1. McDonald's Corporation
Authors:
Adrian Magopet
Kevin A. Sanders
Armand Koti
Northeastern Illinois University | MGMT 393- Strategic Management | March 2013

2. Introduction
McDonald'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, 1955
Each McDonald's restaurant is operated by a
franchisee, an affiliate, or the corporation itself.
The corporations' revenue comes from the rent,
royalties and fees paid by the franchisees, as
well as sales in company-operated restaurants.
Year End 2010– 80% of McDonald’s
Restaurants were franchised worldwide.
59% Conventional Franchises
21% Licensed to Foreign affiliates
20% Company owned

3. Vision, Mission & Values
To be the leading fast food provider around the globe
Mission
McDonald'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.”
Values
Enhancing customer experience, summarized in "Q.S.C. & V.“
Q- Provide good QUALITY
S- SERVICES to customer.
C- Have a CLEAN environment when customer enjoys their meal
V- 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 Space
For example, Customers get the same experience regardless of when or where
Three-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
Segments
Effect
How it influences
Demographic
Positive
Most important for fast food industry that depends highly on people
World population growing which yields a higher demand for food.
Economic
Developing countries’ economies are growing.
Buying power of people from developing countries are increasing.
Global
Global markets are open to every firm and industry.
Countries have tendency to join the global economy.

6. Industry Analysis - Porter`s 5 Forces
Influence
Factors
Threat of New Entrants
HIGH
Economies of scale do exist but limited because of market saturation. Ease of Start-up. Low switching costs. Not much product variation.
Bargaining Power of Suppliers
LOW
Many 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 Buyers
Minimal to zero switching cost (customer unforgiving). CBS reports in 2009 $110 BILLION spent on fast food. 25% of US population eat fast food daily
Threat of Substitute Products
Grocery stores, deli’s and in-house cafeterias, instant food like chicken, sandwiches, pizza and coffee
Intensity of Rivalry
Major 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 Strategy
Integrated 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 LEVEL
High Level of Diversification with Related-Constrained
High Diversification
Currently changing corporate strategy from Related-linked diversification to low diversification.
COOPERATIVE LEVEL
Joint ventures in Japan
51% owned in Russia
Developmental in South America.
Marketing alliance with DreamWorks (movie promotions).
BK & Pepsi have struck a China alliance.
Seattle's Best Coffee
Teamed with Arby’s to form Strategic Sourcing Group (save costs, energy, and gain better competitive contracts for supplies)
INTERNATIONAL
Multi-domestic strategy. Emphasis on aligning with local taste.
Multi-domestic Strategy

9. Competitor Analysis Competitive Advantage Brand Recognition
Flame Broiled Burgers/sandwiches
Inexpensive
Convenience
Marketing
Perceived as higher quality
Premium food made fast
Sustainable
Competitive
Advantages
NONE
Competitor Future Assumptions
Changes in customer preference
Customer Satisfaction = Value and Quality
Competitor future Objectives
Offer 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
TANGIBLE
Financials
Locations
-cities
-Airports
-Gas stations
Trade Secrets & Recipes
Control/Evaluation (consistency)
Human Resources
INTANGIBLE
Value of Brand name
LOGO
Marketing Contracts
High Customer Satisfaction
Innovation &
Product
Development
CAPABILITIES
Positive Publicity
Effective marketing campaigns
Development of exciting new food and beverage offers
Ability to offer industry leading low-prices that are unmatched by competition.
Ability to offer consistency in value at any location at anytime.
Core Competencies
Valuable
Rare
Costly to Imitate
Non-substitutable
Sustainable, Temporary, Parity
SUPPLY CHAIN MANAGEMENT
YES
SUSTAINABLE COMPETITIVE ADVANTAGE
MARKETING

11. Internal Analysis: Value Chain
Distribution
Superior - #1 in fast food industry. Financially strong. Intellectual property.
Inferior
Operations
Superior – Standardized processes
Marketing & Sales
Superior – Known as industry marketing leader
- New upscale restaurants
- McCafe, Free Wi-Fi
- Economies of scale passed on to customers ($1 Menu)
Supply Chain-Management
Superior
major advantage to lock in prices from suppliers.
Own many of their own sources of inputs. (cattle herds in Brazil)

