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IQRA UNIVERSITY

Research Work on McDonalds

Group Members

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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 Report

Table of contents
Table of contents...................................................................................................................................3
EXECUTIVE SUMMARY...........................................................................................................................7
Introduction...........................................................................................................................................7
Macro Environment...............................................................................................................................7
Market Analysis.....................................................................................................................................7
Consumer Analysis................................................................................................................................7
Current Situation – Internal...................................................................................................................7
Company resources...............................................................................................................................7
Objectives..............................................................................................................................................7
Summary of Situation Analysis..............................................................................................................8
The marketing mix and market research...............................................................................................8
Marketing Strategies.............................................................................................................................8
Financial Summary................................................................................................................................8
MCDONALD’S VALUES...........................................................................................................................8
TOP MGT OFFICERS...............................................................................................................................8
Meeting the needs of key audiences.....................................................................................................8
Scenarios...............................................................................................................................................8
Introduction:..........................................................................................................................................9
The McDonald's History......................................................................................................................10
Macro environment.............................................................................................................................11
Political environment..........................................................................................................................12
Economical environment.....................................................................................................................12
Socio-cultural.......................................................................................................................................12
Technological environment.................................................................................................................13
Supply Chain........................................................................................................................................13
Vision...................................................................................................................................................14
Ethical -................................................................................................................................................14
Environmental -...................................................................................................................................14
Economic -...........................................................................................................................................14
Market Analysis...................................................................................................................................15

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Market definition.................................................................................................................................15
Market size..........................................................................................................................................15
Countries with McDonald’s.................................................................................................................19
Market segmentation..........................................................................................................................21
Competition and Market Share...........................................................................................................21
Competition.........................................................................................................................................21
Factors that contribute towards a competition are:............................................................................22
Market share.......................................................................................................................................22
Competitor’s strengths and weaknesses.............................................................................................22
KENTUCKY FRIED CHICKEN (KFC).........................................................................................................23
Strengths.............................................................................................................................................23
Weaknesses.........................................................................................................................................23
PIZZA HUT............................................................................................................................................24
Strengths.............................................................................................................................................24
Weaknesses.........................................................................................................................................24
SUBWAY..............................................................................................................................................25
Strengths.............................................................................................................................................25
Weaknesses.........................................................................................................................................26
Consumer Analysis..............................................................................................................................26
“FAST” FOOD:......................................................................................................................................28
AMBIENCE:..........................................................................................................................................28
STATUS SYMBOL:.................................................................................................................................28
HYGIENE:.............................................................................................................................................28
Buyer motivation and expectations.....................................................................................................29
Current Situation – Internal.................................................................................................................29
Company resources.............................................................................................................................29
Financial..............................................................................................................................................30
People..................................................................................................................................................30
Time.....................................................................................................................................................30
Skills.....................................................................................................................................................31
Objectives............................................................................................................................................31
Mission & Vision statement of McDonald’s.........................................................................................31
McDonald's mission statement............................................................................................................31
McDonald’s Vision statement..............................................................................................................31

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Corporate objectives...........................................................................................................................31
Marketing objectives...........................................................................................................................32
Long term objectives...........................................................................................................................32
Summary of Situation Analysis............................................................................................................33
Internal Strengths................................................................................................................................33
Products:.............................................................................................................................................33
Social Responsibility:...........................................................................................................................33
Employment Opportunities:................................................................................................................34
Brand Recognition:..............................................................................................................................34
Good communication and friendly environment:...............................................................................34
Party celebrations:...............................................................................................................................34
Partnership with Coca Cola:.................................................................................................................34
Partnership with telecom companies:.................................................................................................35
Internal Weaknesses...........................................................................................................................35
Product Variety:...................................................................................................................................35
More advertising:................................................................................................................................35
Drive-ins:.............................................................................................................................................35
External Opportunities........................................................................................................................35
Reasonable Prices:...............................................................................................................................35
Opportunity to be innovative:.............................................................................................................35
Growing dinning out Market:..............................................................................................................36
Dine in Cafes:.......................................................................................................................................36
McCafe’s:.............................................................................................................................................36
External Threats...................................................................................................................................36
More health conscious customers:......................................................................................................36
Foreign as well as local competitors:...................................................................................................37
Changing customer styles:...................................................................................................................37
Key success factors in the industry......................................................................................................37
Sustainable competitive advantages...................................................................................................38
The marketing mix and market research.............................................................................................38
Marketing Strategies...........................................................................................................................40
Product................................................................................................................................................40
Products which McDonalds is offering................................................................................................42
Burgers................................................................................................................................................42

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Fries.....................................................................................................................................................42
Large meals..........................................................................................................................................43
Drinks..................................................................................................................................................43
Shakes..................................................................................................................................................44
Hot drinks............................................................................................................................................44
Medium meals.....................................................................................................................................45
Happy meals........................................................................................................................................45
Desert..................................................................................................................................................46
B.C.G Analysis......................................................................................................................................47
Price.....................................................................................................................................................48
What should be the pricing strategy?..................................................................................................48
Place....................................................................................................................................................48
Promotion............................................................................................................................................49
Financial Summary..............................................................................................................................49
Income Statement...............................................................................................................................50
Balance Sheet......................................................................................................................................51
MCDONALD’S VALUES.........................................................................................................................52
We place the customer experience at the core of all we do...............................................................52
We are committed to our people........................................................................................................52
We believe in the McDonald’s System................................................................................................52
We operate our business ethically......................................................................................................53
We give back to our communities.......................................................................................................53
We grow our business profitably.........................................................................................................53
We strive continually to improve........................................................................................................53
TOP MGT OFFICERS.............................................................................................................................53
Meeting the needs of key audiences...................................................................................................58
Scenarios.............................................................................................................................................59
Economic Slowdown:...........................................................................................................................59
Health Conscious attitude of People:..................................................................................................60
Increased Competition:.......................................................................................................................61
REFERENCES........................................................................................................................................62
People have been interviewed............................................................................................................63

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 EXECUTIVE SUMMARY

Introduction
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 “when
it’s green it’s growing”.

