Professional Documents
Culture Documents
Presented to
R. DiBattista, Ph.D.
In Partial Fulfillment of
The Requirements of MGMT6001
Johnson & Wales University
by
Manatchanok Lertritsirikul (Ann)
Selim Nuhoglu
Sirirat Therawat
October 31, 2006
PART ONE: INTRODUCTION
McDonald’s, the world largest burger chain, had a poor customer service issue in
1994. In 2003, McDonald’s revenue growth declined in the beginning of the year while
the competition had never decreased. McDonald’s error led competitors to entrench
themselves so firmly. Consequently, to re-gain its market share becomes a big challenge
relationships with franchisees after having an issue about turning off women and families
in the past year because the company had turned their focus on men customers (Hoover’s,
2006a), Wendy’s has had trouble placing itself in international market (Thompson et al.
2005).
McDonald’s Corporation as the major company and its top competitors - Burger King
and Wendy’s.
Fast-food and quick service restaurants are companies that own, open, operate or
franchise an eating place which the food is prepared and served quickly in a casual dining
environment to customers who mainly have a compressed time frame. The fast-food is
popular in the US and around the world. In France, the fast-food market had a rapid
growth from 1999 to 2003. The French market was worth $5.09 billion in 2003 (Business
The health concerns surrounding fast food and the obese problem have had a
major impact to the industry in recent years as well as the increasing of the consumers’
preference on Asian tastes. Many brands altered their menus, adding lean items to capture
the market. This trend will continue probably five years (Datamonitor ComputerWire,
2005). The high gas price in the first half of 2006 caused slow traffic in the restaurant
business, though the fast-food business did not take a big hit, but addressed the value of
McDonald’s was found in 1948 in San Bernardino, California. Owners Dick and
Mac McDonald signed a franchise agreement with Ray Kroc who later bought out the
The company introduced the Golden Arches to the market in 1962, followed by a
debut of Ronald McDonald one year later. In 1965, the company went public and ran its
first TV ads. McDonald’s opened its first store outside the US in Canada two years later.
The drive-through window operated for first time in 1975. The increasing competition in
1980s caused the company’s growth rate down to about five percent per year.
Mexican Grill, head quartered in Denver, in 1998 and spun it off in 2006. Donatos
Pizzeria chain, another brand in the family, was bought in 1999, and sold back to the
owner in 2003. Boston Market was bought in 2000. The company continued to expand to
international markets, buying a 33% stake in the UK’s Pret A Manger, a sandwich chain
of our diversity in order to be the World's best quick service restaurant experience.” The
company’s vision is
Ensure that our employees, owner operators and suppliers reflect and represent
the diverse populations McDonald's serves around the world. Harness the multi-
faced qualities of our diversity - individual and group differences among our
(McDonald’s, 2006d).
Corporate Overview
McDonald’s serves about 50 million people in nearly 110 countries each day. It
(McDonald’s, 2006a). The size of organization is larger than the world’s top three
Thirty percent of its locations are company-owned; the others are run by
franchisees. The company relies on a network of independent suppliers and a huge budget
for advertising to maintain the brand image – about $600 million per year (Hoover’s,
2006c). The increasing of public concern for nutrition made the company’s sales
began to improve in 2003 when McDonald’s introduced some healthier fare to the menu.
In 2005, McDonald’s said it would post the status of its efforts to remove transfats from
The global branding campaign “I’m lovin’ it,” which is running now, was
introduced in 2003 and was an attempt to change its brand image to be “Forever Young”
in order to draw young customers. The company had a positive result as the sales
increased steadily through 2003 and early 2004 (Hoover’s, 2006d). Continuing to
improve the company image, and increasing the market share, McDonald’s decided to
renovate its restaurants in a hip style providing a cozy, casual environment (on
franchisee’s budget), and to offer Wi-Fi internet in stores. Currently, about 7,000
As part of overhauling the brand image and increasing sales in the breakfast
Roasters to sell Fair Trade Certified and organic coffees. In 2006, McDonald’s
Competitors
Top competitors of McDonald’s are Burger King and Wendy’s. With more than
11,100 restaurants in the US and about 65 countries, Burger King ranks the word’s
number two hamburger chain behind McDonald’s. To fight competitors, Burger King
added one dollar fare to the menu and focused the company’s marketing efforts on 18 to
34 year olds, called their Superfans, in 2004. It hopes to open about 450 new locations
in fast food business, ranked the world’s number third hamburger chain in terms of
locations – behind McDonald’s and Burger King. The company has more than 6,700
stores in the US and about 20 countries. Besides burgers and fries, Wendy’s offers
alternative fare such as chili, and baked potatoes. Wendy’s also owns the Baja Fresh, a
General Environment
Demographic Segment
The changes in food consumption are mainly affected by income growth and
demographic factors. However, the share of food in the overall household does not move
parallel with income growth. Hence, the consumers with low income spend a larger share
of their income in food, where wealthier consumers prefer to spend mainly in housing,
To explain with a sample, the percentage of the food in the income of an average
American family scaled down from 30 percent to 20 percent between 1960 and 2000
(Schmidt, 2006). Food preferences are more related with the urbanization than economic
growth. Urban areas have larger number of away-from home workforce especially
women in addition to higher income levels. Among developing countries with a large
significantly alter consumers' diets with a greater consumption of meats, fruit, vegetables,
The aging of the population is another factor that slows per capita food
consumption down. Young adults ages 20 to 29 years are about 4 times more likely to eat
fast food than adults 55 years of age and older. Also seniors prefer more fresh fruits and
vegetables, less red meat. There is no big gender difference among the adult fast food
consumers (30% males, 23.5% females), but the adults, which are living suburban areas,
are eating more fast food. Also in the U.S. more African Americans (31%) than other
race-ethnic groups reported eating fast food (Bowman & Vinyard, 2004).
Economic Segment
In spite of the increasing concerns over health, obesity and intense competition,
the global fast food market could achieve almost 20 percent growth during 1999-2003.
However, the growth of the fast food industry remained below the growth of the entire
food industry and fast food has been losing market share to so-called fast casual
restaurants, which offer somewhat better and more expensive foods (All Experts, n.d.).
There were 1.9 billion fast food outlets in 2003, with annual sales worth $282
billion and more than 96 billion meals consumed worldwide (Bremner, 2004). The main
share of the sales belongs to the American consumers, who spent $135bn on fast food in
2005 (Euromonitor, 2006). According to Eric Schlosser, author of the 2001 book Fast
Food Nation, one quarter of U.S. adults visit a fast-food restaurant on a typical day (Kam,
2006). The Americans spend more money on fast food than they do on higher education,
personal computers, software or new cars. They spend more on fast food than on movies,
books, magazines, newspapers, videos and recorded music – combined (Schlosser, 1998).
