McDonald’s Value Chain McDonald’s Value Chain AnalysisAnalysis

Jeovani Zamarripa, Alicia Wylie, Jason Flores, Conor Mullarkeyy

Mission StatementMission Statement

“McDonald's brand mission is to "be McDonald s brand mission is to be our customers' favorite place and way

to eat." Our worldwide operations phave been aligned around a global

strategy called the Plan to Win t i th fi b i f centering on the five basics of an

exceptional customer experience –People Products Place Price and People, Products, Place, Price and Promotion. We are committed to

improving our operations and improving our operations and enhancing our customers' experience.”

Company HistoryCompany History

McDonald’s Bar-B-Que (1940)McDonald s Bar-B-Que (1940)• World’s 1st McDonald’s• Founded by Dick and Mac McDonald• Founded by Dick and Mac McDonald• San Bernadino, CA

D i i & h i• Drive-in & car hop serviceMcDonald’s (1948)

N F l• Name Formulates• Menu develops• 15 Cent hamburger

Company InfoCompany Info

• Corporate Headquarters:p q– McDonald’s Corporation

2111 McDonald's DrOak Brook, IL 60523

• Employees: – Approximately 400,000 McDonald’s employees globallyApproximately 400,000 McDonald s employees globally– 1.6 million people globally are employed through

McDonald’s restaurants and their franchises

• Restaurants: – 32,000 world-wide, 118 countries

2009 Revenue & kU.S. Stocks (US only)

• NYSE: MCDNYSE: MCD– Current Price: $64.74– Change: $0.26 +g

(As of 2/16/2010)

• 2009 Revenue (mil.)$22,744.701• Year Revenue Growth 3 3%• Year Revenue Growth -3.3%• 2009 Net Income (mil.)$4,551.001

Y N t I G th 5 5%• Year Net Income Growth 5.5%

LeadershipLeadership

James Skinner Vice Chairman, CEO

Left to Right: Jose Armario, Group President Canada & Latin America; Janice Fulds, US Chief Operations Officer; James Skinner, Vice Chairman and CEO; Donald Thompson, President U.S.A; Jeffrey Stratton,

Chief Restaurant Officer; Mary Dillion, Global Chief Marketing Officer; Timothy Fenton, President Asia/Pacific Middle East & Africa; Peter Bensen, Chief Financial Officer; Dennis Henequen. President

Europe; (at table) Gloria Santona, General Counsel & Corporate Secretary; Richard Floersch, Chief Human Resource Officer.

CultureCulture

• Forging new opportunitiesForging new opportunities– Innovation from within– Empowered “big thinking”p g g

• Social responsibility– Community FocusCommunity Focus– Responsible Purchasing– Protecting Our Environmentg

• Diversity– Employee ForceEmployee Force

McDonald’s Production SystemMcDonald s Production System

INPUT OUTPUTPROCESS

Employees

Customers

Cook and package foods

Satisfied customers

Customers’ favorite Customers

Restaurants

Food Prep/Assembly Line

Assemble meals to the customers order

Customers favorite place and way to eat

Provide a relaxed and fun environment to eatLine

Frozen foods (patties, fries, chicken nuggets, etc.)

ProduceProduce

Containers

Company image

Operational Strategic f i iPerformance Dimensions

COSTQUALITY

SPEEDFLEXIBILITY

COSTCOST

Make it cheap:Make it cheap:• Economies of scale

– Allows McD’s to pass the value to consumersAllows McD s to pass the value to consumers• McValue Dollar Menu• Party Pack

l• Cost controls

QUALITYQUALITY

Make it consistent:Make it consistent:• Universal taste• Core offerings globallyCore offerings globally

Order Qualifier: Make it good:Order Qualifier: Make it good:• Taste appeal to its target market• Healthy options• Healthy options

SPEEDSPEED

Make it fast:Make it fast:• 90 second service goal

Order Qualifier: Make it dependable:• Menu items available daily• Menu items available daily• Hot & Fresh

Order Qualifier: New Product Development:• R i l it• Regional menu items• Healthy menu options

FLEXIBILITYFLEXIBILITYOrder Qualifier: Product design:• S/M/L/Super size• S/M/L/Super size• Gender based kids meals• Happy meals vs. Mighty kids meals

