McDonalds at a cross road- Meeting the future · PDF file · 2016-01-05McDonalds...
Transcript of McDonalds at a cross road- Meeting the future · PDF file · 2016-01-05McDonalds...
McDonalds at a cross road- Meeting the future LEONARD, NICOLE, NIKLAS & SOFIE
LUND CONSULTANCY GROUP
Agenda
! Analysis
! Alternative actions
! Recommendation
! Implementation
! Financial implications
! Risks
! Conclusion
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Analysis Alternatives Recommendation Implementation Risk Conclusion
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How should McDonalds focus and structure its business in order to meet
changing customer preferences while not diluting the brand
Regain brand identity by introducing ‘Green by McDonalds’ targeting
conscious consumers in developed markets, while going back to the roots
with the mother brand
Main Challenge
Recommendation
The McDonalds brand identity at it’s core
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Value proposition Great burgers
Fast Cheap
Expression Strong colours
Packaging Slogan
Mission & Vision Serve tasty food at a very fast pace to the
world
Relationships Short but loyal
Franchise focus
Great burgers Consistent taste Convenience,
Affordable
Culture Young
Fast paced
Position The number one stop for fast food in a fast
moving world
Personality Young and vibrant
Competencies Sourcing
Market knowledge World presence
Internal
External
McDonalds – the mother brand at it’s roots
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For whom
• Fast moving consumers looking for a quick meal of great tasting burgers • All ages focused on middle class
In the market of
• Fast food • Burgers, fries and add-ons
Promise
• Best possible price for burgers and fast food with great taste • “Im loving it”
Proven by • World presence, history, American burger heritage
McDonalds core identity and its reputation is not aligned
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Identity Fast, cheap, healthy and premium
Communication Marketing and menu updates
Reputation “Cheap, greasy and unhealthy
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Global reach Economies of scale Brand awareness
Health trends Sustainability
Scalability in franchise concept
Reputation problems “too big”
Franchise dissatisfaction
Health trends Increased competition Food safety scandals
Strengths Weaknesses
Opportunities Threats
Internal
External
The competition is increasing from more premium players
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Price level
Perceived quality and/or health
Chipotle
Panera
Shake Shack
Habit Burger
Mcdonald’s
Jimmy john’s
Green by McD
Market segments in different phases and hence with different needs for the QSR* market
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Growth
Time
Take-off Evolving Stagnation Decline
High growth
Int. Lead
Foundational USA
*QSR: Quick service restaurant
The customer preference is changing in the more developed markets
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Demand for heathy options in QSR
Country development
China
India
Europe
Japan
Russia
North America
Stakeholders have different demands
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Employees and society
Work environment
Sustainability
Franchisers
Initial investment at minimum
Operational efficiency
Stability
Customers
Value for money
In-line with self perception
Fast and tasty
Shareholders
Returns and sustainability
Stakeholder needs
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How should McDonalds focus and structure its business in order to meet changing customer
preferences while not diluting the brand
Main Challenge
Three alternatives for future operations
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Status quo 1
Revolutionize the business model and move towards being a healthy alternative 2
Introduce “Green by McDonalds” and go back to the roots with the mother brand 3
Alternative 1, Focus on the development of current business
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Status quo 1
Revolutionize the business model and move towards being a healthy alternative 2
Introduce “Green by McDonalds” and go back to the roots with the mother brand 3
- Continue with a heavily franchised business model - Focus on improving efficiency and effectiveness by streamlining global resources
- Satisfying both healthy trend and original core customers under one brand
Alternative 2, is about going all-in on the healthy trend
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Status quo 1
Revolutionize the business model and move towards being a healthy alternative 2
Introduce “Green by McDonalds” and go back to the roots with the mother brand 3
- Rebrand the company as a healthy food chain - Focus on high quality, trend sensitivity and sustainability
- High prices but with focus on value for money
Alternative 3, “Green by McDonalds” and go back to the roots with the mother brand
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Status quo 1
Revolutionize the business model and move towards being a healthy alternative 2
Introduce “Green by McDonalds” and go back to the roots with the mother brand 3
- Daughter brand with focus on healthy and sustainable food - Daughter brand “green by McDonalds targeting conscious consumers in
developed countries - Mother brand focusing on simplification and quality burgers
Four critical factors for success
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Brand Identity - Is the alternative facilitating an improved brand identity?
