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McDonald’s Corporation

A Strategic Management Case Study www.mcdonalds.com/ Matthew O‟Malley Spenser Ouellette Kristi Plourde Robert Roy

Overview
Company Overview
A Brief history of McDonald’s Existing Mission and Vision Existing Objectives and Strategies

Current Issues

Strategy Formulation
SWOT Matrix Space Matrix IE Matrix Grand Strategy Matrix Matrix Analysis QSPM Matrix

New Mission and Vision External Assessment
Industry analysis Opportunities and threats EFE Matrix CPM Matrix

Strategic Plan for the Future
Objectives Strategies

Implementation Issues Internal Assessment
Strengths and weaknesses Financial Condition IFE Matrix
EPS/EBIT

Evaluation McDonald’s 2008 Update

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•Headquartered in Oak Brook, Illinois. •World‟s largest foodservice retailing chain. •Known for its burgers and fries. •Offers a standard menu at all locations, though some locations may have some variation based on geographic variations in taste preference. •Operates over 31,370 fast food restaurants in over 118 countries, employing 390,000 people. •A majority of the restaurants are operated by franchisees. •McDonald‟s owns the land used for each of the franchises, then builds and secures a long-term lease for the restaurant site. •Franchisees then provide a portion of capital by investing in the equipment, signs, seating and décor of their restaurant business. •The company also operates restaurants under the brand name 'The Boston Market„, acquired in May of •O‟Malley, Ouellette, Plourde, & Roy 2000.
2009 3

Who We Are

What We Sell

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Plourde.Where We Are O‟Malley. Ouellette. & Roy 2009 5 .

Plourde. Several problems arise in adapting the system used by Richard and Maurice to the new restaurant.5 million. is introduced. •1955: The first restaurant run by Ray Kroc opens in Des Plaines. They had been previously sold to the Frejlack Ice Cream Co. soft drinks. •1954: Ray Kroc. Sales top $11 million. Illinois. •1958: The 100 millionth hamburger is sold. There are 34 restaurants in existence.almost $4. and apple pie. suggests nationwide franchising and acts as a franchising agent for the brothers. Ouellette. O‟Malley. Fred Turner is hired to oversee operations.History •Dec 1948: The first McDonald‟s restaurant is opened in San Bernardino. First logo. Offers burgers. & Roy 2009 6 . •1956: Kroc has to repurchase the franchise rights for the Cook County restaurant. California by brothers Richard and Maurice McDonald. fries. Speedee. a milkshake machine salesman. •1957: Year-end sales for close to 40 restaurants. milk shakes.

O‟Malley. in Life magazine. •1960: Look for the Golden Arches becomes the new slogan. Advertises nationally. Ronald McDonald is introduced. Ouellette. They begin advertising on billboards. The fish filet sandwich is added to the menu. bringing the total to 100 franchises. and the 200th restaurant is opened.7 million and opens his first Hamburger University. Plourde. •1963: The 500th McDonald‟s is opened. •1961: Kroc buys out the McDonald brothers for $2. Sales reach $38 million. Fifth anniversary of the company is celebrated. for the training of franchisees •1962: The Speedee logo is replaced by the Golden Arches as the company logo.) •1959: Kroc opens 67 new restaurants. & Roy 2009 7 .History (cont. for the first time.

Sales hit $200 million. Ads start showing on network television. The 1. •1967: The first restaurants outside the US open in Canada and Puerto Rico.History (cont. Plourde.000th store is opened in Des Plaines. Ouellette. •1969: International division of the company is formed.) •1965: Stock goes public in celebration of the 10th anniversary of the company. & Roy 2009 8 . O‟Malley. McDonald‟s is listed on the Midwest and Pacific stock exchanges. •1966: The first public shareholders meeting is held. •1968: The Big Mac is added to the menu.

O‟Malley. Surpasses the Army as the nation‟s biggest dispenser of meals. so get up and get away to McDonald’s. •1974: The first Ronald McDonald House is opened. Fred Turner is named President and CEO. You deserve a break today. •1973: The Egg McMuffin is added to the menu as a breakfast item. Ouellette. Germany. New advertising slogan becomes.History (cont. Plourde. •1972: McDonald‟s is a $1 billion corporation. and Japan. Holland. Sales approach $2 billion.500th restaurant is opened in New Hampshire. Guam. & Roy 2009 9 . •1971: Company headquarters are moved from Chicago to Oak Brook. Illinois. Restaurants are opened for the first time in Australia.) •1970: The 1.

O‟Malley.History (cont. which is a new position. Mike Quinlan becomes president and CEO of McDonald‟s USA. Mike Quinlan becomes president and COO as well as keeping his position with McDonald‟s USA. •1977: A variety of breakfast foods are added to the menu.000th restaurant is opened. •1981: The first restaurants are opened in Denmark. and the 4. and Spain. •1982: Dividends per share rise by 32%. Directors declare the first cash dividend. & Roy 2009 10 . Ouellette. •1980: The 6. Half of all stores have a drive-thru window. •1979: Happy Meals are added to the menu.) •1976: Sales exceed $3 billion. the Philippines.000th store is opened. 25th anniversary is celebrated. Plourde.

