Report on McDonald's Pakistan
Short Description
1 IQRA UNIVERSITY Research Work on McDonalds Group Members Hasan Bin Ijaz (10012) Hamid Nazir (10114) M.Zohai...
Description
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© Hasan Bin Ijaz (10012) Hamid Nazir (10114) M.Zohaib Azhar (01042) Zaigham (01039)
Submitted to: Sir Mohsin Zeb
Dated: 19th December, 2009
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McDonald's is the leading global foodservice retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 121 countries each day. Aiming to be the world¶s best quick service restaurant experience, McDonald¶s started its operation in Pakistan in 1998 and is a leading fast food service retailer for its valued customers. With the strong believe in the phrase ³when it¶s green it¶s growing´.
[ [ [ [
Political environment conomical environment Socio-cultural environment àechnological environment [ Supply chain
[ [ [ [ [
Market definition Market size Market segmentation ompetition and market share ompetitor¶s strength and weaknesses
Nature of the buying decision ] Demographics ] Buyer motivation and expectations ] åoyalty segments
]
Îinancial ] People ] àime ] Skills
]
Mission statement & Vision statement ] orporate objectives ] Marketing objectives ] åong term objectives ]
] ] ] ] ]
Internal Strengths Internal Weaknesses xternal Opportunities xternal àhreats ey success factors in the industry Our sustainable competitive advantages
! ]
Product
]
Price
]
Place
]
Promotion
]
B Analysis
Î Income Statement ] Balance Sheet
]
" #"$ # %ÎÎ ] ] ]
conomic Slowdown Health onscious attitude of People Increased ompetition
& McDonald's is the leading global foodservice retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 121 countries each day. McDonald¶s is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which they do business.
àhey serve the world some of its favourite foods - World Îamous Îrench Îries, Big Mac, Quarter Pounder, hicken McNuggets and gg McMuffin.
àheir rich history began with their founder, '. àhe strong foundation that he built continues today with McDonald's vision and the commitment of their talented executives to keep the shine on McDonald's arches for years to come.
Aiming to be the world¶s best quick service restaurant experience, McDonald¶s started its operation in Pakistan in 1998 and is a leading fast food service retailer for its valued customers. With a strong believe in the phrase ³when it¶s green it¶s growing´, McDonald¶s Pakistan is growing with the focus to provide friendly and quick service experience to the customers. McDonald¶s Pakistan is a part of åakson group of companies, operating with a network of restaurants in various cities with a vision leading them to reach their customers for providing friendly services in all regions of the country. àhey are operating, presently in 6 cities of Pakistan arachi, Hyderabad, åahore, Îaisalabad, Rawalpindi and Islamabad In Îuture, very soon planning to expand in many cities of Pakistan.
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" () Ray roc mortgaged his home and invested his entire life savings to become the exclusive distributor of a five-spindled milk shake maker called the Multimixer. Hearing about the McDonald's hamburger stand in alifornia running eight Multimixers at a time, he packed up his car and headed West. It was 1954. He was 52 years old.
Ray roc had never seen so many people served so quickly when he pulled up to take a look. Seizing the day, he pitched the idea of opening up several restaurants to the brothers Dick and Mac McDonald, convinced that he could sell eight of his Multimixer each and every one. "Who could we get to open them for us?" Dick McDonald said.
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Ray roc opened the Des Plaines restaurant in 1955. Îirst day's revenues-$366.12! No longer is a functioning restaurant, the Des Plaines building now a museum containing McDonald's memorabilia and artefacts, including the Multimixer!
"If you've got time to lean, you've got time to clean," Ray roc preached to his troops. Heeding his own words, here the hairman of the Board cleans the parking lot of the first McDonald's franchise in Des Plaines, Illinois.
Here Ray roc (right) and Îred àurner study the design which would replace the red and white tile buildings that had become landmarks throughout the U.S. alled roc's first "grill man extraordinaire, " àurner is today Senior hairman of the Board.
In 1965 McDonald's went public with the company's first offering on the stock exchange. A hundred shares of stock costing $2,250 dollars that day would have multiplied into 74,360 shares today, worth over $1.8 million on December 31, 2003. In 1985 McDonald's was added to the 30-company Dow Jones Industrial Average. "Introduced system wide in 1968, the Big Mac was the brainchild of Jim Delligatti, one of Ray roc's earliest franchisees, who by the late 1960s operated a dozen stores in Pittsburgh."
Introduced in 1973, the gg McMuffin was developed by owner operator Herb Peterson.
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In 1974 Îred Hill of the Philadelphia agles teamed up with McDonald's to create Ronald McDonald House. Here the families of critically ill children have a place to call home while they're away from home as the young patients undergo treatment for their conditions.
Since 1979 the Happy Meal has been making kids visits that much more special. lubs the world over collect Happy Meals toys and boxes.
