LYCEUM OF THE PHILIPPINES UNIVERSITY BATANGAS

Graduate School
MBA PROGRAM

CASE ANALYSIS

By:
Ma Chere Gracita Reyes-Bilog

STRATEGIC MARKETING MANAGEMENT

Dr. Dante Lubis
June 27, 2015

CASE ANALYSIS
MCDONALDS

VIEWPOINT
Jim Skinner, Chief Executive Officer
TIME CONTEXT
2009
PROBLEM STATEMENT
How can McDonalds increase its appeal to the different segments of the market
without alienating others?
STATEMENT OF THE OBJECTIVE
Increase same stores sales by 10% by end of 2009.
AREAS OF CONSIDERATION
A. Strengths
1. Powerful brand recognition. McDonalds is a leading global food service retailer and
has remained to be a household name throughout the world. Its Golden Arches logo
and Ronald McDonald character are well known globally.
2. Strong global presence. As of 2008, McDonalds has more than 31,100 outlets
scattered in major parts of the world, including United States, Europe, Asia Pacific,
Canada and Latin America.
3. Successful franchise business model. Approximately 80% of McDonald's restaurant
businesses world-wide are operated by franchisees. Thus, McDonald's benefits from
economies of scale. Financially, with franchising, McDonalds has a regular and steady
source of income, in terms of rent and/or royalties.
4. Well-planned and executed turn-around strategy. Cantalupos Plan to Win Strategy
greatly helped McDonalds recover from the dire consequences of its overexpansion.
5. Affordable menu. McDonalds has successfully positioned itself as a fast-food outlet
offering low-cost food and drink without hurting the companys profit.
6. Financial stability. In the midst of a global economic slowdown, McDonalds continued
to grow. Its same store sales even increased by 7.2% during the last quarter of 2008
compared from the figures reported in 2007.
B. Weaknesses
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1. Negative image and publicity: McDonalds is perceived have unhealthy food menu
which can cause obesity and heart attack for customers.
2. Product development problems. McDonalds was not able to capitalize on the trend
towards organic foods.
C. Opportunities
1. Rapidly fragmenting market. The tastes of the consumers are changing. McDonalds
can capitalize on this by developing products other than hamburgers and French fries.
2. Increasing demand for healthier food. As a demand for healthy food increases
significantly, McDonalds can produce healthier alternatives to their menu.
3. More people are on the go. People who are on the go mean more people who prefer
to consume fast food products.
4. Increasing globalization.
5. Economic slowdown. The desire of the people not to spend too much during the
economic slowdown is aligned with McDonalds strategy of offering affordable menu
without hurting the companys profit.
D. Threats
1. Fierce competition: The competition in the fast food industry is very fierce and
developed countries are overcrowded by so many fast food restaurant chains.
2. New competitors. Due to the rapidly fragmenting market, the competitors of
McDonalds are not only those in the fast food chain. Competition has been coming
from quick meals of all sorts that can be found in supermarkets, convenience stores,
and even vending machines.
3. Health issue. People nowadays are becoming more conscious of what they eat.
4. Lawsuits. With a rising awareness of the high fat content of most of the products of
McDonalds, the company is beginning to face lawsuits even from its loyal customers.

MBA: Strategic Marketing Management

ASSUMPTIONS
The financial ratios of McDonalds are assumed better than its competitors given
the declaration of CEO Jim Skinner that the company has continued to be recessionresistant. Two of its closest competitors, KFC and Wendys, failed to cope with the
peoples spending downturn.
ALTERNATIVE COURSES OF ACTION
1. International expansion through continued franchise opportunities.
2. Innovation of products through creation of an organic and healthier menu
3. A focused strategy should be developed around the companys core business, burger,
fries etc, looking to be the best in the industry, and generating incremental sales volume
per store rather than diversify or innovate.
4. Enlarge menu by adding non-traditional McDonalds food items.
5. Make every McDonalds a place to stay through the use of technology and having a
play area.
ANALYSIS
ACA1: International expansion through continued franchise opportunities
Advantages
McDonalds can capitalize on three of its
principal strengths - powerful brand
recognition, strong global presence and
successful franchise business model and
continue to aggressively expand in the
other parts of the world, with focus on
emerging markets such as
China.
McDonalds will thus have more stores and
at the same time an increase in its steady
source of income.

Disadvantages
Limited control over the activities of the
franchise.
Poor functioning, operations or reputation
of one franchise may damage the entire
chains reputation.
There is a difficulty keeping
maintaining intellectual property.

and

The market share of McDonalds will

continue to get bigger.
In addition to growing profits more rapidly,
by expanding its sales volume through
international expansion, McDonalds can
realize cost savings from economies of
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scale, thereby boosting profitability.

McDonalds has the necessary experience
in international expansion.
Product innovation. Part of McDonalds
franchise model is letting its franchisees
have more autonomy in making menu
decisions to fit the particular tastes of its
customers. This will contribute to an
increase in the menu of McDonalds.
ACA2: Innovation of products through creation of an organic and/or healthier
menu
Advantages

Disadvantages

Product innovations can attract new This will require extensive research into
customers as well as keep existing the wants and varying tastes of
customers.
McDonalds consumers for each particular
location or country.
The organic and/or healthier menu can
serve as competitive advantage for This will require huge capital expenditure
McDonalds.
in terms of product research and
development.
This will improve the image of McDonalds.
A successful reception of the organic
If successful, this can lessen the potential and/or health menu in one area does not
lawsuits against the company.
equate into a successful product
innovation in all areas.
This will delay the perceived decline of
McDonalds product life cycle.
ACA3: A focused strategy should be developed around the companys core
business burger and fries at affordable prices gearing towards being the best
in the industry, and generating incremental sales volume per store rather than
diversify or innovate. McDonalds should just improve the tastes of its core
products and heavily advertise to counter the negative publicity.
Advantages

Disadvantages

McDonalds is already globally well-known This requires big expenses on advertising.

to serve burger and fries, not salads nor
gourmet coffee blends nor baked muffins,
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at affordable prices.

