A PROJECT REPORT ONMCDONALDS AND ITS STRATEGIC MANAGEMENT SUBMITTEDTO THE UNIVERSITY OF MUMBAIAS A PARTIAL REQUIREMENT FOR COMPLETING THE DEGREE OFM.COM (ACCOUNTS) SEMESTER ISUBJECT: STRATEGIC MANAGEMENTSUBMITTED BY:SHUBALAXMI. SHETTYROLL NO.: 47

UNDER THE GUIDANCE OF DR. MINU THOMAS SIES COLLEGE OF COMMERCE AND ECONOMICS, PLOT NO. 71/72, SION MATUNGA ESTATE T.V. CHIDAMBARAM MARG, SION (EAST), MUMBAI 400022.

CERTIFICATE This is to certify that SHUBALAXMI. SHETTYof M.Com (Accounts) Semester I (academic year 2013-2014) has successfully completed the project on MCDONALDS & ITS STRATEGIC MANAGEMENT under the Guidance of DR. MINU THOMAS

_________________ ___________________ (Project Guide) (Course Co-ordinator)___________________ ___________________ (External Examiner) (Principal)

Place: _____________ Date: ______________

DECLARATION

I, SHUBALAXMI. SHETTY, Student M.Com (Accounts) Semester I (academic year 2013-2014) hereby declare that, I have Completed the project on MCDONALDS & ITS STRATEGIC MANAGEMENTThe information presented in this project is true and original to the best of my knowledge.

___________________SHUBALAXMI.SHETTY ROLL NO.:47

Place: _____________

Date: ______________

ACKNOWLEDGEMENT

I would like to thank the University of Mumbai, for introducing M.Com (Accounts) course, thereby giving its students a platform to be abreast with changing business scenario, with the help of theory as a base and practical as a solution.I am indebted to the reviewer of the project Dr. Minu Thomas, my project guide who is also our Principal, for her support and guidance. I would sincerely like to thank her for all her efforts.Last but not the least; I would like to thank my parents for giving the best education and for their support and contribution without which this project would not have been possible.

SHUBALAXMI.SHETTY ROLL NO.:47

TABLE OF CONTENTSRNO. TOPICS

1.EXECUTIVE SUMMARY

2.WHAT IS STRATEGY?

3.WHAT IS STRATEGIC MANAGEMENT?

4.MINT BERGS 5 PS FOR STRATEGY

5.HISTORY OF MCDONALDS

6.BACKGROUND OF MCDONALDS

7.STUCTURE OF MCDONALDS

8.LOGO AND SLOGAN

9.VALUES OF MCDONALDS

10.MISSION AND VISION STATEMENT OF MCDONALDS

11.BUSINESS STRATEGY OF MCDONALDS

12.PRODUCT DEVELOPMENT STRATEGY OF MCDONALDS

13.CHALLENGES TO GROWTH OF MCDONALDS

14.ANALYSIS OF MCDONALDS

15.a. SWOT ANALYSIS

16.b. PESTEL ANALYSIS

17.c. PORTERS FIVE FORCE ANALYSIS

18.d. COMPITITORS ANALYSIS

19.e. BCG MATRIX

20.f. EXTERNAL AND INTERNAL EVALUATION MATRIX

21.CONCULSION

22.BIBLIOGRAPHY

EXECUTIVE SUMMARY- The following assignment talks about the strategic management in context to McDonalds. Strategic management is one of the critical issues to be studied by a company in order to understand the causes and solution of the problems and hurdles in the way of the success of the business and its market growth. As we all know that it's a world of globalization and competition and therefore every company has to make certain plans and strategies in order to tackle the problems they face due to the competition in the local and global markets. Every company has to make effective strategies and plans in order to tackle the internal and the external problems faced by the company. Internal problems can be linked with any internal department or process such as HR or Pay role or machinery etc and the external challenges can be competition, changing technologies etc. Globalization on one hand gives benefits to the company to explore new markets and increase its customers in order to make more profits but it also poses different problems and challenges which the company has to tackle to continue its success in the new markets. Company has to design proper strategic plan to point out and tackle the problems curbing the success of the business. Either it's a local or a global market company always needs an efficient strategy to tackle the issues curbing its success in the market. This assignment will discuss the various strategic issues of concern for the McDonalds and plans it has designed to tackle these problems. We will be using different strategic models such as Product Life Cycle, Porter's Five Forces model and BCG matrix in order to understand the issues of strategic concern for the company and how to tackle them for the success of its business.What is management? Managementin allbusinessand organizational activities is the act of coordinating the efforts of people to accomplish desired goals andobjectivesusing available resources efficiently and effectively. Management comprisesplanning,organizing,staffing,leadingor directing, andcontrollinganorganization(a group of one or more people or entities) or effort for the purpose of accomplishing a goal.Resourcingencompasses the deployment and manipulation ofhuman resources,financialresources,technologicalresources, and natural resources.Since organizations can be viewed assystems, management can also be defined as human action, including design, to facilitate the production of useful outcomes from a system. This view opens the opportunity to 'manage' oneself, a prerequisite to attempting to manage others. Management is defined as the organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of clearly defined objectives One views management functionally, such as measuring quantity, adjustingplans, meetinggoals. This applies even in situations where planning does not take place. From this perspective,Henri Fayol(18411925)considers management to consist of sixfunctions:ForecastingPlanningOrganizingCommandingCoordinatingControllingWhat is strategy? The art of planning action to achieve a specific goal is called strategizing and the action plan is called Strategy (Rajan Saxena).The term Strategy was originally applied to warfare as an art of planning and directing large military movements and the operations of war (etymology: Greek strategos, 450 BC).In business, Strategy Management is now accepted as the discipline of managing resources to achieve long term objectives (Sharma & Banga).Richard L. Daft has defined Strategy as The plan of action that prescribes resource allocation and other activities for dealing with the environment and helping the organization attain its goals.What is strategic management? Strategic management is a level of managerial activity below setting goals and abovetactics. Strategic management provides overall direction to the enterprise and is closely related to the field ofOrganization Studies. In the field of business administration it is useful to talk about "strategic consistency" between the organization and its environment or "strategic consistency." According to Arieu (2007), "there is strategic consistency when the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context." Strategic management includes the management team and possibly the Board of Directors and otherstakeholders. "Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment." Strategic Management can also be defined as "the identification of the purpose of the organisation and the plans and actions to achieve the purpose. It is that set of managerial decisions and actions that determine the long term performance of a business enterprise. It involves formulating and implementing strategies that will help in aligning the organization and its environment to achieve organisational goals."

