McDonalds Case studyBy:

Yadira McCulloughBalakrishna VelineniNorberto RomanSudaramurthy VallinayagamSanjay Kalingu

Agenda

• Executive summary• Environmental factors• Porters Five Forces• Case Questions

Executive Summary

• One of the key ongoing issues is the nutritional values of fast food it offers its consumers.

• McDonald’s also faces the issues of:– Providing consumers good quality food at– Good prices with profitable growth in a competitive fast

food industry.

Porters Five ForcesThreat of Suppliers:•McDonalds and its suppliers are dependent on each other•McDonalds took the initiative to create a sustainable supply and develop quality and food safety standards.•For Example when McDonald’s decided to introduce healthy food items it:

– It chose Peterson Farmers to supply its apples, blue berries and cherries.– McDonalds’ chicken supplier, Tyson began using better quality chicken to supply the ingredients

for its chicken nuggets.

Threat of Buyers:•Due to low switching cost of buyers•McDonalds’s developed a framework that allows them to adapt locally•McDonald’s also focus in specific products for each market segment depending on the current trends, health, prices and innovation

Porters Five Forces Contd …Threat of Rivalry

– Intensity of rivalry is high – Main competitors are Burger King, KFC & Wendy’s– Introduced Mccafe coffee beverages to compete with Starbucks coffee– Zero switching costs lead to heavy competition– Introduced breakfast menu to compete with breakfast chain restaurants– Introduced healthy foods in the menu to compete with Subway and improve the brand image

Threat of new Entrants– Threat of new entrants is low to moderate– It’s difficult to compete with McDonald’s with their product differentiation, low cost products and

better customer service– It is one stop food chain for breakfast, coffee and regular menu and at the same time provide healthy

snacks– Large capital investment needed in marketing, advertising and locations to compete with McDonald’s– Extremely Efficient supply chains– It is difficult to compete with McDonald’s global brand image

Porters Five Forces Contd …• Threat of Substitutes

– Threat of substitutes is high– Zero switching cost can lead to switching to other convenience fast food

restaurants such as In-N-Out burger, Five Guys, etc.– People have started looking for low cost healthier options

Key Environmental Factors

• Social-cultural Factors:* Setting the Right values* Health issues* Adapting to Culture

• Economic Factors:* Exchange rates* Inflation and change in interest rate* Purchasing power of the customer

• Political & legal Factors:* Government policies on the regulations of fast food operations* Different political infrastructures* Employment and tax

Key Environmental Factors contd…

• Demographics

InnovationInnovation En

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Eco-systemEco-system

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TechnologTechnology factorsy factors

• Automated beverage dispenser

• Pre-configured equipment's

• Mobilization

• Free Wi-Fi• LCD’s• Toys• Children play

area

• Digital Ecosystem• P.O.S• Kiosks• Inventory

management

• 3D toys printing

• Gamification• Interactive

tables /tablets

Key Environmental Factors contd…

What sustained competitive advantages does the company have?

Strong brand Cost leader

Buys supplies in bulk to get lower prices

Leases lands and property they own to franchises.

Pays less in advertising by using their well-positioned mascot.

Knowledge of the local culture and tastes

Expertise in test marketing around the world

International presence

What internal resources can be considered as valuable, unique, difficult or expensive to imitate?

McDonald’s practices a backward vertical integration.

Produces beef and milk in many countries

Warehousing, distribution, and management of chain are automated, and centralized.

Infrastructure.

Nice restaurants

Mobile coupon applications

Advanced training programs.

Hamburger University

Well-established and knowledgeable corporate architectural structure.

Respect

Commitment enhancement

Talent Management

Conclusion

S W

O T

» Largest fast food market share in the world

» Brand recognition valued at $40 billion» $2 billion advertising budget» Locally adapted food menus» Partnerships with best brands» More than 80% of restaurants are owned

by independent franchisees» Children, families, young adults, healthy

style customers targeting

» Negative publicity» Unhealthy food menu» Mac Job and high employee turnover» Low differentiation

» Saturated fast food markets in the developed economies

» Trend towards healthy eating» Local fast food restaurant chains» Currency fluctuations» Lawsuits against McDonald’s

» Increasing demand for healthier food» Home meal delivery» Full adaptation of its new practices» Changing customer habits and new

customer groups

http://www.strategicmanagementinsight.com/swot-analyses/mcdonalds-swot-analysis.html

Questions ???