ISM ASSIGNMENT: MCDONALD

Submitted by: Shivam Agarwal Vikrant Singh Sandeep Singh Rawat Parmindar Singh

10030141127 10030141058 10030141070 10030141093

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Contents

McDonalds Overview History Vision, Mission & Values McDonalds Product Line SWOT Analysis Financial Highlights McDonalds Past & Current Business Strategies Porters Value Chain Analysis BCG Matrix of McDonald Conclusion

03 03 04 05 06 08 10 13 14 16

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McDonalds Overview

McDonald as being ninth most valuable brand in the world which has replaced the US army as the Nations largest job training organization &Controls the market share of more than 3 food chains taken together in America started in 1940. McDonald's Corporation (MCD) is the world's largest chain of fast food restaurants, serving nearly 47 million customers daily. McDonald's primarily sells hamburgers, cheeseburgers, chicken products, French fries, breakfast items, soft drinks, milkshakes and desserts. More recently, it has begun to offer salads, wraps and fruit. Many McDonald's 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. Company has also expanded the McDonald's menu in recent decades to include alternative meal options like salads and snack wraps in order to capitalize on growing consumer interest in health and wellness Each McDonald's 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. McDonald's revenues grew 27% over the three years
ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion

History
1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in San Bernardino, California, and envisioned a massive new industry: fast food. In what should have been his golden years, Raymond Kroc, the founder and builder of McDonald's Corporation, proved himself an industrial pioneer no less capable than Henry Ford . He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, French fries, and milk shakes. By developing a sophisticated operating and delivery system, he insured that the French fries customers bought in Topeka would be the same as the ones purchased in New York City. Such consistency made McDonald's the brand name that defined American fast food.

Worlds Oldest McDonalds

This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants and the last one with red and- white striped tile exterior. After opening in 1953, it immediately became the standard for the fast food franchises across the country. The building and its 60- foot high neon sign with "Speedee the Chef" are eligible for listing on the National Register of Historic Places.
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Employees wear 50's style uniforms of paper hats, white shirts and bolo ties. The restaurant serves the original menu of hamburgers, cheeseburgers, fries and old-fashioned milkshakes. Also available are more recent McDonald's items such as Big Macs and Happy Meals. McDonald's reopened the facility as it was with walkup windows and outdoor seating. They also constructed and addition housing a museum, gift shop, restrooms and more outdoor seating

McDonalds Vision
To be the best & leading fast food providers around the globe

McDonalds Mission
McDonald's mission is to be our customers' favorite place and way to eat with inspired people who delight each customer with unmatched quality, service, cleanliness and value every time ... we invite you to be the part of this winning team and give yourself an opportunity to grow with the family of people striving to create smiles on the faces of millions of people everyday.

McDonalds 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. 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 high quality food and superior service, in a clean, welcoming environment, at a great value. Our goal is 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 well-trained 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 the three-legged stool of owner/operators, suppliers, and company employees, is our foundation, and the balance of interests among the three groups is key.

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 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 Ronald 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 continuing 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

McDonald Product Line

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SWOT Analysis
Strength
Risk diversity Large market share. Strong supply chain. Promoting ethical conduct Rigorous food safety standards Decentralized yet connected system Strong brand name, image and reputation. Strong financial performance and position Affordable prices and high quality products Nutritional information available on packaging Strong global presence & performance in the global marketplace. Specialized training for managers known as the Hamburger University. McDonalds Plan to Win focuses on people, products, place, price and promotion.

Weakness
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. Low depth and width of products

Opportunities
Growing health trends among consumers Joint ventures with retailers (e.g. supermarkets).

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 Consolidation of retailers likely, so better locations for franchisees. Respond to social changes - by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning. Use of CRM, database marketing to more accurately market to its consumer target groups. It could identify likely customers (based on modeling and profiles of shoppers) and prevent brand switching Strengthen its value proposition and offering, to encourage customers who visit coffee shops intoMcDonalds. The new formats, McCafe, having Wifi internet links should help in attracting segments. Also installing childrens play-parks and its focus on educating consumers about health, fitness. International expansion into emerging markets of China and 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.