Mint bergs 5 Ps for Strategy The word "strategy" has been used implicitly in different ways even if it has traditionally been defined in only one. Explicit recognition of multiple definitions can help people to manoeuvre through this difficult field. Mintzberg provides five definitions of strategy:1.Plan2.Ploy3. Pattern4.Position5.Perspective.Plan: Strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. By this definition strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are developed consciously and purposefully.Ploy: As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor.Pattern: If strategies can be intended (whether as general plans or specific ploys), they can also be realised. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a pattern in a stream of actions. Strategy is consistency in behaviour, whether or not intended. The definitions of strategy as plan and pattern can be quite independent of one another: plans may go unrealised, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish deliberate strategies, where intentions that existed previously were realised, and emergent strategies where patterns developed in the absence of intentions, or despite them.Position: Strategy is a position - specifically a means of locating an organisation in an "environment". By this definition strategy becomes the mediating force, or "match", between organisation and environment, that is, between the internal and the external context.Perspective: Strategy is a perspective - its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Strategy in this respect is to the organisation what personality is to the individual. What is of key importance is that strategy is a perspective shared by members of an organisation, through their intentions and / or by their actions. In effect, when we talk of strategy in this context, we are entering the realm of the collective mind - individuals united by common thinking and / or behaviour.History of McDonalds1948 In December, Dick and Mac McDonald open the first McDonald's in San Bernardino, California. A little hamburger man called "Speedee" becomes the company logo. 1954 Ray A. Kroc, a Multimixer salesman from Oak Park, lIIinois, visits Dick and Mac's San Bernardino.McDonald's, his curiosity initially aroused by the large number of Multimixers they were buying. Ray Kroc becomes the exclusive national franchise agent for the McDonald's brothers. 1955 On April 15, Ray Kroc opens his first McDonald's in Des Plaines, lIIinois. In July, Ray Kroc opens his second McDonald's restaurant in Fresno, California, operated by Art Bender, Ray Krocs first franchisee. Total sales for the company are $193,772. 1956 McDonald's Corporation adds 12 restaurants, including Chicago (2), Skokie, Waukegan, Joliet, and Urbana, lIIinois; Hammond, Indiana; Los Angeles (2), Torrance, and Reseda, California; and Dallas, Texas. Ray Kroc hires Fred Turner as a grillman in his # 1 store in Des Plaines. 1958 McDonald's sells its 100 millionth hamburger. Fred Turner becomes Vice President of the company. McDonald's annual sales skyrocket 151% over the previous year to $10,896,163. 1959 The 100th restaurant opens in Fond Du Lac, Wisconsin. In total, a record 66 restaurants open. McDonald's begins billboard advertising. 1960 McDonalds celebrates its 5th anniversary, opening its 200th restaurant in Knoxville, Tennessee. Annual sales total $37,579,828. Ad campaign cheers on the "All American Meal" -- a hamburger, fries, and milk shake. 1963 The 500th McDonald's restaurant opens in Toledo, Ohio. Hamburger University graduates its 500th student. Ronald McDonald makes his debut in Washington, D.C. The Filet-O-Fish sandwich is created by Lou Groen, McDonalds franchisee, and was added to the national menu in 1965. 1964 At year end, there are 657 restaurants. The company's gross sales hit $130 million. 1965 McDonald's celebrates its 10th anniversary with the first public stock offering at $22.50 per share. Average annual sales for a McDonald's restaurant are $249,000. Ronald McDonald makes his first appearance in the Macys Thanksgiving Day Parade. Network television advertising begins. 1966 Ronald McDonald appears in his first national television commercial. In May, McDonalds holds its first annual public shareholders meeting. On July 5, McDonalds is listed on the New York Stock Exchange with the ticker symbol MCD. McDonalds exceeds $200 million in sales. 1967 The first international McDonalds restaurants open in Canada and Puerto Rico. The Operator National Advertising Fund (OPNAD) begins operation. 1968 The Big Mac and Hot Apple Pie are added to the menu. The 1,000th restaurant opens in Des Plaines, Illinois. McDonalds opens in Hawaii. Average annual sales for McDonalds restaurants open at least 13 months are $333,000. 1969 McDonalds International Division is formed. The new McDonalds mansard roof building design is introduced to replace the red and white design.1970 McDonald's opens inCosta Rica, its third country after the United States and Canada. Having changed hands in 1968, the original "Big M" restaurant closes. It is demolished two years later, with only part of the sign remaining; this has since been restored.1971 The first Asian McDonald's opens in July inJapan, inTokyo'sGinzadistrict. On August 21, the firstEuropeanMcDonald's outlet opens inZaandam(nearAmsterdam) in theNetherlands. The franchisee isAhold. The first McDonald's inGermany(Munich) opens in November. It is the first McDonald's to sell alcohol, as it offersbeer. Other European countries follow in the early 1970s.The firstAustralianMcDonald's opens in theSydneysuburb ofYagoonain May.1972 The McDonald's system generates $1 billion in sales through 2200 restaurants. The 2000th McDonald's restaurant opens inDes Plaines, Illinois.The first McDonald's inFranceopens, inCrteil, even though the company officially recognizes the first outlet inStrasbourgin 1979.1973 The first McDonald's Playland opens inChula Vista, California.The firstSwedishMcDonald's restaurant opens inStockholm, 23 October.1974On November 13, the first McDonald's in theUnited Kingdomopens inWoolwich, southeast London. It is the company's 3000th restaurant.The firstRonald McDonald Houseopens inPhiladelphia, Pennsylvania.1975 The firstHong KongMcDonald's opens in January in Paterson Street, inCauseway Bay,Hong Kong Island. It is also the first McDonald's restaurant inGreater Chinaand theFour Asian Tigers.1975Drive-Thruis introduced in January inSierra Vista, Arizonain order to serve meals to soldiers from nearbyFort Huachucawho were not allowed to wearBDUswhile off post except while in a vehicle. The Drive-Thru is later known as "McDrive" in some countries.1976 McDonald's pays its first cash dividend .1977 McDonald's adds a breakfast line to the U.S. menu.1978 The 5000th McDonald's restaurant opens inKanagawa, Japan.2010 McDonald's introduces Real Fruit smoothies and the Angus Snack Wrap. McDonald's introduces Fruit & Maple Oatmeal to its menu.2011 McDonald's reintroduces the Asian salad. McDonald's makes a deal with theMarine Stewardship Councilto certify the fish used for the Filet-O-Fish sold in Europe.2012 McDonald's begins posting the calories count for items on the menus and menu boards in the drive-thru.2013 McDonald's discontinues it's line of angus burgers and introduces a new modified line of its quarter pound hamburgers.In 2013 the first McDonald's burger restaurant franchise inVietnamwas awarded to the son in law of the Vietnamese prime minister.Background of McDonalds McDonalds is the leading global foodservice retailer with more than 34,000 local restaurants serving approximately 69 million people in 118 countries each day. More than 80% of McDonalds restaurants worldwide are owned and operated by independent local men and women. Our goal is becoming customers favorite way and place to eat and drink by serving core favorites such as the world famous French Fries, Big Mac, Quarter Pounder and Chicken Mc Nuggets. The McDonalds started in 1954. Raymond Kroc who is the founder saw a hamburger stand in San Bernardino, California and visualized a nationwide fast food chain. Kroc tested himself as an ancestor who revolutionized the American restaurant industry. Actually, Raymond Kroc is esteemed being the Farther of Industry. Today McDonalds is the largest brand of fast food restaurant that serve 52 million customers per day more than 100 countries. With the world-class standard, McDonalds unites the QSC&V standards strictly all McDonalds restaurants around the world. In 1985, the first McDonalds restaurant in Thailand was opened at Amarin Plaza. Currently, there are more than 100 McDonalds restaurants nationwide with a ring of convenient services at anytime and anywhere which including breakfast meals from 5.00-11.00 Am., Drive -thru, Dessert kiosk and McCafe. Besides, there is the McDelivery service on 1711 running from 9 Am. until midnight and some restaurant also offer 24-hour service to serve.Structure of McDonalds McDonalds is a centralized, International Division company composed of franchisees and joint venture partners. McDonalds utilizes a broad approach and initially grew overseas by relying on transferring new products, processes, and strategies from the United States to less developed markets1. The idea has always been to transfer the American tradition of fast food to other counties using the same real estate principles, cost advantages, and new technologies that were so successful in the U.S. McDonalds has always exploited the corporate company knowledge and transported and diffused it to foreign markets. Starting with the concrete supplier chain, all the way down to the store design and implementation, differentiation is not encouraged nor is it allowed.With an Ethnocentric mentality, McDonalds has constantly based the companies international operations on home-grown ideas and concepts. Corporate first places the focus the domestic market, and then filters the functions to the overseas operations. Information flows from corporate to the franchisees based on what is working in the United States markets, with the expectation that it will be implemented in the foreign markets. When analyzing McDonalds corporate structure, it is evident that the top down approach is not only used it is enforced. All information starts with corporate and is disbursed to the foreign marketsLogo and Slogan

