[Music] [Applause] [Music] [Music] have you ever wondered why McDonald's restaurants arguably the world's leading fast food company needs a local as well as a global strategy after all the US-based company is a massive global operation it has standardized products like the Big Mac Coke drinks chicken McNuggets French fries and cheeseburgers it's able to deliver major economies of scale and scope from its international operations it has global brands global customer satisfaction it can even research new menu items globally and recover the costs across many countries all classic benefits of a truly global strategy so why does it need a local strategy why bother to have a strategy that fails to exploit its global benefits there are five main reasons beef is fundamental to the McDonald's recipe formula the company goes to great lengths to source quality beef to well-developed global standards but some countries don't eat beef for example India where the cow is regarded with reverence and not eaten even in China chicken is more popular in some regions than beef but it's more than just beef mcdonald's has many local menu variations ranging from a Chinese menu in Germany to special vegetarian dishes in India thus McDonald's needs to cater for local tastes whatever the consequences for global strategy local competition is perhaps easier to understand for a variety of historical reasons different countries have developed different fast food chains over time for example you'll find Wendy's in New York but not Nando you'll find Nando in South Africa but not Burger King like any major multinational McDonald's needs to be able to position itself against its local competitors local laws are also relatively easy to recognize governments in different countries around the world have different views on what can be sold in fast food outlets for example you can buy beer in a McDonald's in Spain but beer sales are illegal in McDonald's in the United Kingdom local franchises are more complex to understand fully mcdonald's does not own all its restaurants centrally for many years it has been operating a franchise system in many countries franchising means a cooperative strategy in which a firm develops a business concept and then offers this to others the franchises in the form of a contractual relationship in the McDonald's case the company not only offers its product range and brands but also design guidance on building an individual restaurant the fat fryers the grills and so on but also training of managers and staff to ensure standardized product delivery even pricing but there's a problem here both for McDonald's headquarters and for the franchisee if the headquarters makes all the key decisions then what incentive is there for the franchisee how can you motivate your franchises to perform better and deliver more profits the McDonald's answer at least in part is local promotions part of the marketing budget is controlled locally by the franchisee offering specially tailored local promotional activity to deliver higher sales finally we have local service quality it's all very well for McDonald's restaurants headquarters in America to lay down international standards for its product range but the products are cooked locally in each restaurant individually with local people actually delivering the local Big Mac the local French fries and the local diet coke in Hong Kong in Berlin Germany or in St petersburg Russia global must be made and delivered locally at McDonald's it can't be done from a central location like a Nike sports shoe manufacturer or an Apple iPhone manufacturer what this means is that McDonald's has standardized equipment but it also has extensive local rule rule books major trainingmies called hamburger universities and continuous monitoring of local quality what does this mean overall for McDonald's global strategy it means that the company needs to operate a strong local strategy alongside its global operations mcdonald's restaurants is local as well as global [Music] [Music]