Strategic Business Analysis: McDonald’s

Table of Contents

Table of Figures

 TOC \h \z \c "Figure"

 
Introduction

            McDonald’s is considered as the largest fast-food chain in the world. In

addition, it is also considered as one of the most powerful brands in the world. In

third annual BrandZ Top Most Powerful Brands Ranking, the company positioned as

top 8 most powerful brand, garnering a total of 49,499 brand value, showing 49% of

brand value change ( 2008). It is considered as major player in the industry of fast-

food in each and every country that it is operating. However, due to the different

changes, the company is facing difficulties and problems.

            The company is facing increasing competition, together with its different

internal weaknesses such as poor management, inefficient marketing as well as lack

of strategies in answering the changing needs and demands of its customers and

franchises. All of these strategic issues must be focused in order to maintain the

competitive advantage and position of the company in the global market. In addition,

the global expansion is also one of the most vital aspects of the company, due to the

fact that McDonald’s is considered as one of the fast growing companies in the

world. Currently, the company operates and licenses more than 31,000 restaurants

in more than 120 countries (2005 ).

            This paper will focus on McDonald’s past and present strengths,

weaknesses, opportunities as well as threats. It will also show different threats that

the global fast-food industry is facing. For the past decade, franchising is considered

as one of the key strategies and success factors of the company that takes about

60% of the entire sales of the company. Furthermore, the primary plan of the

company focuses on the key drivers of success which are people, product, place,

price and promotion, but the company focuses primarily on its people, or focusing on
maintaining and improving employee satisfaction in order to maintain good

relationship between the employees and the customers.

Background of the Company

            McDonald’s is considered as the leading food service organization in the

world. It generates more than $40 billion in terms of Systemwide sales. It operates in

31,000 restaurants in more than 120 countries over six continents in the world. The

company claims that they have the benefits that are from the scale and strong

financial position; the most recognized and respected brands; unparalleled global

infrastructure and competencies in terms of restaurant operations, real state,

retailing, marketing as well as franchising; leader in areas of social responsibility;

sharing knowledge and expertise in terms of food safety; and committed in protecting

the environment for future generations (2003).

            The restaurant chain of McDonald’s of today began its humble beginnings in

San Bernardino, California as a renovated barbecue car-hop restaurant that was

founded by McDonald brothers,   The brothers borrowed $5000 in order to open the

business and hired attractive carhops and offered 29 items in their menu. However,

in 1947, the restaurant experienced financial loss that leads to its transformation.

The McDonald brothers purchased stainless steel grills, stainless steel pumps and

mixer that can spin five milk shakes at the same time. The menu was reduced to 9

items and golden arches were placed on the outside and applied red and white tiled

interior. The restaurant was reopened as the first self-service assembly line, and

drive-in that offered 15 cent hamburgers, 19 cent cheeseburgers, 20 cents malts and

10 cents fries in 1948, and the business experienced performance boom in 1952 and

purchased 10 mixers for the production of milkshake

            The said purchased caught the attention of Ray Albert Kroc that had changed

the entire history of the restaurant. In 1954,  mortgaged his home and invested all of

his savings in order to become the distributor of a milk shake maker machine that

was called as the The Multimixer. found out about McDonald‘s via his friend, that

pushed him to convinced the McDonald brothers to avail of his mixers. In addition,

he convinced the brothers to open more restaurants under his management. As a

result, in 1955,  opened the Des Plaines, Illinois restaurant. As of now, the said store

is already a museum for the company. In 1963, Ronald McDonald as portrayed by ,

the company’s official mascot appeared. In 1967, the company entered the Stock

Exchange (2006).   

            The first Canadian McDonald’s opened in Richmond in 1967. As of now,

there are about 1,375 McDonald’s Restaurants in Canada. In addition, the largest

McDonald’s in the world can be found on the Interstate 44 that is near in Vinita,

Oklahoma. The store starts on one side of the road, and due to the overpass, the

store extends to the other side of the interstate. 85% of the entire restaurants are

owned locally (  2006).

McDonald’s in 2003

            McDonald’s experienced its phenomenal growth during 1960’s up to 1970’s

where in American considered fast service as their priority. During 1980’s the

company faces the growing burger wars or the increasing competition where in

almost all of the players in the fast-food industry are offering the same or similar
products and services. During 1990’s the company started to face different problems

that are related financial, innovation, customer relationship and franchisee

relationship aspects. As a result, during late 1990’s and early 2000, the company

experienced failed turn-around and lackluster in sales.

           

 
  

Figure  SEQ Figure \* ARABIC 1 SWOT Analysis - McDonald's in 2003

Strengths

·        Strong brand image and reputation;

·        Strong global presence;

·        Strong real estate portfolio;

·        Holds majority of the market share in the world’s fast-food hamburger industry.

·        Specialized training for managers known as the Hamburger University;

·        McDonald’s does not need to act as a finance corporation towards its
franchises;
 

Weaknesses

·        Declining share in the market;

·        Weak product development and innovation;

·        Disgruntled franchisees;

·        Quality and taste of products;

·        Reducing ability to increase revenue;

 Poor marketing;
 Many stores started to look out-dated;

·        Poor management

·        Failure to respond to the changing needs and demands of the

customers and franchisee.

