Comprehensive Written Analysis of McDonalds Corporation

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Quimpan, Erwin T. Ontoy, Junejay A. Casinto, Julius Carl S. Rapal, Rudolf C. Javellana, Ryjean Cabel, Samantha

Submitted to

Dexter Miraflor

 Existing Mission, Objective, and Strategies

Mission Statement:
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

Objectives
Profitability

McDonald's is a large corporation, and, therefore, must remain profitable to stay in business. To remain profitable, McDonald's offers quality products at a price that meets its consumers' demands. Ironically, McDonald's has remained profitable, even during global recessions, by offering a cheap alternative to sit-down meals.

Quality Service

McDonald's aims to offer quick, efficient products at a reasonable price. McDonald's strives to expand and increase awareness of nutritious menu items. For example, McDonald's has expanded food and beverages containing fruit and vegetables across the menu, and has increased awareness of fruit, vegetable and dairy options available for children on the menu. Their fast, convenient meals won't result in an unsatisfactory product.

Customer Satisfaction

Customer loyalty is an important objective of McDonald's. Without customer loyalty, there would be a decrease in customers meaning less positive word of mouth from customers to friends and family members. Customer satisfaction involves marketing, as McDonald's identifies the needs and requirements of its consumers in a better way than its competitors. Many consumers choose McDonald's because of its friendly, inviting atmosphere. Restaurants offer comfortable seating, televisions and playgrounds for children. Convenience is also important, as customers want their food produced in a fast, efficient manner.

Reputable Image

McDonald's opened its first restaurant in 1954. As of 2011, McDonald's operates more than 32,000 restaurants serving more than 60 million people in more than 100 countries every day. McDonald's strives for uniformity. If you are in Paris, you can find many similar products on the menu as you would in New York City. McDonald's seeks to continually improve its image as a pathway to a career, rather than a provider of "minimum-wage, dead-end, burger flipping jobs."

Community Outreach

McDonald's strives to increase its financial and volunteer support to Ronald McDonald House Charities through communication outreach. It is involved in many schools, community organizations and nonprofit organizations that benefit citizen in communities all over the world.

Strategies

McDonald's Brand Positioning and Messaging One of the greatest attributes of McDonald's is its "everyday affordability" message that drives customers to McDonald's restaurants. Think of your children - they know McDonald's by the time they are two years old. Chanting "Mickey D's", you can't possibly drive by a 'golden arches' without having to stop. Flanked by great integrated campaigns centered around such initiatives as the Olympics, the Kung Fu Panda film and fresh "I'm Lovin' it" ads, McDonald's continues to keep their marketing edge (and brand) ahead of the pack (its sales are three times that of No. 2 burger chain Burger King).

Ongoing Innovation and Knowing When to Make Changes For McDonald's it will continue to be a year of innovation. According to CMO Mary Dillon: "We are the kind of business and brand that is never happy with yesterday. We are always looking to tomorrow and how do we get better?" This type of thinking and marketing philosophy has always kept the fast-food giant in the black.

Global Reach

By combining fundamentally sound operational practices with innovative marketing strategies, Ray Kroc (McDonald's originator) laid the foundation for McDonald's global success. Today, McDonald's values transcend borders and cultures. Each and every day, 47 million consumers worldwide visit McDonald's because they know and love the Golden Arches, Ronald McDonald and Big Mac sandwiches.

Proposed Mission Statement

It is our mission to be the worlds best quick service restaurant (2). Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer (1) in every restaurant smile (5, 6). To achieve our mission we must be the best employer (9) for our people in each community (8) around the world (3), deliver excellence to our customers in each of our restaurants and achieve profitable growth by expanding the brand McDonalds through innovation and technology (4). 1. Customer 2. Products or services 3. Markets 4. Technology 5. Concern for survival, profitability, growth 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees

External Analysis
Opportunities 1. Rising population in China. 2. Chinese consider drive-throughs a novelty where car ownership is growing rapidly. 3. Burger Kings market share among quick service sandwich chains dropped by 10.95 percent in 2006. 4. Developing a Healthy Lifestyle program to attract health conscious consumers. 5. Hispanic population has recently increased by 14 percent in the U.S. 6. Krispy Kreme Doughnuts- possibility of going bankrupt. 7. 6 percent increase in social shopping areas (i.e. malls, plazas).