A slogan is a short, memorable catch phrase, tagline or motto used to to identify a product or company in advertisements. The advertising slogan, or business slogan most associated with I'm Lovin' ItValues of McDonalds McDonald's brand mission is to be our customers' favorite place and way to eat and drink. Our worldwide operations are aligned around a global strategy called the Plan to Win, which center on an exceptional customer experience People, Products, Place, Price and Promotion. We are committed to continuously improving our operations and enhancing our customers' experience.McDonalds Values Place the customer experience at the core of all it do.Our customers are the reason for our existence. We demonstrate our appreciation by providing them with high quality food and superior service in a clean, welcoming environment, at a great value. Our goal is quality, service, cleanliness and value (QSC&V) for each and every customer, each and every time. Committed to our people.We provide opportunity, nurture talent, develop leaders and reward achievement. We believe that a team of well-trained individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to our continued success.Believes in the McDonalds System.McDonalds business model, depicted by our three-legged stool of owner/operators, suppliers, and company employees, is our foundation, and balancing the interests of all three groups is key.Operate its business ethically.Sound ethics is good business. At McDonalds, we hold ourselves and conduct our business to high standards of fairness, honesty, and integrity. We are individually accountable and collectively responsible.Give back to its communities.We take seriously the responsibilities that come with being a leader. We help our customers build better communities, support Ronald McDonald House Charities, and leverage our size, scope and resources to help make the world a better place.Grow its business profitably.McDonalds is a publicly traded company. As such, we work to provide sustained profitable growth for our shareholders. This requires a continuous focus on our customers and the health of our system.Strive continually to improve.We are a learning organization that aims to anticipate and respond to changing customer, employee and system needs through constant evolution and innovation.Mission & vision statement of McDonalds The mission statement of McDonald's fast food restaurants around the world is not much different from any restaurant chain...

