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ROLL NO.: 47



This is to certify that SHUBALAXMI. SHETTY
of M.Com (Accounts) Semester I (academic year 2013-2014) has successfully completed
Guidance of DR. MINU THOMAS

_________________ ___________________
(Project Guide) (Course Co-ordinator)
___________________ ___________________
(External Examiner) (Principal)

Place: _____________
Date: ______________


I, SHUBALAXMI. SHETTY, Student M.Com (Accounts) Semester I
(academic year 2013-2014) hereby declare that, I have Completed the project on
The information presented in this project is true and original to the best of
my knowledge.

Place: _____________

Date: ______________


I would like to thank the University of Mumbai, for introducing M.Com
(Accounts) course, thereby giving its students a platform to be abreast
with changing business scenario, with the help of theory as a base and
practical as a solution.
I am indebted to the reviewer of the project Dr. Minu Thomas, my project
guide who is also our Principal, for her support and guidance. I would
sincerely like to thank her for all her efforts.
Last but not the least; I would like to thank my parents for giving the
best education and for their support and contribution without which this
project would not have been possible.



The following assignment talks about the strategic management in context to
McDonalds. Strategic management is one of the critical issues to be studied by a
company in order to understand the causes and solution of the problems and hurdles in
the way of the success of the business and its market growth. As we all know that it's a
world of globalization and competition and therefore every company has to make certain
plans and strategies in order to tackle the problems they face due to the competition in the
local and global markets. Every company has to make effective strategies and plans in
order to tackle the internal and the external problems faced by the company. Internal
problems can be linked with any internal department or process such as HR or Pay role or
machinery etc and the external challenges can be competition, changing technologies etc.
Globalization on one hand gives benefits to the company to explore new markets and
increase its customers in order to make more profits but it also poses different problems
and challenges which the company has to tackle to continue its success in the new
markets. Company has to design proper strategic plan to point out and tackle the
problems curbing the success of the business. Either it's a local or a global market
company always needs an efficient strategy to tackle the issues curbing its success in the
market. This assignment will discuss the various strategic issues of concern for the
McDonalds and plans it has designed to tackle these problems. We will be using different
strategic models such as Product Life Cycle, Porter's Five Forces model and BCG matrix
in order to understand the issues of strategic concern for the company and how to tackle
them for the success of its business.
What is management?
Management in all business and organizational activities is the act of coordinating
the efforts of people to accomplish desired goals and objectives using available resources
efficiently and effectively. Management
comprises planning, organizing, staffing, leading or directing,
and controlling an organization (a group of one or more people or entities) or effort for
the purpose of accomplishing a goal.Resourcing encompasses the deployment and
manipulation of human resources, financial resources, technological resources, and
natural resources.Since organizations can be viewed as systems, management can also be
defined as human action, including design, to facilitate the production of useful outcomes
from a system. This view opens the opportunity to 'manage' oneself, a prerequisite to
attempting to manage others.
Management is defined as the organization and coordination of the activities of
an enterprise in accordance with certain policies and in achievement of clearly defined
One views management functionally, such as measuring quantity,
adjusting plans, meeting goals. This applies even in situations where planning does not
take place. From this perspective, Henri Fayol (18411925) considers management to
consist of six functions:
What is strategy?
The art of planning action to achieve a specific goal is called strategizing and the
action plan is called Strategy (Rajan Saxena).
The term Strategy was originally applied to warfare as an art of planning and directing
large military movements and the operations of war (etymology: Greek strategos, 450
In business, Strategy Management is now accepted as the discipline of managing
resources to achieve long term objectives (Sharma & Banga).
Richard L. Daft has defined Strategy as The plan of action that prescribes resource
allocation and other activities for dealing with the environment and helping the
organization attain its goals.
What is strategic management?
Strategic management is a level of managerial activity below setting goals and
above tactics. Strategic management provides overall direction to the enterprise and is
closely related to the field of Organization Studies. In the field of business administration
it is useful to talk about "strategic consistency" between the organization and its
environment or "strategic consistency." According to Arieu (2007), "there is strategic
consistency when the actions of an organization are consistent with the expectations of
management, and these in turn are with the market and the context." Strategic
management includes the management team and possibly the Board of Directors and
other stakeholders.
"Strategic management is an ongoing process that evaluates and controls the
business and the industries in which the company is involved; assesses its competitors
and sets goals and strategies to meet all existing and potential competitors; and then
reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been
implemented and whether it has succeeded or needs replacement by a new strategy to
meet changed circumstances, new technology, new competitors, a new economic
environment., or a new social, financial, or political environment." Strategic
Management can also be defined as "the identification of the purpose of the organisation
and the plans and actions to achieve the purpose. It is that set of managerial decisions and
actions that determine the long term performance of a business enterprise. It involves
formulating and implementing strategies that will help in aligning the organization and its
environment to achieve organisational goals."

