McDonald’s
1.0. Introduction
McDonald’s is one of the largest fast food chains alongside Burger King and others. The restaurant has 36000 outlets that serve over 60 million customers on daily basis in over 100 countries. McDonald’s head quarters are situated in Oak Brook, Illinois, United States. The restaurant employs over 400000 employees worldwide thus becoming the biggest employer in the fast food industry. McDonald’s main products are salads, hamburgers, soft drinks, desserts, French fries, and chicken (Mcdonald.com, 2014).
2.0. Mission and Vision
2.1. Current Mission and Vision
2.1.1. Mission
“McDonald’s mission is to establish itself as a customer’s favorite place and choice of food” (Mcdonad.com, 2014)
2.1.2. Vision
“A restaurant that is best choice of its customers” (McDonald.com,2014)
2.2. Improved Mission and Vision
2.2.1. Mission
“McDonald’s aims to prepare quality and healthy foods for its customers and make itself consumers’ best choice. Furthermore, it’s the ambition of McDonalds to operate its business activities in an ethical way and co-exist peacefully with the society”
2.2.2. Vision
“A profitable future that gives it the ability to give back to the community that made it what it is. McDonald dreams of a bright future for itself, its associates, members, and employees.
2.2.3. Justification for Improvement
A mission and vision statement must show that the restaurant promises to serve its customers with commitment because it values them. The statement must also recognize the support of the local community and promise to give back. The words ‘quality’ in the mission and ‘contribute to the community’ has been specifically added to the statements to show commitment to its customers and gratitude to the local community.
2.3. Comparison with Competitor’s Mission and Vision Statements
McDonald’s main rival in business is the Burger King Restaurant that is second most preferred by customers.
2.3.1. Burger King’s Mission
“To prepare and serve quick food that satisfies the needs of our guests quickly, accurately and courteously, and in more hygienic environment than our rivals. Burger King will conduct its business activities in an ethical way and utilizing the best of its employees. The restaurant aspires to increase its profits over time and provide a platform for career advancement for any of its members.” (Burgerking.org, 2014)
2.3.2. Burger King’s Vision
“A restaurant that serves the best burgers in the world that is real and authentic, and fresh consistent with customer needs. A profitable restaurant in an ethical environment leaving all that are associated with us satisfied.” (BurgerKing.org, 2014)
2.3.3. Comparison
McDonald’s statement is shorter and straight to the point as compared to Burger King’s, which is rather comprehensive and wordy. While Burger King’s mission statement promises the customer quick and satisfying food, McDonald’s aims to establish itself a customer’s favorite place. The latter’s mission statement is not specific as compared to the former’s.
3.0. Financial Ratios (for 2013 and 2014)
3.1. Profitability Analysis
To analyze the profitability of McDonalds the following the ratios were calculated; gross profit margin, operating profit margin, net profit margin, return on equity and return on assets
Table 1.1 shows the profitability ratios for McDonalds for 2013 and 2014
| Year | 2014 | 2013 |
| Gross Profit Margin | 38.10 % | 38.79 % |
| Operating profit Margin | 28.97 % | 31.18 % |
| Net profit Margin | 17.34 % | 19.87 % |
| Return On Equity | 37.34 % | 34.89 % |
| Return On Assets | 13.88% | 15.25% |
3.2. Analysis of Profitability ratios
McDonald’s gross profit margin, operating profit margin, net profit margin , and return on deteriorated between 2013 and 2014. Return on Equity ratio improved from 2013 to 2014.
Table 1.2 shows the different financial ratios for
| Liquidity Ratios | |
| Current Ratio | 1.76 |
| Quick Ratio | 1.72 |
| Leverage Ratios | |
| Debt-to-Total Assets Ratio | 0.29 |
| Debt-to-equity Ratio | 0.54 |
| Long-term debt-to-equity Ratio | 0.54 |
| Times-Interest-earned Ratio | 11.36 |
| Activity Ratios | |
| Inventory Turns | 185.90 |
| Fixed Assets Turnover | 0.70 |
| Total Assets Turnover | 0.72 |
| Accounts Receivable Turnover | 25.90 |
| Average Collection Period | 14.10 |
| Profitability Ratios | |
| Gross Profit margins | 0.33 |
| Operating Profit Margin | 0.22 |
| Net Profit Margin | 0.17 |
| Return on Total Assets | 0.12 |
| Return on Stockholders’ equity | 0.23 |
| Earnings per share | 2.94 |
| Price-earnings Ratio | 15.06 |
| Growth Rations (yearly) | |
| Sales | 9.30% |
| Net Income | 36.20% |
| Earnings per share | 16.75% |
| Dividends per share | 50.00% |
4.0. Organizational Chart
4.1. Current Organizational Chart
`McDonald’s organizational chart is large which is consistent with the size of the restaurant. Don Thomson is the overall chairman overseeing all the business operations of the restaurants in all of its outlets in the world. Under the chairman are two presidents. Jim Skinner is in charge of McDonald’s operations outside the US in Greece, Asia and the Pacific while Afan D. Freidman is charge of operation in the US.
