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McDonald’s Case Analysis
Edi Georg
Kristin Poleski
Julie Smith
Agenda
Edi Georg
Edi Georg
Julie Smith
Kristin Poleski
Russian Profile Economic Crisis Industry Analysis Mission Problems & Issues
Alternatives Plan of Action Timetable Accountability
Pro Forma Performance Measures Risk Analysis Conclusion
Edi Georg
Russian Profile
Economic Crisis
Industry Analysis
Mission Problems & Issues
Russian Profile
Edi Georg
Economic Crisis
Edi Georg
Consumer/Retail Industry
•$257.13 MIL•Multi-genre industry
–Not just restaurants, includes all retail
•McDonalds- approx. 20% Market Share•Current trend: w/high inflation: consumers are spending less money on non-essential goods/services•Major Competition:
–Russloe Bistro–Rostik’s–Various Mom/Pop Restaurants–Cooking at Home
Edi Georg
Mission
• WHO– Solo Adults– Youth
• WHAT– Connect with Russian People– Familiarize brand
• HOW– Marketing, pricing, franchising, menu growth
Edi Georg
Groups
Families 55%
48.2%
320.6%
244.5%
Alone 22.6%
Problems & Issues
• Remain sustainable in volatile economic conditions– Instability of ruble– Political situation
• Long-term growth– Pricing– Menu
Edi Georg
Summary
Edi Georg
Kristin Poleski
Alternatives
Plan of Action
Timeline Accountability
Structure
Alternative Action Plans
• Connect with Russian people– Affordable prices, menu expansion,
franchising, new markets
• Focus on profitability– Raise prices, closes stores, target
profitable market segment
• Push products, not brand– Don’t promote McDonald’s, promote
product being sold
Kristin Poleski
Plan of Action
• Step 1: Keep prices affordable
Kristin Poleski
Plan of Action
• Step 2: Russian Exclusives menu– Soup – Salad – Grilled cheese – Pierogies
Kristin Poleski
Plan of Action
• Step 3: Franchise new locations– Russians willing to spend to bring
aspects of Western culture to their country
– Commitment to Russia– Growth– Education potential
Kristin Poleski
Plan of Action
• Step 4: Target new markets– Educate
• Menu• Brand • Status Symbol• Charities
– Television• Flight 910• Cartoons• Commercials
Kristin Poleski
Visits
Once/ week or more 32.4%
2-3/ month13.1%Once/ month
16.9%
Once/ 2-3 months7.4%
Less often4.3%
First time25.8%
Plan of Action
Kristin Poleski
Affordable Prices
Expand Menu
Franchising
New Markets
Timetable
Kristin Poleski
12 months: Begin franchising new locations, air TV shows
1 month: Hire appropriate staff
3 months: Introduce Russian food to market with promotional pricing 6 months: Evaluate success
of new menu items, end promotional pricing, begin airing commercials
2 months: Start developing commercials, TV shows
18 months: Determine franchising sustainability, outlook for future24 months: Evaluate
financial stability, make decision for future endeavors
Accountability Structure
Kristin Poleski
Chairman &
President
Finance Marketing
Food Operatio
ns
Franchising
Other Advertisi
ng
Television
Commercials
TV Shows
Russian Food
Summary
• 4-step POA– Affordable prices– Introduce Russian food– Franchising– Target new markets
• Timeline• Accountability
Kristin Poleski
Julie Smith
Pro Forma Performance
Evaluation
Risk Analysis
Conclusion
Pro Forma Analysis
Julie Smith
1999 Pro Forma Statement in $Millions
Low (no change)
Medium (15%) High (23%) 2000 (4%) 2001 (3%) 2002 (2%)
Sales 8.2866 9.52959 10.192518 10.35152128 10.3515213 10.513005Cost of Sales (75%/67%) 6.21495 7.1471925 7.6443885 6.935519258 6.93551926 7.0437134
Total (25%/33%) 2.07165 2.3823975 2.5481295 3.416002023 3.41600202 3.4692917
Costs
Administration 0.51 0.51 0.51 0.52 0.53 0.54
Marketing 1 1 1 1 1 1
Depreciation 1 1.05 1.08 1.06 1.07 1.08
total: -0.43835 -0.1776025 -0.0418705 0.836002023 0.81600202 0.8492917
Before taxes -0.43835 -0.1776025 -0.0418705 0.836002023 0.81600202 0.8492917After tax rate of 24% -0.333146 -0.1349779 -0.03182158 0.635361537 0.62016154 0.6454617
Cash Flow 0.666854 0.9150221 1.04817842 1.695361537 1.69016154 1.7254617
Performance Evaluation
• What to measure– Popularity
• Russian menu items• Franchising
– Customer base– Brand Awareness– Sales
• How to measure– Consumer surveys– Russian food sales– TV viewers– Coupon use– Franchises open &
successful– Financial
statements
Julie Smith
Risk Assessment
• Economic instability – ruble recovery• Negative image of foreign companies
– Leaving Russia due to financial concerns
• New menu items flop– It’s just not home-cooking
• No viewers for shows• Franchising unpopular• Obesity problem• Politics/people factor
Julie Smith
Summary
• Pro Forma– 15% increase for 1999– 9% increase over next 3 years
• Performance Evaluation by– Financial statements, feedback, coupon
usage, franchise success rate
• Risk– Ruble, People factor, Menu Items not
working
Julie Smith
Conclusion
• Plan of Action1. Education 2. Pricing3. Menu4. Franchising
• Edge out the competition• Stabilize sales during
despite economic instability
• 24% Sales increase over next 4 years:
Julie Smith
The Future
Questions?