Strategic managementClass 1 – Group 4

Team members:

Tong Tran Thanh Phuong – 295920

Tran Huu Minh Quan – 295923

Pham Chau Bao Khoa - 295916

McDonald’s

Problem statement:

• Chief Executive Don Thompson stated: “More specifically,

growth in the informal eating-out industry has been relatively

flat to declining around the world and we expect that to

continue.”

Introduction

• Background:

Founded: 1955, Franchising since: 1955

Largest fast-food company

Operating in over 121 countries, over 35000 locations with 1.5 million employees

Revenues $28.1 billion in 2013.

• Mission

• Vision

• History

Vision

"McDonald's vision is to be the world's best quick service

restaurant experience. Being the best means providing outstanding

quality, service, cleanliness, & value, so that we make every

customer in every restaurant smile."

Mission

McDonald's brand mission is to be our customers' favorite place

and way to eat and drink. Our worldwide operations are aligned

around a global strategy called the Plan to Win, which center on an

exceptional customer experience – People, Products, Place, Price

and Promotion. We are committed to continuously improving our

operations and enhancing our customers' experience.

History

• 1940 First McDonald’s

• 1952 Attempts at franchising

• 1954 Milk Shake Machine

• 1955 prototype opens in Des Plaines, IL

• 1956 14 McDonald’s

• 1961 McDonald brothers sell rights

• 1965 McDonald’s go public

• 1968 Introduction of Big Mac and shift to Network Television

History (cont)

• 1970 1600 restaurants

• 1980 6000 McDonald’s Restaurants

• 1990 record sales

• 1994 Kuwait City, Kuwait

• 2002 Forty seven years after

30,000 locations

2000 new restaurants

World Wide Web

McDonald’s a recognized Brand Name

Products

• Beverage: Cold-Coffee, ice tea, hot serves, McShakes

Products

• Non-Vegetarian Menu: Filet-O-Fish, , Chicken McCurry Pan, McChicken.

Products

• Vegetarian Menu: Crispy Chinese, McALOOtikki, Mc Veggie, Pizza McPuff,

Paneer Salsa Wrap.

What We Sell

11

Services

• Having more than 15,000 Wi-Fi enabled restaurants.

Services

Where we are Domestic market: USA

McDonald’s Organization Structure

• Having tight control of the firm

• Easily operate the company

• Improving employees’ performance

• Atmosphere of cooperation and teamwork

• The following chart is the organizational structure of McDonald

Don Thompson

Chairman and COO

McDonald’s

Jim Skinner

President and COO

McDonald

in Greece

McDonald

in Asia

McDonald

in Pacific

Alan D. Feidman

President and COO

The Americans

Executive vice

president

Zone

managers

Regional

managers

Executive vice

president

Zone managers

Regional

managers

Market

manager

Franchisees

Operational

Manager

Supervisors

Store managers

First Assistant

Shift Managers

Crow Persons

Regional Human

Resources Manager

Executive vice

president

Zone managers

Regional

managers

McDonald’s

Organization Structure

Key Processes

• Doing business over 100 countries

• 85% franchised restaurants

• All franchisees are independent, full-time operators

• Entrepreneur’s number-one franchise named

Manage Operations Technology

Using OLAP technology:

Manipulates data

View the data and information

Competitors

Competitive advantages

• Striving to be cost leaders: prices cannot be matched by

competitors.

• The speedy delivery of the food.

• Strong global presence and largest market share in fast-food

industry.

• Net competitive advantage.

Product life cycle

US Market

Current strategy of McDonald's:

• Low-cost strategy to compete with competitors

• Cutting cost

• Operating more outlets

• Focusing on Plan to Win

Financial Analysis

Short-term solvency, or liquidity, ratios:

2012 2013

Current ratio 1.45 1.59

Quick ratio 1.09 1.3

Cash ratio 0.68 0.88

Financial Analysis

Long-term solvency, or financial leverage, ratios:

2012 2013

Total debt ratio 0.567 0.562

Debt-equity ratio 0.891 1.436

Equity multiplier 2.313 2.287

Times interest earned

ratio

63.9 63.61

Cash coverage ratio 18.5 18.7

Financial Analysis

Asset utilization, or turnover, ratios:

2012 2013

Inventory turnover137.64 139.07

Days’ sale in inventory2.65 2.62

Receivables turnover20.04 21.3

Days’ sales in

receivables 18.21 17.14

Total asset turnover0.78 0.77

Capital intensity1.28 1.30

Financial Analysis

Profitability ratios:

2012 2013

Profit margin 0.1982 0.1987

Return on assets 15.51 15.66

Return on equity 35.69 35.19

Financial Analysis

Market value ratios:

2012 2013

Price-earnings ratio 20 17.4

Market-to-book ratio 7.52 5.9

SWOT analysisStrengths Weaknesses

The most recognized brand

Strong global presence

McDonald’s Plan to Win

Strong financial performance and position

Operating in many diverse cultures

Offering many popular brands

Success in target very young children

Low-cost leader

Good socially responsible and community oriented

Convenient

Negative publicity

Unhealthy food menu

High employee turnover

Low differentiation

Legal action

Use of HCFC-22

Lacking breakfast menu

Social trend

Threats Opportunities

Competition

Healthy issue

Law issue

Saturated in fast-food industry

Economic recession

Increasing demand for healthier food

Growth of the fast food industry

Globalization

Low cost menu is preferred by larger number of customers

Appearance of freebies and discounts

Diverse tastes and needs of customers

SWOT Matrix

S-O strategies S-T strategies

• Introducing new nutritious menus

• Expanding to Asia market

• Taking advantage of brand name

• McDonald’s “Plan to Win”

• Low-cost leadership

•

• Taking advantage of brand name

• Giving back to community

• Providing new healthier menu

W-O strategies W-T strategies

• Minimizing the negative publicity

• Increasing differentiation

• Using less Trans fat

• Switching from HCFC-22 into HFC

• Increasing Employee satisfaction

CPM MatrixMcDonald's Burger King Yum Brands Wendy's

Critical Competitive

Factors

Weig

ht

Rating Score Rating Score Rating Score Rating Score

Product Quality 0.15 4 0.6 3 0.45 4 0.6 2 0.3

Financial 0.15 4 0.6 1 0.15 3 0.45 2 0.3

Safety 0.12 3 0.36 3 0.36 3 0.36 2 0.24

Consumer Loyalty 0.08 4 0.32 4 0.32 3 0.24 2 0.16

Value based on

Pricing.

0.12 4 0.48 3 0.36 3 0.36 3 0.36

Innovation and

Process Technologies

0.1 3 0.3 3 0.3 2 0.2 2 0.2

Global Expansion 0.1 4 0.4 2 0.2 3 0.3 1 0.1

Market Share 0.1 4 0.4 3 0.3 3 0.3 2 0.2

Promotions 0.08 4 0.32 4 0.32 3 0.24 3 0.24

Total 1 3.78 2.76 3.05 2.1

•McDonald’s

score high 3.78

•Highest market

share 50%

•Has strong

position in the

fast-food industry

Market share

Key External Factors Weight Rating Weighted Score

Opportunities

Low-Price Menu that will attract low-income consumers 0.15 3 0.45

Demand for healthier and more creative products 0.05 3 0.15

Competitors lack of McCafe service 0.15 4 0.6

Expansion in other countries ( China, India) 0.07 2 0.14

Brand loyalty 0.05 2 0.1

Demand for free Wi-Fi versus competitor charges 0.09 3 0.27

Demand for more salad choices on menu 0.09 3 0.27

Weaknesses

Having negative heath issues for consumers such as obesity

and heart attack

0.06 3 0.18

Having negative attention from media because of marketing

toward children.

0.04 2 0.08

Price wars between competitors will cause McDonald lose

customers.

0.07 2 0.14

High turnover rate 0.03 2 0.06

Rising costs 0.06 2 0.12

Calorie counts & nutritional value posted 0.09 2 0.18

Total 1 2.74

External Factors

Evaluation (EFE)

Matrix:

•Increasing sales by Low price

menu & McCafé.

•Creating more diversified menu

with low price.

•Having more competitive

advantages and opportunity

•Biggest weaknesses is healthier

issue and lawsuit issue.

Key Internal Factors Weight Rating Weighted

Score

Strengths

Strong brand name, image and reputation. 0.12 4 0.48

Strong global presence. 0.12 3 0.36

Specialized training for managers known as the

Hamburger University.