Opportunities

·        Globalization, expansion in other countries;

·        Diversification and acquisition of other quick-service restaurants;
·        Growth of the fast-food industry
·        Changing trends in eating habit;
·        Low cost menu that will attract the customers.

Threats

·        Changes in the global economy;

·        Increasing competition in the local and global fast-food industry;

·        Price war;

·        Changing diet preferences and health expectations.

·        Fast-food chain industry is expected to struggle to meet the expectations of the
customers towards health and fitness.

 
  

 
 

 
 

Strengths

            McDonald’s is considered as a global brand that is available in most

countries in the world and shares the same strategic principles, positioning and

marketing in every market throughout the world, but the marketing mix can vary that

helped the company to have a vital market share in all countries as well as

comparable brand loyalty (2005). That is the reason why, McDonald’s is considered

as one of the most famous and loved brands in the world in any industry. Thus, it has

a strong brand image and reputation that lead the company to become the most

powerful brand in the category of fast food according to  in 2008 (, 2008).

            The company also has a strong global presence with its nearest domestic

competitor being only half its size, thus helped McDonald’s to become the leader in

local and international markets. In addition, the company benefited from the cost

reduction through the economies of scale due to its huge size and big global

presence that enables it to expand risk that are involved with the economic

performance of a given country. Thus, the company is well placed in order to expand

and take advantage of the long-term growth in economy ( 2005 ).

            In addition, the company also has a strong real estate portfolio. It can be

observed on the position of the stores of the company, where in it is located in

different areas that are highly known for visibility, traffic volume and most

importantly, ease of access (2005). 

            Above all, the company’s  is also considered as one of its advantages. It is

the Center of Training Excellence of the company. It has emphasized consistency in

terms of restaurants operations procedures, service, quality as well as cleanliness.

The University was founded by , the former senior chairman and Kroc in 1961 in the

basement of the store in Elk Grove Village, Illinois. In February 24, 1961 the first

class with 14 students graduated in the University and as of now there are over

5,000 students that are attending the University each year. Since its first operation

there are about 80,000 restaurant managers, mid-managers and ever owner and

operators that have graduated from the said facility (2008).

Weaknesses

            Food industry is considered as saturated, thus different restaurants must

focus on discovering balance between the increasing prices of raw ingredients as

well as the price sensitive consumer in the world ( 2007). As a result, McDonald’s

has to deal with the viewpoint of the alarming market saturation that will make it hard

for the company to add new stores and outlets (2005).

            In addition, the company is experiencing reduces in ability to increase

revenue. However, the swift of the focus of the company from a value meal menu to

a more diverse one has limited the negative impact of the intense price competition

that was traditionally taking place among the leader of the industry (2005 ).

            Another weakness is the weak development of product, which is considered

as one of the most important activities of any business. It is important to take note
that the last product breakthrough of McDonald’s was Chicken McNuggets in 1983

(2005 ). As a result, the company is having difficulty in meeting the changing

demands and preferences of the customers towards their products and services.

            The company also shows poor marketing effort and connection with its local

customers. There are different advertisement and promotion of the company that

insults and caused negative image for the company. In China, the company

launched a television commercial that some of the Chinese viewers considered as

offensive that shows Chinese man kneeling and begging for a discount from an

electronics salesman who refuses due to the fact that his coupon has expired, then

the ad said that people don’t have to beg in order to take advantage of the

company’s promotion. Thus, the advertisement portrays that Chinese people are

poor and lacking in dignity (2005).  In addition, in Hong Kong, too many promotions

become extremely excessive (2001).

            Furthermore, the company is also facing problem regarding poor

management. There have been different issues that are related to the poor customer

service of the company. According to the customer service index that was conducted

in 2003, McDonald’s has the lowest customer service ranking in the entire fast food

industry; it has even ranked lower in the customer service compare to IRS (2005).

The      surveys customers of about 200 companies and 30 government agencies. As

a result, McDonald’s garner an average score of 64 that enables the company to be

the lowest in the category of fast food and quick service restaurants ( 2003). The

said rate of the customer is somewhat ironic to the position of the company as one of

the most popular brand in the world.

            In addition, the company also has the highest employee turnover rate

compare to its competitors ( 2005). The current annualized turnover number of the

company is 44% per article or annual turnover at 700,000. In details, globally,

managerial turnover is about 20%, at the same time the crew members averages to

80% - 90% ( 2008).  The said events cause the company to spend more costs in

their human resource management. While the organization continues to spend a

great deal of time in the process of recruitment and hiring new employees and staff,

it does not pay true attention to the cost of the turnover among its staffs. The cost of

the employee turnover can be divided into two important categories which are: the

direct cost that include the actual out-of-pocket expenses, together with the time that

is expended by the staff as well as the management; and the opportunity costs, that

include the number of the hours that have been taken for a new employee to acquire

the skills and knowledge of the previous employee fully as well as the cost of the

damage that the terminating employee did to he organization by the process of

alienating the customers, wasting time, sloppy work as well as carelessness. Thus, it

shows that the cost of the employee turnover has a direct influence over the bottom

line of the organization (2006).

