Case Study Analysis of McDonald's

Arguably the most known and frequently visited QSR (Quick Service Restaurant) brand in the world, McDonald’s currently commands the largest home and international market share amidst changing industry dynamics, consumer confidence and legal issues, and stiff competition from similar fast food chains in the home market such as Subway and Starbucks, as well as Leon, or Tim Horton’s on the international front. The following case study focuses on McDonald’s as the subject and it employs qualitative methods to collect and analyse secondary data, while 12 business analytic tools and models are combined to establish the fast food brand’s current global performance, market position, and possible recommendations for further improvements as the company embraces the new VGP scheme that builds upon the SFG strategy.

Results from the case study reveal an urgent need for McDonald’s to consider attaching more importance to customer well-being and “product quality” by cutting down on the menu and investing in dedicated regional fresh produce farms and food pre-processing plants to curb the issue of food health and quality management, costly breakdowns in the production and supply chain distribution, effects of leadership or supplier change on production, and the management of McDonald’s marketing or organisational health. With its current brand value and expansive distribution channels, McDonald’s will be better positioned in the global market with a smaller menu that would, in turn, create an opportunity for enhanced product differentiation while increasing food quality and customer satisfaction whether in a sit-in, drive thru, take-out, or ordered delivery.

Acknowledgement

I want to thank the almighty God for his guidance and blessing throughout this course, as well as my family and friends for the tremendous mental, emotional, and financial support throughout my academic journey.

A special thank you to all my teachers and other faculty staff members especially my most respected project supervisor Dr. Rajendra Kumar for all the kind advice and understanding. You all provided me with strength and support through the tough times.

Finally, I thank the University for offering me this amazing opportunity to advance my studies in such a wonderful institution, and for sufficiently prepping me for an exciting career ahead. I have gained and learned so much during this MBA course. I am forever grateful.

