McDonald's Success Story in Brazil

McDonald's Success Story in Brazil
Case Code: BSTR408
Case Length: 14 Pages
Period: 1979-2011
Pub Date: 2012
Teaching Note: Not Available
Price: Rs.400
Organization: McDonald's Corporation
Industry: Fast Food
Countries: Brazil
Themes: Localization, International Marketing, Emerging Markets
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Abstract Case Intro 1 Case Intro 2 Excerpts

Background Note

The history of McDonald's dates back to the 1930s, when two brothers Richard J McDonald and Maurice McDonald opened a restaurant in Airdome, California, that sold hot dogs, coffee, and tea. Encouraged by the good response to their first restaurant, the brothers decided to expand their business. In 1940, they opened a Barbecue restaurant in San Bernardino, California. The Barbecue business ran successfully for eight years. The brothers, however, found it difficult to run the large-scale business that involved extensive menus, staff, and huge crowds thronging the restaurant. In 1948, they decided to scale down operations.

This included shortening the menu to only hamburgers, French fries, cheese burgers, and drinks. They also worked on developing a process that would make these items quickly using fewer resources. The process increased service speed, allowing them to cater to more customers in the same amount of time. The savings in time and the resulting increase in volumes allowed McDonald's to lower the price of a hamburger from 30 cents to 15 cents.

In 1948, the revamped McDonald's opened. It focused on speed of service, mass production, and lower prices. In 1953, the McDonald brothers decided to focus on franchising for expanding their business. For a thousand dollars, McDonald's franchisees could use the McDonald's brand name.

In 1954, Raymond Kroc (Kroc), a salesman for a company manufacturing milkshake mixers, noticed that one of his large customers was the California-based restaurant owned by the McDonald brothers. Kroc noted that they used something like an assembly line system for making hamburgers and sandwiches. He also found that the restaurant used eight milkshake machines. Sensing an opportunity to expand his business, he met the McDonald brothers to convince them to expand their business. This would give him the opportunity to sell milkshake mixers to every McDonald's restaurant they opened. But the brothers were not interested in business expansion and were content with their existing business operations. Kroc then expressed his willingness to become a McDonald's franchising agent and succeeded in convincing them....

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