Threats

1. Increased expansion of traditional rivals. 2. Yum Brands are the leading quick service chains in China. 3. McDonalds Europe sales dropped by 1.9 percent. 4. Burger Kings sales growth is an estimated 18.2 percent compared toMcDonalds 11.2 percent. 5. Yum Brands variety of food and wide range of prices for selections. 6. Wendys Frescata product line increased sales by 3.2 percent. 7. According to National Restaurant Association (NRA) average menu price increased by 3.2 percent. 8. Growing public awareness of fast food being unhealthy.

Competitive Profile Matrix

Wendys Critical Success Factors Market Share Advertising Global Expansion Product Variety Product Quality Company Image Price Competition Management Experience Customer Service Philanthropy Customer Loyalty Financial Position TOTAL Weight 0.15 0.13 0.12 0.10 0.08 0.07 0.04 0.06 0.07 0.05 0.08 0.05 1.00 Rating 2 2 1 4 1 2 3 2 3 2 2 3 Weighted Score 0.30 0.26 0.12 0.40 0.08 0.14 0.12 0.12 0.21 0.10 0.16 0.15 2.16 Rating 4 3 4 3 3 3 3 3 2 4 3 3 McDonalds Weighted Score 0.60 0.39 0.48 0.30 0.24 0.21 0.12 0.18 0.14 0.20 0.24 0.15 3.25 Rating 2 3 2 3 2 2 3 2 2 1 2 2 Burger King Weighted Score 0.30 0.39 0.24 0.30 0.16 0.14 0.12 0.12 0.14 0.05 0.16 0.10 2.22

 EFE MATRIX Key External Factors Opportunities 1. Rise in population for the Chinese market. 2. Chinese consider drive-thrus a novelty where car ownership is growing rapidly. 3. Burger Kings market share among quick service sandwich chains dropped 10.95 percent in 2006. 4. Developing a Healthy Lifestyle program to attract health conscious consumers. 0.05 5. Hispanic population has recently increased 14 percent in the U.S. 0.02 6. Krispy Kreme Doughnuts possibility of going bankrupt. 0.05 7. 6 percent increase in social shopping areas (i.e. malls, plazas). Threats 0.15 1. Increased expansion of traditional rivals. 0.05 2. Yum Brands are the leading quick service chains in China. 3 0.15 3 0.45 2 0.10 1 0.02 3 0.15 0.05 4 0.20 Weight 0.05 Rating 4 Weighted Score 0.20

0.08

0.24

0.15

0.30

0.02 3. McDonalds Europe sales dropped 1.9 percent. 0.05 4. Burger Kings sales growth is an estimated 18.2 percent compared to McDonalds 11.2 percent. 0.04 5. Yum Brands variety of food and wide range of prices for selections. 0.04 6. Wendys Frescata product line increased sales by 3.2 percent. 0.05 7. According to National Restaurant Association (NRA) average menu price increased by 3.2 percent. 8. Growing public awareness of fast food being unhealthy. TOTAL 0.15

0.08

0.15

0.08

0.08

0.15

0.30

1.00

2.65

 Internal Analysis Strengths 1. Globally recognized brand name. 2. Largest U.S. restaurant chain in international markets with approximately 17,000 stores in 120 countries. 3. Consumption of food away from home accounted for 48.5 percent of total expenditures on food. 4. Total assets of $29 billion in 2006. 5. McDonalds serves nearly 54 million customers daily. 6. McDonalds beat out Starbucks, Burger King and Dunkin Doughnuts in a coffee taste test according to the Consumer Report. 7. In 2006 McDonalds return nearly $5 billion to shareholders through shares acquired and dividends paid. 8. McDonalds sells fast food in Disneys theme parks around the world as well as Ocean Park in Hong Kong. 9. In 2006, revenue and operating income reached a record high of $21.6 billion and $4.4 billion respectively. 10. McDonalds increased the companys dividends by 50 percent, raising the annual $0.67 per share to $1.00 per share totaling about $1.2 billion. Weaknesses 1. Lack of menu development 2. Publics perception of quality, service, and cleanliness at McDonalds units suffered over the past years. 3. McDonalds ranked last out of 25 fast-food chains in a recent study of drive thru order accuracy. 4. McDonalds 5 year average sales are 8.14 compared to 8.89 for the industry. 5. Operations loss in Islands of Jamaica, Barbados, Bermuda. 6. Long-term debt remains over $8 billion. 7. Low personnel productivity. 8. Yum Brands return-on-assets of 13.56 compared to McDonalds 9.74. 9. Website not user friendly.

