Joseph Ricardo

Business 601

June 22, 2014

McDonald’s v. Starbucks Global Strategies

McDonald’s and Starbucks are both two of the most recognized franchises in not only

America but around the world. McDonald’s has always been the biggest fast food company in

America as well as around the world and everyone is familiar with their golden arches and many

children grew up knowing Ronald McDonald. Starbucks is the go to place for people to get their

gourmet coffee. Both of these franchises are engrained in the minds of many American’s whose

daily diets and appetites require a quick fix as many people in this fast paced society have neither

the time nor money to cook or to sit down and eat a healthy and nutritious meal.

As part of McDonald’s revitalization efforts under Charlie Bell and Arcature LLC they

planned to improve the company from within. McDonalds had been focusing mainly on opening

new restaurants while at the same time their current restaurants profits were sinking, there in

sales were declining, quality was down and customer satisfaction was at an all time low. To top

it all off Merriam Webster’s dictionary was adding the word “mcjob” to their dictionary to

describe a dead end job (Light, 2009).

Part of McDonald’s revitalization was to differentiate their stores instead of the old

cookie cutter buildings that were prevailing throughout the landscape. Customers were changing

and they wanted something different from McDonald’s. Of course all of their stores have the

golden arches and are colored themed in red and yellow. Now you can find McDonald’s with

bright fancy lights such as their stores in Las Vegas and their New York McBroadway in the

Theater District, they have a restaurant built into the Vittorio Emmanuale passage in Milan, or

they have art-deco buildings in Australia, post-modern designed restaurants like in Israel, they

have 21st century futuristic designs like their glass sculpture building in Georgia just to name a

few ( Rauchwerger, 2013).

McDonald’s has joined the e-commerce age by partnering with different companies

around the world. Their Hardcastle restaurants in India have teamed up with Direcpay to make

online ordering easier for their customers (Klapec, 2014). McDonald’s has also expanded online

sales to France with whom they have partnered with Worldline, as well as China, Singapore,

Malaysia and Australia to name a few. They are currently testing their ability to sell online in

both Poland and Germany. In October of 2013 McDonald’s hired Atif Rafiq a former Yahoo and

Amazon executive to serve as their first ever Chief Digital Officer as they plan to expand their e-

commerce service globally (McDonald’s Newsroom 2013).

McDonald’s has been able to adapt to different cultures and regions by changing menu

options. In Egypt the company offers McFalafel’s. In European markets the company offers beer

and wine options, and in India their menu has no beef options at all (Shih, 2010). In Muslim

countries the company has made sure to keep all pork options off of their menu and in certain

countries such as Malaysia and Singapore Muslim clerics regularly inspect their facilities for

cleanliness according to their customs. In Israel due to their kosher laws they could no longer

serve cheese on their sandwiches as kosher laws of the Hebrews is that dairy and meat be

separated (Writepass, 2012).

Starbucks was able to benefit from McDonald’s poor growth strategy but only after they

experienced the problems with growing externally instead of internally. This was their big

mistake in the mid 2000’s and cost them dearly. Starbucks was forced to close 600 stores in 2008

due to as Howard Shultz the CEO of the company was quoted as saying “Stores no longer have

the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store.”

(Quelch, 2008). But now Starbucks is back on their growth strategy plan with new innovation to

keep the stores feeling like a place local customers want to purchase their coffee. They are

planning to open 1,500 stores this year and to expand their menu to include both lunch and

dinner options, they also plan to increase their drive through capabilities from 40% of their stores

up to 60% of their stores. Howard Shultz was quoted as saying “This is not 2007 when we we’re

going to grow the company in an undisciplined way.” (Peterson, 2014).

Starbucks has capitalized on the misstep of McDonald’s cookie cutter architecture of

their earlier days. Starbucks hired local architects to design both the outside and inside of their

stores to fit the local scene. What they try to create is local coffee bars that feel like home in their

location and makes their customers want to continue to visit as well as stay a while and enjoy the

atmosphere of the restaurant (Cheek, 2005).