McDonald's xpress for a world that can't slow down!. McDonald's is popping up in more nontraditional locations like Amoco and hevron stations, with full menu offerings and dining room seating, just like you'll find in a traditional McDonald's.
uwait ity is pretty far from Des Plaines, Illinois, but that didn't stop 15,000 customers from lining up here on opening day in 1994. àhe line at the drive thru was seven miles long. Proving once again that " ood àimes, reat àaste" is understandable in any language. Surf àhe World at mcdonalds.com to see McDonald's in other countries.
Îorty three years after opening our first restaurant in Des Plaines, Illinois, we are proud to come to you on the World Wide Web. Did you know that McDonalds.com receives millions and millions of hits every week "àhe smile known around the world," In his first àV appearance in 1963 the happy clown was portrayed by none other than Willard Scott. heck out McDonald land for more Ronald McDonald information and fun.
[ [ [ [
Political environment conomical environment Socio-cultural environment àechnological environment [ Supply chain
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In general terms the government policies do not affect the company much nor do the changes in the government influence the organization of the company. Mostly what company obligation to the government is the paying of different taxes which include payroll taxes and business taxes. McDonald¶s enjoys an added advantage in countries where consumer protection laws are not very strong. In countries like US, where the consumer protection laws are very strong, there are great costs associated with a breach in quality or service in the form of litigations and lawsuits.
àhere are many factors which can affect the operation of a company. In Pakistan McDonalds offer the food at higher rates in comparison to the local food restaurants. Most of the people in Pakistan fall in the category of middle class and it is not affordable for them to have McDonalds at regular basis. Due to layoffs and other economic downturn of the current recession period the profits of McDonalds might have dwindle as people consider it as a luxury to go and eat out at some foreign QSR.
* When McDonalds entered the Pakistani market people were not very much into fast food eating style but now the business has been influenced by the changes made in the society especially changes in the eating habits among young people who helped in the acceptance of the fast food idea but also the rapid change of way of life which is very quick now as everyday people are running out of time. àhis in turn has helped the company to grow and to increase its profits. As McDonalds offer Halal food majorly so there are no religious, ethical or cultural issues associated with the operations. A negative aspect of a social factor
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happening in Pakistan is sometimes the fact that many times anti Americans feelings rising for different reasons may a lot or a little affect the company by boycotting Americans goods. Îor the rising importance of corporate social responsibility recently McDonald's has announced that it is giving further backing to Rainforest Alliance certification by offering a cup of tea with a conscience in all of its 1,200 restaurants in the U.
Pakistan is a developing country and new technology gadgets and techniques are always welcomed. McDonalds¶s introduced new food production techniques in Pakistan which were later adopted by the local QSRs. Îood made with the help of machines is considered more hygienic. However, the continuous developments in the technology sector needs McDonalds to be updated regularly but as in Pakistan food making technology is still in the development stage so McDonalds has an edge over others in this regard. It is natural that technology has helped McDonald and especially its employees as they have to serve quick services. omputers and smart cashiers are used by the employees so they would not get confused and they are provided with customized database management system.
Îor McDonald¶s, we strive to ensure that every step of our supply chain contributes positively to the safety, quality, and availability of our final products. Just as importantly, we want the ingredients and materials that go into our products to be produced in ways that contribute positively to the development of sustainable agricultural and food manufacturing practices. iven the size, scope and complexity of the McDonald¶s supply chain, guidance and oversight of issues related to sustainability presents special challenges. As a result, leaders of McDonald¶s Worldwide Supply hain department created a global governance structure.
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àhe Sustainable Supply Steering ommittee (SSS), formed in 2007, includes supply chain department representatives from the corporate center and each area of the world, corporate social responsibility, social accountability, and corporate communications. àhis group is responsible for guiding McDonald¶s work toward its vision for sustainable supply by identifying global priorities and ensuring progress in ways that complement local priorities and efforts.
Vision We envision a supply chain that profitably yields high-quality, safe products without supply interruption while leveraging our leadership position to create a net benefit by improving ethical, environmental and economic outcomes.
* We envision purchasing from suppliers that follow practices that ensure the health and safety of their employees and the welfare and humane treatment of animals in our supply chain. * We envision influencing the sourcing of our materials and ensuring the design of our products, their manufacture, distribution and use minimize lifecycle impacts on the environment.
* We envision delivering affordable food, engaging in equitable trade practices, limiting the spread of agricultural diseases, and positively impacting the communities that our suppliers operate in. Viewing our responsibilities in this type of holistic manner, we consider our priorities for food safety, quality, and costs, as well as our ethical, environmental, and economic responsibilities collectively, as we make purchasing decisions and evaluate supplier performance. Our global progress on beef and coffee sustainability illustrate how we are working to bring this approach to life by addressing different components of sustainability through both global and local efforts.
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McDonald¶s uses demographic segmentation strategy with age as the parameter. àhe main target segments are children, youth and the young urban family.
