NORTHERN QUEZON COLLEGE, INC

COLLEGE OF BUSINESS ADMINISTRATION

Brgy.Comon, Infanta, Quezon

I. Case Background

MCD was launched in 1940 when brothers Dick and Mc McDonald opened a restaurant
in San Bernadino, California. However, the credit of growing the corporation into a
franchised, global operation is attributed to Ray Kroc, who acquired equity from the
McDonald Brothers and took the firm pubic in 1965. MCD has a really cool history
timeline called “Travel in Time with us” located at the
http;//www.aboutmcdonalds.com/mcd/our_company/mcd_history.html Web page. It
reveals information such as the following:

1979 MCD Introduced Happy Meals

1981 MCD opened stores in Spain, Denmark, and the Philippines

1983 MCD entered its 32nd country

1984 Ray Kroc passed away

1987 MCD Introduced fresh salads

1990 MCD opened a store in Moscow, Russia

1992 MCD opened a store in Warsaw, Poland

1995 MCD’s new and was “Have You Had Your Break Today?”

1996 www.mcdonalds.com Web site introduced

1997 MCD’s new and was “Did Somebody Say McDonald’s?”

2001 The Big N’Tasty sandwich introduced

2003 MCD introduced Premium Salads and its “Plan to Win” strategy

2006 MCD introduced snack Wraps

 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

II. External Factors

i. Opportunities

a. Socio-Cultural

 Major industry analyst rated MCD as a “buy” suggesting low

levels of risk for investors
 Low cost menu that will attract customers.

b. Demographic

 Globalization, expansion in other country especially in (APMEA

and other countries and corporate).
 International expansion.
 Growth of the fast food industry.

C. Physical Environment

 Continued focus on corporate social responsibility reducing the

impact to the environment and community linkages.

ii. Threats

a. Political

 As recently as 2009, activist vandalized MCD’s restaurant during

the G-20 summit in protest of the poverty and income inequalities
brought about by globalization.

b. Economical

 Worldwide economic crisis negatively impacted MCD’s key

competitors.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

 As the U.S. dollar gained strength against most currencies,

especially the euro, British pound, Australian dollar, Canadian
dollar, and the Russian ruble. Foreign currency translation losses
show the extent of damage that global companies like MCD

 Encounter due to the uncertainties in the global environment that

no one has control over.

c. Socio-Cultural

 Growing awareness among the medical and scientific community

as well as the public of the direct relationship between diet and
health.
 Strength of competition
 Health professionals and consumer activists accuse McDonalds of
contributing to the countries health issue oh high cholesterol, heart
attacks, diabetes and obesity.

d. Legal

 MCD continues to encounter lawsuits brought about around the

word by activists and irate parents of children less than 18 years of
age.

III. Internal Factors

i. Strength

a. Socio-cultural

 MCD has been listed among the “top 40 companies”

 Major industry analyst rated MCD as a buy
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

b. Demographic
 Strong financial performance by geographic segment between
2008 and 2009.
 MCD’s operations are organized into a geographical structure with
four key segments.

c. Economic

 MCD’s foundations raise millions of dollar each year for children

centered in the community

d. Technological Segment

 Strong global reach and brand recognition.

ii. Weakness

a. Socio-Cultural
 High official in MCD turnover including the top leadership top
management.
 MCD’s consolidated decline in total asset hold by the company
from among the amounting $29.02 B in 2005.
 Unhealthy food image of MCD
 Legal action related to health issues.
 The position of controller stands vacant.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

IV. External Factors Evaluation Matrix

Key External Factors Weight Rating Weighted Score

Opportunities
1. International expansion. .12 3 .36
2. Major industry analyst rated MCD as a
“buy” suggesting low levels of risk for .11 4 .44
investors
3. Low cost menu that will attract .10 3 0.3
customers.
4. Continued focus on corporate social
responsibility reducing the impact to the .08 3 .24
environment and community linkages.
5. Growth of the fast food industry .16 3 .48
Threats

1.Strength of competition .08 2 .16

2. Health professionals and consumer
activists accuse McDonalds of contributing
to the countries health issue oh high .10 3 0.3
cholesterol, heart attacks, diabetes and
obesity.
3. Worldwide economic crisis negatively
impacted MCD’s key competitors .09 3 .27
4. Growing awareness among the medical
and scientific community as well as the .11 3 .33
public of the direct relationship between
diet and health
5.MCD continues to encounter lawsuits
brought about around the word by activists .05 2 0.1
and irate parents of children less than 18
years of age
Overall Rating 1.0 2.98