Threats
Health professionals and consumer activists accuse McDonald's of contributing to the countrys health issue of high cholesterol, heart attacks, diabetes, and obesity. The relationship between corporate level McDonald's 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. Recent economic condition impacts on consumer confidence & spending, prime real estate is competitiveness; the gradual increment in Limited Brands operations can hamper the MCDs growth. In addition, possible tariffs from government over the imported materials, or minor disturbance in the long supply chain of the company are a risk. The increasing cost of labor in other countries and decline in value of US Dollars everyday can compel the company to change its way of operation.

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Financial Highlights
Comparable sales grew 6.9% and guest counts rose 3.1%, building on 2007 increases of 6.8% and 3.8%, respectively. System wide sales increased 11% (9% in constant currencies). Company-operated margins improved to 17.6% and franchised margins improved to 82.3%. Net income per share from continuing operations was $3.76, an increase of 16% after adjusting for the impact of the 2007 Latin America transaction. Cash provided by operations totaled $5.9 billion and capital expenditures totaled $2.1 billion. Returned $5.8 billion to shareholders through shares repurchased and dividends paid, including a 33% increase in the quarterly cash dividend to $0.50 per share for the fourth quarter Bringing our current annual dividend rate to $2.00 per share.

One-year ROIIC was 38.9% and three-year ROIIC was 37.5% for 2008

Balance Sheet

Period Ending
Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets

30-Jun-11

31-Mar-11

31-Dec-10

30-Sep-10

2,070,000 1,249,100 115,000 591,300

1,939,900 1,160,300 111,500 612,500

2,387,000 1,179,100 109,900 692,500

2,495,000 1,013,600 103,600 564,300

Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges Total Assets Liabilities Current Liabilities

4,025,400 1,355,600 23,015,800 2,725,400 1,710,800 32,833,000

3,824,200 1,317,500 22,644,800 2,669,600 1,624,100 32,080,200

4,368,500 1,335,300 22,060,600 2,586,100 1,624,700 31,975,200

4,176,500 1,295,900 21,477,500 2,521,500 1,697,100 31,168,500

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Accounts Payable Short/Current Long Term Debt Other Current Liabilities

2,729,400 1,219,400 -

2,737,700 1,516,400 -

2,916,400 8,300 -

3,187,400 78,900 -

Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill

3,948,800 11,062,800 1,548,200 1,320,400 -

4,254,100 10,524,300 1,544,500 1,303,700 -

2,924,700 11,497,000 1,586,900 1,332,400 -

3,266,300 11,357,100 1,570,400 1,336,900 -

Total Liabilities Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity

17,880,200

17,626,600

17,341,000

17,530,700

16,600 35,165,000 -27,135,300 5,362,100 1,544,400

16,600 34,386,200 -26,463,300 5,259,900 1,254,200

16,600 33,811,700 -25,143,400 5,196,400 752,900

16,600 32,568,900 -24,759,800 5,108,300 703,800

Total Stockholder Equity

14,952,800

14,453,600

14,634,200

13,637,800

Net Tangible Assets

12,227,400

11,784,000

12,048,100

11,116,300

Currency in USD.

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McDonalds Business Strategies

The McDonalds business structure is based upon a geographic structure. When log on their website, you will be asked to choose the country that you are interested in. Actually, McDonalds divided its operations into five geographical divisions.

