Upload
bruno-nailor
View
215
Download
0
Tags:
Embed Size (px)
Citation preview
cDonald’s Industry Analysis
Group 3Chase Mueller Ashley Hoptay
Olivia Erwin Tanner Gilreath
Paige Stone Brandon Laviage
Anna Rendon
SIC Codes The fast food industry is categorized under:
SIC 5812, Eating Places establishments primarily engaged in the retail sale of
prepared food and drinks for on-premise or immediate consumption as well as caterers and industrial and institutional food service establishments.
Consists of seven different categories: dinner theaters, full-service restaurants, limited-service restaurants, cafeterias, snacks and nonalcoholic beverage bars, food service contractors, and caterers.
NAICS Codes With the replacement of the SIC Codes, the
fast food industry is categorized under: NAICS 722211, Limited-Service Restaurants
establishments primarily engaged in (1) providing food services where patrons generally order or select items and pay before eating or (2) selling a specialty snack or nonalcoholic beverage for consumption on or near the premises.
Orders may be consumed on premises, carried out, or delivered to the customers’ location such as pizza delivery.
History of Fast Food Industry 1921 – White Castle is viewed as the beginning
of fast food Changed the public’s perception; gave hamburgers a
better reputation of quality and gave the image of cleanliness through its use of “white”
Rise of cars also gave rise to the industry Many restaurants utilized short-hand cooks, drive-ins,
and carhops to capitalize on the new craze that the American people had with staying in the car and eating.
History of Fast Food Industry 1948 – Dick and Mac McDonald reopen their
restaurant, McDonald’s Famous Hamburgers, after implementing the “Speedee Service System”, which is synonymous with the assembly line. Simplified operations.
The McDonald brothers also switched from dishes and glassware to paper and plastic to increase efficiency.
History of Fast Food Industry Ray Kroc capitalized on the blue ocean that
the McDonald’s brothers created 1955 – Ray Kroc opened the first restaurant
in the McDonald’s Corporation As other fast food restaurants opened in
the mid-1950s to the late-1960s, they imitated and implemented the “Speedee Service System”.
The Four Major Players McDonald’s is the leading global quick service
restaurant retailer as well as one of the world’s most well-known and valuable brands. 31,377 restaurants in 118 countries Franchisees operate 20,505 restaurants
YUM! Brands Incorporated consists of KFC, Pizza Hut, Taco Bell, Long John Silvers, and A&W All-American Food Restaurants. 35,000 restaurants in 100 countries and territories
80% owned by independent franchise operators.
The Four Major Players Burger King Holdings, Incorporated
Operates 11,565 restaurants in the United States, Canada, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.
10,205 are owned by franchisees.
Wendy’s/Arby’s Group Operates about 10,000 restaurants in the United States and 21
countries. 6,645 of them are Wendy’s, and 5,231 of all Wendy’s fast food
restaurants are franchised.
The Four Major Players Hedgehog Concept
The fast food industry utilizes the hedgehog concept of doing one thing really well: to serve the most customers as possible in a given time period.
The four companies focus on speed, quality, and convenience, and they keep these factors at the forefront of their operations in every location.
The Four Major Players Hedgehog Concept
One of the key success factors of the fast food industry is uniformity, which has allowed the companies to go global and exceed at their endeavors.
Offering the same service at every location gives customers reassurance in the brand
Ray Kroc was quoted as saying, “the organization cannot trust the individual; the individual must trust the organization.”
Chief Business and Economic Characteristics Fast food restaurants represent one of the
largest segments of the food industry. In the United States alone, over 200,000
fast food restaurants are operated bringing in $120 billion a year.
Also known as quick service restaurants.
Chief Business and Economic Characteristics
Industry is made up of international, national, regional and local chains
Chains can be corporate owned or franchised
Chief Business and Economic Characteristics Franchising:
The fast food industry can contribute much of its growth and success to franchising
Why franchise? Franchisees are given the ability to leverage a well-known
brand name and benefit from the purchasing efficiencies and operational expertise of the franchiser.
Franchisers still hold the right to control operational guidelines and quality adherence, and they also hold most of the rights over menu offerings, hours of operation, pricing,
and store design. Gives the company the ability to grow.
Chief Business and Economic Characteristics Franchising and McDonald’s:
Kroc realized the company could be franchised differently than others, which would help them grow and attain profits.
