Project Work

On

Marketing Strategies of McDonalds

Completed under the supervision of

Ms. Mansi Kapoor
(Mentor)

Submitted By
Atul Pratap
Roll No. 367
B.Com (Hons) 3rd Year

DELHI COLLEGE OF ARTS AND COMMERCE

UNIVERSITY OF DELHI

ACKNOWLEDGEMENT

I am sincerely thankful to Miss Mansi Kapoor (Project Mentor),

under whose guidance I have successfully completed this
project and time spent with her had been a great learning
experience.

think

her

constant

encouragement,

warm

responses and for filling every gap with valuable ideas has
made this project successful. She made it possible for me to
put all my theoretical knowledge to work out on the topic:
MARKETING STRATEGIES OF McDonalds.
A mammoth project of this nature calls for intellectual
nourishment, professional help and encouragement from many
people. I am highly thankful to all of them for their help and
encouragement. I wish to acknowledge my great debt to all of
them whose ideas and contribution influenced me to complete
the project work.

TABLE OF CONTENT

1 TITLE PAGE
2 ACKNOWLEDGEMENT
3 INTRODUCTION
4 COMPANY PROFILE
5 HISTORY OF MCDONALDS
6 MISSION VISION AND VALUES
7 INTERNATIONAL MARKET ENTRY MODE
8 SWOT ANALYSIS
9 PORTER'S FIVE FORCES
10 PESTEL ANALYSIS
11 INTERNATIONAL MARKETING
12 COMPETITIVE ADVANTAGES AND PROBLEMS
13 PRIMARY FINDINGS & ANALYSIS
14 CONCLUSION
15 ANNEXURE

Introduction

McDonalds Corporation is the worlds number 1 fast food chain, Richard and
Maurice McDonald started this business with a restaurant in San Bernardino
California in 1940. Now a days McDonalds serving more then 56 million
customers every day.

There are more then 30,000 restaurants operated by McDonalds worldwide in

which more then 80% are operated as franchise and less then 20% are owned
by company.

McDonalds main selling products are hamburgers, cheeseburgers, double

cheeseburgers, big Mac burgers, quarter pond burgers, tasty burgers, flit-ofish burgers, salad and fruits.

McDonald's first menu items were hot dogs, not hamburgers.

Company profile

McDonalds is the words largest fast food corporation, serving more then 57
million people in 119 countries daily with more then 31,000 restaurants world
wide in which 6,899 are owned by company and 20,499 are operated as
franchise and 3,960 are operated by affiliates.

McDonalds employing more then 1.5 million people worldwide, only in UK

Company owned restaurant employed 43,492 in 2004 in which hourly paid
employers are 2,292. 2,291 restaurant management and office staff nearly
500. and nearly 25,000 people employed in franchises.

1 IN 8 American workers has been employed by McDonald's.

In 2003 McDonalds owned donates pizza, McDonalds owned a majority of

stake in chipotle Mexican grill until October 2006, in 2007 McDonalds sold
Boston market to sun capital partners.

Andrew j. McKenna is the chairman of McDonalds Corporation since April

2004, aprill Harrell Perrine president blur cross and blue shield of Florida,
Jim Dalton vice president Dalton agency, Ryan Schwartz treasurer Zurich
insurances,inc. bill van zante secretary McDonalds.

The corporation revenues come from the rent, royalties and fees paid by
franchises, McDonald revenues grew 27% over 3 years ending in 2007 22.8
billion and 9% growth in operating income to 3.9 billion.

History of Mc. Donalds

I m Loving it a tagline known to every segment of the market, let it be kids,

youngsters or elderly people.McDonalds is a global foodservice industry,
which began its operations in the 1940s. The concept of McDonalds was
introduced by brother Dick and Maurice McDonald, by opening a hamburger
stall in San Bernardino, California. They introduced an idea of selling their
food cheaper than competitors by saving on the car hops and persuading
customers instead to go to a counter to order their food. This concept helped
in faster turnaround of the customers. This innovation proved successful and
popular among the customers. McDonalds became pioneer in their industry
by adopting the Fordist approach to the production of hot food. They
focused on burger cooking as a production line rather than a kitchen task.
The staff of McDonalds was committed to one task at a time. When Mr. Ray
Kroc came across McDonalds brothers burger, he had never seen so many
people served so quickly than those at the McDonalds store. He was quite
impressed by the speed of service that they used in catering their customers.
Kroc suggested that the McDonalds brothers to open more outlets of their
stall, but they refused as they were quite busy with their own store and were
not in a position to open any store further. Kroc volunteered to run a new
outlet himself, by paying them royalty for using their concept of business.
The McDonalds brother agreed for the same and a new McDonalds retail
outlet was opened, which was a franchisee by nature.

Kroc was a person with aggressive and risk taking attitude. He realized that
small things were often valued more by customers than some of other things.
He introduced a concept of Cleanliness in his store. He termed cleanliness
not only a symbol of hygiene but it also showed its customers that the
business cared about details. He started growing his business and started
giving franchisee to other people. With the help of Ted Turner, Kroc visioned
that the key success of McDonalds expansion rests on offering franchises.

The major domestic growth of McDonalds in USA began in 1960s, as there

was a demand of cheap takeaway food. Through the franchisee concept,
McDonalds made a move toward worldwide success.
Today the Company operates in more than 117 countries worldwide, serving
more than 50 million customers per day. The companys retail outlets are
either owned by the company or by franchisees. The company focuses on
delivering high quality and value to its customers through its services, product
range and constant quality check of its products.

McDonalds Vision

"To be the best quick service restaurant experience". Being the best means
providing outstanding quality, service, cleanliness, and value, so that we make
every customer in every restaurant smile.