"McDonald's brand mission is to be our customers' favorite place and way to eat." That broad and common mission statement is more clearly defined by the McDonald's Values, which reflects the experience that customers can expect when walking into a McDonald's fast food restaurant no matter where it is located...1.We place the customer experience at the core of all we do.2.We are committed to our people.3.We believe in the McDonald's System.4.We operate our business ethically.5.We give back to our communities.6.We grow our business profitably.7.We strive continually to improve.Currently McDonald's is implementing a global strategy that it calls "Play to Win," which is designed to create a consistently excellent customer experience in McDonald's restaurants. The five key facets of that McDonald's experience are people, products, place, price, and promotion. Vision Statement: McDonalds vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile Vision Statementsare often idealideas forhow a business or organisation will eventually be perceived. When writing avision statement, thecompany directorsmust ask themselves, What do we want in the long run? It may be somethingthat is completely unachievable in the next five, 10 or even 15 years but that is theultimategoal and issomethingthat the company are always working towards. Every goal they set should be working towards making theirvision statementtrue. Vision is a long-term view, sometimes describing how the organization would like the world to be in which it operates. Businesses are aware that avision statementis not a guide that is set in stone, it is more of an inspiration andsomethingbig to work towards and provides the basis for allstrategic planning. It does not give any guidelines as to how the company aims to get to theirultimatevision, it just states that vision to ensure that no one loses focus of their goal and remains motivated. Smaller challenges can then be set to help them work towards the vision. Vision Statementsare usually bold and proud and often state that the business wishes to be the best. Anything stated in any businesses vision is obviously difficult to measure or analyze because while one person may think that they are the best at what they do, this may be a personal opinion and not everyone will necessarily agree. Unless the best can be clearly defined, it is not easy to establish whether or not thevision statementhas been achieved.Business strategy of McDonalds McDonalds has been an industry leader within the fast food industry for years. In the introductory phase of their business operations they focused on following a generic low cost strategy consisting of offering consumers low priced food products in order to, make eating out on a regular basis affordable for families (Marino 627). Faced with changing consumer trends and competitors pursuing aggressive competitive strategies focused on product differentiation and quality; McDonalds then CEO, Jim Cantalupo, determined in order to address the companies recent profit losses and challenges a different stand on generic strategy must be taken. Through the implementation of McDonalds Plan to Winstrategy, Cantalupo shifted the companys generic strategy to differentiation by focusing on marketing to turnaround the negative publicity recently experienced through offering customers a better overall fast food experience as compared to their competitors. McDonalds financial strategy focused on decreasing capital expenditures by 40% while using their cash from 2003 operations to pay off debt and return cash to stockholders. These financial strategies have allowed the company to implement thePlan to Winstrategy while also improving stock performance and sales. Through a growth strategy that involves renovating, rebuilding, and relocating buildings; McDonalds hopes to create a, fresh, sophisticated, but family-friendly atmosphere (Marino 642). However in order to sustain growth and success, additional investments may be needed in the future.McDonalds personnel strategy promotes their desire to market an exceptional customer experience. Hospitality training and e-learning programs offer McDonalds the most cost effective method of training for restaurant staffs, while ensuring employees are dedicated to customer service through the attitudes and skills they bring to the workplace. This directly supports the managerial functional goal of creating a stimulating work environment.Production strategies promote an overall quality experience by offering new products to customers in order to address growing changes in demand for healthier foods and premium products. Technological improvements, including wireless hot spots, improves the relevancy of the overall quality experience McDonalds is trying to market to consumers. With these improvements in each functional area, McDonalds marketing strategy aims to build trust and brand loyalty among current and future customers in order to gain significant competitive advantage in the marketplace.Currently McDonalds functional strategies are all successfully co-aligned with their new generic strategy of marketing differentiation focusing on quality customer experiences. Although Jim Cantalupo is credited to McDonalds improved performance only the future can tell if such strategies will provide McDonalds with the core competencies needed to remain competitive in an overly saturated industry. At which time McDonalds functional strategies may need to be re-evaluated in order to maintain sustainable marketing differentiation.Product Development Strategy for McDonalds: When you are running a small business, it is easy to look at chains like McDonald's with disdain, but there is a lot that you can learn from their success. Part of the success enjoyed by McDonald's stems from their product development strategy. By familiarizing yourself with the way McDonald's develops products, you can apply the same methods to your own products whether they are food products or other consumer goods. Permanent Product Strategy McDonald's features several products on their menu that are permanent and do not change. Examples of this include their basic hamburger and cheeseburger, the Big Mac and the Quarter Pounder. After the initial development, these items remain on the menu for extended periods of time without undergoing significant changes. This strategy ensures that there is always something familiar for consumers on the menu.Temporary Product Strategy In addition to its permanent product offerings, McDonald's regularly develops temporary products. The McRib, for example, is a product that is offered only seasonally. The Big Ocean burger is an example of a burger that was developed as a temporary product, offered only for a few months in 2007. The purpose of this product development strategy is to give customers something new to experience on each visit and to experiment with new items that may become permanent.Local Product Development Strategy As McDonald's has expanded internationally, it has created several products to meet consumer demand in the local markets. In the Netherlands, for example, they have developed the McKroket, a burger featuring a typically Dutch kroket, a deep-fried, ragout-filled patty. In the Canadian province of Quebec, McDonald's offers poutine, a traditional dish of french fries, gravy and curd cheese. Even in parts of New England and Atlantic Canada, they have developed the McLobster, their version of the local lobster roll sandwich. This strategy ensures that local customers have foods to fit their tastes.