McDonald’s invested in real estate and rented the property to its franchisees, which enabled the returns to be much higher.
Largest owner of retail property in the world Makes most of its profits from rent it receives from its
franchisees
Chief Business and Economic Characteristics Convenience
Volume-driven business so customer convenience is key
Located in high traffic areas Transaction speed is vital to ensure more
customers are served in a given amount of time Limited menus speed the food preparation
process and help with quality control by reducing the amount of worker error
Chief Business and Economic Characteristics Technology
Used to maximize efficiency and effectiveness Double drive-thru windows – speed transaction time Inventory management/automated replenishment – important since
dealing with perishable items; saves time dealing with suppliers, new equipment, and computerization
New equipment - ovens that combine convection heat, air impingement, and microwave energy to help cook the food faster
Computerization – Point-of-Sale (POS) Systems and Express pay; reduce ordering errors and cut down transaction time
Chief Business and Economic Characteristics Technology and McDonald’s
McDonald’s has been at the forefront of fast food technology since the company opened
Implemented E-ZPass, FasTrak, and FreedomPay on top of Express Pay
McDonald’s Philippines Help Desk Service Echelon’s LonWorks Technology
Chief Business and Economic Characteristics Role of Government
The government does not control profits or contracts of the industry, but local, state, and federal governments have adopted laws and regulations that involve various aspects of the restaurant business, such as:
Legal and regulatory environment of the industry worldwide exposes the companies to complex compliance, litigation, and other risks that affect operations and increase the cost of doing business
Developing markets also bring risks associated with new and untested laws and judicial systems
Chief Business and Economic Characteristics Role of Government: Intellectual Property
Each company owns or is licensed to use trademarks, service marks, patents, copyrights, trade secrets, and other proprietary information that is important to the company’s business.
Depending on the jurisdiction, trademarks and service marks are generally valid as long as they are being used or are registered.
However, patents, copyrights, and licenses only last for various durations.
Chief Business and Economic Characteristics Role of Government and McDonald’s
The “McDonald’s” trademark and the “Golden Arches” logo are imperative to the company’s business and brand equity.
The “Golden Arches” are now more widely recognized than the Christian cross
To protect its investments in foreign operations, McDonald’s uses forward foreign exchange contracts, foreign currency exchange agreements, and foreign currency denominated debt
Chief Business and Economic Characteristics Problems and Issues
The fast food industry has taken a lot of heat for: Advertising to children – it sparks obesity at a young age Health concerns – taking the blame for people’s diet issues
and weight related diseases Environment – no federal laws or regulations; must follow
local laws; largest consumer of electricity in the American retail sector; accounts for 20% of U.S. litter
Employment concerns – largest private sector employer; do not offer workers valuable life experience, the opportunity to move up, safe working conditions, or satisfactory wages and benefits
Chief Business and Economic Characteristics Mass Production and Control of Suppliers
Mass production is utilized to retain consistency and uniformity in products
Food is mass produced in a factory Since this process involves sending a large
amount of food through a factory in a short amount of time, bacteria, viruses, and parasites can contaminate a significant portion of the food very easily and quickly
Chief Business and Economic Characteristics Mass Production and Control of Suppliers
A handful of corporations have an unprecedented degree of power over the nation’s food supply.
The vast purchasing power and demand for a uniform product have encouraged fundamental changes in how cattle are raised, slaughtered, and processed, which has made the meatpacking industry very dangerous for both its employees and consumers of the product.
Can induce deadly pathogens such as E. coli.
Chief Business and Economic Characteristics Mass Production, Control of Suppliers and
McDonald’s Safety control through Echelon’s LonWorks
Technology Taken stands against the meatpacking industry
by only purchasing the meat that followed FDA rules
Chief Business and Economic Characteristics Competitive Environment
All companies compete on the basis of quality of food and quick service; therefore, differentiation is key
Service, experience and brand name High levels of competition have caused bloody red oceans
in this industry Dollar menus and value meals
Chains own about 88% of the market share causing independents to go out of business much faster than the national failure rate; rising threat of fast casual restaurants is currently low
Chief Business and Economic Characteristics Economic Factors: State of the economy
The spending slowdown and high food and energy prices have caused a slowdown in growth in the fast food industry
In 2008, 55% of restaurant operators reported a same-store sales decline
Food and beverage inputs account for 33 cents for every dollar of sales. With already low operating margins, a slight increase in these costs can have an outsized effect on profitability.
