198 Paper Final

7/29/2019 198 Paper Final

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February 21, 2013

Emma Lina F. Lopez | Tour 198

GABATINRAOLA

MCDONALDS CORPORATION -2007A CASE STUDY


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TABLE OF CONTENTS

I. IntroductionA. Background of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2B. Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2C. Methodologies and Processes Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. Company ProfileA. Background of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2B. Vision, Mission, Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3C. Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4D. CISM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

III. Companys Internal EnvironmentStrengths and weaknesses plus IFE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

IV. Companys External EnvironmentOpportunities and threats plus EFE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

V. Companys Direction and StrategyA. Proposed Vision Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12B. Proposed Mission Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12C. Proposed KRAs and KSIs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12D. Core Value Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12E. Strategic Issues and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12F. SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13G. Juxtaposition of SWOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13H. Strategy Formulation & Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17I. Congruent Business Strategy & Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

VI. Proposed Organizational StructureA. Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19B. Value-Adding Roles and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20C. Personnel Complement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21D. Personnel Management Policies and Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

VII. Proposed Strategy and Operations PlanA. Market Analysis, Segmentation and Development of a Marketing Mix . . . . . . . . . . . . . . . . . . . . . . 26B. The Proposed 5-year Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29C. One year operational Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

VIII. Financial ResourcesGraphs and figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

IX. Proposed Strategic Control MeasuresA. Proposed Quality Assurance Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33B. The Proposed Monitoring and/or Evaluation Systems Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

X. Socio-Economic JustificationA. Cost-Benefit Analysis of Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35B. Recommendation(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35


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I. INTRODUCTIONA. Background of Study

As one of the most successful fast food chain in the world, throughout the development

of McDonalds, we could easily identify many successful business strategy implementations. Inthis paper, the researchers will discuss some critical business strategies, which linked to thecompanys structure and external environment. This paper is organized as follows: In the first

section, the researchers will give brief introduction to the success of McDonalds. In the secondsection, the researchers will analyze some particular strategies used by McDonalds and howthese strategies are suitable to their business structure. The researchers will then analyze whyMcDonalds chose these strategies in response to the changing external environment. Finally, theresearchers will summarize the approaches used by McDonalds to achieve their strategic goals.

B. ObjectivesTo maintain and retain customers with a big company like McDonalds and to extendmarket reach in the Asia & Pacific Region.

C. Methodologies and Processes UsedApplied Strategic Management Concepts from Tour 198 course, using different matrices

and tools.

II. COMPANY PROFILEA. Background of Company

McDonald's Corporation is the world's largest chain of fast food restaurants, servingnearly 47 million customers daily through more than 31,000 restaurants in 119 countriesworldwide. McDonalds sells various fast food items and soft drinks including, burgers, chi cken,

salads, fries, and ice cream. Many McDonald's restaurantshave included a playground for children and advertisinggeared towards children, and some have been redesigned ina more 'natural' style, with a particular emphasis on comfort:introducing lounge areas and fireplaces, and eliminatinghard plastic chairs and tables.

Each McDonald's restaurant is operated by afranchisee, an affiliate, or the corporation itself. Thecorporations' revenues come from the rent, royalties and feespaid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% overthe three years ending in 2007 to $22.8 billion, and 9%growth in operating income to $3.9 billion.

McDonald's corporate logo usedfrom 1968 to 2006. It still exists atsome restaurants.


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History analysis:

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

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

The original mascot of McDonald's was a man with a chef's hat on top of a hamburgershaped head whose name was "Speedee." Speedee was eventually replaced by RonaldMcDonald in 1963.

The present corporation dates its founding to the opening of a franchised restaurant byRay Kroc, in Des Plaines, Illinois on April 15, 1955 , the ninth McDonald's restaurantoverall. 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 in1965.

With the expansion of McDonald's into many international markets, the company hasbecome a symbol of globalization and the spread of the American way of life. Itsprominence has also made it a frequent topic of public debates about obesity, corporateethics and consumer responsibility.

The McDonald's headquarters complex, McDonald's Plaza, is located in Oak Brook,Illinois.

In post-Soviet Russia, business motivators often preach the value of implanting U.S.know-howthe technique of smiling among employees in stores, restaurants andother service-oriented companies. In this spirit, McDonalds restaurants in the 1990s evenincluded a smile on its Russian menu together with the price: free.

B. Vision, Mission, Goals

Vision

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

McDonald's brand mission is to be our customers' favorite place and way to eat, and improve ouroperations 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 aclean environment where customer enjoys their meal. The value of food product makes everycustomer is smiling.


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C. Organizational Structure

1. President and CO2. President, Latin America3. CE Vice President - Global Chief Marketing Officer4. President, Asia/Pacific/Middle East/Africa5. Executive Vice President and COO6. Corporate Executive Vice President and CHRO7. President, Europe8. President, Central Division, USA9. President, East Division10.Non-executive1 Chairman of the Board11.Corporate Senior Executive Vice President and CFO12.President, West Division13.Corporate Executive Vice President, General Counsel and Secretary14.Vice Chairman and CEO15.Corporate Executive Vice President - Worldwide Chief Restaurant Officer16.President, USA17.Honorary Chairman - life trustee of Ronald McDonald House Charities

1an officer not directing any department or division


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D. CISM

Cross Impact System Matrix

1 2 3 4 5

1 X 4 2 3 4 13 3.252 4 X 1 4 1 10 2.50

3 1 2 X 4 4 11 2.75

4 1 4 3 X 4 12 3.00

5 2 4 1 2 X 9 2.25

Factors:1 - Marketing2 - Sales3 - Training

4Service Quality5 - Product Quality

The factor garnering the highest score is marketing with an average of3.25, thus makingit an important aspect of the business operation and is needed to be maintained. While the factorwith the lowest score is product quality with an average of 2.25, therefore must be furtherimproved to achieve more effective and/or efficient.

The Five Forces Framework

CompetitiveRivalry

PotentialEntrants

Buyers

Substitutes

Suppliers


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The Threat of Entrants

Large established companies with strong brand identities such as Burger King, YUMBrand [i.e. KFC], and Wendys do make it more difficult to enter and succeed within themarketplace; new entrants find that they are faced with price competition from existing chainrestaurants.

Bargaining Power of BuyersLow bargaining power of the buyers.