Ninety percent of the money, which Americans spend to eat, goes to processed food. In
the U.S. the burger chains hold the largest share in fast food industry with 54% of the
sales and 76,066 outlets. The industry’ 5 main players, which have 34,7% of the market,
are McDonald’s, Wendy’s, Burger King, Doctor’s Associates and YUM (Euromonitor,
2006).
Political/Legal Segment
The popularity and the success of fast food originates from its convenience but
fast food industry is under fire of consumer, activist and health groups such as PETA,
Center for Science in the Public Interest because of the its unhealthy menu items, which
can lead to obesity with excessive consumption. The uncoverable health issues for
example in the United States the 30 percent of the adults, which means almost 60 million
people, is obese. This number was 30 years ago 15 percent and the trend is similar among
children. The obesity ratio among children have tripled and reached 15 percent in thirty
years (Schmidt, 2006). Besides in the new markets such as Japan the obesity started to
increase with expanding of fast food. Even tough the fast food companies haven’t been
sentenced yet to pay any indemnity to the consumers, the lawsuits about misleading in
the commercial especially directed at children and the contribution of fast food to the
In addition to consumer movements like Slow Food, which aim to protect the
local cuisines and ingredients, the companies begun to put healthier alternatives in their
menu. In response to this, the fast food companies achieved to pass the Cheeseburger
Bill, which actually protects the companies against the lawsuits originated from obesity
claims. However, the industry is still criticized about their advertising, environmental
Sociocultural Segment
Fast food industry faces the claims about reducing the diversity of local cuisine
but fast food restaurants present to the customers different products depending to the
region. For example, while in the western culture the burgers are more popular, fast food
means generally in East Asian countries noodle shops and in the Middle East falafel and
shawarma. Also different kinds of food are dominant in Latin America countries and
India. At this point even the global companies think local and consider cultural
differences. In addition to the differences in taste, there are some rules that cannot be
ignored. For example koshur (Israel) and halal (Muslim countries) are strict diet rules,
which explain how the meal should be prepared. In India the beef cannot be used because
In spite of all these facts, especially American fast food producers cannot protect
themselves from being seen as the symbol of their origin country’s cultural imperialism
symbol. Therefore the American fast-food franchises compose the main target in anti-
Technological Segment
Although the operations in fast food service look easy, modern commercial fast
food, by contrast, is often based on highly processed industrial fashion with a large scale
of standard ingredients and production methods. The items in the menu are made from
processed ingredients at a central supply facility and then packed to be reheated in the
outlets by using microwave technology to save time. In this period the big companies add
some flavors, which are produced in other companies, to make the customers craved.
To reduce the costs, the cheap genetically modified products are very common in
the industry. Also big companies prefer to use software programs in their inventory,
producing and sales systems, and employee training programs. They are trying to use
and testing some technologies, as McDonald’s HyperActive Bob project, to ease the
user is another opportunity for fast food industry. They can make marketing and services
The estimates for the future of the global fast food industry are very promising.
For example, according to ERS research, which consider rising incomes and aging
population, the spending of Americans for fast food will rise around 6 percent per person
between 2000 and 2020, while the spending for full time restaurant will increase 18
percent (USDA, 2006). The aggressive moving of the fast food giants into Asian markets
originates from their very positive growth rates, especially in China and India. China’s
fast food industry is growing with 20 percent annual rate and generated already over $24
billions. The country hosts already many global fast food companies such as
McDonald’s, KFC and Pizza Hut (Wu, 2002). The fast food sales in India passed $1
billion recently but the growth rate is over 40 percent although the quarter of the
Industry Environment
The competitors in the market are countless. Although the five big companies’
sales compose over thirty percent of the market, it is not still the majority. Besides, there
is a high price competition among the big players. Most of the rivals present standardized
products and services to the costumers. To meet the high fixed costs the companies
should make big amount of the sales. The leaders of the industry have thousands of
restaurants and operate not in some countries, in contrast to, the competition is global.
According to 10K reports of the companies in 2006, McDonald’s 31,188 outlets in 121
countries and YUM over 34,000 outlets in more than 100 countries.
Supplier Power
The supplies do not need any special requirement except some health inspections.
Besides, the inputs are very common goods and fast food companies provide them from
various food wholesalers. Especially for the giant food service companies have a great
bargain power against livestock producers and farmers because of their huge amount of
purchases. Another important item for the fast food companies are soda and in soda
market are the companies are dominant Pepsi and Coca-Cola. However, high competition
between these companies reduces their bargain power and makes them dependent to the
fast food industry. For example, Coca-Cola and McDonald’s are allies. The fast food
companies with their huge amount of purchases have a great buyer power against
suppliers and they have extensive relationships with many wholesaler. Also some of the
companies already started to practice vertical integration by developing their own farms.
In the market, there are plenty of the producers of the same products. Also the
prices and services are similar. Therefore, the customers do not see big difference among
the producer and do not show extra performance to find a specific producer. Besides the
customers can provide the same products from retailers with a cheaper price and make on
their own.
Threat of Substitutes
The researches show that the fast food market is losing its share to full time
restaurants and the aggressively branching grocery stores offer the similar products with a
cheaper price. The concerns about health issues and protecting local cuisines temp the
customers healthier and more varied alternatives. However the wide distribution network,
the speed of the service and fast-paced lifestyle may moderate the threat of substitutes.
In the market there are high barriers for the new entrants to compete with the big
companies. These big companies are very well known by the customers and they have a
very successful branding policy, which might be a sample even for the firms in other
fast food consumers show a very weak commitment to fast food chains (Vargas, 2003).
Therefore the main barriers for the new entrants are capital and economies of scale
Future Objective
As this industry grows, the fast food business will still highly compete with each
other in order to attract customers and gain more revenue. The future objective of the fast
food industry is to offer healthy food and premium products in the market since people
are more concerning about their health. People are thinking about what they eat and
looking for way to be physically active. McDonald’s will continue to offer more menu
physical activity and keep the customers trust with responsibility communication and
quality food (McDonald’s Balanced, Active Lifestyles Team, 2005). McDonald’s expect
sales and revenue growth rate of three to five percent and operating income growth of 6
to 7 percent. The company expects to invest 1.8 billion to open about 800 new
Wendy’s future objective is to improve profit restaurant profit margin and reduce
cost over the next three year. It plans to increase sales by reinvigorating core products,
(Oldemark, 2006b). Burger King will focus on opening new restaurants around the world.
fiscal year 2007 and increase the value of band (Forbes, 2006).
In addition, the fast food market is becoming saturated and is beginning to see an
market in order to respond to the increasing demand. They also emphasize on their
The level of price, nutrition, food quality, store location, and product variety are
the main factors for developing strategies in the fast food industry. McDonalds’s
that in order to continue long term financial strength and enduring profitable growth, it
has to understand and satisfy the changing needs, wants, and lifestyle of the current and
potential customers. Its objective is to be a leader in supporting the well-being issue that
many customers care about. It offers a diverse range of menu options at the country level
and around the world. It provides programs and examples in order to inspire physical
activities and well-being for families in their everyday life (McDonald, 2006i).