Table of Contents

Abstract ii

Acknowledgement iii

Chapter 1: Introduction. 1

1.1 Background of Case Study Company. 1

1.1.1 The McDonald’s now. 2

1.1.2 McDonald’s strategy for growth: before and during the SFG to VGP phase. 4

1.1.3 McDonald’s target market share and competition. 5

1.2 Research Problems from the Case. 6

1.2.1 Managing organisational health (MOH) 7

1.2.2 Leading Change (LC) 7

1.2.3 Influencing organisational strategy (IOS) 8

1.2.4 Marketing management (MM) 9

1.3 Case Study Research Questions. 10

1.4 Aims and Objectives of the Case Study. 10

1.5 Significance of the Case Study. 11

1.6 Structure of the Case Study. 12

Chapter 2: Literature Review and Review of Tools for Case Analysis 13

2.1 Overview of the QSR (Quick Service Restaurant) or Fast Food (FF) Industry. 13

2.2 Fast Food (FF) Industry Size. 15

2.3 Growth rate of the Fast Food Industry. 16

2.4 QSR Major players and Competitor Analysis. 16

2.5 Situation Analysis for McDonald’s. 19

2.5.1 P.E.S.T Analysis. 19

2.5.2 S.W.O.T Analysis. 21

2.6 Proposed Plan of Analysis. 22

2.7 Identified Case Study Analysis Models and Tools. 23

Managing Organizational Health. 23

2.7.1 Porter’s generic strategy. 23

2.7.2 The McKinsey’s 7 framework. 25

2.7.3 Ratio analysis. 27

Leading Change. 30

2.7.4 The ADKAR model 30

2.7.5 Kotter’s 8 Steps. 31

2.7.6 The Kurt-Lewin three steps model 33

Influencing Organization Strategy. 34

2.7.7 Porter’s five forces. 34

2.7.8 Value chain analysis. 35

2.7.9 VRIO. 36

Marketing Management 37

2.7.10 The PLC (product life cycle) model 37

2.7.11 Segmentation targeting and positioning. 38

2.7.12 BCG matrix. 38

Chapter 3: Methodology. 40

3.1 Research Philosophy: Positivism. 40

3.2 Research Approach: Inductive Reasoning. 41

3.3 Research Design. 41

3.4 Research Method(s): Qualitative Approach. 42

3.5 Data Collection: Secondary Market Research. 45

3.6 Reliability. 47

3.7 Validity. 48

3.8 Ethical Considerations. 50

Chapter 4: Analysis, Findings, and Discussion. 52

Strategic Analysis of McDonald’s Using Appropriate Models 52

4.1 Managing Organizational Health (MOH) 52

4.1.1 Porter’s Generic Strategies. 52

4.1.2 The McKinsey’s 7 Model 53

4.1.3 Ratio Analysis. 56

4.2 Leading Change (LC) 58

4.2.1 The Kurt Lewin Three Step Model 58

4.2.2 Kotter’s 8-Step Change Model 59

4.2.3 The ADKAR model of change management 61

4.3 Influencing Organizational Strategy (IOS) 62

4.3.1 Porter’s Five Forces. 62

Problem: The moderate threats of new entrants. 62

4.3.2 Value Chain Analysis. 64

4.3.3 VRIO Analysis. 66

4.4 Marketing Management (MM) 68

4.4.1 The PLC (product life cycle) 68

4.4.2 Segmentation Targeting. 69

4.4.3 The BCG matrix. 71

4.5 An Assessment of the Current Position of McDonald’s. 72

4.5.1 Findings from managing organizational health (MOH) 72

4.5.2 Findings from leading change (LC) 72

Developing a vision for Change. 72

Elimination of obstacles. 72

Establish short-term goals 72

Building on change. 73

4.5.3 Findings from influencing organizational strategy (IOS) 73

4.6 Integrated Assessment of the Analysis. 75

4.6.1 Best fit solution from the case analysis. 75

4.7 Selection of strategies for success. 75

4.8 Solutions for the research problems. 75

4.8.1 Shifts in home-market dynamics. 75

4.8.2 Marketing management for McDonald’s products: the product problem. 76

4.8.3 The impact of McDonald’s leadership structure on production. 76

4.8.4 The production and supply chain management strategies applied within McDonald’s. 77

Chapter 5: Conclusion. 78

5.1Recommendations. 78

5.2 Action Plan. 79

5.3 Limitations of the Study. 81

5.4 Scope for Further Research. 81

References 1

Appendix A. 24

McDonald’s Customer Loss Rate (%) 24

Appendix B. 25

McDonald’s Financial Performance (2nd Quarter 2018) 25

Appendix C. 26

Assessing Organisational Health. 26

Appendix D. 27

OH Improvement Cycle. 27

Appendix E. 28

McDonald’s Global Market Coverage as at 2016. 28

Appendix F. 29

Financial Report as at September 30th 2018. 29

Bibliography. 30

Chapter 1: Introduction

In response to divergent QSR (Quick Service Restaurants) industry demands driven by evolving consumer needs and increasing competition, fast food franchisor McDonald’s have in the recent past focused on raising acceptability standards and customer dining experience with regard to food availability, quality, and safety (McCorkle 2017, p. 6). Nonetheless, there emerges a paradigm shift in the forces of long-term competitive advantage within the fast food industry, and consequently within McDonald’s itself, where emphasis is placed on performance capabilities and the ability to decisively exploit quick temporary business opportunities to near perfection as opposed to focusing on the “product attribute” (McCorkle 2017, p. 6). Consequently, by harmonizing components of organisational health management, leading change, influencing organisational strategy, and marketing management, the following case study analysis seeks to establish the current market position of McDonald’s in order to explicate the success or failure factors as the company transitions into the Velocity Growth Plan from the extant Scale for Good scheme.

1.1

Background of Case Study Company

McDonald's is a renowned fast food brand that has managed to grow its trademark over the years operating under the principles of “Quality, Service, Cleanliness, and Value” (Gilbert 2009, p. 6). According to the McDonald’s Corporation official website (updated for 2017 - 2018), the global fast food brand was started in 1940 (in California’s San Bernardino) as a Bar-B-Q drive-in eatery with car-hop services and a big menu. In 1948, after closing down for renovations and re-opening in December of the same year, McDonald’s introduced a new 9-item menu featuring the infamous 15-cent hamburger that later became McDonald’s staple, and the self-service drive-in system (McDonald’s Corporation 2017a).