Bargaining Power of SuppliersBargaining 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 SubstitutesThis could range from a competitive fast food restaurant to family restaurant to a home cookedmeal.

Competitive Rivalry

The strength of competition in this industry is very high; the main rivals are BKC, YUM, andWEN. 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 McDonalds are highly influenced by the individual statepolicies enforced by each government.

Economic:

McDonalds has the tendency to experience hardship in instances where the economy ofthe 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.


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Environmental:

Quality packing. Local manufacture using foreign supplies.

Legal:

Legislation for product. Sustained logo.

III. COMPANYS INTERNAL ENVIRONMENTStrength Weakness

1. Strong brand name, image andreputation.

2. Large market share.3. Strong global presence.4. Specialized training for managers

known as the Hamburger University.5. McDonalds Plan to win focuses on

people, products, place, price andpromotion.

6. Strong financial performance andposition.

7. Introduction of new products.8. Customer focus (centric).9. Strong MCD's performance in the

global marketplace.

1. Unhealthy food image.2. High Staff Turnover including Top

management3. Customer losses due to fierce

competition.4. Legal actions related to health issues;

use of trans-fat & beef oil.5. Uses HCFC-22 to make polystyrene

that is contributing to ozone depletion[Styrofoam take-out containers].

6. Ignoring breakfast from the menu.


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Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted Score

Strengths

Strong brand name, image andreputation. 0.12 4 0.48

Large market share. 0.10 4 0.40

Strong global presence. 0.04 3 0.12

Specialized training formanagers known as theHamburger University.

0.04 3 0.12

McDonalds Plan to Winfocuses on people, products,

place, price and promotion

0.12 4 0.48

Strong financial performanceand position.

0.08 4 0.32

Introduction of new products. 0.06 4 0.24Customer focus (centric). 0.06 4 0.24Strong performance in theglobal marketplace.

0.08 4 0.32

WeaknessesUnhealthy food image. 0.08 1 0.08High Staff Turnover includingTop management

0.04 1 0.04

Customer losses due to fiercecompetition.

0.04 1 0.04

Legal actions related to healthissues; use of trans fat & beefoil.

0.04 2 0.08

McDonald's uses HCFC-22 to

make polystyrene that iscontributing to ozonedepletion.

0.04 2 0.08

Ignoring breakfast from themenu.

0.06 1 0.06

Total 1.00 0.38


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IV. COMPANYS EXTERNAL ENVIRONMENTOpportunities Threats

1. Growing health trends amongconsumers

2. Globalization, expansion in othercountries (especially in China &India).

3. Diversification and acquisition ofother quick-service restaurants.

4. Growth of the fast-food industry.5. Worldwide deregulation.6. Low cost menu that will attract the

customers.7. Freebies and discounts.

1. Health professionals and consumeractivists accuse McDonald's of

contributing to the countrys healthissue of high cholesterol, heartattacks, diabetes, and obesity.

2. The relationship between corporatelevel McDonald's and its franchisedealers.

3. McDonalds competitors threatenedmarket share of the company bothinternationally and domestically.

4. Anti-American sentiments.5. Global recession and fluctuating

foreign currencies.6. Fast-food chain industry is expected

to struggle to meet the expectations ofthe customers towards health andenvironmental issues.

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

OpportunitiesGrowing health trends among consumers 0.08 3 0.24

Globalization, expansion in othercountries (especially in China & India).

0.12 4 0.48

Diversification and acquisition of otherquick-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 thecustomers.

.08 2 0.16

Freebies and discounts. .08 1 0.08


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ThreatsHealth professionals and consumeractivists accuse McDonald's ofcontributing to the countrys health issue

of high cholesterol, heart attacks,diabetes, and obesity.

0.10 3 0.30

The relationship between corporate levelMcDonald's and its franchise dealers.

0.09 3 0.27

McDonalds competitors threatenedmarket share of the company bothinternationally and domestically.

0.12 4 0.48

Anti-American sentiments. .07 2 .14Global recession and fluctuating foreigncurrencies.

.04 3 .12

Fast-food chain industry is expected to

struggle to meet the expectations of thecustomers towards health andenvironmental issues.

.04 2 .08

Total 1.00 2.85

CPM-Competitive Profile Matrix

McDonald's Burger King Yum Brands Wendy's

CriticalSuccessFactors

Weight RatingWeighted

ScoreRating

WeightedScore

RatingWeighted

ScoreRating

WeightedScore

Price 0.15 4 0.60 3 0.45 3 0.45 3 0.45FinancialPosition

0.08 4 0.32 3 0.24 3 0.24 2 0.16

ConsumerLoyalty

0.10 4 0.40 3 0.30 3 0.30 2 0.20

Advertising 0.10 3 0.30 3 0.30 4 0.40 2 0.20

ProductQuality

0.10 4 0.40 3 0.30 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

GlobalExpansion

0.15 4 0.60 2 0.30 3 0.45 1 0.15

TOTAL 1 3.75 2.75 3.20 2.07


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Financial Ratio Analysis

December 2007Growth 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 8.40Net Income (Qtr vs year ago qtr) -22.60 -59.90 -94.80Sales (5-Year Annual Avg.) 6.53 8.14 13.26Net Income (5-Year Annual Avg.) 23.39 15.30 14.45Dividends (5-Year Annual Avg.) 32.36 22.36 12.30Price Ratios

Current P/E Ratio 14.70 14.20 13.00P/E Ratio 5-Year High - 9.50 12.50P/E Ratio 5-Year Low - 4.70 2.00Price/Sales Ratio 2.62 1.88 1.47Price/Book Value 4.62 3.54 3.00

Price/Cash Flow Ratio 11.20 10.00 9.00Profit Margins %

Gross Margin 36.70 32.10 39.40Pre-Tax Margin 26.20 17.20 13.20Net Profit Margin 18.30 12.00 9.105Yr Gross Margin (5-Year Avg.) 33.90 33.30 39.105Yr PreTax Margin (5-Year Avg.) 19.80 14.20 16.605Yr Net Profit Margin (5-YearAvg.)

