STRATEGIC MANAGEMENTPRESENTATION

FAST FOOD INDUSTRY

Market Size and Growth Rates•  Earning trillion-dollar per year. • In the United States, it is sharing 10% of the GDP. Canada- 13%, 13% - Mexico, 11% -European Union, 12% - Latin America and 14%- Asia (2007).

Scope of rivalry Local to international

Stage in Industry Life Cycle 

Curve is flatter- the stage of expansion.

Forces driving Industry Competition

IndustryCompetitors

Rivalry Among Existing Firms

PotentialEntrants

Buyers

Other Stakeholders

Suppliers

Substitutes

RelativePower of Unions,Governments,etc.

Threatof New Entrants

Bargaining Power of Buyers

Threatof Substitute Products or Services

Bargaining Power of Suppliers

Relatively weak

Very strong

Very strong

Moderate to strong

Weak

Supplier Power• Willingness of supplier• Supplier-seller collaboration• Supplies are mostly commodities• Customers- industry leaders

• Barriers to Entry• Economies of scale• Unattractive market growth • Competitors strong offensive moves• Competitors expertise in

marketing and efficiency

Threat of Substitutes• Readily available • Attractively priced • Satisfactory in terms of quality

Degree of Rivalry• Several competing companies. • Product and service differentiation inadequacy. • Aggressive in making fresh moves -           Domestic demand is growing slowly-           Competitors often rely on price cuts to boost volume-           Low switching costs for consumers

Buyers power•A large number of small operators •High fixed costs, •Undifferentiated and replaced•Switching cost low•Consumer-price-sensitive, •Produce the product•Purchases in small volumes •Well-informed about sellers’ products,

prices, and costs

INDUSTRY ANALYSIS

Offensive strategies and defensive approach

Competitive pressure from substitute products, quick, convenient service Threat of new entrants and power of suppliers is not significant-

capital to invest in real estate

Driving force

McDonald’s Competitive analysis matrix

The competitive profile matrix defines the firm major competitor and their particular strengths and weakness & position

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Competitive profile matrix

Mc Donald’s Burger Kings Yum Brands Wendy’s

Critical Success Factor Weight Rating Weighted score

Rating Weighted score`

Rating Weighted score

Rating Weighted score

Price 0.15 4 0.60 3 0.45 3 0.45 3 0.45

Financial Position 0.08 4 0.32 3 0.32 3 0.24 2 0.16

Customer loyalty 0.10 4 0.40 3 0.40 3 0.30 2 0.20

Advertising 0.10 3 0.30 3 0.30 4 0.40 2 0.20

Product Quality 0.10 4 0.40 3 0.40 4 0.40 2 0.20

Innovation 0.15 3 0.45 3 0.45 3 0.45 2 0.30

Market share 0.10 4 0.40 2 0.20 3 0.30 2 0.20

Management 0.07 4 0.28 3 0.21 3 0.21 3 0.21

Global Expansion 0.15 4 0.60 2 0.30 3 0.45 1 0.15

Grand Total 1 3.75 3.03 3.20 2.07

MCDONALD’S CORPORATION

• Largest Chain of Restaurants serving nearly 47 Million customer daily with 31,000 outlet in 119 countries, employing 1.5million people.

• 15% owned and operated directly• Franchisee and JV - revenues come from the rent, royalties and fees

paid by the franchisees & sales in company-operated restaurants.• Profit Grew Over 30% over three years ending to $52.8 billion.• 9% Growth In Operating income to $5.9 billion. • Main characteristic- local deviation from the standard menu• Key success factors- Company Expansion Strategy

McDonald’s Vision, Mission and Value

MACDONALD OVERVIEW

1960’s: introducing Hamburger University., big idea- Big Mac

1970’s: introduced happy meal, thru drive.

1990’s: acquired stakes, web- McDonald’s.com- macdonalization

2003: revitalizing plan - Plan to Win strategy, with its strategic focus on ‘being better, not just bigger’.

Till 2008: 30496 outlets.ranked 5 most admired company in CRS .named as marketer of year by advertising age“ when and where you want it” & "Forever Young”For mobile population: offering more drive thrus- China and US

double drive thrus- in Canada and Russia delivery services – Singapore, Egypt, India

top 8 most powerful brand

2009: Plan to win strategy, focus on being one brand, one system and one plan.