Burger King’s strategy is to individualize each customers order and provide the
fastest service. Burger King gives customers many choices and provides whatever
customers choose. Wendy's differentiate its brand in the quick-service restaurant industry
with innovative products, new product categories, and more compelling advertising. The
Company also plans to test breakfast and introduce it in 2007 and focus on service
excellence, which will improve speed of service, accuracy and courtesy for customers
(Oldemark, 2006b).
Assumption
According to the financial report, McDonald’s has the highest revenue among
Wendy’s and Burger King. In 2006, McDonald’s recorded revenue of $ 21.23 billion
whereas Wendy’s created $ 3.90 billion and Burger King created $ 2.05 billion (Yahoo!
Finance, 2006).
Today, there are many rivals face intense competition in the fast food business.
The market is increasingly competitive, with other fast food business such as fried
chicken and pizza. Thus, many fast food businesses are implementing a low-cost menu to
attract customers. Item on these menus is offered at the lowest possible competitive price,
Cheeseburger, McChicken Sandwich, Fries, Soft Drink, Snack Size Fruit 'n Yogurt
Parfait, Hot Fudge Sundae, 2 pies and a Side Salad (McDonald’s, 2006l). Burger King’s
value menu features Whopper JR, Chicken Tenders, soft drink, French fries, onion rings,
Side green salad and apple pie (Burger King Brands, Inc., 2006). Wendy’s super value
menu features crispy chicken sandwich, yogurt, chicken nugget, Jr. bacon cheese burger,
French fries, soft drink, chocolate frosty, and side salad (Oldemark, 2006a).
food. Healthy conscious customers are increasing their demands. In response to this
trend, McDonald replaces french fries in happy meal with apple slices. Burger King offer
customers a veggie burger. Wendy’s substitutes milk for soft drink in kid’s meal
Capabilities
Most fast food businesses compete on food quality, price, quantity service,
cleanliness and accessible location. They focus on serving customers in food court,
business areas, airport areas and community area in both domestic and international.
Many companies are introducing value-priced menu overseas to test customer reactions.
For example, McDonald’s has offered the McChicken Premium, a zesty chicken breast
filet serve on bun, in the United Kingdom, France, Italy, and Belgium. Burger King has
offered Broiled Salmon Fish Sandwich, the breakfast in Mexico. Wendy acquires several
small companies such as Tim Horton’s and Baja Fresh Mexican Grill to expand its
McDonald’s has more than 31,800 restaurants serving burgers and fries in more
than 100 countries (Hoovers, 2006). Burger King Holdings operates the world's number
two hamburger chain with more than 11,100 restaurants in the US and about 65 other
countries (Hoovers 2006). Wendy's International operates within more than 6,700 of its
eponymous burger joints in the US and about 20 other countries (Hoovers, 2006).
Although Burger King has a larger number of locations than Wendy, It creates less
revenue than Wendy. McDonald has the better performance in both revenue and
extensive location.
expectations $134.2 billion. The sale at the end of year 2005 was $ 136.5 billion,
increased two percent from the past year. The NRA forecasts the sales will
increase about five percent in 2006, rising to $142.4 billion (Martin, 2006).
• Distribution: Distribution channel for the fast-food service restaurant has not
changed much from its beginning. The revenue of each company mostly comes
from the most tradition channel, in store sales. Later in 1975, a drive-through
(thru) was introduced by McDonald’s, and has increased sales through the present
of the world, especially in the US. In some part of the world, burger chain stores
• Buyer needs and requirements: Burgers, Fries, Soda and treats are basic items
that every brand offer to their customers and these are items that most of
customers crave for when they come to the store. In recent years, the customer’s
favor for healthier food in the fast-food chain store has increased and seems the
trends will stay. Salad and bake items, for example, have been added to the menu
as a result. The rising of gas price raised the value concerned for dollars customer
will spend. Cleanliness of the store and a good service of crew members are
want for a drive-thru service are order accuracy, easy-to-read menu board and
• Capital requirements: To enter into the fast-food industry, it does not require
high capital. However, to compete with the major players in the industry, it does.
The major investment in the fast-food industry would be in the marketing and
advertising department. McDonald spends about $600 million dollar each year for
advertising.
Driving Forces
tools to promote new products and current promotions. McDonald ran its first
order food without leaving their cars has growth sales of the fast-food business in
1980s.
things to do in the limited time frame. Fast-food offers quick meal at the value
industry.
• Changing social concern: Obese problem raised consumers’ concern for what
people eat. Burgers and fries were blamed as a bad food causing decrease in sales
in the early of 2000s for burger chain stores, mainly in western countries. On the
other side, sandwich chain restaurant like Subway had increased sales because it
• Everyday low price strategy: Many fast-food stores offer a value item at the
• Quick and Value meal: Quick service is the major key of success of this
industry. Customers expect to get the food as soon as possible at the minimum
which able them to enjoy the discount rate and able to set the price at the bottom
range.
cater to local tastes. Besides, most overseas outlets are owned by native
franchisees which benefit to the brand since the owner understands the market
very well.
Resources
Tangible resources
about 31,000 restaurants in more than 110 countries. McDonald’s employed nearly
450,000 employees as of 2005, led by current Chief Executive Officer Jim Skinner
(McDoanld’s, 2006a). The Golden Arches logo, Ronald McDonald, “Big Mac” and “I’m
lovin’ it” are trademarks of McDonald’s Corporation and its affiliates (McDonald’s,
2006e).
In the last five years, McDonald’s has had cash provided by operation average
about $3.4 billion per year. As of December 2005, McDonald’s achieved 32 consecutive
McDonald’s borrows on a long-term basis and is exposed to the impact of interest rate
changes and foreign currency fluctuations. At December 31, 2005, debt obligations
provides hands on training and the materials to franchisees. The McDonald’s training
also has a 2 advanced 5day courses at the Fred L. Turner Training Center at Hamburger
University in Oak Brook, IL – the company’s center of operation training and leadership
Technological requirement in the fast-food industry has not changed much in term
of order taking and cooking process. McDonald’s operates a research and development
facility in the U.S., two facilities in Europe, and will open one facility in Asia soon (SEC,
2005, p. 4).
McDonald’s has tried to add features into its restaurant; McDonald’s installed
inside and outside some of its restaurant (Kiosk Magazine, 2004). McDonald’s USA
partners with American Express to accept ExpressPay at more than 12,000 McDonald’s
restaurant all over the country enhancing fast and convenient services (American Express
Company, 2006).