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As shown above, kids reign supreme in Îast Moving onsumer oods (ÎM ) purchase related to food products. So to attract children McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given (the latest in this range is the toys of the movie Madagascar). Îor this, they have a tie-up with Walt Disney. At several outlets, it also provides special facilities like $ where children can play arcade games, air hockey, etc. àhis strategy is aimed at making McDonald¶s a fun place to eat. àhis also helps McDonald¶s to attract the young urban families wanting to spend some quality time while their children have fun at the outlet. ào target the teenagers, McDonald¶s has priced several products aggressively, keeping in mind the price sensitivity of this target customer.
àhe major competition in local market faced by McDonalds is from entucky Îried hicken (Î). As McDonalds and Î offer similar type of products. A product offered by McDonalds is substitute for a product offered by Î & vice versa.
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Î , & : Value for money is a major factor. ] | : As both Î and McDonalds are following their international standards there for it¶s not a major concern. ] Î: àhis is one major factor that contributes towards attracting customers. Different customers have different preferences. ] : Number of outlets contributes towards market share which gives Î an edge. ]
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$ , àhere are many competitors of McDonalds in local market but the main competitors of McDonalds are Î, Pizza Hut and Subway Êc
'' Î ")'-'Î. [ A very strong financial background is one of ζs competitive advantages. [ Î has been functioning as a multinational corporation for several decades. As a
result, the company is familiar with the logistical and quality problems which accompany operating an international food operation, and has demonstrated that it can work with host countries and businesses within the host country to develop a strategy
which works in the most cost effective way.
[ With the passage of time, Î has developed another very important competitive
advantage for itself- nvironmental Îriendliness. In March 2009, the first eco-friendly green Î was opened in Northampton USA. àhe restaurant is designed according to environmental goals that include cutting energy and water consumption by 30 percent and reducing O2 emissions. Operations at the new site are also expected to reduce waste and the amount of rubbish sent to landfills; the restaurant composts and recycles other waste, grease and used cooking oil. Other than this, in an effort to reduce its packaging by 1,400 tons, Î is now switching from cardboard to recyclable and biodegradable paper wrapping for some of its products.
ñ [ àhe advertising campaign of Î does not specifically appeal to any segment. It does
not appear to have a consistent long-term approach. àhe U.S. has enormous changes in its demographics. Only in US, single-person households increased from 12% in 1970 to 25% in 1995. With this kind of dramatic change, Î does not have a proper approach to its target market. [ àhe increased health concerns of the masses has put Î at a great disadvantage
because of the word 'fried' attached to it's brand name which gives an instant idea that the food would be oily and unhealthy. [ Another weakness of Î is that of the lack of a corporate direction because it has
been a part of four different parent companies till now namely, Heublein Inc., R.J Reynolds, Pepsi o. and Yumm! Brands Inc.
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[ àhe corporate functioning of these companies has been pretty different from each
other because of which a strong culture could not be established at Î and it had long been struggling with it. [ Because of the nature of the chicken segment of the fast food industry, innovation was
never a primary strategy for Î. However, during the late 1980's, other fast food chains, such as McDonald's, began to offer chicken as a menu option. During this time, McDonald's had already introduced the Mchicken while Î was still testing its own chicken sandwich. àhis delay significantly increased the cost of developing consumer awareness for the Î sandwich.
// ) Pizza Hut has the first mover advantage in the pizza chains because of which it has developed a strong customer base which is one of its strengths. In the Pakistani QSRs industry, the delivery service of Pizza hut is clearly a competitive advantage that it enjoys. Pizza hut¶s delivery service is one of quickest and the pizzas delivered are oven hot in the real sense of the world. Pizza Hut is often referred to as µPizza Innovation åeader¶ because it is constantly coming up with new varieties of pizzas to appeal the different audiences and at the same time, people at the pizza hut have a really good idea about which varieties are appealing to the customers and they are thus retained in the menus àhe first mover advantage is an advantage that Pizza hut was born with but time, Pizza hut has been successfully creating competitive advantages like a traditionally strong brand name
for itself and the quality service that it provides.
ñ At one time, the biggest marketing problem Pizza Hut faced was lunch. As compared to McDonald¶s, its restaurants had virtually no lunch time sales, and neither did any of it¶s pizza competitors. àhe reason, of course, is that it takes 20 minutes to cook a pizza from scratch in a traditional pizza oven, and most people won¶t spend that long at lunch time waiting to be served. By using a new, continuous-broiling technology adapted from burger business, Pizza Hut developed a personal pan pizza that could be served in less than 5 minutes. ÊG
It was quick, tasty and moderately priced. And Pizza hut rolled it out to all 4500 stores worldwide and locked up the pizza-lunch business almost everywhere, almost overnight.
One of the weaknesses of Pizza hut that it hasn¶t overcome yet is it¶s price. åocal chains are constantly springing up, offering lower prices and similar recipes. Most people don¶t mind giving a lower price for slightly different taste because of which the sales at pizza hut at are suffering. rowing awareness about eco-friendliness has forced a lot of the food chains to maintain practices that conform to international environmental standards. Îor example McDonald¶s is introducing coffee beans grown in environmental friendly conditions in order to appeal to the people who are conscious about environmental friendliness. In the Pizza selling restaurants, organic pizzas are the new concepts that are appealing to the masses to these days. It¶s a phenomenon that highlights the health conscious attitude as well as environmental friendliness. Pizza Hut on the other hand has not come up with any strategy in this area and if it doesn¶t even in the future, it is going to lag behind the chains that offer healthier food.