History (cont.000th restaurant is opened. 1984: Ray Kroc. founder and senior chairman of the board of directors. and Turkey. O‟Malley. Ouellette. and restaurants open in Argentina. 1985: The McDLT is introduced. Plourde. dies. Cuba.) 1983: Chicken McNuggets are introduced on the menu. 1984: Year end sales pass $10 billion. Taiwan and Wales. Ed Rensi becomes president of McDonald‟s USA. Mike Quinlan is elected CEO. Open restaurants in Andorra. 1986: McDonald‟s offers comprehensive listings of ingredients in all its foods to the public. and the 8. a hamburger sold with lettuce and tomato in a separate compartment to keep them cool. & Roy 2009 11 . Finland.

•1994: Stella Liebeck from Albuquerque. Restaurants are opened in Hungary. Korea. •1988: An agreement is signed to build the first McDonald‟s in Moscow. takes off from Switzerland. and Yugoslavia.) •1987:Tossed salads are added to the menu. Sales exceed $16 billion. more nutritious fast-foods. •1991: The McLean Deluxe sandwich is introduced and added to the menu after years of research. •1996: The first airborne McDonald‟s. The company diversifies for the first time. the McPlane.History (cont. She receives $640. Ouellette. O‟Malley. to satisfy the public‟s desire for lighter. •1996:The Arch Deluxe hamburger is introduced. Plourde.000 from the suit. with the first in Chicago. with seating for 700. & Roy 2009 12 .9 million for burns from spilling a hot McDonald‟s coffee on her lap. introducing indoor playgrounds. •1990: The world‟s biggest McDonald‟s. New Mexico sues McDonald‟s for almost $2. is opened in Moscow.

Chipotle Mexican Grill. •1998: The company diversifies outside of hamburger sales with its purchase of a minority stake in a Denver based chain of casual Mexican restaurants. •1997: Develop plans to lower prices in order to protect market share from further encroachment. for $173. Ouellette.) •1996: Net profits over the last five years have grown at a compound annual rate of 12%.History (cont. Cut cost of opening a new franchise by 30% through standardization and reliance on drive-thrus.5 million. O‟Malley. & Roy 2009 13 . This was later bought back by the original owner in 2003. •2000: In its largest acquisition ever. mostly by Burger King. New promotion. McDonald‟s purchases Boston Market. •1999: Continues diversification with the purchase of Donatos Pizza Inc. Plourde. Restaurant is opened in French Guiana. Inc. is the most effective marketing plan in McDonald‟s history. the Teenie Beanie Babies.

•2002: McDonald‟s apologizes for not listing beef flavoring as an ingredient in its hash browns and fries and offers to donate $10 million to vegetarian groups. Plourde. •2003: Post their first quarterly loss in over 40 years. even though they include beef flavoring. Ouellette. O‟Malley.History (cont. •2001: About 50 new stores are opened in Mexico. and new store openings are reduced from 1.000 the previous year to 360.) •2001: Faced with a class-action lawsuit for advertising its fries and hash browns as vegetarian. & Roy 2009 14 . Slash spending by 33%. McDonald‟s announces its intent to invest $67 million in the Philippines by 2005.

. Ouellette.) •2004: Introduces the “Go Active! Happy Meal. •2005: Chipotle Mexican Grill Inc. stepometer.History (cont. in which McDonald‟s has a 92 percent ownership stake.000 by 2008. •2006: Plans are established to open 125 restaurants per year in China.6 billion.” consisting of a salad.46 billion. with record annual sales of $20. bringing the total locations there to 1. •2005: Net income increases 14% to $2. files an initial public offering with the Securities and Exchange Commission. and an exercise booklet. & Roy 2009 15 . Plourde. water. O‟Malley.

Place.Mission Statement McDonald's brand mission is to "be our customers' favorite place and way to eat. We are committed to improving our operations and enhancing our customers' experience. Price and Promotion. O‟Malley. Plourde." Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience – People. Products. Ouellette. & Roy 2009 16 .

it all comes back to the food.Vision Statement •We aspire to end hunger one meal at a time by providing low cost. Ouellette. •Corporate Responsibility Statement •McDonald's 2008 Corporate Responsibility Report •It all comes down to the food.high quality nutritional food globally. Running restaurants is a multi-faceted endeavor. & Roy 2009 17 . That‟s what McDonald‟s is all about. The food we serve…how and where we serve it…the welfare of our employees and our suppliers‟ employees…where the food comes from…and so much more. but ultimately. Plourde. O‟Malley.

•http://www. & Roy 2009 18 .Brand Strategy •2003-2008 “I‟m Lovin‟ it” is an international branding campaign by McDonald‟s Corp. Plourde.com/watch?v=5fbrnj2Ki4s O‟Malley. Germany. It was the company's first global advertising campaign. It was created by Heye & Partner. a longtime McDonald's agency based in Unterhaching. Ouellette.youtube. •Target Market is Children/ Elderly People •Happy Meals and Coffee.