Intangible Resources
McDonald’s has a strong well-know brand which appeals to all age and customer
segments. McDonald’s had many awards recognition. It was ranked in the top of the Top
100 Global Brands Scoreboard by BusinessWeek magazine for five years since 2001.
McDonald’s was placed the eighth in 2005 according to two criteria; companies had to be
global in nature, 20% of sales or more has to come from outside the home country. Also
the financial data has be publicly to base the valuation. The brand value of McDonald’s
in 2005 increased from last year about four percent to be at $26,014 million (The
McGraw-Hill, 2006).
employer to work with. Lists below are some latest interesting recognition it had:
• LATINA Style Magazine 2005 - Top 50 Best Companies for Hispanic Women to
• Nation Urban League (Chere Nabor) 2005 - “Face of Leader”, and much more
(McDonald’s, 2006f).
Hamburger University, located in Oak Hill, Illinois, is a learning academy the company
established to develop and provide training courses. It has seven campuses around the
world. McDonald’s also have 139 country and regional training centers that provide
(McDonald's, 2006h)
McDonald's has a good relationship with employees. More than forty percent of
management positions worldwide move up from the system such as Vice Chairman and
CEO Jim Skinner who started his career with McDonald's from a Management trainee,
and Chief Restaurant Office Jeff Stratton who joined the company in 1973 as a
crewmember (McDonald’s, 2006s). They have strong skills and knowledge of the
company and the industry which will enable them to provide high quality service and
chain and new product development), Marketing (sales and marketing), and Human
McDonald’s has good reputation for quality and consistency in their products.
The company has defined and standardized its key processes rigorously, and transfers
as the oversight and training to make sure that its standard is upheld (Peter Keen, 2005).
Capabilities
McDonald’s has a strong capability of providing fast food to serve customers all
over the world. It has more than 31,800 restaurants serving burgers and fries in more than
geographic segments: United States, Europe, Asia/Pacific, Middle East and Africa Latin
international market. It offers various food items, and soft drinks and other beverages. It
seeks to serve its customers with the same quality product and experience, which requires
standardized processes and similar quality ingredients for the core menu.
For the global markets, the company is adapted to the customers demand and
local environment. McDonald’s product offerings vary beyond the core menu to meet
local tastes. For example, McDonald’s Taiwan serve a rice burger and McDonald’s in the
Middle Ease serve the McArabia, which features two grill chicken patties, lettuce, fresh
onions, tomatoes and garlic mayonnaise sauces on folded Arabic flatbread (McDonald’s
Blanced, 2005). McDonald’s do this by not only adapting its products but also changed
brand and customer loyalty. There are measured from strong sales and marketing
functions. The company achieved revenues of $20,460.2 million during the fiscal year
ended December 2005, an increase of 7.3% over 2004. The operating profit of the
company was $4021.6 million during fiscal year 2005, an increase of 13.6% over 2004.
The net profit was $2602.2 million in fiscal year 2005, an increase of 14.2% over 2004
McDonald’s has a working capability of more than 1.5 million people worldwide.
They are valued asset helping McDonald’s operate its fast food business successfully. As
a result, every day McDonald's serves more than 47 million customers around the world
center which emphasized consistent restaurant operations procedures, service, quality and
cleanliness (McDonald’s, 2006h). The university is designed to instruct people employed
provides take-away and drive-thru services, which serve customers immediately and
allow them to order and pick up food from their cars. McDonald’s provide convenience
and inexpenxsiveness for the customers who need to eat but have no time to prepare their
Core Competencies
Brand image, it is the most valuable thing McDonald’s has. McDonald’s is the
number nine global brand. This shows that it has strong global performances. According
comparable sales rose 5.7% in January, on top of a 5.2% increase achieved for January
2005. This makes the 33rd consecutive month of positive global comparable sales
increases, reflecting the ongoing strength of initiatives designed to enhance the customer
restaurants around the world with expanded menu choice and variety, quality food,
Since McDonald’s has realized the potential for growth in international markets, it
has planed to benefit from lessons that they learned in the USA. It has applied the lesson
to its rapidly growing international business. McDonald’s can now share ideas, best
practices and human resources across borders, thus further enhancing its competitive
products to customers in order to address growing changes in demand for healthier foods
and premium products. It provides wide range of low- cost food and fast service to large
groups of customer, including breakfast items, sandwiches, salads, desserts, soft drink,
and value menu. For international market, it successfully adjusts the menu to local taste.
McDonald’s offers vary beyond the core menu to meet local taste. For example,
McDonald’s restaurant in Japan serve pork Teriyaki Burger, McDonald’s Brazil offers
For the international operation, McDonald’s keeps the product, brand or strategy
flexible. Thus, it can be continually adjusted to bridge cultures and meet global trends.
Adaptation is used for many reasons including consumer tastes, preferences, laws and
customs. There are many situations where McDonald’s adapted the product because of
laws and customs in a country. For example, McDonald's began using a trans fat-free
cooking oil in Denmark after that country banned artificial trans fats in processed food
training and materials which franchisees need to be a success in their restaurant business.
The training program is designed to enable franchisees to achieve their goal in doing their
business. It creates learning environment, which facilitate the development of skill. It has
wherever it does business. It provides programs to inspire physical activities for family in
their daily lives. The examples are as follow: (McDonald’s Balanced, 2005).
• It partners with the Olympics and FIFA World Cup to identified meaningful way
to make the customers understand how to balance the food they eat with the
• It supports grassroots sports which are also the way McDonald’s give back to
and physical activity and interactive chat room that allow users to talk with fitness
expert.
royalty.
Distinctive Competencies
Table no.2
The success of the distribution in the fast food industry is mainly related with the
number of the outlets. According to the surveys, the convenience of the outlet is ranked
as the number one factor, which affects the preference of the customer, before than the
quality and speed of the service (Kasdan, 1996). The company McDonald’s has a strong
chain with over 30,000 outlets in 121 countries. However, the company is not the leader
in the distribution for example, YUM!, which is the parent of KFC, Pizza Hut and Taco
Bell, has more outlets than McDonald’s as total (around 2000) and expands further than
Without a discussion McDonald’s is a model company in branding not only for fast food
industry but also for other industries. The company has been rated always in the first ten
of the top brand lists and none of the other companies in fast food take place even in
hundred. The Golden Arches is one of the most recognizable corporate logos. Also if the
96 percent of the school children in the US can identify Ronald McDonald (the clown
mascot of McDonald’s) and if the only fictional character with a higher degree of
However, the competitors cannot be called unheard of and the main issue is that the
McDonald’s has a huge production capacity, which serves every day more than
50 million people worldwide but the main factor, which makes company’s production
unique is their adaptation ability to the region. While the burgers remain staple fare on
the menu, local products have also been added. McDonald’s takes the quality control
very seriously and applies very strict specifications for all raw materials they use.
