Facebook

McDonald’s

GROUP 5 – AT45

Abadingo, Japeth James L.

Engreso, Princess L.

Ortua, Jeneth A.

Pada, Ritchievy M.

Tan, April Rose P.

 FACEBOOK

1. SHORT HISTORY

Facebook, American company offering online social networking services. Facebook was
founded in 2004 by Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz, and Chris Hughes,
all of whom were students at Harvard University. The company has a complicated early history.
It began at Harvard University in 2003 as Facemash, an online service for students to judge the
attractiveness of their fellow students.

In February 2004, Mr Zuckerberg launched "The facebook", as it was originally known;

the name taken from the sheets of paper distributed to freshmen, profiling students and staff.
Within 24 hours, 1,200 Harvard students had signed up, and after one month, over half of the
undergraduate population had a profile.

The network was promptly extended to other Boston universities, the Ivy League and
eventually all US universities. It became Facebook.com in August 2005 after the address was
purchased for $200,000. US high schools could sign up from September 2005, then it began to
spread worldwide, reaching UK universities the following month.

As of September 2006, the network was extended beyond educational institutions to

anyone with a registered email address. The site remains free to join, and makes a profit through
advertising revenue. Yahoo and Google are among companies which have expressed interest in a
buy-out, with rumoured figures of around $2bn (£975m) being discussed. Mr Zuckerberg has so
far refused to sell.

The site's features have continued to develop during 2007. Users can now give gifts to
friends, post free classified advertisements and even develop their own applications - graffiti and
Scrabble are particularly popular.

July of 2007, the company announced that the number of registered users had reached 30
million, making it the largest social-networking site with an education focus.

In February 2012 Facebook filed to become a public company. Its initial public
offering (IPO) in May raised $16 billion, giving it a market value of $102.4 billion. By contrast,
the largest IPO of an Internet company to date was that of the search-engine company Google
Inc., which had raised $1.9 billion when it went public in 2004. By the end of the first day of
the stock’strading, Zuckerberg’s holdings were estimated at more than $19 billion.
2. STRENGTH AND WEAKNESSES

Strengths:

With the growing use of mobile phones and introduction of Facebook app, a precedent
increase is seen in the overall usage has occurred. According to FY2015, Facebook had about
169 million daily account users which is a big number as compared to the previous years.
It also captured major markets in US, Brazil and India.

Another thing that goes in the favour of Facebook is the fact that it has a loyal customer
base, means every user regularly has their personal data and applications set up on Facebook
which they regularly update and thus are active users. Thus, Facebook enjoys the status of non-
replicable competitive advantage.

Their goal is to offer developments on day to day basis, such that user engagement is
achieved at maximum level. This attracts advertisers on the large scale too. Given that Facebook
is known for making the user experience better, we see different new products offered by
Facebook. The concept of 360 degree photos, Notify and Facebook live are best examples of
how well their user engagement has developed over the years by offering innovation.

Facebook has another competitive advantage of collecting lucrative databases.

Information regarding the user’s location, interests, connection is valuable for advertisers as they
can target the right target audience. The company also has a record of strong financial
performance which makes it resilient in the market.

Weaknesses:

Facebook generates its revenues only through advertisement and thereby it is one of its
weak points. These advertisers allocate a small budget for Facebook advertising and their
commitments are also short lived.

Along with that the marketers may not like some of the products offered by Facebook
and the may be willing to quitdoing business with Facebook or pay less than the due amount for
advertising. The company must sign long term commitment deals with advertisers in order to
grow.

3. STRATEGIES BEING EMPLOYED

Facebook has a generic strategy and intensive growth strategies that maintain business
competitive advantage based on efficiency and accessibility of online social media services.
Michael Porter’s model for generic competitive strategies indicates the company’s approach and
strategic direction for business growth. In this business analysis case, it is determined that
Facebook’s generic strategy ensures growth and competitive advantage through the social
network’s features and ease of access to capture a bigger share of the market, addressing
competition against companies like Google, Twitter, and Snapchat, which have significant
presence in the online advertising market. In relation, based on the Ansoff Matrix, Facebook’s
intensive strategies emphasize the use of market penetration as the primary thrust to grow the
business. The company’s generic strategy and intensive growth strategies align with business
strengths and enable the company to keep its market position as one of the world’s leading online
social networking firms.