Feidman is assisted with three executive vice presidents and together, their offices are situated in McDonald’s headquarters in Illinois, US. Each executive vice president has zone manager has zone manger in charge of each of the three McDonalds’ marketing zone in the US. Under the zone managers are the different regional managers, operational managers, market managers, production managers est.
Figure 1.1 shows the McDonald’s current organizational cha
4.2. Recommended Organizational Chart
Fig 1.2 shows the recommended organizational chart suitable for the McDonald’s.
4.3. Justification of the Recommended Organizational Chart
The current organizational chart is suitable for McDonalds but needs a few changes to make it more suitable. For instance, the current organizational chart is general and does not specify the responsibilities of the zone and regional managers. Furthermore, it is hard to identify the core of operation of the restaurants by looking at the current organizational chart. Instead of doing away with current organizational chart, the recommended chart is just an add-on. This implies both the current and recommended organizational chart will be used. The two presidential posts will be retained, and the new recommended organizational chart will be fixed below the post of the second president, Freidman. The three vice-presidents will be in-charge of production, marketing and sales. The area of operations under which Mc Donald’s operates in the US will divided into 5 regions each with manager for production, sales and marketing. The new organizational chart will be more specific because it spells out the exact number (five) under which McDonald will operate. The regional managers will then oversee McDonald’s operation in their region. There will be no overall managers for the regions, and the three regional managers will operate as equals.
5.0. Analysis
5.1. Competitive Profile Matrix
Figure 1.3 shows the competitive profile matrix for McDonald
| McDonald’s | Burger King | Wendy’s | |||||
| Critical success Factors | Weights
00 to 1.0 |
Rating
1 to 4 |
Weighted Score | Rating
1 to 4 |
Weighted Score | Rating
1 to 4 |
Weighted Score |
| Market Share | 0.18 | 4 | 0.72 | 3 | 0.54 | 2 | 0.36 |
| Financial Position | 0.12 | 4 | 0.40 | 3 | 0.36 | 3 | 0.36 |
| Global Expansion | 0.09 | 4 | 0.38 | 3 | 0.27 | 2 | 0.18 |
| Customer Service | 0.09 | 2 | 0.18 | 2 | 0.18 | 2 | 0.18 |
| Advertising | 0.07 | 4 | 0.28 | 3 | 0.21 | 2 | 0.14 |
| Price Competitiveness | 0.07 | 4 | 0.28 | 3 | 0.21 | 2 | 0.14 |
| Product Innovation | 0.11 | 2 | 0.22 | 3 | 0.33 | 3 | 0.33 |
| Product quality | 0.1 | 1 | 0.1 | 2 | 0.2 | 4 | 0.4 |
| Customer Satisfaction | 0.08 | 3 | 0.24 | 3 | 0.24 | 4 | 0.32 |
| Management | 0.09 | 4 | 0.38 | 3 | 0.27 | 3 | 0.27 |
| Total | 1 | 3.22 | 2.81 | 2.68 | |||
In terms of the market share, McDonald’s holds the biggest market share with an weighted average of 0.72 as compared to its main competitors that hold 0.54 and 0.36 respectively. This is attributed to the fact that McDonald’s has more outlets in the world than its main competitors. McDonalds and it competitors have almost equal weighted averages in terms of financial position because of universal stability. McDonald’s expands at higher rate than its competitors establishing close to 400 outlets on yearly basis. McDonald is at the same level with its competitors in terms of customer service. McDonald’s enjoys a big advantage over its rival in price and advertising; it is one of the biggest advertisers in the fast food industry. McDonald’s is stronger than its competitors in terms of management are.
5.2. Value Chain Analysis
McDonald’s Value Chain Analysis follows the Michael Porter’s model follows;
5.2.1. Inbound Logistics
McDonald’s acquires its raw materials from fixed and pre-defined suppliers thereby boosting their labor and capital. McDonalds imports its raw materials from Australia and New Zealand. It ensures that their supplies are consistent with the accepted standards of animal welfare and food safety
5.2.2. Operations
Most McDonald’s outlets have large grills where one cook can prepare a lot of burgers at the same time. The outlets have dressing stations where burgers are incorporated with condiments. The outlets have big fryers where several French fires can be made simultaneously. The outlets Laos have soda fountains and milkshakes for preparation of desserts and beverages. After the foods are prepared, they are transported o the various McDonald’s Restaurants. The restaurants have warehouse that stores foods cleaning supplies and paper products. McDonald’s has a centralized system of warehousing and distribution where one warehouse supplies to several restaurants (Fagansusanto, 2012).