Macro Environment
 Political environment
 Economical environment
 Socio-cultural environment
 Technological environment
 Supply chain

Market Analysis
 Market definition
 Market size
 Market segmentation
 Competition and market share
 Competitor’s strength and weaknesses

Consumer Analysis
 Nature of the buying decision
 Demographics
 Buyer motivation and expectations
 Loyalty segments

Current Situation – Internal

Company resources
 Financial
 People
 Time
 Skills

Objectives
 Mission statement & Vision statement
 Corporate objectives
 Marketing objectives
 Long term objectives

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Summary of Situation Analysis
 Internal Strengths
 Internal Weaknesses
 External Opportunities
 External Threats
 Key success factors in the industry
Our sustainable competitive advantages

The marketing mix and market research

Marketing Strategies
 Product

 Price

 Place

 Promotion

 BCG Analysis

Financial Summary
 Income Statement
 Balance Sheet

MCDONALD’S VALUES

TOP MGT OFFICERS

Meeting the needs of key audiences

Scenarios
 Economic Slowdown
 Health Conscious attitude of People
 Increased Competition

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Introduction:
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.

They serve the world some of its favourite foods - World Famous French Fries, Big Mac, Quarter
Pounder, Chicken McNuggets and Egg McMuffin.

Their rich history began with their founder, Ray Kroc. The 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 “when 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
Lakson 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.
They are operating, presently in 6 cities of Pakistan Karachi, Hyderabad, Lahore, Faisalabad,
Rawalpindi and Islamabad In Future, very soon planning to expand in many cities of Pakistan.

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The McDonald's History

Ray Kroc 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 California running eight Multimixers at a time, he packed up his car and headed West. It was
1954. He was 52 years old.

Ray Kroc 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 to
each and every one. "Who could we get to open
them for us?" Dick McDonald said.

Ray Kroc opened the Des Plaines restaurant in 1955.

First 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 Kroc preached to his troops. Heeding his
own words, here the Chairman of the Board cleans the parking lot of the first McDonald's franchise in
Des Plaines, Illinois.

Here Ray Kroc (right) and Fred Turner study the design which would replace the red and white tile
buildings that had become landmarks throughout the U.S. Called Kroc's first "grill man
extraordinaire, " Turner is today Senior Chairman 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 Kroc's earliest
franchisees, who by the late 1960s operated a dozen
stores in Pittsburgh."

Introduced in 1973, the Egg McMuffin was developed

by owner operator Herb Peterson.

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In 1974 Fred Hill of the Philadelphia Eagles 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. Clubs the world over
collect Happy Meals toys and boxes.

McDonald's Express for a world that can't slow

down!. McDonald's is popping up in more non-
traditional locations like Amoco and Chevron
stations, with full menu offerings and dining room
seating, just like you'll find in a traditional
McDonald's.

Kuwait City is pretty far from Des Plaines, Illinois, but that didn't stop 15,000 customers from lining
up here on opening day in 1994. The line at the drive thru was seven miles long. Proving once again
that "Good Times, Great Taste" is understandable in any language. Surf The World at mcdonalds.com
to see McDonald's in other countries.

Forty 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 "The smile known around the world," In his first TV appearance in 1963 the happy
clown was portrayed by none other than Willard Scott. Check out McDonald land for more Ronald
McDonald information and fun.

Macro environment

 Political environment
 Economical environment
 Socio-cultural environment
 Technological environment
 Supply chain

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Political environment

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.

Economical environment

There 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.

Socio-cultural

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. This 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.

For 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 UK.

Technological environment

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. Food 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. Computers and smart cashiers are used by the employees so they
would not get confused and they are provided with customized database management system.

Supply Chain

For 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.

Given 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 Chain department created a global governance structure.

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The Sustainable Supply Steering Committee (SSSC), 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. This 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.

Ethical - 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.

Environmental - 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.

Economic - 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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Market Analysis
 Market definition
 Market size
 Market segmentation
 Competition and market share
 Competitor’s strength and weaknesses

Market definition

Serving billions of various types of burgers has put a shine on these arches. McDonald's is the
world's #1 fast-food company by sales, with about 32,000 restaurants serving burgers and
fries in about 120 countries. (There are nearly 14,000 Golden Arches locations in the US.)
The popular chain is well-known for its Big Macs, Quarter Pounders, and Chicken
McNuggets. Most of its outlets are free-standing units, but McDonald's also has many units
located in airports and retail areas. Each eatery gets its food and packaging from approved
suppliers to ensure that a Big Mac purchased in Pittsburgh tastes the same as one bought in
Beijing. Nearly 80% of the restaurants are run by franchisees or affiliates.

