Macdonalds Strategic Management Analysis
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Transcript of Macdonalds Strategic Management Analysis
Table of Contents
PageTopics3Introduction3History analysis4Vision, Mission, Value
5The Five Forces Framework
6PESTEL Framework7External Audit8CPM-Competitive Profile Matrix9External Factor Evaluation (EFE) Matrix
10Financial Ratio Analysis
12Internal Audit13Internal Factor Evaluation (IFE) Matrix14SWOT Matrix15SPACE Matrix16Grand Strategy Matrix17The Boston Consulting Group (BCG) Matrix
17The Internal-External (IE) Matrix18The Quantitative Strategic Planning Matrix
(QSPM)20Recommendations
Introduction:
McDonald's Corporation is the world's largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonald’s sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonald's restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more 'natural' style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables.
Each McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporations' revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.1
Historical Analysis:
The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California.
Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant.
The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald in 1963.
The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955 , the ninth McDonald's restaurant overall. Kroc later purchased the
1 http://en.wikipedia.org. 2
McDonald brothers' equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965.
With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.2
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 product makes every customer is smile.
The Five Forces Framework2 http://en.wikipedia.org.
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The Threat of Entrants
Large established companies with strong brand identities such as McDonald’s BKC, YUM, and WEN do make it more difficult to enter and succeed within the marketplace; new entrants find that they are faced with price competition from existing chain restaurants.
Bargaining Power of Buyers
Low bargaining power of buyers.
Bargaining power of suppliers
Bargaining power of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.Threat of Substitutes
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This could range from a competitive fast food restaurant to family restaurant to a home cooked meal.
Competitive Rivalry The strength of competition in this industry is very high; the main rivals are BKC, YUM, and WEN. They compete with international, national, regional, local, retailers of food products (restaurants, quick service, pizza, coffee shops, and supermarkets).
PESTEL Framework:
Political:
The international operations of McDonald’s are highly influenced by the individual state policies enforced by each government.
Economic:
McDonald’s has the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates.
Market leader. Very high target market. Low cost and more incomes. The rate at which the economy of that particular state grows determines the
purchasing power of the consumers in that country.
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Social:
Working within many social groups. Increase employments.
Environmental: Quality packing. Local manufacture using foreign supplies.
Legal:
Legislation for product. Sustained logo.
Technological
Advanced technology development. Quality standards.
External Audit:
Opportunities Threats
1. Growing health trends among consumers
2. Globalization, expansion in other countries (especially in China & India).
3. Diversification and acquisition of other quick-service restaurants.
4. Growth of the fast-food industry.5. Worldwide deregulation.6. Low cost menu that will attract
the customers.7. Freebies and discounts.
1. Health professionals and consumer activists accuse McDonald's of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.
2. The relationship between corporate level McDonald's and its franchise dealers.
3. McDonald’s competitors threatened market share of the company both internationally and domestically.
4. Anti-American sentiments.5. Global recession and fluctuating
foreign currencies.6. Fast-food chain industry is
expected to struggle to meet the expectations of the customers towards health and environmental issues.
CPM-Competitive Profile Matrix
McDonald's Burger King Yum Brands Wendy'sCritical Success Factors
Weight Rating Weighted Score
Rating Weighted Score
Rating Weighted Score
Rating Weighted Score
Price 0.15 4 0.60 3 0.45 3 0.45 3 0.45Financial Position
0.08 4 0.32 3 0.32 3 0.24 2 0.16
Consumer Loyalty
0.10 4 0.40 3 0.40 3 0.30 2 0.20
Advertising 0.10 3 0.30 3 0.30 4 0.40 2 0.20Product Quality 0.10 4 0.40 3 0.40 4 0.40 2 0.20
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Innovation 0.15 3 0.45 3 0.45 3 0.45 2 0.30Market Share 0.10 4 0.40 2 0.20 3 0.30 2 0.20Management 0.07 4 0.28 3 0.21 3 0.21 3 0.21Global Expansion
0.15 4 0.60 2 0.30 3 0.45 1 0.15
Total 1 3.75 3.03 3.20 2.07
External Factor Evaluation (EFE) Matrix
Key External Factors Weight Rating Weighted ScoreOpportunities
Growing health trends among consumers 0.08 3 0.24
Globalization, expansion in other countries (especially in China & India).
0.12 4 0.48
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Diversification and acquisition of other quick-service restaurants.
.04 3 0.12
Growth of the fast-food industry. .10 3 0.30
Worldwide deregulation .04 2 0.08
Low cost menu that will attract the customers.