5.2.3. Outbound Logistics
McDonald’s customers are served at the restaurants. Furthermore, McDonalds emphasizes quality customer service at the restaurants
5.2.4. Marketing and sales
Marketing and sales are centralized within the marketing departments in the headquarters that carry out promotional activities
5.3. Websites Home Page
http://www.mcdonalds.com/us/en/home.html
McDonald’s homepage is comprehensive and has several e-commerce capabilities. The homepage guides the visitors on how to access web pages of the services that they are looking for. The home page has a menu list on the left side that contains item such as Food, I am loving it, Our Story, Careers, Locations, Search, Services, Contact Us and Websites. The ‘Food’ option directs the visitors to the description of the type of foods that McDonald’s offers. ‘I am loving it’ directs the user list and description of McDonalds’s special foods.’ Our Story’ option directs the user to the history of the company. ‘Locations’ options provide information about the different locations that McDonald’s restaurants are situated. ‘Search’ option enables the users to look for information that they need while websites directs users to the various franchises.
5.4. Internal Factor Evaluation (IFE) Matrix.
Table 1.4 shows the IFE for McDonald
| Key Internal Factors | Weights
0.0 to 1.0 |
Rating
On a Scale of 1 to 4 |
Weighted Score |
| Internal Strengths | |||
| Strong worldwide Presence ( It is located in over 110 countries)
High value fixed asset owner ship( land and building)
Brand awareness( It has a easily recognizable and famous logo ‘the Mickey mouse’
McDonald’s Revenue is ever growing year after year
McDonald’s charity activities are well-known in US and the World.
McDonalds’s has a well known systemization and duplication policy
|
0.09
0.09
0.11
0.11
0.06
0.09 |
4
4
4
4
4
4 |
0.36
0.36
0.44
0.44
0.24
0.36 |
| Internal Weakness | |||
| Public Image(Most people perceive it a contributor to the obesity problem)
Poor product innovation(Known to sell the same type of burgers worldwide)
McDonald’s targets children in its advertisements ( A move seen as unhealthy advertising)
Poor Customer service
McDonald is very saturated in the market and has become difficult to expand to other places
Labor turn-over (More than 20 000 workers leave Mc Donald’s on year basis |
0.09
0.09
0.07
0.08
0.07
0.06 |
1
2
2
2
2
1 |
0.09
0.16
0.14
0.16
0.14
0.06 |
| Totals | 1 | 2.86 |
5.5. Industry Trends
Like other industries, the fast food industry is not stagnant, and there are trends associated with it
5.5.1. Health
Consumers are increasingly becoming aware of type of foods that they consume and their effects on their health. Specifically, McDonalds’s has been long associated with foods that cause obesity. The trend requires firms in the fast food industry to produce healthy foods to survive and build good reputation.
5.5.2. Refrigeration Strategy
The Occupation Safety and Health administration requires farms to acquire refrigerators that comply with food safety standards. Fast food restaurant are on verge of adopting natural refrigerant like CO2 in the next ten years (Allsup, 2015).
5.5.3. Emergence of the Chinese Market
The Chinese market is expanding rapidly attracting more US firms to the country to seize the opportunity.
5.5.4. Innovation
Most firms are innovating new ways of preparation of foods that minimizes the use of energy to reduce costs. Reducing cost enables fast food restaurants to enjoy more profit and at the same time reduce prices to enhance price competitiveness (Allsup, 2015).