Conclusion:
A weighted score of 2.98 shows that MCD’s response on opportunities and threats is quite
above average.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

V. Internal Factors Evaluation Matrix

Key External Factors Weight Rating Weighted Score

Strength
1. MCD has been listed among the “top 40 .08 3 0.24
companies”

2.Strong financial performance by

geographic segment between 2008 and .12 4 0.48
2009
3.strong global reach and brand recognition .11 4 0.44

4. MCD’s plan to win focuses on people

product, place, price and promotion. .10 4 0.40

5. Large market capitalization amounting of .09 3 0.24

$59.8 B in food service industry.

Weakness
1. High official in MCD turnover including the .08 3 0.24
top leadership top management.
2. MCD’s consolidated decline in total asset
hold by the company from among the .11 4 0.44
amounting $29.02 B in 2005.

3. Unhealthy food image of MCD .12

4 0.48

4. Legal action related to health issues.

.10 3 0.30

5. The position of controller stands vacant.

.09 3 0.27
Overall Rating 1.0 3.53

Conclusion:
A weighted score of 3.53 shows that MCD’s response on strength and weakness is quite
above average.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

VI. Competitive Profile Matrix

MCD YUM BRANDS SBUX

W R WS R WS R WS
Financial Position 0.25 4 1 3 0.75 2 0.5
Market Share 0.2 3 0.6 2 0.4 1 0.2
0.2
Customer Loyalty 0.1 3 0.3 2 2 0.2
Advertising 0.13 4 0.52 3 0.39 3 0.39
Innovation 0.12 3 0.36 3 0.36 3 0.36
Global Expansion 0.2 4 0.8 3 0.6 3 0.6
Total 1 3.58 2.7 2.25
Conclusion:
Based on CPM, YUM BRANDS is the strongest competitor among the two companies resulting
2.7 of its own weighted score.

VII. Company’s Competitive Position

MCD’s competitive position is quite good. Several strategies that have been implemented
in an effort to repair the failing business was good, the company continues to
underperform from the last quarter of 2009.

VIII. Problem Statement

MCD’s in food industry experienced of decrease in their income in 2009 due to unhealthy
food image of MCD here are some evidences:
1. A joint research study recently conducted at the University of California,
Barketey and Colombia University concluded that he presence of fast food
restaurant near in school have growing epidemic of obesity among young
adolescents.
2. The documentary film supersize me, which argued that MCD menu was
contributing to the obesity epidemic and that the company provided no
nutritional about its product.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

IX. TOWS MATRIX SAMPLE

Strength
1. MCD has been listed among
the “top 40 companies”
2.Strong financial performance by
Internal geographic segment between 2008
and 2009
3.strong global reach and brand
recognition
External 4. MCD’s plan to win focuses on
people product, place, price and
promotion.
5. Large market capitalization
amounting of $59.8 B in food
service industry.
Weakness
1. High official in MCD turnover
including the top leadership top
management.
2. MCD’s consolidated decline in
total asset hold by the company from
among the amounting $29.02 B in
2005.
3. Unhealthy food image of MCD
4. Legal action related to health
issues.
5. The position of controller stands
vacant.

Opportunities SO WO
1. International expansion. S2, S5. O1, O5 W1,W5, O2
2. Low cost menu that will attract
customers. Market Penetration Market Development
3. strong global reach and brand
recognition S4,O4 W3,W4,O3
4. Continued focus on corporate
social responsibility reducing the Market Development Product Development
impact to the environment and
community linkages.
5. Growth of the fast food industry
Threats ST WT
1.Strength of competition S1,S4,T1,T2, T4 W3,W4,T2,T4
2. Health professionals and
consumer activists accuse Product Development Product Development
McDonalds of contributing to the
countries health issue oh high
cholesterol, heart attacks, diabetes
and obesity.
3. Worldwide economic crisis
negatively impacted MCD’s key
competitors
4. Growing awareness among the
medical and scientific community as
well as the public of the direct
relationship between diet and health
5.MCD continues to encounter
lawsuits brought about around the
word by activists and irate parents of
children less than 18 years of age

STRATEGIES: Product Development.