Opportunities

            Globalization, expansion in other countries is considered as one of the most

important opportunities for McDonald’s. The company still needs furthermore

penetration in different countries, specifically Europe, Asia as well as Latin America

(2005 ). The said opportunity will help the company to gain more market that can

help to increase the entire revenue. In addition, Asia is considered as one of the

most feasible market due to the fact that there are different newly developed
countries that can be considered as possible market such as China and Korea.

China is important due to its huge population as well as the growing condition of the

country.

            In addition, diversification and acquisition of other quick-service restaurants

will also be as an opportunity for the company. It is important for the company to

focus on its different branded chain restaurants such as the Chipotle

Grill. This is due to the fact that the Chipotle is considered as the most successful

McDonald’s branded chain of restaurants (2005).

            The growth of the fast-food industry in the world is also an opportunity for the

company. In the US alone, the fast food market has seen a healthy rise in terms of

growth within the last years where in the forecast can be sustained. Thus, the fast

food market is forecast to maintain its current expectations for growth that has an

expected Compound Annual Growth Rate or CAGR of 2.3% for the five-year period

(2005 - 2010). As a result, it will drive the market to a total value of $57.6 billion by

the end 2010, a total increase of 12.1% since 2005. Furthermore, the fast food

market is forecast to have a total huge volume of 37 billion transactions, representing

a total increase of 5.3% since 2005 and the CAGR of the volume of the market

during 2005 – 2010 periods is predicted to be 1% (2006). Aside from that, the fast

food industry of China is experiencing phenomenal growth, and it is considered as

one of the fastest growing industry in the country that has a compounded annual

growth rates of the market that crosses 25% ( 2008). The said growth is the effect of

lack of time of the Americans and Chinese to prepare food due to the amount of the

time that they spend in their works.

            The changing eating habits of the customers can serve as opportunities and

threats for the company. In terms of opportunity, as have mentioned, people tend to

buy fast food because they no longer have much time to cook and prepare meal due

to their works and schedules. In addition, the increasing participation of women in

the labor force affected their time that spent managing their homes, particularly

cooking. In the US alone, during 2004, about 59% of women were in labor force.

From 2000 to 2004, the rate of the labor force participation rate of mothers with

children under age 18 was 71%. During 2004, half of all management, professional

and related occupations was held by women, while women held 14% of architects

and engineers and 29% of physicians and surgeons. In addition, 86% of paralegals

and legal assistance and 89% of dieticians and nutritionists were women ().

            Above all, the low cost menu of the company will gain the attention of price

sensitive customers.

Threats

            Like any other global or multinational companies, the company is exposed to

any changes in the global economy and its aggressive international expansion has

left it as very sensitive to other economic slowdown of other countries (2005). One of

example is the fluctuation of the foreign currency. In addition, due to the economic

slowdown in some countries, particularly in most of developing countries, customers

tend to become price sensitive, and it has a great impact over the buying behavior of

the customers.

            In addition, competition is also one of the most important threats in the

company. As of now, there are many players in the industry, and most of them are
offering the same or similar products and services. The reason behind the said

growth is due to the improvement of the entire fast food industry in the world. That is

the reason why there is intensive price war, extreme battle of innovations and

breakthrough and serious promotions and advertisements are being implemented by

each and every players in the said industry. Increasing competition has led to

aggressive pricing policies amongst the large brands as well as pushed them to

increase their menu diversification as well as product developments in order to

increase sales and market share, thus maintain current position in the entire market

(2002).

            All fast-food hamburger chains, including McDonald’s are forced to respond

to the changes in the preferences of customer from high-calorie foods such as

burger and fries to healthier one such as deli sandwiches and baked potatoes

( 2005). The fast food industry holds negative image as the vital factor in a myriad of

health problems. There are different notions that shows that the combination of

desire for convenience from society and the greed that is driven market has helped

to produced a culvert of repulsive eating habits ( 2008). As of now, more and more

customers are becoming aware of nutritional values and health benefits of products

and services that they are availing. In addition, they people are more figure and body

conscious than before. In addition, childhood obesity was also connected and

blamed for the growing incidents and cases of childhood obesity that can cause

hazardous health problems in adulthood. The said situation has a great impact over

the brand, due to the fact that children have the big share on the revenue of the

brand (2004). The said trends reduced the revenues, staff motivation as well as the

interests of the shareholders of the company, and it can be showed in the strong

protest by different nutritional campaigners against the food that are being promoted
by the company that have affected many lives, not only in the US but in other part of

the world. The said events caused negative impact on the image of the brand that

pushes Disney to decide not to renew its contract with the company (2006).

McDonald’s Revitalization Plan Under New Leadership 2003

            Year 2003 is considered as one of the most important years for the company.

Under the new management of , a major restructuring was announced that focuses

on closure of more than 700 restaurants that mostly in the US and Japan; elimination

of 600 jobs and charges of $853 million.  also shifted away from the traditional

reliance on growth of the company via the process of opening new units to a focus

on gaining more sales and financial growth from the existing units (2004).

            Furthermore,  and his team had chosen to go big and bold with its three main

initiatives such as flawless experience; customer choice; and ubiquity that were

called as the McDonald’s Plan to Win that focuses on improving the customer

expertise (2006).