Mint bergs 5 Ps for Strategy
The word "strategy" has been used implicitly in different ways even if it has
traditionally been defined in only one. Explicit recognition of multiple definitions can
help people to manoeuvre through this difficult field. Mintzberg provides five definitions
of strategy:
3. Pattern
Strategy is a plan - some sort of consciously intended course of action, a guideline
(or set of guidelines) to deal with a situation. By this definition strategies have two
essential characteristics: they are made in advance of the actions to which they apply, and
they are developed consciously and purposefully.
As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to
outwit an opponent or competitor.
If strategies can be intended (whether as general plans or specific ploys), they can also
be realised. In other words, defining strategy as plan is not sufficient; we also need a
definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a
pattern in a stream of actions. Strategy is consistency in behaviour, whether or not
intended. The definitions of strategy as plan and pattern can be quite independent of one
another: plans may go unrealised, while patterns may appear without preconception.
Plans are intended strategy, whereas patterns are realised strategy; from this we can
distinguish deliberate strategies, where intentions that existed previously were realised,
and emergent strategies where patterns developed in the absence of intentions, or despite
Strategy is a position - specifically a means of locating an organisation in an
"environment". By this definition strategy becomes the mediating force, or "match",
between organisation and environment, that is, between the internal and the external
Strategy is a perspective - its content consisting not just of a chosen position, but of an
ingrained way of perceiving the world. Strategy in this respect is to the organisation what
personality is to the individual. What is of key importance is that strategy is a perspective
shared by members of an organisation, through their intentions and / or by their actions.
In effect, when we talk of strategy in this context, we are entering the realm of the
collective mind - individuals united by common thinking and / or behaviour.
History of McDonalds
1948 In December, Dick and Mac McDonald open the first McDonald's in San
Bernardino, California. A little hamburger man called "Speedee" becomes the company
1954 Ray A. Kroc, a Multimixer salesman from Oak Park, lIIinois, visits Dick and Mac's
San Bernardino.McDonald's, his curiosity initially aroused by the large number of
Multimixers they were buying. Ray Kroc becomes the exclusive national franchise agent
for the McDonald's brothers.
1955 On April 15, Ray Kroc opens his first McDonald's in Des Plaines, lIIinois. In July,
Ray Kroc opens his second McDonald's restaurant in Fresno, California, operated by Art
Bender, Ray Krocs first franchisee. Total sales for the company are $193,772.
1956 McDonald's Corporation adds 12 restaurants, including Chicago (2), Skokie,
Waukegan, Joliet, and Urbana, lIIinois; Hammond, Indiana; Los Angeles (2), Torrance,
and Reseda, California; and Dallas, Texas. Ray Kroc hires Fred Turner as a grillman in
his # 1 store in Des Plaines.
1958 McDonald's sells its 100 millionth hamburger. Fred Turner becomes Vice President
of the company. McDonald's annual sales skyrocket 151% over the previous year to
1959 The 100th restaurant opens in Fond Du Lac, Wisconsin. In total, a record 66
restaurants open. McDonald's begins billboard advertising.
1960 McDonalds celebrates its 5
anniversary, opening its 200
restaurant in
Knoxville, Tennessee. Annual sales total $37,579,828. Ad campaign cheers on the "All
American Meal" -- a hamburger, fries, and milk shake.
1963 The 500th McDonald's restaurant opens in Toledo, Ohio. Hamburger University
graduates its 500
student. Ronald McDonald makes his debut in Washington, D.C. The
Filet-O-Fish sandwich is created by Lou Groen, McDonalds franchisee, and was added
to the national menu in 1965.
1964 At year end, there are 657 restaurants. The company's gross sales hit $130 million.
1965 McDonald's celebrates its 10th anniversary with the first public stock offering at
$22.50 per share. Average annual sales for a McDonald's restaurant are $249,000. Ronald
McDonald makes his first appearance in the Macys Thanksgiving Day Parade. Network
television advertising begins.
1966 Ronald McDonald appears in his first national television commercial. In May,
McDonalds holds its first annual public shareholders meeting. On July 5, McDonalds
is listed on the New York Stock Exchange with the ticker symbol MCD. McDonalds
exceeds $200 million in sales.
1967 The first international McDonalds restaurants open in Canada and Puerto Rico.
The Operator National Advertising Fund (OPNAD) begins operation.
1968 The Big Mac and Hot Apple Pie are added to the menu. The 1,000
opens in Des Plaines, Illinois. McDonalds opens in Hawaii. Average annual sales for
McDonalds restaurants open at least 13 months are $333,000.
1969 McDonalds International Division is formed. The new McDonalds mansard roof
building design is introduced to replace the red and white design.
1970 McDonald's opens in Costa Rica, its third country after the United States and
Canada. Having changed hands in 1968, the original "Big M" restaurant closes. It is
demolished two years later, with only part of the sign remaining; this has since been
1971 The first Asian McDonald's opens in July in Japan, in Tokyo's Ginza district. On
August 21, the first European McDonald's outlet opens in Zaandam (nearAmsterdam) in
the Netherlands. The franchisee is Ahold. The first McDonald's in Germany (Munich)
opens in November. It is the first McDonald's to sell alcohol, as it offers beer. Other
European countries follow in the early 1970s.The first Australian McDonald's opens in
the Sydney suburb of Yagoona in May.
1972 The McDonald's system generates $1 billion in sales through 2200 restaurants. The
2000th McDonald's restaurant opens in Des Plaines, Illinois.The first McDonald's
in France opens, in Crteil, even though the company officially recognizes the first outlet
in Strasbourg in 1979.
1973 The first McDonald's Playland opens in Chula Vista, California.The
first Swedish McDonald's restaurant opens in Stockholm, 23 October.
1974On November 13, the first McDonald's in the United Kingdom opens in Woolwich,
southeast London. It is the company's 3000th restaurant.The first Ronald McDonald
House opens in Philadelphia, Pennsylvania.
1975 The first Hong Kong McDonald's opens in January in Paterson Street, in Causeway
Bay, Hong Kong Island. It is also the first McDonald's restaurant in Greater China and
the Four Asian Tigers.
1975 Drive-Thru is introduced in January in Sierra Vista, Arizona in order to serve meals
to soldiers from nearby Fort Huachuca who were not allowed to wear BDUs while off
post except while in a vehicle. The Drive-Thru is later known as "McDrive" in some
1976 McDonald's pays its first cash dividend .
1977 McDonald's adds a breakfast line to the U.S. menu.
1978 The 5000th McDonald's restaurant opens in Kanagawa, Japan.
2010 McDonald's introduces Real Fruit smoothies and the Angus Snack Wrap.
McDonald's introduces Fruit & Maple Oatmeal to its menu.
2011 McDonald's reintroduces the Asian salad. McDonald's makes a deal with
the Marine Stewardship Council to certify the fish used for the Filet-O-Fish sold in
2012 McDonald's begins posting the calories count for items on the menus and menu
boards in the drive-thru.
2013 McDonald's discontinues it's line of angus burgers and introduces a new modified
line of its quarter pound hamburgers.
In 2013 the first McDonald's burger restaurant franchise in Vietnam was awarded to the
son in law of the Vietnamese prime minister.
Background of McDonalds
McDonalds is the leading global foodservice retailer with more than 34,000 local
restaurants serving approximately 69 million people in 118 countries each day. More than
80% of McDonalds restaurants worldwide are owned and operated by independent local
men and women. Our goal is becoming customers favorite way and place to eat and drink
by serving core favorites such as the world famous French Fries, Big Mac, Quarter
Pounder and Chicken Mc Nuggets.
The McDonalds started in 1954. Raymond Kroc who is the founder saw a
hamburger stand in San Bernardino, California and visualized a nationwide fast food
chain. Kroc tested himself as an ancestor who revolutionized the American restaurant
industry. Actually, Raymond Kroc is esteemed being the Farther of Industry.
Today McDonalds is the largest brand of fast food restaurant that serve 52 million
customers per day more than 100 countries. With the world-class standard, McDonalds
unites the QSC&V standards strictly all McDonalds restaurants around the world.
In 1985, the first McDonalds restaurant in Thailand was opened at Amarin Plaza.
Currently, there are more than 100 McDonalds restaurants nationwide with a ring of
convenient services at anytime and anywhere which including breakfast meals from 5.00-
11.00 Am., Drive -thru, Dessert kiosk and McCafe. Besides, there is the McDelivery
service on 1711 running from 9 Am. until midnight and some restaurant also offer 24-
hour service to serve.
Structure of McDonalds
McDonalds is a centralized, International Division company composed of
franchisees and joint venture partners. McDonalds utilizes a broad approach and
initially grew overseas by relying on transferring new products, processes, and strategies
from the United States to less developed markets
. The idea has always been to transfer
the American tradition of fast food to other counties using the same real estate principles,
cost advantages, and new technologies that were so successful in the U.S. McDonalds
has always exploited the corporate company knowledge and transported and diffused it to
foreign markets. Starting with the concrete supplier chain, all the way down to the store
design and implementation, differentiation is not encouraged nor is it allowed.
With an Ethnocentric mentality, McDonalds has constantly based the companies
international operations on home-grown ideas and concepts. Corporate first places the
focus the domestic market, and then filters the functions to the overseas operations.
Information flows from corporate to the franchisees based on what is working in the
United States markets, with the expectation that it will be implemented in the foreign
markets. When analyzing McDonalds corporate structure, it is evident that the top down
approach is not only used it is enforced. All information starts with corporate and is
disbursed to the foreign markets
Logo and Slogan