0.10 3 0.30

McDonalds Plan to Win focuses on people,

products, place, price and promotion

0.12 4 0.48

Introduction of new products 0.06 4 0.24

Customer focus 0.06 4 0.24

Strong performance in the global marketplace. 0.12 4 0.48

Weaknesses

Unhealthy food image 0.08 1 0.08

High Staff Turnover including Top management 0.04 1 0.04

Sued multiple times for serving unhealthy food 0.04 2 0.08

Weakinanalyzingtheneedsofcustomers 0.04 2 0.08

Ignoring breakfast from themenu. 0.06 1 0.06

McDonald's uses HCFC-22 to make polystyrene

that is contributing toozone depletion

0.04 1 0.04

Total 1.00 2.96

Internal Factor Evaluation

(IFE) Matrix

•McDonalds performing well on

strengths and weaknesses

• Taking competitive advantages.

•Being the icon of fast-food

worldwide by franchising.

•Catching the current market trends

and changing.

Boston Consulting Group (BCG)of McDonald's

products

• 1: McCafé

• 2: Big Mac

• 3: The Premium McWrap

• 4: McLean Deluxe

Financial Strength Rating Environmental Stability Rating

Return on investment. 3 Rate of inflation -3

Leverage 4 Demand Changes -3

Net Income 3 Price Elasticity of demand -1

EPS 3 Competitive pressure -3

ROE 2 Barriers to entry new markets -3

Cash Flow 4 Risk involved in business -2

Average 3.17 Average -2.5

Y-axis 0.67

Competitive Advantage Rating Industry Strength Rating

Market share -4 Growth potential 3

Product Quality -4 Financial stability 5

Customer Loyalty -2 Ease of entry new markets 4

Control over other parties -2 Resources utilization 4

Profit potential 2

Demand variability 3

Average -3 Average 3.5

X-axis 0.5

Conservative

Aggressive

CompetitiveDefensive

FS

ISCA

ES

0.67

0.5

The Strategic Position and Action Evaluation

( SPACE Matrix)

McDonald’s should:

•Forward integration

•Product development

Grand Matrix

• Positioning in Quadrant IV

• High market share of 49.6%

• Slowly growth of the Fast-food industry.

• Market expansion and product development are appropriate strategies.

Quadrant II Quadrant I

Quadrant IV

Quadrant III

Rapid Market Growth

Strong Competitive

Position

WeakCompetitive

Position

Slow Market Growth

Strategy 1

• Expanding to Asia market especially China and India.

Implementation:

• Identifying market segmentation.

• Focusing more on potential market.

• Legal permission in foreign country

• Innovating and cooperating with community

Strategy 2

• Focusing on providing diverse menu include nutrition foods.

Implementation:

• Conducting customer survey.

• Researching new products.

• Improving their image.

Time Table

Expanding in Asia market

PLAN PLAN ACTUAL ACTUAL %

ACTIVITY STARTDURATIO

N START DURATION

COMPLET

E

1 Customer survey 1 10 1 6 0%

2 Analyze data 5 6 7 6 0%

3 Identify market needs, segments 10 8 10 8 0%

4 Determine potential customers 17 6 17 6 0%

5 Align with marketing department

for new products 22 3 22 40%

6 Legal permission in foreign country 1 3 1 3 0%

7 Prepare infrastructures 22 8 22 7 0%

8Find suppliers for beef and fresh

vegetables 3 5 3 50%

9 Innovate and cooperate with community 3 4 3 4 0%

1

0Sustain the profit level of products

then expand to new market 30 10 29 150%

Marketing

E-Commerce

• Teaming up with DirectPay to expand online services in India

• Cooperating with WorldLine to host new website in France

• Available online ordering in several countries

• Hiring the first Chief Digital Officer

Recommendation

Long-term Strategy

• Expanding influence and presence in Asia market

Specific Strategy

• Opening at least 1 restaurant per day in China

• Having diversity menu in India

• Receiving feedbacks

Conclusion

• Good performance in fast-food industry

• Long reputation for strong marketing campaigns.

• Must change to adapt new environment

• Have more innovation and creative strategy

The End

Thank you for your attention.