 1O; Saritha Rai,


"Tastes of India in U.S. Wrappers," The New York Times (April 29, 2003), pp. W 1,


W7; Bruce Horovitz, "It 's Back to Basics for McDonald's," USA Today (May 21 ,


2003), pp. 1B, 28; Sherri Day, "After Years at Top, McDonald's Strives to Regain


Ground," Th e New York Times (March 3, 2003), pp. A 1, A 19; Sherri Day and


Stuart Elliot, "At McDonald 's, an Effort to Restore Lost Luster," Th e New York


Times (April 8, 2003), pp. B1, 84; Shirley Leung and Suzanne Vranica, "Happy


Mea ls Are No Longer Bringing Smiles at McDonald's," The Wall Street Journ al


(January 31, 2003), p. B1; Shirley Leung and Ron Lieber, "The New Menu Option


at McDonald's: Plastic," The Wall Street Journal (November 26, 2002), pp. D1,


D2; Shirley Leung, "McHaute Cu isin e: Armchairs, TVs and Espresso-ls


It McDonald's? " Th e Wall Street Journal (August 30, 2002), pp. A 1, A6; Bruce


Horovitz, "McDonald's Tries a New Recipe to Revive Sales," USA Today (J uly 10,


200 1), pp. 1A, 2A; Geoff Win estock and Yaroslav Trofimov, "McDonald's


Reassures Italians About Beef," The Wall Street Journal (January 16, 2001),


pp. A3, A6.


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