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Merger, Acquisition, and International Strategies of McDonalds Research Paper

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Updated: Jul 3rd, 2019

Corporation that operates internationally – MacDonald’s

McDonalds has spread widely all over the world through the many chains of restaurants it has. It owns the biggest fast food restaurant chain globally. Millions of customers go to McDonald’s hence increasing its sales revenue.

In the US, it tops compared to other restaurants followed by Burger King and Wendy’s (Hitt, Ireland & Hoskisson, 2013). In 2003, McDonald incurred losses that analysts associated with consumer behaviour.

It failed to realize the changing needs of its customers and therefore it became less competitive. However, in 2009, it experienced a turn around and there was a boost in its sales.

Strategy that led to merger or acquisition

The reason behind the turnaround was its strategic leaders who decided to adjust its corporate-level strategy but improve its business-level strategy.

McDonalds took a step of changing the value of its products and modifying their features rather than increasing the number of restaurants globally (Hitt, Ireland & Hoskisson, 2013). It minimized its diversification by selling some of its chains.

McDonald’s began to be attentive to its clients who wanted better and healthier products. In addition, it started training programs for its workers, added their opening hours, and upgraded their stores to attract the younger generation.

It also introduced McCafe coffee bars in the United States in 2009. The coffee drinks add value to customers by offering quality drinks at prices less than what their competitors offer. The corporation is modifying its stores and looking forward to a global economic recovery by acquiring prime real estate in Europe.

Company that does not operate internationally- Transfer Technology International Corporation

Transfer Technology International Corporation is a U. S. based company dealing with giving maintenance services in regions that receive moderately high temperatures.

An acquisition strategy will enable the company raise its revenue through acquiring of profitable firms in the maintenance industry. In addition, it will be in a position to develop a range of highly profitable businesses that render services throughout the year.

Company to acquire – Royalty Lawn

Royalty Lawn is a good target because its line of business is similar to Transfer Technology International Corporation. Royalty Lawn provides its services to more than four hundred customers. It has attained a notable growth rate since its foundation.

A team of skilled and experienced leaders, who ensure that their customer service reputation is not tainted, leads Royalty Company (Lovelock, 2007).

The objective of this company is to ensure that their clients get services that they desire. They have done research on their clients and so they understand what their clients need and how their products can fit in within their home and business goals.

This company is profitable because it has good market share and robust growth prospects.

Why the company would be profitable

The newly acquired corporation will help the existing corporation acquire resources that are impossible to get or manufacture internally because of cost factors. The synergies from the resources of the two companies will form more value (Hoffmann & Schaper, 2001).

Moreover, this is a great opportunity for exchanging skills and expertise. The two companies will exchange useful information to develop new ideas.

Behavioral uncertainty will be minimal through forming of control mechanisms and costly safeguards. This would lead to increased transaction costs and low economic efficiency. A solution for this would be acquisition, which would increase economic efficiency.

Merging with a company will minimize the taxes, lead to diversification, and deal with competition appropriately (Lovelock, 2007). There will be achievement of economies of scale and there will be better control of patents and tax advantages.

Corporation that operates internationally

International Business-level strategy

McDonald’s success relates to the business level strategies of differentiation and low-cost leadership application, with basis on the geographical structure. Its key strategy of retaining its top level was to maintain their key markets while still searching for other new markets.

Through the geographical structure, McDonald’s was able to meet the needs of the local customers as well as contribute to local development (Lovelock, 2007).

A cost leadership/differentiation strategy focuses more on products that have undergone differentiation and products manufactured at low costs. A company uses it to design goods and services. This technique is able to satisfy the needs of a wider market or a smaller market.

McDonald’s uses this strategy to meet the needs of the global market. McDonald’s have met two key objects of this technique, which is producing differentiated products and secondly, producing them at a lower cost.

This strategy has its risks in that if it cannot produce differentiated products at low costs then it stagnates, and with stagnation, there is no growth. A cost leadership/differentiation strategy is sometimes hard to execute

McDonald’s business strategy has had a significant effect on environmental factors such as its rivals, social aspects, and the uncertainty condition. McDonald has experienced a threat from rivals because it could not modify its food products according to the changing needs of its consumers (Hitt, Ireland & Hoskisson, 2013).

However, it made a turnaround by differentiating itself through creative ideas. For example, it permits its clients to use the internet through provision of wireless technology. McDonald’s has also used a strategy of focusing more on children.

For instance, it has introduced computers with games made to trigger the kid’s creativity and defining their personal traits.