& Roy 2009 19 .mcdonalds.com/nutritionexchange/nu tritionexchange. Ouellette.Menu • http://www.mcdonalds.html •Nutrition Information •http://nutrition.do O‟Malley.com/usa/eat/mcdonalds_menu. Plourde.

Plourde. Ouellette.Nutrition Information 1st restaurant to place its information in an easy-toread graphic format on their packaging O‟Malley. & Roy 2009 20 .

depicted by the “three-legged stool” of owner/operators.com/publish/csr/home/about/values . We demonstrate our appreciation by providing them with high quality food and superior service. & Roy 2009 21 .crmcdonalds. we hold ourselves and conduct our business to high standards of fairness. working together in an environment that fosters respect and drives high levels of engagement. nurture talent. Plourde. at a great value. At McDonald‟s. is our foundation. in a clean. •We believe in the McDonald’s System •McDonald‟s business model. welcoming environment. •We operate our business ethically •Sound ethics is good business. http://www. develop leaders and reward achievement. • We are committed to our people •We provide opportunity. is essential to our continued success. We are individually accountable and collectively responsible. honesty.Values •We place the customer experience at the core of all we do •Our customers are the reason for our existence. Ouellette. and company employees. We believe that a team of well-trained individuals with diverse backgrounds and experiences.html O‟Malley. and the balance of interests among the three groups is key. suppliers. and integrity.

& Roy 2009 22 . We help our customers build better communities.crmcdonalds. http://www. support Ronald McDonald House Charities. employee and system needs through constant evolution and innovation. we work to provide sustained profitable growth for our shareholders. scope and resources to help make the world a better place.html O‟Malley. Plourde. and leverage our size. •We give back to our communities •We take seriously the responsibilities that come with being a leader. Ouellette. •We grow our business profitably •McDonald‟s is a publicly traded company. This requires a continuing focus on our customers and the health of our system.Values Continued •We strive continually to improve •We are a learning organization that aims to anticipate and respond to changing customer.com/publish/csr/home/about/values . As such.

•First US location was in Chicago. Ouellette. Plourde. •Largest coffee shop brand in Australia and New Zealand by 2003. opened in 2001. & Roy 2009 23 . after 300 locations had opened worldwide. •Turned out to generate 15% more revenue than regular McDonald‟s. •By 2002. O‟Malley. These reflect a consumer trend towards espresso coffees. Australia.McCafé •1993: First McCafé launched in Melbourne. had spread to 13 countries.

O‟Malley. Ouellette. Plourde.McCafe Features a relaxed adult atmosphere. & Roy 2009 24 . Offers customers a variety of specialty coffee drinks along with muffins. pastries and sandwiches.

Plourde. Ouellette. O‟Malley. which includes cash on hand. •Financial Requirements/Down Payment •Initial down payment is required when purchasing a new restaurant (40% of the total cost) or an existing restaurant (25% of the total cost). McDonald‟s does not offer financing but they work with many national lending institutions. & Roy 2009 25 . •The down payment must come from non-borrowed personal resources. securities. bonds.000 of nonborrowed personal resources to consider you for a franchise. •McDonald‟s owns all buildings and properties. •Generally require a minimum of $300. •Remaining balance of purchase price must be paid off with in 7 years. either from McDonald‟s or from a McDonald‟s Owner/Operator.McDonald’s Franchise •Most Owner/Operators enter the System by purchasing an existing restaurant.

Ouellette.Ray Kroc Formula for Success: •Quality •Service •Cleanliness •Value O‟Malley. Plourde. & Roy 2009 26 .

Developed a business model known as “The Three Legged Stool.” Owner/Operator. Plourde. & Roy 2009 27 .Ray Kroc. Suppliers and Employees •Just as all three legs of a stool need to be equal to support the weight. all three elements of the McDonald‟s system are equally important partners in McDonald‟s success.Business Model •Ray Kroc. O‟Malley. Ouellette.

Hamburger University Facility •In 1993. IL. & Roy 2009 28 . Ouellette.square foot facility on an 80-acre campus located at McDonald‟s Corporate in Oak Brook.000. Plourde. McDonald‟s invested $40 million in Hamburger University. a 130. •13 teaching room •300 seat auditorium •12 interactive education team rooms •3 kitchen labs •State of the art service training labs O‟Malley.

Hamburger University •Hamburger University has become the company‟s global center of excellence for McDonald‟s operations training and leadership development. & Roy 2009 29 . •First company to develop a global training center O‟Malley. Cleanliness and Value in the world. Ouellette. Service. •McDonald‟s training mission is to be the best talent developer of people with the most committed individuals to Quality. Plourde.

Ouellette. •Ray Kroc once said. Plourde. O‟Malley. & Roy 2009 30 . I‟m going to put my money in talent. we‟ve got to have talent. “If we are going to go anywhere. •Hamburger University students can earn credit toward a college degree through their course work. And.” •McDonald‟s spends $1 Billion on training and development every year.Hamburger University cont.

