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Title: Mc Donald's Corporation- 2007

A Case Analysis presented to the faculty of the graduate school, PWU

In partial fulfillment for the course Strategic Management


Submitted by: Joan L. Fortuna
Date of Submission: December 6, 2014

I. TITLE: Mc Donald's Corporation, Fast food Chain

II. EXECUTIVE SUMMARY:

Mc Donald's "Play to Win" was initiated in 2003, part of the implementation were some
of the restaurant in Latin America and the Caribbean were being sold to a licensee, Woods
Staton, CEO of RestCO Iberoamericana, Limited. Mc Donald's continuous to maintain its long
term goal of achieving average annual company sales and revenue growth. The Latin American
division was recognized as the "Best company to work for in Latin America" MCD's Latin
American divestiture is intended to support the company's commitment to reduce the number of
restaurants its own and minimize the volatility caused by the wild swings in the value of
currencies. this problem make the investors , chief financial officer more nervous. Wood Staton
engaged into a 20-year master franchise agreement to pay monthly royalties to MCD.
Furthermore, under the agreement the franchisees are obligated to commit to capital expenditures
every year for existing restaurants. MCD collects royalties without investing capital.
As for the competitors, it ranges from the small privately owned eateries to multinational
retailers of food products, but its key competitors include Burger King, Yum brands and Wendys.
Regarding to their financial performance, MCD boasted of continued revenue growth, increase
customer visits and enhanced profitability.
On the contrary, MCD faces legal challenges from activist, consumers, labor unions,
medical and religious groups around the world. Legal issues such as underpaying student
employees in China. Another challenge when California medical doctors' group sued the
company and six other restaurant chains for the presence of carcinogens in the chicken menu
items served. MCD was thrown into the center of controversy with many issues worldwide.
CEO Skinner believes that "Plan to Win Strategy" will continue to deliver results for
customers, members of the Mc Donalds system and shareholder.

III. VIEWPOINT
Units that should implements strategies are the following; Primary implementing unit;
Research and Development and Marketing Department. Secondary; HR Dept., Accounting
IV. TIME CONTEXT: April, 2007
V. STATEMENT OF THE PROBLEM:
What strategy can be formulated to prevent external forces from affecting the value of the
local currencies?
VI. OBJECTIVES
The case study attempts to formulate strategies that would address to the volatility of
wild swings in the value of local currencies.
Problem occurred when there is a currency fluctuation that moves and have a wideranging impact not just on a domestic economy, but also on the global. Based from the website
of Investopedia; Currency fluctuations are a natural outcome of the floating exchange rate
system that is the norm for most major economies. The exchange rate of one currency versus the
other is influenced by numerous fundamental and technical factors. These include relative supply
and demand of the two currencies, economic performance, outlook for inflation, interest rate
differentials, capital flows, technical support and resistance levels, and so on. As these factors are
generally in a state of perpetual flux, currency values fluctuate from one moment to the next. But
although a currencys level is largely supposed to be determined by the underlying economy, the
tables are often turned, as huge movements in a currency can dictate the economys fortunes.
Researcher may find solution of diversifying strategy, widening the product line and
market.

VII. AREAS OF CONSIDERATION (SWOT)


A. INTERNAL FORCES
1. MANAGEMENT
High standards of food and service
Strong leadership
2. HUMAN RESOURCE MANAGMENT
Provide excellent training and development
Such as Internship, leadership development,
global mobility to enhance the development of
leaders. Hamburger University has also
emphasized consistent restaurant operations
procedures, service, quality and cleanliness. It has
become the companys global center of excellence
for McDonalds operations training and leadership
development.

