As any Americana or history buff can tell you, McDonald’s initial dominance of America’s national imagination, and wallets, was based on its ability to produce and provide consistently good quality burgers, fries, and shakes. That is, in its initial iterations, McDonald’s was nearly exclusively a burger chain, and it competed with other burger joints. That’s clearly not the case today; as McDonald’s has sought to keep pace with consumers’ shifting and expanding preferences, it also has built out its menu boards to include a wide range of meal options.  

When the product assortment changes, so does the competition. Accordingly, a recent report shared by McDonald’s highlighted that it is paying attention to a much wider range of competitors that it identifies as direct threats to its market share, including regional favorites and companies focused on chicken, like Chik-fil-A, KFC, and Raising Cane’s. Notably, McDonald’s considers them competitors because it chose, decades ago, to expand its menus to feature Chicken Nuggets and sandwiches. In contrast, the identified competitors actively and strategically specialize in chicken options, without extending their focus to multiple product lines. There aren’t any hamburgers for sale at KFC. 

Other threats identified by McDonald’s similarly prioritize a single market segment. For example, it considers beverage-specific franchises like Dutch Bros. and Starbucks competitors too, due to their potential to threaten the chain’s beverage sales.

Having to account for more competitors is challenging, requiring the corporation to pay attention to competitive moves across a broad spectrum. It is unlikely McDonald’s would go back to its burger roots and eliminate popular chicken and beverage items from its menus though; consumers would hate to see their choices limited. So how can it provide a broad assortment while still enjoying the benefits of specializing? 

The answer might involve an organizational redesign. According to announcements citing the launch of the McDonald’s Restaurant Experience Team, the corporation is experimenting with a vertical redesign, in which three separate units will take responsibility for every function related to three specific menu categories: beef, chicken, and beverages and desserts. Thus, the beverage and desserts team will take charge of the supply chain and development of drinks and sweet snacks, without taking direct consideration of similar such questions and efforts on the beef side, for example.

Reflecting their unique specialization, each unit also is tasked with conceiving of pertinent menu innovations, keeping track of emerging consumer habits and food trends, and surveilling the market to remain alert to any new innovations by competitors. For example, the chicken division already has developed a recipe for, sourced the ingredients, and marketed the introduction of a Chicken Big Mac as a limited menu item. 

In reorienting its internal functions to reflect its reconceived ideas about who, precisely, its competitors are, McDonald’s might be getting ahead of the game. But separate functions also can lead to redundancies. Imagine, for example, that both the beef and the chicken division are devoting extensive resources to developing a great new pretzel bun or gluten-free wrap. If they are undertaking such efforts in parallel, without sharing the effort, it could lead to higher costs in the long term. 

Discussion Questions

1. Is this redesign an example of vertical integration? In what ways does the concept apply? In what ways is it different from a conventional example of vertical integration?
2. Consider some of the latest menu innovations introduced by McDonald’s. Do they create new competitors for the company?

Sources: Aneurin Canham-Clyne, “McDonald’s Creates ‘Restaurant Experience’ Team to Sharpen Menu Innovation,” Restaurant Dive, March 11, 2025; Fernanda Tronco, “McDonald’s Announces Major Changes to Destroy Rivals,” The Street, March 12, 2025; “McDonald’s Creates New Restaurant Experience Team,” McDonald’s, March 11, 2025.