 IFE MATRIX Key Internal Factors Strengths 0.08 1. Globally recognized brand name. 0.15 4 0.60 4 0.32 Weight Rating Weighted Score

2. Largest U.S. restaurant chain in international markets with approximately 17,000 stores in 120 countries.

0.06 3. Consumption of food away from home accounted for 48.5 percent of total expenditures on food. 0.10 0.02 5. McDonalds serves nearly 54 million customers daily. 0.04 6. McDonalds beat out Starbucks, Burger King and Dunkin Doughnuts in a coffee taste test according to the Consumer Report. 0.05 7. In 2006 McDonalds return nearly $5 billion to shareholders through shares acquired and dividends paid. 0.02 8. McDonalds sells fast food in Disneys theme parks around the world as well as Ocean Park in Hong Kong. 9. In 2006, revenue and operating income reached a record high of $21.6 billion and 0.12

0.24

4. Total assets of $29 billion in 2006.

4 4

0.40 0.08

0.16

0.20

0.08

0.48

$4.4 billion respectively. 0.04 10. McDonalds increased the companys dividends by 50 percent, raising the annual $0.67 per share to $1.00 per share totaling about $1.2 billion. Weaknesses 0.03 1. Lack of menu development 0.08 2. Publics perception of quality, service, and cleanliness at McDonalds units suffered over the past years. 3. McDonalds ranked last out of 25 fastfood chains in a recent study of drive thru order accuracy. 4. McDonalds 5 year average sales are 8.14 compared to 8.89 for the industry. 5. Operations loss in Islands of Jamaica, Barbados, Bermuda. 6. Long-term debt remains over $8 billion. 0.01 7. Low personnel productivity. 8. Yum Brands return-on-assets of 13.56 compared to McDonalds 9.74. 9. Website not user friendly. TOTAL 1.00 3.32 0.05 2 0.10 1 0.01 0.08 2 0.16 2 0.16 2 0.06 4 0.16

0.02

0.04

0.01

0.01

0.02

0.04

0.02

0.02

TOWS Matrix

Strengths 1. Strong brand name, image and reputation. 2. 3. 4. Large market share. Strong global presence. Specialized training for managers known as the Hamburger University. 5. McDonalds Plan to Win focuses on people, products, place, price and promotion. 6. Strong financial performance and position. 7. 8. 9. Introduction of new products. Customer focus (centric). Strong performance in the global marketplace. 6. 5. 4. 3. 1. 2.

Weaknesses Unhealthy food image. High Staff Turnover including Top management. Customer losses due to fierce competition. Legal actions related to health issues; use of trans fat & beef oil. Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.

Ignoring breakfast from the menu.

Opportunities

S-O Strategies

W-O Strategies

1.

Growing health trends among consumers. Globalization, expansion in other countries (especially in China & India). Diversification and acquisition of other quick-service restaurants. Growth of the fast-food industry. Worldwide deregulation. Low cost menu that will attract the customers. Freebies and discounts.

2.

1. Focus on Plan to win to attract customers and expansion in other countries (S5, O2, O6). 2. Expansion in market share by more investments in Asia (S2, O2).

1.

Minimize customers losses by provide low cost menu and discounts (W3, O6, O7).

3.

4. 5. 6. 7.

Threats 1. Health professionals and consumer activists accuse McDonald's of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity. The relationship between corporate level McDonald's and its franchise dealers. McDonalds competitors threatened market share of the company both internationally and domestically. Anti-American sentiments. Global recession and fluctuating foreign currencies. Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues. 1.