            The McDonald’s Plan to Win is also known as the 5 P’s or People, Products,

Place, Price & Promotion. The said strategy focused on what he company had

identified as the five most important or vital drivers of success or 5 P’s.

 
  

Figure  SEQ Figure \* ARABIC 2 Plan to Win McDonald's Strategy 2003

People

            People are considered as one of the most important driver of customer

satisfaction fro exceptional experience of the customers. People or the employee

was considered as the instrument in delivering exceptional customer service.

Furthermore, the human resource or labor force is considered as the most vital

resource in any organization due to the fact that it transforms different raw materials
or product into salable products and services. The performance of each and every

employee will reflect on the overall performance of the company.

            The company focuses on staffing their restaurants during the busy periods

and focuses on training their employees in order to deliver outstanding services. The

company also applied new technology such as more visual menu that offers the

employee more user-friendly system that will speed up their service towards the

customers (2005).

The Flawless Experience

            The Plan to Win required rethinking the entire experience chain, from arrival

to exit. The goals were to make the experience more personal and engaging, thus

can help to increase the speed and convenience both at the counter and in the drive-

through. The plan focuses on restaurant manager in order to implement flawless

experience. Even though the company was originally popular for consistent quality

and cleanliness via the establishment of corporate standards as well as rigorous

systemwide oversight, the said new approach was considered as less suited to the

process of providing the more personal experience that each and every consumer

expects today. Thus, only well-trained and committed on-site manager can provide

the said services (2006 ).

            The said aspect of the strategy will help to maintain the advantage or

strengths of the company regarding its strong brand image and reputation around

the globe, and the Hamburger University can be used to the fullest. On the other

hand, the strategy can help to focuses on the weaknesses of the company regarding

the poor management that causes weak product development and innovation. The
said strategy will help to motivate the employee more that will result to high

employee satisfaction, thus help to improve the standard of service in each and

every store of the company in different parts of the globe. In addition, the company

will be able to use the ability and skills of the employee in order to meet the changing

demands of the customers.

            It will also help the company to take advantage of the different opportunities

such as the growth of the fast-food industry. More and more people from around the

world are becoming more dependent in different fast food chains due to the changing

social factors such as work and other schedules, however, due to economic

changes, the demand for low cost menu and great service is also increasing. That’s

why great and fast service of the employees will help increase customer satisfaction.

Product

            The company also focused on their products by becoming responsive on the

changing tastes, demands and preferences of the customers. The primary objective

of the company is to focus on the growing interests of the public towards wholesome

food choices and other premium products in different part of the globe (2005 )

Customer Choice

            Due to the different advocacy of different organizations towards the health

problems that can be obtained in eating or depending on fast foods, McDonald’s and

other players in the industry are facing veto vote from moms, teens or kids between

childhood and adolescence as well as serious that would require a broader menu

choice. As part of the strategy, in order to connect the brand image of the company

to healthy lifestyle and living, McDonald’s committed itself to food and menu
innovation. The Chicken McNugget, despite its popularity and success, was not all

that a chicken nugget could be due to the fact that standard version of McNugget

was made from pressed chicken that is equivalent of hamburger or a different

miscellaneous parts that were combined and pressed into an easily workable whole.

That’s why the company introduced the premium chicken nugget that was made with

the breast meat only. In addition, the company also offers salad and replaces the

shaken salad which was composed primarily of shredded iceberg lettuce with a

mixed salad that contains sixteen different lettuces. Furthermore, the company also

offers new items in their menu that includes varieties of fruit and yogurt parfaits, new

soup selections, McGriddles and other crispy-spicy options for their customers

( 2006 ).

            Due to the fact that the company holds a strong brand image and reputation

and holds a strong global presence, the said action will help the company to become

more connected with the changing health needs of their customers. In addition, it can

help the innovation and development process of the company by focusing on the

healthy items in the menu that will help to improve the quality and taste of their

products.

            On the other hand, the said plan can also serve as a competitive advantage

of the company in handling the intensive competition in the global fast food chain

industry. It will help the company to have different products in some ways.

Place

            Place is also another important aspect. The company focuses in making its

restaurants cleaner, more relevant as well as more modern. Thus the company
focuses on making the company as a place that customer seek out due to the fact

that it offers the food that they want in a modern, fashionable, and at home

environment that they want to be in whether eating alone or with friends or with

family ( 2005). 

Ubiquity

            The company launched and implemented different initiatives that will help to

improve each and every store ambience and environment. In addition, due to the

growing demand for technology and it is important to consider that some of the

customers of the company are working in their offices; the company install wireless

technology that helped them to create wireless hot spots in different restaurants in

28 countries. This helps the company to cater on the demand of working customers

to check their mail and works during their stay in the restaurant. Furthermore, in

some countries, McDonald’s add up coffee houses that offer premium coffee, muffins

ad even pastries at low costs in order to enhance the company’s appeal to the adults

(  2005 ).

            Furthermore, in order to make the stores of the company cleaner and more

fashionable, the company implemented several renovations, rebuilding as well as

relocation of some buildings in order to follow the goal of the company to offer fresh

and sophisticated at the same time friendly environment ( 2005).