A slogan is a short, memorable catch phrase, tagline or motto used to to identify a
product or company in advertisements. The advertising slogan, or business slogan most
associated with

I'm Lovin' It
Values of McDonalds
McDonald's brand mission is to be our customers' favorite place and way
to eat and drink. Our worldwide operations are aligned around a global strategy called the
Plan to Win, which center on an exceptional customer experience People, Products,
Place, Price and Promotion. We are committed to continuously improving our operations
and enhancing our customers' experience.
McDonalds Values
Place the customer experience at the core of all it 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
quality, service, cleanliness and value (QSC&V) for each and every customer, each and
every time.
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.
Believes in the McDonalds System. McDonalds business model, depicted by our
three-legged stool of owner/operators, suppliers, and company employees, is our
foundation, and balancing the interests of all three groups is key.
Operate its business ethically. Sound ethics is good business. At McDonalds, we hold
ourselves and conduct our business to high standards of fairness, honesty, and integrity.
We are individually accountable and collectively responsible.
Give back to its 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.
Grow its business profitably. McDonalds is a publicly traded company. As such, we
work to provide sustained profitable growth for our shareholders. This requires a
continuous focus on our customers and the health of our system.
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.
Mission & vision statement of McDonalds
The mission statement of McDonald's fast food restaurants around the world is
not much different from any restaurant chain...