Plourde. Ouellette.Ronald McDonald House Charities •The mission of Ronald McDonald Charities is to create. & Roy 2009 31 . find and support programs that directly improve the health and well being of children. •Ronald McDonald Houses are located all around the world and provide families a way to stick together in times of need when their children are ill. •Service Provided: •Home-cooked meals •Private bedrooms •Playrooms for children •Special suites for children with suppressed immune systems •Accredited education programs •Recreational activities •Non-clinical support services •Sibling support services O‟Malley.

Plourde. In 2006. & Roy 2009 32 . McDonalds raised more than $25 million worldwide to benefit Ronald McDonald House Charities and other local children‟s charities. O‟Malley.World Children Day McDonalds restaurants around the world celebrate world children‟s day with fundraising activities. Ouellette.

& Roy 2009 33 . Ouellette. Plourde.Mom Knows Best “Loved by kids. McDonalds created a global moms advisory panel of 10 mothers from 7 countries to provide input and guidance on a broad range of topics. approved by mom” is one of McDonalds important goals. O‟Malley. including their food to help better serve the needs of moms and families around the world.

Plourde.Responsible Suppliers “Only purchase from suppliers who meet our stringent food safety standards.” -animal welfare -rain forest and antibiotics policies -supplier social accountability program O‟Malley. but who also share our commitment to social responsibility and sustainability. Ouellette. & Roy 2009 34 .

Skylights and Daylight controls •High efficient rooftops •Water conserving toilets O‟Malley. restaurants are recycling their used cooking oil to sell to companies that specialize in refining the product into clean burning diesel for consumer use.Going Green •McDonald‟s has taken the initiative to incorporate used cooking oil into their operations. •In 2006. McDonalds in the U. •Floor Tiles with a high recycled content •Efficient Lighting Products.S has began developing green restaurants. Ouellette. Plourde. •In several countries across the McDonald‟s System. & Roy 2009 35 .

Coca Cola Glasses.reflects our commitment of the importance of sports and physical activities. Beanie Babies •Olympic Games. Plourde.Global partner of the Olympic games. •World Champions.400 children from 51 countries had the opportunity to meet the world‟s best soccer players at the 2006 FIFA World Cup. & Roy 2009 36 .Popular Promotions •Toys with Happy Meals •Cars •Pirates of the Caribbean •Games. O‟Malley.1. Ouellette.Monopoly/ Uno –Win various prizes and trips •Collectibles.

Supersize Me Scandal
•It all started with a lawsuit against the burger giant by a group of obese teenagers, the case alleged that McDonald‟s had created a national epidemic of obese children by misleading people into thinking their food was nutritious. 2004 •Morgan Spurlock used this lawsuit as his inspiration for his hit film Supersize Me which proved to be scandalous for McDonalds. It was a 30 day documentary that focused on the increase in obesity in America due to McDonalds fast food.
http://www.youtube.com/watch?v=I1Lkyb6SU5U
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Other Important Facts
•53% Household income is spent outside of the home •2006 National Restaurant Association Quick Service Restaurant Sales increased 5% •The Global “Informal Eating Out” market is expected to Grow $50 Billion in 2007 and over •200 Billion the next 4 years •Breakfast Food Industry $77.6 Billion •End of 2006- McDonalds had 31,000 locations word-wide and opened 744 restaurants.

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2006 Objectives
•Grow Market Share •Create long-terms profitable growth for share holders. •Maintain current debt-to capital levels to 35-40% •Reduce the percentage of company owned units. •Decrease selling, general and administration expenses.

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External Assessment

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Plourde. Ouellette.Global Industry Growth O‟Malley. & Roy 2009 41 .

& Roy 2009 42 .S Industry Growth O‟Malley.U. Ouellette. Plourde.

& Roy 2009 43 .Global Segmentation by Type O‟Malley. Ouellette. Plourde.

& Roy 2009 44 .S Segmentation by Type O‟Malley. Plourde.U. Ouellette.

& Roy 2009 45 . Plourde. Ouellette.Competitors Trademarks are property of respective brands O‟Malley.

Plourde. New Products & Services Beverage Market Growth of Franchise Restaurants Demand for Organic Products International Expansion Conservation (going green) O‟Malley.External AuditOpportunities 1. 4. 6. & Roy 2009 46 . 2. 3. Ouellette. 5.

Ouellette. Legal Challenges (McDonald‟s faces many lawsuits) O‟Malley. Growing Health Consciousness 5. & Roy 2009 47 .External Audit-Threats 1. Change in Commodity Prices 2. Economic Slowdown 4. Burger King) 6. Food Safety and Food Borne Illness Concerns 3. Intense Competition (dine-in restaurants. Plourde.