            When and where you want it had become the mantra at the company. The

main goal of the company is to offer a McDonald’s options for the customers,

regardless of his or her location, meaning the company strived to continue its

creation and establishments of traditional store in order to increase its density in

different locations where customers expected to find the restaurant. The company

required the development of new footprints that helps to bring the company to

different small towns, food court, resort destinations and other important and special

venues and places (2006 ).

            The said plan will help the company to maintain its image and reputation as

well as its strong real estate portfolio. In addition it will help the company to focus

and handle its problem regarding its outdated stores in different places that can

affect the image of the company. Aside from that, it also enables the company to

focus on the changing preferences of the customers towards technology due to the

installation of wireless Internet. Thus, the said situation will help McDonald’s to

maintain its position in the global market despite of extensive competition.

Price

            Price is an important factor due to the fact that it has a great impact on the

buying behavior of the customers. It is important to consider the pricing is considered

as one of the most important aspects of market. Thus, because McDonald’s is a

multinational or global company it has to consider different behavior and culture of

the customers in the decision-making regarding the price.

Productivity and Value

            McDonald’s concentrated on offering a broad selection of products at a range

of price points that will appeal to the price sensitive customers. Aside from that, the

company is also offering premium product for those customers who are willing to pay

well. The company also focuses on process of measuring the price driver that
involves activities that will help to improve the value-for-money scores and restaurant

margins (2005 ).

            The said strategy will help the company to take advantage of the opportunity

regarding the popularity of low-cost menu items in different parts of the globe,

primarily in the developing countries, especially during financial and economic crisis.

Promotion

            Promotion is the final element of the strategy of the company. The company

focuses on building trust and brand loyalty. This is important due to the fact that

promotion is the primary connector between the brand and product towards the

target customers.

Brand Awareness

            The company creates different messages that strengthen and support brand

and then connect and relate it with the vital segment of customers which are the

families and young adults. At the same time, the company also plan to continue to

build bonds of trust with the customer as well as the entire community where in the

company perform its business. The company implements different programs during

the said strategy such as the I’m Lovin’ it campaign that was launched in the world

during 2003. Aside from that, different general efforts were don in order to make the

restaurant an easy choice for the families by offering both premium salad and

improving their Happy Meal. Furthermore, the company also put Ronald McDonald in

a prominent position in their marketing efforts towards the customers. Furthermore,

the company also uses the benefits of the Corporate Social Responsibility or CSR in

order to intensify their popularity in the market. Aside from that, the company also
focuses their campaign towards the young adults by featuring different music from

prominent and famous recording artists (2005).

            The said promotion efforts and activities of the company enable to improve

its strong brand image and reputation. Ronald McDonald’s prominent position in

promotion enables the company to gain more support from children, thus offering

variety of products helps the company to focus, not only on the demand and

preferences of the children but also to the demands of the adults. Thus it will create

an impression that McDonald’s is a place where in family and friends can gather

together and spend quality time. The CSR also help to maintain the image and

reputation of the business due to the fact that the increasing importance on the CSR

has a great influence on the relationship between the company and its respective

stakeholders such as investors, clients, vendors, dealers, workers, communities and

even the government (2005 ). Thus it helps to create impressive impact to the

customers, especially now that more and more people are becoming aware of the

current social and environmental issues in different part of the globe.

McDonald’s Current Performance

Plan to Win Leadership

            Under the Plan to Win program, the company turned around and focuses its

operation in US on different services and selection at the existing locations rather

than development of new locations. As have mentioned, the menu strategies focuses

on chicken, breakfast, beverages as well as convenience, thus McDonald’s offer

healthier alternatives in order to meet the healthy preferences of the customers. Just

as the company was in the beginning of its plan,  suffered from a fatal heart attack
during the convention of the company in Orlando. The president and chief operating

officer succeeded him. Unfortunately, Bell passed away due to colon cancer within

the year. As a result,  was positioned as CEO, moved p to CFO of the global

company and Thompson was positioned as the executive vice president as well as

the chief operating officer of the US business in order to oversee the field and

everything that is going on within each and every restaurant daily (2007).

            During August of 2006, Roberts resigned and put Ralph Alvarez as the COO

of the global company, and then he became the president of McDonald’s USA.

Currently he is leading McDonald’s into its fifth year of consecutive growth and

helping to move the company into another area like coffees ( 2007).

Current Strategy and Level of Performance

            The Plan to Win strategy of the company had helped McDonald’s to improve

their position in the global market. In 2004, the cash that was provided by operations

had increased from $600 million to $3.9 billion due to the increased margin that was

influenced by higher sales at the existing restaurants. In the US, the company

obtained an increase of 9.6%, considered as the highest increase in 30 years.

Furthermore, the company had been able to increase the number of restaurant from

26,093 of 1999 to 30,496 in 2004 that helped the company to served an additional

1.6 million customers a day, compare with 2003. The stock of McDonald’s was also

appreciated 29% that had helped to increase the annual cash dividend of the

company to more than double compare to 2002. In addition, the company was

named as the Marketer of the Year by the Advertising Age. The company was also

ranked as number 1 in the list of Fortune of Top 50 Places for Minorities to Work. It

was the second consecutive year for the company to receive the said recognition.
Above all, according to another survey of Fortune, McDonalds was ranked as the top

5 Most Admired Company in terms of social responsibility (2004).The said

improvement shows that the strategy of the company had worked fine in a year.