"McDonald's brand mission is to be our customers' favorite place and way to eat."
That broad and common mission statement is more clearly defined by the
McDonald's Values, which reflects the experience that customers can expect when
walking into a McDonald's fast food restaurant no matter where it is located...
1.We place the customer experience at the core of all we do.
2.We are committed to our people.
3.We believe in the McDonald's System.
4.We operate our business ethically.
5.We give back to our communities.
6.We grow our business profitably.
7.We strive continually to improve.
Currently McDonald's is implementing a global strategy that it calls "Play to Win," which
is designed to create a consistently excellent customer experience in McDonald's
restaurants. The five key facets of that McDonald's experience are people, products,
place, price, and promotion.
Vision Statement: McDonalds vision is to be the world's best quick service
restaurant experience. Being the best means providing outstanding quality, service,
cleanliness, and value, so that we make every customer in every restaurant smile
Vision Statements are often ideal ideas for how a business or organisation will
eventually be perceived. When writing a vision statement, the company directors must
ask themselves, What do we want in the long run? It may be something that is
completely unachievable in the next five, 10 or even 15 years but that is the ultimate goal
and is something that the company are always working towards. Every goal they set
should be working towards making their vision statement true. Vision is a long-term
view, sometimes describing how the organization would like the world to be in which it
operates. Businesses are aware that a vision statement is not a guide that is set in stone, it
is more of an inspiration and something big to work towards and provides the basis for
all strategic planning. It does not give any guidelines as to how the company aims to get
to their ultimate vision, it just states that vision to ensure that no one loses focus of their
goal and remains motivated. Smaller challenges can then be set to help them work
towards the vision.
Vision Statements are usually bold and proud and often state that the business
wishes to be the best. Anything stated in any businesses vision is obviously difficult to
measure or analyze because while one person may think that they are the best at what
they do, this may be a personal opinion and not everyone will necessarily agree. Unless
the best can be clearly defined, it is not easy to establish whether or not the vision
statement has been achieved.
Business strategy of McDonalds
McDonalds has been an industry leader within the fast food industry for
years. In the introductory phase of their business operations they focused on following a
generic low cost strategy consisting of offering consumers low priced food products in
order to, make eating out on a regular basis affordable for families (Marino
627). Faced with changing consumer trends and competitors pursuing aggressive
competitive strategies focused on product differentiation and quality; McDonalds then
CEO, Jim Cantalupo, determined in order to address the companies recent profit losses
and challenges a different stand on generic strategy must be taken. Through the
implementation of McDonalds Plan to Win strategy, Cantalupo shifted the companys
generic strategy to differentiation by focusing on marketing to turnaround the negative
publicity recently experienced through offering customers a better overall fast food
experience as compared to their competitors.
McDonalds financial strategy focused on decreasing capital expenditures by
40% while using their cash from 2003 operations to pay off debt and return cash to
stockholders. These financial strategies have allowed the company to implement the Plan
to Win strategy while also improving stock performance and sales. Through a growth
strategy that involves renovating, rebuilding, and relocating buildings; McDonalds hopes
to create a, fresh, sophisticated, but family-friendly atmosphere (Marino
642). However in order to sustain growth and success, additional investments may be
needed in the future.
McDonalds personnel strategy promotes their desire to market an exceptional customer
experience. Hospitality training and e-learning programs offer McDonalds the most cost
effective method of training for restaurant staffs, while ensuring employees are dedicated
to customer service through the attitudes and skills they bring to the workplace. This
directly supports the managerial functional goal of creating a stimulating work
Production strategies promote an overall quality experience by offering new products to
customers in order to address growing changes in demand for healthier foods and
premium products. Technological improvements, including wireless hot spots, improves
the relevancy of the overall quality experience McDonalds is trying to market to
consumers. With these improvements in each functional area, McDonalds marketing
strategy aims to build trust and brand loyalty among current and future customers in order
to gain significant competitive advantage in the marketplace.
Currently McDonalds functional strategies are all successfully co-aligned with their new
generic strategy of marketing differentiation focusing on quality customer
experiences. Although Jim Cantalupo is credited to McDonalds improved performance
only the future can tell if such strategies will provide McDonalds with the core
competencies needed to remain competitive in an overly saturated industry. At which
time McDonalds functional strategies may need to be re-evaluated in order to maintain
sustainable marketing differentiation.
Product Development Strategy for McDonalds:
When you are running a small business, it is easy to look at chains like
McDonald's with disdain, but there is a lot that you can learn from their success. Part of
the success enjoyed by McDonald's stems from their product development strategy. By
familiarizing yourself with the way McDonald's develops products, you can apply the
same methods to your own products whether they are food products or other consumer
Permanent Product Strategy
McDonald's features several products on their menu that are permanent and do not
change. Examples of this include their basic hamburger and cheeseburger, the Big Mac
and the Quarter Pounder. After the initial development, these items remain on the menu
for extended periods of time without undergoing significant changes. This strategy
ensures that there is always something familiar for consumers on the menu.
Temporary Product Strategy
In addition to its permanent product offerings, McDonald's regularly develops
temporary products. The McRib, for example, is a product that is offered only seasonally.
The Big Ocean burger is an example of a burger that was developed as a temporary
product, offered only for a few months in 2007. The purpose of this product development
strategy is to give customers something new to experience on each visit and to
experiment with new items that may become permanent.
Local Product Development Strategy
As McDonald's has expanded internationally, it has created several products to
meet consumer demand in the local markets. In the Netherlands, for example, they have
developed the McKroket, a burger featuring a typically Dutch kroket, a deep-fried,
ragout-filled patty. In the Canadian province of Quebec, McDonald's offers poutine, a
traditional dish of french fries, gravy and curd cheese. Even in parts of New England and
Atlantic Canada, they have developed the McLobster, their version of the local lobster
roll sandwich. This strategy ensures that local customers have foods to fit their tastes.