 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

X. Internal – External (IE) Matrix

IFE TOTAL WEIGHTED SCORE
(IFE = 3.53)
Strong Average Weak
(3.0 – (2.0-2.99) (1.0 -1.99)
4.0)
EFE TOTAL High I II III
WEIGHTED (3.0 – 4.0)
SCORE Medium IV V VI
(EFE = 2.98) (2.0 – 2.99)
Low VII VIII IX
(1.0 – 1.99)

Grow and Build- Cells I, II, IV: INTENSIVE, INTEGRATIVE

Hold and Maintain- Cells III, V, VII: MARKET PENETRATION, PRODUCT DEVELOPMEN
Harvest or Divest- Cells VI, VIIIIX: RETRENCHMENT, DIVESTITURE

Grow and Build- INTENSIVE AND INTEGRATIVE STRATEGY

 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

XI. Grand Strategy Matrix

IFE – 3.53
EFE – 2.98

Rapid Market Growth

Quadrant II Quadrant I
1 Market Development 1 Market Development
2 Market Penetration 2 Market Penetration
3 Product Development 3 Product Development
4 Horizontal Integration 4 Forward Integration
5 Divestiture 5 Backward Integration
6 Liquidation 6 Horizontal Integration
Weak 7 Concentric Diversification Strong
Competitiv Competitiv
e Position 1 Retrenchment 1 Concentric Diversification e Position
2 Concentric Diversification 2 Horizontal Diversification
Conglomerate
3 Horizontal Diversification 3 Diversification
Conglomerate
4 Diversification 4 Joint Venture
5 Divestiture
6 Liquidation
Quadrant III Quadrant IV
Slow Market Growth

Conclusion:
Based on Grand Strategy Matrix MCD is quite Strong Competitive Position.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

XII. Summary of Strategies

Strategy Options TOWS IE GSM TOTAL
Integration Strategies

1. Forward Integration 1 1 2
2. Backward Integration 1 1 2
3.Horizontal Integration 1 1 2
Intensive Strategies

1. Market Penetration 1 1 2
2. Market Development 1 1 2
3. Product Development 1 1 1 3
Diversification Strategies

1. Concentric Diversification 1 1
2.Conglomerate Diversification
3. Horizontal Diversification
Defensive Strategies

1. Joint Venture
2. Retrenchment
3.Divestiture
4.Liquidation
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

XIV. RECOMMENDED ALTERNATIVE COURSES OF ACTION

PRODUCT DEVELOPMENT

MCD’s can add a new product development that may offer to the customers to
fulfill their needs and wants every day with a nutritional value.

Functional Objectives Strategy Time Budget

Area Frame
Marketing To achieve 6% increase in Advertising & 1-2
revenue Promotion years

Finance To pay the interest expenses Improving the 1-2

according to product food in the menu years
development that is to add a item.
new menu item with a
healthy food.

Operations To make food fast available Expanding the 2-3

to its customers at a healthy new innovated years
food menu and very low product
competitive price but to get worldwide.
profit as well by reducing
the cost of the product.
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

Year Revenues Increase/Decrease

2006 20,895.2

2007 22,786.6 9%

2008 23,522.4 3%

AVERAGE INCREASE 6%

Financial Projection

Sales Forecast
2009 = 23,522.4 x 1.06
2010 = 24,933.74
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