13.70 9.80 11.45

Financial Condition

Debt/Equity Ratio 0.76 0.80 1.03Current Ratio 1.40 1.20 1.40Quick Ratio 1.30 1.10 1.10Interest Coverage - 1.20 29.90Leverage Ratio 2.10 -5.30 1.90Book Value/Share 12.00 10.00 19.75Investment Returns %

Return On Equity 32.20 44.40 27.90Return On Assets 14.90 11.30 8.10Return On Capital 17.00 13.70 11.20Return On Equity (5-Year Avg.) 19.70 22.80 20.60

Return On Assets (5-Year Avg.) 10.00 8.98 8.50Return On Capital (5-Year Avg.) 11.40 11.00 11.50Management Efficiency

Income/Employee $ 10,783.00 $ 9,401.00 $ 91,499.00Revenue/Employee $ 58,806.00 $ 98,207.00 $ 1,000,000.00Receivable Turnover 23.70 44.70 15.80Inventory Turnover 125.70 98.70 12.30Asset Turnover 0.80 1.10 1.00


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V. COMPANYS DIRECTION AND STRATEGYA. Proposed Vision Statement

To serve food and beverages with zero grams trans-fat.

B. Proposed Mission StatementUtilizing the local ingredients and integrating them with the menu, while taking intoconsideration the locals culture and traditions.

C. Proposed KRAs and KSIs

To have uniform operating procedures through the system, taste and service in everyMcDonalds outlets at any point in the world, any day, any time.

McDonalds was very particular with quality of the raw material they used and veryconcerned with their suppliers, could be enhanced by improving displays and food exposurehandling behind counters.

Their concern over the franchisees to make them to feel as one ofMcDonalds partnersnot a subsidiary, all working towards the same goals.

D. Core Value Statement

Serve every person in every nation with a smile E. Strategic Issues and Problems

was faulted in China for underpaying student employee but was cleared by thegovernment a week later on grounds that the laws governing pay issues excluded students

on the payroll September 28, 2006. California medical doctors' group sued the company for the

presence of carcinogens in the chicken menu items served

June 2004. It distributed meal vouchers, balloons, and toys to sick children in the UnitedKingdom

2002. Hindu vegetarian groups in India sued MCD and won; MCD was misrepresentingFrench fries served at its restaurants as 100% vegetable.


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F & G. SWOT Analysis with Juxtaposition of SWOT

Strengths Weaknesses1. Strong brand name, image and

reputation.

2. Large market share.3. Strong global presence.4. Specialized training for managers

known as the Hamburger

University.

5. McDonalds Plan to Win focuseson people, products, place, price

and promotion.

6. Strong financial performance andposition.

7. Introduction of new products.8. Customer focus (centric).9. Strong performance in the global

marketplace.

1. Unhealthy food image.2. High Staff Turnover including

Top management.

3. Customer losses due to fiercecompetition.

4. Legal actions related to healthissues; use of trans fat & beef

oil.

5. Uses HCFC-22 to makepolystyrene that is

contributing to ozonedepletion.

6. Ignoring breakfast from themenu.

Opportunities S-O Strategies W-O Strategies

1. Growing health trendsamong consumers.

2.

Globalization, expansion inother countries (especiallyin China & India).

3. Diversification andacquisition of other quick-service restaurants.

4. Growth of the fast-foodindustry.

5. Worldwide deregulation.6. Low cost menu that will

attract the customers.7. Freebies and discounts.

1. Focus on Plan to win to attract customersand expansion in other countries (S5, O2,O6).2. Expansion in market share by moreinvestments in Asia (S2, O2).

1. Minimize customer losses byproviding low cost menu anddiscounts (W3, O6, O7).

Threats S-T Strategies W-T Strategies

1. Health professionals andconsumer activists accuseMcDonald's of contributingto the countrys health issue

of high cholesterol, heartattacks, diabetes, andobesity.

1. More control on franchise dealersto maintain McDonald's reputationand quality (S1, T2).

2. Provide new product and keepinnovation (S7, T3).

1. Applying 0 grams Trans fat inall worldwide McDonald's(W1, W4, O1).

2. Transfer from HCFC-22 toHFC (hydrofluorocarbon)-free(W5, T6)


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SPACE Matrix

Financial Strength Rating Environmental Stability Rating

Return on investment 4 Rate of inflation -3Leverage 4 Demand Changes -3Net Income 6 Price Elasticity of demand -1EPS 5 Competitive pressure -3ROE 5 Barriers to entry new

markets-3

Cash Flow 4 Risk involved in business -2Average 4.67 Average -2.5Y-axis 2.17

Competitive Advantage Rating Industry Strength Rating

Market share -1.00 Growth potential 5Product Quality -1.00 Financial stability 5Customer Loyalty -1.00 Ease of entry new markets 4Control over other parties -2.00 Resources utilization 4

Profit potential 5Demand variability 3

Average -1.25 Average 4.33

X-axis 3.08

2. The relationship betweencorporate level McDonald'sand its franchise dealers.

3. McDonalds competitorsthreatened market share ofthe company bothinternationally anddomestically.

4. Anti-American sentiments.5. Global recession and

fluctuating foreigncurrencies.

6. Fast-food chain industry isexpected to struggle to meetthe expectations of thecustomers towards healthand environmental issues.


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Directional vector point is: (3.08, 2.17)

Grand Strategy Matrix

Quadrant II Quadrant I

Quadrant IVQuadrant III

Ra id Market Growth

StrongCompetitive

Position

WeakCompetitive

Position

Slow Market Growth

Conservative Aggressive

CompetitiveDefensive

FS

ISC

ES


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The Boston Consulting Group (BCG) Matrix

The Internal-External (IE) Matrix

Strong Average Weak3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

High3.0 to3.99

Medium2.0 to2.99

Low1.0 to1.99

Question Marks

Cash Cows Dogs

Relative Market Share Position

IndustrySales

GrowthRate

StarsMCD

I IIIII

IV V VI

VII VIII IX

McDonald's

The IFE Total Weighted Score

TheEFE

TotalWeightedScore


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H. Strategy Formulation & Recommendation

Expand further into Asian markets over a 2-year period by adding 500 restaurants peryear at a cost of $4 billion annually, and applying 0 grams Trans fat in all worldwideMcDonald's restaurants.