5.6. External Factor Evaluation (EFE) Matrix.
Table 1.5 shows the EFE for McDonald’s
| Key External Factors | Weights
0.0 to 1.0 |
Rating
Scale of 1- 4 |
Weighted Score |
| Opportunities | |||
| Introducing new products and service to market
Competitiveness in the beverage market Expanding by introducing more franchise restaurants The rising demand of organic products and services Expanding to other new countries Conservation of the environment by going green |
0.1
0.08 0.09
0.06
0.1 0.07 |
3
2 3
1
4 1
|
0.3
0.16 0.27
0.06
0.4 0.07 |
| Threats | |||
| Dynamicity of the prices of commodities
Food safety issues Economic Recession The ever growing health concerns of fast foods Competition from other fast food restaurants Uncertain legal environment (McDonald’s has been facing numerous law suits since the problem of obesity arose) |
0.07
0.07 0.1 0.08 0.09 0.09 |
3
4 4 2 4 3 |
0.21
0.28 0.4 0.16 0.36 0.27 |
| Total | 1 | 2.84 |
5.7. SWOT Matrix
| SO Strategies | WO Strategies | ST strategies | WT strategies |
| 1.Developing new products and services for the world-wide market(S1, O1)
|
1.Advertising organic products to a more mature population (W3, O2, O6)
|
1.Launching a more extensive marketing campaign to enhance brand awareness and loyalty(S6, S3, T2, T5)
|
1. Innovate and create new commodities that are accepted by consumers due to the growing health concerns(W1, T2) |
| 2. Developing environmental friendly packaging materials(S6, O6)
|
2. Spending more resources in research and extension to invent new products(W2, O2) | 2. Developing other kinds of menus to reduce the reliance on highly expensive products (S6, T40 | 2. To direct more resource to customer service to reduce the number of lawsuits (W4,T6) |
| 3. Entering new market in new countries(S1, S4, O5) | 3. Creating an Organic Menu (W3,O3)
|
5.8. SPACE Matrix
The Grand Strategy Matrix (GSM0 is used for formulating strategies. According to GSM, McDonalds is positioned in Q4 because it has big market share as compared to its competitors like Burger King and Wendy’s. Currently, McDonalds holds a market share of 49.6%, which is the highest in the market. McDonald’s position in space matrix requires formulating several strategies to survive long in the market. The strategies include forward integration, product improvement, and market penetration.
5.9. Interview synopsis
I interviewed one of McDonalds’ sales representatives, Sean Elliot’s, and he had a lot of information to share and inform the public. Elliot’s talked about the law suits, McDonalds’s new plans, new products and employment opportunities. When asked about McDonalds new plans, Elliot said that they were planning to venture fully into the Asia market. China’s market for fast food is steadily expanding and the existing firms are unable to satisfy the customer needs in terms of quantity and quality. “McDonald’s desires to seize the opportunity before other foreign firms establish themselves” said Elliot. Elliot also commented on the law suits when asked to explain why they were increasing every year. He blamed incitement from food activists as the main catalyst of the lawsuits. Food activists continue to mislead the public that hamburgers and chicken are unhealthy.”When did chicken and a soft drink become unhealthy?” wondered Elliot. According to Elliot, McDonald’s is also planning to develop organic foods and introduce them to the market before 2020.
6.0. Marketing Strategies
6.1. Franchise Model
The company owns only 15% McDonald’s restaurants while the rest are operated by franchisees. The company to ensure that they offer quality products in a clean environment then monitors the franchisees.
6.2. Product Consistency
The company has created high-level networked operation and distribution protocol system enabling it to maintain a desirable and consistent product taste.
6.3. Retailer Brand
McDonald’s has always maintained its brand identity and awareness or a long time. The quality of its products is always high quality, which enhances brand loyalty
McDonald’s should create an organic food menu to suit the growing need for healthy foods. Organic foods can increase the sales for McDonald’s and build a good public reputation. McDonald should also spend more resources on research and extension to invent new products and make it operations more efficient. The restaurant should promote its organic products to attract a more mature population other than targeting children. The restaurants should improve customer service to reduce the number of lawsuits. Lastly, McDonald’s should adopt more environmentally friendly packaging methods to enhance public image and reduce cost of operation thereby increasing the profit margi
- References
Allsup,. (2015). 5 Food Processing Industry Trends for 2015. Food Manufacturing. Retrieved 7
July 2015, from http://www.foodmanufacturing.com/articles/2015/01/5-food-processing-industry-trends-2015
BurgerKing.com, S. (2015). .: Burger King :. – About Us. Bklebanon.com. Retrieved 7 July 2015,
from http://www.bklebanon.com/about-us.html
Euromonitor.com,. (2015). Fast Food in the US. Retrieved 7 July 2015, from
http://www.euromonitor.com/fast-food-in-the-us/report
Fagansusanto,K. (2012). Value Chain and Competitive Advantage of McDonald’s. Retrieved 7
July 2015, from https://fagansusanto.wordpress.com/2012/11/22/value-chain-and-competitive-advantage-of-Mcdonalds.com,. (2015). Home :: McDonalds.com. Retrieved 7 July 2015, from http://www.mcdonalds.com/us/en/home.html mcdonalds/
prezi.com,. (2015). Copy of Organizational Chart McDonalds. Retrieved 7 July 2015, from
https://prezi.com/nucdsyhhfwke/copy-of-organizational-chart-mcdonalds/
Stock Analysis on Net,. (2015). McDonald’s Corp. (MCD) | Profitability. Retrieved 7 July 2015,
from https://www.stock-analysis-on.net/NYSE/Company/McDonalds-Corp/Ratios/Profitability#Gross-Profit-Margin
Yahoo Finance,. (2015). Yahoo Finance – Business Finance, Stock Market, Quotes, News.
Retrieved 7 July 2015, from http://finance.yahoo.com/