Thereafter, McDonald’s continued to add new [signature] items to the national menu under the McDonald’s brothers and later as it grew into a franchise under the directorship of salesman Ray Kroc, the first franchisee in 1955 (McDonald’s Corporation 2017a; Gilbert 2008, p. 8). Kroc went on to buy out the McDonald’s brothers in 1961 for $2.7 million (Gilbert 2008, p. 10). Additional products to the national menu that came through franchisees include the Big Mac (Jim Delligatti – Pittsburg 1968), the Filet-O-Fish (Lou Groen – Cincinnati 1965), the Egg McMuffin (Herb Peterson – Santa Barbara, California 1975), and the McFlurry Desserts (Ron McLellan – Canada 1995). The official McDonald’s menu has expanded to include chicken nuggets introduced in 1983, and the All Day Breakfast introduced in 2015 (McDonald's Corporation 2017a).

1.1.1 The McDonald’s now

Despite the reticent beginnings (McDonald's Corporation 2017a), and the slump in global performance reported in 2014-2015 (The Star 2014; Neate 2015a, 2015b; Debter 2014; Fifield 2014), Statista (2018a) reports that McDonalds had approximately 235, 000 worldwide employees as at 2017, albeit a significant decrease by almost 50%, compared to the number of employees 5 years earlier in 2012 (~440, 000). Furthermore, over 90 percent and 80 percent of McDonald’s operational establishments in the US market and in the global market respectively currently run under the management of approximately 5, 000 small to medium sized independent franchisees (McDonald's Corporation 2017b).

McDonald’s had 37, 557 outlets as at September 30th, 2018 that generated respective sales revenues of $5.4 billion and $15.8 billion for the quarter and the nine months ended September 30th, 2018 (McDonald’s Corporation 2018b, p. 18). Of the 37, 557 outlets, only 2, 812 were company–operated while 34, 745 were franchised to 21, 586 conventional franchisees, 7, 103 developmental franchisees, and 6, 056 foreign affiliates (McDonald’s Corporation 2018b, p. 8).

Also, since its global expansion driven by innovative progressiveness, inclusiveness, and the integration of locals, the menus have diversified to include ingeniously developed geographical-specific local delicacies such as burgers (e.g the Swiss, French and Brazilian stacks or the Jamaican chicken burger), breakfast meals, McCafe drinks, an assortment of vegetarian options (including the IRN-BRU only sold in Scotland), cold drinks and milkshakes, desserts, salads and wraps, sides and fries, saver menus and happy meals, as well as chicken nuggets and selects or the fish nuggets sold in Spain (McDonald’s Corporation 2017f). These unique McDonald’s products – mostly developed through franchisees - have found their way into other markets with a McDonald’s presence – sometimes reservedly due to cultural differences (McDonald’s Corporation 2017g).

1.1.2 McDonald’s strategy for growth: before and during the SFG to VGP phase

The McDonald’s quest for international expansion began in 1967 with entry into the Puerto Rican and Canadian markets (McDonald’s Corporation 2017a). Strong presence in the global market has continued to include nations like Kazakhstan where the first McDonald’s opened in 2016 (McDonald’s Corporation 2017a). To organize global growth, McDonald’s divided its international market into four major segments’; (i) the US (home) market, Foundational Markets & Corporate, the HGMs (High Growth Markets), and International Lead Markets (McDonald’s Corporation 2018b, p. 13).

Currently, strategy for growth at McDonald’s is based on the VGP (Velocity For Growth) scheme initiated in 2017 that primarily focuses on (i) the fortification of strong areas such as family events and breakfast to Retain existing customers, (ii) offering and enhancing value as well as convenience to Regain

lost customers by improving food quality and taste, and finally, (iii) using snacks and coffee to Convert casual visitors into committed customers (McDonald’s Corporation 2017c).

The growth under VGP is expected to be accelerated by customer experience elevation through innovative technology in the home (US) market, leveraging on delivery services, and revolutionising customer interaction across all modes of service provision – take outs, delivery of orders, eating in, and drive thru’s (McDonald’s Corporation 2017c). The VGP strategy builds upon the Scale for Good (SFG) platform that prioritises critical issues such as being committed to the family unit, providing opportunities for the youth, climate and environmental action, recycling and packaging, sustenance of beef, and supporting local communities by advancing the UN Sustainable Development Goals (SDGs) agenda through encouraging local food production (McDonald’s Corporation 2017d).

