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Team 11

Presentationon

McDonalds

Submitted By:Neha BaghelPavleen BatraSarika Taneja

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O bjective

Reasons for McDonald's expansion globally

Why Vietnam is particularly attractive for investment &business?

What would it take, in terms of cost, preparation & effort, toset up a franchise?

If they had an option, would they choose any country for thispurpose(which one & why)?

If there are exciting worldwide opportunities, why does McDonald s not exploit these itself instead of looking for franchises?

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.

As word of their success spread, franchisees started showing

interest. However, the franchising system failed.

McDonald's was started as a drive-inrestaurant by two brothers, Richardand Maurice McDonald in California,US in the year 1937. The business,which was generating $200,000 perannum in the 1940s, got a further boost

with the emergence of a revolutionaryconcept called 'self-service.'

The brothers used assembly lineprocedures in their kitchen for massproduction. Prices were kept low. Speed,

service and cleanliness became thecritical success factors of the business. Bymid-1950s, the restaurant's revenues hadreached $350,000 .

McDonalds History

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At this point, Ray Kroc (Kroc), distributor formilkshake machines expressed interest in the

business, and he finalized a deal with theMcDonald brothers in 1954.

He established a franchising company, theMcDonald System Inc. and appointedfranchisees.

In 1961, he bought out the McDonald brothers'share for $2.7 million and changed the name of the company to McDonald's Corporation. In1965, McDonald's went public...

Currently McDonald's operates in 121 countries &having more than 30000 restaurant and serving 53 Mncustomers everyday

McDonalds History

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SWOT Analysis

S ituationAnalysis

Problems

Alternatives

Rec. I

Rec. 2

Rationale

Franchise System is theBackbone of McDonalds

Success

Distinctive Competency

Allow Quick Expansion

Uniform O peration S tandardization

Same Food Experience

Fr anchises

Q&A

F ranchise System-The backbone of McDonald s Success

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Franchise System is the Backbone of McDonald s Success

The backbone of McDonald s success and most of other fast-food chains isits franchise. In other words, one of the many reasons that McDonald shas been able to expand so quickly and achieve its reputation/brandrecognition has been its effective franchising business model. Not onlydoes the business model allow the company to expand quickly both

domestically and internationally, the franchise system, having uniformoperations, has made the McDonald s restaurants one of the moststandardized in the world. Not only do all McDonald s seek to offer thesame product offerings, they intend to offer the same food experience forall of its customers no matter what part of the world you are in.

Today, M cDonalds franchise network is the world s leading food serviceretailer, with more than 30,000 franchise restaurants serving 52 millionpeople in more than 100 countries. Of those stores, more than 70 percentare owned by independent operator franchisees.

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R easons for going international

Build more brand and shareholder value

Add revenue sources and growth markets

Reduce dependence on your home market

Leverage existing corporate technology ,Supply chains, know-how andintellectual property

Award more franchises in the home country by being global

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Success Factors

Mission statementNew meal for kidsFormulate a strategy

Happy meal with toyImplement the strategyToys were related to movie and characters .

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DECISION MAKINGRecognize the need for decision : happy meals were unpopularGenerate alternatives : End, change the toy or continueEvaluate options : More popular or High costChoose an option : Relate with movieImplement option : Star TrekLearn from feedback : mighty kid meals

So, an operationally focused "Plan to Win". It focuses on people, products, place, priceand promotion.

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Business StrategiesMcDonald s has pursued two strategies since 2003. To keep up with rapidly

changing consumer preferences, demographics and spending patterns,McDonald's has introduced new items (Premium Chicken sandwiches and theAngus Beef Burger) and campaigns to create more healthy foods (PremiumSalads). The strategy reflects the philosophy that novelty, as opposed toloyalty to traditional products, is the key determinant of sales in the fast foodindustry.

McDonald s has also focused on increasing sales at existing restaurants insteadof opening new ones. To do so, McDonald's has remodelled many restaurants,kept stores open longer and increased menu options. Nevertheless, newMcDonald s restaurants are still opening around the world at a rapid rate, and

continues to grow its new restaurants at a 1%-2% rate each year.McDonald s successfully employs a unique type of corporate strategy,transnational strategy, which allows them to compete through standardizationwhile simultaneously adapting to local customs when deemed necessary andappropriate.

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McDonald's size has three key advantages:

Uniform menu offerings can be mass produced,lowering production costs.

Bargaining power with suppliers lowers input costs and boosts margins.

Large advertising budget means lots of domestic and international exposure.

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R easons for not entering in VietnamU nder Vietnamese law, franchising agreements involving licensing and royalty

payments or training and consulting services are regarded as technology transferand require statutory approval.

An anti-Western political backlash in Vietnam that began in 1996 or when theAsian financial crisis hit in 1997-98.

Beef is not widely raised in Vietnam, or of particularly good quality, andMcDonalds would have to invest in a cattle-raising industry from scratch, includingbreeding stock, feed, grazing land and meat processing.

