Mcdonalds Corporation Is The Worlds Largest Chain Marketing Essay

Mcdonalds Corporation Is The Worlds Largest Chain Marketing Essay McDonalds Corporation is the worlds largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonalds sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonalds 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 McDonalds 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. McDonalds 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]   History 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 McDonalds was a man with a chefs 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 McDonalds restaurant overall. Kroc later purchased the 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 McDonalds 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 McDonalds 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 smiling. Suppliers Substitutes Buyers Potential entrants Competitive rivalryThe Five Forces Framework The Threat of Entrants Large established companies with strong brand identities such as McDonalds 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 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 McDonalds are highly influenced by the individual state policies enforced by each government. Economic: McDonalds 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. Social: Working within many social groups. Increase employments. Technological Advanced technology development. Quality standards. Environmental: Quality packing. Local manufacture using foreign supplies. Legal: Legislation for product. Sustained logo. SWOT ANALYSIS Opportunities Threats Growing health trends among consumers Globalization, expansion in other countries (especially in China India). Diversification and acquisition of other quick-service restaurants. Growth of the fast-food industry. Worldwide deregulation. Low cost menu that will attract the customers. Freebies and discounts. Health professionals and consumer activists accuse McDonalds of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity. The relationship between corporate level McDonalds and its franchise dealers. McDonalds competitors threatened market share of the company both internationally and domestically. Anti-American sentiments. 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. Strength Weakness Strong brand name, image and reputation. Large market share. Strong global presence. Specialized training for managers known as the Hamburger University. McDonalds Plan to win focuses on people, products, place, price and promotion. Strong financial performance and position. Unhealthy food image. High Staff Turnover including Top management Customer losses due to fierce competition. Legal actions related to health issues; use of trans fat beef oil. Uses HCFC-22 to make polystyrene that is contributing to ozone depletion. Ignoring breakfast from the menu. COMPARISION McDonalds Burger King Yum Brands Wendys Critical 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 0.45 Financial 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 0.20 Product Quality 0.10 4 0.40 3 0.40 4 0.40 2 0.20 Innovation 0.15 3 0.45 3 0.45 3 0.45 2 0.30 Market Share 0.10 4 0.40 2 0.20 3 0.30 2 0.20 Management 0.07 4 0.28 3 0.21 3 0.21 3 0.21 Global 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 Score Opportunities Growing health trends among consumers 0.08 3 0.24 Globalization, expansion in other countries (especially in China India). 0.12 4 0.48 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 Threats Health professionals and consumer activists accuse McDonalds of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity. 0.10 3 0.30 The relationship between corporate level McDonalds and its franchise dealers. 0.09 3 0.27 McDonalds 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 Financial Ratio Analysis 12/2007 Growth Rates % McDonalds Industry SP 500 Sales (Qtr vs year ago qtr) -3.30 4.20 -3.80 Net Income (YTD vs YTD) 84.70 47.90 8.40 Net Income (Qtr vs year ago qtr) -22.60 -59.90 -94.80 Sales (5-Year Annual Avg.) 6.53 8.14 13.26 Net Income (5-Year Annual Avg.) 23.39 15.30 14.45 Dividends (5-Year Annual Avg.) 32.36 22.36 12.30 Price Ratios Current P/E Ratio 14.7 14.2 13.0 P/E Ratio 5-Year High N/A 9.5 12.5 P/E Ratio 5-Year Low N/A 4.7 2.0 Price/Sales Ratio 2.62 1.88 1.47 Price/Book Value 4.62 3.54 3.00 Price/Cash Flow Ratio 11.20 10.00 9.00 Profit Margins % Gross Margin 36.7 32.1 39.4 Pre-Tax Margin 26.2 17.2 13.2 Net Profit Margin 18.3 12.0 9.1 5Yr Gross Margin (5-Year Avg.) 33.9 33.3 39.1 5Yr PreTax Margin (5-Year Avg.) 19.8 14.2 16.6 5Yr Net Profit Margin (5-Year Avg.) 13.7 9.8 11.45 Financial Condition Debt/Equity Ratio 0.76 .80 1.03 Current Ratio 1.4 1.2 1.4 Quick Ratio 1.3 1.1 1.1 Interest Coverage N/A 1.2 29.9 Leverage Ratio 2.1 -5.3 1.9 Book Value/Share 12.00 10.00 19.75 Investment Returns % Return On Equity 32.2 44.4 27.9 Return On Assets 14.9 11.3 8.1 Return On Capital 17.0 13.7 11.2 Return On Equity (5-Year Avg.) 19.7 22.8 20.6 Return On Assets (5-Year Avg.) 10.0 8.98 8.5 Return On Capital (5-Year Avg.) 11.4 11.0 11.5 Management Efficiency Income/Employee 10,783 9,401 91,499 Revenue/Employee 58,806 98,207 1,000,000 Receivable Turnover 23.7 44.7 15.8 Inventory Turnover 125.7 98.7 12.3 Asset Turnover 0.8 1.1 1.0 Internal Factor Evaluation (IFE) Matrix Key Internal Factors Weight Rating Weighted Score Strengths Strong brand name, image and reputation. 0.12 4 0.48 Large market share. 0.10 4 0.40 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 0.24 Customer focus (centric). 0.06 4 0.24 Strong performance in the global marketplace. 0.08 4 0.32 Weaknesses Unhealthy food image. 0.08 1 0.08 High 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 McDonalds 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 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 4.33 X-axis 3.08 Directional vector point is 🙠 3.08, 2.17) Conservative Aggressive Competitive Defensive FS IS CA ES Grand Strategy Matrix Quadrant II Quadrant I Quadrant IV Quadrant III Rapid Market Growth Strong Competitive Position Weak Competitive Position Slow Market Growth The Boston Consulting Group (BCG) Matrix Question Marks Cash Cows Dogs Relative Market Share Position Industry Sales Growth Rate Stars MCD The Internal-External (IE) Matrix The IFE Total Weighted Score Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 III II I High 3.0 to 3.99 VI V IV The EFE Total Weighted Score McDonaldsMedium 2.0 to 2.99 IX VIII VII Low 1.0 to 1.99 The Quantitative Strategic Planning Matrix (QSPM) Strategy 1 Expand further in Asia by adding 500 restaurants Strategy 2 Applying 0 grams Trans fat in all worldwide McDonalds 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 marketplace 0.08 3 0.24 1 0.08 Weaknesses Unhealthy food image 0.08 1 0.08 4 0.32 High Staff Turnover including Top management 0.10 Customer losses due to fierce competition 0.04 3 0.12 1 0.04 Legal 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 Strategy 1 Expand further in Asia by adding 500 restaurants Strategy 2 Applying 0 grams Trans fat in all worldwide McDonalds restaurants Key External Factors Weight AS TAS AS TAS Opportunities Growing 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 McDonalds of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity 0.10 1 0.10 4 0.40 The relationship between corporate level McDonalds and its franchise dealers 0.09 4 0.36 1 0.09 McDonalds 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 2.01 SUM TOTAL ATTRACTIVENESS SCORE 4.44 4.41 . Conclusion McDonalds faces some difficult challenges. Key to its future success will be maintaining its core strengths-an unwavering focus on quality and consistency-while carefully experimenting with new options. These innovative initiatives could include launching higher-end restaurants under new brands that wouldnt be saddled with McDonalds fast-food image. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater.   The companys environment efforts, while important, should not overshadow its marketing initiatives, which are what the company is all about. 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 McDonalds restaurants.