.08 2 0.16
Freebies and discounts. .08 1 0.08
ThreatsHealth professionals and consumer activists accuse McDonald's of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.
0.10 3 0.30
The relationship between corporate level McDonald's and its franchise dealers.
0.09 3 0.27
McDonald’s competitors threatened market share of the company both internationally and domestically.
0.12 4 0.48
Anti-American sentiments. .07 2 .14
Global recession and fluctuating foreign currencies.
.04 3 .12
Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues.
.04 2 .08
Total 1.00 2.85
Internal Audit
Strength Weakness
1. Strong brand name, image and
reputation.
2. Large market share.
3. Strong global presence.
1. Unhealthy food image.
2. High Staff Turnover including Top
management
3. Customer losses due to fierce
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4. Specialized training for managers known as the Hamburger University.
5. McDonalds Plan to win focuses on
people, products, place, price and
promotion.
6. Strong financial performance and
position.
7. Introduction of new products.8. Customer focus (centric).
9. Strong MCD's performance in the global marketplace.
competition.
4. Legal actions related to health issues; use of trans fat & beef oil.
5. Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.
6. Ignoring breakfast from the menu.
Internal Factor Evaluation (IFE) Matrix
Key Internal Factors Weight Rating Weighted ScoreStrengthsStrong brand name, image and reputation.
0.12 4 0.48
Large market share. 0.10 4 0.40
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Strong global presence. 0.04 3 0.12
Specialized training for managers known as the Hamburger University.
0.04 3 0.12
McDonalds Plan to Win focuses on people, products, place, price and promotion
0.12 4 0.48
Strong financial performance and position.
0.08 4 0.32
Introduction of new products. 0.06 4 0.24Customer focus (centric). 0.06 4 0.24Strong performance in the global marketplace.
0.08 4 0.32
WeaknessesUnhealthy food image. 0.08 1 0.08High Staff Turnover including Top management
0.04 1 0.10
Customer losses due to fierce competition.
0.04 1 0.04
Legal actions related to health issues; use of trans fat & beef oil.
0.04 2 0.08
McDonald's uses HCFC-22 to make polystyrene that is contributing to ozone depletion.
0.04 2 0.08
Ignoring breakfast from the menu. 0.06 1 0.06
Total 1.00 3.16
SWOT MatrixStrengths Weaknesses
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1. Strong brand name, image and reputation.
2. Large market share.3. Strong global presence. 4. Specialized training for
managers known as the Hamburger University.
5. McDonalds Plan to Win focuses on people, products, place, price and promotion.
6. Strong financial performance and position.
7. Introduction of new products.
8. Customer focus (centric).9. Strong performance in the
global marketplace.
1. Unhealthy food image.2. High Staff Turnover including
Top management.3. Customer losses due to fierce
competition.4. Legal actions related to health
issues; use of trans fat & beef oil.
5. Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.
6. Ignoring breakfast from the menu.
Opportunities S-O Strategies W-O Strategies1. Growing health trends among
consumers.8. Globalization, expansion in other
countries (especially in China & India).
9. Diversification and acquisition of other quick-service restaurants.
10. Growth of the fast-food industry.11. Worldwide deregulation.12. Low cost menu that will attract
the customers.13. Freebies and discounts.
1. Focus on Plan to win to attract customers and expansion in other countries (S5, O2, O6).2. Expansion in market share by more investments in Asia (S2, O2).
1. Minimize customers losses by provide low cost menu and discounts (W3, O6, O7).
Threats S-T Strategies W-T Strategies1. Health professionals and
consumer activists accuse it of contributing to the country’s health issue of high cholesterol, heart attacks, and diabetes.
2. The relationship between corporate level McDonald's and its franchise dealers.
3. McDonald’s competitors threatened market share of the company both internationally and domestically.
4. Anti-American sentiments.5. Global recession and fluctuating
foreign currencies.6. Fast-food chain industry is
expected to struggle to meet the expectations of the customers towards health and environmental issues.
