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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

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Dated: 19th December, 2009

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 2

Vision...................................................................................................................14 Ethical -................................................................................................................14 Environmental -...................................................................................................14 Economic -...........................................................................................................14 Market Analysis...................................................................................................15 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

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Time.....................................................................................................................30 Skills....................................................................................................................31 Objectives............................................................................................................31 Mission & Vision statement of McDonald’s..........................................................31 McDonald's mission statement............................................................................31 McDonald’s Vision statement..............................................................................31 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

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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 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

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Scenarios.............................................................................................................59 Economic Slowdown:...........................................................................................59 Health Conscious attitude of People:...................................................................60 Increased Competition:........................................................................................61 REFERENCES........................................................................................................62 People have been interviewed.............................................................................63

People have been interviewed

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

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Current Situation – Internal
Company resources
    Financial People Time Skills

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

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

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MCDONALD’S VALUES TOP MGT OFFICERS Meeting the needs of key audiences Scenarios
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Economic Slowdown Health Conscious attitude of People Increased Competition

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 1

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

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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."

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Introduced in 1973, the Egg McMuffin was developed by owner operator Herb Peterson. 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 nontraditional 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 Economic -

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. 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

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                       

Bahamas 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

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                       

El Salvador

Estonia Fiji Finland

France

Georgia Germany

Greece Gibraltar

Guatemala Guyana Honduras

Hong Kong Hungary

Italy

India

Indonesia

Iraq Ireland

Israel

Japan Jordan Kuwait Latvia

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            

Lebanon Liechtenstein Lithuania Luxembourg

Macau Macedonia Malaysia

Malta

Mauritius Mexico Moldova

Morocco

Netherlands

          
New Zealand Nicaragua

Aruba

Norway Oman

Pakistan

Panama

Peru Paraguay Philippines

Poland

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                       

Portugal 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

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United States

       
Uruguay

American Samoa

Puerto Rico Guam

United States Virgin Islands

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% 70% 60% 50% 40% 30% 2 0% 1 0% 0%

71 % 59 % 52 %

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).

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

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.
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Market share

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

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
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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. • 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.

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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 nontraditional 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
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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.
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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.

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Activities 1 “Fast” food Student, working; Adventurou s, Energetic. Student, working/sel f-made businessme n; working on projects.

Interests Sports, Entertainme nt, Fashion, Music, Recreation. Entertainme nt, Recreation, Fashion, Music, Socializatio n.

Opinions Influenced by peer pressure, Energetic, Impulse buying. Ambitious, Future business and social issues, Politics.

Demographi cs Age: 16-24 years old. Marital status: Single; Heavy users Age: 20-35 yrs old. Marital status: Single and Married. Light to medium users. Age: 16-25 yrs old. Marital status: Single; light to medium users Age: 25-45 yrs old; Marital status: Newly married, Full Nest; Light users

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Ambien ce

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Status Symbol

Student, working; Hanging out, Adventurou s. Working women/me n, housewives; Shopping, Club membershi ps.

Sports, Entertainme nt, Fashion, Music, Recreation.

Energetic, Impulse buying, influenced by peer pressure Planned purchasing, Authoritari an, Strong views, Politics, Future business and social issues.

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Hygiene

Home, Recreation, shopping, Fashion,

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“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 first-choice. These people are authoritarian, have strong views about politics, business

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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 A Family with children

What is McDonald’s for me? A treat to children, a fun place to be for the children.

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

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Fiscal Year End: Revenue (2008): Revenue Growth (1 yr): Employees (2008): Employee Growth (1 yr):

December 23522.40 M 3.20% 400,000 2.60%

Financial

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.
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 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. 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
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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.  To provide its customers with food of a high standard, quick service and value for money

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.

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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
    

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:

roducts:

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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.

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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. 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.

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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.

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.

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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.

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
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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.

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.

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 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.  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

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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.

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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?

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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:

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.

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Products which McDonalds is offering Burgers

Fries

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Large meals

3

Drinks

Shakes

1

Hot drinks

Medium meals

1

Happy meals

Desert

1

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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
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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.

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.

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

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.

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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

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)

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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

Balance Sheet
Assets Dec 08 Dec 07 Dec 06

Current Assets

Cash

2,063.4

1,981.3

2,136.4

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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

Total Liabilities

15,078.9

14,111.9

13,565.5

Shareholder's Equity

Preferred Stock Equity

--

0.0

0.0

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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.

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.

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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

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Mary Dillon
Executive Vice President and Global Chief Marketing Officer

Tim Fenton
President of Asia, Pacific, Middle East and Africa

3

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

Richard Floersch
Executive Vice President and Chief Human Resources Officer

4

Denis Hennequin
President of McDonald's Europe

Jim Johannesen
President, Central Division for McDonald’s USA

Karen King
East Division President - McDonald's USA

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Steve Plotkin
President, West Division for McDonald’s USA

Gloria Santona
Executive Vice President, General Counsel and Secretary

Jeff Stratton
Executive Vice President and Worldwide Chief Restaurant Officer

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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:

Don Thompson
President of McDonald’s USA

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
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changes. There are different types of scenarios that are used for specific situations and 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.

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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 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
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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 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
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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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