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McDonald's Growth Strategies

McDonald's uses three main growth strategies: market penetration, market development, and product development. Market penetration, through opening new locations and promotions, is McDonald's primary strategy. Market development focuses on expanding into new global markets. Product development tertiarily supports growth by introducing new products. These balanced strategies have allowed McDonald's to become the leading global fast food brand and continue profitable expansion.

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Joyce Antoinette
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525 views5 pages

McDonald's Growth Strategies

McDonald's uses three main growth strategies: market penetration, market development, and product development. Market penetration, through opening new locations and promotions, is McDonald's primary strategy. Market development focuses on expanding into new global markets. Product development tertiarily supports growth by introducing new products. These balanced strategies have allowed McDonald's to become the leading global fast food brand and continue profitable expansion.

Uploaded by

Joyce Antoinette
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Strategic Management

(McDonald’s Growth Strategy)

De Silva, Joyce Antoinette P.


Ramis, Schaznae
BSA 202
Dr. Angelita P. Ocampo
McDonald’s is the leading fast food organization in the world. It started way back

in 1954. It all started when Raymond Kroc its founder saw a hamburger stall in San

Bernardino, California. He wanted to transform the American Restaurant industry, so he

made himself as a pioneer. Today, McDonald’s is one of the most valuable brands

around the world. The growth strategies determine McDonald’s approach to growing its

business in the global fast food restaurant industry.

McDonald’s uses three growth strategies, the Market Penetration, Market

Development and Product Development. McDonald’s uses market penetration as its

primary strategy for growth. In applying this growth strategy, McDonald’s grows by

reaching more customers in markets where it already has operations. For example,

McDonald’s opens new restaurants in North America and Europe by franchising, joint

ventures or corporate ownership. A strategic objective connected to this growth strategy

is global expansion through new locations. McDonald’s generic strategy supports this

growth strategy because low costs and low prices empower the firm to easily penetrate

markets. Way back 2010, McDonald's in United States had a new strategy to penetrate

the market in the upcoming summer. The objective of market penetration is to sell more

of the current product to the current market segment. This can be a low risk marketing

strategy because often the company knows the product and the segment very well.

What McDonald's is planning to do in the upcoming summer is offer soft drinks, no

matter what size, for a $1. The company would like their locations to become a

destination of preference for beverage buyers for a 150 day period this summer. The

reason the restaurants can offer the soft drinks for $1 is that these drinks usually

account for about a 90% profit margin. Hopefully, by discounting the soft drinks they will
increase consumers, which will therefore buy other products and increase the total

sales mix. Some franchise owners are worried about this promotion that might hurt the

bottom line because the high margin on soft drinks often offsets the low margins on

other products. The McDonald's strategy is to steal customers not only from other

restaurants but from other places consumers buy soft drinks, like 7 eleven. Then when

the customer is in the McDonald's they will introduce other new beverage such as,

smoothies, frappes and ice coffee. The company has a strategy to add $125,000

additional new sales per store in new beverage sales alone.

Market development is now a secondary growth strategy because McDonald’s

already has restaurants in most regions around the world, except Mongolia, some parts

of the Middle East and west Asia, and the majority of African countries. The objective for

this growth strategy is to set up new locations in new markets, As an example

McDonald’s open a branch in African or Middle East countries because there are still no

operating McDonald’s restaurant there. Based on its generic strategy of cost leadership,

McDonald’s supports this growth strategy by using low prices to compete in new

markets. In addition, McDonald’s has adopted a market development strategy for

expanding into growing economies, especially those of Asian countries. The Golden

Arches have set their sights on penetrating Asian market, as those markets have high

income potential. McDonald’s already enjoys unqualified success in Tokyo, Seoul,

Beijing, India and United Arab Emirates, to name a few Asian markets. There are many

other markets throughout the Asian region that offer the promise of high sales, market

share and profit for the creative fast food company that is fast enough on its feet to set

up operations there.
McDonald’s uses Product development as its tertiary or supporting strategy for

growth. In applying this growth strategy, McDonald’s develops new products over time,

such as new McCafé products. As of now they introduced new flavor of their Mcflurry

they made “McFlurry with Oreo Matcha” and “McFlurry with milo” .They also introduced

new flavors of sundae. The “Hazelnut Brownie Oreo Sundae”, “Cookie Dough Oreo

Sundae” and “Butter cream graham sundae” .McDonald’s also releases new flavors of

shake shake fries. The “Cheese” “Barbeque” and “Honey butter”. And also a new

released product is about the flavors of Japan. There are two new flavors of burgers

and one flavor of McFloat and shake shake fries. The new flavors of burger are namely

“Teriyaki Samurai Burger” and “Ebi Burger”, while in the McFloat is called “Strawberry

Sakura McFloat” and last is the new flavor of fries, the “Nori Shake Shake fries”.

McDonald’s also improved their Spaghetti; they stick to the Filipino taste which is the

“sweet” type of spaghetti. Another one is they launched a spicy chicken. These new

products may be variations of existing products, or entirely new products. The strategic

objective for this growth strategy is to capture more consumers by attracting them to

new products. This growth strategy agrees with McDonald’s broad differentiation

generic strategy in terms of new products that make the company distinct.

To sum it up, McDonald’s certainly uses only the three growth strategies which

are the Market Penetration, Market Development and Product Development. It helps the

McDonald’s to aim the winning market share. The company increases their profit,

market sales, and their scale of operations and to reduce the production cost per unit.

By the use of these growth strategies, McDonald’s the leading fast food organization

and still continuing to grow.

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