P l k• Promotional packagingOrder Qualifier: Product Mix:• Sandwich varietiesSandwich varieties• Soft serve offerings (milkshakes, ice cream

cones, sundaes)• Salads• SaladsOrder Qualifier: Production Volume:• Staffing based on consumer traffic and meal

titime• 24 Hour restaurants and drive-thru

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTUREFIRM INFRASTRUCTURE

HUMAN RESOURCES

TECHNOLOGY

HUMAN RESOURCES

TECHNOLOGY

PROCUREMENTPROCUREMENT

INBOUND LOGISTICS

MARKETING & SERVICES

OUTBOUND LOGISTICSOPERATIONS SERVICEINBOUND

LOGISTICSMARKETING & SERVICES

OUTBOUND LOGISTICSOPERATIONS SERVICE

Firm InfrastructureFirm InfrastructureStrengths:• Brand recognition• Brand recognition• #1 in retail fast food industry• LeadershipLeadership• Financial Strength• Company image• Intellectual property• Franchising

Weaknesses:• LawsuitsLawsuits• Company image• Culture insensitivities

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

HUMAN RESOURCES

TECHNOLOGY

PROCUREMENT

STRENGTH

WEAKNESSINBOUND LOGISTICS

MARKETING & SERVICES

OUTBOUND LOGISTICSOPERATIONS SERVICE

WEAKNESS

Inbound LogisticsInbound LogisticsStrengths:• Economies of scale

– Pass value to customer (i.e. $1 menu)• Just-in-time order & deliveryJust t e o de & de ve y• Sustainable packaging• Renewable resources

P k i i i (82% bl )– Packaging composition (82% renewable resources)– Oil recycling (diesel oil)

• Supply chain controly• Quality control

– Freight truck inspections– Random auditsRandom audits

Weaknesses:• Media backlash

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

HUMAN RESOURCES

TECHNOLOGY

PROCUREMENTEconomies of

l

Just-in-time order & delivery

PROCUREMENT

STRENGTH

scaleSustainable packagingRenewable resourcesSupply chain Supply chain control

Quality controlMedia/PR

INBOUND LOGISTICS

MARKETING & SERVICES

OUTBOUND LOGISTICSOPERATIONS SERVICEWEAKNESS

OperationsOperationsStrengths:

O li & it ki k j b li ti • On-line & on-site kiosk job application systems

• 2nd largest employer in the U.S.2 largest employer in the U.S.• Reinforced information systems • Wireless headsets• Wi-Fi offered in all locations• R&D in target consumer demands and

trendstrends• Corporate guidelines imposed on

franchisees• Franchisees must purchase supplies from

McD’s

OperationsOperationsWeaknesses:

Hi h t ( th 100%)• High turn-over (more then 100%)• 90 second drive-thru rule (unsuccessful)• Impersonal drive-thru greeters • Impersonal drive-thru greeters

(telemarketer like, person is not in store)

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

HUMAN RESOURCES

Just in time order

Job appliation systems2nd largest U.S. employerHigh turn-overReinforced IT systems

TECHNOLOGY

PROCUREMENTEconomies of scaleSustainable

Just-in-time order & delivery

Reinforced IT systemsWireless headsetsWi-FiDrive-thru voiceFranchsor purchase agreement

STRENGTH

Sustainable packagingRenewable resourcesSupply chain control

R&D based on consumer demandsCorp guidelines for Franchisees90 second drive-thru rule

INBOUND LOGISTICS

MARKETING & SERVICES

OUTBOUND LOGISTICS

OPERATIONS SERVICEWEAKNESS

Quality controlMedia/PR

Outbound LogisticsOutbound Logistics

• Distributor agreementsg• Quality control

– Freight truck inspectionsrandom audits– random audits

• Refrigerated trucks• Reinforced Information Systemse o ced o at o Syste s

– Cashier– Assembly Line

Order fulfillment– Order fulfillment• Just in time order and delivery

– Ensuring freshnessg• Packaging quality reinforces freshness

– Hot/Warm food

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

HUMAN RESOURCES

Just in time order

Job appliation systems2nd largest U.S. employerHigh turn-overReinforced IT systems Refridgerated trucks

TECHNOLOGY

PROCUREMENTEconomies of scaleSustainable

Just-in-time order & delivery

Reinforced IT systemsWireless headsetsWi-FiDrive-thru voiceFranchsor purchase agreement

Refridgerated trucksReinforced ITJust-in-time order & delivery

Distributor agreementsQC

STRENGTH

Sustainable packagingRenewable resourcesSupply chain control

R&D based on consumer demandsCorp guidelines for Franchisees90 second drive-thru rule

