mo final project

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Q.1 what opportunities and threats did McDonald’s face? How did it

handle them? What alternatives could it have chosen?

Soln.:-

OPPORTUNITIES

1) Lack of organized food retail chain or branded food items-

As McDonald’s was the first food retail chain which started in 1955. At that

time there was no other food retail chain. McDonalds established the brand at

that time to get recognition in the market and started the organized food retail

chain.

2) Vast market availability -

The opportunities for expansion are great. For example, in China, with a

population of 1.2 billion people, there are only 62 McDonald’s restaurants. It has

been realised that 99 per cent of the world population is not yet McDonald’s

customers.

3) New food items-

As McDonald’s has already made a good impression on the minds of the people

there is a good scope for introducing new food items in order to have some

variation in the food item. They have the ability to add healthier lines of food.

They have already gotten rid of super sizing and I think they have made their

fries healthier.

JAGAN INSTITUTE OF MANAGEMENT STUDIES, ROHINI

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4) Low competition-

When McDonalds was entered in the market there was very low competition.

There were few players in the market like Burger king, Wendy’s Kentucky fried

chicken etc. This didn’t have the better quality as compared to McDonalds. It

helped the McDonalds to attract the customers and established brand loyalty.

THREATS

1) Franchisee- It is a very big threat for selection of franchisee holders in

various area because it has main responsibility to maintain the image of

McDonald’s. There is one example where McDonald’s revoked the

French franchisees because the franchisee failed to meet McDonald’s

standards for fast service and cleanliness, even though their restaurants

were highly profitable. This may have delayed its expansion in France.

2) Consciousness among people about their health- McDonald’s aimed at

providing a good, fresh & healthy food. McDonald’s largely

concentrated about the fast food selling and most of the people of Europe

and Asia specially think that fast food are not healthy. McDonald’s have

a great challenge in front of it to change the perception of the people.

3) Follow the local laws- - McDonald’s had a very good and pre-planned

strategy to enter in the market. They got very good market in US and

wanted to expand their business, so they made plan according to the local

law of that area, because if they didn’t follow the local law it would hurt

the sentiments the people.


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4) People dining behavior- people of different area having different dining

strategy. Most of the people do not like fast foods especially in Asia and

Europe and must have to convince the people about the fast food

behavior.

5) Threats of Substitutes - Substitutes are the products, which can perform

the same function as the original product can perform. People go to

McDonald's for eating, and entertainment. This makes the list of

substitute products quite long, mainly consisting of local and continental

food, e.g., Karahi, Tikka, Kabab, Burger, etc.

6) Threats of New Entrants - Threat of new entrants will be high in fast

food industries because the entry barriers are very low in terms of low

capital requirement and easy access to the raw materials. No organization

has any kind of exclusive control over resources. Another factor that

increases the threat of new entries is the high profit margins in the

industry. Any how some entry barriers exist in terms of product

differentiation and economies of scale and McDonald luckily holds these

barriers over the others.

How McDonalds handled the opportunities and threats

McDonald’s success was largely dependent on its strategy to handle the

opportunities and threats. The time when McDonald’s came, there were

many opportunities and threats present in the market and McDonald’s

correctly matched its strengths with opportunities and worked on its

weaknesses to eliminate the threats.


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How McDonald’s cashed the opportunities:-

McDonald’s created the retail chain and brand for its product, as that time

there was no strong brand was present in the market.

McDonald’s rightly analyzed that food market was very big for its

product and has lots of potential,

McDonald’s introduced the new product and charged very reasonable

price for it.

As that time, competition was very low. It was the very big opportunity

for the McDonald’s to create the brand and easily attaining the customers

attention and loyalty.

How McDonald’s handled its threat:- McDonald’s also faced some

threats but very effectively removed them.

By presenting” QSCV” McDonald’s changed the perception of the people

as people were very conscious about their health.

Pricing strategy was very tremendous. McDonald’s charged very

reasonable price .it helped in grasping the market share.

McDonald’s distribution system was very strong. Because of its

distribution system McDonald’s won over the delay.