The bloody red oceans caused by price wars makes it difficult to pass the rising costs to customers
Chief Business and Economic Characteristics Economic Factors: State of the economy
Explosive growth in foreign markets offset slowing growth in the United States
Prices are being cut in China, which is McDonald’s and YUM! Brands largest market for growth
However, the limited-service eating places are in better shape than the full-service eating places.
With the economic downturn, more people are cutting back on how much they spend when eating out, and therefore, are turning to fast food restaurants.
Chief Business and Economic Characteristics Economic Factors: Market Growth
Gaining new customers as consumers are looking for the convenience of eating out and quality meals at lower prices
Due to China’s size and growth rate, it still remains an attractive market
Vast room for international growth as well as exploring strategy canvases enables the industry to grow and remain attractive
McDonald’s utilizes research and development to cater to international tastes and attain customers
Chief Business and Economic Characteristics Strategy Canvases and McDonald’s
McCafes – increase customer base and redefine McDonald’s image
Revamping stores in the United Kingdom to appeal to businessmen/women and increase the experience of all customers
Constantly searching for ways to redefine its market boundaries or to create blue oceans and attain a larger market share as well as provide its customers with more convenience and a better experience.
Social Factors Health Food
New menu items Listing nutritional facts
Corporate Social Responsibility Ronald McDonald House Dave Thomas Foundation
Social Factors Diversity
Workers Pride 360˚
“Going Green” Packaging Buildings
Technological Trends Wi-Fi
15,000 McDonald’s Burger King, Wendy’s, Subway, Taco Bell
Equipment Drive – Thru’s Outsourcing orders
Time Clocks
Economic Factors Current Economic Status
People want cheap food
Minimum Wage High percent of workers make minimum wage Raise food prices
Political and Legal “Cheeseburger Bill”
Prevent law suits
State Issues California - ban on fast food
International Issues Canada - calorie count
Law Suits
Geographical Factors Globalization
McDonalds - 60% Yum! Brands - 50%
Convenient locations Way home from work Corner of block
Malls, Supermarkets, Gas Stations McDonalds - Wal-Mart Little Caesars - K-Mart
Competitive Factors All other factors
Social Technological Economic Political/Legal Geographical
Predicting next move
5 Forces Model Rivalry Among Existing Firms
Main Competitors McDonald's, Yum! Brands, Wendy’s, Burger King
Total Industry Sales Growth
5 Forces Model Concentration of Competitors
5 Forces Model Differentiation
Hard to separate each other because they offer similar products
So they compete on price McDonald’s able to dominate the market because of the
size of the company
Switching Costs Hard to do, why?
Real Estate, franchisees, and many employees
5 Forces Model Economies of Scale
Efficiency R&D, New Technology
Economies of Scope Learning from past experiences
Example: Dollar Menu
5 Forces Model Threat of New Entrants
Economies of Scale
5 Force Model First Mover Advantage
Get in while its early, and grasp suppliers and consumers
Legal Barriers Patents, trademarks, contracts, licenses, and
government regulations to limit new companies
5 Forces Model Threat of Substitute Products
Relative Price and Performance Everyone produces the same products, need to
compete on price and convenience Buyers Willingness to Switch
Brand performance, and high quality relationships with customers
5 Forces Model Bargaining Power of Buyers
Price Sensitivity Differentiation of products, and cost of switching to
another firm, easy in the fast food industry Relative Bargaining Power
Real vs. Nominal buying power Customer Loyalty
5 Forces Model Bargaining Power of Suppliers
Price Sensitivity Leverage over small suppliers Large Industry, companies name prices and
quantities Supplier relations and price breaks Strategic Alliances
Competitive Moves McDonalds
is the industry leader and has been known as the industry trend setter, yet it has not always been at the forefront on capitalizing new niche markets
They were the first to create and master the “speedee service system “ also known as the assembly line
They were also made the first strategic move of purchasing their own land to rent to franchisees
They were also the first to advertise with an character , which strengthened their brand equity
Competitive Moves YUM! Brands
Taco Bell The first fast food chain to offer free drink refills for
its customers Also created a 3 tier pricing strategy, offering
products at 79¢, 89¢, 99¢ Also the first its menu completely trans-fat free
Competitive Moves KFC
Was the first company to franchisee its businesses
Made the strategic move of offering home cooked style meals, which included coleslaw, macaroni and cheese, baked beans, and rice
Burger King Was the first to emphasize customized order
with its “Have It Your Way “ campaign
Competitive Moves Wendy’s
First to implement value menu, also referred to as the dollar menu
First to create a super bar which was their concept of an all you can eat buffet
First to introduce salads and grilled chicken sandwiches
Next Competitive Moves McDonalds is seen as being the company who
will make the next strategic moves because of their need to be at the forefront of the market and remain the leader in the industry.