Vietnamese catfish could serve as input materials for McDonald's, the world'sleading fast food producer, if the issue of antibiotic residue is settled, according tothe head of Vietnam's organisation for basa catfish processors.

McDonald s is not in Vietnam now because it has not found a suitable partner forfranchising and low level of development of supply-chain infrastructure, and thelack of locally produced ingredients.

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Cost of setting up a franchiseAn expert in franchising analyses that investment in each

restaurant of McDonald s is not less than $1 million, around$500,000 for one of Pizza Hut, $300,000-400,000 for a Lotteriaand around $200,000 for K FC restaurant. The total investmentwould be very large for most small- and medium-size enterprisesof Vietnam.

According to the expert, such a restaurant must have revenue of over VND20 million ($1,250) per day to have profit. However, thebiggest challenge is management and quality control to meet thestandards of the parent firms.

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Steps for setting up a franchise

F ind a franchiser

Consider the requirements andfill out an application

F ill out an application and waitfor the company's acceptance.

Sign your agreement

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W hy M cDonald s went for franchising

LowerFailure

Rate

Help with Start U p and Beyond

Buying Power

Star Power

Profits

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M cDonald s criteria for Franchising

A strong and successful background with an emphasis on

interpersonal skills and financial management.Approximately $175,000 of non-borrowed personal resources.High personal integrityAn entrepreneurial spirit and strong desire to succeedA proven ability to motivate and train peopleThe ability to manage financial resources.A willingness to complete a comprehensive training program

and become proficient in all aspects of operating a McDonald'srestaurant business.

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Facts About M cDonald s Franchise

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Location: South eastern Europe (bordering Montenegro, Albania, Macedoniaand Serbia)Capital: PristinaArea: 10,908 km 2Population: 2.1 millionNational name: Republic of KosovoLanguages: Albanian, Serbian, Bosniak, TurkishEthnicity/race: Albanians 88%, Serbs 7%, other 5%

R eligion: Muslim, Serbian Orthodox, Roman CatholicEconomic summary: GDP/PPP $4 billion (2007 est.)

President: Fatmir Sejdiu (2006)Prime minister: Hashim Thai (2007)M onetary unit: euro (E UR ); Serbian Dinar(RSD) is also in circulation

O verview of Kosovo

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R easons to invest in KosovoCentral location: Location- in heart of the Balkans, Pristina is 1hr driving

distance to any neighbouring country. Ongoing infrastructure projectsinclude modern highway connections to Albania, Serbia and Macedonia. Bythe end of 2009 the driving distance to the Albanian Port of Durres will bereduced to 3 hrs. Pristina International Airport offers air connections tomain European capitals.

Young, educated, multilingual and dynamic population youngestpopulation in Europe. Familiar with English Through engaging in smallerworkshops and private businesses during the 1990s and through vocationaltraining programs established in the last 10 years, Kosovars have gainedskills, which are highly appreciated by foreign investors.

Kosovo and Croatia sign free trade agreement .

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Sound banking system Kosovo s financial sector has been built on completely newfoundations. The Central Bank of the Republic of Kosovo is an independent body,which regulates and supervises the Kosovo financial market. There are 8 licensedbanks, 2 pension funds, 19 other financial intermediaries, 27 financial auxiliaries and10 insurance companies in Kosovo. 6 out of 8 banks in Kosovo are foreign-owned.

Currency: Euro is the official currency eliminating the currency and exchange rate risk.Euro gave a considerable advantage over its competitors in the region by making it

more attractive to foreign investment and by bringing financial and macroeconomicstability.

Free access to EU-market: U S-market and CE FTA(Central European Free TradeAgreement) members. Kosovo derives 3 major benefits from the trade liberalisation,namely 1 . improved export possibilities 2. a better investment environment 3 . stablerelations with its neighbours, member of CE FTA & it also benefits from non-reciprocal,customs-free access to the E U market based on the E U Autonomous Trade Preference(ATP) Regime.

Since the end of a 1998-1999 conflict, Kosovo has received about 3 billion Euros in aid and is

expecting to receive another billion Euros from international donors by 2011.

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H ow will M cDonald s benefit Kosovo

1. will develop a market by providing technological, management and marketing expertise

to local entrepreneurs enabling them to establish a known restaurant in different areas thatcreates jobs translating into income to due to the hiring of local employees and thepurchasing of raw materials from the local farmers and businesses2. incurs less risk, w.r.t to other industries, because food and drinks is a necessity and if thecompany can offer an affordable, alternative source of food then it can gain a significantportion of the market.3. expects continuous growth in long run, although fluctuating, in Eastern Europeancountries due to development and opening of investment opportunities drawing thecontinuing F.D.I. positively affecting employment and income4. there are relatively less multinational restaurants in Eastern Europe giving theestablishment of McDonalds in the region a competitive edge in terms of consumer shareand market leadership5. consumption culture in Eastern Europe is changing due to its involvement in internationaltrade introducing the Eastern Europeans to the fast food culture. The entry of McDonalds inEastern Europe is timely.

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Thank You!!!