Presentation on theme: "McDonald's Corporation"— Presentation transcript:
1 McDonald's Corporation Authors:Adrian MagopetKevin A. SandersArmand KotiNortheastern Illinois University | MGMT 393- Strategic Management | March 2013
2 IntroductionMcDonald's Corporation is the world's largest chain of fast food restaurants, serving nearly 69 million customers daily through more than 34,000 restaurants in 119 countries worldwide.The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California.The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955Each McDonald's restaurant is operated by afranchisee, an affiliate, or the corporation itself.The corporations' revenue comes from the rent,royalties and fees paid by the franchisees, aswell as sales in company-operated restaurants.Year End 2010– 80% of McDonald’sRestaurants were franchised worldwide.59% Conventional Franchises21% Licensed to Foreign affiliates20% Company owned
3 Vision, Mission & Values To be the leading fast food provider around the globeMissionMcDonald's brand mission is “to be our customers' favorite place and way to eat. Our worldwide operations are aligned around a global strategy called the Plan to Win, which center on an exceptional customer experience – People, Products, Place, Price and Promotion.”ValuesEnhancing customer experience, summarized in "Q.S.C. & V.“Q- Provide good QUALITYS- SERVICES to customer.C- Have a CLEAN environment when customer enjoys their mealV- The VALUE of products
4 Critical Facts Affecting Firm Strategic Directions and Performance Standardization: This is the most important concept, consisting of two important dimensions:Time and SpaceFor example, Customers get the same experience regardless of when or whereThree-legged stool : This is Ray Kroc’s philosophy, still applies to McDonald’s today, consisting of a 3-way relationship between Employees, Owner/Operator, and Suppliers.
5 General Environment Analysis SegmentsEffectHow it influencesDemographicPositiveMost important for fast food industry that depends highly on peopleWorld population growing which yields a higher demand for food.EconomicDeveloping countries’ economies are growing.Buying power of people from developing countries are increasing.GlobalGlobal markets are open to every firm and industry.Countries have tendency to join the global economy.
6 Industry Analysis - Porter`s 5 Forces InfluenceFactorsThreat of New EntrantsHIGHEconomies of scale do exist but limited because of market saturation. Ease of Start-up. Low switching costs. Not much product variation.Bargaining Power of SuppliersLOWMany fast food chains with thousands of suppliers. Switching done easily. If firm buys large portion of supplier revenue – power is severely limited. (typical of fast food industry)Bargaining Power of BuyersMinimal to zero switching cost (customer unforgiving). CBS reports in 2009 $110 BILLION spent on fast food. 25% of US population eat fast food dailyThreat of Substitute ProductsGrocery stores, deli’s and in-house cafeterias, instant food like chicken, sandwiches, pizza and coffeeIntensity of RivalryMajor industry participants compete to maintain or increase market share. Competition is based on price because demand is constant
7 Industry Analysis Conclusion: ATTRACTIVENESS FOR NEW ENTRANTS:The fast-food industry is NOT attractive for new market entrants who wish to compete on cost. New entrants may succeed because of low start-up costs and massive market demand but differentiation strategy is critical. (Gourmet/All Natural Fast Food Ex: Epic Burger)ATTRACTIVENESS FOR INCUMBENTS:The market is attractive for existing firms who have established market, brand name and economies of scale to compete.
