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McDonald’s

Cheryl Wilcox
Dale Brockway
Marc Camerlin
Belisa Anzalotti
Agenda

Company Background
SWOT Analysis
Strategies: Past and Future
McHistory
• Ray Kroc opens the Des Plaines restaurant in
1955. First day’s revenues - $366.12
• In 1965, McDonald’s goes public with the
company’s first offering on the stock
exchange
• In 1967, Jim Delligatti invents the Big Mac
• “Makadonaldo” first opened in 1971 (Japan)
McHistory

• Egg McMuffin is introduced in 1973;


Developed by owner operator Herb Peterson
• In 1974 Fred Hill of the Philadelphia Eagles
teams up with McDonald’s to create the Ronald
McDonald House
• Happy Meals (1979)
Fascinating McFacts
• Today, the company operates more than
23,500 restaurants in 109 countries
• Since its founding in 1955, McDonald’s has
sold well over 100 billion hamburgers
• McDonald’s prepares more than 6.8 million
pounds of French fries every day
• More than 50,000 students have graduated
from “Hamburger University”
Franchising McFacts
• Approximately 85% of McDonald’s restaurant
businesses world-wide are owned and
operated by franchisees
• All franchisees are independent, full-time
operators
• McDonald’s was named Entrepreneur’s
number-one franchise for 1997
McDonald’s
Strategic Issue

To Consistently Increase
Shareholder Value through the
Growth of Profits and Market Share
in the Fast Food Industry
SWOT Analysis - Strengths

• Brand Equity…world-wide
• 42% of US fast-food hamburger business
• Consistency of food
• Successful items: Fries, Happy Meal, Big Mac,
Egg McMuffin, Promotions
• Overseas market
• Balance sheet position
SWOT Analysis - Weaknesses

• Declining market share


• Weak product development
• Disgruntled franchisees
• Quality and taste of products
Whose food do Americans
really like best?

Best-tasting food? Best-tasting burgers?

Wendy’s 36%* Burger King 42%


Burger King 32% Wendy’s 32%
McDonald’s 21% McDonald’s 17%

* Percent of respondents
SWOT Analysis - Weaknesses

• Declining market share


• Weak product development
• Disgruntled franchisees
• Quality and taste of products
• Slowed revenue and income growth
Income Trends
Returns
20.0%
18.0% 17.7%

16.0% 16.6%
14.7%
14.7% 14.4%
14.0%
13.0% 14.6%
12.0% 12.3%
10.2%
10.0%
9.1%
8.0%
6.7%
6.0%
4.0% 4.5%

2.0%
0.0%
1994 1995 1996 1997

Revenue Net Income Profit margin


Stock Price
$100

$80 $84

$60 $63
$58
$48 $50
$40

$20

$-
1996 1997 1998
McDonald's Growth S&P Industry Growth
SWOT Analysis -
Opportunities

• International expansion
• Only serving 1% of the world’s
population
• Growing dining-out market
SWOT Analysis - Threats

• Mature/overstored industry
• Strength of competition
• More health-conscious consumers
• Changing demographics
• Fluctuation of foreign exchange rates;
Economies
1997 Competitor Financial
Comparison
20%
16.3%
15%

10% 8.7%
6.8% 7.4%

5% 4.0% 4.4%

0%
Revenues Net Income

McDonald's Burger King Wendy's


Past McStrategies
• Product Development
– Successes: Fries, Happy Meal, Big Mac,
Egg McMuffin, Promotions
– Failures: McPizza, Fajita, Carrot Sticks,
McLean, and the Arch Deluxe
Past McStrategies
• Market Development
– Success: International growth
– Failure: Over-expansion in US
• Alternative locations
• Forward Integration
– Distribution through franchisees with
control over store presentation, menu
items
• Joint Venture: Franchisees
New McStrategies
• Leverage Brand Equity
• Product Development: Focus on
core business
– Quality and taste issues
• Food delivery methods
• MBX (McDonald’s Big Extra)
– Family Value Meal
New McStrategies
• Joint Venture (Franchisee): Change
methods of dealing with franchisees
– To better motivate owners and foster
team spirit
– Enhance owners’ participation in process
improvements
New McStrategies
• Market Penetration and Development
– Continue International expansion
• Retrenchment
– Home office cost reductions
– Splitting into five geographic divisions
• Horizontal Integration
– Purchase competition with differing
target markets
McDonald’s

Cheryl Wilcox
Dale Brockway
Marc Camerlin
Belisa Anzalotti