12. Non-financial Factors
Internal Analysis
Financial Factors
McDonald’s
Wendy’s
Burger King
Industry Average
Operating Margin ratio
0.30
0.07
0.27
.08
ROA
15.44%
16.46%
2.11%
11.34%
ROE
35.73%
35.67%
10%
27.13%
Non-financial Factors
McDonald’s
Wendy’s
Burger King
Brand Image / Name
Very Attractive
Attractive
Location Accessibility
+ 33,000
+ 6,500
+12,500
Market Share
49.6%
12.3%
12.2%

13. Stock Analysis for McDonald’s, Burger King, and Wendy’s

15. Current Strategy Analysis
Type
Analysis
Business Level
Integrated Cost Leadership-Differentiation
McDonald’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 Level
High Levels of Diversification with Related-Constrained
Use synergy between other local McDonald’s stores to maximize savings (previously owned Boston Market and Chipotle)
Cooperative/ Alliance
Vertical Strategy
Alliance 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 businesses
International
Global
Their 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 12-18
McDonald's marketing identified a German fascination with Mexican culture & spicy foods.
China
First 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.
Russia
McDonald’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.
France
Quality 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 leader
Strong financial performance
Specialized training for managers (Hamburger University)
Multi-domestic approach: new products such as McCafe, P`tit Plaisir and yogurt fruit parfaits
Expansion to Asia (especially countries such as India and China)
Diversification and acquisitions of smaller restaurants
Attract new clients
Franchise sales
WEAKNESSES
THREATS
Saturated nature of the fast-food business
Unhealthy food image; the food is abundant in trans-fat
High staff turnover, including management
The relationship between McD Corp and franchisees, NO more franchise sales
Loss of market share, both globally and
in US
Consumer awareness towards food
quality, health concerns
S pursue O, but limits T: s1-o1 while s1-T2; s2-o2 while s2-T2; s3-04 while s3-T1; s4-o3 while s4-t2
W 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 awareness
and negative perception of unhealthy fast food?
What can McDonald’s do to appeal to health
conscious consumers while still delivering
the value McDonald’s is known for?
Adrian Magopet

19. New Strategy Formation
Feasible Alternatives
Strategic Capabilities
Core Competencies
SustainableCompetitiveAdvantage
Exploit Opportunities & Limits Threats
Pursue Industry Leading Green Initiatives
Producing effective marketing campaign to promote initiatives
Industry Leader in Marketing
Marketing contracts already established
Ads on TV, Billboards. Trains/buses
Reduce chance of negative publicity
Introduce All-Natural/ Organic Menu Item
Offers
Established suppliers
Industry reputation
Value leader because of economies of scale
Supply chain can offer All-natural/organic items at lowest price.
New market for ‘all-natural’ Burger
Late Mover = Lost market opportunity
Contract with Local Schools to provide nutritional lunches
Industry leading Operations & supply chain management
Leader in low cost and speed of operation.
Ability to supply low cost nutritional meals to all-income level
Ability to find new domestic revenue
Limit market share loss in US

20. Predicted Competitor Response
Pursue industry Leading Green Initiatives
Respond 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 Items
BK 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 levels
Unable to compete with McDonalds' Value chain
low-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
Level
Strategy
Reasons
Business
Integrated Cost Leadership/
Differentiation
Recent consumer trends show people WANT and WILL pay more for high quality, low fat and nutritional meals.
Corporate
High Levels of Diversification with Related-Constrained
Depending on success level of the Organic Menu, possible Upscale Burger Bar spin off franchise.
Cooperative
Vertical Strategy
Find organic sourcing at minimal cost or possible backwards integration into organic supplier industry
International
Global
May be able to implement different style organic menu in different regions tailored to local taste.

23. The 7 ‘S’ Model
Systems – 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 2013
END
(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 Magopet
Adrian Magopet