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Mcdonalds Corporation Is The Worlds Largest Chain Marketing Essay

3505 words (14 pages) Essay in Marketing

5/12/16 Marketing Reference this

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McDonald’s Corporation is the world’s largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonald’s sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonald’s restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more ‘natural’ style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables.

Each McDonald’s restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporations’ revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald’s revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion. [1] 

History analysis:

The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California.

Their introduction of the “Speedee Service System” in 1948 established the principles of the modern fast-food restaurant.

The original mascot of McDonald’s was a man with a chef’s hat on top of a hamburger shaped head whose name was “Speedee.” Speedee was eventually replaced with Ronald McDonald in 1963.

The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955 , the ninth McDonald’s restaurant overall. Kroc later purchased the McDonald brothers’ equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965.

With the expansion of McDonald’s into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility. [2] 

Vision

To be the best and leading fast food provider around the globe

Mission

McDonald’s brand mission is to be our customers’ favorite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customers’ expectations.

Values

Our values summarized in “Q.S.C. & V.”. Provide good quality, services to customer. Have a cleanliness environment when customer enjoys their meal. The value of food product makes every customer is smiling.

Suppliers

Substitutes

Buyers

Potential entrants

Competitive rivalryThe Five Forces Framework

The Threat of Entrants

Large established companies with strong brand identities such as McDonald’s BKC, YUM, and WEN do make it more difficult to enter and succeed within the marketplace; new entrants find that they are faced with price competition from existing chain restaurants.

Bargaining Power of Buyers

Low bargaining power of buyers.

Bargaining power of suppliers

Bargaining power of suppliers within the fast food industry would be relatively small, unless the main ingredient of the product is not readily available.

Threat of Substitutes

This could range from a competitive fast food restaurant to family restaurant to a home cooked meal.

Competitive Rivalry

The strength of competition in this industry is very high; the main rivals are BKC, YUM, and WEN. They compete with international, national, regional, local, retailers of food products (restaurants, quick service, pizza, coffee shops, and supermarkets).

PESTEL Framework:

Political:

The international operations of McDonald’s are highly influenced by the individual state policies enforced by each government.

Economic:

McDonald’s has the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates.

Market leader.

Very high target market.

Low cost and more incomes.

The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country.

Social:

Working within many social groups.

Increase employments.

Technological

Advanced technology development.

Quality standards.

Environmental:

Quality packing.

Local manufacture using foreign supplies.

Legal:

Legislation for product.

Sustained logo.

SWOT ANALYSIS

Opportunities

Threats

Growing health trends among consumers

Globalization, expansion in other countries (especially in China & India).

Diversification and acquisition of other quick-service restaurants.

Growth of the fast-food industry.

Worldwide deregulation.

Low cost menu that will attract the customers.

Freebies and discounts.

Health professionals and consumer activists accuse McDonald’s of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.

The relationship between corporate level McDonald’s and its franchise dealers.

McDonald’s competitors threatened market share of the company both internationally and domestically.

Anti-American sentiments.

Global recession and fluctuating foreign currencies.

Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues.

Strength

Weakness

Strong brand name, image and reputation.

Large market share.

Strong global presence.

Specialized training for managers known as the Hamburger University.

McDonalds Plan to win focuses on people, products, place, price and promotion.

Strong financial performance and position.

Unhealthy food image.

High Staff Turnover including Top management

Customer losses due to fierce competition.

Legal actions related to health issues; use of trans fat & beef oil.

Uses HCFC-22 to make polystyrene that is contributing to ozone depletion.

Ignoring breakfast from the menu.

COMPARISION

 

McDonald’s

Burger King

Yum Brands

Wendy’s

Critical Success Factors

Weight

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Price

0.15

4

0.60

3

0.45

3

0.45

3

0.45

Financial Position

0.08

4

0.32

3

0.32

3

0.24

2

0.16

Consumer Loyalty

0.10

4

0.40

3

0.40

3

0.30

2

0.20

Advertising

0.10

3

0.30

3

0.30

4

0.40

2

0.20

Product Quality

0.10

4

0.40

3

0.40

4

0.40

2

0.20

Innovation

0.15

3

0.45

3

0.45

3

0.45

2

0.30

Market Share

0.10

4

0.40

2

0.20

3

0.30

2

0.20

Management

0.07

4

0.28

3

0.21

3

0.21

3

0.21

Global Expansion

0.15

4

0.60

2

0.30

3

0.45

1

0.15

Total

1

 

3.75

 

3.03

 

3.20

 

2.07

External Factor Evaluation (EFE) Matrix

Key External Factors

Weight

Rating

Weighted Score

Opportunities

Growing health trends among consumers

0.08

3

0.24

Globalization, expansion in other countries (especially in China & India).