54 0.36 0. & Roy 2009 48 .36 0.0 Market Share Financial Position Global Expansion Customer Service Advertising 0. Ouellette.27 2.1 0.21 Weighted Score Rating 1 to 4 2 3 2 2 2 Wendy's Weighted Score 0.07 0.11 0.28 Weighted Score Burger King Rating 1 to 4 3 3 3 2 3 0.0 to 1.33 0.18 0.08 0.07 1 to 4 4 4 4 2 4 0.18 0.21 0.22 3 3 2 3 3 0.24 0.48 0.18 0.33 0.18 0.27 0. Plourde.McDonalds Competitive Profile Matrix McDonalds Critical Success factors Weights Rating 0.68 O‟Malley.18 0.09 1 4 2 1 3 4 0.09 0.36 0.4 0.27 2.36 0.72 0.36 3.81 2 3 4 4 3 0.2 0.09 0.28 0.22 0.12 0.1 0.14 Price Competitiveness Product Innovation Product Quality Customer Satisfaction Management Totals 0.14 0.24 0.32 0.

08 0. Plourde.4 0.07 0.0 Rating 1 to 4 Weighted Score International Expansion Conservation (going green) 0.16 0. Wendy's) Legal Challenges (McDonalds faces many lawsuits) 0.4 0.09 3 4 4 2 4 3 0 0.36 0. Ouellette.06 Weights 0.07 0.06 3 2 3 1 0.27 0.94 O‟Malley.1 0.09 0.28 0.1 0.08 0.1 0.3 0.21 0.16 0.External Factor Evaluation Matrix McDonalds Key External Factors Opportunities New Products & Services Beverage Market (frosties) Growth of Franchise Restaurants Demand for Organic Products 0.27 0 0 0 0 0 0 Totals 1 2.09 0.07 0 0 0 0 Threats Change in Commodity Prices Food Safety and Food Borne Illness Concerns Economic Slowdown Growing Health Consciousness Intense Competition (din-in restaurants. & Roy 2009 49 .0 to 1.07 4 1 0.

Plourde. & Roy 2009 50 . Ouellette.Internal Assessment O‟Malley.

aspx?ia x=1&Symbol=MCD O‟Malley.msn.com/investor/charts/chartdl. Plourde. & Roy 2009 51 . Ouellette.McDonald's Performance Chart 2006 http://moneycentral.

Financial Highlights • Earnings per share from continuing operations have increased 13% in 2006. • McDonald‟s is focusing on the Brand McDonalds. O‟Malley. & Roy 2009 52 . received $300 million in cash and 18 million shares of McDonald‟s stock. They disposed of Chipotle Mexican Grill in 2006. • Cash from operations has averaged more than $4 billion per year for the last three years. Ouellette. Plourde.

6 21. Ouellette.6B •Three Year Compound Annual Return to Shareholders •MCD 24% •S&P 10% •DJIA 8% •McDonalds more than doubled its annual return to shareholders than the S&P 500 and the Dow Jones Industrial Average.8B 18.) •Revenue Grew Billion •2006 •2005 •2004 9% to a record 21.6B 19.Financial Highlights (Cont. Plourde. & Roy 2009 53 . O‟Malley.

Ouellette.9B •Totaled more than $9B between 2003-2006 O‟Malley. •2006 $1.) •Dividends have increased every year since McDonalds first paid in 1976. nearly doubled since 2004. Plourde. & Roy 2009 54 .9B 2.3B 0.Financial Highlights (Cont.1B 1.55 •Cash returned •2006 •2005 •2004 •2003 to shareholders: 4.67 •2004 $0.00 •2005 $0.

Plourde. Ouellette.Income Statement O‟Malley. & Roy 2009 55 .

Balance Statement http://finance.yahoo. & Roy 2009 56 . Ouellette. Plourde.com/q/bs?s=MC D&annual O‟Malley.

54 11.29 0.17 0.Liquidity Ratios Current Ratio Quick Ratio Leverage Ratios Debt-to-Total Assets Ratio Debt-to-equity Ratio Long-term debt-to-equity Ratio Times-Interest-earned Ratio Activity Ratios Inventory Turns Fixed Assets Turnover Total Assets Turnover Accounts Receivable Turnover Average Collection Period Profitability Ratios Gross Profit margins Operating Profit Margin Net Profit Margin Return on Total Assets Return on Stockholders equity Earning per share Price-earnings Ratio Growth Rations (yearly) Sales Net Income Earnings per share Dividends per share 9.54 0.33 0.00% 0.72 Ratios O‟Malley. & Roy 2009 57 . Ouellette.06 185.75% 50.90 0.72 25.22 0.20% 16.76 1.90 14.94 15.23 2.30% 36.12 0.36 1.10 0.70 0. Plourde.

Industry Ratios Growth Rates % Sales (Qtr vs.8 11.16 26.) Net Income (5-Year Annual Avg.14 10 21.5 -9.5 8. & Roy 2009 .4 31 12.9 25.8 30.8 17.89 13.) 5Yr Net Profit Margin (5Year Avg.39 10.) 5Yr Pretax Margin (5-Year Avg.4 2.63 24. Ouellette.9 7.6 33.1 8.5 SP-500 8.3 16 6. year ago qtr) Sales (5-Year Annual Avg.5 12.) Dividends (5-Year Annual Avg.1 42. year ago qtr) Net Income (YTD vs.1 3.4 13 2.38 3.6 13.3 8.) Price Ratios Current P/E Ratio P/E Ratio 5-Year High P/E Ratio 5-Year Low Price/Sales Ratio Price/Book Value Price/Cash Flow Ratio Profit Margins Gross Margin Pre-Tax Margin Net Profit Margin 5Yr Gross Margin (5-Year Avg.4 33.7 58 O‟Malley.02 5.5 12.1 30.) Industry 7.34 20. Plourde. YTD) Net Income (Qtr vs.5 16.