Market size
In local market McDonalds is operating in these cities:
 Karachi
 Hyderabad
 Faisalabad
 Lahore
 Rawalpindi
 Islamabad
And in international market McDonalds is operating in these countries:

  Algeria

  Argentina

  Australia

  Austria

  Azerbaijan

  Bahamas

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  Bahrain

  Bangladesh

  Belarus

  Belgium

  Bosnia and Herzegovina

  Botswana

  Brazil

  Bulgaria

  Canada

  Chile

  People's Republic of China

  Colombia

  Costa Rica

  Croatia

  Cuba (Guantanamo Bay Naval Base)

  Cayman Islands

  Cyprus

  Czech Republic

  Denmark

  Dominica

  Dominican Republic

  Ecuador

  Egypt

  El Salvador

  Estonia

  Fiji

  Finland

  France

  Georgia

  Germany

  Greece

  Gibraltar

  Guatemala

  Guyana

  Honduras

  Hong Kong

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  Hungary

  Italy

  India

  Indonesia

  Iraq

  Ireland

  Israel

  Japan

  Jordan

  Kuwait

  Latvia

  Lebanon

  Liechtenstein

  Lithuania

  Luxembourg

  Macau

  Macedonia

  Malaysia

  Malta

  Mauritius

  Mexico

  Moldova

  Morocco

  Netherlands

  Aruba

  New Zealand

  Nicaragua

  Norway

  Oman

  Pakistan

  Panama

  Peru

  Paraguay

  Philippines

  Poland

  Portugal

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  Qatar

  Romania

  Russia

  Samoa

  Saint Lucia

  Saudi Arabia

  Serbia

  Singapore

  Suriname[56]

  Slovakia

  Slovenia

  South Africa

  South Korea

  Spain

  Sri Lanka

  Sweden

  Switzerland

  Taiwan

  Thailand

  Turkey

  Ukraine

  United Arab Emirates

  United Kingdom

  United States

  American Samoa

  Puerto Rico

  Guam

  United States Virgin Islands

  Uruguay

  Venezuela

  Yemen

  Zimbabwe

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Countries with McDonald’s

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Market segmentation

McDonald’s uses demographic segmentation strategy with age as the parameter. The main
target segments are children, youth and the young urban family.

% of kids who influence what FMCG brand their

family buys

80% 71%
70% 59%
60% 52%
50%
40%
30%
20%
10%
0%
Biscuits Burgers & Pizzas Fruit Juices

As shown above, kids reign supreme in Fast Moving Consumer Goods (FMCG) 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). For this, they have a tie-up with Walt Disney. At
several outlets, it also provides special facilities like ‘Play Place’ where children can play
arcade games, air hockey, etc. This strategy is aimed at making McDonald’s a fun place to
eat. This also helps McDonald’s to attract the young urban families wanting to spend some
quality time while their children have fun at the outlet. To target the teenagers, McDonald’s
has priced several products aggressively, keeping in mind the price sensitivity of this target
customer.

Competition and Market Share

Competition
The major competition in local market faced by McDonalds is from Kentucky Fried Chicken
(KFC).

As McDonalds and KFC offer similar type of products. A product offered by McDonalds is
substitute for a product offered by KFC & vice versa.

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Factors that contribute towards a competition are:
 Price: Value for money is a major factor.
 Quality of food: As both KFC and McDonalds are following their international
standards there for it’s not a major concern.
 Flavour: This is one major factor that contributes towards attracting customers.
Different customers have different preferences.
 Outlets: Number of outlets contributes towards market share which gives KFC an
edge.

Market share

Market Share

McDonalds
KFC
Pizza Hut
Subway
Others

Competitor’s strengths and weaknesses

There are many competitors of McDonalds in local market but the main competitors of
McDonalds are KFC, Pizza Hut and Subway

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KENTUCKY FRIED CHICKEN (KFC)
Strengths
 A very strong financial background is one of KFC’s competitive advantages.

 KFC 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, KFC has developed another very important competitive
advantage for itself- Environmental Friendliness. In March 2009, the first eco-friendly
green KFC was opened in Northampton USA. The restaurant is designed according to
environmental goals that include cutting energy and water consumption by 30 percent
and reducing CO2 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, KFC is now switching from cardboard to
recyclable and biodegradable paper wrapping for some of its products.

Weaknesses
 The advertising campaign of KFC does not specifically appeal to any segment. It does
not appear to have a consistent long-term approach. The 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, KFC does not have a proper
approach to its target market.
 The increased health concerns of the masses has put KFC 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 KFC 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 Co. and Yumm! Brands Inc.

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  The corporate functioning of these companies has been pretty different from each
other because of which a strong culture could not be established at KFC 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 KFC. 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 McChicken while KFC was still testing
its own chicken sandwich. This delay significantly increased the cost of developing
consumer awareness for the KFC sandwich.

PIZZA HUT
Strengths
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 ‘Pizza Innovation Leader’ 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

The 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.

Weaknesses
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. The 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.

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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. Local 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.

Growing awareness about eco-friendliness has forced a lot of the food chains to maintain
practices that conform to international environmental standards. For 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.

