Mcdonalds Corporation Case Study

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McDonaldsCorporation Casestudy

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Overview of McDonalds

McDonald's Corporation is the world's largest chain of fast food restaurants

Goal to achieve annual growth of 3 % to 5% and average annual income growth f 6 to7%.

Latin America is the highest revenue generator with 700$millon sales.

7500 employees in more than 100 countries.

Geographical structure

Mcdonalds USA, Europe, AMEA, Latin America and International

Each McDonald's restaurant is operated by a franchisee, an affiliate, or the corporationitself.

Revenues come from the rent, royalties and fees paid by the franchisees, as well assales in company-operated restaurants.

McDonald's revenues grew 36% over the three years till 2006.

Decreased liabilities.

In 2006 company was sued for the presence of carcinogens in chicken menu itemsserved.

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McDonalds

Vision

To be the best and leading fast food provideraround the globe

Mission

McDonald's brand mission is to be ourcustomers' favorite place and way to eat, andimprove our operations to provide the mostdelicious 33


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Threat of new EntrantsYes (+) No (-)

1. Do large firms have a cost or performance advantage in your segment of the industry?

1. Are there any proprietary product differences in your industry?

1. Are there any established brand identities in your industry?

1. Do your customers incur any significant costs in switching suppliers?

1. Is a lot of capital needed to enter your industry?

1. Is serviceable used equipment expensive?

1. Does the newcomer to your industry face difficulty in accessing distribution channels?

1. Does experience help you to continuously lower costs?

1. Does the newcomer have any problems in obtaining the necessary skilled people, materialsor supplies?

1. Does your product or service have any proprietary features that give you lower costs?

1. Are there any licenses, insurance or qualifications that are difficult to obtain?

1. Can the newcomer expect strong retaliation on entering the market?

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Yes (+) No (-)

1. Are there a large number of buyers relative to the number of firms in the business?

1. Do you have a large number of customers, each with relatively small purchases?

1. Does the customer face any significant costs in switching suppliers?

1. Does the buyer need a lot of important information?

1. Is the buyer aware of the need for additional information?

1. Is there anything that prevents your customer from taking your function in-house?

1. Your customers are not highly sensitive to price.

1. Your product is unique to some degree or has accepted branding.

1. Your customers businesses are profitable

1. You provide incentives to the decision makers.

Bargaining Power of Buyer`s

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Yes (+) No (-)

1. The industry is growing rapidly.

1. The fixed costs of the business are relatively low portion of total costs.

1. There are significant product differences and brand identities between the

competitors.

1. The competitors are diversified rather than specialized.

1. It would not be hard to get out of this business because there are no

specialized skills and facilities or long-term contract commitments etc.

1. My customers would incur significant costs in switching to a competitor.

1. My product is complex and requires a detailed understanding on the part of

my customer.

1. My competitors are all of approximately the same size as I am.

Rivalry Amongst Existing Competitors

*2

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Yes (+) No (-)

1. My inputs are standard rather than unique or differentiated.

1. I can switch between suppliers quickly and cheaply.

1. My suppliers would find it difficult to enter my business or my customers would find it difficult

to perform my function in-house.

1. I can substitute inputs readily.

1. I have many potential suppliers.

1. My business is important to my suppliers.

1. My cost of Purchases has no significant influence on my overall costs.

Bargaining Power of Suppliers

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Analysis of Porter Five Forces

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Factor

Rivalry among competitors High.

Threat of New Entrants Low

Bargaining power of buyer Low.

Threat of substitutes Moderate.

Bargaining power ofsuppliers Low.


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PEST ANALYSIS

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ECONOMIC

TECHNOLOGICAL

POLITIAL

SOCIALIncreasing inflationLow disposableincome of People.Changes in theexchange rates

Increased innovativetechnology has made fastfood industries to lower theircooking time and produceproducts more healthier andefficiently, through

improved equipments.The integration oftechnology in the operationsof McDonalds tend to addvalue to their products.

Political and regulatorylaws highly influence theFast food industry,specially in UnitedStates.Previously McDonalds

was sued for makingpeople obese byproviding fatty and largebundled meals.

More people,speciallywomen goingout for work.

People arebecoming

more healthconscious.

McDonalds isrequired tochange itmenuaccording to

differentcultures, e,gIndia.


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External Factors

Opportunities Threat

Increasing Consumer Demand for Healthier Food optionsInfections in meat and poultry

Growing into diverse food menus such as Sandwiches,etc.

Anti-American sentiments regarding American products

Growth and Expansion in other countries Increasing regulations and laws to produce food andmaking it quality compatible

Acquisition of Small Restaurants that are providingfighter brands in Fast food industry

Increase in spread of obesity, diabetics and other cardioailments.

Consumer requirement for Low cost menu Increased number of small restaurants opening at everynook and corner

Using oil and fats with less trans fatty acids andvegetable oil.

Global recession and fluctuating foreign currencies

Increasing unemployment worldwide Increased competition by ready to eat food at home.

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Internal Factors

Strength WeaknessStrong brand recognition of McDonalds Increased employee turnover

Huge market share. Increased food cost from suppliers .

Globally present in many countries Previous allegations and law suits on McDonalds as

promoting obesity, trans fat & beef oil.Menus catering to different culture in different

countries

Unhealthy food image.

Vibrant restaurants

Standardized processes globally to produce food.

Strong hr policies leading to highly efficient andeffective people

Strong focus on its employees and their developmentand training

Introduction of new food items on regular basis

Strong financial performance1212


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Now we will move on to

Excel templates

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INTERNAL AUDIT


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VALUE CHAIN ANALYSIS

Human resource management;

Workforce of 465,000 employees

Strong focus on training & development

Technology;

New product iniaters

Standard product & process technologies


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Firm Infrastructure;

Franchise based businesses

12 domestic & 26 foreign subsidiaries

Marketing & Sales;

Convenience to customers

Value based pricing

Services;

Variety of menus for different customers


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Financial Performance

Record growth in 2006

Total current ($4107.7 to $3008.1) and longterm liabilities declined ($8934.3 to $8416.5)

Retained earning increased from ($23.5bn to$25.8bn)

Shareholders equity rose from $15.1bn to$15.5

Net Income increased by 36%

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SPACE Matrix

Financial Strength Rating Environmental Stability Rating

Return on investment 4 Rate of inflation -3

Leverage 4 Demand Changes -3

Net Income 6 Price Elasticity of demand -1

EPS 5 Competitive pressure -3

ROE 5 Barriers to entry new markets -3

Cash Flow 4 Risk involved in business -2

Average 4.67 Average -2.5

Y-axis 2.17

Competitive Advantage Rating Industry Strength Rating

Market share -1.00 Growth potential 5

Product Quality -1.00 Financial stability 5

Customer Loyalty -1.00 Ease of entry new markets 4

Control over other parties -2.00 Resources utilization 4

Profit potential 5

Demand variability 3

Average -1.25 Average 4.331818


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Q/A ?

Mcdonalds Corporation Case Study

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