McDonald’s CorporationMcDonald’s CorporationMBA section-AMBA section-APresented To:Presented To:

Sir.Nasir MahmoodSir.Nasir MahmoodPresented By:Presented By:

SAIMA KAMRAN SAIMA KAMRAN MATEEN AFZALMATEEN AFZALKHALID SUHAILKHALID SUHAIL

SHAHID MAHMOOD SHAHID MAHMOOD

We’re hoping from this presentation you will:We’re hoping from this presentation you will:

Learn a bit about the history of McDonald’s.Learn a bit about the history of McDonald’s. Understand just how much international expansion Understand just how much international expansion

McDonald’s is partaking in.McDonald’s is partaking in. Have an oversight of McDonald’s Global expansion.Have an oversight of McDonald’s Global expansion. Criticism/Opposition to McDonald’s.Criticism/Opposition to McDonald’s. Few small legal cases involving McDonald’s.Few small legal cases involving McDonald’s. Get a Business Overview of McDonald’s.Get a Business Overview of McDonald’s. SWOT Analysis.SWOT Analysis.

Objectives of This PresentationObjectives of This Presentation

Company ProfileCompany Profile

First McDonald’s opened 1940 in San Bernardino, CAFirst McDonald’s opened 1940 in San Bernardino, CA(Dick and Mac McDonald)(Dick and Mac McDonald)

““Speedee Service” (1948) set standard for fast foodSpeedee Service” (1948) set standard for fast food First franchised restaurant opened 1955First franchised restaurant opened 1955

=> Founding of the McDonald’s Corporation=> Founding of the McDonald’s Corporation

Today:Today:Headquarters: Oak Brook, ILHeadquarters: Oak Brook, IL31,000+ locations worldwide31,000+ locations worldwide>1.5 million employees>1.5 million employees>$20B annual revenue>$20B annual revenue

Began in 1940Began in 1940 Located in 122 CountriesLocated in 122 Countries 51 million people are served a day at 31,000 different 51 million people are served a day at 31,000 different

locationslocations Independent local business people own and operate more Independent local business people own and operate more

than 70% of McDonald’s globallythan 70% of McDonald’s globally In 2004, Morgan Spurlock came out with a documentary In 2004, Morgan Spurlock came out with a documentary

titled titled Super Size MeSuper Size Me that looked at the fast food that looked at the fast food corporation as a contributor to obesitycorporation as a contributor to obesity

In about 30 markets outside the U.S., McDonald’s In about 30 markets outside the U.S., McDonald’s restaurants are operated by developmental licensees who restaurants are operated by developmental licensees who own the business and pay McDonald’s royalties based on a own the business and pay McDonald’s royalties based on a percentage of sales.percentage of sales.

Quick FactsQuick Facts

The First McDonald’sThe First McDonald’s

Began by two brothers:Began by two brothers: Dick McDonaldDick McDonald Mac McDonaldMac McDonald

Started off as a hot dog stand in CA [1937]Started off as a hot dog stand in CA [1937] Hot Dog stand moves to Rt.66 and becomes a Hamburger Hot Dog stand moves to Rt.66 and becomes a Hamburger

Joint.Joint. Offers 25 menu itemsOffers 25 menu items Becomes car hopBecomes car hop Highly profitable teen hang Highly profitable teen hang

out out

1st McDonald’s Hamburger Cost $.15

The GenesisThe Genesis

Brothers realize Burgers were most profitableBrothers realize Burgers were most profitable Close down restaurant and reopen as a “Speedy Service Close down restaurant and reopen as a “Speedy Service

System”System” Offer only burgers, shakes, and friesOffer only burgers, shakes, and fries

McDonald’s is franchised to several locationsMcDonald’s is franchised to several locations[1953][1953] First McDonald’s to feature the Golden ArchesFirst McDonald’s to feature the Golden Arches

Ray Kroc discovers McDonald’s [1954]Ray Kroc discovers McDonald’s [1954] Creates “McDonald’s System’s Inc” to start Creates “McDonald’s System’s Inc” to start

franchising [1955] franchising [1955] Renamed to “McDonald’s Corporation” [1960]Renamed to “McDonald’s Corporation” [1960] A McDonald’s in