Especially in the foreign markets the fast food producers might face the suppliers, who
are unwilling to meet specifications. In this situation, the cases in UK and Russia shows
(Karichalil, 2000). Although the success in localizing needs expensive investment such as
research and management costs, it is not too expensive to imitate for the main
McDonald’s has an innovation policy, which promotes the global and regional
initiatives. Besides the different menus for each region, McDonald’s collaborate with
well-known architects to create different designs for new restaurants and extensive
makeovers of existing stores in each country. (For instance, McCafe coffee and dessert
concept in Australia or game stations in Mexico or Gym clubs in France). Also the
company is the creator of the “dollar menu” (special pricing for certain products),
McMenu (different prices on various days of the week in Latin American countries) and
first adaptor of home delivery system in Southeast Asia and some middle east countries
advantage of the company. The company could have achieved to keep its market
leadership for decades. It is not so hard even for the small stores to produce a better
tasting burger than McDonald’s but the millions of consumers still pick McDonald’s.
Even though some competitors have more outlets and imitating the majority of the
innovations in the industry requires inexpensive investment, there is a cliff between the
sales of the McDonald’s and its competitors. They have the same product or service but
originated from the strategy of management, which determines the changing consumer
habits and trends and being the first in taking action for renovation.
Value Chain
Primary Activities
2006).
informed, forecast supplies more accurate and reduce its inventory which
reported in the National Retail Federation 95th Annual Convention & Expo in
New York City, that it could reduce the average inventory level about 30%,
physical plants and equipment, private interviews with workers and discussions
• Safety Standard - McDonald’s provides a safety standard that its suppliers have
and to ensure its suppliers meet or exceed the government requirements. The
(BSE) has reviewed the company’s policies concerned use of specific risk
materials (SRM), advanced meat recovery (AMF) and downers. McDonald’s has
to support a proper animal treatment, quality and safety of the food products.
(McDonald’s, 2006b).
Operations
recognition, understanding the culture and blending itself to fit in while still
maintaining the character of the Western culture let McDonald’s gained market
• Economy of Scale – Serving about 50 million people a day around the world,
paper, McDonald’s has a strong buyer power to negotiate to the cheapest price of
whatever the company buys which enable McDonald’s to sale its products at the
low price.
maintain its standard. The company operates one research and development lab in
the US, two in Europe and will open one in Asia. McDonald’s strategy focuses on
• Trans Fats Usage – Following the market trend and health advocate demand,
kitchen about 15 percent, and still working on a suitable alternative fat that will
Distribution
• Number of stores at convenience location – In the US, there are about 550,000
the location for its restaurant carefully to ensure its store is located in a convenient
• Drive thru – Times is money; every second lost in filling an order is considered
money burned. McDonald’s put POS system to drive –thru units which increases
• Gas station – McDonald’s signed a deal with the nation’s largest gasoline retailer
in China to open stores at existing and future gas stations. However, Jason Xu, an
analyst at KGI Securities in Shanghai, critics that this strategy may take a long
time to get benefit because typically Chinese does not have a habit of eating when
• 24 hour service – McDonald’s extend its operating hour till 2 p.m. in many areas.
Some of them are 24 hours restaurants which enable company to generate more
revenue.
• Plan to Win – McDonald’s implement the Plan to Win to address the key drivers
• Lean fare and Kids meal – McDonald’s expands its menu offering more choices
for kids and adding salad and chicken sandwich to respond to the market trend.
McDonald’s added chocolate milk or apple juice instead of soda (Gray, 2004).
• “I’m lovin’ it” – The global branding campaign which McDonald’s introduced in
2003 at Munich, Germany for the first and roll out to other countries.
• Playplace – McDonald’s is the first who added a child’s play into its restaurant.
One of the primary reasons of this strategy is more than half of the US households
are families with children. Other fast-food chain such as Burger King had
followed this idea. The free play area increases the restaurant sale as children
decided to put its nutrition information on its packing. McDonald’s bases its
(Gogoi, 2006).
Service
MP3 and ring tones, burn CDs, printed digital photos, and surf the Web called
E2Go in Europe and Australia in 2004. It introduced the download kiosk to the
about 7,000 stores in the US equipped Wi-Fi internet for its customers.
• DVD Rental Kiosk – McDonald’s added Redbox DVD rental into the store
providing corporate information, press release, information for investors and links
to relevant websites.
Support Activities
Procurement
sourcing guideline for agriculture and fish products. This assessment examined
environmental issues which associated with key commodities used within the
McDonald’s supply chain. The pilot program involves five of the biggest items
inside the company: beef, pork, chicken, buns and potatoes (Conservation
International, n.d.).
Technological Development
2005 to help streamline its operations. Window XP Embedded has the ability to
work with a single vendor and make restaurant crew training faster and more cost-
effective, also easily integrating and maintaining devices from multiple POS
packaging, reducing the total amount of material used and designing consumer
• Store Location – Customer now can find where the closet McDonald’s store
course.
Table no.3
Liquidity
Current Ratio 0.81 1.45 1.35 0.86 Good
Quick Ratio 0.60 1.25 1.3 0.7 Good
Leverage
Debt to Total Asset 0.49 0.50 0.49 0.34 Poor
Debt-to-Equity 0.65 0.67 0.57 0.43 Poor
L/Term Debt to 0.58 0.59 0.53 0.50 Marginal
Equity
Activity
Total Assets 0.7 0.7 0.8 1.5 Poor
Turnover
A/R Turnover 25.8 26.6 26.3 42.7 Poor
Inventory Turnover 94.6 96.0 104.4 54.4 Very Good
DSO 14.2 13.8 14.5 9.84 Poor
Fixed Asset 0.9 1.0 1.1 1.3 Marginal
Turnover
(Edited from Morningstar Homepages, 2006, Reuters Homepages, 2006 and Hoovers
Homepages, 2006)
Profitability Ratio
0 0 .0 0 %
0 0 .0 0 %
0 0 .0 0 %
0 0 .0 0 % 2222
0 0 .0 0 % 0000
0 0 .0 0 % 2222
0 .0 0 % Industry
0 .0 0 %
Net Profit Return on Return on Gross Operating
Margin Equity Asset Profit Profit
Margin Margin
Profitability Ratios of McDonald’s between 2004 and 2006 and the fast food industry
Profitability ratio is the net result of a number of policies and decisions. The ratios
examined thus far provide useful clues as to the effectiveness of firm’s operations.