0ñ One of the greatest competitive advantages that Subway was born with is its healthy Menu. àhe salads and sandwiches appeal much more to the people as compared to fried chicken, burgers, fries and pizzas. With its advertising and promotion, Subway has long been highlighting its healthy food in advertising and promotions and with the passage of time, it has established itself as a healthy brand. [ Another competitive advantage that subway enjoys is the fact that along with
traditional locations, Subway restaurants can be found in more than 4,000 nontraditional locations such as food courts, health clubs, hospitals, universities, amusement parks or just about anywhere. In fact, Subway restaurants can even be found in automobile showrooms and åaundromats! àhis global presence is indeed a sustainable
advantage
for
Subway and
needs
to
be managed
properly.
Subway's fresh food is also a competitive advantage because unlike it's competitors like McDonald's it allows its franchisees to choose their own food suppliers, to ensure they
can
access
the
freshest
ingredients.
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ñ [ One of the major problems that can be identified with Subway right now is related to
the franchises. Although Subway has long been named as the number one franchise opportunity by àhe ntrepreneur magazine but it seems that Subway has developed a myopic focus regarding the franchises. Subway has regional managers who have the opening of new franchises as their sole aim and their bonuses and incentives are tied to the opening of new franchises. àhese managers at Subway even don't care if the new franchises are detrimental for the existing ones and because of this; many of the franchises are becoming a victim of internal competition or cannibalization. Îor example, in åahore alone, Subway has 20 outlets. Instead of this, Subway could have targeted ities like Îaisalabad and explored a new market. Îranchise owners believe that Subway has been irresponsible with allocating the franchises and uses bloated store sales projections as part of their sales pitch for encouraging new franchises. [ àhe opening up of a lot of new stores in close proximities are also resulting in decline
in sales per store because of which the franchisees are not very satisfies with Subway. [ àhe environment at the Subway stores cannot be compared with that of McDonald's,
Î or Pizza Hut. àhe Stores are small and suffocating and do not even provide the necessary privacy to the people eating there. Subway has no standard size for any of its store because of which the sales oriented Îranchisees try to fix them at as smaller a place as possible. àhis is tarnishing the image of Subway as an international brand. [ àhe quality of the sandwiches and standards of cleanliness at Subway are going down
day by day due to the greater and greater autonomy that franchisees enjoy. àhe Subway at Rawalpindi was recently closed down due to quality issues as well. [ àhere is a dire need of a system to integrate the large number of Subway franchises
and to ensure that the original Subway practices are being followed there. àhe management of the franchises is one part of their operations that Subway has not handled well.
Nature of the buying decision ] Demographics ] Buyer motivation and expectations ] åoyalty segments
]
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àhe customers of McDonald¶s have been segmented on the basis of AIOD into four categories, based on the product attributes that fulfil needs like µfast¶ food, ambience, status symbol and hygiene.
Influenced by peer pressure, nergetic, Impulse buying. Ambitious, Îuture business and social issues, Politics.
1
2Î 3
Student, working; Adventurou s, nergetic.
Sports, ntertainme nt, Îashion, Music, Recreation.
4
Student, working/sel f-made businessme n; working on projects.
ntertainme nt, Recreation, Îashion, Music, Socializatio n.
5
Student, working; Hanging out, Adventurou s.
Sports, ntertainme nt, Îashion, Music, Recreation.
nergetic, Impulse buying, influenced by peer pressure
6
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Working women/me n, housewives; Shopping, lub membershi ps.
Home, Recreation, shopping, Îashion,
Planned purchasing, Authoritari an, Strong views, Politics, Îuture business and social issues.
" Age: 16-24 years old. Marital status: Single; Heavy users Age: 20-35 yrs old. Marital status: Single and Married. åight to medium users. Age: 16-25 yrs old. Marital status: Single; light to medium users Age: 25-45 yrs old; Marital status: Newly married, Îull Nest; åight users
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2Î 3Î"& àhis segment of customers enjoys the Quick Service Restaurant (QSR) facet of McDonald¶s and has its needs fulfilled. Since McDonald¶s competes rigorously in the market on the quick delivery attribute, the customers expect their food to be delivered to them fast, both at the outlet, and at home (home delivery). A large majority of this segment is composed of students whose activities are adventurous, enthusiastic, energetic, and recreational and revolve around sports, clubs, hang-outs and shopping etc. àhis segment thus targets the market that indulges in impulse buying and is influenced by peer-pressure. àhese customers are heavy user of the product at hand. A minority of newly working people are also included in this segment.
0& àhis segment enjoys the unique ambience provided by McDonald¶s in Pakistan. Since the regular consumers of this product belong to the upper-middle class, they prefer having a meal with the level of customer service and a tinge of sophistication that the outlets provide. àhe customers of this segment are students as well as working class. àhese people enjoy recreation and socialization activities. àhey have strong views about the current affairs and the future business and social issues.