Local Adaptation Strategy In addition to developing new products for local markets, McDonald's will also use an adaptation strategy whereby they take a product and modify it to fit local tastes. In India, for instance, the Big Mac has been modified into the Maharaja Mac which contains no beef, in keeping with local diets. In Greece, the Big Mac has been adapted to use a pita bread instead of a bun. Even the McLobster has been adapted to the McCrab in some U.S. markets where crab is a common food.Challenges to growth of McDonaldsRising food prices: Higher food commodity and energy prices have recently pushed up wholesale and retail food prices. The US Department of Agriculture predicts that prices will continue to accelerate during the first half of 2011,leading to a 2% to 3% risein food price inflation for the year. McDonald's and other big burger chains have largely been unaffected so far, but that might soon change. In a report last week, RBC Capital Markets analyst Larry Miller said McDonald's will raise prices by 2% to 3% to help offset its higher food costs. McDonald's declined to comment, citing a quiet period ahead of earnings next week. However, the chain's CFO Pete Bensen told analysts in October that while prices for beef and other ingredients were rising, the burger chain could deal with the increase. But it may be too early to conclude that the Golden Arches will survive the inflationary pressures unscathed. Rising food prices could be a risk for McDonald's, says analyst Andy Barish of Jefferies and Company, even though the chain is largely safeguarded from such volatility because the vast majority of its operating profits, about two-thirds, come from franchises and royalties. While individual franchises might have a harder time dealing with rising prices given the sensitive demand of cost conscious consumers, it could eventually hurt profits of the overall chain if prices rise to levels where it makes it difficult for franchises to expand. Barish doesn't see any major disappointments in sales or earnings this year, but rather a gradual slowing of earnings growth. He expects McDonald's to post 16% earnings growth in 2010, followed by 10% growth in 2011.Limitation of beverages over burgers: McDonald's increasingly diverse menu has helped it become the nation's best-performing restaurant company during the economic slump. The chain realized quickly that consumers have lots of options when it comes to food and drink and they want the option to stop at McDonald's for snack time as opposed to just regular meals. Creative drinks are the product du jour at the chain, with everything from fruit smoothies and specialty coffee drinks. But beverages might only take the company so far. TheWall Street Journal recently cited a company email that disclosed that McDonald'speak lunch-hour business has been flat for five years.And the few analysts taking a bearish view of McDonald's 2011 outlook say real growth of the company's core business -- the burgers and fries part -- is overstated. Howard Penney, restaurant industry analyst with investment research firm Hedgeye and aFortunecontributor, believes the chain has expanded too broadly into beverages, and the plan will eventually catch up with the company -- helping send U.S. same store sales to negative levels during the second, third and fourth quarters this year. Much of McDonald's success in beverages has come from specialty coffees such as lattes, which are sold at relatively higher prices. Penney says year over year sales growth of the pricier beverages has flattened. "McDonald's makes a lot of its money on fries and beverages," Penney says. "So selling beverages is good but it makes operations more complex. It takes more to make a latte than to pour a Coke. To continue peak service time you have to add labor."Return on investment: Some franchises worry that their investments will not pay off, according to an October McDonald's franchisee survey by Janney Montgomery analyst Mark Kalinowski, who maintains a buy rating on the stock. A poll of franchisees shows some concern that corporate demands to redo stores and sell more coffee cost too much and might not pay off in the end. One franchisee writes: "Very concerned about reinvestment issues and whether the Corporation is paying a fair share of McCafe, upgraded technology platforms ..." According to theWall Street Journal, the McCafe machines cost $100,000 to install, with McDonald's covering just $30,000 of that. The criticism might appear typical for any large corporation with a significant franchise business, but if the concerns by some franchise owners begin to snowball, McDonald's could face a problem that no amount of caffeine can fix. Analysis of McDonalds In this part of this research paper we would analyze the McDonalds by utilizing the strategic management matrix tools. For example, we would explore the SWOT Analysis, External Factor Matrix Analysis, Competitive Profile Matrix Analysis and finally the Internal Factor Matrix Analysis to analyze the strategic position of McDonalds in the industry. Our objective here is to utilize the strategic management tools mentioned in the course books and in the research material reviewed during the class secession to come up with valuable conclusion that would add value to McDonalds. However before we proceed to strategic analysis, we would critically view the core issues of McDonalds. This step would help us to better understand the development and implementation of strategies in this organization. SWOT Analysis of McDonaldsStrengths: According to the Company Capability Profile (Appendix I,J) McDonalds greatest strength can be found in competitively taking advantage of market growth. McDonalds has had one of the strongest international presences among fast food competitors. McDonalds has successfully integrated local eating trends and traditions worldwide by varying local menus in different regions of the world. Although all fast food chains have experienced consistent expansion overseas, McDonalds has had the strongest presence since the beginning. As the domestic market began experiencing over-saturation, more than half of McDonalds locations were located throughout the world. This increased McDonalds competitive edge over other fast food chains with industry predictions stating that international countries may be the only source of growth for the fast food industry in future years. This market growth attributes to another competitive strength found in McDonalds which is market share. Although McDonalds market share has been somewhat declining in recent years, the company announced system wide sales of $20,305.7 million in 2003. Among the largest chains in the restaurant industry Burger King ranked number two with only $8,350.0 million in sales demonstrating the significant sales differential among McDonalds and their competitors.Although managerial factor scores indicate a weak managerial functional area relative to the industry, CEO Jim Cantalupo can be characterized as a balanced leader. Cantalupo is largely credited for hisPlan to Winturnaround strategy which helped McDonalds achieve, double-digit percentage sales gains As a result of Cantalupos success much of the negative managerial blame can be placed on management initiatives taken prior to his post-retirement tenure.

