JMJ Marist Brothers

Notre Dame of Marbel University

GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

JMJ Marist Brothers

GRADUATE SCHOOL
NOTRE DAME OF MARBEL UNIVERSITY
City of Koronadal, Province of South Cotabato

CASE ANALYSIS
ON
MCDONALDS CORPORATION

In Partial Fulfillment of the Requirements in BA 239

(STRATEGIC MANAGEMENT)

Presented to
Mr. Antonion L. Boquiren, MBA MNSA

Presented by:
HIBALER, ADA MAUDE S.
LASTIMOSA, MYZYRHYLL MAY L.
ONDOY, GLAIZA S.

Overview
Page | 1

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

I.

Brief History of McDonalds

II.

McDonalds Vision, Mission & Values Statement

a. Existing & Improved Vision Statement
b. Existing & Improved Mission Statement
c. Values Statement

III.

McDonalds Major Competitors

a. YUM
-

Sales and Profits & Strength and Weaknesses

b. Burger King
-

Sales and Profits & Strength and Weaknesses

c. Wendys
-

Sales and Profits & Strength and Weaknesses

IV.

Competitive Profile Matrix

V.

External Opportunities and Threats

VI.

External Factor Evaluation (EFE) Matrix

VII.

Internal Strengths and Weaknesses

VIII.

Internal Factor Evaluation (IFE) Matrix

IX.

Matrices
a. SWOT Matrix
b. Space Matrix
c. Space Matrix Graph
d. Grand Strategy Matrix
e. Internal-External (I-E) Matrix
f.

Quantitative Strategic Planning Matrix (QSPM)

X.

Market Analysis

XI.

Implementation
a. Forecasted Ratios
b. Financial Statements

XII.

Recommended Specific Annual Objectives

XIII.

Recommended Procedures for Strategy

Page | 2

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

I.

BRIEF HISTORY OF MCDONALDS CORPORATION

McDonalds is the worlds leading fast food restaurant chain with more than

34,000 local restaurants serving approximately 69 million people in 119 countries each
day. More than 80% of McDonalds restaurants worldwide are owned and operated by
independent local franchisees.
On December 1948, the first McDonalds restaurant is opened in San
Bernardino, California by brothers Richard and Maurice McDonald. Offers burgers, fries,
milk shakes, soft drinks, and apple pie. Ray Kroc, a milkshake machine salesman,
suggests nationwide franchising and acts as a franchising agent for the brothers in the
year 1954. He run the first restaurant in 1955 and opens in Des Plaines, Illinois. Several
problems arise in adapting the system used by Richard and Maurice to the new
restaurant. First logo, Speedee, is introduced. The next year, Kroc has to repurchase
the franchise rights for the Cook County restaurant. They had been previously sold to
the Frejlack Ice Cream Co. Fred Turner is hired to oversee operations. In 1961, he buys
out the McDonald brothers for $2.7 million and opens his first Hamburger University, for
the training of franchisee. On 1984, Kroc died and Ed Rensi became the president of
McDonalds USA. Go Active! Happy Meal, was then introduced in 2004 consisting of a
salad, water, stepometer, and an exercise booklet.
II.

MCDONALDS VISION MISSION STATEMENT

VISION
(Existing Vision Statement)
Be the worlds best quick service restaurant experience, being the best means

providing outstanding quality service, cleanliness, and value so that we make every
customer in every resto smile.

Page | 3

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

(Improved Vision Statement)

To be the worlds best quick service restaurant experience
The statement is quite long and includes phrases which only describes their
interpretation of being the best but does not depict what they really want to become.
The phrase to be the worlds best quick service restaurant experience is enough to
express futuristic view of McDonalds.
MISSION STATEMENT
(Existing Mission Statement)
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
(Improved Mission Statement)
Be the best employer for our people in each community around the world. Deliver
the operational excellence to our fast food restaurants while insuring we operate
ethically; Achieve enduring profitable growth by expanding the brand and leveraging the
strengths of McDonalds system through innovation, corporate citizenship and
technology. Fulfilling our customer will automatically improve our profit.