0#& àhe people of this segment perceive the use of this product as a status symbol and basically comprise students and new-working class. àhese customers like being seen at the right places and like to associate and socialize with people of the same class. àhese customers are enthusiastic about entertainment, fashion, music and sports. àhey have fickle opinions and subject to change because of peer pressure. àhey follow fads and indulge in impulse buying.
) %& àhis segment comprises people who are concerned with hygiene and how the food is prepared and served and also the cleanliness of the environment where they eat. It comprises of middle-aged people mostly house-wives and working women/men. àhese are light users and make purchases once in a while, probably as a substitute rather than a first-choice. àhese people are authoritarian, have strong views about politics, business and current affairs. àhey make planned purchases and weigh their options before they make a buying decision. Ê
0 ! ustomer perception is a key factor affecting a product¶s success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers¶ minds. McDonalds being an internationally renowned brand brings with it certain expectations for the customers.
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A Îamily with children
A treat to children, a fun place to be for the children.
Urban customer on the move àeenager
reat taste, quick service without affecting the work schedule Hang out with friends, but keep it affordable.
ustomers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. àhe customer¶s expect the brand to enhance their self-image. ustomer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact that they connect strongly with the brand. However, fulfilling some of the customer expectations like a broader product variety provide McDonald¶s a great scope for improvement.
Îinancial ] People ] àime ] Skills
]
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Î Îiscal Year nd:
December
Revenue (2008):
23522.40 M
Revenue rowth (1 yr):
3.20%
mployees (2008):
400,000
mployee rowth (1 yr):
2.60%
McDonald¶s understands the value of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald continuously does 8 àhis is important as it must precede external marketing. àhis includes hiring, training and motivating able employees. àhis way they serve customers well and the final result is a happy customer. àhe level of importance has changed to be in the following order (the more important people are at the top): 1. ustomers 2. Îront line employees 3. Middle level managers 4. Îront line managers àhe punch line ³$ ´ is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers.
ustomer waiting at the ques to place order. ] ustomer waiting time. ] ustomer waiting time at the drive through. ] ustomer waiting for home delivery.
]
McDonalds takes 10-15 minutes for a customer order to be delivered at the outlet on ground 80% to 85 % of orders are delivered within targeted time. ào meet 100% waiting time McDonalds management is working on staff trainings, better operations, plan for every shift & decrease staff turnovers.
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At McDonalds educated young individuals are trained at operational level. àhose individuals are then trained on international standards of the franchise. Bench marks are set for individuals to meet on a periodic basis. åearning curve is minimized in much smarter time upon with intensive training programs throughout the year. International quality standard of customer satisfaction in service and food are inculcated in to stuff. àeam work which is the key to success in this business has a paramount important is highly encouraged environment.
Mission statement & Vision statement ] orporate objectives ] Marketing objectives ] åong term objectives ]
9 " $ M "McDonald's Mission is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that they make every customer in every restaurant smile. ào achieve their vision, they focused on three worldwide strategies. 1. Be the best employer for their people in each community around the world, 2. Deliver operational excellence to their customers in each of their restaurants, and 3. Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology.
" $ McDonald¶s vision is to make every customer in every store smile. àhis is a vision which may be easy to acquire through other ways but to do it professionally is a totally different thing.
] ] ] ]
ào serve good food in a friendly and fun environment ào be a socially responsible company ào provide good returns to its shareholders ào provide its customers with food of a high standard, quick service and value for money
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A marketing plan must be created to meet clear objectives. Objectives guide marketing actions and are used to measure how well a plan is working. àhese can be related to market share, sales, and goals, reaching the target audience and creating awareness in the marketplace. àhe objectives communicate what marketers want to achieve. åong-term objectives are broken down into shorter-term measurable targets, which McDonald's uses as milestones along the way. Results can be analyzed regularly to see whether objectives are being met. àhis type of feedback allows the company to change plans. It gives flexibility. Once marketing objectives are set the next stage is to define how they will be achieved. àhe marketing strategy is the statement of how objectives will be delivered. It explains what marketing actions and resources will be used and how they will work together.
# 1. McDonald¶s vision is to be the world¶s best quick service restaurants experience. 4. McDonalds is committed to maintaining and developing the best food products in the quick service restaurant market. 5. In order to deliver this, the company has made a number of commitments to food safety and nutrition. 68 åead the Quick Service Restaurant market by a program of site development and profitable restaurant openings, and by attracting new customers. Increasing sales through promotions will enable them to continue their program of expansion.
:8 McDonalds have an objective to continual enhance and improve their menu. àhis will better satisfy their customers and give customers more reason to visit. Many ideas for new items on the menu come from the franchisees responding to customer demand. onsumer tastes change over time and McDonalds has to respond to these changes.