QCPackaging

INBOUND LOGISTICS

MARKETING & SALES

OUTBOUND LOGISTICS

OPERATIONS SERVICEWEAKNESS

Quality controlMedia/PR

Marketing & SalesMarketing & Sales

Strengths:Strengths:• Product

– Health and wellness campaign & product p g pofferings

– Consumer and market researchP i• Price– McValue Dollar Menu

Party pack– Party pack• Promotion

– Disney and Nickelodeon license agreementsy g– Coca-Cola endorsement– “Feeding the athletes” Olympic sponsorship

Marketing & Sales (cont’d)Marketing & Sales (cont d)

Strengths:Strengths:• Place

– New upscale MD’sp– MD’s goes “green”– McCafe– Wi-Fi– McDonald’s Play Place

• Ronald McDonald• Community outreachCommunity outreach

Marketing & Sales (cont’d)Marketing & Sales (cont d)

Weakness:Weakness:• “Supersize Me” movie• Media/PR• Adaptation to global culture and customs• Product failures

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength C i

HUMAN

Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

Job appliation systemsHUMAN

RESOURCES

TECHNOLOGY

E i f

y2nd largest U.S. employerHigh turn-over

Just-in-time order & delivery

Reinforced IT systemsWireless headsetsWi-FiDrive-thru voice

Refridgerated trucksReinforced ITJust-in-time order & delivery

Consumer ResearchMcValue Dollar MenuParty Packs

PROCUREMENT

Economies of scaleSustainable packagingRenewable resourcesSupply chain control

Quality controlMedia/PR

Franchsor purchase agreement

R&D b d

Distributor agreementsQCPackaging

Party PacksCartoon AffiliationsCokeOlympic SponsorUpscale MD'sGoing GreenM C f

STRENGTH

R&D based on consumer demandsCorp guidelines for Franchisees90 second drive-thru

l

McCafeWi-FiMD's Play PlaceRonald McDonald"Supersize Me"Media/PR

INBOUND LOGISTICS

MARKETING & SALES

OUTBOUND LOGISTICS

OPERATIONS SERVICEWEAKNESS

rule Global expansion issuesProduct failures

ServiceServiceStrengths:• Fast food service• Order accuracyy• Clean environment• Friendly customer servicey

Weaknesses:Weaknesses:• Lack of customer service• Employee apathyEmployee apathy• Dissatisfied customers

MD’s Value Chain AnalysisMD s Value Chain AnalysisFIRM INFRASTRUCTURE

Brand recognition #1 in retail fast food industry Leadership Financial Strength C i

HUMAN

Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities

Job appliation systemsHUMAN

RESOURCES

TECHNOLOGY

E i f

y2nd largest U.S. employerHigh turn-over

Just-in-time order & delivery

Reinforced IT systemsWireless headsetsWi-FiDrive-thru voice

Refridgerated trucksReinforced ITJust-in-time order & delivery

Consumer ResearchMcValue Dollar MenuParty Packs

PROCUREMENT

Economies of scaleSustainable packagingRenewable resourcesSupply chain control

Quality controlMedia/PR

Franchsor purchase agreement

R&D based on

Distributor agreementsQCPackaging

Party PacksCartoon AffiliationsCokeOlympic SponsorUpscale MD'sGoing GreenM C f

Fast food service

STRENGTH

R&D based on consumer demandsCorp guidelines for Franchisees90 second drive-thru rule

McCafeWi-FiMD's Play PlaceRonald McDonald"Supersize Me"Media/PR

Order accuracyClean environmentFriendly customer serviceLack of customer service

INBOUND LOGISTICS

MARKETING & SALES

OUTBOUND LOGISTICSOPERATIONS SERVICE

WEAKNESSGlobal expansion issuesProduct failures

Employee apathyDissatisfied customers

Core CompetenceCore Competence

• McDonald’s strength lies in the operations and firm i f infrastructure.

• McDonald’s core competency is the production and d li d f ff d bl f d t l b f delivery speed of affordable food to a large number of customers to support a low cost, high speed, and consistent quality strategy

• McDonald’s strategy is supported by its strong financial resources, brand image, market leadership, buyer supplier relations, and product value. p

Competitive AdvantageCompetitive Advantage

• #1 Fast food restaurant in industryy• Customers• Value and affordable menu• Convenience• Franchisee base

Fun FactsFun Facts…

• Aprox.. 9 million pounds fries served p 9 pdaily

• 380 sesame seeds on a sesame bun• Approx. 82% of consumer packaging is

made from renewable materialsC t il i t bi di l f l• Convert oil into biodiesel fuel

• Logo differs between “green” locations and traditional locations (green and traditional locations (green background vs. red color)

• Beer served in Germany McDonald’sy