The company’s net profit margin increased to 12.72% in 2005 and to 13.20% in
2006. The ratio was 4 times higher than the industry average which indicates that
McDonald’s earned better profit from net profits as a percentage of total sales. The
company had better control over its cost compared to its competitors.
on equity increased to 17.73% in 2005 and to 18.7% in 2006, which was higher than the
industry average. It is goods news for the investors where they made $0.19 for every
was two times higher return on its assets than the industry average. McDonald’s could
For gross profit margin ratio, McDonald’s was decreased to 30.9% in 2005 and
increased to 31.2% in 2006. This measures the total margin available to cover operating
expenses and yield a profit. This amount can then be used to pay fixed expenses such as
marketing and selling expenses, R&D expenses and administrative expenses. The
company was more successful than the industry which indicates that McDonald’s made
During 2004 to 2006, McDonald’s operating profit margin was higher than the
industry. The company had more desirable number than the industry. It was more
effective on operating the costs and increasing its sales. It reached a percentage of 19.6 in
The Company's strong performance reflects the ongoing benefits of enhancing the
Liquidity Ratio
2 .2
2 .2
2 .2
0 2222
2 .2 2222
2 .2 2222
2 .2 Industry
2 .2
0
Current Asset Quick Ratio
Liquidity Ratios of McDonald’s between 2004 and 2006 and the Fast Food Industry
McDonald’s current ratio was increased to 1.45 in 2005 and lowered to 1.35 in the
following years. However, the ratio was still higher than the industry ratio (0.86) which
indicates that McDonald’s had more ability to meet short-term obligations than the
industry had. It is important to note that in McDonald’s successfully increased its current
assets in order to meet current liability and cover short term debt in 2005 and 2006.
McDonald’s improved its quick ratio between 2004 and 2006. The ratios in year
2005 and 2006 were also higher than the industry ratio which could be the result of
decreased leverage of the company. McDonald’s had a better ability to pay off its debts
Leverage Ratio
2 .2
2 .2
2 .2
2 .2 2222
2 .2 2222
2 .2 2222
2 .2 Industry
0
Debt to Total Debt to Long Term
Asset Equity Debt to
Equity
Leverage Ratios of McDonald’s between 2004 and 2006 and the Fast Food Industry
McDonald’s did not have much different number of debt to total asset ratio during
2004 and 2006. However the ratio is higher than the industry which indicated that the
company relied on debt to finance assets than the industry did. In 2006, For every dollar
McDonald’s owned its assets, it owed $0.49 to an outside lender while the industry owed
2006, a more desirable number. However, those numbers were higher than the industry
(0.43), which indicates that the company relied more on debt financing than the industry
did.
0.53 in 2006. The number was not much different when compared with the industry
(0.53) in 2006.
It is important to note that both debt-to-equity and long-term debt to equity ratios
of year 2006 were lower than 2005 obviously. This is because McDonald’s repaid a huge
amount of debt in 2006. However, the company should continue to lower these leverage
ratios.
Activity Ratio
222
000
00
00 2222
2222
00
2222
00 Industry
0
Asset A/R Inventory DSO Fixed
Turnover Turnover Turnover Asset
Turnover
Activity Ratios of McDonald’s between 2004 and 2005 and the Fast Food Industry
McDonald’s total asset turnover did not have much different number between
2004 and 2006. The number was 0.7 in 2004, 0.7 in 2005, and 0.8 in 2006 which was
lower than the industry ratio (1.5). This indicated that in 2006 every dollar McDonald’s
invested in total asset, It generated $ 0.8, while those of industry generated $1.5.
to 26.3 in 2006. This ratio during 2004 and 2006 was lower than the industry. This
suggests that McDonald’s should re-assess its credit policies in order to ensure the timely
ratio was two times higher than the industry in 2006, which indicates that McDonald’s
has strong sales and manages its resources more effectively than the industry
During 2004 and 2006, McDonald’s took more days than the industry to collect
revenue after sales had been made, which shows that McDonald’s had a harder time
Fixed asset turnover ratio measures how effectively a firm uses its plant and
equipment. McDonald’s had an improved trend of fixed asset turnover. However, the
number is not as high as the industry. In 2006, for every dollar McDonald’s invested in
fixed assets, the company generated $1.1 in sales while the industry generated $1.3
Overall Summary
profitability and liquidity ratios were also higher than the industry. For leverage ratios,
However, McDonald’s relied more on debts to finance than the industry did.
McDonald’s, then, has to continuously improve its profit. It should cut its operating cost
in order to gain higher profit margin. For activity ratios, McDonald’s has a very high
inventory turnover which shows its efficiency. However, its other ratios in this section
need some improvement. It suggests that McDonald’s should reassess the credit policy
Table no.4
Liquidity
Current Ratio 1.35 0.92 3.23 0.86 Wendy’s
Quick Ratio 1.3 0.75 3.0 0.7 Wendy’s
Leverage
Debt to Total 0.49 0.78 0.40 0.34 Wendy’s
Assets
Debt-to-Equity 0.57 1.88 0.36 0.43 Wendy’s
L/Term Debt to 0.53 1.87 0.35 0.50 Wendy’s
Equity
Activity
Assets Turnover 0.8 0.8 1.0 1.5 Wendy’s
A/R Turnover 26.3 12.8 18.3 42.7 McDonald’s
Inventory 104 N/A 37.5 54.4 McDonald’s
Turnover
DSO 14.75 27.45 22.92 9.84 McDonald’s
Fixed Asset 1.1 2.3 1.7 1.3 Burger King
Turnover
(Edited from Morningstar Homepages, 2006, Reuters Homepages, 2006 and Hoovers
Homepages, 2006)
Profitability Ratios
0 0 .0 0 %
22 .22 %
0 0 .0 0 %
0 0 .0 0 %
0 0 .0 0 % McDonald's
22 .22 % Burger King
0 0 .0 0 % Wendy's
Industry
0 .0 0 %
0 .0 0 %
Net Profit Return on Return on Gross Operating
Margin Equity Assets Profit Profit
Margin Margin
Profitability Ratios of McDonald’s, Burger King, Wendy’s and the Fast Food Industry
Among the tree companies, McDonald’s had the highest figure on net profit
margin (13.20%), return on equity (18.7%), return on asset (9.9%) and operating profit
margin (19.6%)
Better net profit margin indicates that McDonald’s earned better profit from net
profits as a percentage of total sales than Burger King and Wendy. The company earned
McDonald’s had a better ability to utilize shareholders’ funds than Burger King
and Wendy. For every dollar the shareholders of McDonald’s invested they earned $0.19
of net income whereas the shareholders of Burger King and Wendy’s earned only $0.05
of net income
McDonald’s could generate its profits from asset better than those two companies
and industry. This places McDonald’s as an efficiently managed company. The company
was able to use its assets to its fullest potential, which highlights McDonald’s ability to
In addition, McDonald’s operated the costs and increased its sales more effective
than Burger King and Wendy’s. However, Burger King had the highest gross profit
margin (36.70%) which indicates that Burger King made more reasonable profit on sales
fundamental business drivers. The results confirm that the strategy of growing by
improving the existing restaurants and focusing on the right strategy for McDonald’s.