Downey, CA is the oldest operating

McDonald’s today[opened in 1953]

The Genesis Continued…The Genesis Continued…

In 1967 the first McDonald’s outside of the US opens upIn 1967 the first McDonald’s outside of the US opens up Richmond, British ColumbiaRichmond, British Columbia

Big Mac and Apple Pie introduced [1968]Big Mac and Apple Pie introduced [1968] 1971 McDonalds really starts going global1971 McDonalds really starts going global

Asian: Tokyo Ginza District, JapanAsian: Tokyo Ginza District, JapanEuropean: Netherlands, Munich, GermanyEuropean: Netherlands, Munich, Germany

1974 – McDonald’s Starts the Ronald McDonald House 1974 – McDonald’s Starts the Ronald McDonald House Charities as a non-profit organization to improve the health Charities as a non-profit organization to improve the health and well being of children. In 1985 the first RMHC opened and well being of children. In 1985 the first RMHC opened internationally in the Netherlands.internationally in the Netherlands.

McDonald’s in Germany

offered Beer as a part of their

menu

The Genesis Continued…The Genesis Continued…

ExpansionExpansion

Expansion rate slowed in the last few years due to declining Expansion rate slowed in the last few years due to declining operating margins and focus on improving existing restaurants operating margins and focus on improving existing restaurants and menu offerings.and menu offerings.

International expansion was led by late CEO, Jim Cantalupo, who International expansion was led by late CEO, Jim Cantalupo, who passed away of a heart attack in April 2004, age 60.passed away of a heart attack in April 2004, age 60.

By the late 1990‘s, McDonald’s aggressive expansion resulted in By the late 1990‘s, McDonald’s aggressive expansion resulted in cannibalization of its own sales because stores were built too close cannibalization of its own sales because stores were built too close to each other.to each other.

In 2003,the focus changed from adding new restaurants to In 2003,the focus changed from adding new restaurants to building sales at existing restaurants.building sales at existing restaurants. Struggling European and South Korean restaurants Struggling European and South Korean restaurants

U.K. - public concerns over unhealthy menu itemsU.K. - public concerns over unhealthy menu items Germany & South Korea - adverse economic conditionsGermany & South Korea - adverse economic conditions

Between 2003 and 2004, underperforming restaurants were closed in Between 2003 and 2004, underperforming restaurants were closed in the U.S., Japan, Latin America and Jamaica.the U.S., Japan, Latin America and Jamaica.

SARS concerns had a negative impact on sales in 2003 in many Asian SARS concerns had a negative impact on sales in 2003 in many Asian countries.countries.

ExpansionExpansion

International ExpansionInternational Expansion

1967 - Canada & Puerto Rico (first restaurants outside the 1967 - Canada & Puerto Rico (first restaurants outside the U.S.)U.S.)

1971 - Tokyo, Japan, Amsterdam, Netherlands & Sydney, 1971 - Tokyo, Japan, Amsterdam, Netherlands & Sydney, Australia Australia

1979 - Rio de Janeiro, Brazil1979 - Rio de Janeiro, Brazil 1990 - Moscow, Russia & China1990 - Moscow, Russia & China

The Chinese characters "Mai Dang Lao" are used to The Chinese characters "Mai Dang Lao" are used to phonetically approximate the word "McDonald's“.phonetically approximate the word "McDonald's“.

1992 - Casablanca, Morocco & Czech Republic1992 - Casablanca, Morocco & Czech Republic 1993 - The first McDonald's at sea opens aboard the Silja 1993 - The first McDonald's at sea opens aboard the Silja

Europa, the world's largest ferry sailing between Europa, the world's largest ferry sailing between Stockholm and Helsinki.Stockholm and Helsinki.

1994 - Restaurants open in Bahrain, Bulgaria, Egypt, 1994 - Restaurants open in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, Oman, New Caledonia, Trinidad and United Kuwait, Latvia, Oman, New Caledonia, Trinidad and United Arab Emirates.Arab Emirates.

Across The GlobeAcross The Globe

India: Sandwich sauces, shakes and soft-serve products do India: Sandwich sauces, shakes and soft-serve products do not contain eggs in order to offer more variety to not contain eggs in order to offer more variety to vegetarian customers.vegetarian customers.