            Currently, the company is still implementing the said strategy, where in the

company focuses on being one brand, one system and one plan. The system

alignment around the said strategy grounds the company in what is the most

important to the customers, thus help to provide a dynamic framework on the

approach that is used in the global business.

            The company is focusing more on the areas of human resource where in it

established priorities in different areas of hiring, training as well as reward in order to

maintain workplace flexibility in their restaurant. The company is also measuring the

effectiveness of the practices of the people by regular employee survey that help to

increase the commitment level of crew and manager of the company. In addition

McDonald’s also offer development from the crew room to the board room, starting

with the on-the-job training in the company’s restaurants and then progressing t the

college-level management classes that are being offered at the Hamburger

University. The Leadership Institute of McDonald’s also offers accelerated programs

to about 200 high potential employees from the entire system of the company. As a

result, in 2007, the company was ranked as one of the Top 20 Global Companies for

Leaders ( 2007).

            In addition, the company is also focusing on product development and

innovation. As of now, the McDonald’s is offering Snack Wrap that offer flexibility to

adapt to the local tastes. Furthermore, the company also set an alliance with the

Kenco Rainforest in order to offer coffee to their customers  (2007).

            In terms of place, there are about 24,500 restaurants in different parts of the

globe that is already offering 24-hour service helping their customers who are

working in night or graveyard shift to avail of their products and services. The

company is also taking advantage of the growing mobile population in China and

Russia by offering drive-thrus, at the same time in the US and Canada, greater

efficiency and double drive-thru lanes enables the company to serve more

customers in quick manner. Aside from that, the company is also offering delivery

services in Singapore, Egypt and other countries in Asia in order to make the life of

their customers easier (2007).

            To meet the different demands and behavior of customers in different places

in the world, the pricing decision-making varies from one place to another. This is

due to the fact that there are markets that considered as price sensitive. That’s why

the company is collaborating with its suppliers and leverage different economies of

scale in order to make sure that they have a reliable and efficient supply of high

quality ingredients at competitive and predictable prices (2007).

            In 2007, there are about 115 countries who have participated in one of the

most successful promotions of McDonald’s, its partnership with DreamWorks’ Shrek

the Third. The said promotion, with the help of the Shrek licensed characters made

the process of choosing milk, fruit or vegetables as part of Happy Meal more fun for

kids than ever. In 2008, the company helps the Olympic dream come true for 200

kids with the McDonald’s Champion Kids, which enables them to experience the

Olympic in Beijing. Above all, the company also uses the global appeal of games by

bringing the fun of popular games, particularly the Monopoly to the customers

around the world ( 2007).

            As a result, the global comparable sales had increased by 6.8%, from $4.3

billion during 2006 to $4.8 billion in 2007. the company also showed $23 billion in

total revenue and a 25% three-year compounded annual return to the shareholders,

more than double to the three-year returns of the S&P 500 and the Dow Jones

Industrial Average. As a result, for three consecutive years, the company has been

included in the Dow Jones Sustainability Index that reflects in the company’s

ongoing effort towards CSR ( 2007).

           

 
 

Figure  SEQ Figure \* ARABIC 3 SWOT Analysis McDonald's 2009

Strengths

·        Strong brand image and reputation and strong global presence

·        Great quality of product;

·        Strong real estate portfolio;

·        Strong market position;

·        Quick response to the changing needs and demands of customers;

·        Not finance corporation to its franchises;

·        Specialized training for managers known as the Hamburger University;
·        Good Human Resource Management and Marketing

Weaknesses

·        Disgruntled franchisees;

·        Quality issues across the franchise network of the company.

·        Core product line out of line with the current trends towards healthier lifestyle for
children and adults. The product line focuses heavily on hot foods and burgers.

Opportunities

·        Globalization (China and India);

·        Diversification and acquisition of other quick-service restaurants;
·        Growth of the fast-food industry
·        Changing trends in eating habit;
·        Low cost menu that will attract the customers;
·        Application of Information Technology;
·        Wi-Fi Internet can attract segments of customers
·        CSR

Threats

·        Changes in the global economy;

·        Increasing competition in the local and global fast-food industry;

·        Changing diet preferences and health expectations.

·        Fast-food chain industry is expected to struggle to meet the expectations of the
customers towards health and fitness;

·        Pressure groups such as environmental.

 
 

 
 

           

           

 
 

            Figure 3 shows the SWOT analysis of the company in 2009. It is important to

take note that the company had been able to show a great improvement in

performance from 2003. Compare to the SWOT analysis in 2003, it can be observed

that the company holds the same strengths that focuses on the strong brand image

and reputation, strong global presence, real estate portfolio as well as its strong

position in the overall market. However, due to the Plan to Win strategy that was

implemented in 2003,some of the weaknesses have became strengths for

McDonald’s such as the product development and innovation, quality and taste of

products, marketing, management, appearance of stores as well as the response

towards the changing demands and needs of the customers. While all the

weaknesses were the same, aside from it was reduced to the problem regarding

connection with the franchise network that will reflect on the issues regarding quality;

and the fact that, most of the player in fast-food industry, that the core product of the

company is out of the line with the current trends and interests of the people towards

healthier lifestyle, both for children and adults.

