Strategic Evaluation of McDonald

McDonald’s Strategic Evaluation Wajahat Hussain Roll No. 20 MBA-BBA (marketing) 19/03/12

McDonald's Corporation (NYSE: MCD) is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth. A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion. McDonald Primarily sells; hamburgers, cheeseburgers, chicken,

fries, breakfast items, soft

drinks, shakes, desserts, salads, wraps, smoothies and fruit.

History of McDonald The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume legs. McDonald's first filed for a U.S. trademark on the name "McDonald's" on May 4, 1961, with the description "Drive-In Restaurant Services," which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol. The overlapping double arched "M" symbol logo was temporarily disfavored by September 6, 1962, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. Although the "Golden Arches" appeared in various forms, the present form as a letter "M" did not appear until November 18, 1968, when the company applied for a U.S. trademark.

McDonald's corporate logo used from 1968 to 2006. It still exists at some restaurants.

The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets in 1965. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the

McDonald brothers' autobiography. The site of the McDonald brothers' original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.

Vision To be the best and leading fast food provider around the globe

Mission McDonald's brand mission is to be our customers' favorite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customers' expectations.

Objectives of McDonald     

Profitability Quality Service Customer Satisfaction Reputable Image Community Outreach

Vision Proposed To be the best and leading fast food provider around the globe

Mission Proposed McDonald’s brand mission is to be our customer’s favorite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customer’s expectation.

External Audit

EFE Matrix (External Factor Evaluation)

Internal Audit Strength 1. Strong brand name, image and reputation. 2. Large market share. 3. Strong global presence. 4. 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. Introduction of new products 8. Customer focus (centric) 9. Strong Performance on the global marketplace

Weakness 1. Unhealthy food image. 2. High Staff Turnover including Top management 3. Customer losses due to fierce competition. 4. Legal actions related to health issues; use of trans fat & beef oil. 5. Uses HCFC-22 to make polystyrene that is contributing to ozone depletion. 6. Ignoring breakfast from the menu.

IFE Matrix (Internal Factor Evaluation)

Analysis of EFE EFE Matrix shows it is managing its opportunities and threats average. Actions: 1. Acquire small food companies to attract heavy traffic 2. Make contracts with major educational institutions and corporations 3. introduce healthier products with low calories and fats

Analysis of IFE IFE Matrix shows that McDonalds is managing strength and weaknesses very well Actions: 1. It should maintain its leadership position to overcome its weaknesses 2. Should provide the healthy low calories food 3. Should disclose the proper information to customers to avoid legal actions

CPM (Competitive profile Matrix) McDonalds

YUM

BURGER KING

WEIGHT

RATING

W.SC

RATING

W.SC

RATING

W.SC

Product Quality

0.25

3

0.75

4

1

3

0.75

Price Competitiveness

0.2

3

0.6

3

0.6

3

0.6

Market Share

0.2

4

0.8

3

0.6

2

0.4

R& D

0.05

2

0.1

2

0.1

2

0.1

Financial Position

0.1

4

0.4

3

0.3

2

0.2

Consumer Loyalty

0.2

3

0.6

3

0.6

2

0.4

Critical SUCCESS FACTORS

Total

1.00

3.25

3.2

2.45

CPM shows that McDonalds is doing well as compare to its competitors Actions: 1. It should emphasize on its product quality as it is lacking as compare to YUMS 2. McDonalds should also focus on R&D to gain competitive advantage

SWOT Matrix STRENGTHS (S):

WEAKNESSES (W):

Value based pricing

sued multiple times for serving unhealthy food

Strong R&D Strong global presence in more than 100 countries

weak in analyzing the needs of customers

Standardized quality products

Do not disclose proper information to customers

market leader in both the domestic as well as the international markets

Attracting kids due to which parents are going against them

Large number of loyal customer Good CSR Focused on customer’s comfort by making different zones for different customers Convenient and extended hours OPPORTUNITIES (O):

S-O STRATEGIES

W-O STARTEGIES:

Respond to social changes - by innovation within healthier lifestyle foods

introducing new menus with nutritious ingredients (S2,S3,O1,O2,O3)

Providing healthier products to avoid legal actions(W1,O1,O3)

Joint ventures with retailers or acquisitions

Entering new market by Acquisition and Mergers(S3,S5,O2)

Providing proper information to customers on product ingredients through proper advertisement (W4,O1)

Introducing new food items

and products

THREATS (T):

S-T STRATEGIES

W-T STRATEGIES

Consumer focus on nutrition and healthier lifestyles.

Providing healthier products through R&D (S2,S4,T1)

Recession or down turn in economy

Reduce threat of competitors by bringing new innovative products through strong R&D and by focusing more on loyal customers (S1,S2,S3,S6,T3)

Strongly analyzing the needs of customers in order to reduce the threat of new entrants and of existing competitors (W2,T3,T4)

Major competitors, like YUM, Burger King, Wendy's New entrants in the industry Fluctuation in Exchange Rates

Grand Strategy Matrix

ACTIONS: It should go for,  Forward integration (joint ventures with retailers)  Product development (launch new innovative products such as sandwiches with more healthier ingredients)  Market penetration by attracting non users of the product through intensive advertising and by providing healthier products

Financial Analysis

SPACE Matrix

ANALYSIS: SPACE Matrix shows that McDonalds should aggressively go for Forward integration (joint ventures with retailers) Product development (launch new innovative products such as sandwiches with healthier ingredients)

BCG Matrix

Company is having high market shares and high growth rate in the industry.

QSPM STRATEGIC ALTERNATIVES provide the healthy low calories food

Entering new markets through acquisitions and mergers

WEIGHT AS

TAS

AS

TAS

Respond to social changes - by innovation within healthier lifestyle foods

0.12

0.48

4

0.48

Joint ventures with retailers or acquisitions

0.2

3

0.6

Introducing new food items and products

0.2

4

0.8

4

0.8

Consumer focus on nutrition and healthier lifestyles.

0.15

4

0.6

3

0.45

Recession or down turn in economy

0.08

3

.24

Major competitors, like YUM, Burger King, Wendy's

0.09

4

0.36

3

0.27

New entrants in the industry

0.06

3

0.18

2

0.12

Fluctuation in Exchange Rates

0.1

4

0.4

OPPORTUNITIES: 4

THREATS

SUM TOTAL ATTRACTIVENESS OF SCORE

1.00

2.34

3.36

WEIGHT

AS

TAS

AS

4

0.4

STRENGTHS Strong global presence in more than 100 countries

0.1

market leader in both the domestic as well as the international markets

0.2

3

0.6

4

0.8

Large number of loyal customer

0.08

4

0.32

4

0.32

Strong R&D

0.08

4

0.32

2

0.16

Standardized quality products

0.05

3

0.15

3

0.15

Convenient and extended hours

0.05

2

0.10

Value based pricing

0.06

2

0.12

3

0.18

Focused on customer’s comfort by making different zones for different customers

0.05

Good CSR

0.05

2

0.10

sued multiple times for serving unhealthy food

0.15

4

0.20

3

0.45

weak in analyzing the needs of customers

0.08

3

0.24

3

0.24

Do not disclose proper information to customers

0.04

2

0.08

2

0.08

Attracting kids due to which parents are going against them

0.01

3

0.03

SUB TOTAL ATTRACTIVENESS OF SCORE

1.00

WEAKNESS

2.26

2.78

TAS

Goals for 2011-2013