1.1.3 McDonald’s target market share and competition

McDonald's has managed to stay relevant throughout the years despite the competition by mainly targeting the young generation (Bauer et al. 2009, p. 284; Simon 2013, p. 4; Anzman-Frasca 2015, p. 1056-1057; Longacre et al. 2016, p. 474) with the expectation that they will be long-term consumers of their products and services (Bauer et al. 2012, p. 491; McCorkle 2017, p. 7-8). According to an FTC (Federal Trade Commission) report, 44 U.S. companies promoting food & beverage products to children and teens (youths) aged collectively between 2 and 17 years spent approximately $2.1 billion on targeted marketing in 2006 and nearly 19.5% lower (1.79 billion) in 2009 (2012, p. 5). Another report by Simon (2013, p. 4) asserts that McDonald’s spends billions of dollars every year on its advertising budget; most of it targeting children. The overall marketing expenditure targeting all age groups including adults totalled to 9.65 billion in 2009 (Federal Trade Commission 2012, p. 5). Particularly, the QSR (Quick Service Restaurant) industry led by McDonald’s spent $714 million promoting their products to the youth in 2009 (Federal Trade Commission 2012, p. 6).

McDonald’s competes on the international landscape based on location, quality, convenience, service, affordability, and product range (McDonald’s Corporation 2017, p. 2; McDonald’s Corporation 2018a). According to the McDonald’s annual report, global competition for McDonald’s is identified under the following IEO (Informal Eating Out) categories (2017, p. 2); (a) street kiosks and stalls, (b) quick service eateries, (c) 100% home cooked food providers, (d) full-service establishments with casual dining, (e) cafes, (f) smoothie or juice bars, (g) cafeterias with self-service, and (h) specialised coffee shops.

1.2

Research Problems from the Case

McDonald’s seems to be suffering from the same problems experienced in previous years such as the dysfunctional management exhibited through its franchisees – especially on a global scale, quality management of the production and supply chain distribution for its ingredients and/or essential raw materials required for all its extensive menu products, and poor food quality (Whitten 2018). Essentially, constant revenue reduction during the 2015 – 2016 periods can be attributed to loss of customers. See Appendix A for rate of McDonald’s annual customer loss. Revenue continued on a downward trend through to the 2nd quarter of 2018 in the home and high-growth markets even as the company reported gains in its NYSE:MCD per share price, overall same-store sales, albeit boosted by international lead markets (e.g. France and the UK), and an increment in net income (Whitten 2018). See Appendix B for bar chart representation of actual vs. projected 2018 2nd quarter financial performance reports.

1.2.1 Managing organisational health (MOH)

Problem issue: Shifts in home market dynamics - Dysfunctional adaptability to changes

One of the greatest problems experienced by McDonald’s is the consistent shift in its home market. The entire food service industry is constantly plagued by an intrinsic tension resulting from the pragmatist and idealist dynamics underpinning the duality of each company’s mission – “revenue vs. people”, “pecuniary feasibility vs. societal morals” (Ashforth & Reingen 2014, p. 479); also extending to the realms of animal, environmental, and social welfare (McCorkle 2017, p. 6). Hence, it is vital for McDonald’s to employ techniques aimed towards managing organisational health (Xenidis & Theocharous 2014, p. 565) in order to control its adaptability to rapid changes (Alman 2010, p. 3; OHDDC 2011) and overcome the high competition characteristic of the fast food restaurant business (McCorkle 2017, p. 3). To assess and determine organisational health metrics, Xenidis and Theocharous (2014, p. 566) suggest a 4-step analysis method as summarised in Appendix C, while the OHDDC (2011) presents an 11-step organisational health improvement cycle as shown in Appendix D.