925 29.19 0.58 1. Ouellette.5 5.696 343.9 34.4 11.7 37.7 14.150 48.3 20.1 4 5.1 6.Financial Condition Debt/Equity Ratio Current Ratio Quick Ratio Interest Coverage Leverage Ratio Book Value/Share 0.7 43.4 13.8 5.7 3.1 3.8 7.69 0. & Roy 2009 59 .) Return On Capital (5-Year Avg.3 4 16.) Management Efficiency Income/Employee Revenue/Employe e Receivable Turnover Inventory Turnover Asset Turnover 15.9 1.) Return On Assets (5-Year Avg.6 0.5 5.9 0.) Investment Returns % Return On Equity Return On Assets Return On Capital Return On Equity (5-Year Avg.8 3.25 Industry Ratios (Cont.1 4.4 0.5 0.6 O‟Malley. Plourde.930 9.

Net Income X 5 = 3544. Ouellette. Stockholders' Equity + Good Will = 15458.531. Number of Shares Outstanding X Share Price = 1204 X 44.362.30 + 2073.00 3. & Roy 2009 60 .32 Method Average $34.16 X Net Income 3544.373.22 O‟Malley. Plourde.Net Worth Analysis 1.33 $53.67 4.747.33/EPS 2.6 $3.2 $64.721.44 = 18.90 2.20 X 5 $17. Share Price = 44.

Strong Global Presence (located in over100 countries) 2. Ouellette. Plourde. Revenue Growth 9% (Above Industry Average of 7. Systemization and Duplication (Consistency) O‟Malley.Strengths 1. Brand Recognition 4.Internal Audit. Strong Real Estate Portfolio 3.5%) 5. The Ronald McDonald House (Children Charity) 6. & Roy 2009 61 .

Market Saturation (more difficult to add new stores) 6. & Roy 2009 62 . Ouellette. Customer Service 5. Product Innovation 3. Plourde. Public Perception (perceived as a contributor to societies obesity problem) 2.Internal Audit-Weaknesses 1. Labor Turnover O‟Malley. Advertising (targets young children) 4.

3 or 4 3 or 4 4 4 4 4 4 4 0.44 0.09 0.16 Weighted Score Advertising.08 1 or 2 1 2 0.07 0.11 0. Plourde.11 0.36 0.06 2 2 2 1 0.16 0.06 0 0 0 0 0 Totals 1 2.Internal Factor Evaluation Matrix McDonald's Key Internal Factors Internal Strengths Strong Global Presence (located in over 100 countries) Strong Real Estate Portfolio (franchises. & Roy 2009 63 .36 0 0 0 0 Internal Weaknesses Public Perception (perceived as a contributor to societies obesity problem) Product Innovation 0.0 to 1.targets young children (many countries ban unhealthy advertisements) Customer Service Market Saturation (more difficult to add new stores) Labor Turnover 0. 2.24 0. buildings) Brand Recognition (Ronald McDonald is as famous as Mickey Mouse) Revenue Growth 9% (Above Industry Average of 7.09 0.95 O‟Malley.36 0. Ouellette.09 0.07 0.06 0.14 0.09 0. land.14 0.0 Rating 1.09 Weights 0.44 0.5%) The Ronald McDonald House (Children Charity) Systemization and Duplication Process (consistency) 0.08 0.

Plourde. & Roy 2009 64 .Strategic Formulation O‟Malley. Ouellette.

O1) WO Strategies ST Strategies WT Strategies 1. Spend more money on 2. O5) menu.SWOT Matrix SO Strategies 1. T6) 3. Research and Develop Products to Older increase Brand Recognition and products that quell Demographic. O6) services. Launch Marketing Campaign 1. Develop alternatives to Research and existing menu that can be easily 2. Ouellette. Create an organic territories. T4) 2. (S1. O4. S4. Advertise Organic for Ronald McDonald House to 1. T2. (W2. O1) O‟Malley. Customer Loyalty. (W2. & Roy 2009 65 . Increase spending on 2. (S6. O1) (S6. Develop Green Development to create implemented and don't rely on Customer Service efforts to Packaging for all new products and more expensive commodities. T3. (W3. (S5. Develop New Products & Services For Global Markets. Integrate into new 3. Growing Health Concerns. T1) (W4. O6) T5) (W1. Plourde. Stores. (S1. decrease legal challenges. S3.

Plourde. & Roy 2009 66 . Ouellette.McDonald’s SPACE Matrix Conservative FS +6 +5 +4 +3 +2 +1 Aggressive CA -6 -5 -4 -3 -2 -1 -1 -2 -3 -4 +1 +2 +3 +4 +5 +6 IS Defensive -5 -6 Competitive ES O‟Malley.