Page | 4

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

Be the best employer for our people in each community around the world.
(Markets, concern for employees)

Deliver the operational excellence to our fast food restaurants while insuring we
operate ethically. (Philosophy, Products & Services)

Achieve enduring profitable growth by expanding the brand and leveraging the
strengths of McDonalds system through innovation, corporate citizenship and
technology. (Technology, Concern for Survival, Growth & Profitability, Concern for
public image)

Fulfilling our customer will automatically improve our profit. (Customers, Selfconcept)

VALUES

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 quality, service, cleanliness and
value (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

Page | 5

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

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 our

three-legged

stool

of

owner/operators, suppliers, and company employees, is our foundation, and balancing

the interests of all three groups is key.
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.

Page | 6

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

McDonalds is a publicly traded company. As such, we work to provide sustained

profitable growth for our shareholders. This requires a continuous 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.

III.

MCDONALDS MAJOR COMPETITORS

a. YUM BRANDS
SALES & PROFITS
Market Cap
Employees
Quarterly Revenue Growth
Revenue
Gross Margin
Operating Profits
Operating Margin
Net Profits
EPS ratio
P/E Ratio
PEG (5 yr expected)
P/S:

17,610,000,000
53,200
6.60%
9,700,000,000
25.75%
1,860,000,000
12.95%
840,000,000
3.037
22.13
1.73
1.79

STRENGTHS & WEAKNESSES

Strengths

Weaknesses
1. Continuous rapid overseas growth and 1. Underperformance and slowing of U.S.
expansion, especially in China
sales, specifically with KFC and Pizza
2. Worlds largest restaurant company:
Hut brands
Page | 7

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

3.

4.
5.
6.
7.

over 37,000 restaurants in 110

2. Relatively small market share in
countries and territories
oversaturated U.S. fast food industry
KFC, Pizza Hut, Taco Bell, and Long
3. Older U.S. restaurant units losing sales
John Silvers are worldwide leaders in
annually
chicken, pizza, Mexican, and seafood
quick-service sectors
KFC is the first, the largest, and fastest
growing quick-service restaurant chain
in China
Strong domestic and international
brand recognition and brand image
13% annual Earnings Per Share
growth since 2001
Product diversity across different
brands

B. BURGER KING
SALES & PROFITS
Market Cap
Employees
Quarterly Revenue Growth
Revenue
Gross Margin
Operating Profits
Operating Margin
Net Profits
EPS ratio
P/E Ratio
PEG (5 yr expected)
P/S:

3,510,000,000
37,000
8.90%
2,180,000,000
34.08%
334,000,000
11.02%
102,000,000
0.763
34.08
1.45
1.60

STRENGTHS & WEAKNESSES

Page | 8

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

Strengths
1.
2.
3.
4.

Geographic Diversification
Established Market Share
Globally Recognized Brand
Superior Growth Plan

Weaknesses
1. Vulnerability to Labor and
Regulatory Influences
2. Reliance on so called Super
Customers

C. WENDYS
SALES & PROFITS
Market Cap
Employees
Quarterly Revenue Growth
Revenue
Gross Margin
Operating Profits
Operating Margin
Net Profits
EPS ratio
P/E Ratio
PEG (5 yr expected)
P/S:

3,510,000,000
37,000
8.90%
2,180,000,000
34.08%
334,000,000
11.02%
102,000,000
0.763
34.08
1.45
1.60

