McDonald’sTurnaroundPlan - · PDF filemcdonald’sturnaroundplan...
Transcript of McDonald’sTurnaroundPlan - · PDF filemcdonald’sturnaroundplan...
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McDonald’s Turnaround Plan A PRESENTATION TO: MCDONALD’S UPPER MANAGEMENT
GOODMAN SCHOOL OF BUSINESS, BROCK UNIVERSITY
ABDUL, VERA, YANQI, KAJSA
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Problem and SoluIon
Problem:
How can McDonald’s improve its customer
sa6sfac6on and revenue?
Solu,on:
Adjust current turnaround plan to address brand
trust, and customer sa6sfac6on.
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End Goal McDonald’s future vision: • Organiza6onal flexibility and adaptability • Customer-‐focused
• Stable revenue and cash flow streams • Sustainable long-‐term growth
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Agenda • Current Situa6on • Key Issues • Qualita6ve Analysis • Quan6ta6ve Analysis • Alterna6ves • Implementa6on
• Risk Mi6ga6on
• Conclusion
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QualitaIve Analysis
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Current SituaIon • Q2 2015 • Historically resilient to declining profits • Compe,,ve advantage: Quick service, low prices, powerful franchising network
• CEO, Steve Easterbrook • May 2015, CEO has proposed a Turnaround Plan
• Company decline in revenue and sales • 2014 = “The Lost Year” • Q1 2015: -‐11% revenue • Q2 2015: -‐13% profits, -‐2% sales
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Key Issues • Declining profits: Decline in sales and profitability Q1 2015 • Brand trust: Poor percep6on of food quality • Menu: Complex menu slows down opera6ons • Franchisees: Pessimis6c future view • Unfocused: Trying to be everything to everyone
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Market Analysis 1. Domes,c Market: 40% opera6ng income
2. Global Lead Market: 40%, Australia, Canada, France, Germany and UK
Well developed franchising organiza6on
Modest opportuni6es for new stores
3. High Growth Market: 10%, China, Italy, Russia, Poland
Growing opportunity for ea6ng-‐out sectors 4. Founda,on Market: 10%, other 100 markets
Focused on local culture and customiza6on
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CompeItor Analysis Direct Compe,,ons: Fast food restaurants
Beder fare and faster service Healthy op6ons
Indirect Compe,tors: Specialty restaurants, other causal restaurants
Beder food quality, Various pricing level based on the food
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Consumer Analysis Tradi,onal customers:
Changing taste in food Increasing concerns in health issues, like obesity Millennials:
Customizable food
High quality food Healthy food Self image: healthy and savvy
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QualitaIve Analysis STRENGTHS
• Global franchising network
• Flexibility in developing new products
• Low price and modestly fast service
WEAKNESSES
• Complex menu
• Low efficiency in global market management
• Low efficiency in premium product
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QualitaIve Analysis OPPORTUNITIES
• Growing opportunity for new store in global lead market
THREATS
• Compe66on from direct and indirect compe6tors
• Consumers’ changing taste
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QuanItaIve Analysis
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Current Financial SituaIon: CompeItor Comparison
-‐0.020
0.000
0.020
0.040
0.060
0.080
McDonald's Taco Bell Chipotle Dunkin' Donuts
Comparable sale growth in 2015 Q2
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Current Financial SituaIon: Total Revenue
0.00
2000.00
4000.00
6000.00
8000.00
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Total Revenue ( in US $ Million)
Company-‐operated restaurants Frachised Restaurants
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Current Financial SituaIon: OperaIng Income Margin
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Opera6ng Income Margin
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Current Financial SituaIon: Net Income Margin
0.00
0.05
0.10
0.15
0.20
0.25
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Net Income Margin
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Current Financial SituaIon: CorrelaIon
Correla6on change from -‐0.85 to 0.28
0.000
0.050
0.100
0.150
0.200
0.250 Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Propor6on of SGA in Total expense Net income Margin
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ProjecIon of the frachisees Cost: Grill, toasters and other equipment : 175 million App, website: 10 million Labeling: 20 million Marke6ng: 25 million Decora6on: 200 million Supervision: 10 million
Benefit: 300 million in saving of SGA expense.
Break-‐even period: 1.5 year
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AlternaIve Analysis
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AlternaIves
1. Back to Basics • Cut menu items • Leverage compe66ve advantage
2. Reinvent Yourself • Stay current, compete
• Ancillary brand
3. Adjusted Turnaround Plan • Focus on transparency
• Focused geographic segments
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AlternaIve 1: Rejected Back to Basics: Tried and tested model of selling burgers + Simplify menu by curng items
+ Leverages resilience
+ Enhances compe66ve advantage
-‐ Does not address changing consumer percep6on
-‐ Not adaptable to poli6cal, environmental, social elements
-‐ Not a compe66ve strategy
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AlternaIve 2: Rejected Reinvent Yourself: Through ancillary brands + New brand image
+ Addresses change in customer values (health conscious)
-‐ Building reputa6on and posi6ve brand image takes 6me
-‐ Does not enhance compe66ve advantage
-‐ Alienates loyal fast food lovers
-‐ Risky
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AlternaIve 3: OpImal SoluIon Adjusted Turnaround Plan
• Business restructuring • US • Interna6onal Lead Markets: Australia, Canada, Germany, France, UK • High Growth Markets: China, Italy, Poland, Russia, South Korea, Spain, Switzerland, Netherlands • Founda6onal Markets: 100 other countries
• Simplify menu: remove 16 items
• Focus on product quality • Selling 3500 restaurants to franchisees by 2018 • Franchisees pessimis6c about future, but will generate a lot of revenue
• Transparency: promo6ons
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JusIficaIon Op,mal Solu,on: Tweaked Turnaround Plan
+ Business restructuring enables growth, quick decision making, and a focused plan per geographic segment
+ Focus on product quality increases consumer percep6on of food quality
+ Transparency promo6ons improve brand trust and image
+ Leverages compe66ve advantage
-‐ Current plan lacks detail
-‐ Trying to please everyone
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Decision Matrix 1. Back to Basics 2. Reinvent Yourself 3. Tweaked Turnaround
Plan
Profitability -‐ + +
Timeliness + -‐ +
Risk -‐ -‐ +
Strategic Fit + + +
Compe66ve Advantage
+ -‐ +
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ImplementaIon
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ImplementaIon Con,nue with Business Restructuring into 4 segments
• US • Standardized menus • Mass customiza6on
• Interna6onal Lead Markets • Healthy menu op6ons • Relabeling
• High Growth Markets • Quality focused • Transparency
• Founda6onal Markets • Local taste
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ImplementaIon • US • Preorder • Create a new app • Customize website • Remove kiosks
• Refurbish restaurants • Invi6ng and warm atmosphere
• Standardize menu
• Interna6onal Lead Markets • Replace menu with healthy op6ons • Green label • Marke6ng campaign
• High Growth Markets • Create center of excellence for quality
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Risk MiIgaIon RISK
Menu complexity
Image
Cost Franchisee complaints
MITIGATION
Replacing Enhance employee training
Ordering app will reduce wai6ng 6me
Relabeling and marke6ng
Centre of excellence
Removing costs for kiosks
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Conclusion
Problem:
How can McDonald’s improve its customer
sa6sfac6on and revenue?
Solu,on:
Adjust current turnaround plan to address brand
trust, and customer sa6sfac6on.
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“Transparency and Quality”