McDonalds Mission
McDonald's brand mission is to be our customers' favourite place and way to
eat and drink. Our worldwide operations are aligned around a global strategy
called the Plan to Win, which center on an exceptional customer experience
People, Products, Place, Price and Promotion. We are committed to
continuously improving our operations and enhancing our customers'
experience.
McDonalds Values
We place the customer experience at the core of all we do. Our customers are
the reason for our existence. We demonstrate our appreciation by providing
them with highquality food and superior service in a clean, welcoming

environment, at a great value.Our goal is quality, service, cleanliness and value

(QSC&V) for each and every customer, each and every time.
We are committed to our people. We provide opportunity, nurture talent,
develop leaders and reward achievement. We believe that a team of welltrained
individuals with diverse backgrounds and experiences, working together in an
environment that
fosters respect and drives high levels of engagement, is essential to our
continued
success.
We believe in the McDonalds System. McDonalds business model, depicted
by our three-legged stool of owner/operators, suppliers, and company
employees, is our foundation, and balancing the interests of all three groups is
key.
We operate our business ethically. Sound ethics is good business. At
McDonalds, we hold ourselves and conduct our business to high standards of
fairness, honesty, and integrity. We are individually accountable and collectively
responsible.
We give back to our communities. We take seriously the responsibilities that
come with being a leader. We help our customers build better communities,
support Ronal McDonald House Charities, and leverage our size, scope and
resources to help make the world a better place.
We grow our business profitably. McDonalds is a publicly traded company. As
such, we work to provide sustained profitable growth for our shareholders. This
requires a continuous focus on our customers and the health of our system.
We strive continually to improve. We are a learning organization that aims to
anticipate and respond to changing customer, employee and system needs
through
constant evolution and innovation.

McDonalds' Caesar salad is more fattening than their hamburger.

McDonalds International Market Entry Modes

In 1940, McDonalds operated only one QSR but today has restaurants at
33,000 locations in 119 countries. McDonalds utilises a variety of international
market entry modes for rapid expansion: sole ventures, franchising, master
franchising and joint ventures.
15% of McDonalds branded restaurants are operated as sole ventures. This
involves a significant capital commitment but allows the highest degree of
control.
Most restaurants are operated as franchises, allowing rapid expansion without
high capital requirements. Franchising has also allowed McDonalds to benefit
from local knowledge, demonstrated by the menu differences by country.
However, McDonalds maintains control over crucial aspects such as the supply
chain, marketing mix and staff training.
Master Franchising introduces a third party as a go-between to overcome
geographical and cultural barriers. The combination of the master franchisees
local knowledge and McDonalds brand and model has been a successful
formula, allowing expansion whilst maintaining significant control.

McDonalds has also expanded internationally through joint ventures. Again,

this allows for rapid expansion and utilises the knowledge of firms in closelylinked markets. Since 14
both firms invest equity in the project, there is a lower financial risk for both
parties; however, many joint ventures end in hostility and conflict due to firms
taking advantage of one another (Brown and Harwood, 2010).

SWOT ANALYSIS

Strengths
1. Largest fast food market share in the world.McDonalds is the largest fast
food restaurant chain in terms of total world sales (8%). It is
the second largest outlet operator with more than 34,000 outlets, serving 69
million consumers every day in 119 countries.
2. Brand recognition valued at $40 million. Companys brand is the most
recognized brand in fast food industry and is valued at $40
billion. McDonalds is also famous by the Ronald McDonald clown.
3. $2 billion advertising budget. McDonalds spends on advertising more than
the next 4 fast food restaurant chains combined.
4. Locally adapted food menus. The fast food chain is operating in many diverse
cultures where tastes in food are extremely different
than those of US or European consumers. Thus ability to adapt to local tastes is
one of McDonalds strengths.
5. Partnership with best brands. McDonalds offers only most popular brands in
its restaurants, such as: Coca Cola, Dannon Yogurt,
Heinz ketchup and others.

6. More than 80% of restaurants are owned by independent franchisees.

Therefore, McDonalds can focus more on perfecting its
serving system and marketing campaigns.
7. Children targeting. The business successfully targets very young children
through offering playgrounds, toys with its meals and advertisements.
Weaknesses
1. Negative publicity. McDonalds is heavily criticized for offering unhealthy
food to its customers, stimulating obesity and strong marketing
focus on very young children.
2. Unhealthy food menu. Although McDonalds tries to introduce healthier
choices in its menu, the menu is largely formed of unhealthy
meals and drinks. Such menu offering prompts protests by organizations that
fight obesity and hence, decreases McDonalds popularity.
3. Mac Job and high employee turnover. Mac Job is a low paid and a low skilled
job, which is often seen negatively by its employees.
This results in lower performance and high employee turnover, which increases
training costs and add to overall costs of McDonalds.
4. Low differentiation. McDonalds is no longer able to substantially
differentiate itself from other fast food chains (at least not enough to
gain some market share) and opts to compete by price rather than by additional
features
Opportunities
1. Increasing demand for healthier food. While demand for healthier food
increases, McDonalds could introduce more healthy food
choices in its menu and reverse its weakness into strength. McDonalds is trying
to seize such an opportunity and soon plans to open
only vegetarian restaurant in India.
2. Home meal delivery. McDonalds could exploit an opportunity of delivering
food to home and increase its reach to customers.
3. Full adaptation of its new practices. McDonalds has redesigned its logo and
restaurant design in 2006. In addition, it has introduced
some new practices. In a result, remodeled restaurants have seen 89%