As shown in above pie charts that around 65% of McDonalds restaurants and approximately 75% of its revenues are generated in the United State and Europe. So, to McDonalds, the most important strategic approach for maintaining its leading position is to keep their major markets at the same time expanding their business into the other emerging markets. However, different consumer groups in different countries may have very different tastes and/or requirements. So each full functional geographic unit of McDonalds was required to wholly response for producing and marketing its products in that region. Through this regional structure, McDonalds could not only satisfy the local consumers needs in different geographical areas but also pursuing maximum local development. Actually they produce and market slightly different types of products in different areas, and they even have different prices. As Jim Skinner, the vice-chairmen of McDonalds illustrated that if you are looking for a command center with one push button that operate our restaurant in every corner of the world, you wont find it. However, their philosophy of QSC&V-quality, service, cleanliness and value is same for everywhere. And McDonalds targets the similar consumer segments that need fast service, affordable price and good standard hygiene. So their main products are similar in most countries, where they provided
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service, including beef, chicken, bread potatoes and milk. As the consumers in different countries having different foods requirements, McDonalds keep launching new products for their regional consumers. In this case China and France can be very good examples .

McDonalds in China
In 1990, McDonalds opened their first store in shenzhen (near Hong Kong). But before they actually started their business, McDonalds had already carried out 5 years business research and all sorts of information gathering such as the income level of the Chinese people, the kind of foods they enjoy etc. Moreover, their re-design of the counter, chairs and desks also reflected their considerations of the height and body shape of Chinese people. They made lots of efforts to promote their American burgers, and wanted to repeat the same success in China market as they has done elsewhere. Unfortunately, they are not as successful as KFC, their biggest rival, in China now. There are lots of reasons to explain it, one important issue which has once been ignored by McDonalds is that Chinese people are more prefer chicken dishes than beef burgers, which are their main products. After identified this problem, McDonalds has tried to adapt more Chinese tastes by adding more chicken meals into their menu for attracting more customers.

McDonalds in France
In France, where customers has been resentful of the fast-food chains incursion, McDonalds has boosted it sales by remodeling restaurants i.e. hardwood floors, wood-beam ceilings, comfortable armchairs, and also by adding new menu items such as espresso, brioche and more upscale sandwiches. Actually they have successfully responded to the preferences of the local area. In the other countries the situation is the same. For example, in Canada, McDonalds has introduced new Canadian feature breakfast. In Belgium, the McChicken Premiere has been added to the menu. Although McDonalds has been regarded as the ultimate example of standardization for the world market.

McDonalds Current Strategies Competitor:

Its unlikely that McDonalds can always be No.1. In an annual consumer satisfaction survey, McDonalds has been scored dead last among fast-food restaurants since 1992. In the fourth quarter of 2002, McDonalds disclosed its first-ever quarterly loss, one reason why McDonalds is struggling is that the consumers began to switch to its competitors, such as Burger King, Wendys, and Subway. These companies emphasized on offering fresher, hotter, high-quality foods at lower price with faster service. On the other hand, McDonalds decided to close 719 poorly performing restaurants around world. All of these simply proved that McDonalds might no longer be competitive in the fast-food market. And if McDonalds cannot adapt external
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environment change, they might be gradually diminished and even replaced by other competitors. In order to keep their market share, increasing sales and profits. McDonalds has to respond to the threat of competitors. In 2003, McDonalds offered the McGriddles sandwiches in the US and the Canada feature breakfast. Meanwhile, McChicken Premiere and a zesty chicken have been introduced in the UK, France, Italy and Belgium. McDonalds was trying to satisfy customers desire for premium products at affordable prices. Furthermore, McDonalds is providing more choice with respond to offer Happy Meal to keep the children. For example, Happy meal now including chicken selects, and no-sugar add fruit drink (juice and low-fat drink) and also to produce McDonalds coffee which appeals to adult. Those products have been made to attract existing customer and develop new customers. Moreover, in addition to the innovative menu, McDonalds is also rebuilding and even relocating some of their restaurants to make the environment more attractive. At the same time, McDonalds is differentiating itself by creating more relevant experiences such as allowing the customers to access the Internet with the wireless technology platform. This innovative way not only attracts the teenagers, but also perfectly fitting the modern professionals requirements.