1. More control on franchise dealers to maintain McDonald's reputation and quality (S1, T2).
2. Provide new product and keep innovation (S7, T3).
1. Applying 0 grams Trans fat in all worldwide McDonald's (W1, W4, O1).
2. Transfer from HCFC-22 to HFC (hydrofluorocarbon)-free (W5, T6)
SPACE Matrix
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Conservative Aggressive
CompetitiveDefensive
FS
ISCA
ES
Financial Strength Rating Environmental Stability Rating
Return on investment 4 Rate of inflation -3Leverage 4 Demand Changes -3Net Income 6 Price Elasticity of demand -1EPS 5 Competitive pressure -3ROE 5 Barriers to entry new markets -3Cash Flow 4 Risk involved in business -2
Average 4.67 Average -2.5
Y-axis 2.17Competitive Advantage Rating Industry Strength RatingMarket share -1.00 Growth potential 5Product Quality -1.00 Financial stability 5Customer Loyalty -1.00 Ease of entry new markets 4Control over other parties -2.00 Resources utilization 4
Profit potential 5 Demand variability 3
Average -1.25 Average 4.33
X-axis 3.08
Directional vector point is :( 3.08, 2.17)
Grand Strategy Matrix
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The Boston Consulting Group (BCG) Matrix
The Internal-External (IE) Matrix13
Quadrant II Quadrant I
Quadrant IVQuadrant III
Rapid Market Growth
Strong Competitive
Position
WeakCompetitive
Position
Slow Market Growth
Question Marks
Cash Cows Dogs
Relative Market Share Position
IndustrySales
GrowthRate
Stars MCD
Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High3.0 to 3.99
Medium2.0 to2.99
Low1.0 to 1.99
The Quantitative Strategic Planning Matrix(QSPM)
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I III II
IV V VI
VII VIII IX
McDonald's
The IFE Total Weighted Score
The EFE Total
Weighted Score
Strategy 1
Expand further in Asia by adding 500 restaurants
Strategy 2
Applying 0 grams Trans fat in all worldwide McDonald's restaurants
Key Internal Factors Weight AS TAS AS TAS
Strengths Strong brand name, image and reputation 0.12 4 0.48 4 0.48
Large market share 0.10 4 0.40 2 0.20
Strong global presence 0.04 4 0.12 2 0.08
Specialized training for managers known as the Hamburger University
0.04 - - - -
McDonalds Plan to Win focuses on people, products, place, price and promotion
0.12 4 0.48 4 0.48
Strong financial performance and position 0.08 4 0.32 4 0.32
Introduction of new products 0.06 - - - -
Customer focus (centric) 0.06 1 0.06 4 0.24
Strong performance in the global marketplace0.08 3 0.24 1 0.08
Weaknesses
Unhealthy food image 0.08 1 0.08 4 0.32High Staff Turnover including Top management 0.10 - - - -Customer losses due to fierce competition 0.04 3 0.12 1 0.04Legal actions related to health issues; use of trans fat & beef oil
0.04 1 0.04 4 0.16
Uses HCFC-22 to make polystyrene that is contributing to ozone depletion
0.04 - - - -
SUBTOTAL 1.00 2.34 2.40
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Strategy 1
Expand further in Asia by adding 500 restaurants
Strategy 2
Applying 0 grams Trans fat in all worldwide McDonald's restaurants
Key External Factors Weight AS TAS AS TAS
OpportunitiesGrowing health trends among consumers 0.08 1 0.08 4 0.32
Globalization, expansion in other countries (especially in China & India)
0.12 4 0.48 1 0.12
Diversification and acquisition of other quick-service restaurants
0.04 - - - -
Growth of the fast-food industry 0.10 4 0.40 4 0.40
Worldwide deregulation 0.04 4 0.16 1 0.04
Low cost menu that will attract the customers 0.08 - - - -
Freebies and discounts 0.08 - - - -
Threats
Health professionals and consumer activists accuse McDonald's of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity
0.10 1 0.10 4 0.40
The relationship between corporate level McDonald's and its franchise dealers
0.09 4 0.36 1 0.09
McDonald’s competitors threatened market share of the company both internationally and domestically
0.12 4 0.48 4 0.48
Anti-American sentiments 0.07 - - - -Global recession and fluctuating foreign currencies 0.04 - - - -Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues
0.04 1 0.04 4 0.16
SUBTOTAL 1.00 2.10 2.01SUM TOTAL ATTRACTIVENESS SCORE 4.44 4.41
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Recommendations
Expand further into Asia markets over a 2-year period by adding 500 restaurants per year at a cost of $4 billion annually, and applying 0 grams Trans fat in all worldwide McDonald's restaurants.
References1. www.mcdonalds.com 2. www.moneycentral.msn.com 3. www. mcdonalds .ca 4. Strategic Management concepts and cases by Fred David 12 edition5. Exploring Corporate Strategy text & cases 8th edition6. U.S. Environmental Protection Agency
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