higher than average market growth. McDonalds should finish

remodeling all of the restaurants and adapt the best practices in them as soon as
possible.
4. Changing customer habits and new customer groups. Changing customer
habits represent new needs that must be met by
businesses. So far, the company has been successful in introducing its McCaf,
McExpress and McStop restaurants to meet the
changing customer habits and the needs of previously untapped customer
groups.
Threats
1. Saturated fast food markets in the developed economies. The fast food market
in the developed countries is already overcrowded by
so many fast food restaurant chains and this already proves to be a threat to
McDonalds as it barely grew through 2012.
2. Trend towards healthy eating. Due to government and various organizations
attempts to fight obesity, people are becoming more
conscious of eating healthy food rather than what McDonalds has to offer in its
menu.
3. Local fast food restaurant chains. Local fast food restaurants can often offer a
more local approach to serving food and menu that
exactly represents local tastes. Although McDonalds does a great job in
adapting its own menu to local tastes, the rising number of local
fast food chains and their lower meal prices is a threat to McDonalds.
4. Currency fluctuations. The business receives a part of its income from foreign
operations. The profits that are sent back to US have to
be converted into dollars and may be affected by the exchange rates, especially
when the dollar is appreciating against other currencies.
In 2012, McDonalds profit was largely affected by appreciating dollar.
5. Lawsuits against McDonalds. McDonalds has already been sued for many
times and lost quite a few lawsuits. Lawsuits are
expensive as they require time and money. And as McDonalds continues to
operate more or less the same way, there is high probability for more expensive
lawsuits to come.

McDonalds PESTEL Analysis:

The company focused on restructuring and innovation and improving its
operations. With implementation of this the company was able to retrieve its
position within the food industry.

Political
Currently governments of certain groups in United States and Europe are
tending to control the business of fast food because of health reasons (2005).
Governments are also applying restriction for issuing license for franchises.
There should be good relationships with government in giving tax and
employments in international markets.
McDonald is also pressurized by china because they are disrupting
the culture.
Economical
Working in an international market McDonalds must face international rules
of business like about tax because each company has different rules for tax
and for McDonalds franchise it must pay some percentage of its revenue to
McDonalds hade office in United Kingdom.
Local markets cannot maintain the supply of materials thats the reason
McDonald import beef and potato to fulfill its demand.
In international markets the economies of the country also affect the sales of
the products because if the economy is not stable and people of the country
have not much income it will effect the business.
Social
In developing countries the lifestyle of people changing very fast like
Malaysia because of their developing economy more people of the country
are financially able to eat fast food.
In Middle East countries urban young generation wants new technology in
their lives like wireless internet, credit card payment and other attractions
like music.
Technological
Advertisement is the most powerful toll of McDonalds to create a demand of
its products and especially McDonalds works hard to create the demand of its
product in the minds of young generation.

Recently McDonalds implemented new technology to increase the speed of

proceeding of its products such as a Big Mac takes 60 seconds to process in
three stages
1 bun toasted by an oven (20 sec)
2 meat fries (20 sec) and decorating bun (10 sec)
3 packaging (10 sec)
Environment
As a worlds largest fast food chain obviously the consumption of beef,
potato, chicken is more then any other food chains thats the reason they had
been critics and McDonalds is also disrupting the culture and McDonalds is
trying to cover these issues especially in china.
Legal
McDonalds cares its reputation in fast food market they follow 20 working
hours for student employees in UK as according to the rule in UK and also
internationally they respect all the polices which are applied for fast food
chains.

Value Chain of McDonalds (Michael Porter)

Primary Activities

1. Inbound Logistics

1) McDonalds purchases raw vegetables and other raw materials from its
fixed, pre- defined suppliers only, therefore by increasing capital and labor, their
production will increase proportionately.
Source and further information:
McDonalds has practiced a backward vertical integration,
by replacing most of its suppliers. It has done so for two reasons,
1) To reduce costs,
2) To ensure that its products are of top quality. These supplies
include beef and milk to be used in its products, which it gets from its farms.
Other suppliers include local grocery stores that supply McDonalds with fresh
vegetables. Soft drinks are supplied exclusively by Coca-Cola, which is also its
ally. McDonalds supplies also include raw material such as flour, sugar, yeast,
etc.
2) McDonalds own information:
We import some beef raw materials from Australia and New Zealand. And
those plants have to meet all our same requirements that we hold our U.S. plants
to; which includes animal welfare and food safety, testing everything.

2. Operations :
McDonalds Backgrouds for Operation Management
Before the McDonalds brothers invented their fast-food operations system,
some restaurants did make food pretty quickly. These restaurants employed
short-order cooks, who specialized in making food that didnt require a lot of
preparation time.
Being a short-order cook took skill and training, and good cooks are in high
demand. These speedee system, however, was completely different. Instead of
using a skilled cook to make food quickly, it used lot of unskilled workers.

The McDonalds Brothers changed the design of restaurant kitchen. Instead of

having lots of different equipment and stations for preparing a wide of variety
food, the Speede kitchen had:

A very large grill where one person could cook lots of burgers
simultaneously

A dressing station where people added the same condiments to every

burgers

A fryer where one person can made french fries

A soda fountain and milkshake machine for desserts and beverages

A counters where customers placed and received their orders.