Social problem healthy issue

With the economic development, peoples living standards have increased dramatically these years. People are becoming more concerned about their health issues. It cannot be denied that McDonalds has attempted to make itself more convenience for the people. However, people also believe that such kinds of fast food are not good for their health.The world health organizations report presented that those food not only can cause the obesity of children, but also is part of the reason of causing cancer. Healthy issues became the biggest stumbling block to the development of McDonalds. Customers were switching to healthier offering, such as Subways sandwiches, or KFCs mashed potato instead of fried potato. McDonalds has responded to this healthy trend. In order to compete, McDonalds has added salads and other lighter options into their menu. If a mother comes in, she is not only buy the happy meal for her children, she will also be likely to buy herself a meal too .the lighter options also encourage existing customers to come back more often, because there is a greater variety of choices.

Focus on Children
No matter how different the tastes and the local needs are, McDonalds has paid considerable attention to the children in every country. They built happy land for them, offering fantastic happy meals with novelty toys to them. Furthermore, McDonalds has just launched computers with games that were designed to inspire the childrens imagination at the same time shape their personal characteristics. There are three main reasons for McDonalds to focus on the children: (1) Children are one of the biggest consumers groups to McDonalds. And McDonalds has been regarded, as their favorite place to go .The brand culture happiness is known by children. (2) McDonalds believe that focusing on children can build the stable business, and will provide the best engine to encourage the whole family to come to McDonalds. For example, one happy meal for a child only cost $ 5 but McDonalds can produce more new products in addition to happy meal to offer the whole family. (3) By Building a brand loyalty with the children, McDonalds more likely to be successfully today and in the future. McDonalds is not just selling the happy meal to children; it is selling the American culture to the children the enjoyable individual life.

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Porter Value Chain Analysis of McDonalds

The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin for McDonalds. The primary value chain activities are:

Inbound Logistics: the receiving and warehousing of raw materials and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are soldto them. These primary activities are supported by:

Technology development: technologies to support value-creating activities.The value chain model is a useful analysis tool for defining a firm's corecompetencies and the activities in which it can pursue a competitive advantage as follows: Cost advantage: by better understanding costs and squeezing them out of the value-adding activities. As Per the Porter's 5 Forces analysis McDonalds deals with factors outside an industry that influence the nature of competition within it, the forces inside the McDonalds influences the way in which the firms compete, and so the industrys likely profitability is conducted in Porters five forces model. A business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace. So McDonalds rivalry in this competitive market is blooming.

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BCG matrix of McDonalds

The need for strategy in order to expand its existing product in very promising markets for McDonalds is very essential. McDonalds along with KFC and other major fast food chains have dominated the American continent as well as elsewhere. BCG Matrix: The market growth rate measures industry attractiveness. The underlying theory for examining market growth rate is the industry life cycle. The BCG assumes that growth rates, life cycle stages affect a firms finances Placing products in the BCG matrix results in 4 categories in a portfolio of a McDonalds:

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?McDonalds Europe McDonalds USA McDonalds Asia

Americas McDonalds

1. Stars (=high growth, high market share) Frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. So, McDonalds USA is under Star position.

2. Cash Cows (=low growth, high market share) Profits and cash generation should be high, and because of the low growth, investments needed should be low. Keep profits high. 3. Dogs (=low growth, low market share) Avoid and minimize the number of dogs in a company. Beware of expensive turn around plans.

4. Question Marks (= high growth, low market share) Have the worst cash characteristics of all, because high demands and low returns due to low market share

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Conclusion
Increase its product line. To have more variety to choose from, to include more deserts and more items like Pizza McPuff. It should continue to provide better and quick service. By lower the supply chain cost so that it helps in cost reducing. MCD is willing to expand their Happy Meal choices to attract and retain customers& can also Introduction of McCafees serving premium and specialty coffees and other beverages and other products such as cakes, pastries etc in the existing McDonalds. Focus on gifts for all generations i.e. youth, kids especially senior citizen which is a completely new concept. MCD should provide special promotions during festivals. They should increase the space for provision of birthday party areas& try to sponsor college festivals. After analyzing the marketing mix of McDonalds, it is clear that the company can be said to be `global, i.e. combining elements of globalization and internationalization. McDonalds have achieved this through applying the maxim, `think global, act local

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