McDonald’s Overview

McDonald as being ninth most valuable brand in the world which has replaced the US army as the
Nation’s 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
II. 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.
World’s Oldest McDonald’s
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.
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.

.McDonald’s 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.
IV.McDonald’s Culture & Value
MCDONALD’S 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 McDonald’s System
McDonald’s 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.
➢ We operate our business ethically
Sound ethics is good business. At McDonald’s, 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
McDonald’s 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, system needs
through constant evaluation and innovation.

1. Health professionals and consumer activists accuse McDonald's of contributing to the country’s
health issue of high cholesterol, heart attacks, diabetes, and obesity.
2. The relationship between corporate level McDonald's and its franchise dealers.
3. McDonald’s competitors threatened market share of the company both internationally and
domestically.
4. Anti-American sentiments.
5. 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 MCD’s 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.
VI.Five Forces Analysis
Competition
Restaurant industry is highly competitive industry. There are many small fast food businesses in the industry
who fight with each other to improve their customer base; McDonalds is not an exception to this Since its
establishment in 1940, MCD has excelled in the sector. Nevertheless, to stay in the competition, it started with
McCafé. This helped the company to stay in the business as a major fastfood business. Another major step
came out when McDonald started Breakfast to compete with the existing business serving breakfast. Hence,
this industry is extremely competitive and the MDC should be up to date with customer taste & preferences.
Ease of Entry
Although it is hard to enter the restaurant business, it is hard to establish a distinct brand name. There is a
high cost of entry in the market and there is \ high research and development costs. Large established
companies with strong brand identities such as McDonald’s 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.
Substitutes
There are many substitutes in this industry. Since there are a wide variety of products that people can
choose, they could either be substituted by MDC Burgers, Beverages, dairy products, and others.
Strength of Suppliers
Power of suppliers within the fast food industry would be relatively small, unless the main ingredient of
the product is not readily available.
Strength of Buyers
Relatively strength of buyers is low in this industry

Distinctive Notion
According to a report issued by Business Week, McDonalds holds 9th position in top 100 brand names all over
the world in 2007. Having a long history of almost 69 years, it has established a sense of closeness in the
customers. This is one of the major reasons for McDonalds is being rated one of the highest retention rates
among customers. It is now operating 120 & above affiliated franchises & restaurants.
McCafé is yet another distinctive addition to McDonald’s product line. It is part of our delicious lineup of new
McCafé specialty coffees. Available at the front counter and drive-thru, McDonald’s can now provide express
service to espresso lovers throughout the U.S. Nevertheless, it is also popular among youngsters. Breakfast
product is another specialty under the portfolio of McDonalds. Earlier opening times, premium coffee and a
flavorful breakfast menu have accelerated our morning momentum in the U.K. and U.S., growing sales and our
market share at breakfast.
VII.Financial highlights include:
•
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

Outlook for 2009

We will continue to drive success in 2009 and beyond by remaining focused on being better, not just bigger.
We will do so by further enhancing our understanding of consumers’ needs and wants; facilitating greater
sharing and adoption of best practices and new ideas worldwide; and leveraging a strategic approach to
implementing initiatives to drive the best bottom-line impact.
Despite challenging economic conditions, the McDonald’s System is energized by our current worldwide
momentum. We will continue to build on our strength in five key areas: maintaining the balance between price
and value; maximizing the benefit of available capital by improving the relevance and contemporary feel of our
existing restaurants; leveraging the equity and unique tastes of core menu favorites like the Big Mac, the
Quarter Pounder with Cheese and our world-famous French Fries; continuing our financial discipline and
evaluation of success measures to ensure these measures are driving actions that positively impact our
restaurants; and furthering operations excellence by focusing on improved execution

VIII.PEST ANALYSIS
Political & Legal
•
The international operations of McDonald’s are highly influenced by the individual state policies
enforced by each government.
Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation
under the Obama administration that impacts employment/labor, trade, product safety, transportation/logistics,
health care, tax, privacy, or environmental issues could have an adverse impact on our financial condition and
results of operations.
Economic
•
McDonald’s 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

X. BCG matrix of McDonald’s

The need for strategy in order to expand its existing product in very promising markets for McDonald’s is very
essential. McDonald’s 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 firm’s finances.

Placing products in the BCG matrix results in 4 categories in a portfolio of a 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, McDonald’s 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