This will not attract the healthy-eaters, thus

effectively alienating them.

This will keep its loyal customers.

This does not require huge
expenditure
for
research
development.

capital
and

ACA 4: Enlarge menu by adding non-traditional McDonalds food items.

Advantages

Disadvantages

Product innovations can attract new This will require extensive research into
customers as well as keep existing the wants and varying tastes of
customers.
McDonalds consumers for each particular
location or country.
This will lengthen the companys and/or its
product life cycle.
This will require huge capital expenditure
in terms of product research and
The introduction of non-traditional food development.
items can serve as competitive advantage
for McDonalds.
A successful reception of new food items
in one area does not equate into a
This can help combat the negative image successful product innovation in all areas.
of McDonalds.
ACA 5: Make every McDonalds a place to stay through the use of technology and
having a play area.
Advantages

Disadvantages

This will attract employees and teenagers This will require renovation of existing
who always seem to want to connect to restaurants and may require capital
expenditure.
the internet.
This will also provide a place for parents to
allow their children a safe place to play.
Additional market segment being served
will increase profitability.
CONCLUSION

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In determining the best alternative, the following criteria will be used, with the
corresponding percentage or weight for each criterion:
1. Cost-efficiency. Ability to successfully implement the course of action at minimal costs.
(30%)
2. Sustainability of the course of action. Capacity to endure and support the fulfillment
of the identified objective. (40%)
3. Timeliness of expected result. How fast this ACA can get its objective. (30%)
ACA
International
Expansion
Product
Innovation
Core Product
Improvement
Non-Traditional
Food Items
Place to Stay

Cost
Efficiency
30

Sustainability

Timeliness

TOTAL

35

15

80

10

35

15

70

20

10

30

10

35

15

70

20

20

20

60

Given the above Decision Matrix, the first alternative course of action, international
expansion through continued franchise opportunities, received the highest score. It is
more cost efficient to undertake international expansion rather than product innovation
or core product improvement because McDonalds will adopt its tried and tested
franchise model. Thus, the costs associated with its international expansion are minimal
especially when compared to the license fees and royalties it will receive. It is also I
important to note that through international expansion, McDonalds can simultaneously
address the need to develop new products including healthier products. This is because
the franchise model of McDonalds allows the franchisee to create new menu to fit the
tastes and preferences of its customers, usually in accordance with the specific
countrys culture. There will thus be simultaneous product development and innovation
at little or no expense to McDonalds. In its international expansion, McDonalds can
focus on emerging markets such as China which is heavily populated. Thus, through
international expansion, McDonalds will be able to meet its objective of increased same
stores sales by 10% by the end of 2009.
PLAN OF ACTION
Activity
Person Responsible
Time Frame
Set a Board Meeting to President of the Board of January 2009
discuss the strategy
Directors
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Activate the Franchising

Team to review all pending
franchise
applications
worldwide,
scout
for
possible lucrative franchise
locations,
including
interview of prospective
applicants and recommend
for approval applications for
franchise.
Approval
of
Franchise
Application
Drafting
and
signing
franchise agreement
Training of staff

Finance
Manager, Four (4) to twelve (12)
Franchising Committee
weeks

CEO Jim Skinner and/or One

(1)
week
from
area/region manager
recommendation
Legal Department
Two
(2) weeks from
approval
Human
Resources One (1) to six (6) months,
assigned to the area/region depending on time of
franchise
Construction. Refurbishing Operations; real estate Two (2) to four (4) months
or renovation of building
division of McDonaldss from approval
assigned to the area/region
Opening
of
new Franchisee;
McDonalds One
(1)
week
from
McDonalds restaurant
representative
occupancy of restaurant
Strategy
Evaluation; CEO Jim Skinner
Every end of the month
Adjustments
on
the
strategy
that
needs
improvement
and
disseminate
Performance
review. CEO
Jim
Skinner; Every quarter
Monitor market reactions to area/regional head;
any new products; monitor
performance of franchise
Assessment of financial Finance
Department; Every quarter
returns
area/regional head
RECOMMENDATIONS
McDonalds is a well-known brand in all the major regions of the world. However, the
market is rapidly being fragmented and the tastes of its consumers have been changing
over the years. Coupled with this is the negative image that McDonalds has become
associated with. McDonalds must be able to adapt to the new environment, increasing
number of competitors in an industry that almost over-saturated and nearing the decline
stage.

MBA: Strategic Marketing Management

References
Hill, C. and Jain, A. (2012). International Business (6 th Edition). McGraw Hill
Companies.
How Has McDonald's Been So Successful for So Long? (accessed on June 22, 2015;
http://www.franchisedirect.com/information/markettrendsfactsaboutfranchising/thesucce
ssofmcdonalds/8/1111/)
Johnson, G., Scholes, K. and Whittington, R. (2005) Exploring Corporate Strategy: Text
and Cases. Pearson Education Limited, Essex, U.K.
Global Strategy of McDonald and How it Reached all Corners of the World.
https://www.academia.edu/6465022/Global_Strategy_of_McDonald_and_How_It_Reac
hed_All_corners_of_World (accessed on June 24, 2015).

MBA: Strategic Marketing Management