Weaknesses: Prior to the return of Cantalupo, Jack Greenberg served as CEO. Much of McDonalds poor performance in 2002 can be attributed to Greenburgs strategic direction. Although he had many ideas that focused on improving customer service rankings many business analysts criticize Greenberg in that he launched too many initiatives simultaneously and had failed to properly implement any of them (Marino 630). Such traits indicate that Greenberg can be described as a Novice leader (Appendix K). McDonalds focused too heavily on increased expansion and diversification to new food segments within the industry. This weakened McDonalds while draining them of financial resources. Product innovations developed included the, Made for You, cooking system costing the corporation $420 million, while franchisees were forced to invest between $18,000 and $100,000 in kitchen upgrades. Such a financial investment led to additional problems between McDonalds and their franchisees, a relationship that was on shaky grounds to begin with. These unsuccessful initiatives put McDonalds at an extreme disadvantage to their competitors; many of who gained competitive advantage while McDonalds remained slow to respond to changing market conditions. This lack of proper strategic planning implemented during Greenbergs tenure has resulted in the lowest performance ranking in the fast food industry based on such factors as poor customer service, extremely high employee turnover, and slow order processing time. Such factors hindered McDonalds and forced them to play catch up in an already overly saturated market. Such poor rankings can ultimately jeopardize the firms new strategy of market differentiation in the future by forever casting a negative light on the company.Opportunities: Utilizing an environmental threat and opportunity profile (ETOP); demonstrates that McDonalds has the greatest chance of opportunity concerning geographic and technological environmental forces (Appendix L). Industry predictions indicate that much of the future growth present in the fast food industry will come from overseas expansion. Success will come first to those companies who are able to market themselves successfully within international geographic environments. This opportunity successfully aligns with McDonalds current competitive strength with regards to international market growth. In this mature industry market differentiation can be enhanced through quality improvements and innovations. The ETOP profile indicates that technological advancements can bring such success to McDonalds. By providing wireless internet services in restaurants across the globe McDonalds is adding value to the desired customer experience they are attempting to elicit.Threats: Overwhelmingly social forces are the largest threat to McDonalds. Consumer preferences are now geared more towards healthier food alternatives and McDonalds has traditionally had a negative image in regards to providing health benefits to consumers. Although McDonalds is attempting to overcome such an environmental threat, they are an easy target for negative publicity. McDonalds has been the industry leader for decades so naturally they become the first targeted. The many competitors now present in the industry often serve as an environment threat to the fast food chain. Major fast food restaurants such as Burger King and Wendys have been more successful than McDonalds in addressing current consumer health trends. Wendys has successfully adapted to this change in lifestyle with the introduction of their gourmet salad line. Typically 30% of those consumers visiting Wendys do so specifically for the purpose of purchasing salads from theirGarden Sensationssalad line (Marino 632). Although McDonalds is now offering more products to such health conscious consumers, new sandwich chains such as Subway will serve as an alternative to the typical greasy fast food hamburger chains. As a result McDonalds must also take suchcompetitors seriously.

PESTEL Analysis of McDonalds Pest is an analysis of the external macro and micro environment in which a business operates. Pest stands for political, economical, social, technological, environmental and legal factors.