8 Competitor Analysis Current Strategies BUSINESS LEVEL Cost Leadership and Differentiation StrategyIntegrated Cost leadership/ differentiation.(good fit for Fast Food Industry)Integrated Cost leadership/ Differentiation.Higher emphasis on quality than competitors. (Good Fit for Fast Food Industry)CORPORATE LEVELHigh Level of Diversification with Related-ConstrainedHigh DiversificationCurrently changing corporate strategy from Related-linked diversification to low diversification.COOPERATIVE LEVELJoint ventures in Japan51% owned in RussiaDevelopmental in South America.Marketing alliance with DreamWorks (movie promotions).BK & Pepsi have struck a China alliance.Seattle's Best CoffeeTeamed with Arby’s to form Strategic Sourcing Group (save costs, energy, and gain better competitive contracts for supplies)INTERNATIONALMulti-domestic strategy. Emphasis on aligning with local taste.Multi-domestic Strategy
9 Competitor Analysis Competitive Advantage Brand Recognition Flame Broiled Burgers/sandwichesInexpensiveConvenienceMarketingPerceived as higher qualityPremium food made fastSustainableCompetitiveAdvantagesNONECompetitor Future AssumptionsChanges in customer preferenceCustomer Satisfaction = Value and QualityCompetitor future ObjectivesOffer Oatmeal, real fruit smoothies. Focus on more global markets.5000 of stores outside US with 90% of Company growth from outside US.Enhance customer experience by introducing new furniture such as fireplaces and comfortable seating in their establishments
10 Sustainable, Temporary, Parity TANGIBLEFinancialsLocations-cities-Airports-Gas stationsTrade Secrets & RecipesControl/Evaluation (consistency)Human ResourcesINTANGIBLEValue of Brand nameLOGOMarketing ContractsHigh Customer SatisfactionInnovation &ProductDevelopmentCAPABILITIESPositive PublicityEffective marketing campaignsDevelopment of exciting new food and beverage offersAbility to offer industry leading low-prices that are unmatched by competition.Ability to offer consistency in value at any location at anytime.Core CompetenciesValuableRareCostly to ImitateNon-substitutableSustainable, Temporary, ParitySUPPLY CHAIN MANAGEMENTYESSUSTAINABLE COMPETITIVE ADVANTAGEMARKETING
11 Internal Analysis: Value Chain DistributionSuperior - #1 in fast food industry. Financially strong. Intellectual property.InferiorOperationsSuperior – Standardized processesMarketing & SalesSuperior – Known as industry marketing leader- New upscale restaurants- McCafe, Free Wi-Fi- Economies of scale passed on to customers ($1 Menu)Supply Chain-ManagementSuperiormajor advantage to lock in prices from suppliers.Own many of their own sources of inputs. (cattle herds in Brazil)
15 Current Strategy Analysis TypeAnalysisBusiness LevelIntegrated Cost Leadership-DifferentiationMcDonald’s stays ahead of competition by providing customers with more options of healthier meals, cheaper prices and fast service.Product innovation and existing property upgrades. (McCafe, smoothies, free WI-FI Internet)Corporate LevelHigh Levels of Diversification with Related-ConstrainedUse synergy between other local McDonald’s stores to maximize savings (previously owned Boston Market and Chipotle)Cooperative/ AllianceVertical StrategyAlliance with major oil companies to set up shops at stations (also using this strategy in China)McDonald’s owns some rental properties that they develop and rent to other businessesInternationalGlobalTheir multi-domestic strategy allows McDonald’s to respond better to the dynamic environment. Local restaurants are sensitive to society`s culture values. (wine served in France, no beef in India)
16 Global Markets France Germany China Russia Serve alcohol Most popular restaurant brand to Germans aged 12-18McDonald's marketing identified a German fascination with Mexican culture & spicy foods.ChinaFirst Fast Food provider to offer a drive-up lane.Firms are grouped by district, based on the income of local consumers- McDonald's food is expensive for the average citizen in China.RussiaMcDonald’s took a risk buying real- estate in low-growing areas that would eventually become prime property. This strategy paid off over time because of property appreciation, resulting in considerable profits.FranceQuality menu options:P`tit Plaisir (mini snack)Little Mozza (tomato and mozzarella salad)Jambon Beurre (ham and butter on a crusty baguette)Stand-alone McCafes, oferring fruit tarts and serving beverages in ceramic mugs