Ouellette. Plourde. & Roy 2009 67 .Grand Strategy Matrix O‟Malley.

•No Value in producing a BCG Matrix •McDonalds would be considered a Star. Plourde. & Roy 2009 68 . Ouellette.BCG Matrix •McDonalds stores compete in the same market whether they are corporate owned or franchised. O‟Malley.

Plourde.99 V VI VII Low 1-1.99 I High 3-4 II III EFE Scores IV Medium 2-2. & Roy 2009 69 .99 VIII IX O‟Malley.IE Matrix IFE Scores Hold And Maintain Strong 3-4 Average 2-2. Ouellette.99 Weak 1-1.

Ouellette. Plourde.Matrix Analysis Alternative Strategies Forward Integration Backwards Integration Horizontal Integration Market Penetration Market Development Product Development Concentric Diversification Conglomerate Diversification Horizontal Diversification X X IE SPACE X X X X X X X X X GRAND COUNT 1 1 1 2 1 2 X X X 2 2 2 Joint Venture Retrenchment Divestiture Liquidation X 2 0 0 0 O‟Malley. & Roy 2009 70 .

A. Ouellette. Market Penetration B. Product development & related diversification 2) Spend more money on research and development to create new products and services and increase the efficiency of operation.Possible Strategies 1) Create an Organic Menu. Product development & related diversification O‟Malley. Plourde. A. & Roy 2009 71 .

Quantitative Strategic Planning MatrixQSPM Option2 Spend more money on R&D to create new Create an Organic products and services and increase the efficiency of menu.12 0.24 2 0.36 0 0 0.28 0.2 0. operations Weight AS TAS AS TAS 1 to 4 1 to 4 0.0 4 2 2 4 4 3 2 3 3 3 O‟Malley. Plourde.4 4 0.06 4 0.16 0.08 3 0.07 0.09 0.32 0.4 0. & Roy 2009 72 .21 0.09 1 0 0.08 0. Wendy's) Legal Challenges (8.07 0.24 0. Ouellette.14 0 0.24 2 0.3 0.8million lawsuits) total should be 1.09 0 0 0.1 0.14 0 0.27 0 Option 1 Key External Factors Opportunities New Products and Services Beverage Market (frosties) Growth of Franchise Restaurants Demand for Organic Products International Expansion Conservation (Going Green) Threats Change in Commodity Prices Food Safety and Food Borne Illness Concerns Economic Slowdown Growing Health Consciousness Intense Competition (Dine-In Restaurants.07 0.1 4 0.1 0.

27 0. Ouellette.32 0 0 0 0 1 3.07 0.44 0 0 0 Increase $ on Research & Development 1 to 4 4 0.QSPM (Cont.36 0 0. buildings) Brand Recognition (Ronald McDonald is as famous as Mickey Mouse) Revenue Growth 9% (Above industry average 7.08 0.07 0.3 3. Plourde.11 0.08 0.09 0.32 0 0 0 0 3 4 0.06 4 4 0.5% The Ronald McDonald House (Children Charity) Systemization & Duplication Process (consistency) Weaknesses Public Perception (perceived as a contributor to societies obesity problem) Product Innovation Advertising (targets young children) Customer Service Market Saturation (more difficult to add new stores) Labor Turnover total should be 1.11 0. & Roy 2009 73 .23 O‟Malley.44 0 0 0 4 4 0.09 0.06 0.36 0 0.09 0.) Key Internal Factors Strengths Strong Global Presence (located in over 100 countries) Strong Real Estate Portfolio (land.0 0.09 Organic Menu 1 to 4 4 0.

Future Plans O‟Malley. Ouellette. & Roy 2009 74 . Plourde.

Ouellette. & Roy 2009 75 .Objectives Objectives for 2007 and the next three years are: •Better restaurant operations •Branded affordability •Menu variety and beverage choice •Grow market share •Maintain debt-to-capital levels to 3540% •Create long-term profitable growth for shareholders O‟Malley. Plourde.

000 Develop green packaging for all stores. $15.000 Spend more money on Research & Development to create new products and services and increase the efficiency of operations.000 Increase spending on customer service efforts to decrease legal challenges. Plourde. & Roy 2009 76 .000.000.000 O‟Malley.000. This will decrease McDonald‟s operations expenses and create a better atmosphere in the long run.000 Advertise organic products to the older demographic.000. $25. This will increase McDonald‟s sales and be a positive effective on its public image. Ouellette. $5. $10.000 Total Costs= $65.000. $10.Recommendations Create an organic menu to satisfy the growing hunger for healthier foods.000.

9% in 2006.7 billion in 2006 up 21% from 2005.8% of overall food and beverage sales in 2006. including food and non-food products. Ouellette. Plourde. O‟Malley. were $17.Going Organic •Organic Food sales are anticipated to increase an average of 18 percent each year from 2007 to 2010. •Total US organic sales. •Organic food represents approximately 2. The organic sector grew 20. & Roy 2009 77 .