Implementation of the McCafes to draw customers from coffee shops
First to respond to economic downturn by lowering prices
Competitive Success Customers seek products that are readily
available and quickly delivered
Major fast food players look across the industry to understand the driving forces behind the market’s competitive success, so companies can capitalize on these concepts
Industry’s Consistency Approach One of the biggest key success factors for the fast food
industry is their ability to offer consistent products and services at every location
Franchises and chain stores must reliably offer the same product or service at numerous locations to build customer loyalty
YUM! Brands, Wendy’s, and Burger King all take the same approach which has made them leading competitors with McDonald’s
Icons Another driving force of the fast food industry has been its ability to
capture both young and old audiences Each leading competitor has easily recognizable icons that appeal
to its target audience, which in turn differentiates them from its competitor
These icons are easily recognizable and add to the experience when eating and also create a positive attitude
Convenience Consumers look to quick services restaurants to
provide them with a quality meal that will fit into the pace of their fast moving lifestyles
The large number of locations within close proximity to each other is ensure customer convenience at every turn
Many fast food chains can be spotted at shopping centers, airports, gas stations
Franchising the Industry Franchising has played a key role in the
success and growth of the fast food industry
Inside Out Approach: Focusing on Quality McDonalds has taken an “inside out” approach to drive
sales, by improving its inside approaches of store operations, product offerings, and customer experiences
McDonald’s Skillful Marketing: 5P’s People
In order to ensure a friendlier and more customer focused support staff the emphasize hospitality training known as the People Approach - Respect, Commitment Enhancement, & Talent Management
Products Incorporates uniform quality products and implemented the McDonald’s
Holistic Approach- High Quality Choices, Consumer Friendly Nutrition Information, & Communicate Responsibly
Place Each location is strategically analyzed based on demographics,
population, major roadways, and traffic that passes through the site to find the best location
McDonald’s Skillful Marketing: 5P’s Price
Allows customers to enjoy a quality meal without a hefty price Created the Value Menu (Dollar Menu) to get great food at bargain
prices Although McDonald’s is taking dollar menu items as a “loss leader”
adding to the menu such as large fries and a drink has allowed the restaurant to be profitable
Promotion Promotional character and symbols Subliminal Marketing Co-operative Marketing Traditional Advertising
Conclusion After analyzing the fast food industry’s history, growth, and current
success factors, one can conclude that it is safe to stay in this particular industry.
The fast food industry has seen substantial growth since its creation through the proliferation of its chains through franchises. By franchising the industry, chains have been able to rapidly expand and quickly capture a large percentage of the market share at a cheaper cost to them.
The major players in the fast food industry offer consistency and convenience, which are two characteristics of commodities that people search for because these needs have been instilled in people since they were born.
Conclusion Some may argue that the industry is coming to a halt due to the
market saturation in the United States, but there is a lot of room for growth nationally and internationally.
The industry also does not need to worry about new threats entering the market at this time because of the state of the economy.
McDonald’s understands the importance of brand awareness and recognition, so it consistently spends the most on advertising, which has solidified its position as one of the most well known brands in the world.
Conclusion McDonald’s stands at the forefront of the fast food industry. Another
driving force that keeps the company locked in its position is the large amount of capital that McDonald’s owns as well as its influence with other industries.
McDonald’s is the largest private real estate owner, and the company employs about 1.6 million people worldwide, plus it is a large purchaser of beef, poultry, pork, cheese, beverages, and paper and packaging material.
Therefore, the company is extremely vital to the industry as well as the economy as a whole because its presence impacts jobs and the success of other industries. This also reinforces the company’s and the industry’s market strength and attractiveness.