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McDonalds Corporation Case study

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Overview of McDonalds

McDonald's Corporation is the world's largest chain of fast food restaurants Goal to achieve annual growth of 3 % to 5% and average annual income growth f 6 to 7%. Latin America is the highest revenue generator with 700$millon sales. 7500 employees in more than 100 countries. Geographical structure

Mcdonalds USA, Europe, AMEA, Latin America and International

Each McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. Revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 36% over the three years till 2006. Decreased liabilities. In 2006 company was sued for the presence of carcinogens in chicken menu items served.

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McDonalds
Vision

To be the best and leading fast food provider around the globe

Mission
McDonald's

brand mission is to be our customers' favorite place and way to eat, and improve our operations to provide the most delicious

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Threat of new Entrants

Yes (+)
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No (-)

Do large firms have a cost or performance advantage in your segment of the industry? Are there any proprietary product differences in your industry? Are there any established brand identities in your industry? Do your customers incur any significant costs in switching suppliers? Is a lot of capital needed to enter your industry? Is serviceable used equipment expensive? Does the newcomer to your industry face difficulty in accessing distribution channels? Does experience help you to continuously lower costs? Does the newcomer have any problems in obtaining the necessary skilled people, materials or supplies? Does your product or service have any proprietary features that give you lower costs? Are there any licenses, insurance or qualifications that are difficult to obtain? Can the newcomer expect strong retaliation on entering the market?

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Bargaining Power of Buyer`s

Yes (+)
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No (-)

Are there a large number of buyers relative to the number of firms in the business?

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Do you have a large number of customers, each with relatively small purchases?

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Does the customer face any significant costs in switching suppliers?

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Does the buyer need a lot of important information? Is the buyer aware of the need for additional information?

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Is there anything that prevents your customer from taking your function in-house?

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Your customers are not highly sensitive to price. Your product is unique to some degree or has accepted branding. Your customers businesses are profitable You provide incentives to the decision makers.

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Threat of Substitutes
Yes (+) No (-)

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Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.

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The customer will incur costs in switching to a substitute

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Your customer has no real substitute.

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Your customer is not likely to substitute.

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Rivalry Amongst Existing Competitors

Yes (+) The industry is growing rapidly. The fixed costs of the business are relatively low portion of total costs. No (-)
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There are significant product differences and brand identities between the competitors.

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The competitors are diversified rather than specialized.

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It would not be hard to get out of this business because there are no specialized skills and facilities or long-term contract commitments etc.

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My customers would incur significant costs in switching to a competitor.

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My product is complex and requires a detailed understanding on the part of my customer. My competitors are all of approximately the same size as I am.

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Bargaining Power of Suppliers

Yes (+) No (-)

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My inputs are standard rather than unique or differentiated.

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I can switch between suppliers quickly and cheaply.

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My suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function in-house.

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I can substitute inputs readily. I have many potential suppliers. My business is important to my suppliers. My cost of Purchases has no significant influence on my overall costs.

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Analysis of Porter Five Forces

Factor Rivalry among competitors High. Threat of New Entrants Low Bargaining power of buyer Low. Threat of substitutes Bargaining power of suppliers Moderate. Low.

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PEST ANALYSIS

ECONOMIC

TECHNOLOGICAL

POLITIAL

SOCIAL

Increasing inflation Low disposable income of People. Changes in the exchange rates

Increased innovative Political and regulatory technology has made fast laws highly influence the food industries to lower their Fast food industry cooking time and produce ,specially in United products more healthier and States. efficiently, through Previously McDonalds improved equipments. was sued for making people obese by The integration of technology in the operations providing fatty and large of McDonalds tend to add bundled meals. value to their products.

More people, specially women going out for work. People are becoming more health conscious. McDonalds is required to change it menu according to different cultures, e,g India.

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External Factors
Opportunities Threat Increasing Consumer Demand for Healthier Food optionsInfections in meat and poultry Growing into diverse food menus such as Sandwiches, etc. Growth and Expansion in other countries Acquisition of Small Restaurants that are providing fighter brands in Fast food industry Consumer requirement for Low cost menu Using oil and fats with less trans fatty acids and vegetable oil. Increasing unemployment worldwide

Anti-American sentiments regarding American products Increasing regulations and laws to produce food and making it quality compatible Increase in spread of obesity, diabetics and other cardio ailments. Increased number of small restaurants opening at every nook and corner Global recession and fluctuating foreign currencies Increased competition by ready to eat food at home.

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Internal Factors
Strength Strong brand recognition of McDonalds Huge market share. Globally present in many countries Menus catering to different culture in different countries Vibrant restaurants Standardized processes globally to produce food. Strong hr policies leading to highly efficient and effective people Strong focus on its employees and their development and training Introduction of new food items on regular basis Strong financial performance Weakness Increased employee turnover Increased food cost from suppliers . Previous allegations and law suits on McDonalds as promoting obesity, trans fat & beef oil. Unhealthy food image.

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Now we will move on to Excel templates

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INTERNAL AUDIT
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VALUE CHAIN ANALYSIS

Human resource management;

Workforce of 465,000 employees Strong focus on training & development

Technology;

New product iniaters Standard product & process technologies

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Firm Infrastructure;
Franchise 12

based businesses

domestic & 26 foreign subsidiaries

Marketing & Sales;

Convenience Value

to customers

based pricing

Services;
Variety

of menus for different customers

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Financial Performance
Record Total

growth in 2006

current ($4107.7 to $3008.1) and long term liabilities declined ($8934.3 to $8416.5) earning increased from ($23.5bn to equity rose from $15.1bn to $25.8bn)

Retained

Shareholders

$15.5
Net

Income increased by 36%

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SPACE Matrix
Financial Strength Return on investment Leverage Net Income EPS ROE Cash Flow Average Rating 4 4 6 5 5 4 4.67 Environmental Stability Rate of inflation Demand Changes Price Elasticity of demand Competitive pressure Barriers to entry new markets Risk involved in business Average Y-axis Competitive Advantage Market share Product Quality Customer Loyalty Control over other parties Rating -1.00 -1.00 -1.00 -2.00 Industry Strength Growth potential Financial stability Ease of entry new markets Resources utilization Profit potential Demand variability Rating -3 -3 -1 -3 -3 -2 -2.5 2.17 Rating 5 5 4 4 5 3

Average

-1.25

Average

4.33

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Q/A ?