2. company name
Quick Facts
Started in 1940 as a barbeque drive-in restaurant
by two brothers, Dick and Mac McDonald, in San
Bernardino, California
Raymond Kroc, founder and builder of McDonald's
Corporation was a milkshake machine salesman
prior to meeting the two brothers in 1954
By 1958, McDonald’s had sold its 100 millionth
hamburger.
McDonald’s restaurants is operated by either a
franchisee, an affiliate, or the corporation itself
Revenues come from the rent, royalties and fees
paid by the franchisees, as well as sales in
company-operated restaurants.
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Vision & Mission
To be the best and leading fast
food provider around the world
Summarized in Q.S.C.V -
Quality, Service, Cleanliness and
Value - this is the guiding force
behind it’s service to customers.
The value of food products makes
every customer smile.
Being the best company for all
employees in every community
around the world
Deliver services with superior
operational systems for each
customer in every branch of
McDonald’s restaurants
Keep progressing in a favorable
direction as
a brand, while continuing to
develop operational systems
through innovation and technology
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Value Chain Analysis
Primary Activities
Inbound Logistics - Organizing the supply of food and materials to restaurants
through approved 3rd party logistics operators
Production in huge plants exclusive to control food distribution and packaging
systems
Operations- Ensure specific guidelines are followed in food preparation
Computerized order tracking technology that ensures consistency in service
and food production
Outbound Logistics - Growing as a part of McDonald’s recycling system
integrating in the logistics of distribution centers
Efficient crew who store and distribute goods from the warehouse at the right
time
Marketing - Long term objectives are broken down into short term measurable
targets which as used as milestone accomplishments
Franchises are given autonomy in marketing mix decisions
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General Administration - Strategic planning to ensure their competitive
strategy of customer service that sustains their growth and capitalization is met
They conduct surveys and have a hot-line where customers can call to file
complaints or offer suggestions about their experience so as to strengthen the
company
Technological Development - R&D in field research needs for end user
Quality development in collaboration with good suppliers
Forward integration through franchisees with control over store presentation
and menu items
HRM - Consistently provide sufficient training to employees on how to perform
work processes and how to treat customers
Each time their product is redesigned, they conduct training sessions for all
employees to enhance their development
Procurement - Flexibility to choose the best suppliers in the market who can
increase or decrease the amount supplied without being held to a benchmark
Sought partners with expertise on down trade distribution
Value Chain Analysis
Supporting Activities
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McDonald's –Five Forces
Threat of Competition HIGH
Very similar products in the Fast Food industry
High Competitors Advertising Capabilities
Location of outlets are close
EX: KFC, Chick-fil-A
Threat of New Entrance Moderate
Easy to enter, low setup cost
Lack of ability to compete with MCD( cost efficiency,
customer awareness)
Threat of Substitutes Moderate
Substitutable food
Irreplaceable image
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McDonald's –Five Forces
Power of Suppliers LOW
Worlds largest restaurant chain in sales
High bargaining power over its suppliers(volume)
Most of them owe MCD for their own existence
Low power of suppliers—Lower the cost of raw
materials and High competitive price
Power of Buyers LOW
Less chances of switching, high brand image through
differentiation and uniqueness
Attractive price
Buyer don’t have bargaining power(Low volume)
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McDonald's –Macro environments
Economic
• Inflation
• Exchange rate
Social
• Employment
Technological
• Improvement by advanced technology
Environmental
• Forced not to harm the environment
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McDonald's – Competitors
There are many competitors are eating their shares.
The main things they have to compete with each other
are
1.Minimizing cost
2.Customer satisfaction
3.Healthy ingredients
4.Convenient locations
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McDonald's – Diversification
Mc Café
Modern, relaxing mood
Free Wifi
Attract new market segments
Variety of drinks
Satisfy hunger
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McDonald's –VRIO Analysis
Value: McDonald’s hold a high value in accordance to its brand
image and exploitation of the available resources which had helped it
evolved successfully for more than five decades.
Rarity: The utility of the resource may be franchise oriented and
spread through its breadth but the main control still remains in the
hands of the top 50 management authorities. The franchisee has to
follow the company rules strictly to run a franchise of McDonald’s.
Imitability: McDonald’s may not be difficult to imitate in aspect of
the product but its functionality is very difficult to achieve.
Organization support: McDonald’s is always ready to exploit
new resource and the organization structure is well organized. It
provides a good support to its franchise operations.
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McDonald's –Generic Strategies
Broad Differentiation
drive through, lobby, restroom, Breakfast menu, Lunch menu , and
someone who is capable of speaking Spanish
today in over 14,000 restaurants provide free WiFi service for the
customers
McDonald’s has successfully used a differentiated market
segmentation strategy by targeting the family unit and particularly
children with their “Happy Meal” and price
Leading Cost
It offers basic fast-food meals at low prices.
They are able to keep prices low through a division of labor that
allows it to hire and train inexperienced employees rather than
trained cooks.
It also relies on few managers who typically earn higher wages.