17 SWOT Analysis STRENTGHS OPPORTUNITIES Well-known brand name, image and global presence as a market leaderStrong financial performanceSpecialized training for managers (Hamburger University)Multi-domestic approach: new products such as McCafe, P`tit Plaisir and yogurt fruit parfaitsExpansion to Asia (especially countries such as India and China)Diversification and acquisitions of smaller restaurantsAttract new clientsFranchise salesWEAKNESSESTHREATSSaturated nature of the fast-food businessUnhealthy food image; the food is abundant in trans-fatHigh staff turnover, including managementThe relationship between McD Corp and franchisees, NO more franchise salesLoss of market share, both globally andin USConsumer awareness towards foodquality, health concernsS pursue O, but limits T: s1-o1 while s1-T2; s2-o2 while s2-T2; s3-04 while s3-T1; s4-o3 while s4-t2W limit O, but enhance T: w1-o2 while w1-t2; w2-o3 while w2-T3; w3-o4 while w3-T1
18 Critical Strategic Issues How should McDonalds re-gain lost domestic market share and revenue?How can McDonald's address consumer awarenessand negative perception of unhealthy fast food?What can McDonald’s do to appeal to healthconscious consumers while still deliveringthe value McDonald’s is known for?Adrian Magopet
19 New Strategy Formation Feasible AlternativesStrategic CapabilitiesCore CompetenciesSustainableCompetitiveAdvantageExploit Opportunities & Limits ThreatsPursue Industry Leading Green InitiativesProducing effective marketing campaign to promote initiativesIndustry Leader in MarketingMarketing contracts already establishedAds on TV, Billboards. Trains/busesReduce chance of negative publicityIntroduce All-Natural/ Organic Menu ItemOffersEstablished suppliersIndustry reputationValue leader because of economies of scaleSupply chain can offer All-natural/organic items at lowest price.New market for ‘all-natural’ BurgerLate Mover = Lost market opportunityContract with Local Schools to provide nutritional lunchesIndustry leading Operations & supply chain managementLeader in low cost and speed of operation.Ability to supply low cost nutritional meals to all-income levelAbility to find new domestic revenueLimit market share loss in US
20 Predicted Competitor Response Pursue industry Leading Green InitiativesRespond with greater marketing emphasis on promote current green practices called “Burger King Green Sessions”Marketing campaigns featuring its new LEED restaurants. LEED buildings meet criteria requirements for having a sustainable, environmentally friendly and energy-efficient design.Introduce All-Natural/Organic Menu ItemsBK has goal for “cage free eggs and pork” by 2017.Will need to try to infuse menu with more organics.More honesty with ingredients. (Ex – New natural French fries)Contract with local schools to provide low-cost lunches for all income levelsUnable to compete with McDonalds' Value chainlow-cost lunches not an option.Focus on college campus contracts.Unable to compete with McDonalds` Value Chain.Fast food delivery market could be an option. (Jimmy Johns)
21 New Strategy Selection: Introduce all-natural organic menu items to compete with new ‘gourmet’ burger market trend.
22 Current Strategy Changes LevelStrategyReasonsBusinessIntegrated Cost Leadership/DifferentiationRecent consumer trends show people WANT and WILL pay more for high quality, low fat and nutritional meals.CorporateHigh Levels of Diversification with Related-ConstrainedDepending on success level of the Organic Menu, possible Upscale Burger Bar spin off franchise.CooperativeVertical StrategyFind organic sourcing at minimal cost or possible backwards integration into organic supplier industryInternationalGlobalMay be able to implement different style organic menu in different regions tailored to local taste.
23 The 7 ‘S’ ModelSystems – McDonalds must find an efficient source of organic inputs to enable them to offer high quality at low price.Strategy – McDonald’s needs to plan for external environment changes such as consumer taste. New ‘Gourmet’ Fast Food is a new and up coming market trend.Structure – Decentralized structures give McDonald’s the ability to adapt and address any issues that may appear in their global operations.
24 Strategy Implementation Timeline START 2013END(2013) Market Study, R&D, Consumer testing (2013) Search for organic suppliers Contracts (Mid 2014) Introduce new line of ‘All-natural organic’ menu items (2015) Look for feedback on social networks and media outlets (2015) Conduct market survey to view opinions on new organic menu items (2015) Make any necessary improvements (2016) Expand or Retract depending on new strategy success.
25 We hope you are hungry by now! THANK YOU FOR YOUR ATTENTION! Adrian MagopetAdrian Magopet