1.2.2 Leading Change (LC)

Problem issue: The impact of McDonald’s leadership structure on performance

Leadership is a key component in the McDonalds case study as it provides strategic direction in operations according to Lussier and Achua (2015, p. 401). Visionary top to middle level managers at McDonald’s should constantly seek for prospective ways to provide sustainable leadership development and competency models (Carter 2004, p. 297) that define critical change initiative success factors through action learning, assessment/evaluation, coaching (Carter 2004, p. 285-289), as well as reinforcement to the culture of continuous innovations and business growth (Lussier and Achua 2015, p.136; Carter 2004, p. 282-308); including for regional managers (Carter 2004, p. 287-297). Poor leadership styles at McDonald’s have an impact on the brand’s growth because managers directly dictate how the employees perform in their functions, which subsequently has a ripple effect on customer satisfaction (Mourdoukoutas 2016).

1.2.3 Influencing organisational strategy (IOS)

Problem issue: Production and supply chain management strategies applied within McDonald’s

Supply chain and production at McDonald's are directly dependent on each other since efficient production facilitates the timely supply of products and services (Hough & Neuland 2008, p.155). Lack of consistency is, however, a major problem in production especially when contamination risk assessment in the supply chain only includes facility level countermeasures instead of the supply chain level thus facilitating opportunities for unintentional or intentional food fraud or food crime (Manning & Soon 2016, 827). According to Hill et al. (2014, p.300), replicating the United States ingredients supply chain on an international scale is another critical issue faced by the company.

While McDonald’s has been successful in the U.S over time due to the close relationship with its suppliers and substantial control over the production procedures (McDonalds Corporation 2017d), this advantage may not be consistent or applicable in overseas franchises. The main materials and ingredients that require special sustainability attention include coffee, beef, palm oil, chicken, environmentally friendly fiber packaging, and fish (McDonald’s Corporation 2017e) which McDonald’s currently sources from different global suppliers (McDonald’s Corporation 2018b, p. 24; McDonald's Corporation 2009, p. 37-38, 43).

1.2.4 Marketing management (MM)

Problem Issue: Marketing management for McDonald’s products: The product problem

Marketing is a business function that should be held accountable for a company’s performance improvements, and ensuring the progress of shareholders’ value (Terblanche et al. 2013, p. 217; Singh & Pattanayak 2014, p. 408; McDonald’s Corporation 2017, p. 4). The marketing department at McDonald’s is presented by the challenge of running successful marketing campaigns for its products due to its extensive diverse menus both in the home market and in the international market, as well as government regulations (McDonald’s Corporation 2018b, p. 2, 36).

1.3

Case Study Research Questions

1. How has McDonald's managed to overcome paradigm shifts in home market dynamics over the years and what are the present changes constraining the brand’s achievement of the VFG vision?

2. How has McDonald’s leadership structure impacted productivity and performance with regard to attaining objectives set for the VFG strategy?

3. What Production and Supply Chain Management strategies need to be applied within McDonald’s to influence the new organisational strategy?

4. What marketing management strategies should be employed by McDonald’s towards the achievement of the VFG goals?

1.4

Aims and Objectives of the Case Study

The case study aims to investigate and thoroughly analyse McDonald's since 2015, and trace the various transitions undergone by company over the 3 years. The research objectives are:

To assess McDonald’s organisational health in comparison to other fast food chains and franchises. [MOH]

To establish the leadership structure(s) and change management models required to solve business functionality problems leading to underperformance within McDonald’s. [LC]

To clearly understand McDonald’s production and supply chain management practices. [IOS]

To identify the marketing management strategies applied by McDonald’s. [MM]

1.5 Significance of the Case Study

McDonalds is a major retailer in the fast food industry that has continued to grow and expand in various regions throughout the world due to its great influence as an industry giant in the market. Fundamentally, the existence of a loyal customer base since its establishment has ensured its progressive rise and growth. The current case study is imperative to business research as it identifies business models that are required to solve various business function problems. These models establish a metric for the identification of McDonald’s global position, and the necessary structures that need to be developed for the fast food chain to eliminate economic, social, and political issues. Therefore, the case study analyses the effectiveness of leading change, marketing management, influencing organisational strategy, and managing the organisational health of McDonald’s in order to identify key strategic points of improvement.