S-T Strategies More control on franchise dealers to maintain McDonald's reputation and quality (S1, T2). Provide new product and keep innovation (S7, T3). 1.

W-T Strategies Applying 0 grams Trans fat in all worldwide McDonald's (W1, W4, O1). Transfer from HCFC-22 to HFC (hydrofluorocarbon)-free (W5, T6)

2.

2.

2.

3.

4. 5. 6.

SPACE Matrix

Financial Strength Return on investment Leverage Net Income EPS ROE Cash Flow Average

Rating 4 4 6 5 5 4 4.67

Environmental Stability Rate of inflation Demand Changes Price Elasticity of demand Competitive pressure Barriers to entry new markets Risk involved in business Average Y-axis

Rating -3 -3 -1 -3 -3 -2 -2.5 2.17 Rating 5 5 4 4 5 3

Competitive Advantage Market share Product Quality Customer Loyalty Control over other parties

Rating -1.00 -1.00 -1.00 -2.00

Industry Strength Growth potential Financial stability Ease of entry new markets Resources utilization Profit potential Demand variability

Average

-1.25

Average X-axis

4.33 3.08

Grand Strategy Matrix

Rapid Market Growth Quadrant II Quadrant I

Weak Competitive Position Quadrant III Quadrant IV

Strong Competitive Position

Slow Market Growth

The Boston Consulting Group (BCG) Matrix

Relative Market Share Position

Industry Sales Growth Rate

MCD

Stars

Question Marks

Cash Cows

Dogs

The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong 3.0 to 4.0 High 3.0 to 3.99 I

Average 2.0 to 2.99 II

Weak 1.0 to 1.99 III

The EFE Total Weighted Medium Score 2.0 to 2.99

IV

VI

McDonald's

VII Low 1.0 to 1.99

VIII

IX

The Quantitative Strategic Planning Matrix (QSPM)

Strategy 1

Strategy 2

Expand further in Asia by adding 500 restaurants

Applying 0 grams Trans fat in all worldwide McDonald's restaurants AS TAS

Key Internal Factors Strengths Strong brand name, image and reputation Large market share Strong global presence Specialized training for managers known as the Hamburger University McDonalds Plan to Win focuses on people, products, place, price and promotion Strong financial performance and position Introduction of new products Customer focus (centric)

Weight

AS

TAS

0.12 0.10 0.04 0.04

4 4 4 -

0.48 0.40 0.12 -

4 2 2 -

0.48 0.20 0.08 -

0.12

0.48

0.48

0.08 0.06 0.06 0.08

4 1 3

0.32 0.06 0.24

4 4 1

0.32 0.24 0.08

Strong performance in the global marketplace Weaknesses Unhealthy food image 0.08 1 0.08 4 0.32

High Staff Turnover including Top management Customer losses due to fierce competition Legal actions related to health issues; use of trans fat & beef oil Uses HCFC-22 to make polystyrene that is contributing to ozone depletion SUBTOTAL

0.10 0.04 0.04

3 1

0.12 0.04

1 4

0.04 0.16

0.04

1.00

2.34

2.40

Strategy 1

Strategy 2

Expand further in Asia by adding 500 restaurants

Applying 0 grams Trans fat in all worldwide McDonald's restaurants AS TAS

Key External Factors Opportunities Growing health trends among consumers Globalization, expansion in other countries (especially in China & India) Diversification and acquisition of other quickservice restaurants Growth of the fast-food industry Worldwide deregulation Low cost menu that will attract the customers Freebies and discounts

Weight

AS

TAS

0.08 0.12

1 4

0.08 0.48

4 1

0.32 0.12

0.04

0.10 0.04 0.08 0.08

4 4 -

0.40 0.16 -

4 1 -

0.40 0.04 -

Threats Health professionals and consumer activists accuse McDonald's of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity The relationship between corporate level McDonald's and its franchise dealers McDonalds competitors threatened market share of the company both internationally and domestically Anti-American sentiments Global recession and fluctuating foreign currencies Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE 0.10 1 0.10 4 0.40

0.09

0.36

0.09

0.12

0.48

0.48

0.07 0.04 0.04

0.04

0.16

1.00

2.10 4.44

2.01 4.41