SUBWAY
Strengths
One of the greatest competitive advantages that Subway was born with is its healthy Menu.
The 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 non-
traditional 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 Laundromats! This 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

24
 they can access the freshest ingredients.

Weaknesses
 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 The Entrepreneur 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. These 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. For
example, in Lahore alone, Subway has 20 outlets. Instead of this, Subway could have
targeted Cities like Faisalabad and explored a new market. Franchise 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.
 The 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.
 The environment at the Subway stores cannot be compared with that of McDonald's,
KFC or Pizza Hut. The 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 Franchisees try to fix them at as smaller a
place as possible. This is tarnishing the image of Subway as an international brand.
 The 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. The
Subway at Rawalpindi was recently closed down due to quality issues as well.
 There 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. The
management of the franchises is one part of their operations that Subway has not
handled well.

25
Consumer Analysis
 Nature of the buying decision
 Demographics
 Buyer motivation and expectations
 Loyalty segments

The customers of McDonald’s have been segmented on the basis of AIOD into four
categories, based on the product attributes that fulfil needs like ‘fast’ food, ambience,
status symbol and hygiene.

Activities Interests Opinions Demographi

cs
1 “Fast” Student, Sports, Influenced Age: 16-24
food working; Entertainme by peer years old.
Adventurou nt, Fashion, pressure, Marital
s, Music, Energetic, status:
Energetic. Recreation. Impulse Single;
buying. Heavy users
2 Ambien Student, Entertainme Ambitious, Age: 20-35
ce working/sel nt, Future yrs old.
f-made Recreation, business Marital
businessme Fashion, and social status:
n; working Music, issues, Single and
on projects. Socializatio Politics. Married.
n. Light to
medium
users.
3 Status Student, Sports, Energetic, Age: 16-25
Symbol working; Entertainme Impulse yrs old.
Hanging nt, Fashion, buying, Marital
out, Music, influenced status:
Adventurou Recreation. by peer Single; light
s. pressure to medium
users
4 Hygiene Working Home, Planned Age: 25-45
women/me Recreation, purchasing, yrs old;
n, house- shopping, Authoritari Marital
wives; Fashion, an, Strong status:
Shopping, views, Newly
Club Politics, married, Full
membershi Future Nest; Light
ps. business users
and social
issues.

26
“FAST” FOOD:
This 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. This
segment thus targets the market that indulges in impulse buying and is influenced by
peer-pressure. These customers are heavy user of the product at hand. A minority of
newly working people are also included in this segment.

AMBIENCE:
This 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. The customers of this segment are students as well as working class. These
people enjoy recreation and socialization activities. They have strong views about the
current affairs and the future business and social issues.

STATUS SYMBOL:
The people of this segment perceive the use of this product as a status symbol and
basically comprise students and new-working class. These customers like being seen at
the right places and like to associate and socialize with people of the same class. These
customers are enthusiastic about entertainment, fashion, music and sports. They have
fickle opinions and subject to change because of peer pressure. They follow fads and
indulge in impulse buying.

HYGIENE:
This 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. These
are light users and make purchases once in a while, probably as a substitute rather than a

27
 first-choice. These people are authoritarian, have strong views about politics, business
and current affairs. They make planned purchases and weigh their options before they
make a buying decision.

Buyer motivation and expectations

Customer 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.

Target Segment What is McDonald’s for me?

A Family with children A treat to children, a fun place to be for the children.

Urban customer on the Great taste, quick service without affecting the work schedule
move

Teenager Hang out with friends, but keep it affordable.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects
their values. The customer’s expect the brand to enhance their self-image. Customer
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.

Current Situation – Internal

Company resources
 Financial
 People
 Time
 Skills

28
Financial
Fiscal Year End: December

Revenue (2008): 23522.40 M

Revenue Growth (1 yr): 3.20%

Employees (2008): 400,000

Employee Growth (1 yr): 2.60%

People
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 Internal Marketing. This is important as it must precede
external marketing. This includes hiring, training and motivating able employees. This way
they serve customers well and the final result is a happy customer.
The level of importance has changed to be in the following order (the more important people
are at the top):
1. Customers
2. Front line employees
3. Middle level managers
4. Front line managers
The punch line “I’m loving it” is an attempt to show that the employees are loving their work
at McDonalds and will love to serve the customers.

Time
 Customer waiting at the ques to place order.
 Customer waiting time.
 Customer waiting time at the drive through.
 Customer 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.

29
To meet 100% waiting time McDonalds management is working on staff trainings, better
operations, plan for every shift & decrease staff turnovers.

Skills
At McDonalds educated young individuals are trained at operational level. Those individuals
are then trained on international standards of the franchise. Bench marks are set for
individuals to meet on a periodic basis. Learning 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. Team work which is the
key to success in this business has a paramount important is highly encouraged environment.

Objectives
 Mission statement & Vision statement
 Corporate objectives
 Marketing objectives
 Long term objectives

Mission & Vision statement of McDonald’s

McDonald's mission statement
"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. To 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 statement

McDonald’s vision is to make every customer in every store smile. This is a vision which
may be easy to acquire through other ways but to do it professionally is a totally different
thing.

Corporate objectives
 To serve good food in a friendly and fun environment
 To be a socially responsible company
 To provide good returns to its shareholders
 To provide its customers with food of a high standard, quick service and value for
money 

30
Marketing objectives
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.

These can be related to market share, sales, and goals, reaching the target audience and
creating awareness in the marketplace. The objectives communicate what marketers want to
achieve.