Shultz is now working on expansion of the company’s e-commerce options as they have

seen increases in both online, mobile payments and purchases online of gift cards. The company

is also planning to expand into creating Starbucks currency. Shultz is quoted as saying that new

e-commerce strategies will help "to create new channels of revenue and profit outside four walls

of stores .. amid a seismic shift" (Baertlein, 2014). The company realized that consumers are

purchasing in new ways and this means that companies need to adapt to the new digital age

structure of purchasing and shopping which is largely internet based.

Starbucks expansion internationally has been aided by their ability to adapt the local

cultures into their store. In a place such as China the company realized that most of their patrons

come in pairs or in groups unlike their American locations where most customers visit alone. In

China their coffee houses are designed with more community tables and couches and chairs so

their patrons can relax (Tepper, 2012). In India they offer more local flavors and blends and their

interiors are designed by local craftsmen and artist and feature local teakwood furniture. They

also offer local Indian breakfast options such as the Tandoori Paneer Roll.

Has Starbucks truly learned from the missteps of McDonald’s only time will tell as they

continue to use to growth strategy of opening new shops. Will they be able to keep their public

appeal and brand value as they continue to grow from the outside and will they be able to grow

the company from within? I would think under the leadership of Howard Shultz they will but it

all depends on how his vision is carried out throughout the company. McDonalds has a lot of

growing competition especially with more healthy fast food options out there such as Subway

and Chipotle, as American’s become more concerned about their diets and way of eating out will

the stigma of McDonald’s food as being both cheap in price and cheap in quality ever fade away

from the American public’s mind, again only time will tell. I for one steer clear of McDonald’s

and fast food burger restaurants; I do frequent healthier options such as Subway, Chipotle and

prefer to cook at home. I believe McDonald’s and Starbucks will continue to grow and profit as

most consumers only want a quick fix for their caffeine and dietary needs and these two

companies are the go to places for both of these.

References:

Baertlin, L. (2014). Starbucks promotes CFO to new post in e-commerce push. Reuters.

Retrieved on June 19, 2014 from http://www.reuters.com/article/2014/01/29/starbucks-

management-idUSL2N0L31RL20140129

Cheek, L. (2005). On architecture: Starbucks puts a double shot of hometown flavor in every

store. Seattle PI. Retrieved on June 21, 2014 from

http://www.seattlepi.com/ae/article/On-Architecture-Starbucks-puts-a-double-shot-of-

1171711.php

Klapec, A. (2014). McDonald’s quickly improves its e-commerce presence. Evigo. Retrieved on

June 20, 2014 from http://evigo.com/10660-mcdonalds-quickly-improves-e-commerce-

presence/

Kiddon, J. and Light, L. (2009). Six rules for brand revitalization. Upper Saddle River, NJ.

Pearson Education, Inc.

McDonalds Newsroom (2013). McDonald’s Names Atif Rafiq Chief Digital Officer.

McNewsroom. Retrieved on June 20, 2014 from

http://news.mcdonalds.com/Corporate/news-stories/McDonalds-Names-Atif-Rafiq-Chief-

Digital-Officer

Peterson, K. (2014) Starbucks’ growth strategy? Open more Starbucks. CBSnews. Retrieved on

June 22, 2014 from http://www.cbsnews.com/news/starbucks-growth-strategy-open-

more-starbucks/

Quelch, J.. (2008) How Starbucks’ growth destroyed brand value. Harvard Business Review.

Retrieved on June 19, 2014 from http://blogs.hbr.org/2008/07/how-starbucks-growth-

destroyed/

Rauchwerger, D. (2013) A Quintessentially American look at McDonald’s Architecture.

Architizer. Retrieved on June 22, 2014 from http://architizer.com/blog/mcdonalds-

architecture-america/

Shih, T. (2010). Thinking global, acting local. Anthem. Retrieved on June 19, 2014 from

http://www.anthemedge.com/index.php?/blog/entry/thinking-global-acting-local/

#.U6bZjPldXuI

Tepper, R. (2012). Starbucks Appeals To Regional Tastes With Tweaks To Decor And

Offerings. Huffington Post. Retrieved on June 20, 2014 from

http://www.huffingtonpost.com/2012/11/06/starbucks-regional-tastes_n_2083193.html