The Process
The mass-production process requires each restaurants chain to have a
distribution network to carry the food to every restaurant. Warehouses store
enormous amounts of everything a restaurant needs. Including foods, paper
products and cleaning supplies. The warehouses the ship supplies to each
restaurant by truck. Warehousing and distribution, just like the management of
chain, is centralized rather than handled by each restaurant.
In some chains, managers track the restaurantss inventories of food, wrappers,
cups, and other necessary items. They often order everything the restaurant
need from the distribution center, which ships it to them.
In other chains, it is automated, which means, a computer keeps track of what
the restaurants have and should have on hand, or the distribution center ships
the necessary items on a regular schedule instead of waiting a request from the
restaurant.
McDonalds is always keen to take the charge of crucial task of turning the
company around to meet customer demands. One of thefirst steps that it
prposeshas been to inovate the process of manufacturing and logistics.
This had been done with the view to increase efficiency of the supply chain in
terms of capacity, technology selections, and buying policies.

3. Outbound Logistics
McDonalds is committed to providing the highest quality food and superior
service, at a great value, in a clean and welcoming environment. Thats why we
work with our employees, franchisees, and suppliers to serve a balanced array
of food choices and provide the nutrition information needed for customers to
make sound decisions.
At the restaurant level, McDonalds is focused on energy conservation,
sustainable packaging, and waste management. We are dedicated to innovation
and improving our operations in order to build an even more sustainable,
environmentally friendly, and profitable business. And we will continue to
reoptimize our menu, modernize the customer experience, and broaden
accessibility to our brand, so that consumers will always enjoy the maximum
McDonalds experience.(

4. Marketing and Sales

McDonalds restaurants are found in 119 countries and territories around the
world and serve 58 million customers each day. McDonalds operates over
31,000 restaurants worldwide, employing more than 1.5 million people. The
company also operates other restaurant brands, such as Piles Caf.
Focusing on its core brand, McDonalds began divesting itself of other chains it
had acquired during the 1990s. The company owned a majority stake in
Chipotle Mexican Grill until October 2006, when McDonalds fully divested
from Chipotle through a stock exchange. Until December 2003, it also owned
Donatos Pizza. On August 27, 2007, McDonalds sold Boston Market to Sun
Capital Partners.
Notably, McDonalds has increased shareholder dividends for 25 consecutive
years, making it one of the S&P 500 Dividend Aristocrats In October 2012, its
monthly sales fell for the first time in nine years.
Advertising
McDonalds has for decades maintained an extensive advertising campaign. In
addition to the usual media (television, radio, and newspaper), the company
makes significant use of billboards and signage, sponsors sporting events
ranging from Little League to the Olympic Games, and makes coolers of orange

drink with its logo available for local events of all kinds. Nonetheless, television
has always played a central role in the companys advertising strategy.
To date, McDonalds has used 23 different slogans in United States
advertising, as well as a few other slogans for select countries and regions. At
times, it has run into trouble with its campaigns.
McDonalds in Indonesia
The first McDonalds restaurant was founded in 1940 by two brothers Dick and
Mac McDonald, but was later bought out by Ray Kroc and expanded to the
entire world.
Until in 2004, McDonalds has 30,000 restaurant worldwide with an average
number of visitors to 50 million people and visitors per day and eating houses
1,700 people.
The first McDonalds restaurant located at Sarinah in Indonesia, Jakarta and
opened on February 23, 1991. Different from most McDonalds restaurants
abroad, McDonalds also sells fried chicken and rice in a restaurant-restaurant in
Indonesia.
On October 1, 2009 McDonalds turned into a Tony Jacks Indonesia but not all
McDonalds outlets. There are 13 outlets of McDonalds owned by Bambang
Rachmadi changed among others located in Sarinah (Thamrin), Melawai Plaza,
Blok M Plaza, Arion, Kelapa Gading, Sunter, Bandung Indah Plaza, Tunjungan
Plaza, Soekarno-Hatta Airport, ITC Mangga Dua, Citra Land , Gajah Mada
Plaza, and Kebon Jeruk. Shortly thereafter, in 2010 Tony Jacks Indonesia
expert bankrupt and was taken by McDonalds.

5. Services
Free Wi-Fi @ McDonalds
Your favorite McDonalds meal now comes with complimentary Wi-Fi. Get
some work done, check email, connect with friendsfor free!
With free Wi-Fi at more than 11,500 participating restaurants, customers can
access the Internet using their laptops or PDAs at no charge. So grab a McCaf
Latte and log onits on us! Just one more thing to love about McDonalds.
Gift Cards

Whether youre looking to reward your co-workers for a job well done or say
thank you to someone special, give the Arch Card* or McDonalds Gift
Certificates**. Great for a cash-free fries run, too!

Arch Card
The Arch Card is a pre-paid card that gives customers a quick and convenient
way to pay at McDonalds. Arch Cards also make the perfect gift for holidays or
any special occasion. Arch Cards come in denominations of $5, $10, $25, and
$50.
They can be purchased for the first time or reloaded later at participating
McDonalds restaurants nationwide. They are also available at retailers
including Safeway, Kroger, SuperValu and Ahold.
McDonalds Arch Cards never expire, and there are no penalty or dormancy
fees.
PlayPlaces & Parties
You bring the kids, well make the party. Super-fun for the kids, stress-free for
you! Weve got this party thing down to a science: Happy Meals, cake,
decorations, party favors. Talk to your local McDonalds manager to make
arrangements.Depending on your location, you can have your childs party at a
McDonalds PlayPlace for even more fun!

Support Activities
1. Firm Infrastructure
McDonalds Infrastructure is modern an sophisticated, they using the advanced
IT and yet theyre still maintaining the green activities.