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McDonald's –SWOT Analysis
Strength
Brand name
Adapts to local markets
Socially responsible with charities
Safety and quality food
Weakness
Management's failure to see trends that do not fit
High employee turnovers
Price competition
Controlling quality with franchised operations
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McDonald's –SWOT Analysis
Opportunities
Upscale restaurant
Organic foods for the health conscious
Going green
Expanding to new parts of the globe
Threats
Sued for unhealthy food many times
Health concerns
Competitors
Contamination risks
Geopolitical issues affect
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McDonald's – Recommendation
Develop new offerings
Buy local popular chains such as Haidilao in China
or Panera Bread.
Form a JV with companies like Nestle to sell
branded and packaged ice cream and exploit the
brand name.
Started in 1940 as a bbq drive in restaurant by two brothers in San Bernadino, CARaymond Kroc is the found and builder of the MCDonalds Corporation – he used to be a milkshake machine saleman prior to meeting the 2 brothersBy 1958 McDonalds had already sold its 100 millionth hamburgerIts restaurants are operated by either a franchise affiliate or corporation and revenues for rent come from royalties and fees paid by the franchisees and sales from their restaurants
Vision – to be the best and leading fast food provider around the worldQSCV is the guiding force behind its customer serviceMission – Being the best company for all Ees in every community around the world- Deliver services with superior operational systems
TTM – Trailing Twelve monthsRevenue is presently at 28,106 million compares to 22,745 million in 2009. Net income is at 5,586 million compares to 4,551 in 2009
Return on Equity is at 35.69% which is a 2.5% increase from 2009Return on invested capital is at the same level as it was in 2009Asset turnover is also consistent at 0.78Day sales in inventory which is # days on avg inventory is on hand is at 17.5 which is also a 1.6 pt increaseInventory turnover is at 140.2 which is a 12 pt increase from 2009 reflecting the number of times they sell their entire inventory
CompetitionRestaurant industry is highly competitive industry. There are many small fast food businesses in the industry who fight with each other to improve their customer base; McDonalds is not an exception to this. Since its establishment in 1940, MCD has excelled in the sector. Nevertheless, to stay in the competition, it started with McCafé. This helped the company to stay in the business as a major fast food business. Another major step came out when McDonald started Breakfast to compete with the existing business serving breakfast. Hence, this industry is extremely competitive and the MDC should be up to date with customer taste & preferences.Ease of EntryAlthough it is hard to enter the restaurant business, it is hard to establish a distinct brand name. There is a high cost of entry in the market and there is \ high research and development costs. Large established companies with strong brand identities such as McDonald’s do make it more difficult to enter and succeed within the marketplace; new entrants find that they are faced with price competition from existing chain restaurants.SubstitutesThere are many substitutes in this industry. Since there are a wide variety of products that people can choose, they could either be substituted by MDC Burgers, Beverages, dairy products, and others.Strength of SuppliersPower of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.Strength of BuyersRelatively strength of buyers is low in this industry
CompetitionRestaurant industry is highly competitive industry. There are many small fast food businesses in the industry who fight with each other to improve their customer base; McDonalds is not an exception to this. Since its establishment in 1940, MCD has excelled in the sector. Nevertheless, to stay in the competition, it started with McCafé. This helped the company to stay in the business as a major fast food business. Another major step came out when McDonald started Breakfast to compete with the existing business serving breakfast. Hence, this industry is extremely competitive and the MDC should be up to date with customer taste & preferences.Ease of EntryAlthough it is hard to enter the restaurant business, it is hard to establish a distinct brand name. There is a high cost of entry in the market and there is \ high research and development costs. Large established companies with strong brand identities such as McDonald’s do make it more difficult to enter and succeed within the marketplace; new entrants find that they are faced with price competition from existing chain restaurants.SubstitutesThere are many substitutes in this industry. Since there are a wide variety of products that people can choose, they could either be substituted by MDC Burgers, Beverages, dairy products, and others.Strength of SuppliersPower of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.Strength of BuyersRelatively strength of buyers is low in this industry
.Embryonic Stage- McDonald’s successful tactics like a uniform military style of preparing food and having a drive-thru set themselves up to be I a strong position during later phases of the industry life cycle.Growth Stage- use franchise andtry being adaptive Maturity Stage-McDonalds is not the only firm offering delicious burgers and fries. Consumers have a wide variety of choices. The book says mature industries often undergo consolidation- the combination of competitors through merger or acquisition. McDonalds decided to “merger” with Wal-Mart by placing their restaurants in Wal-Mart stores. This gave them a slight competitive advantage in the industry.Decline Stage-This is the last stage and many firms consider the strategy of exiting the industry. McDonalds in my opinion doesn’t have any thought of doing this anytime soon. Although price competition has been intensive with customers watching more of how they spend money, dollar menu ideas are appealing but most burger firms are offering the same kinds of menus. So sales will decline some.
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McCafe is an excellent example of diversification. By starting McCafe, McDonald's is offering new products that were not available in traditional McDonald's stores. McCafe specializes in serving cafes, which attracts customers that usually don't come to McDonald's to eat fastfood. The store has modern, and relaxing mood. This is important to attract new market segments, probably customers that go to caféto take a sip of coffee, get some snack to satisfy hunger, and chat in a relaxing environment. Thus, McDonald's McCafe serves as an example performing diversification by developing both new products and new markets.