POLITICAL FACTORS The international operations of McDonalds are highly influenced by the individual countrys policies enforced by each government. For instance, there are certain groups in India, Europe and the United States that clam our for state actions pertaining to the health implications ofeating fast food. They have indicated that harmful elements like cholesterol and adverse effects like obesity are attributable to consuming fast food products. On the other hand, the company is controlled by the individual policies and regulations ofoperations. Specific markets focus on different areas of concern such as that of health, worker protection, and environment. All these elements are seen in the government control of the licensing of the restaurants in the respective states of the country. For instance, there is an impending legal dispute in the McDonalds franchise in India where certain infringement of rights and violation of religious laws pertaining to the contents of the food. The existence ofmeat in their menus in India is apparently offensive to the Hindu religion in the said market. There are also other studies those points to the infringement of McDonalds Stores with reference to the existing employment laws in the target market. Like any business venture, these McDonalds stores have to contend with the issues of employment procedures as well as their tax obligations so as to succeed in the foreign market like India. Since it is apparent that the company is expanding continuously, it is wise to deal directlywith the proper authorities in the respective markets that they intend to operate in. This way,the company can adopt a good way of establishing good relationship with the government. Itis advisable that the company rests on the good graces of the government on which they willbe penetrating. To do this, all they have to do is accomplish all the prescribed acts and satisfyall the prerequisites for doing business. The company must also be acquainted with the law inorder to know what their responsibilities and their possible liabilities. Also McDonaldsshould protect its workers by ensuring all the hiring, compensation, training or repatriation inaccordance to the Indian labour laws.ECONOMIC FACTORS: As a business entity, McDonalds need to face a lot of economic variables outside its company or its macro environment. Dealing with international sourcing for its material McDonalds should be aware on the global supply and currencies exchange. Remember, McDonalds import most of its raw material such as beef and potatoes due to local market cannot supply in abundant to meet the demand of its product. Any upside of currencies especially dollar will be impacting its cost of purchase. Working on the local country, McDonalds must face government regulations on tax of profit where it gains from the operation and other tax such as entertainment and restaurant service tax. Each country may have different scale or types of tax available and McDonalds should follow the regulation if it wants to continue the operation. As a franchise, McDonalds should also pay certain percentage of the revenue to the parent company inUnitedStates. The economic condition and growth of the country also is an important indicator to the demand of products that McDonalds offered. As the foodpricedslightly above normal foods, not many people will have the income range to consume the products. Moreover if the economy is bad and income percapita is affected, the demand of McDonalds product will certainly going down. On the other hand the good economy also means disposable income is more and people can spend more on moreexpensivefood at fast food restaurant.SOCIO-CULTURAL FACTOR: The changing lifestyles of Malaysia due to development of Malaysian economy should be also taking into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have quality in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with something good (for example prosperity), Asian like rice and Americanseat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local taste but it should constantlysurveyand learn about local culture to better understand and design the best product for them.TECHNOLOGICAL FACTOR: For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or promotional campaign discount which will benefits them from time to time.ENVIRNOMENTAL FACTOR: As one of world largest consumer of beef, potatoes and chicken, McDonalds always had been critics for world environmentalist. This is because high consumption of beef causing the green house effect by methane gasses coming from the cows ranch.Large scale plantationhas effect the environment and lost of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In Japan, once McDonalds want to introduce whale burger causing uproar because whales are endangered species. Before using paper packaging, once McDonalds also had been criticized for being insensitive to pollution because using polystyrene based packaging for its foods. Imagine millions of people purchase from fast food operator and how is the impact to world environment by throwing away those hard to recycle packaging. Our world is getting concern on environment issue and business operating here should not just care for profit, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation. Critics and concern from all public or activist should be review and support if necessary to ensure we play our social responsibility better.LEGAL FACTOR: As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. For example is the Halal certification that becomes a concern to Muslim consumers. McDonalds should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws and quality & environment certification (such as ISO) in which the outlet has been certified. The legal requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous.Porters five force analysis Abusinesshas to understand the dynamics of its industries and markets in order to compete effectively and intensively in the marketplace. The forces which derive competition and attractiveness of a market, contending that the competitive environment is created by the interaction of these five different forces acting on abusiness. In addition to rivalry among existing firms and the threat of new entrants into themarket, there are also the forces of supplier power,the powerof buyers, and the threat of substituteproductsor services (The Figure1Porters Five Forces Framework). Michael E. Porter suggested that the intensity of competition is determined by the relative strengths oftheseforces. The Five Forces directly are interconnected with the effect on the companys ability to serve its customers and to make a profit.A change in any of these forces generally requires a company to re-assess its competitive strategies.Competitive rivalryAccording to Porters Five Forces Model, if entry into a market is easy then rivalry is likely to be high. Considering McDonalds competitive rivalry, there is intense competition in fast food industry that many small fast food businesses fight with each other to improve their customer base. This makes a competition the major focus between businesses. Although, McDonalds, with more than32,000 local restaurants serving more than60 million people in 117 countries each day,has a number of fast food outlet competitors across the countries such as Burger King, Taco Bell, KFC, Wendys, it is currently the leader of the industry in market capitalization with a cap of $39.31 billion.The Threat of new entrantsThe threat of new entrants in the fast food industry is high because there are no legal barriers which would keep them from entering the industry. The economies of scale and the access of the distribution are the major barriers that firms face in the industry. Firms must spend a large amount of capital on advertising and marketing in order to enjoy successful existence and long life of a fast food outlet.Large established companies with strong brand names such as McDonalds make it more difficult to enter the market because new entrants are faced with price competition from existing chain restaurants.Thus, it takes a pretty much time for a new business to establish in the fast food industry.Supplier bargaining powerThe bargaining power of suppliers of McDonalds is high because McDonalds restaurants use the same products from the same suppliers and it doesnt matter if you are in Rochester, MN or Beijing, China you can get the same Big Mac everywhere. This is a feature McDonalds want to keep going on by encouraging consistency among its restaurants. Supplying these products to McDonalds across the globe is the whole business for the suppliers and, however, if McDonalds would lose even one supplier it would have to change one or more of its product lines and perhaps the whole menu what the McDonalds customers were used to. This gives the suppliers of McDonalds a high bargaining power.Buyer bargaining powerBuyers, in the fast food industry, are those who is ordering fast food at the local restaurant, over the telephone, or internet or just paying or consuming the products24.Bargaining power of customers of McDonalds is low because of low customer switching costs which are nearly zero; however, for example, one-fifth of the USA population eats in a fast food restaurant every day. Thus, fast food industry does not worry about customers loyalty. Fast food products industry is differentiated which are usually or almost always promoted by advertising that is because of a vast competition between fast food firms. Product differentiation is very important in fast food industry to make your product stand out against the crowded fast food industry products. Furthermore, quality of the product or service in the fast food industry is very important as customers have full information of the products they buy and consume.Furthermore, if the fast food industry does not match the demands of the buyers and the general consumer trends, then the buyers can choose not to buy their product and convince others to do the same. A good example of this is the movie Super Size Me. It is a movie showing an ordinary consumer trying to live of McDonalds fast food, and the purpose of the movie was to see what the traditional fast food from McDonalds could do to your health if you were to eat their products for every meal. This movie shows what the buyers possible reactions could be if not satisfied or not being pleased. The reactions from the whole market were a large change in consumer preferences and brand preferences.The threat of substitutesSeveral factors determine if there is a threat of substitute products in an industry. First, if the consumers switching costs are low, which means that there is little of anything stopping the consumer from purchasing the substitute instead of the industrys product, then the threat of substitute products is high. Second, if the substitute product is cheaper than the industrys product there is a high risk of threat of substitutes. Third, if the substitute product is having equal or superior quality, functions, attributes, or performance compared to the industrys product, the threat of substitutes as well is high.With so many firms in the fast food industry with low switching costs, vide variety of similar products that people can chose, and healthier alternatives, the threat of substitutes is very high.As there is intense competition between rival sellers in the fast food industry, the competition between firms selling substitute products is intense as well. One very important issue is that the customer always tends to find another product comparable or better in terms of the quality of fast food products. Another thing is that fast food industry is unhealthy to its customers health. The majority of the public think that fast food restaurants primarily serve high in fat content foods which are unhealthy and as a consequence they tend to look elsewhere for healthier alternatives. While fast food products are not always associated with health and quality, fast food restaurants keeps a major advantage over other firms selling substitute products through the lower prices of their products and a quick, convenient service.

