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Winning Positions

Posted on June 16, 2021

In 2002, I opened my first IRA account. Ignoring everything I was learning in my business school classes about diversification theory, I invested my meager capital by picking three individual stocks.

McDonald’s, makers of the world’s greatest French fries, was one of my selections. I picked it after reading an analyst report with a very simple thesis: McDonald’s stock was being valued as a restaurant chain but it should have been valued as a real estate holdings company that operated restaurants. The report went on to explain that McDonald’s, and their committed franchisees, had been acquiring the best retail real estate since the 1960’s and they controlled thousands of the most attractive locations in the world. The point was that regardless of the quality of McDonald’s restaurant operations, the financial market was undervaluing their real estate holdings–and therefore the stock itself.

The report pointed out that McDonald’s strategy to build and control great locations created real estate holdings that gave it a Winning Position. A Winning Position is place of market power that drives differentiation, profit or both. At it’s core, strategy is about acquiring a Winning Position that will sustain.

McDonald’s real estate holdings created what is known as a Preferred Offering. A Preferred Offering is one in which a firm’s products or services differ from its competitors and those differences are perceived as better than the competitor’s products/services by customers. The locations that McDonald’s controls offer easier access, higher traffic, more prominence and better visibility than the competition–and these locations are the source of differential advantage.

It’s unlikely you are running a business as large and well established as McDonald’s, but you can still learn from its example. Consider these three factors as you develop your strategies:

  • Determine what type of a Winning Position your business should be pursuing
  • Challenge your organization to develop and execute strategic initiatives that create that Winning Position
  • Once you have a Winning Position, determine how to optimize it for maximum sustainability.

Creating a Winning Position should be every executive’s goal. Once created, the business will reap significant rewards. I should know—my initial investment in McDonald’s stock has averaged a 15% annualized return for the past 20 years. Golden arches indeed!


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