Corporate Level Strategies of MC DONALDS

Corporate level strategy is a strategy which is aimed at the long term position of a
business. A company for instance, may consider where it will be in 10 years time and
should decide in what ways it should reach the aim by pursuing certain strategies and
directions. A corporate or business can use variety of methods to develop a corporate
level strategy but, there are four main strategies that almost all businesses use which are:
• Concentrate on a single business, which means that the business stays on the same
industry or activity in order to create a strong competitive position within the
industry.
• Diversification; which is to move to a new business to provide a new good or service.
There are two kinds of diversification, related diversification which is to compete in
similar area/industry of activities to build a synergy and unrelated diversification
which is to enter a new industry to compete and build a portfolio strategy.
• International Expansion. This is to compete in more than one market to serve the
needs of the other markets/countries.
• Vertical Integration. This is a way to cut costs by providing your own ways of inputs,
backward vertical integration and your own channels of distribution and selling
outputs by forward integration.

Mc Donald’s is a fast food restaurant operating on a global basis. It is operating on 119

countries world wide. Mc Donald’s was opened for the first time in Cyprus, larnaka in
June 1997 and by now there are 16 Mc Donald’s restaurants in Cyprus.
Mc Donald’s uses corporate level strategies like all other global basis corporations in
order to reach corporate goals to be cost effective.

MC Donald’s is a business which only concentrates on a single task which is the fast food
business industry as stated by Dr. Weber, (2000). This will help the business to
concentrate on a single task and gain power, market share and consumer loyalty in result.
This is because they will run many strategies, plans and researches to find the best
solutions of the consumer needs and preferences. However this can be very risky if the
business fails to meet the right needs of consumers and therefore will not be profitable
and as a result will close down due to bankruptcy.

As stated in Washington post (2005) MC Donald’s diversifies its operations in many

ways. The firm uses related diversification which is to produce similar products which
are burgers and salads mainly but in variety of choices e.g. Big Mac or Mac chicken,
different kinds of salads, and also they operate in more than one geographical area but
still performing the same task. Also it has opened MC cafes all around the world. Mc
Donald’s gains many advantages by doing related diversification, firstly, if there are two
Mc Donald’s restaurants in a city, then the two firms can build a synergy by co-operating
and coordinating together to enjoy the same facilities such as the advertisements,
suppliers and even events such as charity events. Secondly, as stated by Ricky, W (2003),
the firm depends less on a single product, so it’s less vulnerable to competitive or
economic threats. This means that Mc Donald’s having variety of products like burgers,
salads, ice creams and drinks does is not being threaten of competition because it has
diversity in its products, for instance, Mc Donald’s Greek Mac makes it stronger than the
rivals like Burger King because the rivals don’t have such product. Thirdly, it allows the
firm to use technology or expertise developed in one market e.g. fast food to enter a
second market more cheaply and easily e.g. MC Café. However, the only disadvantage
that Mc Donald’s faces, is the cost of coordinating the operations of the related divisions.

In 2001, McDonald's launched a new venture by opening two hotels in Switzerland

(Zurich and Lully) under the name "Golden Arch Hotel. Stefan, M (2005).This is a good
example of an unrelated diversification because Mc Donald’s is spreading the risks of its
business from a single activity to many others like taking part in the Hotel industry.
Unrelated diversification provides a portfolio for Mc Donald’s because it is operating on
two different industries and the risk is reduced because if one of the two markets that the
business has activity in fails to grow successfully, then the growth of the other market
will cover the costs of it. Secondly, such conglomerate strategy is less vulnerable to
competitive threats because any given threat from a competitor is likely to affect only a
portion of its total operations. However, unrelated diversification is very difficult to
manage since the company has to deal with two markets and their strategies, plans and
organization and coordination of each specific market which it is dealing with.

McDonald’s has introduced the American concept of fast food and franchising to many foreign
Markets as stated by, Francine L, (2005). Moreover, the firm has by now, expanded throughout
most of the world by operating on 119 countries. Mc Donald’s is known globally today because it
is expanded internationally. Mc Donald’s is using multi-domestic strategy to serve each nations
needs. It is customizing the fast food menus for each specific country/nation to suit the people’s
wants. For instance there is Greek Mac in Cyprus and Greece. The advantage of this strategy is
that the company is targeting a nation very effectively and gains market share by attracting the
customers whereas, the cost of production will increase in order to add a new feature to the firm
and the prices will rise to cover the costs.

As stated in “Getting the Facts Straight” leaflet of Mc Donald’s, the firm is working with
top suppliers and independent experts on health and safety. The Cyprus Mc Donald’s
restaurants’ inputs such as meat, is ordered regularly from Italy with the highest quality
and when they enter the island, it is supplied to all the franchise branches on the island by
Mc Donald’s vans and trucks. This shows that Mc Donald’s owns its inputs and has its
farms to breed cattle and grow vegetable and potatoes. This allows the firm to lower the
costs by doing vertical backward integration, if not the firm had to pay extra money every
time for getting the supplies. Also it, maintains a guaranteed time, quality and amount of
supply to the restaurants when required. The drawback of vertical integration is that, at
the beginning of the integration huge amounts of capital should be invested in to the
backward integration.

Mc Donald’s business has been working since 1956 till now successfully and still
operates under these corporate level strategies.
References:

• Mc Donald’s website available at: www.mcdonalds.com.cy

• Dr. Webber, w , (2000) available information online at:
http://www.csupomona.edu/~wcweber/301/301slide/ch07301/sld019.htm
• Washington post co. , (2005), information available at:
http://www.washingtonpost.com/wp-srv/business/post200/2005/MACD.html
• Ricky, W (2003) International Business 3rd edition, prentice hall international
• Stefan, M, (2005) information available at:
http://www.thunderbird.edu/about_thunderbird/case_series/2005/_05-0017.htm
• Francine ,L, (2005) information available at:
http://www.ftc.gov/be/seminardocs/04beyondentry.pdf
• MC Donald’s “getting the facts straight” leaflet from Mc Donald’s orphanides.