Ouellette. 1 in Arizona. •Easy acquisition for McDonalds if they pursue the organic segment of the fast food industry. •Privately owned company. Plourde. •Serves only organic food and beverages. 1 in Kansas. O‟Malley. •Locations: 2 in Maine. & Roy 2009 78 . 1 in Massachusetts.O'Naturals Organic Fast Food •McDonalds “competition” in the organic segment.

Plourde.Implementation O‟Malley. Ouellette. & Roy 2009 79 .

000.562.204.61 Tax Rate: 35% Interest Rate: 7% # Shares Outstanding: 1.124 O‟Malley.000. Plourde.EPS/EBIT Analysis Amount of money needed: $65.000 Stock Price as of 12/31/06: $41. Ouellette. & Roy 2009 80 .000 # Shares needed: 1.

468.000 1.157.205.000 246.750 1.500 387.815.000.500 1.000 61.562.500 387.124 0.093.550.250 208.000 245.093.250.450.500 1.30 Percent Stock Recession Normal Boom 65.EBS/EBIT Analysis (Cont.562.000 595.185.000 1.000 208.500 1.468.323500542 Recession 65. Plourde.487 0.000 0 600.000 4.000 60.000 390.562.815.000.500.292.750.750 160.000 4.124 0.385.000 21.205.907.000 87.450.000.000 162.562.000 250.000.000.000 250.407.204.550.205.205.429.032605354 0.450.500 1.000 245.093.000 3.000 42.250 40.185.000 3.468.000 596.907.134791892 Boom 600.124 0.205.000.000 600.635.500 39.500 1.042.550.000.250 86.322075427 O‟Malley.000 3.562.000 4.205.185.000.000 0 65.487 0.637 1.133195457 0. & Roy 2009 81 .204.000 4.487 1.042.407.929.550.000 85.000 208.500 159.204.000.000 21.321047329 EBIT Interest EBT Taxes EAT #Shares EPS EBIT Interest EBT Taxes EAT #Shares EPS 70 Percent Stock.30 Percent Debt Recession Normal 65.000 21.) Recession 65.321172178 70 Percent Debt.000 60.000 210.132390144 Boom 600.000.000 4.205.500 159.000.179.450.750 387.637 1.500 85.205.000 0 250.157.124 0.03259268 Debt Financing Normal 250.562.000 595.000.000.000.000.550.500 39.885.13233868 Boom 600. Ouellette.000 4.500.000.000 1.815.035045892 Common Stock Financing Normal 250.542.205.450.450.550.637 0.033358901 0.292.000 22.000.124 0.124 0.542.

Plourde.Other Issues • Labor Turnover •Employee Retention • Cultural differences in international countries • Laws and regulations in international countries • Currency • Public Relation O‟Malley. & Roy 2009 82 . Ouellette.

& Roy 2009 83 .Evaluation O‟Malley. Plourde. Ouellette.

not just bigger. suppliers. Ouellette. & Roy 2009 84 . and employees united in our commitment to customers. with its strategic focus on "being better. •We have the world's best owner/operators.Update-Current Strategy and Objectives 2007-2008 •Our Plan to Win." has delivered even better restaurant experiences to customers and superior value to shareholders. •We are leveraging greater consumer insight to deliver sustainable business results for the long-term benefit of our shareholders. Plourde. O‟Malley.

aspx?ia x=1&Symbol=MCD O‟Malley.McDonald’s Performance Chart 2006-2009 http://moneycentral.msn.com/investor/charts/chartdl. Ouellette. & Roy 2009 85 . Plourde.

•Since its founding in 1955.000 pounds of fresh apples this year.000. •Nearly one in eight workers in the US has at some time been employed by McDonald‟s. O‟Malley. & Roy 2009 86 . Plourde.S. McDonald‟s has sold well over 100 billion hamburgers. •More than 50.000 students from all over the world have graduated with “Bachelor of Hamburgerlogy” degrees from McDonald‟s from Hamburger University.McDonald’s Trivia •McDonald‟s sell more than 1/3 of all the French fries sold in restaurants in the U. •McDonald‟s restaurant will buy 54. Ouellette. •There is about 178 sesame seeds on a Big Mac bun.

O‟Malley. Ouellette. & Roy 2009 87 . Plourde.

Online Edition. 2009 http://galenet.mcdonalds. Notable Corporate Chronologies.galegroup. Plourde. Farmington Hills.com o moneycentral. Reproduced in Business and Company Resource Center. Mich. 2007.com/ Business & Company Resource Center o McDonald’s Corp.Bibliography  McDonald‟s Corporation-2007 Case Notes by Vijaya Narapareddy of University of Denver  McDonald‟s Online www.Strategic Management Case Study  Analyst Reports o Yahoofinance.: Gale Group. Thomson Gale.com/servlet/BCRC O‟Malley.onaturals. & Roy 2009 88 .msn.com/ o 2006 Annual Report o Graphics  Datamonitor o Global Fast Food Industry Profile 2008 o US Fast Food Industry Profile 2008  Tony Gauvin o Wendy’s 2007.com  O'Naturals o www.com o Organic Trade Association http://www. Ouellette.ota.