Page | 9

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

STRENGTHS & WEAKNESSES

Strengths

Weaknesses
1. Breakfast Menu Problem
2. Management

1. Expert Management
2. Atmosphere
3. Global Brand

McDonalds
Critical
Success
factors

Yum Brands

Wendys

Weight Ratin Weighte Ratin Weighte Ratin Weighte Ratin Weighte

s
g
d Score g
d Score g
d Score g
d Score
0.0 to
1.0 1 to 4

Market Share

Burger King

0.18

1 to 4
0.72

1 to 4
0.54

1 to 4
0.54

0.36

Page | 10

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

Financial
Position

0.12

0.48

0.36

0.36

0.36

Global
Expansion

0.09

0.36

0.27

0.27

0.18

Customer
Service

0.09

0.18

0.27

0.18

0.18

Advertising

0.07

0.28

0.28

0.21

0.14

Price
Competitivenes
s

0.07

0.28

0.28

0.21

0.14

Product
Innovation

0.11

0.22

0.33

0.33

0.33

Product Quality

0.1

0.1

0.4

0.2

0.4

Customer
Satisfaction

0.08

0.24

0.24

0.24

0.32

Management

0.09

0.36

0.27

0.27

0.27

Total

3.22

3.24

2.81

IV.

COMPETITIVE PROFILE MATRIX (CPM)

V.

MCDONALDS EXTERNAL OPPORTUNITIES & THREATS

1.
2.
3.
4.

External Opportunities
New Products & Services
Beverage Market
Growth of Franchise Restaurants
Demand for Organic Products

2.68

External Threats
1. Change in Commodity Prices
2. Food Safety and Food Borne Illness
Concerns
3. Economic Slowdown
Page | 11

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

5. International Expansion
6. Conservation (going green)

VI.

4. Growing Health Consciousness

5. Intense Competition (dine-in
restaurants, Burger King)
6. Legal Challenges (McDonalds
faces many lawsuits)

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Key External Factors

Weights
0.0 to
1.0

Opportunities
New Products & Services

Rating
1 to 4

0.1
0.0

Beverage Market (frosties)

Growth of Franchise Restaurants

Weighted Score

0.3

0.16

0.27

2
4

0.12
0.4

0.07

0.21

4
4

0.28
0.4

0.16

0.36

0.27
3.00

0.0
0.0
Demand for Organic Products
International Expansion

Conservation (going green)

Threats

0.1
0.0

0.0
Change in Commodity Prices

7
0.0

Food Safety and Food Borne Illness Concerns 7

Economic Slowdown
Growing Health Consciousness
Intense Competition (din-in restaurants,
Wendy's)
Legal Challenges (McDonalds faces many
lawsuits)
Totals

VII.

0.1
0.0

8
0.0
9
0.0
9
1

MCDONALDS INTERNAL STRENGTH & WEAKNESSES

Page | 12

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

INTERNAL STRENGTHS
1. Strong Global Presence (located
in over- 100 countries)
2. Strong Real Estate Portfolio
3. Brand Recognition
4. Revenue Growth 9% (Above
Industry Average of 7.5%)
5. The Ronald McDonald House
(Children Charity)
6. Systemization and Duplication
(Consistency)

VIII.

INTERNAL WEAKNESSES
1. Public Perception (perceived as a
contributor to societies obesity
problem)
2. Product Innovation
3. Advertising (targets young
children)
4. Customer Service
5. Market Saturation (more difficult
to add new stores)
6. Labor Turnover

INTERNAL FACTOR EVALUATION (IFE) MATRIX

Key Internal Factors

Rating
1, 2, 3 or
0.0 to 1.0
4
Internal Strengths
3 or 4
Strong Global Presence (located in over 100 countries)
0.09
4
Strong Real Estate Portfolio (franchises, land,
buildings)
0.09
4
Brand Recognition (Ronald McDonald is as famous as
Mickey Mouse)
0.11
4
Revenue Growth 9% (Above Industry Average of 7.5%)
0.11
4
The Ronald McDonald House (Children Charity)
0.06
4
Systemization and Duplication Process (consistency)
0.09
4
Internal Weaknesses
1 or 2
Public Perception (perceived as a contributor to
societies obesity problem)
0.09
1
Product Innovation
0.08
2
Advertising- targets young children (many countries
ban unhealthy advertisements)
0.07
2
Customer Service
0.08
2
Market Saturation (more difficult to add new stores)
0.07
2
Labor Turnover
0.06
1
Totals
1

IX.

