1. Strategic management
Class 1 – Group 4
Team members:
Tong Tran Thanh Phuong – 295920
Tran Huu Minh Quan – 295923
Pham Chau Bao Khoa - 295916
2. McDonald’s
Problem statement:
• Chief Executive Don Thompson stated: “More specifically,
growth in the informal eating-out industry has been relatively
flat to declining around the world and we expect that to
continue.”
3. Introduction
• Background:
Founded: 1955, Franchising since: 1955
Largest fast-food company
Operating in over 121 countries, over 35000 locations with 1.5 million employees
Revenues $28.1 billion in 2013.
• Mission
• Vision
• History
4. Vision
"McDonald's vision is to be the world's best quick service
restaurant experience. Being the best means providing outstanding
quality, service, cleanliness, & value, so that we make every
customer in every restaurant smile."
5. Mission
McDonald's brand mission is to be our customers' favorite 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.
6. History
• 1940 First McDonald’s
• 1952 Attempts at franchising
• 1954 Milk Shake Machine
• 1955 prototype opens in Des Plaines, IL
• 1956 14 McDonald’s
• 1961 McDonald brothers sell rights
• 1965 McDonald’s go public
• 1968 Introduction of Big Mac and shift to Network Television
7. History (cont)
• 1970 1600 restaurants
• 1980 6000 McDonald’s Restaurants
• 1990 record sales
• 1994 Kuwait City, Kuwait
• 2002 Forty seven years after
30,000 locations
2000 new restaurants
World Wide Web
McDonald’s a recognized Brand Name
15. McDonald’s Organization Structure
• Having tight control of the firm
• Easily operate the company
• Improving employees’ performance
• Atmosphere of cooperation and teamwork
• The following chart is the organizational structure of McDonald
16. Don Thompson
Chairman and COO
McDonald’s
Jim Skinner
President and COO
McDonald
in Greece
McDonald
in Asia
McDonald
in Pacific
Alan D. Feidman
President and COO
The Americans
Executive vice
president
Zone
managers
Regional
managers
Executive vice
president
Zone managers
Regional
managers
Market
manager
Franchisees
Operational
Manager
Supervisors
Executive vice
president
Zone managers
Regional
managers
Regional Human
Resources Manager
Store managers
First Assistant
Shift Managers
Crow Persons
McDonald’s
Organization Structure
17. Key Processes
• Doing business over 100 countries
• 85% franchised restaurants
• All franchisees are independent, full-time operators
• Entrepreneur’s number-one franchise named
20. Competitive advantages
• Striving to be cost leaders: prices cannot be matched by
competitors.
• The speedy delivery of the food.
• Strong global presence and largest market share in fast-food
industry.
• Net competitive advantage.
22. Current strategy of McDonald's:
• Low-cost strategy to compete with competitors
• Cutting cost
• Operating more outlets
• Focusing on Plan to Win
23. Financial Analysis
Short-term solvency, or liquidity, ratios:
2012 2013
Current ratio 1.45 1.59
Quick ratio 1.09 1.3
Cash ratio 0.68 0.88
24. Financial Analysis
Long-term solvency, or financial leverage, ratios:
2012 2013
Total debt ratio 0.567 0.562
Debt-equity ratio 0.891 1.436
Equity multiplier 2.313 2.287
Times interest earned
ratio
63.9 63.61
Cash coverage ratio 18.5 18.7
25. Financial Analysis
Asset utilization, or turnover, ratios:
2012 2013
Inventory turnover 137.64 139.07
Days’ sale in inventory
2.65 2.62
Receivables turnover
20.04 21.3
Days’ sales in
receivables 18.21 17.14
Total asset turnover
0.78 0.77
Capital intensity
1.28 1.30
27. Financial Analysis
Market value ratios:
2012 2013
Price-earnings ratio 20 17.4
Market-to-book ratio 7.52 5.9
28. SWOT analysis
Strengths Weaknesses
The most recognized brand
Strong global presence
McDonald’s Plan to Win
Strong financial performance and position
Operating in many diverse cultures
Offering many popular brands
Success in target very young children
Low-cost leader
Good socially responsible and community oriented
Convenient
Negative publicity
Unhealthy food menu
High employee turnover
Low differentiation
Legal action
Use of HCFC-22
Lacking breakfast menu
Social trend
Threats Opportunities
Competition
Healthy issue
Law issue
Saturated in fast-food industry
Economic recession
Increasing demand for healthier food
Growth of the fast food industry
Globalization
Low cost menu is preferred by larger number of customers
Appearance of freebies and discounts
Diverse tastes and needs of customers
29. SWOT Matrix
S-O strategies S-T strategies
• Introducing new nutritious menus
• Expanding to Asia market
• Taking advantage of brand name
• McDonald’s “Plan to Win”
• Low-cost leadership
•
• Taking advantage of brand name
• Giving back to community
• Providing new healthier menu
W-O strategies W-T strategies
• Minimizing the negative publicity
• Increasing differentiation
• Using less Trans fat
• Switching from HCFC-22 into HFC
• Increasing Employee satisfaction
32. Key External Factors Weight Rating Weighted Score
Opportunities
Low-Price Menu that will attract low-income consumers 0.15 3 0.45
Demand for healthier and more creative products 0.05 3 0.15
Competitors lack of McCafe service 0.15 4 0.6
Expansion in other countries ( China, India) 0.07 2 0.14
Brand loyalty 0.05 2 0.1
Demand for free Wi-Fi versus competitor charges 0.09 3 0.27
Demand for more salad choices on menu 0.09 3 0.27
Weaknesses
Having negative heath issues for consumers such as obesity
and heart attack
0.06 3 0.18
Having negative attention from media because of marketing
toward children.
