McDonald

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McDonalds
Chase Mueller Ashley Hoptay Tanner
Gilreath Anna Rendon Olivia Erwin Brandon
Laviage Paige Stone
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Overview

• Analyzed McDonalds and its three competitors,
  YUM! Brands, Burger King and Wendys, to assess
  the companys standing in the industry.
• Focused on the key company characteristics, its
  financial situation, each companys
  organizational flexibility and culture,
  strategies used, and their ability to be able to
  compete in todays market and economy.

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Corporate Social Responsibility

• Has become a way of doing business.
• Understand that they must deliver responsible
  food to its consumers.
• How it serves food.
• Where the food comes from.
• What people want from it.
• Therefore, the company works closely with its
  suppliers, franchisees and employees to ensure
  products are safely delivered to consumers.

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Corporate Social Responsibility

• McDonalds goes green
• Since 2000, the company has opened up multiple
  green restaurants.
• Rebuilding restaurants with a more innovative and
  efficient design that will reduce the use of
  water and energy.
• Enhancing its packaging 82 of its packaging is
  made from renewable resources
• Closed Loop Hierarchy for Packaging and Waste

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Corporate Social Responsibility

• McDonalds ishealthy?
• Three aspects involved provide consumer-friendly
  nutrition information, bring consumers
  high-quality choices, and communicate responsibly
• Offer salads, wraps, smaller portions and
  healthier sides. Zero grams of Trans fat in fried
  foods.
• Can find all of the nutrition information on the
  Web. Also implementing a new packaging design
  where the nutrition information will be placed on
  the wrapper.
• Strengthening its Global Childrens
• Marketing Guidelines

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Corporate Social Responsibility

• McDonalds makes its presence known
• Gets involved with its communities in four ways
• Ronald McDonald House
• Sponsorships
• Owner/Operator Involvement
• Disaster Relief

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Corporate Social Responsibility

• Quality every step of the way
• Takes great prudence to ensure that every aspect
  of the supply chain positively contributes to the
  safety, quality and availability of its products.
• Uses a Social Accountability program to uphold
  its strict standards for its suppliers.
• Not afraid to leverage its size and influence to
  raise questions about the suppliers methods and
  to encourage improvement in their practices.

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Forecasting and Speed of Response

• McDonalds plays a large part in its communities,
  and the company is constantly searching for new
  ways to get involved or help the environment. The
  company also tries to project future needs to
  lessen the impact that its business has on its
  communities.
• McDonalds is able to quickly respond to its
  communities needs and wants
• McDonalds was the only quick service restaurant
  to make Health Magazines list of Americas Top
  10 healthiest meals at limited-service
  restaurants

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Entrepreneurial Orientation

• 78 of McDonalds restaurants are operated by
  franchisees.
• Creates a strong entrepreneurial feel.
• The only competitor with a larger mix of
  franchisees is Burger King 90 of restaurants
  are operated by franchisees.
• Very selective when granting franchises or
  licenses. Will not franchise to passive investors
  that do not appear capable of matching the goals
  and requirements that McDonalds sets for all of
  its locations

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Attraction and Retainment

• Make that a McCareer please.
• Supports development from the crew room to the
  board room.
• Promotes from within.
• Provides training for all levels.
• Service level receive on the job training where
  they learn the technology as well as customer
  service techniques
• Provide college level classes at Hamburger
  University for management training
• McDonalds Leadership Institute provides almost
  200 employees from the McDonalds system to
  partake in the accelerated programs and learn how
  to be a corporate leader in the company
• Ranked as one of the Top 20 Global Companies for
  Leaders in 2007 by Fortune

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Super Sizing Value

• Value menu no value cost trade-off
• Dollar Menu, Yen for Great Value in Japan
• Maintain a supply of high quality ingredients
• Ensured by the companys size and strength over
  its suppliers
• Variety and selection of menu items to satisfy
  all tastes
• Research and Development is essential to growth
• Have three food studios located in Munich, Hong
  Kong and Chicago where chefs test and create
  their new concoctions

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Delivering Value

• Convenience and accessibility are important
  aspects that bring consumers more value
• Located in close proximity to each other
• Found in areas with a high customer concentration
• Expanding the number of 24 hour locations
• Opening drive-thrus in areas such as Russia and
  China and adding double drive-thrus in the US
• Kiosks in India and Indonesia
• Delivery service in Singapore, Egypt and other
  Asian and Middle Eastern countries