Long-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. This 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. The
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.

Long term objectives

1. McDonald’s vision is to be the world’s best quick service restaurants experience.

2. McDonalds is committed to maintaining and developing the best food products in the
quick service restaurant market.

3.  In order to deliver this, the company has made a number of commitments to food safety
and nutrition.

4. Lead 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.

5. McDonalds have an objective to continual enhance and improve their menu. This 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. Consumer
tastes change over time and McDonalds has to respond to these changes.

31
Summary of Situation Analysis
 Internal Strengths
 Internal Weaknesses
 External Opportunities
 External Threats
 Key success factors in the industry
 Our sustainable competitive advantages

Internal Strengths
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:

Products:
The 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. The 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.

Social Responsibility:
The 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 UK.

32
 In Pakistan however, McDonald’s has not yet come up with an effort that can show the
company’s goodwill towards the masses here. Like KFC, 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.

Employment Opportunities:
The 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 CVs
online.

Brand Recognition:
McDonalds has gained recognition worldwide. The 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 Karachi and Lahore and McDonald’s is regarded as a symbol of value and quality
for your money.

Good communication and friendly environment:

McDonalds has always ensured a friendly environment to offer to its customers. Children
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.
Employees are also very polite and they are always ready to serve you in every best
possible way that they can.

Party celebrations:
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. Children are provided with an opportunity to celebrate
their day in the way that they want.

Partnership with Coca Cola:

McDonalds and Coca Cola are official global partners. Coca cola is a big brand name
serving people all over the world with beverages.

33
Partnership with telecom companies:
McDonalds offered special deals to its clients with up size meals who are the users of a
particular company such as Warid and Ufone.

Internal Weaknesses
Product Variety:
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. The tastes are a bit different but they too are offering chicken and cheese
burgers, drinks and fries at competitive prices. This situation requires McDonald’s to be
more innovative and price competitive.

More advertising:
In Pakistan, McDonald’s rarely advertises at TV, 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.

Drive-ins:
The 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. The service time at the drive-ins is also subject to great
variations and needs to be improved.

External Opportunities
Reasonable Prices:
McDonalds can broaden its market by offering meals at more competitive prices in
comparison to other local QSRs such as AFC, Al Maida etc. This way it could get hold of
the potential customers too.

Opportunity to be innovative:
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, Tandoori, Masala and other spicy tastes which are staple of the country.

34
 Breakfast and special noon meals:

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.

Growing dinning out Market:

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.

Dine in Cafes:
McDonalds can open up with small-sized cafes for the teenagers in their universities and
colleges.

McCafe’s:
McDonalds has opened coffee shops by the name of McCafe’s in UK. Pakistan can serve
as a new potential market for these cafes.

External Threats
More health conscious customers:
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. To 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. For 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.

35
Foreign as well as local competitors:
In the growing market QSR market of Pakistan McDonalds competitors are entering not
only from other countries but from within the country too. Their competitive prices could
be a reason due to which McDonalds can lose its share in the Pakistani market.

Changing customer styles:

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. To remain competitive, McDonalds needs to be
innovative and should change along with the Pakistani consumer styles

Key success factors in the industry

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.

There are many Key success factors 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 Lakson Group of

Companies. Apart from the fact that LGC 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. Therefore 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. This 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.
 McDonalds doesn’t offer just burgers. Their well diversified menu is also one of the
key success factors as most of McDonald’s competitors are quite specialized: KFC in
chicken, Pizza Hut in pizzas etc.

36
  When it comes to eating out during Ramadan in any fast food restaurant, the name
that clicks to the customers is McDonald’s. The reason is the affordable deals that
they offer, that seem to beat all others when it comes to prices.

 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. These places are a source of
attraction not for the services they provide but for McDonald’s as well. For example
one of its outlets has been opened in Park Towers in Karachi so as to attract the
shoppers who visit it very frequently. Another strategic location that McDonald’s has
acquired is at the Clifton beach. This has forced many others nearby restaurants and
one of the very famous cuisine restaurants with the name of Kublai Khan to get
closed. Same is the case in Rawalpindi/Islamabad where McDonald’s holds an
important strategic location. The customers that are driven to the Cinepax are
automatically attracted towards McDonald’s.

Sustainable competitive advantages

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. The world recognition associated with the
brand McDonald’s itself is also one of McDonald’s competitive advantages.

The marketing mix and market research

Having identified its key audiences, a company has to ensure

a marketing mix is created that appeals specifically to those
people. The marketing mix is a term used to describe the four
main marketing tools – the 4Ps

37
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 TV 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.

38
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. These 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

These additional psychological factors are significantly important to the customer. They can
be even more important than the products' physical benefits.

Through marketing, McDonald's establishes a prominent position in the minds of customers.

This is known as branding.

Marketing Strategies
 Product

 Price

 Place

 Promotion

 BCG Analysis

Product
How should the company design, manufacture the product so that it enhances the
customer experience?

39
The important thing to remember when offering menu items to customers is that they have a
choice. They have a huge number of ways of spending their money and places to spend it.
Therefore, 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.

Care 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. Their ability to generate profits will vary at different
points in their life cycle.