0.04 2 0.08
Price wars between competitors will cause McDonald lose
customers.
0.07 2 0.14
High turnover rate 0.03 2 0.06
Rising costs 0.06 2 0.12
Calorie counts & nutritional value posted 0.09 2 0.18
Total 1 2.74
External Factors
Evaluation (EFE)
Matrix:
•Increasing sales by Low price
menu & McCafé.
•Creating more diversified menu
with low price.
•Having more competitive
advantages and opportunity
•Biggest weaknesses is healthier
issue and lawsuit issue.
33. Key Internal Factors Weight Rating Weighted
Score
Strengths
Strong brand name, image and reputation. 0.12 4 0.48
Strong global presence. 0.12 3 0.36
Specialized training for managers known as the
0.10 3 0.30
Hamburger University.
McDonalds Plan to Win focuses on people,
products, place, price and promotion
0.12 4 0.48
Introduction of new products 0.06 4 0.24
Customer focus 0.06 4 0.24
Strong performance in the global marketplace. 0.12 4 0.48
Weaknesses
Unhealthy food image 0.08 1 0.08
High Staff Turnover including Top management 0.04 1 0.04
Sued multiple times for serving unhealthy food 0.04 2 0.08
Weakinanalyzingtheneedsofcustomers 0.04 2 0.08
Ignoring breakfast from themenu. 0.06 1 0.06
McDonald's uses HCFC-22 to make polystyrene
0.04 1 0.04
that is contributing toozone depletion
Total 1.00 2.96
Internal Factor Evaluation
(IFE) Matrix
•McDonalds performing well on
strengths and weaknesses
• Taking competitive advantages.
•Being the icon of fast-food
worldwide by franchising.
•Catching the current market trends
and changing.
34. Boston Consulting Group (BCG)of McDonald's
products
• 1: McCafé
• 2: Big Mac
• 3: The Premium McWrap
• 4: McLean Deluxe
35. Financial Strength Rating Environmental Stability Rating
Return on investment. 3 Rate of inflation -3
Leverage 4 Demand Changes -3
Net Income 3 Price Elasticity of demand -1
EPS 3 Competitive pressure -3
ROE 2 Barriers to entry new markets -3
Cash Flow 4 Risk involved in business -2
Average 3.17 Average -2.5
Y-axis 0.67
Competitive Advantage Rating Industry Strength Rating
Market share -4 Growth potential 3
Product Quality -4 Financial stability 5
Customer Loyalty -2 Ease of entry new markets 4
Control over other parties -2 Resources utilization 4
Profit potential 2
Demand variability 3
Average -3 Average 3.5
X-axis 0.5
The Strategic Position and Action Evaluation
( SPACE Matrix)
McDonald’s should:
•Forward integration
•Product development
Conservativ
e
Aggressive
FS
C IS
A
Defensive Competitive
ES
0.67
0.
5
36. Grand Matrix
• Positioning in Quadrant IV
• High market share of 49.6%
• Slowly growth of the Fast-food
industry.
• Market expansion and product
development are appropriate
strategies.
Quadrant II Quadrant I
Quadrant
IV
Quadrant
III
Rapid Market Growth
Strong
Competitive
Position
Weak
Competitive
Position
Slow Market Growth
37. Strategy 1
• Expanding to Asia market especially China and India.
Implementation:
• Identifying market segmentation.
• Focusing more on potential market.
• Legal permission in foreign country
• Innovating and cooperating with community
38. Strategy 2
• Focusing on providing diverse menu include nutrition foods.
Implementation:
• Conducting customer survey.
• Researching new products.
• Improving their image.
39. Time Table
Expanding in Asia market
PLAN PLAN ACTUAL ACTUAL %
ACTIVITY START
DURATIO
N START DURATION
COMPLET
E
1 Customer survey 1 10 1 6 0%
2 Analyze data 5 6 7 6 0%
3 Identify market needs, segments 10 8 10 8 0%
4 Determine potential customers 17 6 17 6 0%
5 Align with marketing department
for new products 22 3 22 4
0%
6 Legal permission in foreign country 1 3 1 3 0%
7 Prepare infrastructures 22 8 22 7 0%
8
Find suppliers for beef and fresh
vegetables 3 5 3 5
0%
9 Innovate and cooperate with community 3 4 3 4 0%
1
0
Sustain the profit level of products
then expand to new market 30 10 29 15
0%
41. E-Commerce
• Teaming up with DirectPay to expand online services in India
• Cooperating with WorldLine to host new website in France
• Available online ordering in several countries
• Hiring the first Chief Digital Officer
42. Recommendation
Long-term Strategy
• Expanding influence and presence in Asia market
Specific Strategy
• Opening at least 1 restaurant per day in China
• Having diversity menu in India
• Receiving feedbacks
43. Conclusion
• Good performance in fast-food industry
• Long reputation for strong marketing campaigns.
• Must change to adapt new environment
• Have more innovation and creative strategy
