Global Strategies
Aniket Mandal(09DF005) Arka Probha Ghosh(09DF011) Priyadeep Mukherjee(09DF041) Soumalya Biswas(09DF056)
McDonald’s Global Strategy Brief History of McDonald’s The McDonald brothers (Richard & Maurice) started off a drive‐in restaurant in San Bernardino, California. In 1940s, the McDonald brothers invented a revolutionary new concept called ‘self‐service’. McDonald’s popular products included the Big Mac, French fries, Chicken McNuggets, Egg McMuffin, Quarter Pounder sandwiches, hamburgers and cheeseburgers. Employing “car hops” the McDonald brothers became the first restaurant to offer speedy service to people while they stayed in their cars.
The Mastermind Ray Kroc discovers McDonald’s [1954] Kroc became the first franchisee appointed by Richard & Maurice McDonald in San Bernardino , California.
Beginning of the journey In 1954, Kroc established a franchising company by the name McDonald System Inc. In 1961, Ray Kroc bought out the McDonald brother’s share for $2.7 million and opened his first restaurant in Des Plaines , Illinois (near Chicago) , and the McDonald's Corporation was created . In 1965, McDonald’s went public, selling its shares over‐the‐counter for $22.50. The share price skyrocketed to $49 within a week.
Achievements McDonald’s has over 30,000 local restaurants in more than 121 countries. 70 percent of their restaurants worldwide are owned and operated by independent, local businessmen and businesswomen McDonald’s serves nearly 50 million customers each day McDonald’s has its own Hamburger University in Illinois, and the first batch graduated in 1961 In 1963, McDonald’s sold its one billionth hamburger McDonald’s is listed on the New York, Frankfurt, Munich, Paris and Tokyo stock exchanges
The clown character seen in all McDonald advertisements , Ronald McDonald, was created in 1963. The first McDonald’s drive‐thru opened in Sierra Vista, Arizona in 1975 Happy Meals were added to McDonald’s menu in 1979 McDonald’s launched McCafe in 1994. McDonald’s launched the new worldwide Balanced Active Lifestyles public awareness campaign in 2005 McDonald’s celebrated its 50th Anniversary on April 15, 2005
Market Proliferation •1967 ‐ Canada & Puerto Rico (first restaurants outside the U.S.) •1971 McDonalds really starts going global Asia: Tokyo Ginza District (Japan) Europe: Netherland, Munich (Germany) •1979 ‐ Rio de Janeiro (Brazil) •1990 ‐ China & Moscow (Russia) •1996 – India (Delhi & Mumbai)
Brand Image Initial Image • • • •
Foreign brand Didn’t know what to expect Discomforting Expensive
Current Image • • • • •
Friendly atmosphere Inexpensive Quick service Value for money Familiarity with the brand
Branding Strategies • • • • •
Single design for packaging Aggressive advertising Various promotional schemes Sponsorships Creating an over all McDonalds experience
Distribution & Strategic Alliance • • • • •
Wal‐Mart stores in the year ‘93 Disney in the year ’96 Chipotle Mexican Grill in ‘98 Aroma in ‘99 Opened restaurants in Amoco & Chevron Gas Station
Advertisement Strategies • Sponsored the Atlanta Olympics, 1996 & Sydney Olympics,2000. • Sponsored the Soccer World Cup in France, 1998.
Branding Strategy Points in India • Collaboration with Coke, MTV, Sony Music. • Co‐sponsor of various inter school science competition. • Scratch cards on large combo meals. • Prizes ‐ caps, t‐shirts, CD’s, internet cards. • Sponsoring IPL.
Brand Fatigue • Failure to introduce popular items on menu. • Inappropriate pricing strategies. • Lack of understanding local tastes. • Infrastructural inadequacies. • Over estimation of demand. • Continuous expansion caused franchisee profit drop by 30% in 1990’s. • Resulting to a loss $ 343.8 million in 2002.
Brand Repositioned • • • • • •
Introduction of value meals. Introduction of healthier options. Analysis of Indian taste. Better planning strategies. Targeted younger as well as family crowd In ‘98 they introduced a new concept named ‘Made for you.’
• Started home delivery services. • Renovated its existing outlets. • Introduced the world wide “Im loving it ” campaign. • In Japan the companies name was changed to “Makudonaldo”.