I. Congruent Business Strategy and Programs

The Quantitative Strategic Planning Matrix (QSPM)

Strategy 1

Expand further inAsia by adding 500restaurants

Strategy 2

Applying 0 gramsTrans fat in allworldwideMcDonald'srestaurants

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 0.16 2 0.08

Specialized training for managers known as theHamburger 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 0.32High Staff Turnover including Topmanagement

0.10 - - - -

Customer losses due to fierce competition 0.04 3 0.12 1 0.04

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

0.04 1 0.04 4 0.16

Uses HCFC-22 to make polystyrene that iscontributing to ozone depletion

0.04 - - - -

SUBTOTAL 1.00 2.38 2.40


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Strategy 1

Expand further inAsia by adding 500restaurants

Strategy 2

Applying 0 gramsTrans fat in allworldwide

McDonald'srestaurants

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 accuseMcDonald's of contributing to the countrys healthissue of high cholesterol, heart attacks, diabetes, andobesity

0.10 1 0.10 4 0.40

The relationship between corporate levelMcDonald's and its franchise dealers

0.09 4 0.36 1 0.09

McDonalds competitors threatened market share ofthe 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 tomeet the expectations of the customers towardshealth and environmental issues

0.04 1 0.04 4 0.16

SUBTOTAL 1.00 2.10 2.01

SUM TOTAL ATTRACTIVENESS SCORE 4.20 4.41


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VI. PROPOSED ORGANIZATIONAL STRUCTUREA. Organizational Structure

The researchers proposed this organizational structure as to have a clear-cut view of thedifferent departments, and mainly to have three world divisions which the Central, West and Eastdivisionseach governing the major regions and continents. Included in the Central division areNorth and South America, in West division are Europe and Africa, and in East division are Asia& the Pacific regions as well as the Middle East.


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B. Value-Adding Roles and Structure


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C. Personnel Complement

Savings and money management programs:

Profit Sharing and Savings Plan - lets employees save from 1% to 50% of their pay on atax-deferred basis in the 401(k) feature of the plan. McDonald's matches eligible

employees' contributions with $3 for each $1 of the first 1% of pay they contribute, and$1 for each $1 on the next 4% they contribute. Eligible employees may also receive adiscretionary profit sharing match of 0% to 4% based on the first 1% of pay theycontribute.

MCDirect Shares - a direct stock purchase plan that lets employees further buildownership and reinvest dividends in the company.

Credit Union - All McDonald's employees can take advantage of a full range of servicesavailable through the Corporate America Family Credit Union.

Financial Planning Services - This program gives employees access to professionalfinancial planning services through Ameriprise Financial.

Programs designed to help employees maintain or regain the right balance:

Vacation, Holidays - McDonald's offers paid vacation for staff employees as well asRestaurant Management employees. The amount of vacation time employees have

available depends on how long they have worked at McDonald's. In addition,McDonald's offers ten paid holidays (less for part-time workers) for eligible employees.

Anniversary Splash- Eligible employees get an extra week of paid time off in the yearwhen they reach an anniversary on certain span of yearsfive, ten, fifteen, and so on.

Sabbatical Program - Eligible employees can take an eight-week paid sabbatical for every10 years of full-time continuous service with the company.

Short Fridays - In the summer months, McDonald's offices follow a compressed workweek in order to end early on Fridays. All full-time staff employees are eligible forsummer hours.

Leave of Absence - Because employees may be faced with difficult situations that requirethem to take time from work, McDonald's provides a leave of absence program withspecific policies regarding types of leave such as family and medical leave, adoptionleave and funeral leave.

Alternative Work Approach - To help staff better balance their work and personal life,they may be able to arrange an Alternative Work Approach. There are two full-timeoptions (flex time and compressed work week) and two part-time options (part-timeschedule and job sharing).

Adoption Assistance - Our adoption assistance program helps employees afford the costsassociated with adopting a child under age 18. Employees are reimbursed for 80% ofeligible expenses, up to $2,500 per child.


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Child Care - McDonald's has agreements with two national child care providers -Childrens' Creative Learning Centers (KinderCare, Children's World and others) and

Learning Care Group (La Petite Academy, Tutor Time and others) - for a 10% discounton tuition for employees. (They do not offer discounted rates for children under age 2.)

Educational Assistance - Our educational assistance program helps support eligibleemployees in their efforts to further their education. Employees can get reimbursed foreligible expenses, up to a maximum of $5,250 a year ($2,000 a year for part-timeemployees), for grades "C" and above.

Matching Gift Program - Our matching gifts program is designed to encourage employeesupport of not-for-profit organizations. With this program, McDonald's matchesemployee gifts to qualified educational, civic, cultural, health and youth organizationswith one dollar for every dollar the employee contributes, up to $5,000 a year.

Employee Resource Connection - This program gives eligible employees access to abroad array of services that help them manage many facets of their life outside the office,

including: Concierge services, for help in finding resources for almost anythingemployees may be interested in; financial services, for help with subjects such as settinga budget, getting out of debt, and any other financial information; legal services, for legalinformation and, if necessary, referrals to qualified attorneys; and counseling services forprofessional, confidential assistance for managing problems and personal concerns.

McDonald's Fitness Discount Program - Employees can receive discounts on new healthclub memberships, home fitness equipment and other fitness products.

Auto and Home Insurance Program - McDonald's employees can purchase auto andhome insurance through the MetLife Auto and Home Insurance Program. The MetLife

Auto and Home Insurance Program offer a McDonald's group rate plus other advantages.

BeyondWork - BeyondWork is a free Internet discount program for recreational productsand services. McDonald's employees in the U.S. can go online 24 hours a day, seven daysa week to BeyondWork's site and find valuable resources and savings on popular

products and services.

Health & Protection

Medical - McDonalds offers three Preferred Provider Organization (PPO) medical planoptions that use the Blue Cross Blue Shield of Illinois network of providers. The planshave different benefit levels and pay more for in-network covered costs than for out-of-

network covered costs. All three of the plans feature a prescription drug program and anunlimited lifetime benefit maximum. In addition, the McDonald's medical plans cover

preventive care, including annual physical exams for employees and covered familymembers, well-baby care, and child immunizations and inoculations. In some areas,HMOs are also available.


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Vision Supplement - Employees may elect the vision supplement plan, which providescoverage for eyeglasses and contact lenses, plus a mail-order contact lens replacement

program, and discounts on Lasik laser vision correction surgery.

Dental - Our dental plan allows employees to see the dentist of their choice and covers awide range of dental services. Preventive services, including sealants for children, are

covered at 100% with no deductible. Basic and major services are covered at 80%, after adeductible. The plan also covers 50% of eligible orthodontia expenses for adults andchildren after a one-time deductible.