4. THE PRIMARY REASONS FOR BEING A GLOBAL BRAND

I. Connecting the world and the community

II. Connecting commerce

The company develops its business as a reliable social media service provider. In
relation, the company’s large consumer base is a strength that brings a number of beneficial
externalities. For example, the large number of users or members makes Facebook’s social
networking website and mobile apps more attractive to potential new members, more attractive
to advertisers, and more difficult for new social media companies to compete with. Moreover,
high revenues are a beneficial internal strategic factor that supports the company’s financial
capacity for research and development (R&D) investments for new products and new business
ventures. Also, Facebook’s organizational culture contributes to innovativeness in the workforce.
This internal factor enables product development, which is a growth strategy.

Sources:

Hall, M. (2007). Facebook – American Company. Encyclopaedia Britanica. Retrieved from

https://www.britannica.com/topic/Facebook

Phillips, S. (2007, July). A Brief History of Facebook. The Guardian. Retrieved from
https://www.theguardian.com/technology/2007/jul/25/media.newmedia

Greenspan, R. (2018). Facebook Inc.’s Generic Strategy & Intensive Growth Strategies.
Panmore. Retrieved from http://panmore.com/facebook-inc-generic-strategy-intensive-
growth-strategies
 MCDONALD’S

1. SHORT HISTORY

McDonald’s is known for its hamburgers. Its headquarters are in Oak Brook, Illinois. The
first McDonald’s restaurant was started in 1948 by brothers Maurice (“Mac”) and Richard
McDonald in San Bernardino, California. They bought appliances for their small hamburger
restaurant from salesman Ray Kroc, who was intrigued by their need for eight malt and shake
mixers. When Kroc visited the brothers in 1954 to see how a small shop could sell so many milk
shakes, he discovered a simple, efficient format that permitted the brothers to produce huge
quantities of food at low prices. A basic hamburger cost 15 cents, about half the price charged by
competing restaurants. The self-service counter eliminated the need for waiters and waitresses;
customers received their food quickly because hamburgers were cooked ahead of time, wrapped,
and warmed under heat lamps.

Kroc offered to begin a franchise program for the McDonald brothers and on April 15,
1955, he opened the first McDonald’s franchise in Des Plaines, Illinois, and in the same year
launched the McDonald’s Corporation, eventually buying out the McDonald brothers in 1961.
The number of McDonald’s outlets would top 1,000 before the end of the decade. Boosted by
steady growth, the company’s stock began trading publicly in 1965. The chain continued to
expand domestically and internationally, extending to Canada in 1967, reaching a total of 10,000
restaurants by 1988, and operating more than 35,000 outlets in more than 100 countries in the
early 21st century. Growth was so swift in the 1990s that it was said a new McDonald’s opened
somewhere in the world every five hours. It effectively became the most popular family
restaurant, emphasizing affordable food, fun, and flavors that appealed to children and adults
alike.

The success of McDonald’s brought increased criticism, much of which concerned its
perceived association with a global increase in obesity. McDonald’s responded by adding
healthy items to its menu, and in 2017 it began testing a vegan hamburger. During this time it
also eliminated supersized portions, and its U.S. and Canadian restaurants stopped using trans-fat
oil in a number of items. Such measures, however, did little to stem health concerns. In addition,
as one of the world’s largest private employers, McDonald’s faced numerous calls to increase
wages. The term McJob was added to the Merriam-Webster dictionary to mean “low-paying
job.” In the late 20th century, McDonald’s moved beyond the hamburger business by acquiring
Chipotle Mexican Grill (1998), Donatos Pizza (1999), and Boston Market (2000) in the United
States, and in the United Kingdom McDonald’s purchased Aroma Cafe (1999) and an interest in
Pret A Manger (2001), a sandwich restaurant chain. However, by late 2008 McDonald’s no
longer owned or had a stake in any of those companies, instead concentrating on its own brand.
2. STRENGTH AND WEAKNESSES

Strengths:

 McDonald's has successfully rolled out new items like coffees, smoothies, and Angus
burgers, expanding the range of menu choices.
 With a strong product offering, the company has grown income throughout the recession,
notching strong increases in same-store sales.
 Operations are spread around the world, meaning the company is not exposed to just one
currency or economy.
 Even trading near its highs, McDonald's serves up sizzling dividend yields that top the
10-year Treasury. The yield comes with a side order of annual dividend hikes dating back
to 1976. The annual dividend payment has gone from 55 cents per share in 2005 to $2.20
this year.

