Mc Donalds Global Operations Connor Mcmahon Ben Roye

Mc. Donald’s Global Operations Connor Mcmahon, Ben Roye, Naveen Kumar, Nathan Maedgen

Keys to Success • Collaboration- The ability to get both store and corporate office employees to rally together around key principles and strategies. • Be customer-centric- “The customer is always right. ” Always listen to the customer. What they say they want is choice and value. • Ability to be locally relevant- The business model must vary by region. The franchises must be able to adapt and adjust to local customs. For example, Spam in Hawaii and shrimp in Japan. Customers want to feel that the company understands them. • Be a good corporate citizen- Always reducing energy output, promoting sustainable fisheries, and working to promote environmentally-friendly supply chain practices. • Talent management and leadership development- Provide a leadership institute for top talent to plan their careers and promote diverse teams.

Mc. Donald’s Structure • Geographic structure divided into 5 divisions. • US, EU, Asia/ME/Africa, Latin America, Canada • Strategic approach involves maintenance of leading positions, while expanding in emerging markets. • Geographic structure involves each region being responsible for producing/marketing within a region. • This structure in turn allows for localization. • No central command exists, yet key values dominate all regions.

Brand Strategy • 4 objectives for success: • 1. Widen customer base • 2. Reinvention of brand image (linger, flexible, grab and go) • 3. Stress on value • 4. Expansion of food items

Paninaro • Youth movement of the 80’s. • Met at a new, Italian-owned fast food chain. • Obsession with Americana, fashion, materialism. • Fostered by Reaganomics, Thatcherism, deregulation. • Mc. Donald’s now owns the original Italian fast-food chain. • Environment was extremely ideal and compatible with Mc. Donald’s.

Italian Factors Influencing Strategic Approach: • Aging population, high amount of pensioners. • Low-birthrate • Sluggish economy, high unemployment. • Mc. Donald’s low-cost leadership strategy fits perfectly with these. • Focus will be much less on children than in the US.

Beginnings of the Franchise • History – 1954 Ray Kroc became the first franchisee appointed by the Mc. Donald Brothers Original Goal • – 1957 Quality, Service, Cleanliness and Value (Q. S. C. & V. ) became the company motto. 1963 First Billion • – – – • One billion hamburgers sold. The 500 th restaurant opened. The 500 th student graduates from Hamburger University. Ronald Mc. Donald made his debut. Mc. Donald's net income exceeded $1 million. • Stock Market – 1966 Mc. Donald's Corporation went public. – 1967 Mc. Donald's listed on the New York stock exchange on the 7 th May. • First Global Store – 1967 The first restaurants outside of the USA opened in Canada and Puerto Rico. Enters Europe – 1974 – New countries - England, Netherlands, Antilles, Guatemala. – The 3, 000 th Mc. Donald's restaurant was opened in Woolwich, England the first in the UK. The company admitted that NOBODY went in and later decided to target children with TV ads. • Italy last European Hold Out – 1986 – Mc. Donalds opens World’s largest Mc. Donald’s in Rome

Locations Across Europe and Italy • • • #1 US 12, 804 #2 Japan 3, 598 #3 Canada 1, 154 #4 England 1, 115 #5 Germany 1, 091 #6 France 857 #7 Australia 701 #8 Taiwan 338 #9 China 326 #10 Italy 290 • By Capita • #1 USA • #2 New Zealand • #5 Japan • #28 Italy • • • By GDP #1 New Zealand #2 Australia #6 Japan #34 Italy

Mc. Donald’s Architecture

Menu/Pricing Medium Mc. Donalds Meal: Big Mac Fries and Drink € 6. 00/$8. 03 in Italy

1 Euro Menu

The Last Holdout • Italy was the last Western European Country to have a Mc. Donalds – Firs Mc. Donalds opened in 1986 in Rome • Traditional Italian Eating Habits – Breakfast is a light meal • Biscuits, Baked Bread, Coffee – Snack (10 -11 am) • Crackers, Fruit, – Lunch is normally made of many courses • Usually if meat is served for lunch wont be for dinner. – Snack (4 pm) – Dinner is light as well • Soup, Chicken Stock, Small Pasta • Italian Family Values – The family is the centre of the social structure

Italy is no Exception to Change • Changing Trends – Global Modernization has affected the family setting – Launched the first Mc. Donald’s in Rome on 1986 • More and more families have both parents working outside the home – meal preparation has become more and more difficult to schedule into a hectic routine. This has lead to the change of healthy Italian eating habits. • Traditional Italian Cooking has changed – Meals need to be prepared quickly – Traditionally slow-cooking methods – Many Families have are abandoning customary eating habits

Changing eating Habits • Fast-food chains are not as popular in the smaller Italian towns, but have a clear presence in large cities. • This is having an impact on one of the world's healthiest nations. • Changing customs in order to adapt to the modern world • More women have careers and work outside of the home – customary home cooked meals are a lot less frequent. This leaves the two main courses that Italians gravitate towards to convenience foods.