            The opportunities are the same, but there are some added factors such as

expansion in improving economies such as China and India; application of IT that will

help to enhance the quality and speed of service. Furthermore, focusing on the

McCafe will help the company to gain more customers in other segments,

particularly adults. Furthermore, the company must also focus on the needs of the

children regarding Play Park and offer adults regarding information and facts about

health and fitness.

            Just like opportunities, the threats in the entire fast-food chain industry are

the same compare to 2003 analysis, aside from the growing concern of the people

and other pressure groups towards the environmental impact of different processes

and procedures of the company in preparing and delivering food for the customers.

Competitor Analysis

            The following are the primary competitors of McDonald’s in fast food industry,

primarily in the US:

Wendy’s

            Wendy’s Old-Fashioned Hamburger was founded by David Thomas in Ohio

and was incorporated in 1976 (Wendy’s 2008). The company is considered as the

third largest fast-food hamburger business in the world that is operating 9,000 stores

in about 33 countries in the world. During 2002, the company recorded total revenue

of 2.73 billion that shows 14.2% increase compare to 2001. The strategy of the

company focuses on offering different products and services compare to its

competitor (Thompson & Strickland, 2005 p. C-223).

            During 2002 – 2003, most of the food chain company is focusing on lowering

the prices of their products in order to gain competitive advantage, but the company

refused to follow the said trend and continue to focus on the quality of their products

than price. As a result, Wendy’s had been able to offer unique items such as Garden

Sensation, that enables the company to become prominent as a company that offer

healthy items in their menu (Thompson & Strickland, 2005 p. C-223).

            In terms of expansion, Wendy’s focuses on international expansion in Latin

America, and uses acquisitions of smaller brands and joint ventures as the primary

approach in expansion (Thompson & Strickland, 2005 p. C-224).

            During the second quarter of 2007, the company reached a total of $558.3

million of sales, showing an increase, compare to $557.7 million in the same quarter

of the previous year. The company recorded a decline in their franchise revenue,

from $76.3 million of the second quarter of the recent year to $75.6 million of 2007

second quarter, this is because there is fewer open franchise restaurants compare to

2006

            Based on the said facts, it can be seen that Wendy’s maintains its core

strategy, which is to focus on the quality of their product and not on global

expansion. In addition, Wendy’s is also offering different healthy products that are

not available in the menu of its competitors. Wendy’s also implements acquisition of

smaller brand as their primary expansion approach, one of this is their acquisition of

Baja Mexican Grill, however, under the management of Wendy’s Baja had started to

lose money, that’s why the company decided to sell Baja in 2006. Aside from that,

the company also acquires the  , but the company started some of its share in 2005.
            The main disadvantages of the company is that it does not have an easily

recognizable product that can be connected by the customers to the brand like Big

Mac of McDonald’s and Whopper of Burger King ( 2005 ).

Jack in the Box

            Jack in the Box is one of the most important competitors of McDonald’s in the

industry and it was founded in 1951. During 2002, the company has a total of 1,850

restaurants in about 17 states. During the same year, the company recorded total

revenue of $2.2 billion dollars that was up to 4.7% from 2001 (2005 . .

            The main strategy of the company during the said time is that it focuses its

services and products towards the demands, needs and preferences of adult

customers only, this is different from McDonald’s, Wendy’s and Burger King that

focuses on the demands of the whole family. The company had been able to

produce their innovative items like teriyaki chicken bowl and chicken fajita pita. Just

like Wendy’s, Jack in the Box did not involved itself in the price war, instead it

focuses its efforts towards the improvement of the quality of their product, together

with the effort to attract women, that helped the company to reduce their dependency

over the young males which is considered as a crowded market (2005 ).

            At the end of fourth quarter, September 28, 2008, the company recorded net

earnings of $26.9 million or a total of 47% of diluted share, compare to the $26.8

million or 43% diluted share during the fourth quarter of 2007. It shows that the net
earnings are $119.3 million or $2.01 per diluted share in 2008. It show that both the

fourth quarter and fiscal year 2008 showed a negative impact of about 4 to 5 %

diluted share due to the losses and costs that are related to the Hurricane Ike (,

2008).

            The company sticks to its strategy to focus on a particular age segment of

the customers, and that is to offer products and services that are suitable to the

preferences, demands and needs of adults. That is the reason why the company

focuses on different innovations and developments that will offer the customers the

on-the-go convenience. As matter of fact, the company is the first major hamburger

chain to developed and expand its own concept of drive-thru dining and most of its

restaurants have indoor dining areas that are open 18 – 24 hours a day (2006).

            Due to the growing demand for personalized products as well as healthy

preferences of the customers, the company offers their Build Your Meal calculator,

where in the visitor can go the website of the company and then custom-build their

favorite burger or sandwich online that will help them to analyze the nutritional

information. Aside from that, the company also offers fresh and hot product due to

the assembly-to-order program. The company also uses acquisition as their

approach in expansion; the Qdoba Mexican Grill was acquired by the company in

January of 2003 (Jack in the Box, 2006).