By adapting the method of food preparation according to the local laws

McDonald’s didn’t hurt the cultural sentiment of the people.

Alternatives available for McDonald’s:-

McDonald’s at the time of the entry had chosen the traditional menu.

Instead of this McDonald’s should had introduced the some new food

products to completely grab the market share. McDonald’s should done

there advertising not only by targeting the young and children but also

focused on aged people.as McDonald’s had set its quality standard but


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most of the franchisee holder didn’t follow that, so McDonald’s should

had controle on them.

So according to me these above are some alternatives that

McDonald’s could have chosen.

Q.2 Before McDonald’s entered the European market, few people

believed that fast food could be successful in Europe. Why do you

think McDonald’s has succeeded? What strategies did it follow?

How did these differ from its strategies in Asia?

Soln.:- It is true that European market has a huge scope of fast food because

there was no any branded fast food chain available in Europe. European

people have different food behavior and think that they can easily follow such

change. McDonald’s prepared foods accordance with the local laws. It have

different price rate of materials according to their people behaviors as well as

there make different menu according to the dining habits.

For example- The prices vary considerably around the world ranging from

$5.20 in Switzerland to $1.05 in China for the Big Mac that costs in the United

States $2.32. The Economist magazine even devised a ‘Big Mac Index’ to estimate

whether a currency is over or undervalued. Thus, the $1.05 Chinese Mac translates

into an Implied Purchasing Power Parity of $3.88.

McDonald’s introduced the Japanese to French fries, potatoes were

used in Japan only to make starch.

I think McDonald’s has succeeded because McDonald’s have a great

strategy to come in European market. It took the company 14 years of planning

before it opened a restaurant in Moscow in 1990. But the planning paid off. After

the opening, people were standing in a very huge amount. It has been said that


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McDonald’s restaurant in Moscow attracts more visitors—on an average 27,000

daily—than Lenin’s mausoleum (about 9,000 people). The Beijing opening in 1992

attracted some 40,000 people to the largest (28,000 square-foot) restaurant at a

location where some 8,00,000 pedestrians pass by every day.

McDonald’s have following strategies given below-

Be first in the market

Well planned for 14 years time period

Worked according to local laws

Different pricing behaviour

Different menu according to the dining habits.

McDonald’s was one of the first restaurants in Europe to welcome

families with children.

European strategy is different with respect to Asian strategy by following

reasons-

In case of Europe they take larger time as compare to Asian strategy.

They don’t know the customer behaviour of Asian countries but they well

familiar about the European customer behaviour.

Generally European are prepare to adopt the new things as compare to the

Asian. So they may have some extra afford specially in Asia.

In Europe the McDonald’s ensures consistent products by controlling every

stage of the distribution. Regional distribution centers purchase products and

distribute them to individual restaurants. The centers will buy from local

suppliers if the suppliers can meet detailed specifications. McDonald’s have

had to make some concessions to available products. For example, it is

difficult to introduce the Idaho potato in Europe.


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Q.3 What is McDonald’s basic philosophy? How does it enforce this

philosophy and adapt to different environments?

Soln:- McDonald’s have a very great strategy and philosophy. The main

philosophy of its success is to cover mainly four golden arches- quality, service,

cleanliness and values........

Quality- McDonald’s concentrated on quality of product. Better the quality

better will be the selling, and ultimately increase the profit.

Service- The main power of McDonald’s is provide better service to the

customer. They make good service for customer and keep in mind to become

the best service provider.

Cleanliness- McDonald’s sell product in an healthy environment so that they

give force on cleanliness.

Values- The value of the customer is important and well known by each and

every worker as well as to the managements.

Its products, handling and cooking procedures and kitchen layouts are

standardized and strictly controlled. McDonald’s revoked the first French

franchises because the franchise failed to meet its standards for fast service and

cleanliness, even though their restaurants were highly profitable. This may have

delayed its expansion in France.

These basic four strategies make to provide an image regarding the

freshness of food material. Quality of product is the most important strategy to

make a good image in front of the customers. Service, cleanliness and values of

the customers is awesome in the greater extend. These provide a good image of

company as well as customer satisfactions.