Meeting customer demand - Is the alternative in line with what consumers want?
Corporate flexibility - Is the alternative enabling for the company to be agile in it’s
operations?
Sustainability - Is the alternative a step towards environmental friendliness?
Alternative 3 is the most favorable
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Brand Identity
Meeting customer demand
Corporate flexibility
Sustainability
1. Status quo 2. Going all green
3. Introduce daughter brand and go back to
roots
NO
NO
SEMI
SEMI
SEMI
YES
NO
YES
YES
YES
YES
YES
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Regain brand identity by introducing ‘Green by McDonalds’ targeting conscious consumers in developed markets, while going back to the
roots with the mother brand
Recommendation
The daughter brands position meets a growing demand
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For whom • Conscious consumers looking for convenient food
In the market of
• Healthy fast food
Promise • Fast and healthy food at a convenient location
Proven by • Track record, company size, food knowledge
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Overview: Implementation overview
YEAR 1
- Research and development
- Internal communication
- Preparation of external roll out
YEAR 4-5 - Expand Green by
McDonalds to new markets
- Monitor and evaluate
YEAR 2-3
- Worldwide roll-out of McDonalds “Back to the roots”
- Roll-out of Green by McDonalds in developed countries
- Marketing campaigns
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The three step process of our strategy
INTERNAL OPERATIONS
- Internal communication
- Change management - Franchise platform - Aligning brand identity
MARKETING ACTIONS - Communicate brand
image. - Target existing and
new customers - Increase brand
awareness
VALUE PROPOSITION
Restructure and redefine ! Same core, different offerings - McDonalds - Green by McDonalds
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CHANGE MANAGEMENT Recruit group to work with research, development and communication of new changes.
BRAND IDENTITY ALIGNMENT Look to the corporate identity looking to history, track record, internal organization and future goals. Refocus in order to match all parts with McDonalds core promise.
FRANCHISE PLATFORM Decrease gap to local franchisers through introducing an online platform where franchisers can connect. Platform can be used to monitor, communicate change and support and motivate.
INTERNAL INFORMATION AND COMMUNICATION Be transparent to stakeholders and employees. Inform, explain, support and motivate to get everyone on board with the changes.
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24 Increase relevance and competitiveness through redefining value proposition
McDonalds
“Back to the roots: Great products at any time”
- Re-evaluate menu - Focus on what you are
famous for. Simple food, no hassle.
- Same price, new improved menu.
- Food safety and value for money
Franchise Selection Criteria
- Track Record - QSR Experience - Creative mindset - “I’m loving it” attitude - Team person - Take initiatives - Global thinking, local
adaptiveness
Green by McDonalds
- Same core values, different concept.
- Target conscious consumers
- Millennials - Sustainable approach - Limited menu
- 50% vegetarian - Higher price but value
for money
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25 Gain awareness and successfully perceived image through multichannel marketing
McDonalds
“Same products, same price, better quality”
- McClassics - Online marketing
- Highlight classics - Bring back oldies but
goodies - Heritage stamps
- 80+ years of knowledge in business
Green by McDonalds
• Sustainability campaign • Green the earth
• Pop-up concept • Presence at events,
festivals • Online marketing
• Social marketing campaigns
• McGreen Community
I’m lovin it every day at any time and place
Timeline
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McDonalds ! 2016! 2017! 2018! 2019! 2020!
Internal organisation!
Recruit change mgmt! !
Develop guidelines! !
Brand Identity! !
Internal communication! !
Value Proposition!
Development of new concept! !
Roll-out of concept! ! !
Development of Green by McDonalds! !
Roll-out of Green by McDonalds! ! !
Marketing!
McDonalds Marketing Campaign! ! !
Green by McDonalds campaign! ! !
Monitor! ! !
Assumptions reaching future profit
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Assumptions! 2016! 2017! 2018!