0.12

4

0.48

Diversification and acquisition of other quick-service restaurants.

.04

3

0.12

Growth of the fast-food industry.

.10

3

0.30

Worldwide deregulation

.04

2

0.08

Low cost menu that will attract the customers.

.08

2

0.16

Freebies and discounts.

.08

1

0.08

Threats

Health professionals and consumer activists accuse McDonald’s of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity.

0.10

3

0.30

The relationship between corporate level McDonald’s and its franchise dealers.

0.09

3

0.27

McDonald’s competitors threatened market share of the company both internationally and domestically.

0.12

4

0.48

Anti-American sentiments.

.07

2

.14

Global recession and fluctuating foreign currencies.

.04

3

.12

Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues.

.04

2

.08

Total

1.00

2.85

Financial Ratio Analysis 12/2007

Growth Rates %

McDonald’s

Industry

S&P 500

Sales (Qtr vs year ago qtr)

-3.30

4.20

-3.80

Net Income (YTD vs YTD)

84.70

47.90

8.40

Net Income (Qtr vs year ago qtr)

-22.60

-59.90

-94.80

Sales (5-Year Annual Avg.)

6.53

8.14

13.26

Net Income (5-Year Annual Avg.)

23.39

15.30

14.45

Dividends (5-Year Annual Avg.)

32.36

22.36

12.30

Price Ratios

Current P/E Ratio

14.7

14.2

13.0

P/E Ratio 5-Year High

N/A

9.5

12.5

P/E Ratio 5-Year Low

N/A

4.7

2.0

Price/Sales Ratio

2.62

1.88

1.47

Price/Book Value

4.62

3.54

3.00

Price/Cash Flow Ratio

11.20

10.00

9.00

Profit Margins %

Gross Margin

36.7

32.1

39.4

Pre-Tax Margin

26.2

17.2

13.2

Net Profit Margin

18.3

12.0

9.1

5Yr Gross Margin (5-Year Avg.)

33.9

33.3

39.1

5Yr PreTax Margin (5-Year Avg.)

19.8

14.2

16.6

5Yr Net Profit Margin (5-Year Avg.)

13.7

9.8

11.45

Financial Condition

Debt/Equity Ratio

0.76

.80

1.03

Current Ratio

1.4

1.2

1.4

Quick Ratio

1.3

1.1

1.1

Interest Coverage

N/A

1.2

29.9

Leverage Ratio

2.1

-5.3

1.9

Book Value/Share

12.00

10.00

19.75

Investment Returns %

Return On Equity

32.2

44.4

27.9

Return On Assets

14.9

11.3

8.1

Return On Capital

17.0

13.7

11.2

Return On Equity (5-Year Avg.)

19.7

22.8

20.6

Return On Assets (5-Year Avg.)

10.0

8.98

8.5

Return On Capital (5-Year Avg.)

11.4

11.0

11.5

Management Efficiency

Income/Employee

10,783

9,401

91,499

Revenue/Employee

58,806

98,207

1,000,000

Receivable Turnover

23.7

44.7

15.8

Inventory Turnover

125.7

98.7

12.3

Asset Turnover

0.8

1.1

1.0

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight

Rating

Weighted Score

Strengths

Strong brand name, image and reputation.

0.12

4

0.48

Large market share.

0.10

4

0.40

Strong global presence.

0.04

3

0.12

Specialized training for managers known as the Hamburger University.

0.04

3

0.12

McDonalds Plan to Win focuses on people, products, place, price and promotion

0.12

4

0.48

Strong financial performance and position.

0.08

4

0.32

Introduction of new products.

0.06

4

0.24

Customer focus (centric).

0.06

4

0.24

Strong performance in the global marketplace.

0.08

4

0.32

Weaknesses

Unhealthy food image.

0.08

1

0.08

High Staff Turnover including Top management

0.04

1

0.10

Customer losses due to fierce competition.

0.04

1

0.04

Legal actions related to health issues; use of trans fat & beef oil.

0.04

2

0.08

McDonald’s uses HCFC-22 to make polystyrene that is contributing to ozone depletion.

0.04

2

0.08

Ignoring breakfast from the menu.