Products go through a life cycle, which is illustrated below:

40
The type of marketing undertaken and the amount invested will be different, depending on
the stage a product has reached. For 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.

Products which McDonalds is offering

Burgers

Fries

41
Large meals

42
Drinks

Shakes

Hot drinks

43
Medium meals

Happy meals

44
Desert

45
B.C.G Analysis

Price Strategies

Product Line Pricing:

McDonald’s has a unique pricing strategy that falls solely on their many product lines.  Their
Value Meals fall into the category of Product Line Pricing.  “Where there is a range of
product or services the pricing reflect the benefits of parts of the range.” For example, you
can order a Two Cheeseburger Value meal that comes with a medium drink and fries for
around $3 (prices may vary).  You can Super Size this meal to get a large drink and large
fries for a little more money or you can go with another value meal that might include
different items for different price. 

Promotional Pricing:
If you have driven past a McDonald’s, you will notice that somewhere on their property,
whether it is a banner on their building or spelled out on their sign, they are always offering
some sort of promotional pricing.  For example, McDonalds is offering free chicken burger
with every Big Mac meal. This promotion can be seen as a large banner draped across the
building on many restaurants in Maine.  This promotion changes weekly and may consist of
different menu items packaged together.

46
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.  For a limited time frame, you
could get a free small coffee every morning from 4-7am.  This was to promote their new
coffee partnership with Green Mountain Coffee and helped spread the word that McDonald’s
was now offering coffee.   

Value Pricing:
“This approach is used where external factors such as recession or increased competition
force companies to provide 'value' products and services to retain sales.”  The most notable
and recent example of this is McDonald’s “Dollar Menu.” The Dollar Menu was created
because McDonald’s recognized that the economy was in a decline and that their competition
was getting fiercer.  The Dollar Menu satisfies the current decreasing economy and has
increased the pressure towards competitors.  The 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.    

Place
There 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 Karachi, Hyderabad, Lahore, Faisalabad, Rawalpindi and
Islamabad In future, very soon planning to expand in many cities in Pakistan.

Promotion
What is the suitable strategy and channels for promotion of the product?

47
The various promotion channels being used by McDonald’s to effectively communicate the
product information are given above. A clear understanding of the customer value helps
decide whether the cost of promotion is worth spending.

There are three main objectives of advertising for McDonald’s are to make people aware of
an item, feel positive about it and remember it. The right message has to be
communicated to the right audience through the right media.

Financial Summary
 Income Statement
 Balance Sheet

Income Statement
Dec 08 Dec 07 Dec 06

Revenue 23,522.4 22,786.6 21,586.4

48
Cost of Goods Sold 14,883.2 14,881.4 14,602.1

Gross Profit 8,639.2 7,905.2 6,984.3

Gross Profit Margin 36.7% 34.7% 32.4%

SG&A Expense 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%

Nonoperating Income 237.7 (103.2) (680.7)

Nonoperating Expenses (522.6) -- --

Income Before Taxes 6,158.0 3,572.1 4,166.4

Income Taxes 1,844.8 1,237.1 1,293.4

Net Income After Taxes 4,313.2 2,335.0 2,873.0

Continuing Operations 4,313.2 2,335.0 2,873.0

Discontinued Operations 0.0 60.1 671.2

Total Operations 4,313.2 2,395.1 3,544.2

Total Net Income 4,313.2 2,395.1 3,544.2

Net Profit Margin 18.3% 10.5% 16.4%

Diluted EPS from Total Net Income ($) 3.76 1.98 2.83

Dividends per Share 1.63 1.50 1.00

49
Balance Sheet

Assets Dec 08 Dec 07 Dec 06

Current Assets

Cash 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 Current Assets 411.5 421.5 435.7

Total Current Assets 3,517.6 3,581.9 3,625.3

Net Fixed Assets 20,254.5 20,984.7 20,845.7

Other Noncurrent Assets 4,689.4 4,825.1 4,552.8

Total Assets 28,461.5 29,391.7 29,023.8

Liabilities and Shareholder's Equity Dec 08 Dec 07 Dec 06

Current Liabilities

Accounts Payable 620.4 624.1 834.1

Short-Term Debt 31.8 1,991.1 17.7

Other Current Liabilities 1,885.7 1,883.3 2,156.3

Total Current Liabilities 2,537.9 4,498.5 3,008.1

Long-Term Debt 10,186.0 7,310.0 8,416.5

Other Noncurrent Liabilities 2,355.0 2,303.4 2,140.9

50
 Total Liabilities 15,078.9 14,111.9 13,565.5

Shareholder's Equity

Preferred Stock Equity -- 0.0 0.0

Common Stock Equity 13,382.6 15,279.8 15,458.3

Total Equity 13,382.6 15,279.8 15,458.3

Shares Outstanding (mil.) 1,079.2 1,079.2 1,079.2

MCDONALD’S VALUES
We place the customer experience at the core of all we do
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 QSC&V for each and every customer, each and every time.

We are committed to our people

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.

We believe in the McDonald’s System

McDonald’s business model, depicted by the “three-legged stool” of owner/operators, suppliers, and
company employees, is our foundation, and the balance of interests among the three groups is key.

We operate our business ethically

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.

We give back to our communities

We take seriously the responsibilities that come with being a leader. We help our customers build
better communities, support Ronald McDonald House Charities, and leverage our size, scope and
resources to help make the world a better place.