Greener Than Ever

McDonalds strives to provide eco-friendly workplaces and restaurants that

reflect our sustainability goals and demonstrate environmental stewardship in
the workplace.
In August 2008, McDonalds USA opened its first corporate-owned pilot green
restaurant and received Leadership in Energy and Environmental Design
(LEED) Gold certification in April 2009. Some of the green attributes of the
Chicago restaurant include energy-efficiency equipment and lighting, high
efficiency plumbing fixtures, and permeable pavement and rainwater collection
for irrigation. Were using this green building lab to help refine our green
building strategy. Our second green restaurant was completed in North Carolina
in early 2010.
Green building strategies arent limited to McDonalds restaurants. Using the
LEED rating system developed for Existing Buildings (LEED EB), we recently
tackled our Global Headquarters in Oak Brook, Illinois. Our 20-year-old
Campus Office Building (affectionately known as the COB) was granted
Platinum Certification, the highest level possible. The COB is one of the oldest
buildings to receive this certification.
The sustainable building enhancements made during the certification process
have resulted in clear financial and environmental benefits. Energy use is at its
lowest level in five years, helping to offset rising utility costs. Enhanced
recycling efforts have diverted over 58% of waste targeted for landfill, helping
control disposal costs. And overall, our efforts are reducing McDonalds
environmental impact.

2. Human Resource Management

The work offered by McDonalds may have some positive elements, but
workers are often choosing employment at McDonalds in the context of having
few other attractive options. Almost regardless of what people think of the work
itself, working at McDonalds could be said to offer advantages for some
employees who want flexible hours and are engaged in other activities and
responsibilities. For those marginalised in the labour market who have few
chances of a job elsewhere, McDonalds offers much needed work.
However, the employees dependence on McDonalds and/or their tendency to
see their employment as a short-term strategy makes them vulnerable to
management manipulation. Those with minimum interest simply leave if they
do not like it, and this is clearly reflected in high labour turnover. Perhaps they

are attracted by the combination of fairly secure employment, familiar family

surroundings created by a highly paternalistic approach to management and lots
of employees of similar age or temperament. This may help to explain how the
corporation sometimes retains individuals who could probably obtain better
paid and more skilled work elsewhere. As (1986) puts it, it is recruiting as
means of control. As already suggested, however, whether this is a deliberate
strategy or something else is not clear (, 1994).
The employment relationship at McDonalds is managed by a complete
spectrum of controls, from simple, direct and bureaucratic controls to the
management of subjectivity. At one end of the spectrum, restaurant managers
are disciplined to accept tough work schedules and must prove themselves up
to the challenge of punishing schedules. Long hours and loyalty are locked in,
with young managers being persuaded not only to accept as the norm many
hours of unpaid work but also to gain a perverse satisfaction from surviving
these tough and uncompromising work routines. In addition, young managers
who may or may not get similar opportunities elsewhere in the labour market
are romanced by offers of promotion and career development. At the other end
of the spectrum, more direct methods are used to maintain control. However,
this still leaves unanswered the question of how the corporation has managed to
sustain the uniformity of its employee relations practices despite major
differences across societal cultures.
3. Technology Development
Even as consumer confidence stagnates domestically and in Europe,
McDonalds will focus on modernizing restaurants, evolving the menu and
engineering value, said Don Thompson, the companys president and chief
operating officer, in an earnings call on Friday.
McDonalds net income rose 5 percent and same-store sales increased 7.3
percent for the quarter, and the brand gained market share in the United States
and abroad, according to the companys first-quarter earnings report.
The call marked a transition from McDonalds Corp. chief executive Jim
Skinner, who will retire June 30, to incoming leader Thompson, but both
executives stressed that the companys strategy going forward would remain as
focused as ever on the brands Plan to Win.
Asked what he thought his legacy would be after taking over for Skinner,
Thompson responded that he would preach fundamentals just like Skinner.
Thompson gave a few hints toward McDonalds near-term strategy.

When we talk about modernizing the customer experience, technology will

play a big role in that, and so will the new look of McDonalds, he said. When
we talk about optimizing the menu, well be more focused on nutrition-based
products, as well as our core items and premium products like those coming out
of Europe. Weve proven that we can scale products and learn from our other
areas of the world, and well do that at an accelerated pace.

McDonalds enters five-year IT support deal with Fujitsu

The services provider plans to roll out user-exchangeable parts to McDonalds
1,200 branches throughout UK and Ireland
Fujitsu has signed a five-year deal with fast food chain McDonalds to supply
IT support to the companys 1,200 branches in the UK and Ireland.
The IT outsourcer will offer support for point-of-sale systems and back office
operations to both company-owned and franchise outlets, replacing various
incumbent suppliers.
Fujitsu plans to make McDonalds IT systems more reliable by deploying
systems built on user-exchangeable parts, the company said in a statement.
This will allow staff to fix minor IT problems themselves by replacing faulty
units such as card readers, it claimed.
The provider said success would be judged on whether it simplified IT support
for branch staff, reduced of on-site engineering visits and drove down the total
cost of ownership of McDonalds IT equipment over its lifetime. Fujitsus
business unit director Jon Wolfe said that keeping tills open and operating was
the most important job for IT support.
However the role moving forward is as much about the customer experience
and supporting new technologies that ensure agility in meeting customer
demands, such as touch-screen ordering and contactless payments both areas
that McDonalds is already deploying, Wolfe claimed. In Janaury 2011,
McDonalds announced that it will use Visas contactless payments
infrastructure.

4. Procurement
McDonalds E-Procurement SystemMcDonalds E-Procurement System is
basically a main reason for their successful supply chain management.It is so

efficient that it provides the backbone not only to all the logistics but the whole
McDonalds supply chain management.

How McDonalds Uses E-procurement SystemsEmac Digital:(Internet

procurement site designed for McDonalds Corporations 27,000
franchises)Emac Digital Company is E-Procurement website which is jointly
owned by McDonalds and Accel-KKR Internet Co.