Sonic

            Sonic was founded by Troy Smith in 1953 in Shawnee, Oklahoma as Top

Hat. By 2003, the company recorded a growth of 2.4 billion in revenue that is

considered as 6.2% increase, and it had grown to more than 2,700 locations, where
in more or less 80% were franchise. Sonic is smaller compare to other competitors in

the industry, but it had been able to be listed as one of the Top 200 Best Small

Companies by Forbes for the last 10 years; one of the Hot Growth Companies of

Business Week during 2002 and 2003; and one of the top franchise opportunities by

the Entrepreneur Magazine (Thompson & Strickland, 2005 p. C-224).

            Sonic focuses on its unique drive-in restaurant business, which is considered

as the largest in America is one of the strategies of the company in order to meet the

demands of the customers. Aside from that, the company also offer broad selection

of items in their menu and offer a different restaurant atmosphere which bring back

the old times. The Sonic tried to focus on its item that will offer fun and novelty. Aside

from that, the company has a strong and very good relationship with its franchisees

that helped them to add new products in their menu. As a result, in 2004, the

company shows increase of 16 – 17% in their earnings per share (Thompson &

Strickland, 2005 p. C-224).

            As of now, the company still implements and maintain the said strategy in

order to come up with the expectations of the customers. However, just like the other

major competitors, Sonic had started to focus on the nutritional values of its products

in order to respond on the growing demand of the customers for healthier food. The

official website of Sonic offers and shows page that will show the company’s menu

and the respective nutritional values that shows the calories, fat, sugar and other

aspects that are related to nutritional contents of their products.

 
 

Conclusion

            Base on the performance of McDonald’s from 2003 up to the present, it can

be said that the Plan to Win strategy was successful because the company had been

able to maintain its position as the most important player in the fast food industry.

However, there are different threats and opportunities that must be focused by the

company in order to maintain the said position. Primarily, the growing consciousness

of the world regarding the negative impact of fast foods, not only for health but to the

physical aspects is affecting its overall demand. That’s why the company must focus

on giving their customers varieties of items in their menu that will cater to their

healthy preferences.

            In addition, it is also important to consider the growing competition in the

industry because most of the players are offering almost-the-same products and

most of them is involved in the price war.

            Globalization offer a great opportunity for expansion, however, it is important

to consider that it also offers difficulties in terms of management and marketing due

to the fact that each and every nations inhibits differences in terms of cultures and

traditions that will influence the customers’ preferences, demands and the entire

buying behavior and patterns.

            Above all, McDonald’s must focus on giving CSR that is considered as a

powerful marketing tool. This will help to boost the current strength of the company,

which is the brand image and reputation.

Appendices

Appendix A – SWOT Analysis and Plan to Win Strategy 2003

 
           

People Place Product Price Promotion

 
  §Strong brand §   Strong brand § Strong brand §    Strong brand §Strong brand

image and image and image and image and image and
 
reputation reputation reputation reputation reputation
§  Strong §   Strong global § Strong global §    Strong global §Strong global
 
global presence presence presence presence

presence
S §  Specialized §   Strong real § Holds majority §    Holds majority § Holds majority

training for estate portfolio of the market of the market of the market
T
managers share in the share in the share in the

known as the world’s fast- world’s fast-food world’s fast-food

R
Hamburger food hamburger hamburger hamburger

University industry industry industry

E

 
N

 
  §  Weak §   Many stores § Declining §    Failure to §Declining share

product started to look out- share in the respond to the in the market

  development dated market changing needs

and innovation and demands of

 
the customers
 §  Quality and   § Weak product   § Weak product
 
taste of development development and

products and innovation innovation

  §  Poor   § Quality and   §Quality and

management taste of taste of products

  products
§  Failure to   § Failure to   §Poor marketing

  respond to the respond to the

changing changing needs

  needs and and demands of

demands of the customers

 
the customers
        §Failure to

W respond to the

changing needs
E
and demands of

the customers
A

 
  §  Growth of §   Globalization, § Globalization, §    Globalization, §Globalization,

the fast-food expansion in other expansion in expansion in other expansion in

O industry countries other countries countries other countries

  §   Growth of the § Growth of the §    Growth of the § Growth of the

P fast-food industry fast-food fast-food industry fast-food industry

industry
    § Changing   § Changing
P
trends in eating trends in eating

habit habit
O
    § Low cost   §  Low cost menu

menu that will that will attract

R
attract the the customers

customers
T

 
  §  Increasing §   Increasing § Changes in §    Changes in the §  Changes in the

competition in competition in the the global global economy global economy

 
the local and local and global economy

global fast- fast-food industry

 food industry
  Fast-food §   Fast-food chain § Increasing §    Increasing §   Increasing

chain industry industry is competition in competition in the competition in

 
is expected to expected to the local and local and global the local and

struggle to struggle to meet global fast-food fast-food industry global fast-food

 
meet the the expectations industry industry

  expectations of the customers

of the
 
customers
    § Changing diet Fast-food chain §    Changing diet
T
preferences and industry is preferences and

health expected to health

H
expectations struggle to meet expectations

the expectations of
R
the customers
    § Fast-food   §    Fast-food
E
chain industry is chain industry is

expected to expected to
A
struggle to meet struggle to meet

T the the expectations

expectations of of the customers

S the customers