Spending Accounts - The flexible spending accounts let employees set aside pre-taxdollars to pay for certain health care and day care expenses. Employees can set aside upto $2,500 in the Healthcare Spending Account for expenses not covered or only partiallycovered by their medical, dental or vision supplement plans. For day care expenses thatallow employees or their spouses to work, they can set aside up to $5,000 in the Day Care

Spending Account.

Short and long-term disability - Both short and long term disability coverage is providedat no cost to employees. Short term disability provides benefits if an employee cannotwork for more than 10 consecutive days; how long benefits continue depends on thenature of the employee's disability and years of service. Long term disability coveragereplaces 60% of the employee's monthly base salary while he or she is disabled.

Employee and dependent life insurance - McDonald's provides basic life insurance of twotimes the employee's base salary at no cost to the employee. In addition, employees canpurchase additional life insurance coverage for themselves. Basic dependent lifeinsurance for their spouse or domestic partner and/or children is also provided at no costto the employees. And, employees may also purchase additional dependent life insurance

coverage.

Accidental death and dismemberment insurance - AD&D covers employees if they die orare seriously injured in an accident. McDonald's provides AD&D coverage equal to two

times the employee's base salary. If the employee elects additional life insurancecoverage, he/she automatically has an equal amount of optional AD&D coverage at noextra cost.

Travel and business travel accident insurance - McDonald's provides travel accidentcoverage of two times an employee's base salary at no cost to employees. Travel accidentinsurance pays benefits in the event of an accident when traveling for either business or

personal reasons. McDonald's also provides business travel accident insurance coveragefor employees traveling on company business, also at no cost. Depending on the

employee's position, this coverage is either $100,000 or $200,000 and is in addition totravel accident coverage.

Pay & Rewards"Pay for performance" philosophy: The better your results, the greater your pay opportunities.


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Base Pay - Base pay is the fixed amount of cash compensation you receive for your workat McDonald's. It is determined by looking at what employees in a similar type of job are

paid at other companies, what other employees in the same or a similar job atMcDonald's are paid, and how well you perform the job, your skills, experience andcontributions, and your performance over time.

Short Term Incentives - Unlike base pay, which is the fixed amout of pay for the job youdo, short term incentives are the variable, at-risk portion of cash compensation you mayearn each year. Rewards are based on annual performance -- both business andindividual -- with measures tied directly to the McDonald's business strategy, and payouts

are aligned to the annual performance of the part of the business you support.

Long Term Incentives - McDonald's grants LTI stock awards to eligible employees tocreate a link between the future performance of McDonald's business and the rewards forindividuals who are currently at or may grow into a level that can influence long term

business results.

Recognition Programs - Our recognition programs are designed to reward and recognizestrong performers. For our corporate, division and region offices, these include thePresidents' Award (given to the top 1% of individual performers worldwide) and theCircle of Excellence Award (given to top teams worldwide to recognize theircontributions for advancing our vision).

Company Car Program - Our company car program provides eligible employees with acompany car for both business and personal use. If eligible, employees can choose from avariety of vehicles, depending on their level within the company. The program covers thecost of insurance, maintenance and repair.

D. Personnel Management Policies and Systems

Training & Development

McDonalds believes in lifelong learning. It provides training and development at all

levels to help its personnel refine their skills, grow in their current position or transition to a newrole in the company.

Hamburger UniversityIt is McDonald's Center of Training Excellence. Since its inception, training at

Hamburger University has emphasized consistent restaurant operations procedures, service,

quality and cleanliness. It has become the companys global center of excellence for McDonaldsoperations training and leadership development. Today, more than 5,000 students attendHamburger University each year. Since 1961, more than 80,000 restaurant managers, mid-managers and owner/operators have graduated from this facility

At McDonalds, the training mission is to be the best talent developer of people with themost committed individuals to Quality, Service, Cleanliness and Value (QSC&V) in the world.Our strong commitment to the training and development of our People has resulted in manyfirsts and honors, including being (1) The first restaurant company to develop a global training


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center, (2) The only active QSR currently to receive college credit recommendations fromtheAmerican Council on Education (ACE), the United States oldest and most recognizedunifying body for higher education and (3) Continually recognized for excellence in training.

Global Mobility

McDonalds Global Mobility Program is designed to enhance the development ofleadersit gives unparalleled insight into McDonalds global operations and the impactMcDonalds has on a global scale. A global assignment offers the opportunity to experience

working and living in a new global location and we encourage our employees to get the most ofout the experience on both a professional and personal level.

Leadership DevelopmentAs the world changes and new business challenges arise, we need leaders who can inspire

and guide McDonalds to new heights. Our future success requires leadership not just inmanagement roles, but at all levels of the organization. We expect every employee to liveMcDonalds Values and demonstrate leadership, no matter what your level or position.

Career DevelopmentCareer Development at McDonalds combines a focus on personal growth and

development with talent management objectives in order to help employees to perform at theirvery bestwhile experiencing personal career satisfaction.

InternshipsMcDonalds lets college and graduate-level students sample a taste of the corporate world

through a variety of paid internship opportunities. Students work as an integral part of projectteams and develop initiatives alongside staff as well as opportunities to interact with McDonald'sexecutive leadership.

Total CompensationMcDonald's benefits and compensation program is designed to attract, retain and engage

talented people who will deliver strong performance and help McDonald's achieve our businessgoals and objectives. Its benefits and compensation include: medical, dental, profit sharing,vacation, Sabbatical Program, Employee and dependent life insurance, Incentive Pay,Recognition Programs


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VII. PROPOSED STRATEGY AND OPERATIONS PLANA. Market Analysis, Segmentation and Development of a Marketing MixProduct: How should the company design, manufacture the product so that it enhances the

customer experience?

Product is the physical product orservice offered to the consumer. Productincludes certain aspects such as packaging,guarantee, looks etc. This includes both thetangible and the non-tangible aspects of theproduct and service.

McDonalds has intentionally kept itsproduct depth and product width limited.

McDonalds studied the behaviour of the Indiancustomer and provided a totally different menuas compared to its international offering. Itdropped ham, beef and mutton burgers from themenu. India is the only country whereMcDonalds serve vegetarian menu. Even thesauces and cheese used in India are 100%

vegetarian. McDonalds continues to innovate new products in accordance to the changingpreferences and tastes of its customers. The recent example is the introduction of the ChickenMaharaja Mac.