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Internal Audit

Strength

• Strong Brand name, image & reputation• Large market share• Strong global presence• Specialized training for managers known

as hamburger university• Plan to win focuses on 4 p’s• Strong financial performance& position• Proven production methods & countless

new innovation ( breakfast, café etc)• Customer focus• The company has favorable access to

distribution networks • Strong MCD performance in the global

market place

Weakness

• Unhealthy food image• High staff turnover including top

management• Customer losses due to fierce

competition• Legal actions related to health issues :

use of trans fat & beef oil• Uses HCFC – 22 to make polystyrene

that is contributing to ozone depletion• lack of product offerings to meet varied

customer tastes and preferences • Many restaurants are outdated

SWOT ANALYSIS

External Audit

Opportunities• Growing health trends among the

customer• Falling global trade barriers in

attractive markets • Globalization , expansion in other

countries• Diversification & Acquisition of other

quick- service restaurants• Growth of fast food industry• Worldwide deregulation• Low Cost menu that will attract the

customers.• Expansion of menu to meet healthier

consumer preferences • Freebies & discounts

Threats• Health professional& Consumer activist

accuse MCD of contributing of high cholesterol, heart attacks, diabetes & obesity

• Relationship B/W MCD Corporate & Its franchisee

• Anti- American Sentiments• Global recession & Fluctuating foreign

currencies• Industry to struggle to meet the customers

towards health & environmental issues.• Rivals copy McDonald’s innovations fairly

quickly, eliminating first-mover advantages

• The company has the propensity to induce shifts in consumer tastes away from the firm's products

PEST ANALYSIS

Political and legal•Highly influenced by the individual state policies•Recurrent bellowing in opposition to the fast food industry.

Economic•Exchange rate fluctuations•The rate at which the economy grows ; hit by inflation

Social•With definite types of personalities. •Below the age bracket of thirty-five•Working within many social groups

Technological •Inventory system and the management of the value chain•Quality standards

Environment •Accusations of environmental damage.

Mc Donald’s USA Mc Donald’s USA

THE BCG MATRIXTHE BCG MATRIX

Mc Donald’s EUROPE Mc Donald’s EUROPE

Mc Donald’s ASIA Mc Donald’s ASIA Mc Donald’s AMERICAS Mc Donald’s AMERICAS

ANSOFF MATRIXANSOFF MATRIX

Market penetration loyal consumer base and existing products

Product development new foods and new burgers in their menu

Market development established globally

McDonalds new cafe style shops

As it is something new McDonalds has introduced but still related to their food market : fast food company diversifying into selling coffee. can be a part of Related diversification strategy(McDonalds are already selling coffee so it could also be a product development strategy..??)

As it is something new McDonalds has introduced but still related to their food market : fast food company diversifying into selling coffee. can be a part of Related diversification strategy(McDonalds are already selling coffee so it could also be a product development strategy..??)

Supplier performance index

ImportBreath of supplyprocess control

equipment

No direct control over issues, positive influence by raising questions, bringing people to the table and encouraging improvement

The McDonald’s Supply Chain

PORTER VALUE CHAIN ANALYSIS OF MCDONALD’S

The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting

in a profit margin for McDonald's.

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•Organizing the supply of food and materials to restaurants through approved third party logistics operators.

•Production in huge plants denoted exclusive to McDonald’s control food distribution and packaging system

Inbound logistics

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Relatively Few Management Layers to Reduce Overhead

Effective Training Programs to Improve Worker Efficiency and Effectiveness

Timing of Asset Purchases

Efficient Plant Scale to Minimize Manufacturing Costs

Selection of Low Cost Transport Carriers

Delivery Schedule that Reduces Costs

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes

Frequent Evaluation Processes to Monitor Suppliers’ Performances

Policy Choice of Plant Technology

Organizational Learning

Efficient Order SizesO

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•R&D in field research needs of end users.• quality development in collaboration with good suppliers

•Forward integration: through franchisees with control over store presentation, menu items etc. and enhance participation in process improvement

Operations

Technological Development

Human Resource Management

Firm Infrastructure

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Selection of Low Cost Transport Carriers

Delivery Schedule that Reduces Costs

National Scale Advertising

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Effective Product Installations to Reduce Frequency and Severity of Recalls

Frequent Evaluation Processes to Monitor Suppliers’ Performances

Efficient Order Sizes

Interrelationships with Sister Units

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•Is the concern of the franchisee.

•Outbound logistics are growing as a part of McDonald’s recycling system integrating in the logistics of distribution center

Outbound logistics

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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•Long term marketing objectives are broken down into shorter term measurable targets, which McDonald uses as milestones.

