McDonalds Business Strategy - Essay Example

By 1968, the chain comprised 1,000 units, which rose to 5,000 units by 1978. By 2001, the company operated around 30,000 units worldwide. Whilst keeping menus limited, McDonald's diversified its range from its original hamburgers and cheeseburgers. In 1964, the company launched its Filet-o-Fish sandwich, followed by signature burger the Big Mac in 1968, Happy Meals in 1979 and Chicken McNuggets in 1983. (Keynote, 2003; Leitch; 2004) While the majority of sales remain concentrated on burgers and fries, drinks and desserts are important and the brand periodically experiments with other menu additions, such as salads and local specialities.

McDonald’s currently gearing up for the introduction of a new salad range in 2006. The late-1990s saw McDonald's shift its focus, as burger fast food, especially in the US, seemed dangerously crowded and mature. Consequently, McDonald’s focused on diversification, introducing new menu items and aiming to attract a more adult demographic, while retaining its core consumer base of children. 2000 saw the introduction of salads, low-fat desserts and a wider choice of chicken and fish burgers.

The company also began to relax the McDonald's formula, introducing more regional menu variations and experimenting with new formats, such as cafés and kiosks. This strategy of diversification also resulted in a number of acquisitions during the review period, seeing a shift away from its traditional single-brand focus. In 1998, McDonald’s purchased London-based coffee chain Aroma and in 1999 and 2000 McDonald’s purchased US chains Donatos Pizzeria with an emphasis on “home-cooked meal” style fast food. . The company also began to relax the McDonald's formula, introducing more regional menu variations and experimenting with new formats, such as cafs and kiosks.

This strategy of diversification also resulted in a number of acquisitions during the review period, seeing a shift away from its traditional single-brand focus. In 1998, McDonald's purchased London-based coffee chain Aroma and in 1999 and 2000 McDonald's purchased US chains Donatos Pizzeria (Ohio based), Mexican self-service cafeteria brand Chipotle (Denver based) and Boston Market with an emphasis on "home-cooked meal" style fast food. Beyond acquisitions, McDonald's also made a series of strategic investments.

In February 2001, McDonald's acquired a minority interest (33%) in the British sandwich chain Pret a Manger. In 2002, McDonald's formed a joint venture with Fazoli's, a fast casual Italian restaurant concept based in Lexington, Kentucky, to develop 20-30 Fazoli's restaurants in the US. (Leitch; 2004) This also gave McDonald's the option to purchase the entire company at a later date. The company also opened its first multibranded unit, offering Boston Market, Donatos and McDonald's. However, these acquisitions did not prove wholly successful.

In 2002, the company experienced a difficult year, culminating in its first ever quarterly loss. This poor performance was partly due to weak economies in Latin America and APMEA (Asia-Pacific, Middle East and Africa) and to increasing competition in mature US and Western European fast food. However, the company also felt that its strategy of brand diversification was diluting its focus on core brand McDonald's. In 2002, Aroma was sold to Caff Nero and in 2003