It is a procurement hub launched in 2001 allow all of McDonalds franchises

across the globe to buy everything needed to run their restaurants. From
uniform to HamBurger

Aside from being faster and more convenient for franchisees, the procurement
site also allow business owners to buy supplies and materials at a discounted
price, ultimately reducing costs for McDonalds. E-Procurement allows 85% cut
in costs according to McDonalds supply chief Edwards.

McDonalds PORTER 5 Forces:

Threat of New Entrants
The threat of new entrants is relatively low. Although it is not too expensive to
start up a fast food restaurant, it is difficult to compete with established leaders
in the industry such as McDonalds, Burger King, and Wendys. With their
standardized products and services at low prices, combined with a very strong
brand, it is extremely difficult for a new entrant to compete directly with these
existing businesses. The risk of new entrants is always there and there are local
fast food places that are created every year. However, it will take a significant
amount of capital investment and many years of operations to build up a
recognizable name and be able to compete with the well-known brands.

Bargaining Power of Buyers

The bargaining power of buyers is low in the industry as well. McDonalds,
Burger King, Wendys, among others, are highly competitive with their product
pricing as it stands. Price floors are already being experimented with through
dollar menus at McDonalds and Burger King, and 99 menu at Wendys, at
which some of these companies actually operate at a loss for each sale from this
value menu. Therefore, with low prices already established in the industry, the
bargaining power of buyers will be low because fast food restaurants already
offer selections at various price points that cater to all budgets.
Bargaining Power of Suppliers
The bargaining power of suppliers is moderate. Based on the good relationship
that McDonalds has with suppliers, the bargaining power is fairly stable
currently. The reliance that McDonalds has on suppliers is equal to the reliance
suppliers have on McDonalds. On one hand, McDonalds has a good supply
chain of quality materials at fair prices. On the other hand, suppliers are surely
content with supplying to a large consuming company such as McDonalds.

However, there are many substitute suppliers out there that can replace current
suppliers (i.e., Pepsi could replace Coca Cola) without a significant drop in
quality, should there be a rift in the buyer-supplier relationship.
Threat of Substitute Products and Services
The threat of substitute products and services is high. Since McDonalds can be
categorized as a fast food service franchise, we have to take into account other
fast food restaurants products and classify them as substitute products.
Restaurants with similar hamburger substitutes include nationwide chains
Burger King, Wendys, White Castle, and Sonic Drive-In, to name a few.
Regional chains with similar hamburger substitutes include the West Coasts InN-Out Burger, the Midwests Culvers, and the East Coasts Five Guys. Diverse
fast food substitutes include fried chicken from Kentucky Fried Chicken,
sandwiches and subs from Subway, and fish from Long John Silvers. As we
can see, substantial substitute products exist, whether they are similar in nature
or completely different, yet still classifiable as fast food.
Intensity of Rivalry among Competitors in an Industry
The intensity of rivalry among competitors in the fast food industry is at a high
level. Over the years, fast food restaurants have done more to compete not only
with similar quick service institutions, but with high end food and beverage
companies as well. For example, McDonalds introduced premium customizable
coffee beverages recently to compete with higher-end Starbucks Coffee. Along
with Burger King and many other fast food chains, they added a breakfast menu
in the 1970s, to compete with the breakfast chains every morning. There are
multiple reports on the number of fast food restaurants in the US, ranging from
85,000 300,000. With so many fast food establishments around, as well as
competition with non-fast food restaurants, it is logical that rivalry is high and
intense in the industry.

McDonalds International Marketing Mix (7Ps)

This framework identifies many of McDonalds success factors within each
business area.
1. Product
McDonalds strives to offer a standardised service worldwide (McDonalds
Corporation, 2012). However, the company is embedded with an
entrepreneurial spirit giving franchisees some local control and creativity,
providing the service offering is of a high standard (Appendix 3). Some of the
most famous products including the Fillet o Fish, the Egg McMuffin and the
Big Mac were created through franchisee innovation. Franchisees are given
autonomy to adapt the products (Datamonitor, 2010) whilst the corporation
maintains a high degree of standardisation through quality control. The majority
of well-known products are usually offered in all markets unless they do not suit
local customs and religion. For instance, Big Macs are not sold in Indian outlets
as the population is primarily Hindu. However, even iconic products are
adjusted to local taste such as providing spicier food in most Asian countries,
allowing the company to overcome a variety of cross-cultural barriers
(McDonalds, 2012).

2. Price - McDonalds has positioned itself as a fast-food outlet offering lowcost food and drink. The affordable menu has been adapted worldwide whilst
maintaining their core goal of quality assurance. Ongoing innovation has
allowed new pricing strategies such as the Dollar Menu or its equivalent
Saver menu in the UK (McDonalds 15 Corporation, 2012). In response to
increasing food costs, McDonalds opted to increase prices by less than 1%,
adopting the change gradually to the menu in order to retain price-sensitive
customers (Lockyer, 2011).
3. Place (International Distribution and Supply Chain)
Although McDonalds product offerings differ between countries, they operate a
standardised global supply chain. This lean operation is 100% outsourced with
no back-up system. The chain comprises of two tiers. Tier 2 suppliers are
primarily food producers, whilst Tier 1 suppliers are processors. For example, a
Tier 2 potato farm supplies a Tier 1 processing firm who turn the potatoes into
French-fries and potato wedges. Produce is transported to distribution centres
before allocation and delivery to individual restaurants. The success of the
supply chain is attributed primarily to their commitment to outsourcing noncore activities to expert firms.
McDonalds supplier terms are rigorous; suppliers are expected to be
accountable until the food is consumed and the end customer is satisfied.
Legally-signed contracts with suppliers are not used; all deals are made on a
handshake because they operate a one supplier - one product policy and
maintain long-term relationships regardless of the external environmental
conditions.
McDonalds has 30 35 stock-keeping units at the supply side, creating a
streamlined operation. Sole distribution partners are responsible for the entire
logistics process in designated geographical areas, whether it be the daily
hamburger order, or a replacement appliance. McDonalds continuously
scrutinises these partners to ensure they are meeting goals and benchmarks to
improve efficiency.