McDonalds bring with it a globally reputed brand, world class food quality and excellentcustomer specific product features.

Place: Where should the product be available and what is the role of distribution channels?

The place mainly consists of the distribution channels. It is important so that the productis available to the customer at the right place, at the right time and in the right quantity. Nearly50% of U.S.A is within a 3 minute drive from a McDonalds outlet.

There is a certain degree of fun and happiness that a customer feels each time he dines atMcDonalds. There are certain value propositions that McDonalds offers to its customers basedon their needs. McDonalds offers hygienic environment, good ambience and great service. NowMcDonalds has also started giving internet facility at their centres and they have been playingmusic through radio instead of the normal music. There are certain dedicated areas for childrenwhere they can play while their parents can have some quality time together.

Price: What should be the pricing strategy?

Pricing includes the list price, the discount functions available, the financing optionsavailable etc. It should also take into the consideration the probable reaction from the competitorto the pricing strategy. This is the most important part of the marketing mix as this is the only


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part which generates revenue. All the otherthree are expenses incurred. The price must takeinto consideration the appropriate demand-supply equation.

McDonalds came up with a very catchypunch line Aap ke zamane mein, baap kezamane ke daam meaning Prices of yourfathers generation today. This was to attractthe middle and lower class consumers and theeffect can clearly be seen in the consumer baseMcDonalds has now.

McDonalds has certain value pricing and bundling strategies such as happy meal, combomeal, family meal etc to increase overall sales volumes.

Promotion: What is the suitable strategy and channels for promotion of the product?

The various promotion channels being usedby McDonalds to effectively communicate the

product information are given above. A clearunderstanding of the customer value helps decidewhether the cost of promotion is worth spending.

The three main objectives of advertising forMcDonalds are to make people aware of an item,

feel positive about it and remember it. The rightmessage has to be communicated to the rightaudience through the right media. McDonalds doesits promotion through television, waiting sheds/busstops and train stations. They also use print adswhich is an important marketing medium forpromotion.

Some of the most famous marketing campaigns of McDonalds are: You Deserve a break today, so get up and get away- To McDonalds Food, Folks, and Fun Im loving it.

People: How are benefits of internal and external marketing converged?McDonalds understands the value of both its employees and its customers. It

understands the fact that a happy employee can serve well and result in a happy customer.McDonald continuously does Internal Marketing. This is important as it must precede

external marketing. This includes hiring, training and motivating able employees. This way theyserve customers well and the final result is a happy customer.


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The level of importance has changed to be in the following order (the more importantpeople are at the top):

1. Customers2. Front line employees3. Middle level managers4.

Front line managers

The punch line Im loving it is an attempt to show that the employees are loving theirwork at McDonalds and will love to serve the customers.

The McDonalds ExperienceMarketing in the service industry is becoming an increasingly complex challenge. The

paradigms of service marketing demand a passionate understanding of customer expectationsand perceptions, and linking them to product design & delivery as well as operational planning.This is where McDonalds has excelled due to its ability to successfully integrate the customers

perspective in its products and operations in a comprehensive manner. The revamped menu in

India is an example of McDonalds strategy of integrating the customers perspective in itsproducts. And, the operational integration is evident from McDonalds emphasis on its suppliersas its customers as well as its treatment of its consumers as co-producers of services.

The ultimate aim of Service Marketing is not just to become a Service Leader but tocreate a Service Brand. The Service Delivery Process is the key to achieving this aim of ServiceMarketing.

McDonalds uses demographic segmentation strategy with age as the parameter. Themain target segments are children, youth and the young urban family. So to attract childrenMcDonalds has Happy Meal wherein toys ranging from hot wheels to various Walt Disneycharacters are given (the latest in this range are the toys of the movie Rise of the Guardians). Forthis, they have a tie-up with Walt Disney. At several outlets, it also provides special facilities likePlay Place where children can play arcade games, air hockey, etc. This strategy is aimed atmaking McDonalds a fun place to eat. This also helps McDonalds to attract the young urbanfamilies wanting to spend some quality time while their children have fun at the outlet. To targetthe teenagers, McDonalds has priced several products aggressively, keeping in mind the price

sensitivity of this target customer. In addition, facilities like Wi-Fi are also provided to attractstudents to the outlets.

Target Segment What is McDonalds for me?

A Family with children A treat to children, a fun place to be for the children.

Urban customer on the move Great taste, quick service without affecting the work schedule

Teenager Hanging out with friends, but keep it affordable.


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B. The Proposed 5-year Strategic PlanYear 1 - McDonalds need to keep on innovating new range of productsYear 2 - Develop outstanding supplier relationship especially in new branchesYear 3 - Improve the equipment and utilize database marketing

Year 4 - Set a new standard for training and service qualityYear 5 - Organize an event that will showcase the different product lines of thecorporation, and a grand event that shall cater to the customers especially to the childrenworldwide.

C. One year operational PlanMcDonalds Corporation needs to rediscover the Asia & Pacific region and increase

promotions to extend market reach.

Operational Facets

The company is committed to staffing locally and promoting from within thatMcDonalds has managers who understand both the corporate and the local cultures. Theemphasis when recruiting is that the applicants are customer focused; the right attitude is seen asmore important than technical ability. The company believes that the best way to stand out fromthe crowd is to satisfy customers all the time as this is standard strategy.

It can be considered that as consumer skepticism grows, companies are forced to competefor credibility in the marketplace as the customer confidence needed for long term loyalty can beearned only by firms that establish an image of fairness. Fairness is especially important forservice firms, whose product is intangible and difficult to evaluate, forcing consumers to rely ontrust. When consumers are vulnerable, violation of justice principles can trigger perceptions ofunfairness such perceptions produce intense reactions from customers, who are often driven toget even with the firm(Seiders and Berry, 1998). Moreover, branding in online environmentsposes sufficient range of challenges and opportunities that it is important to shine the spotlight onbranding in digital environments, and to explore some of the potential impacts of online channelsfor branding strategy. Businesses need to develop integrated brand strategies. Brand presenceand experience in the virtual world must mirror presence and experience in the real world, butalso add value, or another dimension to the overall brand experience.