Local Adaptation Strategy
In addition to developing new products for local markets, McDonald's will also
use an adaptation strategy whereby they take a product and modify it to fit local tastes. In
India, for instance, the Big Mac has been modified into the Maharaja Mac which contains
no beef, in keeping with local diets. In Greece, the Big Mac has been adapted to use a
pita bread instead of a bun. Even the McLobster has been adapted to the McCrab in some
U.S. markets where crab is a common food.
Challenges to growth of McDonalds
Rising food prices:
Higher food commodity and energy prices have recently pushed up wholesale and
retail food prices. The US Department of Agriculture predicts that prices will continue to
accelerate during the first half of 2011, leading to a 2% to 3% rise in food price inflation
for the year. McDonald's and other big burger chains have largely been unaffected so far,
but that might soon change.
In a report last week, RBC Capital Markets analyst Larry Miller said McDonald's
will raise prices by 2% to 3% to help offset its higher food costs. McDonald's declined to
comment, citing a quiet period ahead of earnings next week. However, the chain's CFO
Pete Bensen told analysts in October that while prices for beef and other ingredients were
rising, the burger chain could deal with the increase.
But it may be too early to conclude that the Golden Arches will survive the
inflationary pressures unscathed. Rising food prices could be a risk for McDonald's, says
analyst Andy Barish of Jefferies and Company, even though the chain is largely
safeguarded from such volatility because the vast majority of its operating profits, about
two-thirds, come from franchises and royalties. While individual franchises might have a
harder time dealing with rising prices given the sensitive demand of cost conscious
consumers, it could eventually hurt profits of the overall chain if prices rise to levels
where it makes it difficult for franchises to expand.
Barish doesn't see any major disappointments in sales or earnings this year, but
rather a gradual slowing of earnings growth. He expects McDonald's to post 16%
earnings growth in 2010, followed by 10% growth in 2011.
Limitation of beverages over burgers:
McDonald's increasingly diverse menu has helped it become the nation's
best-performing restaurant company during the economic slump. The chain realized
quickly that consumers have lots of options when it comes to food and drink and they
want the option to stop at McDonald's for snack time as opposed to just regular meals.
Creative drinks are the product du jour at the chain, with everything from fruit smoothies
and specialty coffee drinks.
But beverages might only take the company so far. The Wall Street Journal
recently cited a company email that disclosed that McDonald's peak lunch-hour business
has been flat for five years. And the few analysts taking a bearish view of McDonald's
2011 outlook say real growth of the company's core business -- the burgers and fries part
-- is overstated.
Howard Penney, restaurant industry analyst with investment research firm
Hedgeye and a Fortune contributor, believes the chain has expanded too broadly into
beverages, and the plan will eventually catch up with the company -- helping send U.S.
same store sales to negative levels during the second, third and fourth quarters this year.
Much of McDonald's success in beverages has come from specialty coffees such as lattes,
which are sold at relatively higher prices. Penney says year over year sales growth of the
pricier beverages has flattened.
"McDonald's makes a lot of its money on fries and beverages," Penney says. "So
selling beverages is good but it makes operations more complex. It takes more to make a
latte than to pour a Coke. To continue peak service time you have to add labor."
Return on investment:
Some franchises worry that their investments will not pay off, according to
an October McDonald's franchisee survey by Janney Montgomery analyst Mark
Kalinowski, who maintains a buy rating on the stock. A poll of franchisees shows some
concern that corporate demands to redo stores and sell more coffee cost too much and
might not pay off in the end.
One franchisee writes: "Very concerned about reinvestment issues and whether the
Corporation is paying a fair share of McCafe, upgraded technology platforms ..."
According to the Wall Street Journal, the McCafe machines cost $100,000 to install, with
McDonald's covering just $30,000 of that.
The criticism might appear typical for any large corporation with a significant
franchise business, but if the concerns by some franchise owners begin to snowball,
McDonald's could face a problem that no amount of caffeine can fix.
Analysis of McDonalds
In this part of this research paper we would analyze the McDonalds by
utilizing the strategic management matrix tools. For example, we would explore the
SWOT Analysis, External Factor Matrix Analysis, Competitive Profile Matrix Analysis
and finally the Internal Factor Matrix Analysis to analyze the strategic position of
McDonalds in the industry.
Our objective here is to utilize the strategic management tools mentioned in the course
books and in the research material reviewed during the class secession to come up with
valuable conclusion that would add value to McDonalds.
However before we proceed to strategic analysis, we would critically view the core issues
of McDonalds. This step would help us to better understand the development and
implementation of strategies in this organization.
SWOT Analysis of McDonalds
According to the Company Capability Profile (Appendix I,J) McDonalds greatest
strength can be found in competitively taking advantage of market growth. McDonalds
has had one of the strongest international presences among fast food
competitors. McDonalds has successfully integrated local eating trends and traditions
worldwide by varying local menus in different regions of the world. Although all fast
food chains have experienced consistent expansion overseas, McDonalds has had the
strongest presence since the beginning. As the domestic market began experiencing
over-saturation, more than half of McDonalds locations were located throughout the
world. This increased McDonalds competitive edge over other fast food chains with
industry predictions stating that international countries may be the only source of growth
for the fast food industry in future years. This market growth attributes to another
competitive strength found in McDonalds which is market share. Although McDonalds
market share has been somewhat declining in recent years, the company announced
system wide sales of $20,305.7 million in 2003. Among the largest chains in the
restaurant industry Burger King ranked number two with only $8,350.0 million in sales
demonstrating the significant sales differential among McDonalds and their competitors.
Although managerial factor scores indicate a weak managerial functional area relative to
the industry, CEO Jim Cantalupo can be characterized as a balanced leader. Cantalupo is
largely credited for his Plan to Win turnaround strategy which helped McDonalds
achieve, double-digit percentage sales gains As a result of Cantalupos success much of
the negative managerial blame can be placed on management initiatives taken prior to his
post-retirement tenure.