XV. MCDONALD’S INCOME STATEMENT

MCDONAL'S INCOME STATEMENTS
YEAR ENDING DECEMBER 31
2008 2009 2010 2011
REVENEUS
Sales by company operated restaurant $16,560.90 $17,554.55 $18,607.82 $19,724.29
Revenues from franchised restaurants 6,961.60 7,379.30 7,822.06 8,291.38
Total Revenues 23,522.50 24,933.85 26,429.88 28,015.67
OPERATING COST AND EXPENSES
Company-Operated restaurant expenses
Food and Paper 5,586.10 5,921.27 6,276.55 6,653.14
Payroll and Employee benefits 4,300.10 4,558.11 4,831.60 5,121.50
Occupancy and other operating expenses 3,766.70 3,992.70 4,232.26 4,486.20
Franchised restaurant-occupancy expenses 1,230.30 1,304.12 1,382.37 1,465.31
Selling, general and administrative expenses 2,355.50 2,496.83 2,646.64 2,805.44
Impairment and other charges, net 6.00 6.36 6.74 7.14
Other operating (income) expense. Net -165.20 -175.11 -185.62 -196.76
Total Operating Cost and Expenses 17,079.50 18,104.28 19,190.54 20,341.97
Operating Income 6,442.90 6,829.46 7,239.24 7,673.59
Interest expense-net of capitalized interest of
$12.3,$6.9 and $5.4 522.60 553.96 587.20 622.43
Non-operation (income) expense, net -77.60 -82.26 -87.2 -92.43
Gain on sale of investment -160.10 -169.7 -179.88 -190.67
Income from continuing operating before
provision for income taxes 6,158.00 6,527.46 6,744.72 7,334.26
Provision of Income taxes 1,844.80 1,955.49 2,072.82 2,197.19
Income from continuing operations 4,313.20 4,571.97 4,671.90 5,137.07
Income from discontinued operations (net of taxes
of $ 34.5 and $101.9)
Net Income $4,313.20 4,571.97 4,671.90 5,137.07
Per Common share-basic:
Continuing operations $3.83 $4.06 $4.30 4.56
Discontinued Operations
Net Income 3.83 4.06 4.30 4.56
Per Common share-diluted:
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

Continuing operations 3.76 3.99 4.23 4.48

Discontinued operations
Net Income 3.76 3.99 4.23 4.48
Dividends declared per common share 1,625.00 1,722.50 1,825.85 1,935.40
Weighted-average share outstanding-basic 1,126.60 1,194.20 1,265.85 1,341.80
weighted-average share outstanding-diluted 1,146.00 1,214.76 1,287.65 1,364.91

XVI – MCDONALD’S BALANCE SHEET

MCD's BALANCE SHEET

PERIOD ENDING
2008 2009 2010 2011
Assets
Current Assets
Cash and Cash Equivalent 2,063,400 2,187,204 2,318,436 2,457,542.41
Short Term Investment
Net Receivables 931,200 987,072 1,046,296 1,109,074.10
Inventory 111,500 118,190 125,281 132,789
Other Current Assets 411,500 436,190 462,361 490,103
Total Current Assets 3,517,600 3,728,656 3,952,375 4,189,517.90
Long Term Investment 1,222,300 1,295,638 1,373,376 1,455,778.90
Property Plant and Equipment 20,254,500 21,469,770 22,757,956 24,123,434
Goodwill 2,237,400 2,371,644 2,513,943 2,664,779.20
Intangible Assets
Accumulated Amortization
Other Assets 1,229,700 1,303,482 1,381,691 1,464,592.40
Deffered Long Term Asset Charges
Total Assets 28,461,500 30,169,190 31,979,341 33,898,102
Liabiliies
Current Liabilities
Accounts Payable 2,506,100 2,656,466 2,815,854 2,984,805.20
Short/Current Long Term Debt 31,800 33,708 35,731 37,874.40
Other Current Liabilities
Total Current Liabilities 2,537,900 2,690,174 2,851,585 3,022,679.60
Long Term Debt 10,186,000 10,797,160 11,444,990 12,131,689
Other Liabilities 1,410,100 1,494,706 1,584,388 1,679,451.70
Deffered Long Term Liability Charges 944,900 1,001,594 1,061,89.6 1,125,391.02
 NORTHERN QUEZON COLLEGE, INC
COLLEGE OF BUSINESS ADMINISTRATION
Brgy.Comon, Infanta, Quezon

Minority Interest
Negative Goodwill
Total Liabilities 15,078,900 15,983,634 16,942,652 17,959,211.20
Stockholder's Equity
Misc. Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 16,600 17,596 18,652 19,770.87
Retained Earnings 28,953,900 30,691,134 32,532,602 34,484,558.12
Treasury Stocks -20,289,400 -21,506,764 (22,797,169.5 -24,165,000
Capital Surplus 4,600,200 4,876,212 5,168,785 5,478,911.81
Other Stockholder's Equity 101,300 107,378 113,821 120,649.90
Total Stockholder's Equity 13,382,600 14,185,556 15,036,689 15,938,890.70
Total Liabilities and SE 28,461,500 30,169,190 31,979,341 33,898,102