The pull strategy allows individual restaurants to place orders with distribution
centres, which then re-issue orders to suppliers who only produce the quantities
ordered. This means suppliers hold little surplus stock, optimising efficiency.
The 31Q system forecasts demand accurately, allowing suppliers to plan three
years in advance. Lead-time is critical and this system ensures that demand is
always catered for.
Hazard Analysis Critical Control Point (HACCP) and Supplier Quality
Management System (SQMS) programmes ensure compliance with legislation.
These systems trace food produce from farm to fork and ensure quality,
hygiene and food safety at every level.
4. Promotion
McDonalds achieved 6th position on Best Global Brands 2011 as a result of
continuous promotional activities. The iconic Golden Arches (Appendix 4) are
used in promotions globally. The im lovin it campaign, launched in 2003 used
celebrity endorsement to increase their appeal to younger consumers. Justin
Timberlake was used for vocals and the campaign was launched in 86 Englishspeaking countries (Appendix 5) and was adapted for non-English speaking
countries.
Recently, the what were made of campaign increased transparency and was
used to fight against negative publicity regarding ingredients.
5. People
At McDonalds, service employees represent the brand at the frontline where
customers have their first interaction with the organisation. It is important that
staff give a good impression and therefore, training is of paramount importance.
Employees undergo rigorous on-the-job training in customer service, food
handling and preparation.

In addition, McDonalds provides opportunities for managers and would-be

franchisees to develop and hone their management skills through a dedicated
facility . the Hamburger University (HU). HU has campuses worldwide and
provides training for employees to improve their proficiency in managing the
restaurant.
McDonalds aim is to create a vibrant working environment for staff and
managers. This creates a chain effect whereby customers are positively
influenced and are more likely to return. To re-create this chain effect in
different markets, the recruitment and training processes are standardised
globally. McDonalds is always on the look-out for lively team players who are
trained according to guidelines, which provides Quality, Service, Cleanliness
and Value (QSC&V) to every customer that they serve.
6. Process
As the term fast-food suggests, McDonalds prepares and serves food rapidly.
Strict guidelines and regulations are followed in food preparation to ensure high
standards of hygiene and food safety. Customers can usually see the kitchen
while being served, allowing transparency, so customers can eat in confidence.
Food is mass-cooked and hot-held until service. However, due to the continual
stream of customers, it does not deteriorate before consumption.
To maintain its foothold as market leader, McDonalds maintains a high degree
of process standardisation across all outlets to increase efficiency. This ensures
that they have high standards of hygiene and food safety in all outlets.
7. Physical Evidence
McDonald's has a homogenous look across their outlets from dcor to staff
uniform. Their global re-branding strategy furthers standardisation, allowing
consumers to experience familiarity despite visiting outlets in different
countries. In family-oriented areas, there are indoor playgrounds to satisfy
customers. The company ensures that all franchisees comply with regulation
regarding hygiene to maintain their reputation for 18 cleanliness. Staff training
is standardised globally to ensure customers are treated consistently.

McDonalds Competitive Advantage

1. Cost Leadership

Supply chain: McDonalds buys supplies in bulk and, to get lower prices

Real Estate: McDonalds leases land and property they own to franchises

Marketing: McDonalds is such a well known brand name and Ronald

McDonald such a well known mascot McDonalds has to do much less
advertising than many other chains to maintain awareness of their brand.

Strategic/predatory customer selection (see Supersize Me) Mc

Donalds purposefully aims their brands at kids who can be taught to over-eat
fast food and, in addition, serves things like ultra-fatty sauces with salads and
fatty foods in general with sugar baked into breads and often soda-only drink
selections, all designed to make McDonalds customers unhealthily addicted to
compounds in their food.
2. Differentiation
McDonalds does not believe in opening its restaurant without any knowledge
of the local culture and tastes.
The company caters to a large customers market with varying tastes and thus
cant afford to introduce products without familirizing itself with provincial
prefences in food. For this reason, McDonalds distributes its products in
foreign locations with the hel of franchises who are well aware in of that works
in their country.
This is an exremely inteligent distribution method because on the one hand, it
doesnt create rifts between governments and McDonalds official, and on the
other hand, it helps in providing people with the kind of products they desire. It
is important to understand that Mcdonalds doesnt change its basic product
range for any country but tries to introduce certain changes in secondary
products in order to make them suitable for local tastes.
McDonalds predominantly sells hamburgers, various types of chicken
sandwiches and products, French fries, soft drinks, breakfast items, and
desserts. In most markets, McDonalds offers salads and vegetarian items, wraps
and other localized fare. On a seasonal basis, McDonalds offers the McRib
sandwich. Some speculate the seasonality of the McRib adds to its
appeal.Various countries, especially in Asia, are currently serving soup. This
local deviation from the standard menu is a characteristic for which the chain is
particularly known, and one which is employed either to abide by regional food
taboos (such as the religious prohibition of beef consumption in India) or to
make available foods with which the regional market is more familiar (such as
the sale of McRice in Indonesia). In Germany, McDonalds sells beer.

