Mcdonald'S: Polishing The Golden Arches

McDonald’s:
Polishing the
Golden Arches
Components of a
Company’s Macro-environment
Macro
Economic Conditions
environment
Competitive
gy
Environment
olo
hnc
Te
Suppliers Substitutes
Legislation
Regulation
Company
&
s
Rival
Firms Buyers
New
So
cie
Entrants
ta
Val
lu
es
t i on
Popula
o gra p hics
Dem
Major Rival Firms
Burger King Corporation

Wendy’s International
Hardee’s (CKE Restaurants)
Jack in the Box
Sonic
System-wide Outlets for
top five fast food Hamburger Chains & Market Share,2002
Company Stores Countries Market

Share
McDonalds 31108 120 33.06%
Burger King 11455 58 13.68%
Wendy’s 8811 22 11.39%
Hardee’s 3295 15 2.78%
Jack in the 2000 1 3.67%
Box
Threat of Substitutes
Re-heatable Prepared Foods

Delivery foods such as pizza.
Products purchased from the local grocery store
Availability of products that cater to the health-
conscious lifestyle like Fruits, salads
Threat of New Entrants
In order to compete on a large scale, new firm will

require a great deal of capital to invest in real estate
and build physical restaurant locations.
The market is already so saturated that the new
competitor might find it difficult to establish a
customer base and become profitable
Bargaining Power of Buyer
Low Switching Cost

The majority of the public tends to view fast-food
restaurants as primarily serving foods that are high
in fat content and unhealthy and as a result they are
likely to look elsewhere for a healthy food.
Buyer can go to any fast food restaurant convenient
to the.
Bargaining Power of Supplier
Low bargaining power with suppliers since there are

multiple suppliers for the same products
One company might purchase their meat supplies
from a couple different meat manufacturers, then
purchase their dairy needs from a number of
different dairy companies, and also purchase their
bakery products from a variety of sources.
Technological Environment
Microwave oven led to decreased consumption of

fried food & red meat.
E-learning program for training of staff
Installing wireless technology
Societal Values & Lifestyles
Affordable products with consistent quality.

Healthier options and brand Image needs to be
provided
Must be convenient and fast to accommodate the
fast pace of lifestyles.
No matter how different the tastes and the local
needs are, McDonald’s has paid considerable
attention to the children in every country.
Population Demographic
Age
-Happy meal for Kids
-Targeting Young Adults with relevant advertising
featuring music from leading recording artists
Local flavor in Products
-In India McAloo tikki
-Kosher restaurant in Jerusalem that did not serve
dairy products.
SWOT Analysis
Strength
Strongest international presence among fast-food

chains
Location
Real estate operations bring in large revenues and
allow McDonald’s to open more stores
Local Menus in Different Regions
Kosher restaurant in Jerusalem
Consistent Expansion
Hamburger University training program for
McDonald’s franchise owners & store managers
Weaknesses
Customer Service
McDonald’s has the lowest the customer service
ranking in the fast food industry and is ranked even
lower on customer service than the US internal
revenue services.
Poor average Service time as compared to rivals
Poor Management & Marketing
“Made for you System”-Costing $420 million to
McDonald & $18000 to $1,00,000 to franchisees.
High Employee Turnover
Weaknesses
Declining market share

Weak product development
Failures: McLean, Low-fat frozen yogurt, fat-free apple muffins,
salad shaker
Disgruntled franchisees
Over domestic expansion & “Made for you” system