•Country teams are given autonomy in marketing mix decision.

•Advertising & PR is outsourced (Mudra agency in India)

Marketing

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Services provided by the companies enrollment standards

Service

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Procurement

Sought partners with expertise on down trade distribution

Procurement

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Technological Development

Technology and development research in quality assurance, and packing readdressed at lower cost, faster delivery chain system and process control equipments, recycling system.

R & D

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Human Resource Management

HRM specialists in R&D and expertise in food formulation, education to raise awareness of issues and raise demand. The addressing environmental issues and CRS.

HRM

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Human Resource Management

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Firm Infrastructure

Strong real estate portfolio.International organization more than 50000 employees works in more than 50 countries,

Rapid market growth

Slow market growth

Strong competitive position

Week competitive position

Quadrant IQuadrant II

Quadrant IIIQuadrant IV

Grand Strategy Matrix

Excellent strategic positionConcentration on current markets & productsTake risk aggressively when necessary

Excellent strategic positionConcentration on current markets & productsTake risk aggressively when necessary

RECOMMENDATIONS

Stay-on-the-offensive strategy

Fortify-and-defend strategy

Recommended Strategy/possible strategies

Adaption strategy

Focus on CSR .The 2009.Global Best of Green highlights - local innovations that can be shared and applied in other markets across McDonald System.

Grand strategy matrix-alternative strategies

Market developmentMarket penetrationProduct developmentForward integration Backward integrationHorizontal integrationConcentric diversification

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SWOT MatrixStrength

1.Strong Brand name, image & reputation

2.Large market share

3.Strong global presence

4.Specialized training for managers known as hamburger university

5.Plan to win focuses on 4 p’s

6.Strong financial performance& position

7.Introduction of new product

8.Customer focus

9.Strong MCD performance in the global market place

Weakness1.Unhealthy food image

2.High staff turnover including top management

3.Customer losses due to fierce competition

4.Legal actions related to health issues : use of trans fat & beef oil

5.Uses HCFC – 22 to make polystyrene that is contributing to ozone depletion

6.Ignoring breakfast from the menu

S-O Strategies W-O Strategies

1. Opportunities2. Growing health trends among the customer

3. Globalization , expansion in other countries

4. Diversification & Acquisition of other quick- service restaurants

5. Growth of fast food industry

6. Worldwide deregulation

7. Low Cost menu that will attract the customers

8. Freebies & discounts

Focus on the plan to win to attract customers & expansion in other countries(S5, O2,O6)Expansion in the market share by more investments in Asia (S2,O2)

Minimize customers losses by providing low cost menu & discounts.(W3, O6,O7)

S-T Strategies W-T Strategies

Threats1.Health professional& Consumer activist accuse MCD of contributing of high cholesterol, heart attacks, diabetes & obesity

2.Relationship B/W MCD Corporate & Its franchisee

3.Anti- American Sentiments

4.Global recession & Fluctuating foreign currencies

5.Industry to struggle to meet the customers towards health & environmental issues

More control on franchise dealers to maintain MCD’s reputation & quality.(S1, T2)Provide new product & keep innovation. ( S7, T3)

Applying ) grams trans fat in all world wide MCD’s. ( W1, W4, O1)Transfer from HCFC-22 to HFC – free.( W5, T6)

•To deal directly with the proper authorities •Acquainted with the law•Carry out a well conducted market research.

PEST ANALYSIS

McDonald’s deemed as demigod in the fast food business in the international scene, what it preserves as revealed in its processes is the need for flexibility. Any business in spite of the

muscle of the brand name or the size of its reserves could not afford any failures in their individual markets.

•Obtain the relevant information from the target market. •Find out the shifts in areas•The cost-effectiveness, interactivity and real-time effects of the communications •Find out the environmental regime •Minimise the use of Styrofoam materials and plastic cups. •Hire local counsels

‘Think global, act local’

CONCEPTUAL STORMING Mr. Akshat JainCONCEPTUAL STORMING Mr. Akshat Jain

PRESENTATION &Spade Work By Preeti Chaudhary

PRESENTATION &Spade Work By Preeti Chaudhary

IDEAS FLOOD

ANNUAL REPORT 2007,2008http:/ivy thesis. typepad.comwww.ccfplus.comwww.about mcdonalds.comwww.crmcdonalds.comMcDonald's Environmental ReportCrafting and Executing Strategy by

Thompson, Strickland, Gamble