Problems faced by McDonalds

Bad food image

To defend the image of its food, McDonalds launched a social media campaign
inviting customers to ask questions about the ingredients it uses. Showing just
how bad perceptions can be, among the first questions McDonalds addressed
were Why doesnt your food rot? and Do you use real chicken in your
Chicken McNuggets?
The company has run similar programs in Canada and Australia, where it says
the program has built trust with customers.
Lack of flexibility
Consistency has long been one of McDonalds attractions people like
knowing exactly what theyll get when they order a Big Mac. But now people
are gravitating toward places like Chipotle that let people tailor their orders. To
offer greater customization down the line, McDonalds recently rolled out prep
tables in its kitchens that can hold more toppings and sauces.
The company is also testing a Build-Your-Own-Burger offering in Southern
California that lets people pick the bun, patty and toppings they want. In
Australia, McDonalds has already said it plans to roll out the format
nationwide.
Slow, inaccurate service
McDonalds executives have said they introduced too many items too quickly
last year, such as McWraps and the option to substitute egg whites for its
breakfast sandwiches. That slowed down service and led to inaccurate orders.
On Tuesday, McDonalds said it would focus on a simplified menu that
highlights its most popular items but did not give specifics.
Price sensitivity
Raising prices without driving away customers has been tricky for McDonalds.
At one time, for instance, the popular Dollar Menu included a Big N Tasty,
which was made with a quarter-pound of beef. But over the years, McDonalds
has had to swap out items as costs for beef and cheese have climbed.

Late last year, McDonalds revamped its Dollar Menu to be called the Dollar
Menu & More, with a range of prices up to $5.
Increased competition
In addition to newer players like Chipotle, longtime rivals Burger King and
Wendys have been intensifying competition, too. And Taco Bell launched a
national breakfast menu to go after the growing breakfast market, which
McDonalds has long dominated.

Strategic and Tactical Recommendations for McDonalds

The following table outlines the strategic and tactical recommendations for the
future success:
Short-term (6 months- 1 year)

Long-term (1- 5 Years)

Continue expansion of their

franchises in developing markets with
growing middle classes
Adapting the menus to the cultural
and regional taste (brazil pastry, India
cheese, size adaptation)- health
trends
Loyalty program- point system
leading to free item system, discount

Increase recycling and environmental

friendly material and packaging
completely
Increase charity work such as health
conscious charities as more regulation
for advertising appears
Enter health conscious food market
with another brand

Short Term Recommendations (6 months 1 year)

Further expansion in emerging markets with growing middle classes provides
growth opportunities since many western markets are saturated.
Cultural taste is already a focus for McDonalds and emerging economies offer
multiple opportunities for product adaptation. For example, pastry options in
Brazil and cheese products in India could increase sales. Further adaptation of
meal size and price will cater for a larger market demographic.

A loyalty scheme can be used to increase purchase frequency. This could be

initiated through student discounts, or a points-based scheme offering a free
item after multiple purchases.
Long-Term Recommendations (1 5 years)
With growing environmental awareness, environmentally-friendly and ethicallysourced packaging could be used to further differentiate McDonalds from
competitors.
Although McDonalds supports various charities including the Ronald
McDonald House Charities, further emphasis on charitable work could
positively alter customers perception of the brand, especially since their
product offering is often seen as a barrier to good health.
Entering the health-conscious fast-food market under the guise of a different
brand would secure a larger market share and diversify their business, spreading
the risk of failure. For example, Coca-Cola launched the health-conscious
Vitamin Water brand, which is perceived very differently to Coca-Cola itself.

ANNEXURE

1. Have you ever tried McDonald ?

a) Yes
b) No

2. Gender

a) Male
b) Female

3. How old are you?

a) Below 10
b) 10-19
c) 20-35
d) 36-50
e) 51 & Above

4. Do you enjoy McDonalds?

a) Yes
b) No
c) It's not bad
5. What brand would you say is more popular among the public?

a) McDonalds
b) KFC
c) Subway

6.. Do you think the price for a Burger of McDonalds is cheap or expensive?

a) Cheap
b) Slightly over priced
c) Expensive

8. If you were to see the McDonalds logo somewhere would you recognize it?

a) Yes
b) No

9. How often do you visit McDonalds?

a) Never
b) Once/few times a year

c) Few times a month

d) Few times a week
e) Everyday
Have you ever tried McDonald ?
30
25
20
Yes

15

No
10
5
0
McDonald's

Gender

How old are you?

. Do you enjoy McDonalds?

Do you think the price for a Burger of McDonalds is cheap or expensive?

Executive Summary

McDonalds is a Centralized, International company, which competes in

the fast food industry supplying hamburgers, french fries and other
consumable items using standardization, heavy expansion and branding as the
driving force. McDonalds operates in over 121 countries and has over
30,000 restaurants worldwide.

McDonalds utilized an intense, rapid expansion into foreign countries

through three primary methods, franchising, company owned restaurants, and
joint ventures. With the majority of international restaurants stemming from
franchising agreements, McDonalds management relied on this method to aid
in the acceptance of a new style of eating into unfamiliar markets. With
minimal risk and maximum gains, franchising continues to contribute heavily
to McDonalds international success.

With a centralized, international structure, McDonalds keeps a tight grasp on

operations, cost and quality. With an ethnocentric management strategy,
McDonalds relies on domestic based logic and attitudes and transfers them to
their international outlets and restaurants.

In order to control its overseas operation, McDonalds uses a combination of

two approaches. The majority of control would fall under the rules approach,
meaning that control lies with headquarters creating procedures and policies

for the subsidiaries to follow. However, there is also a little of the cultural
approach that has surfaced and is being utilized judging by the adaptation that
has occurred in some of the overseas restaurants. This has occurred even with
the tight internalized norms that are constantly presented and enforced by
headquarters.