McDonalds

summarized byAndi S. BoedimanStrategic Innovation Consultantandisboediman@gmail.comwww.ideonomics.com

McDonald’s History

• McDonald’s starts as a hamburger stand in 1954• Ray Kroc opens the first McDonald’s franchise in 1955• McDonald’s comes to Wall Street in 1965• McDonald’s introduces the “Big Mac” in 1968• “Makadonaldo” first opened in 1971 (Japan)• !e Egg McMuffin is introduced to the public in 1973• !e first Ronald McDonald House is created in 1974• !e Happy Meal is created in 1979• McDonalds hits the web in 1998

Fascinating Facts

• Today, the company operates more than 23,500 restaurants in 109 countries

• Since its founding in 1955, McDonald’s has sold well over 100 billion hamburgers

• McDonald’s prepares more than 6.8 million pounds of French fries every day

• More than 50,000 students have graduated from “Hamburger University”

Franchising Facts

• Approximately 85% of McDonald’s restaurant businesses world-wide are owned and operated by franchisees

• All franchisees are independent, full-time operators

• McDonald’s was named Entrepreneur’s number-one franchise for 1997

The Factors of Production

• Land• Labor• Capital• Entrepreneurial

Activity

Land

• !e physical space where production takes place

• Over 30,000 Restaurants in 199 Countries World Wide

Labor

• Time spent producing goods and services

• 398,000 Employees; 98% work in restaurants

Capital

• Physical Capital – !e buildings, machines, and equipment– 30,000 Restaurants– machines used…ovens, grills, cash registers…

• Human Capital – skills associated with the job of employees– Owner– Manager– Marketing– Basic Employee

Entrepreneurial Activity

• Recognizes opportunity and then proceeds to take advantage of that opportunity

• Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of a five-spindled milk shake maker called the Mulitmixer. Hearing about the McDonald’s hamburger stand in California running eight Multimixers at a time, he packed up his car and headed west. Ray Kroc opened up the first McDonald’s franchise in Des Plaines, Illinois, in 1955.

SWOT Analysis - Strengths

• Brand Equity…world-wide• 42% of US fast-food hamburger business• Consistency of food• Successful items: Fries, Happy Meal, Big

Mac, Egg McMuffin, Promotions• Overseas market• Balance sheet position

SWOT Analysis - Weaknesses

• Declining market share• Weak product development• Disgruntled franchisees• Quality and taste of products

Whose food do Americans really like best?

Best-tasting food?

Wendy’s 36%*Burger King 32%McDonald’s 21%

Best-tasting burgers?

Burger King 42%Wendy’s 32%McDonald’s 17%

* Percent of respondents

SWOT Analysis - Weaknesses

• Declining market share• Weak product development• Disgruntled franchisees• Quality and taste of products• Slowed revenue and income growth

Income Trends

Revenue Net Income Profit margin

Stock Price

McDonald's Growth S&P Industry Growth

SWOT Analysis - Opportunities

• International expansion• Only serving 1% of the world’s population• Growing dining-out market

SWOT Analysis - Threats

• Mature/oversaturated industry• Strength of competition• More health-conscious consumers• Changing demographics• Fluctuation of foreign exchange rates;

Economies

1997 Competitor Financial Comparison

McDonald's Burger KingWendy's

Strategic Issue

To consistently increase shareholder value through the growth of profits and market share in the fast food industry

Past Strategies

• McDonald’s becomes known for the motto "QSC" for Quality, Service, and Cleanliness.

Past Strategies

• Product Development– Successes: Fries, Happy

Meal, Big Mac, Egg McMuffin, Promotions

– Failures: McPizza, Fajita, Carrot Sticks, McLean, and the Arch Deluxe

Past Strategies

• Market Development– Success: International growth– Failure: Over-expansion in US

• Forward Integration– Distribution through franchisees with control

over store presentation, menu items• Joint Venture: Franchisees

New Strategies

• Leverage Brand Equity• Product Development:

Focus on core business– Quality and taste issues

• Food delivery methods• MBX (McDonald’s Big

Extra)– Family Value Meal

New Strategies

• Joint Venture (Franchisee): Change methods of dealing with franchisees– To better motivate owners

and foster team spirit– Enhance owners’

participation in process improvements

New Strategies

• Market Penetration and Development– Continue International expansion

• Retrenchment– Home office cost reductions– Splitting into five geographic divisions

• Horizontal Integration– Purchase competition with differing target markets

Advertising

• To call public attention to especially by emphasizing desirable qualities so as to arouse a desire to buy or patronize

Advertising

• Two reasons for advertising – To shi$ the demand

curve to the right– Make demand for its

output less elastic

Innovation

• Value– Promote price and

satisfying desires• Premium

– Great tasting premium products

• Wholesome– Consumer interest in

healthy lifestyles

Innovation

• Big N’ Tasty - a great-tasting lettuce and tomato hamburger sandwich

• McChicken - a gently-seasoned fried chicken sandwich • McValue fries • So$ drink • Side salad • Snack-size Fruit n’ Yogurt Parfait, a combination of low-fat,

custard-style yogurt with blueberries and strawberries • Sundae - creamy so$ serve with hot fudge or other

toppings like caramel or strawberry • Two pies - baked apple with cinnamon

Plan To Win

“We will have well-trained, friendly PEOPLE working in our restaurants and the right PRODUCTS at a range of affordable PRICES. We will showcase our restaurants as PLACES that are clean, contemporary and welcoming, and create PROMOTIONS that resonate with key consumer groups.” –McDonald’s

Conclusion

• Today , McDonalds has grown to 25,000 restaurants in about 120 countries serving 50 million daily. Becoming the largest fast food chain in America.

i’m lovin’ it

summarized byAndi S. BoedimanStrategic Innovation Consultantandisboediman@gmail.comwww.ideonomics.com

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