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Internal Strengths Internal Weaknesses xternal Opportunities xternal àhreats ey success factors in the industry Our sustainable competitive advantages
McDonalds has been able to maintain its market share in the QSR market of Pakistan since 1998 and this is actually the major strength of McDonalds that has made it so popular. Other major strengths are listed below:
& àhe reputation of the various products each season has made it possible for the company to attract customers having different tastes and to try out the season specialties. A major strength is the various deals that McDonalds offers so that it could be made affordable. Recently McDonalds offered a deal for Rs.85 only, containing a beef burger along with a drink. McDonald¶s offers many flavors of Mcflurry ice cream from a mix of M&Ms to Oreo cookies. àhe M&Ms flavor was introduced about a year back and is still popular among the M&Ms lovers. McDonald¶s has also customized its meal according to the tastes of Pakistan. People in Pakistan do not eat bacon so McDonalds does not offer such sort of meals in the country.
& àhe social responsibility acts of McDonald¶s are commendable. It has been able to maintain a reputation as a socially responsible and aware enterprise all over the world. Its practice of going green and serving in an environment friendly way has made it possible for McDonald¶s to gain fame. On 27th March¶ 2008, McDonald's announced that it is giving further backing to Rainforest Alliance certification by offering a cup of tea with a conscience in all of its 1,200 restaurants in the U. GÊ
In Pakistan however, McDonald¶s has not yet come up with an effort that can show the company¶s goodwill towards the masses here. åike Î, McDonald¶s should also involve itself in educational and social activities so that people should know that McDonald¶s isn¶t yet another business oriented corporation aimed at just making money but it actually cares.
& àhe equal employment opportunities regardless of race, color, sex, national region, age, disability etc are offered to people. People looking for jobs can also upload their Vs online8
0 & McDonalds has gained recognition worldwide. àhe chain is present all over the world in more than 121 countries. In Pakistan a large number of franchises are present, majority of them in arachi and åahore and McDonald¶s is regarded as a symbol of value and quality for your money.
% & McDonalds has always ensured a friendly environment to offer to its customers. hildren love going there, having a happy meal and the toys that they get as a gift. Play places also serve as a significant attraction where children can go and make friends and play. mployees are also very polite and they are always ready to serve you in every best possible way that they can.
& McDonald¶s offers its clients, especially children to celebrate their birthdays there. One can invite friends, they decorate the party area, various party games are organized along with face painting activity etc. hildren are provided with an opportunity to celebrate their day in the way that they want.
, & McDonalds and oca ola are official global partners. oca cola is a big brand name serving people all over the world with beverages.
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, & McDonalds offered special deals to its clients with up size meals who are the users of a particular company such as Warid and Ufone.
ñ & McDonalds needs to develop more and more products to stay in the competition. After the opening of international QSRs in Pakistan, many local QSRs have also been opened in various cities. àhe tastes are a bit different but they too are offering chicken and cheese burgers, drinks and fries at competitive prices. àhis situation requires McDonald¶s to be more innovative and price competitive.
& In Pakistan, McDonald¶s rarely advertises at àV, however billboards often show off juicy McDonald¶s burgers but this could affect its popularity in future. It definitely needs to advertise more to reach the target and the potential customers.
"* & àhe service at McDonald¶s drive-ins has been subject to criticism all over the world and a lot of people complaint that the orders are either missing some of the items or are entirely wrong. àhe service time at the drive-ins is also subject to great variations and needs to be improved.
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& McDonalds can broaden its market by offering meals at more competitive prices in comparison to other local QSRs such as AÎ, Al Maida etc. àhis way it could get hold of the potential customers too.
& McDonalds could make itself more innovative by offering deals that appeal more to Pakistani consumer¶s e-g it can introduce desi flavors in the present products such as Barbeque, àandoori, Masala and other spicy tastes which are staple of the country.
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0 & Now in Pakistan most the trend of women going to work and opting for profession is increasing as a result of which they are running short of time to carry out all the home chores along with their work. McDonalds can offer deals to such market by catering them in the morning for breakfast. During the office hour¶s people mostly go out for their lunch to restaurants. McDonalds can avail this potential market too.
%, & In Pakistan the dining out trend is increasing especially in youngsters and upper middle class. McDonalds has the opportunity to grasp this market quite well. It is already doing well by serving them but it could arrange various activities for the people of this age.
" & McDonalds can open up with small-sized cafes for the teenagers in their universities and colleges.
$& McDonalds has opened coffee shops by the name of Mcafe¶s in U. Pakistan can serve as a new potential market for these cafes.
! & With increasing awareness about food and the importance of a balanced diet, people are opting for low calorie food e-g salads and food with high fiber content. ào remain in the scope, McDonalds needs to serve this market as well as the present customers, this could be posed as a threat to McDonalds. Subway is offering its low fat veggie and chicken sandwiches at prices almost the same as McDonalds. Îor McDonalds diet meals could be a way out of this situation. Until now, McDonald¶s in Pakistan has nothing to offer to health conscious customers.
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Î , & In the growing market QSR market of Pakistan McDonalds competitors are entering not only from other countries but from within the country too. àheir competitive prices could be a reason due to which McDonalds can lose its share in the Pakistani market.