Competitor analysis of McDonalds:PIZZA HUT: Pizza Hut is a global fast food chain, a subsidiary of Yum! Brands Inc. , the worldslargest restaurant company.Strategic Objectives:When we talk about strategic objectives, Pizza hut says: We want to satisfy our customers by offering them The best. Diversification of the products that they offer hasalways been a focal point of strategies at Pizza Hut. The strategies at Pizza hut areguided by principles like Cleanliness, Hospitality, Accuracy, Maintenance, Productquality and Speed (CHAMPS). Since its a global chain, the strategies are baPIZZA HUTsed uponcustomizing the services, advertising and marketing activities according to the countriesthat they are operating in. Customer service and satisfPIZZA HUTaction have of course alwaysbeen a vital aspect of the strategies. Another important feature of the Pizza Hutsstrategies are the 3 Fs (Fun, Friendly and Familiar)

Problems and Weaknesses:At one time, the biggest marketing problem Pizza Hut facedwas lunch. As compared to McDonalds, its restaurants hadvirtually no lunch time sales, and neitherdid any of its pizzacompetitors. The reason, of course, is that it takes 20minutes to cook a pizza from scratch in a traditional pizzaoven, and most people wont spendthat long at lunch time waiting to be served. Byusing a new, continuous-broiling technology adapted from burger business, Pizza Hutdeveloped a personal panpizza that could be served in less than5 minutes. It wasquick, tasty and moderately priced. And Pizza hut rolled it out to all 4500 storesworldwide and locked up the pizza-lunch business almost everywhere, almostovernight. One of the weaknesses of Pizzahut that it hasnt overcome yet is its price. Localchains are constantly springing up, offering lower prices and similar recipes.Competitive Advantages:Pizza Hut has the first mover advantage in the pizza chains because ofwhich it hasdeveloped a strong customer base which is one of its strengths.In the Pakistani QSRs industry, the delivery service of Pizza hut is clearly a competitiveadvantage that it enjoys. Pizza huts delivery service is one of quickest and the pizzasdelivered are oven hot in the real sense of the world.Pizza Hut is often referred to asPizza Innovation Leader because it is constantlycoming up with new varieties of pizzas to appeal the different audiences and at thesame time, people at the pizza hut havea really good idea about which varieties areappealing to the customers and theyare thus retained in the menusThe first mover advantage is an advantage that Pizza hut was born with but time, Pizzahut has been successfully creating competitive advantages like a traditionally strongbrand name for itself and the quality service that it provides.KENTUCKY FRIED CHICKEN (KFC): KFC, founded and also known as Kentucky Fried Chicken, is a chain of fast food restaurants based in Louisville, Kentucky. KFC is a brand and operating segment called a "concept"KFC has the strategic objectives of expansion along with profits and sales growth. KFC has also been applying its strategies at improving services and making them more and more customer friendly. It has not only been customizing it's menu according to thecountries that it has been operating in, it has also been trying to cater todifferent ethnicgroups like AfricanAmericans and Hispanics. Such types of strategies are focused on increasing the customer base by better customization of products. Other than the traditional eat-in restaurants, KFC has alsobeen expanding into non-traditional facilities like shopping malls, hospitals, universities, stadiums; office buildings etc and a numberof strategies have been formulated to aid this kind of expansion.Problems and Weaknesses: The advertising campaign of KFC does not specifically appeal to any segment. It does not appear to have a consistent long-term approach. The U.S. has enormous changes in its demographics. Only in US, single-person households increased from 12% in 1970 to 25%in 1995. With this kind of dramatic change, KFC does not have a proper approach to its target market.The increased health concerns of the masses has put KFC at a greatdisadvantage because of the word 'fried' attached to it's brand name which givesan instant idea that the food would be oily andunhealthy. Because of the nature of the chicken segment of the fast food industry,innovation was never a primary strategy for KFC. HoweveSubway is a restaurant franchise that primarily sells submarine sandwiches and salads.Competitive analysisA very strong financial background is one of KFCs competitive advantages.KFC has been functioning as a multinational corporation for several decades. Asa result, the company is familiar with the logistical and quality problems whichaccompany operating an international food operation, and has demonstrated thatit can work with host countries and businesses within the host country to developa strategy whichworks in the mostcost effective way. With the passage of time, KFC has developed another very important competitive advantage for itself- Environmental Friendliness. In March2009, the first eco-friendly green KFC was opened in Northampton USA. The restaurant is designed according to environmental goals that include cutting energy and waterconsumption by 30 percent andreducing CO2 emissions. Operations at the new site are also expected to reduce waste and the amount of rubbish sent to landfills; the restaurant composts and recycles other waste, grease and used cooking oil. Other than this, in an effort to reduce its packaging by 1,400 tons, KFC is now switching from cardboard to recyclable and biodegradable paperwrapping for some of its products.

BCG matrix of McDonaldsBCG matrix(or growth-share matrix) is a corporate planning tool, which is used to portray firms brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis

External factor evaluation of McDonalds

Internal factor evaluation of McDonalds

Conculsion: What started as a simple food stand on Huntington drive, Californiain 1937, through the ages have become a billion Dollar corporationand the worlds second largest fast -food chain. When analysed, onewould understand that McDonalds had a stable growth in the pastyears.The credits of building it into one of worlds la rgest fast foodoperation can be given to Ray Kroc who took over McDonaldsfrom its establishers, modernised and expanded it to suit thecontemporary trend. Today McDonalds has a net worth of $15.15billion.Through this project report and market survey we saw the howMcDonalds was formed, its history and the present position. Wealso its list of various products offered and the corporate profile.Through the marketing mix, we saw how they make use of theirproduct, price, place, promotion mixes. SWOT a nalysis showed usthe strengths and weakness of McDonalds as well as theopportunities and threats they have got.The consolidated financial statement showed us the financialposition of the corporation as of 2011. The questionnaire surveyprovided us with a clear picture of the needs, want and expectationsof the consumers of the fast food market in general and McDonaldsin particular. The respondents also rated the services provided bythe corporation. At last we also saw the top five reasons that makeMcDonalds so popular.I gladly hope that this project has met its aim.Let me conclude by quoting this quote by Ray Kroc"Perfection is very difficult to achieve, and perfection was what Iwanted in McDonalds. Everything else was secondary for me."

Bibliography: www.mcdonalds.comwww.google.com