1.6 Structure of the Case Study

Figure 1: Case study structure

Chapter 2: Literature Review and Review of Tools for Case Analysis

2.1 Overview of the QSR (Quick Service Restaurant) or Fast Food (FF) Industry

In the advent of creative culinary skills and varied offerings on fast food menus, it is imperative for leading brands such as McDonald’s to adopt models of change leadership and management where continuous improvement does not culminate to organisational chaos (Kazmi & Naarananoja 2013, p. 44). However, the hyper-competition and globalisation dynamics characterised by constant changes have rapidly expanded the freedom and range of possible choices for the modern consumer presenting social and technical interaction complexities that require organisations to adapt their designs or strategies ad infinitum (Alcover et al. 2017, p. 5).

The QSR or fast food industry is rapidly growing throughout the world with majority of the fast food retailers such as McDonald’s expanding their businesses within the US (home market) and across borders to other countries (Rasmussen et. al. 2007). Hence, the industry is characterised by intense competition among various companies such as McDonald’s which accounts for a considerably large market share (Drury 2008, p. 274).

The US QSR industry originally began with the sale of hamburgers and hotdogs in Southern California before the practice advanced further throughout the nation with the introduction of a larger variety of food products for the ever growing number of customers (Schlosser 2012, p. 3). According to Schlosser (2012, p. 40) Americans spent approximately $ 6 billion on fast foods in 1970 but this figure significantly increased to $110 billion in 2000. In 2007, fast food sales in the United States reached $179 million; a 5% increase due to the growing number of restaurants that totalled to 248,400 units (Freemark 2018, p.441). On the contrary, despite being the country’s biggest private employer, the industry largely relies on low paid unskilled labour (Royle & Towers 2004, p. 10).

As stated by Miremadi and Kazemzadeh (2016, p.26) the fast food industry market segment is quite flexible and not restricted to any age limits. The purchase of fast foods is a habitual process that regularly develops into community norms (Bowman et. al. 2004). Currently, half of the public’s expenditure on food is spent in fast food restaurants due to aspects related to time saving and availability (Smith 2007, p.45). According to Counihan (2002, p.34), the centralised purchasing aspects of large fast food restaurant chains and the demand for standardised products has given numerous brands power over some countries’ food supply.

The concept of uniformity is another key success factor within this industry because familiar brand images give consumers a sense of reassurance when associated services and products are uniquely the same everywhere in the market (Naung 2015). For instance, McDonald’s chains emphasise on providing the same products and services throughout the franchises since familiar brands influence food consumption and attract consumers (McDonald’s Corporation 2018a, p. 29). Currently, regular US citizens make an average of four orders and three orders for French fries and hamburgers respectively on a weekly basis (Song 2016, p.6). Due to changing customer behaviours and the adoption of healthy lifestyles (Lafay et. al. 2000), McDonald’s has also been investing in providing healthier options for its customers in order to maintain relevance in the market as well as compete with emerging brands such as Chick-fil-A, Shake Shack, and 5 Guys (McCorkle 2017, p. 3).

2.2 Fast Food (FF) Industry Size

Slightly over a decade ago, there were over 200,000 fast food chains in the United States serving fifty million American consumers through various establishments such as drive thu’s, on-site premises, cafeterias, buffets and take-outs (Cullen 2005). As part of strategic expansion, the industry utilised the Small Business Administration (SBA) in financing the development of new fast food outlets (Brody 2017, p.56), hence subsidizing the launch of brands such as McDonalds. On the other hand, government-backed loans facilitated the development of approximately six hundred new restaurants with fifty-two outlets representing various national chains (Jou 2017, p.1).

Recent available global statistics from Euromonitor International show that as at 2016, the IEO segment had ≥9 million establishments (with McDonald’s worldwide coverage accounting for nearly 0.4% of the total) that generated sales estimated at $1.2 trillion within 2016 alone; McDonald’s sales accounted for 7% of the total 2016 IEO sales (McDonald’s Corporation 2017, p. 2). Industry-wise (including full-service restaurants), the total number of food outlets as at 2016 rose to ≥19 million establishments that jointly generated sales of up to $2.4 trillion (McDonald’s Corporation 2017, p. 2). McDonald’s accounted for 3.5% and 0.2% of the total sales and number of establishments respectively (McDonald’s Corporation 2017, p. 2). See Appendix F for McDonald’s revenue report as at September 30th 2018.