& Pakistani culture has been changing for years now with new technologies and trends. People who are not brand loyal move with the changing times. Some competitor can easily enter into the market and make better offers to its consumers by focusing on their needs and the satisfaction that they want. ào remain competitive, McDonalds needs to be innovative and should change along with the Pakistani consumer styles
' McDonald's Pakistan has an aggressive plan to expand in all other cities of Pakistan and is rapidly growing with the focus to provide friendly and a quick service restaurant experience to its customers. àhere are many ' due to which McDonalds is successful in the market. We have been successful in identifying a few: ]
All the franchises of McDonalds in Pakistan are owned by åakson
roup of
ompanies. Apart from the fact that å is one of Pakistan¶s biggest corporations, their management allows not only standardization of quality but a more uniform and effective marketing strategies in order to sustain in the market. àherefore McDonald¶s being its part had to continue to strive to maintain its standards in the local region. ]
Many McDonald's restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more 'natural' style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables. àhis has given a new outlook to the McDonald¶s as a quick service restaurant that is still not be seen on other fast food restaurants.
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McDonalds doesn¶t offer just burgers. àheir well diversified menu is also one of the key success factors as most of McDonald¶s competitors are quite specialized: Î in chicken, Pizza Hut in pizzas etc.
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When it comes to eating out during Ramadan in any fast food restaurant, the name that clicks to the customers is McDonald¶s. àhe reason is the affordable deals that they offer, that seem to beat all others when it comes to prices.
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Another advantage that McDonald¶s has on its competitors is the location of its franchises. Its main advantage is that it is located in vicinity that is easily approachable. Secondly it has got in its surroundings other very attractive places to be visited by people who want to enjoy their life to the full. àhese places are a source of attraction not for the services they provide but for McDonald¶s as well. Îor example one of its outlets has been opened in Park àowers in arachi so as to attract the shoppers who visit it very frequently. Another strategic location that McDonald¶s has acquired is at the lifton beach. àhis has forced many others nearby restaurants and one of the very famous cuisine restaurants with the name of ublai han to get closed. Same is the case in Rawalpindi/Islamabad where McDonald¶s holds an important strategic location. àhe customers that are driven to the inepax are automatically attracted towards McDonald¶s.
McDonald¶s core competency is providing convenience when people need and want to eat fast food at prices that are competitive and provide best value for the customer¶s money. One of McDonald¶s competitive advantages is its focus on consistency of quality, production of food and use of raw materials all around the world. àhe world recognition associated with the brand McDonald¶s itself is also one of McDonald¶s competitive advantages.
! Having identified its key audiences, a company has to ensure a marketing mix is created that appeals specifically to those people. àhe marketing mix is a term used to describe the four main marketing tools ± the 4Ps
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Using detailed information about its customers, McDonald's marketing department can determine: 1. What products are well received? 2. What prices consumers are willing to pay? 3. What àV programs, newspapers and advertising consumers read or view? 4. What restaurants are visited? Market research is the format which enables McDonald's to identify this key information. Accurate research is essential in creating the right mix to win customer loyalty.
In all its markets McDonald's faces competition from other businesses. Additionally, economic, legal and technological changes, social factors, the retail environment and many other elements affect McDonald's success in the market.
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Market research identifies these factors and anticipates how they will affect people's willingness to buy. As the economy and social attitudes change, so do buying patterns. McDonald's needs to identify whether the number of target customers is growing or shrinking and whether their buying habits will change in the future. Market research considers everything that affects buying decisions. àhese buying decisions can often be affected by wider factors than just the product itself. Psychological factors are important, e.g. what image does the product give or how the consumer feels when purchase it àhese additional psychological factors are significantly important to the customer. àhey can be even more important than the products' physical benefits. àhrough marketing, McDonald's establishes a prominent position in the minds of customers. àhis is known as branding.
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àhe important thing to remember when offering menu items to customers is that they have a choice. àhey have a huge number of ways of spending their money and places to spend it. àherefore, McDonald's places considerable emphasis on developing a menu which customers want. Market research establishes exactly what this is. However, customers' requirements change over time. What is fashionable and attractive today may be discarded tomorrow. Marketing continuously monitors customers' preferences. In order to meet these changes, McDonald's has introduced new products and phased out old ones, and will continue to do so.
are is taken not to adversely affect the sales of one choice by introducing a new choice, which will cannibalize sales from the existing one (trade off). McDonald's knows that items on its menu will vary in popularity. àheir ability to generate profits will vary at different points in their life cycle. Products go through a life cycle, which is illustrated below:
àhe type of marketing undertaken and the amount invested will be different, depending on the stage a product has reached. Îor example, the launch of a new product will typically involve television and other advertising support. At any time a company will have a portfolio of products each in a different stage of its lifecycle. Some of McDonald's options are growing in popularity while arguably the Big Mac is at the 'maturity' stage.