Weaknesses:

 It will be harder and harder to find prime locations to build a set of golden arches. The
U.S. is saturated with its restaurants, so growth will have to occur internationally, posing
potential cultural challenges.
 While the annual dividend hikes are likely to continue, the dividend growth rate has been
slowing and will probably continue to slow or level off.

3. STRATEGIES BEING EMPLOYED

I. McDonald's Main Business Strategy Was and Still Is Investing in Advertising &
the Franchise Model.

 “In 1967, McDonald's spent $2.3 million, or about 1 percent of its sales, on its first
national advertising campaign, which was an unheard amount for a fast-food chain.”
 Ray Kroc joined McDonald's in 1955, eventually taking it over and is the one attributed
for its rapid growth and success. He started to franchise and eventually bought
McDonald's from the McDonald's brothers in 1961. Ray valued advertising and
marketing. “Kroc believed that advertising was an investment that would, in the end,
come back many times over, and advertising has always played a key role in the
development of the McDonald's Corporation.”
 McDonald's spends approximately 2 billion dollars in advertising – targeting different
groups including children.
 There are three objectives McDonald's has for advertising: make people aware of the
item, feel positive about the item, and remember the item.
 McDonald's invested in advertising earlier in their establishment.
 McDonald's Happy Meals included toys like popular Teenie Beanie Baby Promotion in
1996 and 1997 and established a Global Marketing Alliance with Disney/Pixar in 1998
(Promoted their movies). They advertised towards children targeting popular toys that
children would be drawn towards.

II. McDonald's Advertised Towards Children &the Family

 McDonald's marketed towards families and children it's presented as a fun place to go
with your family.

III. McDonald's Created The Recognizable Icon Of The Golden Arches

 In 1952, the McDonald brothers decided they needed a new building, so they closed
down their store to create a more eye-catching appearance that included the two yellow
golden arches we know today.

IV. McDonald's Created The Recognizable Icon Of Ronald McDonald

 In 1967, Ronald McDonald was introduced by a franchise owner. Franchise owners

realized the importance of advertising and utilizing the icon as a clown to appeal to
children.
 It is noted that by 1973, Ronald McDonald was more familiar to 96% of American
children than the name of their president.
 Ronald McDonald ranks second in terms of the most recognizable fictional character
after Santa Claus among U.S. School Children.

4. THE PRIMARY REASONS FOR BEING A GLOBAL BRAND

The success of McDonald's is the business equivalent of the American Dream. While
McDonald's was not the first franchise business, it has possibly become the premier example
of the business model. With roots that trace back to a single drive-in started by a pair of
brothers, Dick and Mac McDonald, in Southern California, McDonald's has grown to a
network of well over 35,000 locations in more than 100 countries.
 Threecharacteristics which stand out when speaking about the success of McDonald's:

I. Consistency

It doesn't matter if you're visiting a McDonald's in California or Connecticut, America or

Australia – you're going to have a similar experience wherever you are.

II. Innovation

At first, the characteristics of consistency and innovation seem to contradict one another. But
in fact, they work together to allow for McDonald's continued growth.Innovation stemming from
responsiveness to customers and franchisees has played a big role in McDonald's fending off
stagnation over the years.

III. Resiliency

But perhaps the biggest reason McDonald’s has been a success for so long is its ability to
weather storms. Though the trajectory for McDonald's has been primarily upward throughout its
existence, the company has had to weather several challenges and controversies but still recovers
up.

Sources:

Tikannen.A. (2017). McDonald’s – American Corporation. Encyclopaedia Britanica.

Retrieved from https://www.britannica.com/topic/McDonalds

Bailee.R. (2017). Primary Reasons for Being A Global Band. Franchise Direct. Retrieved
https://www.franchisedirect.com/information/markettrendsfactsaboutfranchising/thesucc
essofmcdonalds/8/1111/