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Reimaging Value

• Feel that its restaurants are the best way for
  the company to express its brand and create the
  ultimate customer experience
• Renewed about 10,000 restaurants within the past
  five years
• Design is contemporary and eco-friendly
• Burger King is also re-investing in the design of
  its restaurants

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Marketing and Promotions

• Relevant marketing and promotions strengthen its
  connection with its customers and build brand
  awareness and loyalty
• Im Lovin It campaign
• Promotions such as Monopoly and Uno evoke
  customer interaction and get them involved with
  the brand
• Burger King is advertising more and is utilizing
  a more viral campaign

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Financial and Accounting Analysis

• Quantitative accounting disclosures are intended
  to effectively communicate the financial
  statements numbers
• Certain legal manipulations and disclosures could
  give a company an unrealistic value as well as
  mislead its investors.
• Tools
• Financial Ratios

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Ratio Analysis

• It is used to show the resources a firm and its
  ability to cover their current assets with
  current liabilities.
• The higher a firms current ratio is, the more
  able a firm is to pay off its liabilities.

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Ratio Analysis

• The quick asset ratio, or acid-test, uses the
  firms most liquid assets than can quickly be
  turned into cash for their book value amounts to
  pay off current debts.
• The assets included in this ratio are cash,
  marketable securities, and accounts receivable.

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Ratio Analysis

• Working capital turnover is determined by
  dividing a companys sales by its working
  capital current assets less current liabilities.
• It evaluates how efficient a company uses its
  working capital balance to create sales.

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Ratio Analysis

• It simply gives profit as a percentage of net
  sales.
• It shows how much of each dollar of product sold
  is profit.
• By having a small percentage it shows that the
  company is not utilizing their resources well and
  their cost to produce the item are too high.

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Ratio Analysis

• The firm uses the previous years assets to
  better reflect profitability for the current
  year.
• This is done because profits with the new assets
  will not be recognized until the next fiscal year
  and that is how it gives people a better
  understanding on how they either helped or hurt
  the company.

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Ratio Analysis

• The purpose of the Z-score is to help us make
  calculations that help us to understand where a
  company stands with their credit risk.
• A company is considered to be bankrupt when their
  Z-score is below 1.81. When a firms score
  exceeds 2.67, the firm is considered to have low
  risks in the bankruptcy and credit categories.

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Marketing and Management

• McDonalds once focused on children for their
  advertising, but recent law suits and
  documentaries resulted in the companys
  innovation and major changes to health related
  product ranges. Now more teenagers and adults
  rule the McDonalds ad world.
• McDonalds had begun concentrating so heavily on
  expansion and growing big that it missed out on
  key factors like quality maintenance and RD.
• McDonalds strategic plan is influencing their
  marketing efforts by building better brand
  transparency. They want their image to be
  recognized globally. They are enhancing the
  customers experience.

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Marketing and Management

• The change in the top managerial level has
  created a new wave in performance and major
  changes have been implemented to retain and
  sustain the brand quality and innovation. As the
  new CEO rightly quotes
• The world has changed. Our customers have
  changed. We have to change too."
• -James R. Cantaloupe,
• Chairman and CEO, McDonalds
• Types of marketing mix that McDonalds use to
  achieve their marketing goals are longer
  operating hours, everyday value meals, and
  optimizing efficiency in the drive-thru.

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Business Life Cycle McDonalds

• 1948 Richard and Maurice McDonald open the first
  McDonald's restaurant in San Bernardino,
  California.
• 1954 Ray Kroc gains the rights to set up
  McDonald's restaurants in most of the country.
• 1955 Kroc opens his first McDonald's restaurant
  in Des Plaines, Illinois he incorporates his
  company as McDonald's Corporation.
• 1961 Kroc buys out the McDonald brothers for
  2.7 million.
• 1963 McDonald's goes public.
• 1967 The company opens its first foreign
  restaurant in British Columbia, Canada.
• 1973 Breakfast items begin to appear on the
  menu, with the debut of the Egg McMuffin.
• 1974 The first Ronald McDonald House opens in
  Philadelphia.

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Business Life Cycle McDonalds

• 1975 The first McDonald's drive-thru window
  appears.
• 1985 McDonald's becomes one of the 30 companies
  that make up the Dow Jones Industrial Average.
• 1998 The company takes its first stake in
  another fast-food chain, buying a minority
  interest in Colorado-based Chipotle Mexican
  Grill.
• 1999 Donatos Pizza Inc. is acquired.
• 2000 McDonald's buys the bankrupt Boston Market
  chain.
• 2002 Restructuring charges of 853 million
  result in the firm's first quarterly loss since
  going public.
• 2003 McDonald's sells Donatos in order to
  refocus on its core hamburger business.

