Presentation on McDonald·s

Submitted By: Neha Baghel Pavleen Batra Sarika Taneja
Team 11

Reasons for McDonald's expansion globally Why Vietnam is particularly attractive for investment & business? What would it take, in terms of cost, preparation & effort, to set up a franchise? If they had an option, would they choose any country for this purpose(which one & why)? If there are exciting worldwide opportunities, why does Mc Donald s not exploit these itself instead of looking for franchises?

Prices were kept low. the franchising system failed.000. Speed. service and cleanliness became the critical success factors of the business. However. By mid-1950s.' The brothers used assembly line procedures in their kitchen for mass production. As word of their success spread. which was generating $200. US in the year 1937. Richard and Maurice McDonald in California. the restaurant's revenues had .McDonald¶s History McDonald's was started as a drive-in restaurant by two brothers. reached $350. franchisees started showing interest. got a further boost with the emergence of a revolutionary concept called 'self-service. The business.000 per annum in the 1940s. .

. ‡He established a franchising company.7 million and changed the name of the company to McDonald's Corporation. and appointed franchisees. distributor for milkshake machines expressed interest in the business. the McDonald System Inc. Currently McDonald's operates in 121 countries & having more than 30000 restaurant and serving 53 Mn customers everyday . Ray Kroc (Kroc). and he finalized a deal with the McDonald brothers in 1954. he bought out the McDonald brothers' share for $2..McDonald¶s History ‡ At this point. McDonald's went public. ‡In 1961. In 1965.


Franchise System-The backbone of McDonald s Success Rationale SWOT Analysis Situation Analysis Problems Franchise System is the Backbone of McDonald·s Success Alternatives ‡Distinctive Competency Rec. 2 Q&A . I Franchises ‡Allow Quick Expansion ‡Uniform Operation ² Standardization ‡Same Food Experience Rec.

has made the McDonald s restaurants one of the most standardized in the world. the franchise system. In other words. Not only does the business model allow the company to expand quickly both domestically and internationally. having uniform operations.000 franchise restaurants serving 52 million people in more than 100 countries. they intend to offer the same food experience for all of its customers no matter what part of the world you are in. Today. more than 70 percent are owned by independent operator franchisees. . Of those stores. one of the many reasons that McDonald s has been able to expand so quickly and achieve its reputation/brand recognition has been its effective franchising business model. with more than 30. McDonalds franchise network is the world s leading food service retailer.Franchise System is the Backbone of McDonald s Success The backbone of McDonald s success and most of other fast-food chains is its franchise. Not only do all McDonald s seek to offer the same product offerings.

Supply chains.Reasons for going international  Build more brand and shareholder value  Add revenue sources and growth markets  Reduce dependence on your home market  Leverage existing corporate technology . know-how and intellectual property  Award more franchises in the home country by being global .

Success Factors Mission statement New meal for kids Formulate a strategy Happy meal with toy Implement the strategy Toys were related to movie and characters. .

products. change the toy or continue Evaluate options: More popular or High cost Choose an option: Relate with movie Implement option: Star Trek Learn from feedback: mighty kid meals So.DECISION MAKING Recognize the need for decision: happy meals were unpopular Generate alternatives : End. price and promotion. It focuses on people. . an operationally focused "Plan to Win". place.


as opposed to loyalty to traditional products.Business Strategies McDonald s has pursued two strategies since 2003. Nevertheless. kept stores open longer and increased menu options. demographics and spending patterns. McDonald's has remodelled many restaurants. To keep up with rapidly changing consumer preferences. which allows them to compete through standardization while simultaneously adapting to local customs when deemed necessary and appropriate. and continues to grow its new restaurants at a 1%-2% rate each year. McDonald s successfully employs a unique type of corporate strategy. is the key determinant of sales in the fast food industry. McDonald s has also focused on increasing sales at existing restaurants instead of opening new ones. . The strategy reflects the philosophy that novelty. transnational strategy. new McDonald s restaurants are still opening around the world at a rapid rate. To do so. McDonald's has introduced new items (Premium Chicken sandwiches and the Angus Beef Burger) and campaigns to create more healthy foods (Premium Salads).

McDonald's size has three key advantages:  Uniform menu offerings can be mass produced. .  Large advertising budget means lots of domestic and international exposure.  Bargaining power with suppliers lowers input costs and boosts margins. lowering production costs.

if the issue of antibiotic residue is settled. Beef is not widely raised in Vietnam. or of particularly good quality. the world's leading fast food producer. grazing land and meat processing. . including breeding stock. and the lack of locally produced ingredients. Vietnamese catfish could serve as input materials for McDonald's. feed.Reasons for not entering in Vietnam Under Vietnamese law. An anti-Western political backlash in Vietnam that began in 1996 or when the Asian financial crisis hit in 1997-98. and McDonalds would have to invest in a cattle-raising industry from scratch. according to the head of Vietnam's organisation for basa catfish processors. franchising agreements involving licensing and royalty payments or training and consulting services are regarded as technology transfer and require statutory approval. McDonald s is not in Vietnam now because it has not found a suitable partner for franchising and low level of development of supply-chain infrastructure.

such a restaurant must have revenue of over VND20 million ($1.250) per day to have profit.000 for KFC restaurant. around $500.and medium-size enterprises of Vietnam.000 for one of Pizza Hut. According to the expert. The total investment would be very large for most small.Cost of setting up a franchise An expert in franchising analyses that investment in each restaurant of McDonald s is not less than $1 million. the biggest challenge is management and quality control to meet the standards of the parent firms. However. $300.000-400.000 for a Lotteria and around $200. .