- Mc Donalds established the first restaurant


company to develop a global training center

3. MARKETING MANAGEMENT
a) Price
Competitive pricing
b) Promotion
Effective promotional tools
c) Product
High quality products
d) Place - Strategically located and Franchise as
their Channel of Distribution
McDonald's continues to be recognized as a premier
franchising company around the world. More than
80% of our restaurants worldwide are owned and
operated by our Franchisees.

e) People
Satisfied employees
Mc Donald's believed that people are the most
important assets of their business, they provide
rewarding opportunities for their employees
f) Physical evidence
g) Process
Fast delivery of service

STRENGTH

WEAKNESSES

4. FINANCIAL MANAGEMENT
Mc Donald operating and net incomes showed
a steady increase.
5. RESEARCH AND DEVELOPMENT
Mc Donalds has extensive approach to research
and development
This involves understanding external factors such as
changing customer needs, macro trends and the
competitive landscape. In addition they ensure
theylearn from inside the business by understanding
what developments or launches have been successful
elsewhere in the world and why. Throughout the
research and development process they partner with
key suppliers, engage consumers and seek input from
franchisees. This is fundamental to the McDonald's
business model and ensures we achieve the right
balance across our product and service offering.

B. EXTERNAL FORCES
OPPORTUNITIES
1. POLITICAL
Governmental stability
2. ECONOMIC
Volatility caused by the wild swings in the
value of local currencies/ fluctuations of
currencies
3. SOCIAL
Commercial market is very active
Continuous growth of restaurant industry
Legal factors
4. TECHNOLOGICAL
Continuous growth of technology
infrastructure, popularity of social media
network
5. COMPETITIVE FORCES
Increasing competitor

THREATS

VIII. ALTERNATIVE COURSE OF ACTION


ACA # 1:Build a new product; product extension
Advantages:
1) New product line help limit losses and capture gains during financial crisis.
2) New product will strives to smooth out unsystematic risk or problems so that the positive performance
of some investments will neutralize the negative performance of others
3) It will increase improve profitability and flexibility of the company

Disadvantages:
1) Risky as the business has no experience in the new market and does not know if the product is going
to be successful.
2) It can be very expensive whereas product development usually requires a company to acquire new
skills, new techniques and new facilities.
3) Risk of product failure

ACA # 2 Intensive marketing for the investor to franchise Mc Donald's


Advantages:
1) Less risky compare to the other 2 ACA's
2) Less expensive
3) This can support the company's commitment to reduce the number of restaurant of its own,
and increase the number of franchisee
Disadvantages:
1) Marketing a business will require an investment of time
2) It will require a research.

ACA #3 Market development by offering wide variety of menu that will target new market
like senior citizens and health conscious consumers
Advantages:
1) Sales and profits will grow.
2) Minimize the volatility caused by the wild swings in the value of local currencies

Disadvantages:
1) It will require intensive research of new potential markets, new product line and consumer
behavior towards the needs of the markets.
2) Added expenses for marketing tools to promote new product in the new markets.
3) Conducting a market research can be costly

IX. DECISION MATRIX


CRITERIA
1. Cost Requirement
2. Time Requirement
3. Ease of implementation
4. Uncertainty
5. Complexity
6. High risk consequence
TOTAL
Likert Scale:

ACA # 1
2
3
2
3
3
2
15

ACA #2
5
4
3
4
3
3
22

5- cheapest

2- less expensive

4- less cheap

1- expensive

3- moderate

ACA #3
2
3
2
3
3
2
15

X. RECOMMENDATION:
In view of the results of the SWOT analysis, it reveals that most of the marketing mix are
their strength, Mc Donald's master the art of marketing their product. They also aims to
continually build its brand by listening to its customers.
On the contrary, changes in the external environmental present threats to Mc Donald's
specifically the volatility caused by the wild swings in the value of local currencies. Additionally,
economic, legal and technological changes, social factors, the retail environment and many other
elements affect McDonalds success in the market.
Three ACA's were presented, ACA #1 and ACA# 3 are both practice of spreading money
among different investments to reduce risk, these 2 ACA are also known as diversification by
picking up the right group of investments, these may also limit losses and reduces the
fluctuations of investments without sacrificing too much potential gain. However, it appeared in
the decision matrix that these 2 ACAs are both risky and will require a big amount of money to
implement these two strategies.
Based on the decision matrix, ACA#2 Intensive Marketing strategy that will invite
investors to franchise Mc Donald's shows the most number of points. Less risk, less cost, ease of
implementation and at the same it stick to the company's commitment; to reduce restaurant on its
own and increase the number of franchisee.
that address to the current problem.

This strategy would be the best possible strategy