McDonald’s Corporation in the new millennium

Content

• Introduction• Fast Food Industry• Hamburger Segment• Non-hamburger Segment• McDonald’s Future

Mc Donald CorporationA market leader in fast food industryRevenue $14.9 billion in 2001Serving more than 58 million customers dailyNo of global restaurants : >32,000No of countries : 117No of employees : 1.7 millionNo of franchise : > 75%Diversification – McCafe

“Big Mac Attack” – earning declines late 1990 ‘til early 2000 - Market share growth : 2.2 (Burger King 2.7, Wendy 2.5)

McDonald’s Franchises versus Company-Owned Restaurants

2004 2005 2006 2007 2008 2009

Total Restaurants

30,496 30,766 31,046 31,377 31,967 32,478

Franchised Restaurants

22,317 22,593 22,880 24,471 25,465 26,216

Company-Owned Stores

8,179 8,173 8,166 6,906 6,502 6,262

% Company-Owned Stores

26.8% 26.6% 26.3% 22.0% 20.3% 19.3%

Vision & Mission

• "McDonald's vision is to be the world's 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."

Q1 & Q2

• How are customer tastes changing in the fast-food industry? What impact do these changes have on Mc Donald?

• How well are these changes in customer tastes and preferences being reflected in competitive strategies in the industry?

Answer 1&2

• A1:• Needs: Healthy, quick, cheap• Impact on McDonald : sales & profit decline

• A2:• To develop new line of products which is more

healthier• Drive throu• Value meal

Fast Food Industry• Mature market - slow growth• Trend

– Move to non-hamburger sandwiches (Subway)- Recognition of the importance of heavy users(20%

/ 60%) single male >30yr working class job, love loud music, don’t like to read, sociable

- Increase in fast casual segment (deli sandwiches & meals), growth 15-20%

- Quick service sector only growth 2%- Change of eating habits (healthconcious & bored

with fast food)

Hamburger segment

• Major competitors : Burger King, Wendy’s, Hardees

• Drive-through – 65% sales, higher growth(3x)

Burger King Hardees’s Wendy’s

Market share No. 2 No. 4 No.3

Product (new/core) Salad, chicken whopper

Bacon Cheeseberger, Croissant Sunrise sandwiches

Burger, chicken sandwiches, value meal, Garden sensation salad

Price Valued-priced Reduced price Premium

Place Drive-through 2784 outlets

Promotion Bundled sanwiches, fries & soft drinks

Increase advertising budget 30% in 2002

Marketing strategy permanent Convert to Star Hardees, increase breakfast sales, own Carl’s junior

Quality, customer satisfaction, innovation, unit level sales, focus on in-store operation

Non-Hamburger Segment

• Main competitors : Pizzahut, KFC, TacoBell (all 3 owned by Tricon Global Restaurants)

• Higher growth than Hamburger segment• Fragmented :

– sandwiches : Subway– Pizza : Pizza Hut– Fried chicken : KFC

Pizza Hut KFC Taco Bell

Market share 22% of all pizza restaurant

Product P’zone (new) Kids Lap Top Pack (new), 18 different food combinations; Blazin’ Crispy Strips, BBT sandwiches

Grilled Stuff Burito, Chicken Quesadilla

Price premium

Place 11,000 outlets

Promotion 1 for$5.99, 2 for $10.99

Marketing Strategy Differentiated, value oriented

Brand building Shift to higher price products

Latest Development

• A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's 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.[7]

• McDonald's primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, shakes, and desserts. In response to obesity trends in Western nations and in the face of criticism over the healthiness of its products, the company has modified its menu to include alternatives considered healthier such as salads, wraps and fruit.

McDonald Product Development

• New products : Fried Chicken sandwiches, Grilled chicken sandwiches, Brownie, etc

• Advertising message: tasty & nutritious, friendly & fun

• Fitness Fun with Ronald McD for kindergardens & primary schools

• Charity : Ronald McDonld House

Introduction

• McCafe (Diversification)– Originated in Australia 1993 – >300 outlets in 17 countries– Cappuccino, lattes, tea, fruit smoothies, cake,

muffins, tarts

Q3 & Q4

• What are McDonald’s strengths and weaknesses and what conclusions do you draw about its future?

• Should McDonald’s develop a separate strategy for the heavy user segment of the fast food industry?

A3 : Strengths

• Industry leader : influence the eating of Americans • Strong financial background• Efficient production line to ensure consistent product quality

& taste.• A consistent restaurant/dining experience• A best supply chains in fast –food industry• Gain highest respect from its vendors• Conveniences restaurant worldwide• Strong brand recognition• Economy of scale

A3 : Weaknesses• Lack of products innovation• Slow in developing new product for healthier

food

A3: Conclusion

A4 : Heavy User Market• Yes! Because they are the mainstream of

company revenue• Demographic : Single Male, < 30 years,

working• Behavior : love loud music, sociable, don’t like

to read• Marketing Strategy & Marketing-Mix

Approach

A4 : Heavy User Market

• Positioning : An Economy & Happy Place for social gathering

• Product : Value meal (10 sets free 1, free add on)• Place : convenience for working people with hip

hop music (entertainment / pub)• Price : economy (more choice for value meal) • Promotion : TV, Radio, internet(facebook)• People : internal training on upsell to heavy user

Q5

• What should Jack Greenberg do to grow sales, profits, and market share at McDonald’s?

Ansoff’s Product-Market Expansion

Market Penetration (short term)-Increase drive thru & 24 hrs to more outlets-- coverage expansion of delivery service-target on heavy user segment

Product Development (long term)- Expand to Non-Hamburger segment - Fast casual & healthy meal

Market Development (short term)-Expand to other emerging market like Africa, Middle East Countries

Diversification (long term)-McCafe - expand to more countries-Backward : acquired food manufacturer

Yum! Brands

                                                                  

Yum! Brands, Inc., based in Louisville, Ky., is the world's largest restaurant company in terms of system restaurants with nearly 38,000 restaurants in over 110 countries and territories and more than 1 million associates. Yum! is ranked #216 on the Fortune 500 List and generated more than $11 billion in revenue in 2010. The Company's brands - KFC, Pizza Hut and Taco Bell – are the global leaders of the chicken, pizza and Mexican-style food categories. The Yum! system includes three operating segments: U.S., International (Yum! Restaurants International) and China Division. Outside the United States in 2010, the Yum! system opened approximately four new restaurants each day of the year, making it a leader in international retail development.At Yum! we're building a vibrant global business by focusing on four key business strategies:•Build leading brands across China in every significant category •Drive aggressive international expansion and build strong brands everywhere •Dramatically improve U.S. brand positions, consistency and returns •Drive industry-leading, long-term shareholder and franchisee value

Results for 2010 once again affirmed our consistent record of success with 17% Earnings Per Share (EPS) growth, which marks the ninth straight year we delivered at least 13% growth and exceeded our 10% EPS growth target. For the full year 2010, we opened nearly 1,400 new restaurants outside the U.S. Importantly, we maintained our Return on Investment Capital (ROIC) of 20%+ and continued to be an industry leader.We're proud of the unique culture we've built, one that's filled with energy, opportunity, and fun. We believe in our people, trust in their positive intentions, encourage ideas from everyone, and have actively developed a workforce that is diverse in style and background. Yum! is a place where anyone can, and does, make a difference

                              

Yum! Brands, Inc., based in Louisville, Ky., is the world's

Wendy’s International