VIII. FINANCIAL RESOURCES Continued revenue growth, increased customer visits, and enhanced profitability as the

company invested in new products, menu choices, modern restaurants, and providingattractive everyday value in the first quarter of 2007.

Sales increased for four years in a row Operating and net incomes showed a steady increase While total current and long-term liabilities declined, retained earnings increased from

$23.5 billion in 005 to $25.8 billion in 2006. Shareholders' equity rose from $15.1 billion to $15.5 billion during this period


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EXHIBIT 1 McDonald's Revenues by Region

(in $ millions)

Amount Increase/(Decrease)

2006 2005 2004 2006 2005

Company-operated sales:U.S. $ 4,410 $ 4,098 $ 3,828 8% 7%

Europe 5,885 5,465 5,174 8% 6%

AMEA 2,674 2,453 2,390 9% 3%

Latin America 1,552 1,237 933 25% 33%

Canada 882 765 730 15% 5%

Corporate & Other 680 708 700 -4% 1%

Sub-total $ 16,083 $ 14,726 $ 13,755 9% 7%

Franchised and affiliated revenues:

U.S. $ 3,054 $ 2,857 $ 2,697 7% 6%

Europe 1,753 1,607 1,563 9% 3%

AMEA 379 362 331 5% 9%

Latin America 107 90 75 19% 20%Canada 199 183 168 9% 9%

Corporate & Other 11 7 5 57% 40%

Sub-total $ 5,503 $ 5,106 $ 4,839 8% 6%

Total revenues:

U.S. $ 7,464 $ 6,955 $ 6,525 7% 7%

Europe 7,638 7,072 6,737 8% 5%

AMEA 3,053 2,815 2,721 8% 3%

Latin America 1,659 1,327 1,008 25% 32%

Canada 1,081 948 898 14% 6%

Corporate & Other 691 715 705 -3% 1%

TOTAL $ 21,586 $ 19,832 $ 18,594 9% 7%

EXHIBIT 2 Operating Income by Region

(in $ millions)

Amount Increase/(Decrease)

2006 2005 2004 2006 2005

Company-operated sales:

U.S. $ 2,657 $ 2,422 $ 2,182 10% 11%

Europe 1,610 1,449 1,471 11% -1%

AMEA 364 345 200 6% 73%

Latin America 55 30 (20) 83% nm

Canada 198 156 178 27% -12%

Corporate & Other (439) (410) (473) 7% -13%

TOTAL $ 4,445 $ 3,992 $ 3,538 11% 13%


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EXHIBIT 3

Consolidated Operating Results of

McDonald's Corporation

Operating results

(Dollars in millions, except per share

data)

2006 2005 2004

Revenues

Sales by Company-operated restaurants $ 16,083 $ 14,726 $ 13,755

Revenues from franchised and affiliated

restaurants 5,503 5,106 4,839

Total revenues 21,586 19,832 18,594

Operating costs and expenses

Company-operated restaurant

expenses 13,542 12,575 11,688

Franchised restaurants-occupancy

expenses 1,060 1,021 1,003

Selling, general and administrative

expenses 2,338 2,167 1,939

Impairment and other charges (credits),

net 134 (28) 281

Other operating expense, net 67 105 145

Total operating costs and expenses 17,141 15,840 15,056

Operating income 4,445 3,992 3,538

Interest expense 402 356 358

Non-operating income, net (123) (38) (21)

Income from continuing operations

before

provision for income taxes 4,166 3,674 3,201

Provision for income taxes 1,293 1,088 923

Income from continuing operations 2,873 2,586 2,278

Income from discontinued operations 671 16 1Net income $ 3,544 $ 2,602 $ 2,279

Income per common share - diluted

Continuing operations $ 2.30 $ 2.03 $ 1.79

Discontinued operations 0.53 0.01 -

Net income per common share - diluted 2.83 2.04 1.79

Weighted-average common shares

outstanding - diluted 1,251.70 1,274.20 1,273.70

EXHIBIT 4 McDonald's Restaurants by Region

System-wide restaurants at year end

2006 2005 2004U.S. 13,774 13,727 13,673

Europe 6,403 6,352 6,287

AMEA 7,822 7,692 7,567

Latin America 1,656 1,617 1,607

Canada 1,391 1,378 1,362

Corporate & other 621 631 656

TOTAL 31,667 31,397 31,152


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EXHIBIT 5

McDonald's Corporation: Consolidated Balance

Sheet

31-Dec

(In millions, except per share data 2006 2005

ASSETS

Currents Assets

Cash and equivalents $ 2,136.4 $ 4,260.6

Accounts and notes receivable 904.2 793.9

Inventories, at cost, not in excess of market 149.0 144.3

Prepaid expenses and other current assets 435.7 640.2

Discontinued operations - 380.0

Total current assets 3,625.3 6,219.0

Other assets

Investment in and advances to affiliates 1,036.2 1,035.4

Goodwill, net 2,209.2 1,924.4

Miscellaneous 1,307.4 1,236.7

Total other assets 4,552.8 4,196.5

Property and equipment

Property and equipment, at cost 31,810.2 29,482.5

Accumulated depreciation and amortization (10,964.5) (9,909.2)

Net property and equipment 20,845.7 19,573.3

Total assets $ 29,023.8 $ 29,988.8

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Notes payable $ - $ 544.0

Accounts payable 834.1 678.0

Income taxes 250.9 569.6

Other taxes 251.4 233.1

Accrued interest 135.1 158.5

Accrued payroll and other liabilities 1,518.9 1,158.1

Current maturities of long-term-debt 17.7 658.5

Discontinued operations 107.9

Total current liabilities 3,008.1 4,107.7

Long-term debt 8,416.5 8,934.3

Other long-term liabilities 1,074.9 851.5

Deferred income taxes 1,066.0 949.2

Shareholders' equity

Preferred stock, no par value; authorized - 165.0 million shares;

issued - none

Common stock, $0.01 par value; authorized - 3.5 billion shares; issued -

1,660.6 million shares 16.6 16.6Additional paid-in capital 3,445.0 2,720.2

Retained earnings 25,845.6 23,526.0

Accumulated other comprehensive income (loss) (296.7) (733.1)

Common Stock in treasury, at cost; 456.9 and 397.4 shares (13,552.2) (10,373.6)

Total shareholder's equity 15,458.3 15,146.1

Total liabilities and share holder's equity $ 29,023.8 $ 29,988.8


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IX. PROPOSED STRATEGIC CONTROL MEASURESA. Proposed Quality Assurance Systems

McDonalds goal is straight-forward: to give customers a similar dining experienceanywhere in the world and maintain high standards of service and quality- fast, accurate, andfriendly.