Liquidity Ratios
2 .2
0
2 .2
McDonald's
0
Burger King
2 .2 Wendy's
0 Industry
2 .2
0
Current Ratio Quick Ratio
Liquidity Ratio of McDonald’s, Burger King, Wendy’s and the Fast Food Industry
Wendy’s had the highest figure of current ratio (3.23) and quick ratio (3.0). This
shows that Wendy’s had the ability to pay short-term obligations and depts. better than
McDonald’s and Burger King. However, all of three companies had higher current ratio
2 .2
McDonald's
0
Burger King
2 .2 Wendy's
Industry
0
Debt to Total Debt to Equity Long Term
Asset Debt to Equity
Leverage Ratios of McDonald’s, Burger King, Wendy’s and the Fast Food Industry
Wendy’s had less debt to total asset, debt to equity and long-term debt to equity
than McDonald’s and Burger King. It represents that McDonald’s and Burger King relied
Activity Ratio
222
000
00
McDonald's
00
Burger King
Wendy's
00
Industry
00
0
Asset A/R Inventory DSO Fixed Asste
Turnover Turnover Turnover Turnover
Activity Ratios of McDonald’s, Burger King, Wendy’s and the Fast Food Industry
The total asset turnover of three companies was not much different. However,
Wendy’s had the highest figure to total asset turnover ratio. It represents that for every
dollar Wendy’s invested in total asset, it could generated more about of dollar than
King and Wendy’s which indicates that McDonald’s extension of credit and collection of
accounts receivable was more efficient than Burger King and Wendy’s. However the
ratios of three companies were lower than the industry. This suggests that McDonald’s,
Burger King and, Wendy should re-assess its credit policies in order to ensure the timely
McDonald’s had higher inventory turnover than Wendy’s (37.5) and industry.
(Burger King’s inventory turnover ratio is not available) which indicates that
McDonald’s took 15 days after to collect revenue after sales have been made. It
performed better than Burger King and Wendy’s, which took 27 days and 23 days
accordingly. However, the ratios of three companies were above the 10-day average
industry which shows that they had a harder time collecting the receivable.
Burger King had the highest figure of fixed asset turnover ratio. It represents that
for every dollar invested in fixed assets, Burger King was able to generate more sales
Each company had dominant financial in different ratios. For profitability ratios,
McDonald’ was the strongest in the area of net profit margin, return on equity, return on
asset and operating profit margin. The ratios were higher than the competitors and
industry. However, Burger King had the strongest gross profit margin. McDonald’s
liquidity ratios were lower than Wendy’s but higher than the industry. Thus, they are
acceptable. Wendy’s had a more desirable number of leverage ratios than McDonald’s
and Burger King. McDonald’s, and Burger King needs to improve the leverage ratios
because they had less ability to pay off their liability than the industry did. For the
activity ratios, Wendy’s performed well in the area of asset turnover. Burger King
performed well in the area of fixed asset turnover. McDonald’s performed well in the
area of day sales outstanding, account receivable turnover and inventory turnover.
Nevertheless, McDonald’s needs some improvement in this section because some ratios
High
WEN
Low
BK
MCD
Few locations Many locations
Number of restaurant
restaurants more than its competitors. However, it does not have a high commitment from
customers. In contrast of the number of location, McDonald’s has the lowest score of
of any companies in order to cover as many geographic areas as possible. This should be
a near term strategy to increase the market share. For the long term strategy, McDonald’s
should increase the customer loyalty to maintain its leading position in the market.
From the customers’ perception there is no big difference between the product quality of
McDonald’s and its competitors’ but accepting the nutrition and fat value of the foods as
a main factor, McDonald’s present more healthier foods than the competitors do
Besides being the most recognizable brand in fast food industry, McDonald’s has been in
the first ten of top brands list of the world for decades. More important than that, among
the burger based producer, the number of the world wide outlets of the company is more
than double to Burger King, which is the second in the list. The importance of this fact
originates from that the customers care the convenience of the restaurant more than its
brand. Also, the company is the last in the list of customer loyalty. The customer
satisfaction is low among the McDonald’s customer and Wendy’s has a faster and more
competitors. Even if there is little differences, special pricing promotions like coupons,
balance this difference. Especially in Europe and US, the price of the products is cheap
Although Wendy’s offers more sandwich and salad menu than its competitors,
McDonald’s differentiation strategy is not limited only with products and it has a variety
of local food, services and design of the outlets especially in foreign countries.
Comparing the debt to equity and gross profit margin, McDonald’s is behind its
competitors but the revenues and operating margins show that the company operates
This assessment showed us a very special characteristic of burger based fast food
industry different. The quality of products and services are the some but McDonald’s are
much further than its competitors. The main factors, which make McDonald’s stronger,
SWOT
Table no.6
Strength Weakness
• Brand Name • Service Quality
• Finance • Low Customer Loyalty
• Number of restaurant • Low Customer Satisfaction
• Standardization • Unsuccessful Promotion Strategy
• Diversified geographic
• First Move
Opportunity Threats
1. Public Perception
The company’s image is affected badly by health, low wages and marketing
issues. Especially the nutrition of the ingredients is the one of the most controversial
subjects in the media. The customers are directed to look for healthy food options. Even
though comparing with the competitors in the fast food industry, McDonald’s offers a
wider variety of nutritious items, as a parent company they draw the majority of the
unwanted attention. Also the company has to take in consideration the environmental
concerns of the customers. Some environmental initiatives might pay themselves off by
McDonald’s is one the most recognized brands in the world. Although the US
customers show little commitment to the fast food brands, this reputation will be useful
especially in foreign markets. Abroad, the lines in front of the first established outlets of
McDonald’s are not originated from the fast service or high quality products of the
company. The company is the symbol of fast food culture and has different types of
customer than US. Therefore, McDonald’s suffers from the backlashes of this reputation
Growing customer wants and needs along with increased competition has forced
the company to alter and improve their menu to better fit the environment. Therefore the
products, services and even the design of the outlets are different in each region but the
creation and implementation of the new products cost millions of dollars. Also some of
the new products such as Arch Deluxe and McPizza, which do not exist anymore,
couldn’t provide the desired success and the projects like “Made for You” created a
contradiction with the standardized process of a fast food company. For example,
McDonald’s invested around 400 million dollars to redesign of the production in the
outlets to let the customers choose the ingredients of the food but the problem was the
customers complained about longer waits in line. Finally with the exception of some
countries, the company removed “Made for You”. The company has a similar problem in
its new “Plan to Win” strategy. Even though as total sales, the strategy has been
successful since it was announced in 2003, some franchisees complain about the rising
costs.
3. Customer service
The quality management perception of the company includes the total customer
satisfaction and minimizing the time for processes, which are based on efficient
operations. The company invests in improving the processes and training the employees.