SWOT Analysis • Strength – Strong brand name and image – 42% of US hamburger business – Overseas market – Strong financial statement – Economies of scale – Market versatility
Weakness • • • •
Declining market share Weak product development Disgruntle franchises Slowed revenue and income growth
Opportunities • International expansion • Only serving 1% of the world population • Growing dining‐out market
Threats • • • • • •
Increasing market players More health conscious people Fast changing of food preferences Changing demographics Fluctuating foreign exchange rates The economy
PEST ANALYSIS To analyze the current status of McDonald’s corporation, we chose to use the PEST method to evaluate the following categories P E S T
Political Economic Social Technological
Political Challenges •Health and Safety Guidelines The director of the obesity program for the Children's Hospital Boston, David Ludwig, claims that "fast food consumption has been shown to increase calorie intake, promote weight gain, and elevate risk for diabetes" Centre for Science in the Public Interest, a long‐time fast food critic over issues such as caloric content, trans fats and portion sizes
Political Challenges •
Ecological/environmental issue – Fast food industry giants such as Wendy's, Pizza Hut, and McDonalds are some of the largest consumers of paper products in the US. "Every year millions of pounds of food packaging waste litter our roadways, clog our landfills and spoil our quality of life.
Political Challenges • Wars and conflicts War between countries where the company operates. They have also become a symbol of capitalism and Americanism meaning that they have now become the target of terrorist group and attack.
Economic Challenges • McDonald’s must consider economic challenges when expanding internationally. Low set up costs = rapid expansion One of the challenge for fast food industry is that to keep the price is low for the customer. Franchising facilitates set ups » McDonald’s corporation provides financing assistance and training for new franchise owners to manage cash flow and keep businesses profitable.
Social Challenges • The main reason is the consumers worries had greatly increased with health fears of increasing obesity • Customers now opted for more healthier options like subway which offered more of a variety for health conscious customers.
Social Considerations • To ease customers concern about health issues, McDonald’s has made changes to the following; •McDonalds changed its image vastly by evaluating the current menu and making changes to it from using organic products to revising the whole menu entirely by offering salads and vegetarian burgers. •McDonald’s serves a range of high‐quality foods that can fit into a balanced diet. The accurate and accessible nutrition information help guests make informed menu choices.
Social Considerations • Emphasis on food safety: McDonald's suppliers have food safety management systems in place, including Good Manufacturing Practices , a verified Hazard Analysis Critical Control Point (HACCP) plan and crisis management, food security and other applicable programs
Technological Advantages • McDonald’s has taken advantage of technology to streamline their processes and improve efficiency. Through technology enhancements such as Help Desk Service, network and application consolidation, and other technology implementations, operations of the company are greatly improved.
Technological Advantages • Touch Order Allows You To Place Order At McDonald’s Via Handset
Technological Advantages • The customers can place their order directly from their tables, dubbed as “Touch Order”. It’s the first self‐ordering system in the world Technology Spotlight: McDonald's tests Speedpass cashless payment system
Technological Advantages • McDonald’s has also implemented technology to improve supply chain management, and allows customers to access this information to make more informed decisions about what they eat.
STRATEGIES USED IN DIFFERENT GEOGRAPHICAL LOCATIONS
India • Locally focused menu choices (using lamb meats instead of beef meat keeping the religious sentiments of most Indians) – McDonald’s in India has specific menu items –For the vegetarian market (50% veg items)
• While offering the basic burger and fries, McDonald’s in China also offers: – Szechuan‐style spicy chicken wings – Seafood Soup – Rice – Oriental Sauces – Taro and Red Bean Dessert
Locally Focused Menu Choices • • • • • •
Philippines – McSpaghetti noodles. Norway – Salmon Fillet sandwich (MacLak). Arab Countries – Halal menus. Israel – Kosher meat. Germany – McD Restaurants severed beer. France – McD Restaurants served Wine.
Increase presence in Asian countries McDonald's has most certainly had a profound effect on China. When the first McDonald's opened in Beijing more than a dozen years ago, 40,000 people lined up to observe a Big Mac and get their picture taken with the infamous Ronald McDonald. McDonald's is growing faster in China than in the United States. McDonald’s owns & operates more than 600 stores across 105 cities in China. More than 100 more McDonald's stores will be added annually to Chinese cities within the coming years.
Backbone of McDonald’s Success • The main pillar behind its success both in domestic and in international(QSC&V‐ model). • Offers the same food experience in all its outlet. • Over 30,000 franchise restaurants serving 52 million people in 121 countries. • 70% are owned by independent operator franchises.
Market Share of the Major Players
Conclusion • McDonald’s should continue to expand internationally, but be mindful of the local dietary needs and desire of people to eat a healthy balanced diet. The competition from Subway is important to consider, but there is still a large gap between store earnings. McDonald’s stores earn around $2 Million each, while Subway stores earn around $445,000. As people begin to understand that the “healthy” alternative offered at Subway can be had at McDonald’s, there are few reasons to go elsewhere.
• More Healthy Choices • McDonald’s should develop menu choices that are healthy and socially acceptable. – It is possible to develop a menu that people will enjoy and that also fits into the original “Speedy Service” model the company introduced in the 1950’s. – Use local food sources where possible. » Using local sources decreases the time to market, and also decreases the use of fuel to transport goods.
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