Steps for setting up a franchise Find a franchiser Consider the requirements and fill out an application Fill out an application and wait for the company's acceptance. Sign your agreement .

Why McDonald s went for franchising Lower Failure Rate Help with Start Up and Beyond Buying Power Star Power Profits .

. Approximately $175.McDonald s criteria for Franchising A strong and successful background with an emphasis on interpersonal skills and financial management. A willingness to complete a comprehensive training program and become proficient in all aspects of operating a McDonald's restaurant business.000 of non-borrowed personal resources. High personal integrity An entrepreneurial spirit and strong desire to succeed A proven ability to motivate and train people The ability to manage financial resources.

Facts About McDonald s Franchise .

Turkish Ethnicity/race: Albanians 88%. Serbian. other 5% Religion: Muslim.Overview of Kosovo Location: South eastern Europe (bordering Montenegro.1 million National name: Republic of Kosovo Languages: Albanian. Serbian Dinar (RSD) is also in circulation . Serbian Orthodox.) President: Fatmir Sejdiu (2006) Prime minister: Hashim Thaçi (2007) Monetary unit: euro (EUR). Roman Catholic Economic summary: GDP/PPP $4 billion (2007 est. Bosniak. Macedonia and Serbia) Capital: Pristina Area: 10.908 km2 Population: 2. Albania. Serbs 7%.



which are highly appreciated by foreign investors. Ongoing infrastructure projects include modern highway connections to Albania. By the end of 2009 the driving distance to the Albanian Port of Durres will be reduced to 3 hrs. Pristina is 1hr driving distance to any neighbouring country.Reasons to invest in Kosovo Central location: Location. Familiar with English Through engaging in smaller workshops and private businesses during the 1990s and through vocational training programs established in the last 10 years. Young. Kosovars have gained skills. Serbia and Macedonia. Kosovo and Croatia sign free trade agreement. educated. Pristina International Airport offers air connections to main European capitals. multilingual and dynamic population youngest population in Europe. .in heart of the Balkans.

Wireless. EU-compatible legislation: Since 1999 Kosovo s legal system has been re-built and is now completely compatible with the EU legislation. Kosovo-Sweden sign development cooperation agreement: Toward European integration. has a installed the International Standards for Financial Reporting. stability and economic growth in Kosovo. Joined the International Monetary Fund and the World Bank in June. . including VOIP. Modern.Reasons Contd Modern Telecommunications: Offers modern telecom systems. and Cable. Kosovo s legislation offers national treatment for foreign investors.. GPRS. with lower prices than in any other European Country. offering the latest and most modern technologies.

. a better investment environment 3. 6 out of 8 banks in Kosovo are foreign-owned. improved export possibilities 2. Kosovo has received about 3 billion Euros in aid and is expecting to receive another billion Euros from international donors by 2011. Euro gave a considerable advantage over its competitors in the region by making it more attractive to foreign investment and by bringing financial and macroeconomic stability. Currency: Euro is the official currency eliminating the currency and exchange rate risk. namely 1. 19 other financial intermediaries. 27 financial auxiliaries and 10 insurance companies in Kosovo. which regulates and supervises the Kosovo financial market. There are 8 licensed banks. Free access to EU-market: US-market and CEFTA(Central European Free Trade Agreement) members. customs-free access to the EU market based on the EU Autonomous Trade Preference (ATP) Regime. 2 pension funds. The Central Bank of the Republic of Kosovo is an independent body.Sound banking system Kosovo s financial sector has been built on completely new foundations. stable relations with its neighbours. Kosovo derives 3 major benefits from the trade liberalisation. member of CEFTA & it also benefits from non-reciprocal. Since the end of a 1998-1999 conflict.

incurs less risk. w. although fluctuating. expects continuous growth in long run. alternative source of food then it can gain a significant portion of the market. because food and drinks is a necessity and if the company can offer an affordable.t to other industries.there are relatively less multinational restaurants in Eastern Europe giving the establishment of McDonalds in the region a competitive edge in terms of consumer share and market leadership 5. .r. in Eastern European countries due to development and opening of investment opportunities drawing the continuing F. management and marketing expertise to local entrepreneurs enabling them to establish a known restaurant in different areas that creates jobs translating into income to due to the hiring of local employees and the purchasing of raw materials from the local farmers and businesses 2. consumption culture in Eastern Europe is changing due to its involvement in international trade introducing the Eastern Europeans to the fast food culture. will develop a market by providing technological.How will McDonald s benefit Kosovo 1. 3. The entry of McDonalds in Eastern Europe is timely. positively affecting employment and income 4.I.D.

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