McDonald’s Organizational Structure Analysis

McDonald’s organizational structure characteristics advantages and disadvantages case study and analysis
A McDonald’s in Liberdade, São Paulo, Brazil. McDonald’s organizational structure evolves over time to facilitate the firm’s management of global operations in the fast food restaurant market. (Photo: Public Domain)

McDonald’s organizational structure was reformed in July 1, 2015 to improve the company’s handling of its global operations. A firm’s organizational structure defines the system through which organizational components coordinate to achieve business objectives. McDonald’s organizational structure facilitates managing markets based on performance levels. As the largest fast food restaurant chain in the world, McDonald’s keeps evolving to address current and emerging market issues. The firm rolls out new products to maintain its performance in satisfying customers. These endeavors are supported through McDonald’s organizational structure, which is designed to adapt to the changing business environment.

McDonald’s organizational structure establishes the arrangement or pattern of interactions among various business areas. Through its organizational structure, McDonald’s succeeds in managing efficiency and performance in its operations in the global fast food restaurant industry.

Features of McDonald’s Organizational Structure

McDonald’s has a divisional organizational structure. Each division handles a specific operational area. The aim of this organizational structure is to support autonomy and organizational flexibility. McDonald’s organizational structure has the following characteristics, arranged according to significance:

  1. Global hierarchy
  2. Performance-based divisions
  3. Function-based groups

Global Hierarchy. McDonald’s has a global hierarchy to cover all its operations worldwide. This feature of the organizational structure emphasizes corporate control. For example, McDonald’s CEO directs the activities of all business areas. Mandates are passed from the CEO down to middle managers, and to the restaurant managers and personnel. This characteristic of McDonald’s organizational structure is typical of most global business organizations.

Performance-Based Divisions. The performance-based divisions are the most distinct feature of McDonald’s organizational structure. The company reorganized its structure on July 1, 2015. Before the reorganization, the geographic divisions in McDonald’s organizational structure were (a) U.S., (b) Europe, (c) Asia/Pacific, (d) Middle East and Africa (APMEA) and (e) Other Countries & Corporate (OCC) including Canada, Latin America and Corporate. After the reorganization, McDonald’s used performance as basis for the new divisions in its organizational structure: (a) U.S., (b) International Lead Markets, (c) High Growth Markets, and (d) Foundational Markets and Corporate. The U.S. accounts for more than 40% of McDonald’s revenues, and the lead markets for 40%. The high-growth markets account for 10% of revenues.

Function-Based Groups. McDonald’s maintains function-based groups in its organizational structure. For example, under corporate operations, the company has a human resource management group, a supply chain and franchising group, and a legal group. This characteristic of the organizational structure enables McDonald’s to address the basic functions in its business.

McDonald’s Organizational Structure Advantages & Disadvantages

An advantage of the hierarchy in McDonald’s organizational structure is its support for monitoring and control of global operations. Also, the performance-based divisions have the advantage of enabling McDonald’s to implement strategies based on market performance similarities. For example, the firm applies similar strategies for all lead markets. However, a disadvantage of McDonald’s organizational structure is that it tends to generalize strategies for the performance-based divisions. The company has limited flexibility because of this feature of the organizational structure.

References
  • Child, J. (1972). Organizational structure, environment and performance: The role of strategic choice. Sociology6(1), 1-22.
  • Markides, C. C., & Williamson, P. J. (1996). Corporate diversification and organizational structure: A resource-based view. Academy of Management journal39(2), 340-367.
  • Martin, R., Muuls, M., de Preux, L. B., & Wagner, U. J. (2012). Anatomy of a paradox: Management practices, organizational structure and energy efficiency. Journal of Environmental Economics and Management63(2), 208-223.
  • McDonald’s Corporation (2015). Company Profile.
  • McDonald’s Corporation Form 10-K 2014.
Tags:


COPYRIGHT NOTICE:
This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s. Copyright by Panmore Institute - All rights reserved. Small parts of this article may be quoted or paraphrased for research purposes, as long as the article is properly cited and referenced together with its URL/link.