Weights

Weighted
Score

MATRICES
Page | 13

0.36
0.36
0.44
0.44
0.24
0.36

0.09
0.16
0.14
0.16
0.14
0.06
2.95

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

a. SWOT ANALYSIS

SO Strategies

WO
Strategies

ST Strategies
WT Strategies
1. Launch
Marketing
Campaign for
Ronald McDonald
House to
increase Brand 1. Research and
1. Advertise Organic Recognition and Develop products
1. Develop New Products Products to Older
Customer
that quell Growing
& Services For Global
Demographic. (W3, Loyalty. (S5, S3, Health Concerns.
Markets. (S1, O1)
O4, O6)
T3, T5)
(W1, T2, T4)
2. Develop
alternatives to
existing menu
that can be
2. Spend more
easily
2. Increase
money on Research implemented and spending on
and Development to don't rely on
Customer Service
2. Develop Green
create new products more expensive efforts to decrease
Packaging for all Stores. and services. (W2,
commodities.
legal challenges.
(S6, O6)
O1)
(S6, T1)
(W4, T6)
3. Integrate into new
3. Create an organic
territories. (S1, S4, O5) menu. (W2, O1)

b. SPACE MATRIX

Financial Strength

Rating

Environmental
Stability

Return on investment

Rate of Inflation

-3

Leverage

Demand Changes

-3

Net Income

Price elasticity of
demand

-1

EPS

Competitive pressure

-3

ROE

Barriers to entry new

markets

-3

Cash Flow

Risk involved in

-2

Rating

Page | 14

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato
business
Average

4.67

Average

-2.5

Y-axis

2.17

Competitive Advantage

Rating

Industry Strength

Rating

Market Share

-1.00

Growth potential

Product Quality

-1.00

Financial stability

Customer Loyalty

-1.00

Ease of entry new

markets

Control over other parties

-2.00

Resources utilization

Profit potential

Demand variability

Average

4.33

X-axis

3.08

Rating

Environmental
Stability

Rating

Rate of Inflation

-3

Leverage

-3

Net Income

Demand Changes
Price elasticity of
demand

EPS

-3

ROE

Cash Flow

Competitive pressure
Barriers to entry new
markets
Risk involved in
business

Average

4.67

Average

-2.5

Y-axis

2.17

Average

C.

-1.25

McDonalds SPACE MATRIX

Financial
Strength
Return on
investment

-1

-3
-2

Competitive
Advantage

Rating

Industry Strength

Rating

Market Share

-1.00

Growth potential

Product Quality

-1.00

Financial stability

Page | 15

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

Customer
Loyalty

-1.00

Ease of entry new

markets

Control over
other parties

-2.00

Resources utilization

Profit potential

Demand variability

Average

4.33

Average

-1.25

X-axis

3.8

D. Grand Strategy Matrix

E. McDonalds Grand Strategy Matrix

Page | 16

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

F. INTERNAL-EXTERNAL (I-E) MATRIX

IFE Scores
Hold And Maintain

Strong

Average

3-4

Weak

2-2.99

1-1.99

II

III

IV

VI

EFE Scores

High 3-4

Medium 22.99

McDonalds

Page | 17

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

VII

VIII

IX

Low 1-1.99

G. QUANTITATIVE STRATEGIC PLANNING MANAGEMENT

Option
1

Key External Factors

Opportunities
New Products and
Services
Beverage Market
(frosties)
Growth of Franchise
Restaurants
Demand for Organic
Products
International
Expansion
Conservation (Going
Green)
Threats
Change in Commodity
Prices
Food Safety and Food Borne
Illness Concerns
Economic
Slowdown
Growing Health
Consciousness
Intense Competition (Dine-In
Restaurants, Wendy's)
Legal Challenges
(8.8million lawsuits)