Prior to the return of Cantalupo, Jack Greenberg served as CEO. Much of
McDonalds poor performance in 2002 can be attributed to Greenburgs strategic
direction. Although he had many ideas that focused on improving customer service
rankings many business analysts criticize Greenberg in that he launched too many
initiatives simultaneously and had failed to properly implement any of them (Marino
630). Such traits indicate that Greenberg can be described as a Novice leader (Appendix
K). McDonalds focused too heavily on increased expansion and diversification to new
food segments within the industry. This weakened McDonalds while draining them of
financial resources. Product innovations developed included the, Made for You,
cooking system costing the corporation $420 million, while franchisees were forced to
invest between $18,000 and $100,000 in kitchen upgrades. Such a financial investment
led to additional problems between McDonalds and their franchisees, a relationship that
was on shaky grounds to begin with. These unsuccessful initiatives put McDonalds at
an extreme disadvantage to their competitors; many of who gained competitive advantage
while McDonalds remained slow to respond to changing market conditions. This lack of
proper strategic planning implemented during Greenbergs tenure has resulted in the
lowest performance ranking in the fast food industry based on such factors as poor
customer service, extremely high employee turnover, and slow order processing
time. Such factors hindered McDonalds and forced them to play catch up in an already
overly saturated market. Such poor rankings can ultimately jeopardize the firms new
strategy of market differentiation in the future by forever casting a negative light on the
Utilizing an environmental threat and opportunity profile (ETOP); demonstrates
that McDonalds has the greatest chance of opportunity concerning geographic and
technological environmental forces (Appendix L). Industry predictions indicate that
much of the future growth present in the fast food industry will come from overseas
expansion. Success will come first to those companies who are able to market
themselves successfully within international geographic environments. This opportunity
successfully aligns with McDonalds current competitive strength with regards to
international market growth.
In this mature industry market differentiation can be enhanced through quality
improvements and innovations. The ETOP profile indicates that technological
advancements can bring such success to McDonalds. By providing wireless internet
services in restaurants across the globe McDonalds is adding value to the desired
customer experience they are attempting to elicit.
Overwhelmingly social forces are the largest threat to McDonalds. Consumer
preferences are now geared more towards healthier food alternatives and McDonalds has
traditionally had a negative image in regards to providing health benefits to
consumers. Although McDonalds is attempting to overcome such an environmental
threat, they are an easy target for negative publicity. McDonalds has been the industry
leader for decades so naturally they become the first targeted. The many competitors
now present in the industry often serve as an environment threat to the fast food
chain. Major fast food restaurants such as Burger King and Wendys have been more
successful than McDonalds in addressing current consumer health trends. Wendys has
successfully adapted to this change in lifestyle with the introduction of their gourmet
salad line. Typically 30% of those consumers visiting Wendys do so specifically for the
purpose of purchasing salads from theirGarden Sensations salad line (Marino
632). Although McDonalds is now offering more products to such health conscious
consumers, new sandwich chains such as Subway will serve as an alternative to the
typical greasy fast food hamburger chains. As a result McDonalds must also take such
competitors seriously.

PESTEL Analysis of McDonalds
Pest is an analysis of the external macro and micro environment in which a business
operates. Pest stands for political, economical, social, technological, environmental and
legal factors.

The international operations of McDonalds are highly influenced by the individual
countrys policies enforced by each government. For instance, there are certain groups in
India, Europe and the United States that clam our for state actions pertaining to the health
implications of eating fast food. They have indicated that harmful elements like
cholesterol and adverse effects like obesity are attributable to consuming fast food
products. On the other hand, the company is controlled by the individual policies and
regulations of operations. Specific markets focus on different areas of concern such as
that of health, worker protection, and environment. All these elements are seen in the
government control of the licensing of the restaurants in the respective states of the
country. For instance, there is an impending legal dispute in the McDonalds franchise in
India where certain infringement of rights and violation of religious laws pertaining to the
contents of the food. The existence of meat in their menus in India is apparently offensive
to the Hindu religion in the said market. There are also other studies those points to the
infringement of McDonalds Stores with reference to the existing employment laws in the
target market. Like any business venture, these McDonalds stores have to contend with
the issues of employment procedures as well as their tax obligations so as to succeed in
the foreign market like India. Since it is apparent that the company is expanding
continuously, it is wise to deal directlywith the proper authorities in the respective
markets that they intend to operate in. This way,the company can adopt a good way of
establishing good relationship with the government. Itis advisable that the company rests
on the good graces of the government on which they willbe penetrating. To do this, all
they have to do is accomplish all the prescribed acts and satisfyall the prerequisites for
doing business. The company must also be acquainted with the law inorder to know what
their responsibilities and their possible liabilities. Also McDonaldsshould protect its
workers by ensuring all the hiring, compensation, training or repatriation inaccordance to
the Indian labour laws.
As a business entity, McDonalds need to face a lot of economic variables outside
its company or its macro environment. Dealing with international sourcing for its
material McDonalds should be aware on the global supply and currencies exchange.
Remember, McDonalds import most of its raw material such as beef and potatoes due to
local market cannot supply in abundant to meet the demand of its product. Any upside of
currencies especially dollar will be impacting its cost of purchase.
Working on the local country, McDonalds must face government regulations on
tax of profit where it gains from the operation and other tax such as entertainment and
restaurant service tax. Each country may have different scale or types of tax available and
McDonalds should follow the regulation if it wants to continue the operation. As a
franchise, McDonalds should also pay certain percentage of the revenue to the parent
company in United States. The economic condition and growth of the country also is an
important indicator to the demand of products that McDonalds offered. As the
food priced slightly above normal foods, not many people will have the income range to
consume the products. Moreover if the economy is bad and income percapita is affected,
the demand of McDonalds product will certainly going down. On the other hand the good
economy also means disposable income is more and people can spend more on
more expensive food at fast food restaurant.
The changing lifestyles of Malaysia due to development of Malaysian economy
should be also taking into consideration. While more people are able financially to eat at
more expensive outlet such as fast food restaurant, they have higher expectation. They
want to have quality in services and more conveniences that can differentiate one
restaurant from another. Young urban consumers want technology in their life and
facilities such as credit card payment, wireless internet, cozy and relaxing ambient place,
and other attraction for their hangout and eating. All these needs should also be taken into
consideration. There is not much difference between cultural and the purchase of
products in a single country but for different countries cultural sensitivity should be
upheld. For example in India people (Hindu) do not take beef, Muslim countries do not
take pork, German like beers, Finnish like fish type of food menu, Chinese like to
associate food with something good (for example prosperity), Asian like rice and
Americans eat in big-sized menu. So far McDonalds has shown good efforts in
localization of its menu to suit local taste but it should constantly survey and learn about
local culture to better understand and design the best product for them.
For a fast food restaurant, technology does not give a very high impact on the
company and it is not a significant macro environment variables. However McDonalds
should be looking to competitors innovation and improve itself in term of integrating
technology in managing its operation. For example in inventory system, supply chain
management system to manage its supply, easy payment and ordering systems for its
customers and wireless internet technology. Implementation of technology can make the
management more effective and cost saving in the long term. This will also make
customer happy if cost savings results in price reduction or promotional campaign
discount which will benefits them from time to time.
As one of world largest consumer of beef, potatoes and chicken, McDonalds
always had been critics for world environmentalist. This is because high consumption of
beef causing the green house effect by methane gasses coming from the cows
ranch. Large scale plantation has effect the environment and lost of green forest opening
for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for
cruelty to animals and slaughtering. In Japan, once McDonalds want to introduce whale
burger causing uproar because whales are endangered species. Before using paper
packaging, once McDonalds also had been criticized for being insensitive to pollution
because using polystyrene based packaging for its foods. Imagine millions of people
purchase from fast food operator and how is the impact to world environment by
throwing away those hard to recycle packaging. Our world is getting concern on
environment issue and business operating here should not just care for profit, but careful
usage of world resources for sustainable development and care for environment safety
and health for our future generation. Critics and concern from all public or activist should
be review and support if necessary to ensure we play our social responsibility better.
As a certified fast food operator, there are many regulations and procedures that
McDonalds should follow. For example is the Halal certification that becomes a concern
to Muslim consumers. McDonalds should protect its integrity and consumer confidence
by ensuring all materials and process are as claimed or must followed.
Other legal requirement that the business owner should follow as stipulated in
laws are such as operating hours, business registration, tax requirement, labor and
employment laws and quality & environment certification (such as ISO) in which the
outlet has been certified. The legal requirement is important because the offenders will be
fined or have their business prohibited from operating which can be disastrous.
Porters five force analysis
A business has to understand the dynamics of its industries and markets in order to
compete effectively and intensively in the marketplace. The forces which derive
competition and attractiveness of a market, contending that the competitive environment
is created by the interaction of these five different forces acting on a business. In addition
to rivalry among existing firms and the threat of new entrants into the market, there are
also the forces of supplier power, the power of buyers, and the threat of
substitute products or services (The Figure1 Porters Five Forces Framework). Michael
E. Porter suggested that the intensity of competition is determined by the relative
strengths of these forces.