2.3 Growth rate of the Fast Food Industry

The growth rate and size of the fast food industry is a clear indication of the continued progress in quality levels, customer satisfaction, and revenue (Vanniarajan 2009). Different brands such as McDonalds have continued to ensure a high growth rate of the industry by investing their resources and time on affordability, consistency and timely delivery of quality services (Mathias et. al. 2001), as well as “healthier foods” (Oches 2011). By the end of 2008, the fast food industry provided employment for over four million individuals as opportunities within the franchises increased by approximately 200,000 jobs every year (Bauer et. al 2009). Nevertheless, this growth rate was challenged by quick service restaurant (QSR) brands whose annual growth was expected to increase by two percent through 2020 (Frynas & Mellahi 2015). Importantly, while the projections made in 2015 to refranchise 4, 000 more restaurants by end of 2018 have been achieved (McDonald’s Corporation 2015, p. 16), the long-term 95% franchising goal is yet to be realised (McDonald’s Corporation 2018b, p. 13). However, McDonald’s has managed to sustain the strong market segments through its core franchising models (McDonald’s Corporation 2015, 2017, 2018a, 2018b). See Appendix E for current McDonald’s global market coverage.

2.4 QSR Major players and Competitor Analysis

Key players within the fast food market include global brands such as Yum Brands (KFC, Taco Bell), McDonalds Corporation, Burger King Holdings, and Starbucks’s international (Statista 2018b). McDonalds has the largest market share since it serves a large customer base globally (Yuece 2012, p. 6). According to Freemark (2018, p.441) top brands such as McDonalds and the Burger King represent sixty percent of the total sales and fast food units within the fast-food sector since 2002. Consequently, these fast food brands have influenced and shaped the food processing and manufacturing industry that supports specific demands for products such as chicken, hamburger patties and French fries (Sachdeva 2015, p.43). However, McDonalds controls the largest market share, and thus, the most valued brand in 2018 due to its high global market share percentage ahead of Burger King, Subway, and KFC among others as shown in the figure below.

Figure 2: Fast Food brand value in US dollars as at 2018 (Statista 2018b)

Furthermore, the brands have revolutionised mass production concepts that further transformed food production, distribution and marketing. For instance, KFC has an influence on the chicken supply chain configuration being one of the main chicken buyers in the world (Christiansen 2014, p.291). KFC provide the basis for the types of chicken farmers should farm, and the quality standards that need to be effected. Burger King on the other hand, is working towards restructuring its restaurants through changing their packages, cleaning the cooking process and changing their uniforms to provide a modern approach to the industry (Wahba 2015). McDonald was placed at 101 percent in average domestic revenue per unit ahead of Burger King in 2010 (Hastings et al 2011, p. 139). Growth within the industry will continue to advance as long as different franchises are able to meet market demands and achieve customer satisfaction. Figure 3 below shows the market share of top fast food restaurants in the US market.

Figure 3: US fast food brand market share

2.5 Situation Analysis for McDonald’s

2.5.1 P.E.S.T Analysis

According to Gupta (2013, p. 35) the PEST – Political, Economic, Social, and Technological - framework of analysis is used to identify ways that organizations are influenced by the macro-environment. PEST analysis is critical for the strategic management of risks and an organisation’s shifting competitive position when reacting to exogenous (environmental) changes that extend beyond the organisation’s control (Sammut-Bonnici & Galea 2015, p. 1).

Figure 4: PEST analysis factors

Table 1: PEST analysis for McDonald’s

2.5.2 S.W.O.T Analysis

Table 2: SWOT analysis of McDonald’s

2.6 Proposed Plan of Analysis

Figure 5: Case study analysis tools

2.7 Identified Case Study Analysis Models and Tools

Managing Organizational Health

2.7.1 Porter’s generic strategy

Introduced by Michael Porter in 1985, the Porter’s Generic strategy is applied by most large firms to gain competitive advantage over business rivals (Hodgkinson 2013, p. 100; Tanwar 2013, p.13). The model demonstrates that every firm’s advantages are based on d