From then to Now • What had been a family event is now about convenience and speed • What had been about quality and the skill of cooking is now about fitting a meal into the schedule of the family • Types of Meals have changed – Meals in the past often did not use meat as a center of the meal. – Meals were served in courses which increased family time and was considered a stress reliever • Now fast food is in modern society – Most meals use meat as the center – Fast food is served Fast – This new habit leads us to the success of Mc. Donalds and other Fast Food Restaurants

Mc. Cafe Showing Great Success • Food/Beverage outlet observers have proclaimed Mc. Cafe is the most important Mc. Donalds innovation since its breakfast line. • Mc. Donalds Europe has flatly stated it sees itself in time via the Mc. Cafe concept becoming the largest coffee retailer in Europe. • Some Mc. Cafes even have separate seating areas. Many variations are being tested for success in varying national markets. • The European Division is proclaiming it will soon have 1, 200 Mc. Cafes in its theater of operations. • For Europe, Mc. Cafes have been a feature in Irish outlets for the past few years, and have spread to Germany, France, Italy and other national markets.

Mc. Donald’s Meeting Cultural Needs • Mc. Donald’s latest effort to “go Italian” The Mc. Italy Menu – Items on the Mc. Italy menu are 100% Italian Products – Italians have always supported locally grown and homemade products. Now Italy’s government has allied itself with Mc. Donalds to source food locally. • Italy’s Agriculture Ministers supported the new “go Italian” wearing Mc. Donald’s apron at the launch of the ‘Mc. Italy’ – Two new sandwiches and a salad featuring all-Italian produce. – The new sandwiches will use 1, 000 tons of Italian agricultural products a month – Will help Italian farmers grappling with tough economic times. – The Mc. Italy menu offers various types of locally grown fruits and salads as well.

Mc Donald’s Challenges • Global Issues – Target of anti-globalization protests – It is often blamed for obesity and excessive packaging waste – Franchising problems • Criticisms seen as a symbol of American domination of economic resources. allegations of exploitation of entry-level workers selling unhealthy food, production of packaging waste, exploitative advertising (especially targeted at children, minorities, and low-income people), – contributing to suffering and exploitation of livestock. – –

Mc Donald’s Challenges • Legal cases – Mc. Donald's took two anti-Mc. Donald's campaigners, Helen Steel and Dave Morris, to court for a trial lasting two and a half years the longest in English legal history – criticized for its approach to preserving its image and copyrights. It has threatened many foodservice businesses with legal action unless they drop the Mc or Mac from their trading name. – 26 -year legal action against an Illinois restaurant owned by a man named Ronald Mc. Donald – Mc. Donald's sued a restaurant in Kingston, Jamaica, because of trademark infringement, although it had opened in 1971, before Mc. Donald's entered the Jamaican market – In July 2001, Mc. Donald's was fined £ 12, 400 by British magistrates for illegally employing and over-working child labor in one of its London restaurants

Mc Donald’s Challenges in Italy • When world's largest Mc. Donald's opened in Rome in 1986. Some called the new 425 -seat unit the "death of Italian cuisine‘ • many irate citizens protested its presence and asked the government to close the restaurant. • "tremendous backlash' to American fast food by many Italians • labor laws made it difficult to hire part-time workers for split shifts at noon and night shifts • Famous Italian designer Valentino sued the Mc. Donalds, charging that the smell of their fries were ruining his clothes. A long battle ensued, which resulted in Mc. Donald's fixing venting and airflow

Mc Donald’s Challenges in Italy • Italy’s slow-food movement, led by a non-profit organization that opposes fast food, criticized the government’s endorsement of Mc. Donald’s Corp. ’s new line of Mc. Italy burgers in early 2010. • When Italian agriculture Minister Luca Zaia endorsed Mcdonalds , some critics said that he was selling out to a multinational corporation • Zaia responded by saying that the Mc. Italy campaign would prompt Mc. Donald’s to spend 3. 5 million euros ($4. 8 million) a month buying food from Italian farmers which will be a boost to the Italian economy

Mc Donalds in Italy – Success factors • Mc. Donald's bought out their competitor, Burghy, a chain that belonged to Italy's largest meat producer, Cremonini. Mc. Donald's took over all Burghy restaurants and in exchange Cremonini became the sole meat supplier for Mc. Donald's in Italy and parts of Europe • Turning the young into Mc. Donald's fans was easy, but convincing older generations was quite difficult. To win over the parents Mc. Donald's introduced healthier food options like salad and pasta bars • Business agreement with Italian oil giant Agip. This agreement allowed the opening of many more restaurants in Agip gas stations, giving those on the road a one-stop shop-and-gas option • Introduction of franchising, moving away from a controlled corporate environment. Franchising led private citizens and small businesses to invest and to spread the chain.

Mc Donalds in Italy – Success factors • Mc. Donald's Teamed Up With Italian Government – political influence and support • Focused on locally grown and homemade products , to source food locally – helped convince Italian people. • Mc. Donald’s to add $4. 8 million monthly to the Italian economy due to its use of local produce.