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Business Life Cycle Wendys

• 1969 Dave Thomas opens the first Wendy's
  restaurant in downtown Columbus, Ohio.
• 1972 Wendy's franchising begins.
• 1975 First international restaurant opens in
  Canada.
• 1976 Wendy's International, Inc. goes public.
• 1977 Company begins national television
  advertising.
• 1978 The 1,000th Wendy's opens in Springfield,
  Tennessee.
• 1981 Thomas makes his first appearance as
  Wendy's advertising spokesperson.
• 1984 Famous and award-winning "Where's the
  Beef?" ad campaign is run.
• 1986 James W. Near becomes president and COO
  and launches a major reorganization.
• 1995 Wendy's International acquires Tim Hortons,
  a Canadian coffee and baked goods chain.
• 1997 The 5,000th Wendy's restaurant opens in
  Columbus, Ohio.
• 2002 Dave Thomas dies Wendy's International
  acquires a 45 percent stake in Café Express.

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Business Life Cycle Burger King

• 1954 James McLamore and David Edgerton establish
  Burger King Corporation.
• 1959 The company begins to expand through
  franchising.
• 1967 Burger King is sold to Pillsbury.
• 1977 Donald Smith is hired to restructure the
  firm's franchise system.
• 1989 Grand Metropolitan plc acquires Pillsbury.
  
• 1997 Grand Metropolitan merges with Guinness to
  form Diageo plc.
• 2002 A group of investors led by Texas Pacific
  Group acquire Burger King.

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Business Life Cycle KFC

• 1952 The Colonel begins actively franchising his
  chickenbusiness by traveling from town to town
  and cooking batches of chicken for restaurant
  owners and employees. The Colonel awards Pete
  Harman of Salt Lake City with the first KFC
  franchise. A handshake agreement stipulates a
  payment of a nickel to Sanders for each chicken
  sold.
• 1960 The Colonel's hard work on the road begins
  to pay off and there are 190 KFC franchisees and
  400 franchise units in the U.S. and Canada.
• 1964 Kentucky Fried Chicken has more than 600
  franchised outlets in the United States, Canada
  and the first overseas outlet, in England.
• 1966 The Kentucky Fried Chicken Corporation goes
  public.
• 1969 The Kentucky Fried Chicken Corporation is
  listed on the New York Stock Exchange.
• 1971 More than 3,500 franchised and
  company-owned restaurants are in worldwide
  operation when Heublein Inc. acquires KFC
  Corporation

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Business Life Cycle KFC

• 1979 KFC cooks up 2.7 billion pieces of chicken.
  There are approximately 6,000 KFC restaurants
  worldwide with sales of more than 2 billion.
• 1982 Kentucky Fried Chicken becomes a subsidiary
  of R.J. Reynolds Industries, Inc. (now RJR
  Nabisco, Inc.) when Heublein, Inc. is acquired by
  Reynolds.
• 1986 PepsiCo, Inc. acquires KFC from RJR
  Nabisco, Inc.
• 1997 PepsiCo, Inc. announces the spin-off of its
  quick service restaurants - KFC, Taco Bell and
  Pizza Hut - into Tricon Global Restaurants, Inc.
• 2002 Tricon Global Restaurants, Inc., the
  world's largest restaurant company, changes its
  corporate name to YUM! Brands, Inc. In addition
  to KFC, the company owns AW All-American Food
  Restaurants, Long John Silvers, Pizza Hut and
  Taco Bell restaurants

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McDonalds Corporate Structure

• Management gurus often cite McDonalds corporate
  structure model.
• The company's highly decentralized management
  runs its franchises.
• McDonalds uses a functional structure, with the
  Chief Executive overseeing five major areas of
  activities.
• Franchise candidates must sign an agreement with
  the firm, which gives them the right to operate a
  specific McDonalds location for a period of 20
  years.
•  

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McDonalds Corporate Structure Chart
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McDonalds Corporate Culture

• McDonalds vision statement is quality, service,
  convenience, and value (QSCV)..
• No one portrays McDonalds culture more than
  Hamburger University, it is a place where
  Organizational culture is franchisees, managers,
  and assistant managers are indoctrinated into the
  culture that is McDonald's.
• This structure allows McDonalds to export
  successfully not only its management system but a
  very distinct culture as well.
• Inspectors continually reinforce McDonalds
  culture and by contests to determine whom best
  reaches the standards McDonald's sets for all its
  franchises.
• McDonald's manuals emphasize the organization's
  motto, QSCV, and they define every task an
  employee needs to know.
• These manuals ensure that efficiency,
  predictability, and control are involved in
  production and customer service.

