MCDONALDS

McDonalds

McDonalds

Introduction

McDonald's background

Two brothers, Richard and Maurice McDonald founded McDonald's in 1937. The brothers developed food processing and assembly line techniques at a tiny drive-in restaurant east of Pasadena, California.

In 1954, Ray Kroc, a milk-shake mixer salesman, saw an opportunity in this market and negotiated a franchise deal giving him exclusive rights to franchise McDonald's in the USA. Mr Kroc offered a McDonald's franchise for $950 at a time when other franchising companies sold restaurant and ice-cream franchises for up to $50,000. Mr Kroc also took a service fee of 1.9 per cent of sales for himself plus a royalty of 0.5 per cent of sales went to the McDonald brothers. The McDonald's brothers sold out for $2.7 million in 1961.

McDonald's first international venture was in Canada, during 1967. Shortly afterwards, George Cohon bought the licence for McDonald's in eastern Canada, opening his first restaurant in 1968. Cohon went on to build a network of 640 restaurants, making McDonald's in Canada more lucrative than any of the other McDonald's outside the USA.

The key to the international success of McDonald's has been the use of franchising. By franchising to local people, the delivery and interpretation of what might be seen as US brand culture are automatically translated by the local people in terms of both product and service. McDonald's now has over 20,000 restaurants in over 100 countries, and around 80 per cent are franchises.

Globalisation versus internationalisation

Globalisation involves developing marketing strategies as though the world is a single entity, marketing standardised products in the same way everywhere. Globalised organisations employ standardised products, promotional campaigns, prices and distribution channels for all markets. Brand name, product characteristics, packaging and labelling are the easiest of the marketing mix variables to standardise.

Globalisation of markets requires total commitment to international marketing; it embodies the view that the world is a single market. For example, Nike trainers, Levi's' jeans and Coca-Cola have all crossed global borders; however, even there, some tailoring of the message is visible.

Internationalisation involves customising marketing strategies for different regions of the world according to cultural, regional and national differences to serve specific target markets. In order to standardise the marketing mix, the strategy needs to group countries by social, cultural, technological, political and economic similarities.

Ohmae (1989) states that “large companies must become more global if they hope to compete. They must change from companies that treat their foreign operations as secondary, to companies that view the entire world as a single borderless market”. Levitt (1983) suggests that, as markets become increasingly similar and more global, the key to success lies in the ability to globalise.

Czinkota and Ronnenken (1995) believe that multinational companies should have to find out how they must adjust an entire marketing strategy, including how they sell and distribute, in order to fit in with new market demands. “Altering and adjusting the marketing mix determinants are essential and vital to suit local tastes, meet special needs and consumers' non-identical requirements” (Czinkota and Ronnenken, 1995).

However, Taylor (1991) supports the view that companies should ...