McDonald’s should not engage in a targeted acquisition of another company, where the discouragement is made for vertical integration specifically. However, the company should aim to conduct a horizontal integration. The recommendation is made on the basis of McDonald’s current situation, which is already heavily integrated into its vertical framework. Thus, McDonald’s should focus on acquiring another chain of restaurants to diversify its brand portfolio and increase its customer base by attracting market segments that are not drawn to the original brand.
It is important to note that the acquisition process can go mainly in two ways. These include vertical or horizontal integrations, where the former refers to a movement along the supply chain (McLaney, 2017). However, horizontal integration is a sideway directional acquisition, where a target is a company operating at a similar level of the supply chain (McLaney, 2009). Although it is usually better to integrate vertically to remove the risk elements from the suppliers, McDonald’s is not in such a position. The company has already successfully integrated vertically, where “Mcdonald’s also owns most of the land that their stores are placed on so they don’t have to deal with landlords or leasing costs” (Washcollcms, 2017, para. 4). Therefore, the company should expand horizontally since it is fully integrated vertically with no room for significant change.
In conclusion, the recommendation is that McDonald’s should acquire companies horizontally because it has no vertical dependencies. The target for horizontal acquisitions should be companies that have customer segments inaccessible to McDonald’s. These might include health-conscious consumers, who view the corporation’s products as unhealthy. By focusing on horizontal expansion, McDonald’s can capture larger market segments, which will significantly increase its market share and diversify its brand portfolio available.
Reference List
McLaney, E. (2009) Business finance: theory and practice. 8th end. Hoboken: Prentice Hall.
McLaney, E. (2017) Business finance. 11th end. Philadelphia: Trans-Atlantic Publications.
Washcollcms. (2017) ‘Vertical integration’, Mediums and Messages, Web.