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Q.4 Should McDonald’s expand its menu? If you say no, then why

not? If you say yes, what kinds of products should it add?

Soln:- McDonald’s should expand its menu. The reason behind it is that, as of

now, it is facing a fierce competition from many companies like Burger king,

Wendy’s Kentucky fried chicken, pizza hut etc. In ordered to have an edge over

others, there is need to introduce variety in eatables and some additions could be

made in terms of products which have not been introduced by any of the

competitive firms.

Some of these products that should be added to the company are-

PIZZA

MOMOS

NOODLES

SEA FOOD

HOT DOGS

ICE CREAM

MOCKTAILS/BEVERAGES

Q.5 Why is McDonald’s successful in many countries around the

world?

Soln.:– Ray Kroc opened the first McDonald’s restaurant in 1955 with its

QSCV (Quality, Service, Cleanliness and Value) model which was a hit. By

1983 it had 6000 restaurants in US and by 1985 it reached on its 18000

restaurant in 89 countries. The success McDonald’s achieved in this span was


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tremendous. Following has some points that was behind this outstanding

success of McDonald’s -

1. McDonald’s was the first one in organized food retail chain . It had no

competition in the beginning , that helped in creating its brand image in

the mind of people.

2. McDonald’s put so much stress on QSCV (Quality, Service, Cleanliness

and Value) MODEL, which helped in serving the people in the best

possible way.

3. McDonald’s established its brand quickly with heavy advertising.

Advertising campaigns were based on local themes that best captured the

attention of the people.

4. McDonald’s gave training to its employees in Hamburger University and

taught them 22 languages with the aim of providing 100% customer

satisfaction around the world.

5. McDonald’s prepared food according to the local laws of the countries.

For Example, menus in ARAB countries comply with Islamic food

preparation.

6. McDonald’s planned very well before entering any market as it took 14

years of planning before it opened a restaurant in Moscow, Europe in

1990 and this planning worked very well as it was able to attract on an

average 27000 people daily.


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7. McDonald’s targeted different countries with different prices of the same

products. Hence good Pricing strategy was followed by McDonald’s.

8. McDonald’s targeted people of every age group. As in Europe

McDonald’s welcomed families with children. Not only were children

welcomed, but also in many restaurants they were also entertained with

crayons and papers, a play land, and the clown Ronald McDonalds who

can speak 20 languages.

McDonald’s aimed at the adult market as well as it introduced

Arch Deluxe on a potato-flower bun with lettuce, onions, ketchup, tomato

slices, American cheese, grainy mustard and mayo sauce. McDonald’s

over- 50 adult burger was a huge success.

9. McDonald’s focused on employee satisfaction as well. For example, in

Moscow, the pay given to employee was about 50% higher than average

Soviet salary.

10. McDonald’s excellent distribution network was one of the biggest

strengths of the company as it believed in prompt service, which

prevented the company from delay. With its expansion it started relying

on various franchisees but it also kept an eye on those franchisees to

follow McDonald’s QSCV Model properly.

11.McDonald’s time to time adapted the new items in its menu but never

disrupted existing operations. Hence it shows that McDonald’s

introduced new items in the market carefully.


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Because of these strategies adopted by McDonald’s, it is able to

survive successfully in many countries and is still dominating the market

irrespective of the presence of its competitors.

METHODOLOGY

FACTS OF THE CASE:-

Ray Kroc opened the first McDonald’s restaurant in 1955.

In 1967 McDonald’s opened its first restaurant outside the United States,

in Canada. Since then, the international growth accelerated.

By 1983 it had more than 6000 restaurants in the United States and by 1995

it had more than 18,000 restaurants in 89 countries, located in six continents.

In 1995 alone, the company built 2,400 restaurants.

In 1995, the “Big Six” countries that provide about 80 percent of the

international operating income are: Canada, Japan, Germany, Australia,

France and England. In the same year, more than 7000 restaurants in 89

countries generated sales of $14 billion.

McDonald’s “QSC&V” (quality, service, cleanliness, and value) was a

hit.

