F o o d S e r v i c e I n d u s t r y

The McDonald’s Corporation

Market Size and Growth

60% of sales occur outside of the United States.

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1996 1997 1998McDonald's Growth S&P Industry Growth

• The global fast food market grew by 4.1% in 2007 to reach a value of $106.9

• in 2012, the global fast food market is will have a value of $130 billion, an increase of 21.6% since 2007.

Industry Profitability

• McDonald’s• Burger King• Wendy’s• Yum!• Doctor’s• Jollibee• Chow King• Greenwich

Major Players

Market Shares

Market Shares

• U.S. Spending Slowdown Negatively Impacts Fast Food Sales• Rising Food Prices Pressure Fast Food Margins• Growing Global Middle Class and International Expansion are

a Recipe for Profit• Health and Wellness Concerns are Bad for Fast Food• Fast Casual Restaurants are Growing Threat • Drive Thru feature• Environmental Awareness Campaigns• Health Conscious Campaigns

Trends and Prospects

The McDonald’s Restaurant

Vision

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

Mission

McDonald’s brand mission is to be our customers’ favorite place and way to eat, and improve our operations to provide the most delicious fast food

that meet our customers’ expectations.

Values

Our values summarized in “Q.S.C. &V.”. Provide good quality, services to customer. Have a cleanliness environment when customer enjoys their

meal. The value of food production makes every customer is smiling.

Mission, Vision & Objectives

• McDonald’s is firmly established in the market and has a very strong brand name• It is globalized with 31,000 restaurants serving 120 countries. Of the 31,000

restaurants at least 14,000 restaurants in the US • It has active charity operations which is good for the company profile (Ronald

McDonald House)• It has adjusted Ingredients and product offerings to comply with upgraded health

standards deemed necessary by the USDA• Optimum Budget is placed on the food products• Equipment is standardized therefore it is easy for McDonald’s to maintain quality

control on its products• The company is strict with its cleanliness policies

Strengths

• It earns revenue not merely by fast food sales, but also as a property investor, a franchiser of restaurants

• It has a successful partnership with Coca Cola• McDonald’s provides extensive training for employees which gives it a reputation

for good customer service (Hamburger University)• It offers a low-cost menu• McDonald’s is diversified per culture which makes it easier for them to reach out

to the market• McDonald’s has regular monthly promotions to keep consumers interested• The production for the products is localized except for certain countries like the

Philippines where they import from Singapore• McDonald’s prefer direct investment in new countries, and strictly select new

franchisees/ joint venture partners and evaluate them regularly and periodically this allows them implementation of quality control over franchises

Strengths

• The advertising campaign in the US are mainly targeted toward children which somehow limits its market (the Philippine Ad Campaign is geared towards family orientation –a key Filipino trait)

• Consumers use disposable income to purchase fast food meals so when the budget it threatened, consumers redirect these funds

• McDonald's has been impacted by negative press like the documentary "Supersize Me" by Morgan Spurlock in which he contributed our societies obesity to McDonald's and other fast food chains

• Product development has slow progression due to strict company values making it less versatile to changes in trends

• Certain products are only offered seasonally thus limiting its menu to the main stay standard products

• Its franchising standards keeps it from rapidly expanding outside the US compared to its rate within the country

• Uses HCFC-22 to make polystyrene that is contributing to ozone depletion

Weaknesses

External Environment

• The 2008 Global Recession threatens every business in the world. McDonald’s relies mostly on the disposable income by it target markets therefore if there is a global economic problem, then the consumers may not have enough to spend for McDonald’s

• McDonald’s is a global market leader in the fast food industry

Economic Environment

• ‘Mc’ from their trading name incites legal cases when it comes into conflicts with other establishments that use it.

• The international operations of McDonald’s are highly influenced by the individual state policies enforced by each government

Political, Legal, and Regulatory Environment

• The diversity of the cultures around the world affect the menu that McDonald’s offer

• The rapid technological advancement will affect the demand for hiring

• McDonald's has a long-standing commitment to environmental protection. Restaurants around the world have innovative programs for recycling, resource conservation, and waste reduction.

Socio-Cultural, Technological, Natural Environment

• Threat of New Entrants

• Intensity of Rivalry among Existing Competitors

• Bargaining Power of the Buyers

• Bargaining power of Suppliers

• Threat of Substitute Products and Service

Five Forces Model

• There is a growing trend for healthy living in the market. McDonald’s can take advantage of this by adjusting certain ingredients in their products and as well as introducing new ones that will fit with this lifestyle.

• The rapid development in the countries outside the US is an opportunity for McDonald as the people in those countries will be increasing the pacing of their lifestyle and will develop the need for quick food service such as McDonalds.

• Its partnership with Coca Cola allows it to share markets with Coke.• The market for people who dine out is growing and McDonald’s affordable menu

makes it easier to reach out to them• In Dumaguete City, the establishment of Robinson’s is an opportunity for

McDonald’s to have another branch in the area as it will generate public interest in its vicinity

• McDonald’s is a choice fast food for foreigners due to its global recognition• A mobile store (van) is in the works and it will allow McDonald’s to make sales in

other areas where they do not have a branch

Opportunities

• Health professionals and consumer activists accuse McDonald's of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.

• The communication distance may create a hindrance in the relationship between corporate level McDonald's and its franchise dealers.

• Global anti-American sentiments due to recent world wide affairs• Global recession and fluctuating foreign currencies.• Fast-food chain industry is expected to struggle to meet the expectations of the

customers towards health and environmental issues• Fast food industry is a saturated industry which will heavily affect company sales• The growing trend for health oriented products (Iced tea, salads, health

sandwiches) is on the rise• The public is becoming more aware how fast food fattens them• Rampant development of local competitors • Local competitors have the advantage of being more familiar with the market

Threats

Conclusion

• McDonald’s company is very particular with its brand. Therefore, they are not conscious on developing a new product to compete with the other fast-food chains.

• The company is known to be conscious to the diverse cultures that they cater to, by having a versatile menu

• The fast-food industry, and McDonalds being the biggest market shareholder, are greatly affected by the growing trend of people being more health conscious.

Conclusion

Recommendations

Products• Develop new products line which focus on organic food and healthier food (zero trans-fat) • Add more flavor or new type of fast food which differentiate the company from its competitors Promotion & Pricing • Buy-more-save-more promotion strategy: add a line of special offer-family size meals or

“Barkada Treats”- with lower price to attract customers to purchase more than once.• The company should also participate and get involved in community programs in order to reach

to the market. Product & Pricing• The company should provide organic food with competitive prices to attract organic food fans Promotion & Branding • There has to be a regular promotion in order to capture the attention of the people• Brand the company name with better service and more enjoyable eating experience in its

promotional efforts Management• Strictly select new franchisees/ joint venture partners and evaluate them regularly and

periodically

Recommendations