Option2
Spend more
Create an
money on R&D to
Organic
create new products
and services and
increase the efficiency
menu.
of operations
T
T
Weight
AS
AS
AS
AS
1 to
4
1 to 4
0
0
0.1
4
.4
4
.4
0.0
0
0
8
3
.24
2
.16
0.0
9
0
0
0.0
0
0
6
4
.24
2
.12
0.1
0.0
7

0
0
4

.28

.14

0.0
7

0
0
3

.21

.14

0.0
7

0
0
0.1
0.0

.2

.32

.3

.24

0.0
9

0
0
0

0
4

.36

0
3

.27

0.0
9

Page | 18

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

total should be
1.0

Key Internal Factors

Strengths
Strong Global Presence (located in
over 100 countries)
Strong Real Estate Portfolio (land,
buildings)
Brand Recognition (Ronald
McDonald is as famous as Mickey
Mouse)
Revenue Growth 9% (Above
industry average 7.5%
The Ronald McDonald House
(Children Charity)
Systemization & Duplication
Process (consistency)
Weaknesses
Public Perception (perceived as a
contributor to societies obesity
problem)
Product Innovation
Advertising (targets young
children)
Customer Service
Market Saturation (more difficult to
add new stores)
Labor Turnover
total should be
1.0

Organic
1 to 4
0.09

0.09
0.11

Menu

0.36

Increase $
on
1 to 4
4

0
4

0.44

Research &
Development

0.36
0

0.44

0.11

0.06

0.09

0.09
0.08

4
4

0.32

3
4

0.27
0.32

0.07
0.08

0
0

0
0

0.07
0.06

0
0

0
0

3.3

3.23

Page | 19

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

H. MARKET ANALYSIS

Alternative Strategies

IE

SPACE

GRAND

COUNT

Forward Integration

Backwards Integration

Horizontal Integration

Market Penetration

Market Development
Product Development

Concentric Diversification

Conglomerate Diversification

Horizontal Diversification

Joint Venture
Retrenchment

Divestiture

Liquidation

I. RECOMMENDED SPECIFIC ANNUAL OBJECTIVES

o
o
o
o
o
o

Better restaurant operations

Branded affordability
Menu variety and beverage choice
Grow market share
Maintain debt-to-capital levels to 35-40%
Create long-term profitable growth for shareholders

Page | 20

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City ofmenu
Koronadal,
Province
South Cotabato
organic
to satisfy
theofgrowing
hunger

J.

Create an
for healthier
foods. This will increase McDonalds sales and be a positive effective
on its public image.
-

Advertisement to promote new

menu

10,000

Develop green packaging for all

stores.
This will decrease
McDonalds operations expenses
and create a better atmosphere in
the long run.

10,000

Spend more on Research &

Development to create new
products
and
services
and
increase the efficiency
of
operations.
Total Costs=

10,000

REC
OM
ME
NDA
TIO
NS

$30,000

GOING ORGANIC
o Organic Food sales are anticipated to increase an average of 22 percent each
year from 2007 to 2010.
o Organic food represents approximately 2.8% of overall food and beverage sales
in 2006. The organic sector grew 20.9% in 2006.
o Total US organic sales, including food and non-food products, were $17.7 billion
in 2006 up 21% from 2005.
ONATURALS ORGANIC FAST FOOD
o McDonalds competition in the organic segment.
o Privately owned company.
o Locations: 2 in Maine, 1 in Massachusetts, 1 in Arizona, 1 in Kansas.
o Serves only organic food and beverages.
Page | 21

JMJ Marist Brothers

Notre Dame of Marbel University
GRADUATE SCHOOL
City of Koronadal, Province of South Cotabato

o Easy acquisition for McDonalds if they pursue the organic segment of the fast
food industry.

UPDATE-CURRENT STRATEGY AND OBJECTIVES 2007-2008

Our Plan to Win, with its strategic focus on "being better, not just bigger," has
delivered even better restaurant experiences to customers and superior value to
shareholders.
We have the world's best owner/operators, suppliers, and employees united in
our commitment to customers.
We are leveraging greater consumer insight to deliver sustainable business
results for the long-term benefit of our shareholders.

Page | 22