Food is prepared in accordance with local laws. For example, the menus

in Arab countries comply with Islamic food preparation laws. In 1995,

McDonald’s opened its first kosher restaurant in Jerusalem where it does

not serve dairy products

Every day, more than 33 million people eat at McDonald’s around the world

with 18 million of them in the United States.

The McDonald’s Corporation operates about 21 percent of the

restaurants. McDonald’s has been willing to relinquish the most control


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to its Far Eastern operations, where many restaurants are joint ventures

with local entrepreneurs, who own 50 percent or more of the restaurant.

European and South American restaurants are generally company-

operated or franchised (although there are many affiliates—joint ventures

—in France).

Every day, more than 33 million people eat at McDonald’s around the

world with 18 million of them in the United States.

For the Big Mac, The prices vary considerably around the world –

Switzerland $5.20, China 1.05, US $2.32 , Britain, $2.80, Denmark

$4.92, France $3.85, Germany $3.48, Hong Kong $1.23, Japan $4.65 and

Russia $1.62.

Identification of problems and issues :-

Delayed expansion of restaurants in france due to the failure of franchises in

meeting their standards for fast sevice and cleanliness.

Training issues of local managers.

Strenuous and fierce competition from other fast food companies like burger

king, Wendy’s, Kentucky fried chicken, pizza hut etc.

Factors:-

1) Internal Factors

QSC&V strategy

Employee satisfaction

Training managers

2) External Factors

Local laws of countries

Traditional menus


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Advertising

Population

Franchisees

SWOT analysis

Strengths

“QSC&V” (quality, service, cleanliness, and value)

Food is prepared in accordance with local laws.

McDonald’s international sales have been increasing by a large percentage

every year. Every day, more than 33 million people eat at McDonald’s

around the world with 18 million of them in the United States.

It has quality assurance centres(QACs),located in Europe, US and asia in

order to fulfil the quality attribute.

teach the skills in 22 languages with the aim of providing 100 percent

customer satisfaction

Not only are children welcomed, but also in many restaurants they are also

entertained with crayons and paper, a playland, and the clown Ronald

McDonald’s who can speak twenty languages

With the aging population, McDonald’s takes aim at the adult market

Its products, handling and cooking procedures and kitchen layouts are

standardized and strictly controlled

McDonald’s ensures consistent products by controlling every stage of the

distribution.

McDonald’s uses essentially the same competitive strategy in every country:

Be first in a market, and establish its brand as rapidly as possible by

advertising very heavily


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The advertising campaigns are based on local themes and reflect the

different environments

Like the U.S. franchises, restaurants abroad are allowed to experiment with

their menus.

McDonald’s has done very well with a great percentage of profits coming

now from international operations.

Weaknesses

In Moscow, McDonald’s entered the market with a bang but they were

unable to handle the customer effectively..

According to Big Mac Index, McDonald’s was unable to set the price

according to purchasing power parity of the countries.

Less number of retail outlets in 1995.

Opportunities

Yet fast food has barely touched many cultures. The opportunities for

expanding the market are great when one realizes that 99 percent of the

world population is not yet McDonald’s customers. For example, in China,

with a population of 1.2 billion people, there are only 62 McDonald’s

restaurants (1995). McDonald’s vision is to be the major player in food

services around the world.

Any new venture is risky and can be either a very profitable addition or a

costly experiment.


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Threats

Franchisee

Consciousness among people about their health-

Follow the local laws-

People dining behaviour

Threat of Substitutes

Threat of New Entrants

FORMULATIONS OF CORPORATE STRATEGY

Operative decisions:-

Well planned

Good advertising

Work according to local laws

Traditional menu

Making family restaurant

Employee satisfaction

Customer satisfaction

Bringing new items & taking initiatives

Strategic decision:-

QSC&V

Pricing

Different age section concentration

Family restaurant

Making good brand image


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Recommendation:-

McDonald’s should provide 24 hour service.

New food items should be introduced.

More kids can be attracted with the help of more toys in the form of

happy meal.

Some new stores should be opened for the convenience of the customers.


mo final project

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