0.06

1

0.06

Total

1.00

3.16

SPACE Matrix

Financial Strength

Rating

Environmental Stability

Rating

Return on investment

4

Rate of inflation

-3

Leverage

4

Demand Changes

-3

Net Income

6

Price Elasticity of demand

-1

EPS

5

Competitive pressure

-3

ROE

5

Barriers to entry new markets

-3

Cash Flow

4

Risk involved in business

-2

Average

4.67

Average

-2.5

 

 

Y-axis

2.17

Competitive Advantage

Rating

Industry Strength

Rating

Market share

-1.00

Growth potential

5

Product Quality

-1.00

Financial stability

5

Customer Loyalty

-1.00

Ease of entry new markets

4

Control over other parties

-2.00

Resources utilization

4

Profit potential

5

 

Demand variability

3

 

Average

-1.25

Average

4.33

 

 

X-axis

3.08

Directional vector point is 🙁 3.08, 2.17)

Conservative

Aggressive

Competitive

Defensive

FS

IS

CA

ES

Grand Strategy Matrix

Quadrant II

Quadrant I

Quadrant IV

Quadrant III

Rapid Market Growth

Strong Competitive

Position

Weak

Competitive

Position

Slow Market Growth

The Boston Consulting Group (BCG) Matrix

Question Marks

Cash Cows

Dogs

Relative Market Share Position

Industry

Sales

Growth

Rate

Stars

MCD

The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

III

II

I

High

3.0 to 3.99

VI

V

IV

The EFE Total Weighted Score

McDonald’sMedium

2.0 to

2.99

IX

VIII

VII

Low

1.0 to 1.99

The Quantitative Strategic Planning Matrix

(QSPM)

Strategy 1

Expand further in Asia by adding 500 restaurants

Strategy 2

Applying 0 grams Trans fat in all worldwide McDonald’s restaurants

Key Internal Factors

Weight

AS

TAS

AS

TAS

Strengths 

Strong brand name, image and reputation

0.12

4

0.48

4

0.48

Large market share

0.10

4

0.40

2

0.20

Strong global presence

0.04

4

0.12

2

0.08

Specialized training for managers known as the Hamburger University

0.04

McDonalds Plan to Win focuses on people, products, place, price and promotion

0.12

4

0.48

4

0.48

Strong financial performance and position

0.08

4

0.32

4

0.32

Introduction of new products

0.06

Customer focus (centric)

0.06

1

0.06

4

0.24

Strong performance in the global marketplace

0.08

3

0.24

1

0.08

Weaknesses

Unhealthy food image

0.08

1

0.08

4

0.32

High Staff Turnover including Top management

0.10

Customer losses due to fierce competition

0.04

3

0.12

1

0.04

Legal actions related to health issues; use of trans fat & beef oil

0.04

1

0.04

4

0.16

Uses HCFC-22 to make polystyrene that is contributing to ozone depletion

0.04

SUBTOTAL

1.00

2.34

2.40

Strategy 1

Expand further in Asia by adding 500 restaurants

Strategy 2

Applying 0 grams Trans fat in all worldwide McDonald’s restaurants

Key External Factors

Weight

AS

TAS

AS

TAS

Opportunities

Growing health trends among consumers

0.08

1

0.08

4

0.32

Globalization, expansion in other countries (especially in China & India)

0.12

4

0.48

1

0.12

Diversification and acquisition of other quick-service restaurants

0.04

Growth of the fast-food industry

0.10

4

0.40

4

0.40

Worldwide deregulation

0.04

4

0.16

1

0.04

Low cost menu that will attract the customers

0.08

Freebies and discounts

0.08

Threats

Health professionals and consumer activists accuse McDonald’s of contributing to the country’s health issue of high cholesterol, heart attacks, diabetes, and obesity

0.10

1

0.10

4

0.40

The relationship between corporate level McDonald’s and its franchise dealers

0.09

4

0.36

1

0.09

McDonald’s competitors threatened market share of the company both internationally and domestically

0.12

4

0.48

4

0.48

Anti-American sentiments

0.07

Global recession and fluctuating foreign currencies

0.04

Fast-food chain industry is expected to struggle to meet the expectations of the customers towards health and environmental issues

0.04

1

0.04

4

0.16

SUBTOTAL

1.00

2.10

2.01

SUM TOTAL ATTRACTIVENESS SCORE

4.44

4.41

.

Conclusion

McDonald’s faces some difficult challenges. Key to its future success will be maintaining its core strengths-an unwavering focus on quality and consistency-while carefully experimenting with new options. These innovative initiatives could include launching higher-end restaurants under new brands that wouldn’t be saddled with McDonald’s fast-food image. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater. 

The company’s environment efforts, while important, should not overshadow its marketing initiatives, which are what the company is all about.

Recommendations

Expand further into Asia markets over a 2-year period by adding 500 restaurants per year at a cost of $4 billion annually, and applying 0 grams Trans fat in all worldwide McDonald’s restaurants.

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