McDonald¶s: Polishing the Golden Arches

Components of a Company¶s Macro-environment

Macro environment

Economic Conditions Competitive Environment
Suppliers Substitutes

Company
Rival Firms New Entrants Buyers

Major Rival Firms y Burger King Corporation y Wendy¶s International y Hardee¶s (CKE Restaurants) y Jack in the Box y Sonic .

68% 11.78% 3.2002 Company McDonalds Burger King Wendy¶s Hardee¶s Jack in the Box Stores 31108 11455 8811 3295 2000 Countries Market Share 120 58 22 15 1 33.System-wide Outlets for top five fast food Hamburger Chains & Market Share.67% .06% 13.39% 2.

Threat of Substitutes y Re-heatable Prepared Foods y Delivery foods such as pizza. salads . y Products purchased from the local grocery store y Availability of products that cater to the health- conscious lifestyle like Fruits.

Threat of New Entrants y In order to compete on a large scale. new firm will require a great deal of capital to invest in real estate and build physical restaurant locations. y The market is already so saturated that the new competitor might find it difficult to establish a customer base and become profitable .

. y Buyer can go to any fast food restaurant convenient to the.Bargaining Power of Buyer y Low Switching Cost y The majority of the public tends to view fast-food restaurants as primarily serving foods that are high in fat content and unhealthy and as a result they are likely to look elsewhere for a healthy food.

Bargaining Power of Supplier y Low bargaining power with suppliers since there are multiple suppliers for the same products y One company might purchase their meat supplies from a couple different meat manufacturers. then purchase their dairy needs from a number of different dairy companies. . and also purchase their bakery products from a variety of sources.

Technological Environment y Microwave oven led to decreased consumption of fried food & red meat. y E-learning program for training of staff y Installing wireless technology .

McDonald¶s has paid considerable attention to the children in every country. y Healthier options and brand Image needs to be provided y Must be convenient and fast to accommodate the fast pace of lifestyles. .Societal Values & Lifestyles y Affordable products with consistent quality. y No matter how different the tastes and the local needs are.

Population Demographic y Age -Happy meal for Kids -Targeting Young Adults with relevant advertising featuring music from leading recording artists y Local flavor in Products -In India McAloo tikki -Kosher restaurant in Jerusalem that did not serve dairy products. .

SWOT Analysis .

Strength y Strongest international presence among fast-food y y y y y chains Location Real estate operations bring in large revenues and allow McDonald¶s to open more stores Local Menus in Different Regions Kosher restaurant in Jerusalem Consistent Expansion Hamburger University training program for McDonald¶s franchise owners & store managers .

00. Poor average Service time as compared to rivals y Poor Management & Marketing ³Made for you System´-Costing $420 million to McDonald & $18000 to $1.000 to franchisees.Weaknesses y Customer Service McDonald¶s has the lowest the customer service ranking in the fast food industry and is ranked even lower on customer service than the US internal revenue services. y High Employee Turnover .

Weaknesses y Declining market share y Weak product development Failures: McLean. salad shaker y Disgruntled franchisees Over domestic expansion & ³Made for you´ system y Quality and taste of products . fat-free apple muffins. Low-fat frozen yogurt.

Opportunities y Diversification and acquisition of other quick-service restaurants y Add healthier lines of food y Initial public offerings in other countries could raise revenues y Retail merchandise potentially used to raise revenues .

product innovation. and growth y Changing Customer Preferences Health conscious consumers demanding better quality. All fast-food chains expected to struggle to meet new consumer health expectations y Matured & Saturated Industry in US y Changes in Currency Exchange Rate . healthier menu items.Threat y Increased Competition Increased competition among rival sellers. including price wars.

Key Success Factors y Location y Restaurant appearance. putting much focus on cleanliness and modern environment y Customer Taste Preferences Growing interest in healthy foods y Affordable Price y Building trust and brand loyalty .

changing conditions.Strategy Making Process Monitoring Developments. new opportunities. evaluating performance & making corrective adjustments Developin g Strategic Vision Setting Objectives Crafting strategy to achieve objectives & vision Implementi ng & Executing strategy Revise as needed in light of actual performance. & new ideas .

Strategic Vision y ³Low-priced. increase dividends Annual System-wide sales growth of between 3 & 5 percent. Cleanliness) ‡ Financial Objectives Cutting capital expenditure by 40%. Clearing Debts. repurchase of shares. Service.´ Objectives ‡ Focus on QSVC (Quality. value-oriented product fast & efficiently in clean & pleasant surroundings. . Value.

product.Crafting Strategy y The ³Plan to Win´ strategy is important in the offensive strategy because it is about being innovative and challenging to the competitors. people. and promotion. price. y The plan focuses on five key drivers of success. . place.

Strategy Implementation ‡ People -more visual menu boards. more relevant. and more modern -installing wireless technology -Adding Coffee Houses ³McCafe´ at value price . reducing menu items -interactive e-learning program to train staff ‡ Products -Responsive to changing taste preferences & premium products ‡ Place -Making restaurants cleaner.

Strategy Implementation ‡Price -Improving productivity & value -Low Price products for price sensitive customers & premium products for customers willing to pay high price ‡Promotion -Building trust & brand loyalty through promotion -³I¶m lovin¶ it´ campaign launched worldwide -targeting young adults with advertising featuring music Cont«. .

y Mystery shoppers.50. evaluating performance & making corrective adjustments y Company¶s stock price had reached a price of $24. .79 from $12. inspection & toll free numbers for customers to provide feedback.Monitoring Developments.

Past Strategies y Growth Strategy Market Development International Expansion y ³Made For You´ cooking system y Price cuts to attract customers  Providing value meal y Focus on building customer loyalty .

New McStrategies y Leverage Brand Equity ³I¶m lovin¶ it´ campaign launched in 2003 y Product Development: Focus on core business    Family Value Meal Happy meal Response to changing taste preferences & premium products .

New McStrategies y Market Penetration and Development  Continue International expansion y Retrenchment Turnaround Strategy Focus on internal operation & slowing store expansion ..Cont«.

.Cont«.. New McStrategies y Focus on Customer Services -Training staff worldwide in customer service attitudes and skills -Measuring success in terms of reducing complaints regarding service & increase friendliness scores & Speed of service.

Five Generic Competitive Strategies Overall Low-cost Provider Strategy Best Cost Provider Strategy Broad Differentiation Strategy McDonalds Focused Low-cost Strategy Focused Differentiation Strategy .

and continue their expansion in foreign countries. and the Pacific y McDonald¶s should continue its diversification and incorporate more healthy foods & Focus on healthier & Low fat products . such as Asia.Strategic Possibilities y Decrease expansion in the almost saturated domestic markets.

Thank You .

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