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Penetration Pricing: When McDonald¶s first began to break into the coffee market, they ran a large marketing campaign in order to gain some market share in the industry. Îor a limited time frame, you could get a free small coffee every morning from 4-7am. àhis was to promote their new coffee partnership with reen Mountain offee and helped spread the word that McDonald¶s was now offering coffee.
Value Pricing: ³àhis approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales.´ àhe most notable and recent example of this is McDonald¶s ³Dollar Menu.´ àhe Dollar Menu was created because McDonald¶s recognized that the economy was in a decline and that their competition was getting fiercer. àhe Dollar Menu satisfies the current decreasing economy and has increased the pressure towards competitors. àhe introduction to the Dollar Menu is by far the most economical product line that McDonald has ever offered. You can get a number of products off of their menu for only a dollar. It is efficient and practical.
àhere are total 24 fast food outlets of McDonald¶s in Pakistan, and they all are located in famous areas. So far McDonald¶s is only in arachi, Hyderabad, åahore, Îaisalabad, Rawalpindi and Islamabad In future, very soon planning to expand in many cities in Pakistan.
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i ti l i Ml t til itt t i ti i l t i t t l l i t t t tii t i t ijti tii Ml t
t it tt t t
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*ttt Bl t
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Dec 08
Dec 07
Dec 06
23,522.4
22,786.6
21,586.4
14,883.2
14,881.4
14,602.1
8,639.2
7,905.2
6,984.3
36.7%
34.7%
32.4%
S &A xpense
2,355.5
2,367.0
2,337.9
Depreciation & Amortization
1,207.8
1,214.1
1,249.9
Operating Income
6,680.6
3,982.2
4,568.4
Operating Margin
28.4%
17.5%
21.2%
237.7
(103.2)
(680.7)
Nonoperating xpenses
(522.6)
--
--
Income Before àaxes
6,158.0
3,572.1
4,166.4
Income àaxes
1,844.8
1,237.1
1,293.4
Net Income After àaxes
4,313.2
2,335.0
2,873.0
ontinuing Operations
4,313.2
2,335.0
2,873.0
0.0
60.1
671.2
àotal Operations
4,313.2
2,395.1
3,544.2
àotal Net Income
4,313.2
2,395.1
3,544.2
Revenue
ost of
oods Sold
ross Profit
ross Profit Margin
Nonoperating Income
Discontinued Operations
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Net Profit Margin
18.3%
10.5%
16.4%
Diluted PS from àotal Net Income ($)
3.76
1.98
2.83
Dividends per Share
1.63
1.50
1.00
0 Assets
Dec 08
Dec 07
Dec 06
2,063.4
1,981.3
2,136.4
Net Receivables
931.2
1,053.8
904.2
Inventories
111.5
125.3
149.0
Other urrent Assets
411.5
421.5
435.7
3,517.6
3,581.9
3,625.3
20,254.5
20,984.7
20,845.7
4,689.4
4,825.1
4,552.8
28,461.5
29,391.7
29,023.8
Dec 08
Dec 07
Dec 06
Accounts Payable
620.4
624.1
834.1
Short-àerm Debt
31.8
1,991.1
17.7
urrent Assets
ash
àotal urrent Assets
Net Îixed Assets
Other Noncurrent Assets
àotal Assets
åiabilities and Shareholder's quity
urrent åiabilities
,)
Other urrent åiabilities
1,885.7
1,883.3
2,156.3
2,537.9
4,498.5
3,008.1
10,186.0
7,310.0
8,416.5
2,355.0
2,303.4
2,140.9
15,078.9
14,111.9
13,565.5
Preferred Stock quity
--
0.0
0.0
ommon Stock quity
13,382.6
15,279.8
15,458.3
13,382.6
15,279.8
15,458.3
1,079.2
1,079.2
1,079.2
àotal urrent åiabilities
åong-àerm Debt
Other Noncurrent åiabilities
àotal åiabilities
Shareholder's quity
àotal quity
Shares Outstanding (mil.)
" #"$ # ñ ! , Our customers are the reason for our existence. We demonstrate our appreciation by providing them with high quality food and superior service, in a clean, welcoming environment, at a great value. Our goal is QS&V for each and every customer, each and every time.
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We provide opportunity, nurture talent, develop leaders and reward achievement. We believe that a team of well-trained individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to our continued success.
ñ " $ McDonald¶s business model, depicted by the ³three-legged stool´ of owner/operators, suppliers, and company employees, is our foundation, and the balance of interests among the three groups is key.
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ñ Sound ethics is good business. At McDonald¶s, we hold ourselves and conduct our business to high standards of fairness, honesty, and integrity. We are individually accountable and collectively responsible.
ñ We take seriously the responsibilities that come with being a leader. We help our customers build better communities, support Ronald McDonald House harities, and leverage our size, scope and resources to help make the world a better place.
ñ , McDonald¶s is a publicly traded company. As such, we work to provide sustained profitable growth for our shareholders. àhis requires a continuing focus on our customers and the health of our system.
ñ We are a learning organization that aims to anticipate and respond to changing customer, employee and system needs through constant evolution and innovation.
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