McDonalds chose to focus on kids because the highest sales were to kids, focusing on children would encourage the whole family to go to MacDonald’s hence high chances for more sales, and finally developing a loyalty with children would establish a lasting legacy for future business.

International Corporate-level strategy

McDonalds have used the transnational strategy where they have applied both low-cost and domestic responsiveness at the same time to market their products and services. This strategy requires a creative method in order to control the manufacturing and marketing of the goods.

This strategy is most effective because it is the only workable technique in the international market, which is very competitive (Hoffmann & Schaper, 2001). The international strategy form value by taking products and services to international markets where they are nonexistence.

This is an easy strategy in that the international corporation provides standardized products and services in different parts of the world, without differentiating the products. McDonald’s has introduced a McCafe menu in addition to their standard menu.

They have expanded their businesses by focusing on coffee-espresso industry alongside the fast food restaurants. As a result, they have increased their rivals such as Starbucks, which were not there before (Hitt, Ireland & Hoskisson, 2013).

Recommendations for improvement

McDonalds should consider introducing international flavors in its food in the USA. The new menu should satisfy the need for healthier foods by offering salads and more meals that are chicken and other varieties.

McDonalds should differentiate its food products so that they include flavors from India and Russia to satisfy the changing demands of their clients. In addition, they should consider strategic alliances with other businesses found in other countries.

This alliance would be important because they could enhance their organizational capabilities and therefore acquire competitive advantage especially in the global market.

They could achieve this by working to have entrance to new markets, which would be easy for the local business because they know about the culture of the people and understand the local market (Hoffmann & Schaper, 2001).

Through strategic alliances, MacDonald’s would form a network of beneficial links, which would allow them do well and increase their sales.

Corporation that does not operate internationally

Business-level strategy

Business-level strategy proposal for Transfer Technology International Corporation would be the differentiation strategy. In this technique, the corporation will focus on improving the value of their products so that they satisfy the demands of their customers.

This company will accomplish this by modifying their designs, adding new features, enhanced branding and improved after sale services. A differentiation strategy will help the corporation to get a competitive advantage therefore gaining control of the consumer demand.

For example, it can improve the value of a product by doing a study to know what the customer wants though marketing. This will help the company produce products that precisely match the consumer wants (Hoffmann & Schaper, 2001).

Secondly, an after sale service forms an opinion of advanced differentiation in the thoughts of the consumers by answering customers’ questions and helping them with their purchased products. This would raise the value that clients associate with the company’s products and therefore the cost of each product.

Differentiation will make the company realize more profits because of the high demand due to successful differentiation, which will allow the corporation to utilize its assets more expeditiously and therefore experience reduced costs from scale of economies (Hoffmann & Schaper, 2001).

Productive differentiation enables a corporation to retain prices at a constant level or maybe rise slightly. Increase sales, and increase productivity through scales of economies. At the end, this company will achieve its objectives by increasing their sales and accelerating profit growth.

Corporate-level strategy

The diversification strategy is a good proposal for Transfer Technology International Corporation. The strategy of the company will be to venture into other businesses that may have similarities with the original business or they may not have a relationship.

With successful diversification, the corporation will be able to improve the productivity of one or more businesses, which would not be the case if the corporation were independent.

This corporation will improve the productivity of each business by leveraging valuable skills, experience, and utilizing them to the new businesses (Hoffmann & Schaper, 2001). In addition, this company will be in a position to improve productivity by achieving economies of scope.

This implies that the company will experience low costs because there is a distribution of expenses across the businesses. Therefore, the corporation will incur less expenses and experience greater profits than companies with no potential to share available resources.

Diversification will also enhance the productivity of this corporation through superior internal governance shills (Lovelock, 2007). This occurs when superior managers set high standards of productivity from the other businesses that are part of the corporation.

Superior managers can achieve this by giving incentives to managers and employees who perform well, choosing managers with experience and training them, helping managers detect issues in their businesses and discover solutions to them, setting high standards of performance each business and giving this responsibility to managers.

Reference List

Hitt, A., Ireland, D., & Hoskisson, E. (2013). Strategic management: Concepts and cases: Competiveness and globalization. Mason, OH: South-Western Cengage Learning.

Hoffmann, W. & Schaper W. (2001). Acquire or Ally? A Strategy Framework for Deciding Between Acquisition and Cooperation. Journal of Management International Review, 41(1), 131-159.

Lovelock H. (2007). Developing marketing strategies for transnational service operations. Massachusetts, USA: Lovelock Associates

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