The Five Forces directly are interconnected with the effect on the companys ability to
serve its customers and to make a profit. A change in any of these forces generally
requires a company to re-assess its competitive strategies.
Competitive rivalry
According to Porters Five Forces Model, if entry into a market is easy then rivalry is
likely to be high. Considering McDonalds competitive rivalry, there is intense
competition in fast food industry that many small fast food businesses fight with each
other to improve their customer base. This makes a competition the major focus between
businesses. Although, McDonalds, with more than 32,000 local restaurants serving more
than 60 million people in 117 countries each day, has a number of fast food outlet
competitors across the countries such as Burger King, Taco Bell, KFC, Wendys, it is
currently the leader of the industry in market capitalization with a cap of $39.31 billion.
The Threat of new entrants
The threat of new entrants in the fast food industry is high because there are no legal
barriers which would keep them from entering the industry. The economies of scale and
the access of the distribution are the major barriers that firms face in the industry. Firms
must spend a large amount of capital on advertising and marketing in order to enjoy
successful existence and long life of a fast food outlet. Large established companies with
strong brand names such as McDonalds make it more difficult to enter the market
because new entrants are faced with price competition from existing chain
restaurants. Thus, it takes a pretty much time for a new business to establish in the fast
food industry.
Supplier bargaining power
The bargaining power of suppliers of McDonalds is high because McDonalds
restaurants use the same products from the same suppliers and it doesnt matter if you are
in Rochester, MN or Beijing, China you can get the same Big Mac everywhere. This is a
feature McDonalds want to keep going on by encouraging consistency among its
restaurants. Supplying these products to McDonalds across the globe is the whole
business for the suppliers and, however, if McDonalds would lose even one supplier it
would have to change one or more of its product lines and perhaps the whole menu what
the McDonalds customers were used to. This gives the suppliers of McDonalds a high
bargaining power.
Buyer bargaining power
Buyers, in the fast food industry, are those who is ordering fast food at the local
restaurant, over the telephone, or internet or just paying or consuming the
. Bargaining power of customers of McDonalds is low because of low
customer switching costs which are nearly zero; however, for example, one-fifth of the
USA population eats in a fast food restaurant every day. Thus, fast food industry does not
worry about customers loyalty. Fast food products industry is differentiated which are
usually or almost always promoted by advertising that is because of a vast competition
between fast food firms. Product differentiation is very important in fast food industry to
make your product stand out against the crowded fast food industry products.
Furthermore, quality of the product or service in the fast food industry is very important
as customers have full information of the products they buy and consume.
Furthermore, if the fast food industry does not match the demands of the buyers and the
general consumer trends, then the buyers can choose not to buy their product and
convince others to do the same. A good example of this is the movie Super Size Me. It
is a movie showing an ordinary consumer trying to live of McDonalds fast food, and the
purpose of the movie was to see what the traditional fast food from McDonalds could do
to your health if you were to eat their products for every meal. This movie shows what
the buyers possible reactions could be if not satisfied or not being pleased. The reactions
from the whole market were a large change in consumer preferences and brand
The threat of substitutes
Several factors determine if there is a threat of substitute products in an industry. First, if
the consumers switching costs are low, which means that there is little of anything
stopping the consumer from purchasing the substitute instead of the industrys product,
then the threat of substitute products is high. Second, if the substitute product is cheaper
than the industrys product there is a high risk of threat of substitutes. Third, if the
substitute product is having equal or superior quality, functions, attributes, or
performance compared to the industrys product, the threat of substitutes as well is high.
With so many firms in the fast food industry with low switching costs, vide variety of
similar products that people can chose, and healthier alternatives, the threat of substitutes
is very high.
As there is intense competition between rival sellers in the fast food industry, the
competition between firms selling substitute products is intense as well. One very
important issue is that the customer always tends to find another product comparable or
better in terms of the quality of fast food products. Another thing is that fast food industry
is unhealthy to its customers health. The majority of the public think that fast food
restaurants primarily serve high in fat content foods which are unhealthy and as a
consequence they tend to look elsewhere for healthier alternatives. While fast food
products are not always associated with health and quality, fast food restaurants keeps a
major advantage over other firms selling substitute products through the lower prices of
their products and a quick, convenient service.