Uruguay: McHuevo (hamburger with a poached egg on top)Uruguay: McHuevo (hamburger with a poached egg on top) Norway: McLaks (grilled salmon sandwich Norway: McLaks (grilled salmon sandwich

with dill sauce)with dill sauce) Germany: BeerGermany: Beer Thailand: Samurai Pork Burger (sausage patty in teriyaki Thailand: Samurai Pork Burger (sausage patty in teriyaki

sauce)sauce) Taiwan: Rice BurgerTaiwan: Rice Burger Pakistan: Offers Halal meat onlyPakistan: Offers Halal meat only

International Taste OfferingsInternational Taste Offerings

Today, the company operates more than 30,000 restaurants in Today, the company operates more than 30,000 restaurants in

approximately 120 countries on five continentsapproximately 120 countries on five continents

Since its founding in 1955, McDonald’s has sold well over 100 billion Since its founding in 1955, McDonald’s has sold well over 100 billion

hamburgershamburgers

McDonald’s prepares more than 6.8 million pounds of French fries every McDonald’s prepares more than 6.8 million pounds of French fries every

dayday

Advertising Age named McDonald’s marketer of the Advertising Age named McDonald’s marketer of the

year for 2004 year for 2004

Ranked 5Ranked 5thth for Social Responsibility by Fortune for Social Responsibility by Fortune

magazinemagazine

All franchisees are independent, full-time operatorsAll franchisees are independent, full-time operators

Approximately 70% of McDonald’s restaurant Approximately 70% of McDonald’s restaurant

businesses world-wide are owned and operated by businesses world-wide are owned and operated by

franchiseesfranchisees

Mc FactoidsMc Factoids

Often blamed for ObesityOften blamed for Obesity Blamed for excessive packaging wasteBlamed for excessive packaging waste Anti-Globalization protestsAnti-Globalization protests Seen as American symbol of economical resource Seen as American symbol of economical resource

dominancedominance Exploitative advertisingExploitative advertising Suffering and exploitation of livestockSuffering and exploitation of livestock High calorie foodsHigh calorie foods

CriticismCriticism

Business OverviewBusiness Overview

Business OverviewBusiness Overview

Franchises the majority of its restaurantsFranchises the majority of its restaurants

Franchises generate revenue for the corporation through Franchises generate revenue for the corporation through rent, commissions, and initial feesrent, commissions, and initial fees

Avoids having to invest a significant amount of capital in its Avoids having to invest a significant amount of capital in its restaurantsrestaurants

Business Overview Continued…Business Overview Continued…

Three main business strategies:Three main business strategies:1.1. Predicting and responding to changes in consumer Predicting and responding to changes in consumer

tastes and preferences, demographics and spending tastes and preferences, demographics and spending patterns.patterns.

Adjusts menu accordinglyAdjusts menu accordingly

2.2. Maximizing sales at existing restaurantsMaximizing sales at existing restaurants Remodeling restaurants, increasing kitchen efficiency, Remodeling restaurants, increasing kitchen efficiency,

streamlining drive-thru orderingstreamlining drive-thru ordering

3.3. Opening new restaurantsOpening new restaurants About 1,000 new units planned for 2008About 1,000 new units planned for 2008 Total number of restaurants growing at 1%-2% per yearTotal number of restaurants growing at 1%-2% per year

Business FinancialsBusiness Financials

Year Year 20072007 20062006 20052005

Total Revenues Total Revenues $22.8B$22.8B $20.9B$20.9B $19.1B$19.1B

Company-Company-operated salesoperated sales

$16.6B$16.6B $15.4B$15.4B $14.0B$14.0B

Franchise/Franchise/Affiliate Affiliate revenuesrevenues

$6.2B$6.2B $5.5B$5.5B $5.1$5.1

Franchise/Franchise/Affiliate salesAffiliate sales

$46.9B$46.9B $41.4B$41.4B $38.9B$38.9B

Operating Operating IncomeIncome

$3.9B$3.9B $4.4B$4.4B $4.0B$4.0B

Strengths Strengths

Many locationsMany locations International presenceInternational presence

Perpetual demand for fast foodPerpetual demand for fast food Reliable, quick, efficient, CHEAPReliable, quick, efficient, CHEAP

Dollar menu especially popularDollar menu especially popular

Wide variety of foods to appeal to a wide range of Wide variety of foods to appeal to a wide range of consumersconsumers

Sociologist George Ritzer, author of “The McDonaldization Sociologist George Ritzer, author of “The McDonaldization of Society”, states that of Society”, states that McDonaldization is a transformation McDonaldization is a transformation of rationalization, moving away from traditional to rational of rationalization, moving away from traditional to rational modes of thought, and scientific management.  modes of thought, and scientific management. 