Ownership strategy selling off 3 500 restaurants to franschisees by 2018! 1167! 1167! 1167!
Green by McDonalds 5 % new, 1 600 restaurants by 2018! 533! 533! 534!
Increased revenue growth 8 %!
SG&A $300 Million savings to 2017! -150! -150!
Revenue from Green McDonalds 20 % increase
Split view of change in ownership strategy introducing Green franchise
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Overview restaurants (Million USD)! 2015! 2016! 2017! 2018!
Total franchise! 25,300! 26,467! 27,633! 28,800!
Revenue per franchise! 0.396! 0.409! 0.423! 0.438!
Total owned restaurants! 6,700! 6,066! 5,433! 4,800!
Revenue per owned! 2.93! 3.49! 4.21! 5.15!
Green franchised! -! 533! 533! 533!
Revenue per green franchise! -! 0.49! 0.51! 0.57!
Total restaurants! 32,000! 32,533! 33,066! 33,600!
Total revenue increase! 29,636! 32,269! 34,838! 37,637!
New investments to secure the implementation of future success
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Investments (Million USD)! 2016! 2017! 2018!
R&D of menu both existing and Green! 10! 2! 2!Sustainibility campaign! 3! 3! 3!Online! 0,5! 0,5! 0,5!TV comercial! 2! 2! 2!Green sponsored events! "! 2! 2!Green concept marketing! 1! 1! 1!Green online! 0,5! 0,5! 0,5!Employee training! 10! 5! 1!Change-management-group! 0.8! 0.8! 0.8!Total investment costs! 26.8! 15.8! 11.8!
High future increase in net income
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Income Statements!US$ Millions! 2012! 2013! 2014! 2015E! 2016E! 2017E! 2018E!
Sales by company owned restaurants! 18602! 18874! 18169! 19622.5! 21192! 22887.7! 24718.72!
Revenues from franchised restaurants! 8964! 9231! 9272! 10013.8! 10815! 11680! 12614.45!Revenues from Green franchises! -! -! -! -! 261.4! 270.3! 303.5!Total Revenues! 27567! 28105! 27441! 29636! 32269! 34838! 37637!Operating costs and expenses!Food & Paper! 6318! 6361! 6129! 6190! 6252! 6315! 6378!Payroll etc.! 4710! 4824! 4756! 4804! 4852! 4900! 4949!Occupancy etc.! 4195! 4393! 4402! 4446! 4490! 4535! 4581!Franchised restaurants! 1527! 1624! 1697! 1714! 1731! 1748! 1766!SG&A! 2455! 2385! 2487! 2512! 2414! 2304! 2189!Other operating costs! -243! -247! 18! 18! 18! 19! 19!Total operating costs! 18962! 19341! 19492! 19687! 19884! 20083! 20283!Operating income! 8604! 8764! 7949! 9949! 12385! 14755! 17353!Interest expense etc.! 525! 558! 577! 583! 589! 594! 600!Provision for taxes! 2614! 2618! 2614! 2640! 2667! 2693! 2720!Net income! 5464! 5586! 4757! 6726! 9130! 11468! 14033!
37 % Increase
More than doubled!
Risks are manageable
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RISKS 1. Daughter brand not able
to wash off McD’s image of being unhealthy
2. Loyal customer not supporting McD stepping
away from their core
3. Long start-up time to find suitable franchisers
4. Problems with monitoring
the increased number of franchisers
MITIGATION 1. Marketing campaigns
together with research reports on new healthy
food alternative
2. Inform about benefits of healthy food and that the daughter brand is an add-
on
3. Take advantage of McDs global reach to ensure
franchisers fulfilling criteria 4. Setup clear milestones
No risk at high
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3 4
1
2
Impact
Probability
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How should McDonalds focus and structure its business in order to meet
changing customer preferences while not diluting the brand
Regain brand identity by introducing ‘Green by McDonalds’ targeting
conscious consumers in developed markets, while going back to the roots
with the mother brand
Main Challenge
Recommendation
Presentation overview
Analysis Alternatives Implementation Finance Risks
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