McDonalds is well-known for its consistency in the production of hamburgers. Each ofus expects every McDonalds sandwich to be similar to the last one. We expect consistencywithout regard to geographic location or time of day. McDonalds meets these expectations by

maintaining rigorous standards in their production process. Their trademark competitive edgewas its process management approach in which the company put hamburgers on the assemblyline. McDonald's has an extensive range of quality systems in place ranging from the foodsuppliers up to restaurant preparation and service of food.

How McDonald's Ensures Consistent Quality They carefully match the level of service quality with product design Uniformity in production is a major goal Product design concentrates on maintaining consistency in how products are presented Efficient service delivery-concentrates on meeting time demands of customer Seek to measure results of training through competency tests, feedback, and mystery

diners

Repetitive emphasis on consistency is a primary competitive advantage over competitors Provide rigorous employee training for handling and preparation of food Global standardized operations Their product design concentrates on maintaining consistency in how products are

prepared as well as what raw-food components are used

Quality is ensured through standardized and careful employee training effortsBenefits Related to Consistent Quality

Provides cost standards for other outlets within the organization Enables cost efficiencies Benchmarks set for productivity Areas of weakness can be easily detected and evaluated Higher quality (i.e. greater consistency/less variability) can also translate into lower costs,

which result in greater return for the same dollar sales

Prevention costs may be higher, but other costs will be reduced and avoided in long-run Reduces uncertainty in minds of customers


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Difficulties Faced With Consistent Quality

Although McDonalds has pioneered and standardized the approach to commercialproduction of fast food, they may have difficulties capitalizing on continuously changingconsumer preferences.

In a perfect world it would be best for any organization to have employees who love theirjobs, enjoy working with their co-workers, are happy with the salary, willing to workhard for their managers and never leave the organization. However, in the real worldemployees do leave either because they want more money, hate the work environment,hate their co-workers, want a change or because their spouse gets a dream job in anotherstate (Sharma, 2008).

Low pay is one of the main reasons of a high employee turn-over. Another reason is thatmore than half of the employees at McDonalds are part-timers, especially students.Having a job at a fast food restaurant is just a mean to pass through just like a steppingstone in your life, not like a career. With that, McDonald's Corp. believes it has found an

answer in its high turn-over rate of employees: Make it a McCareer, not a McJob.

B. The Proposed Monitoring and/or Evaluation Systems Strategy

McDonalds organization relations are important to the success of the company mostly

dealing to such operational facets being applied and executed. Customer service as well asperformance based operations of the company such as refereeing to online branding and otherdomain such as for instance, arguing that brand building will be increasingly important inproviding continuity and customer commitment in fast moving marketplace. During the year2001, McDonalds was ranked one of worlds ten most valuable brands (Kotler, 2003) .McDonalds is one of the leading food service retailers with more than 30,000 local McDonaldsrestaurants serving millions of customers each day in more than 100 countries.

Improvements

The innovative brand and creative direction will be the strategic glue for worldwidemarketing and advertising campaigns. Creative teams working on McDonalds will executecreative direction into markets. McDonald will need to embrace more on concept of corporatecitizenship and social responsibility. McDonalds will seek to engage with local communitiesand to be environmentally responsible in relation to the processes associated with its productsand be communicated through the web site through providing information about McDonaldscommunity activities. Through the opportunities that the web site offer, McDonalds can engagewith communities associated with loyalty schemes. McDonald's prospered with organizationsdesigned according to the principles of mass production manufacturing. Quality of service needsto provide settings of a cycle not just to monitor and make recruitment and training crucial foreveryone but links compensation to performance for employees at operational level.

In adhering to customer service, McDonalds aims to localize its marketingcommunications strategy as it needs to consider the enormous range of cultural and otherdifferences that it would be faced with in each country. It would be nave to ignore the various


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local markets and the factors which may affect the performance of its products in them. There isa need to analyze consumers attitudes towards its product, usage patterns and ethnic, moral andreligious considerations in that environment. Although the idea is to promote McDonalds asglobal image, McDonalds focuses on the needs of the communities they are entering. In a

communications context, the maxim brand globally, advertise locally (Sandler and Shani,

1991) is the McDonalds promotional strategy. There is ample need to explore on key elementsof the promotional mix, appropriate to McDonalds and must be examined.

X. SOCIO-ECONOMIC JUSTIFICATIONA. Cost-Benefit Analysis of the Strategic Plan

During the 5-year strategic plan, McDonalds Corporation will surely shell out a bigamount of money in order to ensure and secure its place in the global market. Being anaccomplished food and beverage company already, customer retention and service crewstandards are top-priority.

By focusing expenses on these target areas of development, it shall minimize the cost thatshall be incurred. Market reach shall also be extended, by tapping new market segments in theAsia & Pacific region.

B. Recommendation(s)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'srestaurants.

To sum up, there is a strong possibility that if the company fails to recognize the newcompetitions, shifting of consumer interests, and the social trends or innovative technologies, itwill lose its market share. Previously, McDonalds emphasis on adding new restaurants for near5 years, more than 50% of increase in new restaurants opened. Unfortunately, there was only 2%of increase in the sale of the food. So, in the year 2003 McDonalds decided to change its focuson increasing sales at existing restaurant and reduced capital spending which allows for asizeable amount of cash be returned to shareholder. For achieving their objectives, theMcDonalds strategy should be attract more new customers, encourage existing customers tovisit McDonalds more often, build brand loyalty and, ultimately, create enduring profitablegrowth for the company.


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SOURCES

mcdonalds.com/

mcdonalds.com.ph/

articles.chicagotribune.com/2007-05-15/business/0705140540_1_restaurants-turnover-rate-karen-king

behance.net/gallery/McDonalds-Happy-Price-Menu/2039247

themoscowtimes.com/opinion/article/why-russians-dont-smile/436037.html

ukdissertations.com/dissertations/management/high-employee-turnover-at-mcdonald.php

198 Paper Final

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