Quality and taste of products
Opportunities
Diversification and acquisition of other quick-service

restaurants
Add healthier lines of food
Initial public offerings in other countries could raise
revenues
Retail merchandise potentially used to raise
revenues
Threat
Increased Competition
Increased competition among rival sellers, including
price wars, product innovation, and growth
Changing Customer Preferences
Health conscious consumers demanding better
quality, healthier menu items.
All fast-food chains expected to struggle to meet new
consumer health expectations
Matured & Saturated Industry in US
Changes in Currency Exchange Rate
Key Success Factors
Location
Restaurant appearance, putting much focus on
cleanliness and modern environment
Customer Taste Preferences
Growing interest in healthy foods
Affordable Price
Building trust and brand loyalty
Strategy Making Process
Monitoring
Crafting Developments,
Implementi
Developin strategy to evaluating
Setting ng &
g Strategic achieve performance &
Objectives Executing
Vision objectives making
strategy
& vision corrective
adjustments
Revise as needed in light of actual

performance, changing conditions,
new opportunities, & new ideas
Strategic Vision
“Low-priced, value-oriented product fast &

efficiently in clean & pleasant surroundings.”
Objectives
• Focus on QSVC (Quality, Service, Value, Cleanliness)
• Financial Objectives
Cutting capital expenditure by 40%,
Clearing Debts, repurchase of shares, increase dividends
Annual System-wide sales growth of between 3 & 5 percent.
Crafting Strategy
The “Plan to Win” strategy is important in the

offensive strategy because it is about being
innovative and challenging to the competitors.
The plan focuses on five key drivers of success;
people, product, place, price, and promotion.
Strategy Implementation
• People
-more visual menu boards, reducing menu items
-interactive e-learning program to train staff
• Products
-Responsive to changing taste preferences & premium
products
• Place
-Making restaurants cleaner, more relevant, and more
modern
-installing wireless technology
-Adding Coffee Houses “McCafe” at value price
Strategy Implementation Cont….
•Price
-Improving productivity & value
-Low Price products for price sensitive customers & premium
products for customers willing to pay high price
•Promotion
-Building trust & brand loyalty through promotion
-“I’m lovin’ it” campaign launched worldwide
-targeting young adults with advertising featuring music
Monitoring Developments, evaluating
performance & making corrective adjustments
 Company’s stock price had reached a price of $24.79 from

$12.50.
 Mystery shoppers, inspection & toll free numbers for
customers to provide feedback.
Past Strategies
Growth Strategy
Market Development
International Expansion
“Made For You” cooking system
Price cuts to attract customers
 Providing value meal
Focus on building customer loyalty
New McStrategies
Leverage Brand Equity
“I’m lovin’ it” campaign launched in 2003

Product Development: Focus on core
business
 Family Value Meal
 Happy meal
 Response to changing taste preferences & premium
products
Cont…..
New McStrategies
Market Penetration and Development

 Continue International expansion
Retrenchment
Turnaround Strategy
Focus on internal operation & slowing store expansion
Cont…..
New McStrategies
Focus on Customer Services

-Training staff worldwide in customer service
attitudes and skills
-Measuring success in terms of reducing complaints
regarding service &
increase friendliness scores & Speed of service.
Five Generic Competitive Strategies
Overall Low-cost Broad Differentiation

Provider Strategy Strategy
Best Cost
Provider
Strategy
McDonalds
Focused Low-cost Focused
Strategy Differentiation Strategy
Strategic Possibilities
Decrease expansion in the almost saturated domestic

markets, and continue their expansion in foreign
countries, such as Asia, and the Pacific
McDonald’s should continue its diversification and
incorporate more healthy foods & Focus on healthier
& Low fat products
Thank You

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McDonald’s:

Burger King Corporation

Company Stores Countries Market

Re-heatable Prepared Foods

In order to compete on a large scale, new firm will

Low Switching Cost

Low bargaining power with suppliers since there are

Microwave oven led to decreased consumption of

Affordable products with consistent quality.

Strongest international presence among fast-food

Declining market share

Over domestic expansion & “Made for you” system

Diversification and acquisition of other quick-service

Revise as needed in light of actual

“Low-priced, value-oriented product fast &

The “Plan to Win” strategy is important in the

 Company’s stock price had reached a price of $24.79 from

Leverage Brand Equity

“I’m lovin’ it” campaign launched in 2003

Market Penetration and Development

Focus on Customer Services

Overall Low-cost Broad Differentiation

Decrease expansion in the almost saturated domestic

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