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We grow our business profitably

McDonald’s is a publicly traded company. As such, we work to provide sustained profitable growth
for our shareholders. This requires a continuing focus on our customers and the health of our system.

We strive continually to improve

We are a learning organization that aims to anticipate and respond to changing customer, employee
and system needs through constant evolution and innovation.

TOP MGT OFFICERS

Jim Skinner
Vice Chairman and Chief Executive Officer

Ralph Alvarez
President and Chief Operating Officer

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Jose Armario
Group President McDonald's Canada and Latin America

Peter Bensen
Executive Vice President and Chief Financial Officer

Mary Dillon
Executive Vice President and Global Chief Marketing Officer

Tim Fenton

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President of Asia, Pacific, Middle East and Africa

Janice Fields
Executive Vice President and Chief Operations Officer, McDonald's USA

Richard Floersch
Executive Vice President and Chief Human Resources Officer

Denis Hennequin
President of McDonald's Europe

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Jim Johannesen
President, Central Division for McDonald’s USA

Karen King
East Division President - McDonald's USA

Steve Plotkin
President, West Division for McDonald’s USA

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Gloria Santona
Executive Vice President, General Counsel and Secretary

Jeff Stratton
Executive Vice President and Worldwide Chief Restaurant Officer

Don Thompson
President of McDonald’s USA

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Meeting the needs of key audiences
There are a limited number of customers in the market. To build long-term business it is
essential to retain people once they have become customers. Customers are not all the same.
Market research identifies different types of customers. For example:

These examples represent just a few of McDonald's possible customer profiles. Each has
different reasons for coming to McDonald's.

Using this type of information McDonald's can tailor communication to the needs of specific
groups. It is their needs that determine the type of products and services offered, prices
charged, promotions created and where restaurants are located.

To meet the needs of the key market it is important to analyse the internal marketing
strengths of the organization. Strengths and weaknesses must be identified, so that a
marketing strategy which is right for the business can be decided upon.

The analysis will include the:

 company's products and how appropriate they are for the future

 quality of employees and how well trained they are to offer the best service to customers

 systems and how well they function in providing customer satisfaction e.g. marketing
databases and restaurant systems

 financial resources available for marketing.

Scenarios
Scenario Analysis is traditionally considered to be a tool that provides a means for
considering multiple futures in relation to social, economical, political and technological
changes. There are different types of scenarios that are used for specific situations and

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 circumstances. For McDonald’s we have developed a number of scenarios keeping in
mind the present socio-economic and political situation.

These scenarios are aimed at identifying assumptions at a macro level. Amongst the
STEEP (social, technological, economic, environmental and political) forces McDonald’s
focuses mainly on the political, environmental and the social factors.

Economic Slowdown:

Like any other multinational companies, McDonald’s is exposed to any changes in the
global economy e.g. inflation over past some years. The fluctuation of the foreign
currency and its international expansion has left it as very sensitive to economic
slowdown of other countries. The economic slowdown in some countries, particularly in
most of developing countries has made the customers become price sensitive, and it has a
great impact over the buying behaviour of the customers because of reduction in the
purchasing power of customers. In order to cope up with the upcoming recession
McDonald’s needs to focus on two major strategies:

More for less (in terms of price)

McDonald’s in developing countries like Pakistan should now focus on revenue growth
by attracting more customers to the existing franchises rather than going for growth in
terms of opening more and more franchises.

In order to cut costs it can form associations with food companies and suppliers just like it
has done with Coca-Cola. Other than this McDonald’s should start diversifying in low
priced products like milkshakes and smoothes and introduce more variety in the existing
range. For most people out there, McDonald’s is more of an experience rather than just an
eating out occasion and McDonald’s has to focus on making the experience more and
more fulfilling in terms of both value and price. It can also introduce a greater range of
low priced snacks to cater to the recession driven public for whom McDonald’s is more
of a status symbol.

Health Conscious attitude of People:

There are many social issues that can be thought of as potential threat to the company in
present as well as in future. One of the concerning causes is the issue related to health

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conscious attitude of people. The fast food industry is often criticized because of its role
in creating numerous health problems including obesity. Initially these fast food chains
were thought to be the driving force for the unhealthy eating disorders. Nowadays, more
and more customers are becoming aware of nutritional values and health benefits of
products and services than before. Childhood obesity is also a major cause of cynicism
regarding the fast food chains. The said situation has a great impact over the brand, due to
the fact that children have the big share on the revenue of the brand. The said trends
reduced the revenues, staff motivation as well as the interests of the shareholders of the
company, and it can be showed in the strong protest by different nutritional campaigners
against the food being promoted by the company that have affected many lives, not only
in the US but in other part of the world. These are still the potential source of threats for
the company as the said events caused so much negative impact on the image of the brand
that it pushed Disney to decide not to renew its contract with the McDonald’s.

In order to cope with this situation McDonald’s will have to come up with greater
variations in its menu for the health conscious people. McDonald’s will have to put
greater emphasis on healthier food like sandwiches, baked potatoes and salads. The
outlets in Pakistan serve a little more than the traditional McDonald’s burgers. They’ll
have to introduce a healthier menu and then emphasize the healthy side of McDonald’s
through aggressive promotion to cope with the health concerns associated with its
products. McDonald’s should also come up with low calorie variations of all its burgers
and make its fries healthier by using the right kind of oil.