Ritzer has highlighted 4 major concepts of McDonaldization:Ritzer has highlighted 4 major concepts of McDonaldization: EfficiencyEfficiency - the optimal method for accomplishing a - the optimal method for accomplishing a

task task CalculabilityCalculability - objective should be quantifiable (i.e. - objective should be quantifiable (i.e.

sales) rather than subjective (i.e. sales) rather than subjective (i.e. taste)                  taste)                 

PredictabilityPredictability - standardized and uniform services - standardized and uniform services ControlControl - standardized and uniform employees - standardized and uniform employees

Strengths Continued…Strengths Continued…

These concepts have led to the stability and expansion of These concepts have led to the stability and expansion of McDonald’s in the overseas market, especially in East Asia, McDonald’s in the overseas market, especially in East Asia, where more and more McDonald’s franchises are opening where more and more McDonald’s franchises are opening constantly, leading to the belief that maybe one day every constantly, leading to the belief that maybe one day every restaurant will be taken over by McDonald’s itself.restaurant will be taken over by McDonald’s itself.

McDonald’s franchises in various countries also offer a McDonald’s franchises in various countries also offer a variety of meals to better help customers in choosing food variety of meals to better help customers in choosing food that is best accustomed to people’s beliefs. that is best accustomed to people’s beliefs. For example, various faiths don’t permit people eating For example, various faiths don’t permit people eating

pork or beef. The substituting of an existing meal with an pork or beef. The substituting of an existing meal with an alternative food can lead to the creation of new menu alternative food can lead to the creation of new menu items, therefore, keeping the volume of customers high items, therefore, keeping the volume of customers high at all times as long as the expectations of customers are at all times as long as the expectations of customers are met with the outcome of higher revenues.met with the outcome of higher revenues.

Strengths Continued…Strengths Continued…

Opportunities Opportunities

Spin-off brandsSpin-off brands New restaurants offering richer, more satisfying New restaurants offering richer, more satisfying

customer experiencecustomer experience Economies of scope advantages?Economies of scope advantages?

Healthier productsHealthier products Compete with Subway and “healthy fast food” Compete with Subway and “healthy fast food”

alternativesalternatives

McJobs Program:McJobs Program: McDonald’s is one of the top 25 companies that has McDonald’s is one of the top 25 companies that has

focused in hiring people with disabilities, giving them a focused in hiring people with disabilities, giving them a chance to make a living like everyone else, leading to chance to make a living like everyone else, leading to the creation of the McJobs Program. the creation of the McJobs Program.

Looking to employ disabled people is what McDonald’s Looking to employ disabled people is what McDonald’s focuses on because, according to John Yeh, focuses on because, according to John Yeh, “employment of persons with disabilities is a win-win “employment of persons with disabilities is a win-win situation for employers, persons with disabilities, and situation for employers, persons with disabilities, and service providers.”service providers.”

Considered the best employer for AsiansConsidered the best employer for Asians

McDonald’s worldwide willingly hires people constantly in McDonald’s worldwide willingly hires people constantly in order to supplement the growing need of employees for its order to supplement the growing need of employees for its growing franchise in over 101 countries.growing franchise in over 101 countries.

Opportunities Continued…Opportunities Continued…

Focus on already existing operations before continuing Focus on already existing operations before continuing expansion in order to increase their profit margin.expansion in order to increase their profit margin.

Continue focusing on expanding in India and China because Continue focusing on expanding in India and China because they are both developing countries with increasing they are both developing countries with increasing economies and high populations.economies and high populations.

Add more menu choice and variety to promote healthier Add more menu choice and variety to promote healthier lifestyles.lifestyles.

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