However, the company ranked the last among the fast food chains in the customer
satisfaction. The company cannot meet the customer expectations in the quality and the
speed of the service. The customers complain mostly about slow service and
unprofessional employees.
4. Expansion
The convenience of the restaurants plays the major role in the preferences of the
customers and McDonald’s, which has over 32,000 existing outlets and opened averagely
700 outlets per year since 2000, is the leader in the burger based fast food companies.
However, more than half of these outlets are in US or European market and these markets
are saturated. Therefore the companies are directed to new markets such as Asia and
expanding very aggressively, for instance 100 of the 700 new outlets are opened in
China. By expanding quickly into international markets, the target is arriving before
competition and securing a plan for future growth opportunities. Also being first in the
international markets makes the company first in the minds of international consumers
instead of a simple supply chain and weaker foreign currency might impact international
divisions’ profitability. For example in 2002 the company closed its 175 outlets in 10
countries due to poor profitability. Besides, the expanding in saturated markets brought
up some other problems. McDonald’s tried to expand into airports, malls and hospitals
5. Acquisitions
The full service restaurant market has a bigger growth ratio than fast food
industry. Therefore, McDonald’s moved into other brands of food and restaurants. They
acquired Boston Market and Pret A Manger. These acquisitions will allow McDonald’s
to move into growing non-hamburger markets while increasing product selection and
have the ability to be expanded internationally depending on their success in the existing
markets.
6. Franchisees
Over 70 percent of the outlets are franchised and the average demand for an outlet
is 10. Hence, the franchisees are another important customer group. On the other hand,
serve customers better. The company has also increased its staff of consultants who
inspect restaurants and work with franchisees to improve their operations but the plan
comes at a difficult time for many of McDonald's smaller operators, who are being
squeezed by flat sales and rising costs. The franchisees claim that this strategy forces
weaker franchisees out and gives more restaurants to larger operators with more financial
resources. Also, the franchisees complain about the cannibalism of close outlets.
OBJECTIVES
• Better the company’s image in the eyes of the customers by cooperating with well
• Expand in the promising markets such as Asia and increase the profitability in the
existing markets
resources
• Increase the revenues by entering in other food industries under new brands
STRATEGIES
1. Localizing
The company knows the maintaining the industry leadership without considering
consumer trends, is impossible. Therefore the company start to apply a “Plan to Win”
program, which focuses on 5 P’s “people, product, place, price, promotion” (Hume, n.d).
They intend to reduce the company’s ownership percentage in outlets, although the 85
independent operators. The purpose is cooperating with local entrepreneurs who know
In addition to burgers, the menus of McDonald’s offer several types of food such as
salads, fruits and local product options. Also they practice the differentiation in services
too. For example in some areas they have different pricing, home delivery and diner
services. A new strategy for mature market is developing new brands in other food
segments.
3. Growing
outlets, maximizing sales and profits at existing outlets and improving international
profitability (McSpotlight, n.d.). .While the company seizing the new markets in
Southeast Asia, they focus in the mature markets like Europe and US to add customers to
existing stores. Also maximizing sales and profits at existing stores will be achieved
through better operations, product development, effective marketing and lower costs.
4. Public Relation
The company realized the increasing health trend and focused extraordinary
efforts to add nutritious products in their menu. Also McDonald’s provides information
to the customers about the quality of its food. They developed nutrition and education
programs for the customers and motivates them to make food and fitness choices that are
right for them. Besides, McDonald’s collaborates with sport and health organizations
such as IOC and Better Health Foundation. For example, McDonald’s was the sponsor of
the 2006 Winter Olympics and the McDonald’s global web site “Go Active” was created
with the support of IOC. As part of its waste reduction action plan, McDonald’s has
committed to reviewing annually all food service products and packaging items to
honored by the U.S. Environmental Protection Agency for its conservation and recycling
efforts. The firm collaborates with its suppliers, train them about environmental issues
about its performance and deficiencies. In addition to two main surveys on larger scale,
the managers are supposed to talk at least one customer during each travel path which
means every thirty minutes of his shift. To ensure that all employees properly perform
their assigned duties, McDonald’s invests greatly in their training program. Beside the
basic FAF (Fast, Accurate and Friendly) training program, the company has 10
international training centers and every year around 5,000 people attend to Hamburger
prestigious awards for their leading-edge training, including the “Employer of Choice
DECISION CRITERIA
McDonald’s increases the diversity of its products not only by imitating some
local products but also building their own food studios. The last sample is that the
company built in 2006 a new multimillion dollar food studio in Hong Kong for Asian
market. With these cooking laborites which employ the executive chef, nutritionist and
quality experts, the company created the greatest cookbook in the world ( Bremner,
2006).
To better the public image McDonald’s has assembled their Global Advisory
appropriate steps in helping its customers achieve optimal health. Because of the
continual review and evaluation of packaging materials, the company was announced by
implement the new packaging in more than 20,000 restaurants by the end of 2006 (Yahoo
Finance, 2006).
measurement such as Fast Track 2+2 Timing Systems which calculate the total time that
the customers spend in the line since the beginning of order until getting their food
they intend to convert their existing ownership to franchising agreement. Under this
program the company will hand over the control of approximately 800 restaurants in 32
countries outside the U.S. to the local operators (Yahoo finance, 2006).
Besides to empower the efficiency of its supply chain McDonald’s has cooperated
business to business marketplace, to ease the sales and purchases in the food industry
(Bertognoli, n.d.).
Balanced Scorecard
Conclusions
The National Restaurant Association forecasts the sales of fast-food business will
increase about five percent in 2006, rising to $142.4 billion. McDonald’s which ranks the
number one in the hamburger chain business has a good resources and ability to serve
millions customers in varied geographic areas. However, the research shows that among
its direct competitors McDonald’s has the lowest score of consumer commitment.
The growing health concern has affected the industry for couple years.
McDonald’s is doing very well in term of responding to the market trend. The company
future objective is to offer variety choice on the menu, promote nutrition information and
support physical activities. The competition in the fast-food restaurant is very intense.
McDonald’s use a marketing strategy of “Think Global, Act Local.” It promotes the
global campaign “I’m lovin’ it.” In the same time, to capture different markets in each
image is the most valuable thing it has, and helps the company being sustain in the
market. The financial health of McDonald’s is strong though leverage ratios of the
Recommendations
“Plan to Win”, should be addressed and come up with a strategy to improve the customer
relationship and what front line employees should do (smiling, courtesy greeting, etc.) to
fast-food business. McDonald’s should pay close attention to the service provided for a
drive-through window. Friendly, accuracy of order taking and speed of service should be
improved. The company’s mistake on some of it’s strategies such as “made for you”
which made the operation system slower indicates that McDonald’s should do research
For long term strategy, McDonald’s should expand to other areas of food
business.
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