Increased Competition:
One of the environmental factors surrounding McDonald’s is the fierce competition from
the competitors. There are many players in the industry, and most of them are offering
the same or similar products and services. The reason behind this growth is due to the
improvement of the entire fast food industry in the world. There is an intensive price war,
extreme battle of innovations and breakthrough and serious promotions and
advertisements are being implemented by different players in the global fast food
industry. Increasing competition has led to aggressive pricing policies amongst the large
brands as well as pushed them to increase their menu diversification as well as product
developments in order to increase sales and market share, thus maintain current position

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in the entire market. The start of new McCafe’s at McDonald’s is also one of the
strategies to capture some of Starbuck’s market share.

To keep hooked on with its current customers, McDonald’s need to focus more on the
strategies that attract children to their store. This would not only help them in keeping
their customers but would build on relationship with the new ones.

McDonald’s would also have to put greater focus on cutting costs because in these times
of recession, a lower price is something that attracts a lot of customers. People at
McDonald’s should study their entire value chain and cut costs wherever they can. Due to
recession, a lot of fast food chains are losing their customer and in today’s competitive
environment, the loss of one is the gain of other. By applying this strategy McDonald’s
should see what is that factor because of which the customers are abandoning these
brands and then provide these customers such alternatives that nobody else is providing.

REFERENCES

 http://www.mcdonalds.com.pk
 http://www.mcdonalds.com
 http://www.google.com
 http://smeda.com
 http://scribd.com
 http://kfc.com.pk
 http://kfc..com
 http://pizzahut.com.pk
 http://pizzahut.com
 http://subway.com.pk
 http://subway.com
 http://en.wikipedia.org/wiki/Pizza_Hut
 http://en.wikipedia.org/wiki/Mcdonalds
 http://en.wikipedia.org/wiki/Subway
 http://en.wikipedia.org/wiki/kfc
 http://Pakistanmba.jimdo.com

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 http://www.viaint.com/case_study.php/caseid/6
 http://www.diet.com/g/subway-diet
 http://bimtech-retail.com/blog/tag/customer/
 http://www.franchise-international.net/franchise/Subway-Sandwiches/Committed-to-
Franchising-Excellence/524
 http://www.subway.com/subwayroot/newsItems/newsItem1.aspx
 http://www.scribd.com/doc/11494031/Brand-Mnagement-Subway-Sandwiches
 http://www.startupnation.com/forums/1063/8/1
 http://72.14.235.132/search?
q=cache:FWRVd3ZxEBQJ:www.leadingedge.com.au/news/case_studies_marketing.p
df+subway
%2Bcompetitive+advantage&cd=4&hl=en&ct=clnk&gl=pk&client=firefox-a
 http://www.terremark.com/subway-study.aspx
 http://books.google.com.pk/books?
id=jqWuD7dF3GcC&pg=PA489&lpg=PA489&dq=Pizza+hut
%2Bstrategic+Vision&source=bl&ots=IeN-
yWv4d3&sig=B_yFuIm_SqmMxmkGX5Sns4Sot2k&hl=en&ei=PEwISvPAIpSWMd
HygKMD&sa=X&oi=book_result&ct=result&resnum=2#PPA490,M1
 http://books.google.com.pk/books?
id=khBvEqr4cM0C&pg=PA101&lpg=PA101&dq=pizza+hut
%2Bcompetitive+advantage&source=bl&ots=beujVQtWTA&sig=PCbxUymIaCx5e
A0-
RttLCcEJHrE&hl=en&ei=9moISvvRKJu8M5u76KID&sa=X&oi=book_result&ct=re
sult&resnum=3#PPA107,M1
 http://www.cio.com.au/article/160244/how_find_your_competitive_advantage
 http://www.ypant.co.uk/dept/Business_Studies/Library/A2_work/SWOT%20analysis
%20of%20pizza%20hut.pdf
 http://www.environmentalleader.com/2009/01/28/kfc-switches-to-earth-friendly-
packaging/
 http://www.uwosh.edu/es/students/KFC
 http://www.greenerbuildings.com/news/2009/03/11/first-green-kfc-taco-bell
 http://www.fundinguniverse.com/company-histories/KFC-Corporation-Company-
History.html
 http://www.franchisetrade.com/articles/healthy-food.html
 www.scribd.com/doc/12814873/SWOT-AnalysisMcDonalds.html

 http://consistentquality.blogspot.com/

 http://www.scribd.com/doc/7065813/BA-McDonalds

 http://wiki.answers.com/Q/What_are_McDonald's_core_competencies

 http://home.comcast.net/~nelson1397/mcdonaldscase.htm

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  http://adelino.typepad.com/adelino_marketing/2007/01/starbucks_mcdon_1.html

 http://blogs.harvardbusiness.org/cs/2008/01/why_mcdonalds_new_coffee_strat.html

 http://first.emeraldinsight.com/samples/mcdonalds2.pdf

 http://www.podtech.net/home/?p=196

People have been interviewed

Mr. Hilal Mir (Snr. Marketing Executive)

Mr. Ali Arslan (Snr. Marketing Officer)
Mr. Bilal Ahmmed (Branch Manager F-9 Islamabad)

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