Controversies Still Exist • Former Mc. Donald’s Italia head is appointed Italy’s Cultural Director – Mario Resca was the head of Mc. Donald’s Italia for 15 years. Recently, he was appointed as the director of museums and archaeological sites for all of Italy. Fears quickly arose that he would “Mc. Donaldise” precious Italian culture. MP Manuel Ghizzoni, an opposition spokesman on cultural affairs, said “I’m lost for words… What's the link between hamburgers and the extraordinary cultural heritage of Italy? ” Mr. Resca came back and said, "I don't want to 'Mc. Donaldise' Italy's culture but we want multinational companies to choose Italy to launch products like the i. Pod. It would be a fantastic opportunity for the company and good for Italy's image. "

Competition in Italy • Burger King – Burger King sponsors local concerts to try to get their name in the public eye. This is an innovative way to advertise and is something that Mc. Donald’s is not currently doing. – This isn’t much information available about Mc. Donald’s second biggest rival, Burger King, in Italy. Mc. Donald’s third largest competitor, Wendy’s, hardly has a presence in Italy.

Competition in Italy, cont. • Mc. Donald’s innovative advertising – Mc. Donald’s renews their UEFA EURO sponsorship until 2012. Upon doing this, they became the sixth global partner for the flagship national team competition. This sponsorship includes integrated broadcast rights in Europe as well as the exclusive rights to a number of marketing and promotional campaigns across the restaurant chain in Europe giving fans a chance to compete for relevant sports tickets.

Local Competition – In 2006, Mc. Donald’s was met with defeat in the city of Altamura. It turns out that the local residents of Altamura, a small town in southern Italy, were very proud of their local food and the culture that was threatened by the introduction of a Mc. Donald’s in early 2001. Luca Digesu, a fourth generation baker, opened Antica Casa Digesu, a small bakery right next to the Mc. Donald’s. He opened the store with the intention of stealing some customers away with the more preferred local tastes. “’What took place was a small war between us and Mc. Donald’s, ’ said Onofrio Pepe, a retired journalist who founded an association here devoted to local delicacies. ‘Our bullets were focaccia. And sausage. And bread. It was a peaceful war, without any spilling of blood. ’” The Mc. Donald’s didn’t do well but was able to stay open for five years. When the Mc. Donald’s realized that their local competition was going next door, they started offering school field trips to visit their kitchens, free rentals for children’s birthday parties, coupons for the children, and a large-screen television for customers to watch football. In the end, the local competition won out. Mc. Donald’s closed its doors in 2006.

Mc. Donald’s Moves Forward in the 21 st Century • Responding to Health Issues – In 2001, CEO Jack Greenberg responded to health issues by stating the following: “We’re selling meat and potatoes and bread and milk and Coca-Cola and lettuce and everything else you can buy in a grocery store. What you choose to eat is a personal issue. Every nutritionist I’ve talked to says a balanced diet is the key to health. You can get a balanced diet at Mc. Donald’s. Nobody’s mad at the grocery store because you can buy potato chips and pastries there. Nobody wants a full diet of that either. ” – At the same time, Mc. Donald’s released a low-fat burger substitute, the Mc. Lean Burger hamburger, which proved highly unpopular with customers. It was pulled from the menus shortly thereafter.

• In 2004, Mc. Donald’s introduced the “Go Active! Adult Happy Meal” which included a Premium Salad, bottled water, and a pedometer. Despite Mc. Donald’s efforts, if consumers go to Mc. Donald’s, they prefer to eat unhealthy. Furthermore, the community still backlashes by questioning whether Mc. Donald’s really cares about the long-term health effects of their other menu items. The societal effects of using a product such as this are called externality costs.

New Menu Items – In 2001, Mc. Donald’s Big Mac was selling well. Mc. Donald’s took this as a good sign and rolled out the “Pizza Mia” and the “Mc. Toast. ” They also introduced fresh squeezed red orange juice from Sicily. This was an attempt to “take the plunge into pizza” products. The toast comes with Italian cheese. – At the same time, Burger King added “Spizzico Pizza” made by Italy’s own Autogrill chain.

• From March 9 to May 24, 2010, Mc. Donald’s offered kiwi-on-a-stick at select stores across Italy. This was the first time that Italian fruit was offered at a fast food chain. Mc. Donald’s is directing this new offering at women since kiwi is rich in vitamin C and has good nutritional value. This was also an alternative to the apple currently offered in the Happy Meal combination.

Where Mc. Donald’s is Now – Mc. Donald’s, as well as other fast food chains, have become more accessible in the 21 st century as heavy traffic and changing working hours no longer allow the time for elaborate home-cooked meals. – Despite Mc. Donald’s lackluster sales in the United States, its global sales continue to climb. Since the late 1990 s, more than half of Mc. Donald’s sales have come from abroad. In 2008, more than 60% of Mc. Donald’s’ $23. 5 billion sales came from outside the United States. Specifically, Mc. Donald’s attributed a lot of these out-performances to sales in Europe.

Mc. Donald’s Europe Interview • Procurement and business solution manager at Mc. Donald’s Europe Ltd. (Paris office) • Education: L'Institut de la Francophonie pour l'Administration et la Gestion • Key challenge for developing business is regionalization. • Southern Italy has higher logistics cost, but lower optimal price points=tighter margins. • Mc. Donald’s Europe is extremely worried about bailout impacts on their business.