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Yum! Brands Corporate Structure

• Originally an accumulation of restaurant chain
  accounts put together for not only the addition
  of Pepsi fountain accounts, but for profit from
  food sales.
• Chains were acquired and managed virtually
  independently, essentially skipping the usual
  corporate practice of bringing them in line with
  the rest of the business units. 
• Now, the company operates its business through
  three geographical reporting segments the US,
  the International segment and China segment.  
• The US segment operates multi-brand restaurants,
  where two or more of the concepts, such as KFC,
  Pizza Hut, Taco Bell, Long John Silver's and AW,
  are operated in a single unit.  
• Outside the US the company and its franchisees
  use decentralized sourcing and distribution
  systems involving many different global,
  regional, and local suppliers and distributors.

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Yum! Brands Corporate Structure Chart
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Yum! Brands Corporate Culture

• Over the past 12 years, Yum! Brands success has
  been driven by their focus on building leading
  brands in China in every significant category.
• They strive to drive aggressive, international
  expansion and build strong brands everywhere.
• They try to dramatically improve U.S. brand
  positions, consistency and returns, driving
  industry-leading, long-term shareholder and
  franchisee value, and build a unique, fun culture
  led by people who love the restaurant business.
•  They created the Yum! Dynasty Growth Model.
• How We Win Together Principles are their
  corporate values and are built around a "People
  Capability First" philosophy.

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Strengths

• Franchises
• McDonalds operates 31,377 restaurants with
  20,505 of those restaurants being operated by
  private owners
• Brand Recognition
• Branding allows customers to recognize icons,
  thus becoming more brand loyal
• Product Uniformity
• Offering the same consistent product creates
  customer loyalty
• Pricing Strategy
• Value Menu

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Weaknesses

• Saturation
• pricing wars against competitors has caused a
  decrease in revenue
• Public Perception
• unhealthy product offerings has lead to numerous
  lawsuits

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Opportunities

• Market share
• countries such as Latin America and the
  Caribbeans, Europe, The Middle East and North
  America, Sub- Sahara Africa, and Oceana have very
  few McDonalds chains, creating a huge untapped
  market
• Younger Generation
• tend to be on the go, and look for meals that are
  quick, cheap, and convenient, thus giving a huge
  opportunity to serve an adult crowd

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Opportunities

• Innovativeness
• Continuously using technological factors, perhaps
  text message ordering can influence revenue or
  joining the going green movement
• Product Offering
• Constantly seeking new product offerings allows
  new opportunities for growth and expansion of
  their brand recognition

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Threats

• Economic Slowdown
• Recessionary period and global economic slowdown
  has led to currency losses, inflation or
  deflation
• Casual Dining Restaurants
• have decreased menu prices
• Cheddars burger 4.99
• Imitation
• new formats and new menu items are being imitated

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Company Assessment Summary
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Competitive Scope

• Global Scale
• Local, regional, national, and international
  competitors
• Makes up 2.4 of 575,000 total restaurants in U.S.

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Strategic Intent

• Leader in QSR industry
• Uses advertising, marketing, and public relations
  to promote brand image and focus on value, food
  taste, menu choice and customer experience

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Market Share Objective

• Focus on internal growth through expanding the
  number of restaurants as well as capturing new
  market share from other industries.
• Ex coffee sector
• Plan to Win
• Designed to bring more value to shareholders
• Ex flat screen TVs, internet

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Competitive Position/Situation

• Well-entrenched
• Global leader
• Keep position through expanding the number of
  stores, internal operations to new ventures, and
  customer experience.

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Strategic Posture

• Defensive Strategies - reactions to competition
  and to defend market share
• Dollar menu
• Value meals
• Offensive Strategies - proactive approach to keep
  and secure its position as market leader
• New market ventures
• Customer loyalty

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Competitive Strategy

• Differentiation
• Advertising and marketing
• Recognizable name and logo
• Social responsibility and commitment to community
• Green movement
• Safe and high quality meat
• Technology
• Speedee Service System