Competitor analysis of McDonalds:
Pizza Hut is a global fast food chain, a subsidiary of Yum! Brands Inc. , the
worldslargest restaurant company.
Strategic Objectives:When we talk about strategic objectives, Pizza hut says: We want
to satisfy our customers by offering them The best. Diversification of the products that
they offer hasalways been a focal point of strategies at Pizza Hut. The strategies at Pizza
hut areguided by principles like Cleanliness, Hospitality, Accuracy, Maintenance,
Productquality and Speed (CHAMPS). Since its a global chain, the strategies are
baPIZZA HUTsed uponcustomizing the services, advertising and marketing activities
according to the countriesthat they are operating in. Customer service and satisfPIZZA
HUTaction have of course alwaysbeen a vital aspect of the strategies. Another important
feature of the Pizza Hutsstrategies are the 3 Fs (Fun, Friendly and Familiar)

Problems and Weaknesses:At one time, the biggest marketing problem Pizza Hut
facedwas lunch. As compared to McDonalds, its restaurants hadvirtually no lunch time
sales, and neither did any of its pizzacompetitors. The reason, of course, is that it takes
20minutes to cook a pizza from scratch in a traditional pizzaoven, and most people wont
spend that long at lunch time waiting to be served. Byusing a new, continuous-broiling
technology adapted from burger business, Pizza Hutdeveloped a personal pan pizza that
could be served in less than 5 minutes. It wasquick, tasty and moderately priced. And
Pizza hut rolled it out to all 4500 storesworldwide and locked up the pizza-lunch business
almost everywhere, almostovernight. One of the weaknesses of Pizza hut that it hasnt
overcome yet is its price. Localchains are constantly springing up, offering lower prices
and similar recipes.
Competitive Advantages:
Pizza Hut has the first mover advantage in the pizza chains because of which it
hasdeveloped a strong customer base which is one of its strengths.In the Pakistani QSRs
industry, the delivery service of Pizza hut is clearly a competitiveadvantage that it enjoys.
Pizza huts delivery service is one of quickest and the pizzasdelivered are oven hot in the
real sense of the world.Pizza Hut is often referred to as Pizza Innovation Leader
because it is constantlycoming up with new varieties of pizzas to appeal the different
audiences and at thesame time, people at the pizza hut have a really good idea about
which varieties areappealing to the customers and they are thus retained in the menusThe
first mover advantage is an advantage that Pizza hut was born with but time, Pizzahut has
been successfully creating competitive advantages like a traditionally strongbrand name
for itself and the quality service that it provides.
KFC, founded and also known as Kentucky Fried Chicken, is a chain of fast food
restaurants based in Louisville, Kentucky. KFC is a brand and operating segment called a
KFC has the strategic objectives of expansion along with profits and sales growth. KFC
has also been applying its strategies at improving services and making them more and
more customer friendly. It has not only been customizing it's menu according to the
countries that it has been operating in, it has also been trying to cater to different ethnic
groups like African Americans and Hispanics. Such types of strategies are focused on
increasing the customer base by better customization of products. Other than the
traditional eat-in restaurants, KFC has also been expanding into non-traditional facilities
like shopping malls, hospitals, universities, stadiums; office buildings etc and a
number of strategies have been formulated to aid this kind of expansion.
Problems and 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 greatdisadvantage because
of the word 'fried' attached to it's brand name which givesan instant idea that the food
would be oily and unhealthy. Because of the nature of the chicken segment of the fast
food industry,innovation was never a primary strategy for KFC. HoweveSubway is a
restaurant franchise that primarily sells submarine sandwiches and salads.
Competitive analysis
A very strong financial background is one of KFCs competitive advantages.
KFC has been functioning as a multinational corporation for several decades. Asa result,
the company is familiar with the logistical and quality problems whichaccompany
operating an international food operation, and has demonstrated thatit can work with host
countries and businesses within the host country to developa 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.

BCG matrix of McDonalds
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to
portray firms brand portfolio or SBUs on a quadrant along relative market share axis
(horizontal axis) and speed of market growth (vertical axis) axis

External factor evaluation of McDonalds

Internal factor evaluation of McDonalds

What started as a simple food stand on Huntington drive, Californiain 1937,
through the ages have become a billion Dollar corporationand the worlds second largest
fast -food chain. When analysed, onewould understand that McDonalds had a stable
growth in the pastyears.The credits of building it into one of worlds la rgest fast
foodoperation can be given to Ray Kroc who took over McDonaldsfrom its establishers,
modernised and expanded it to suit thecontemporary trend. Today McDonalds has a net
worth of $15.15billion.Through this project report and market survey we saw the
howMcDonalds was formed, its history and the present position. Wealso its list of
various products offered and the corporate profile.Through the marketing mix, we saw
how they make use of theirproduct, price, place, promotion mixes. SWOT a nalysis
showed usthe strengths and weakness of McDonalds as well as theopportunities and
threats they have got.The consolidated financial statement showed us the
financialposition of the corporation as of 2011. The questionnaire surveyprovided us with
a clear picture of the needs, want and expectationsof the consumers of the fast food
market in general and McDonaldsin particular. The respondents also rated the services
provided bythe corporation. At last we also saw the top five reasons that
makeMcDonalds so popular.I gladly hope that this project has met its aim.Let me
conclude by quoting this quote by Ray Kroc"Perfection is very difficult to achieve, and
perfection was what Iwanted in McDonalds. Everything else was secondary for me."