McDonald’s Case Analysis
I. Current Situation.
A. Environment.
1. Economic
McDonald's contributed greatly to our country's economy. It created
millions of new work possibilities for the ordinary public. The company also
employs teens on a part-time basis, which enables a broader range of individuals
to work, resulting in even more employment openings. To maximize profits, the
McDonald's Corporation gives employees relatively low wages and does not
compensate them for working overtime. This is because they take food stamps
from the student, the elderly, disabled, and the homeless.
2. Cultural and social
McDonald's menu does not adhere to low-carb and low-sugar diets,
making them less appealing to health-conscious individuals. The fast-food chain
is attempting to alter its menu to appeal to a wider population. They've just
released high-protein smoothies, but customers are still grumbling about the high
sugar level. McDonald's menu must be redesigned to meet the requirements of a
worldwide audience. People are increasingly abandoning 'junk food' in favor of
low-calorie, low-salt diets.
3. Political and legal
McDonald's is subject to health and sanitary standards imposed by the
nations in which it operates. Political issues have a significant impact on the
performance of the fast-food industry. Cross-border hostility and enmity among
the nations in which it operates might be detrimental to the restaurant.
McDonald's, on the other hand, has room to grow in growing nations such as
India. McDonald's food safety standards and cleanliness requirements are critical
to the company's success. Often, emerging nations have low restrictions, making
it appealing for McDonald's to enter these areas. Increased regulations and
government regulations, on the other hand, can be significant obstacles to growth.
As it operates, it must comply with the regulations and laws of numerous
countries.
B. Industry.
1. Definition
McDonald's Philippines, also known as McDo in the Philippines, is the
master franchise of the multinational fast food corporation McDonald's. The
Golden Arches Development Corporation, a subsidiary of Alliance Global Group,
owns the master franchise.
2. Classification
McDonald's is a subsidiary fast food restaurant, founded in Morayta,
Sampaloc, Manila (September 27, 1981) and the founders by George T. Yang
(Founder and Chairman) Kenneth S. Yang (President and CEO) Margot B. Torres
(Managing Director) Christine D. Lao (Marketing Director) while the owner is the
Golden Arches Development Corporation. Their headquarters is in the 17/F
Citibank Centre Building, Paseo De Roxas Avenue, Salcedo Village, Makati,
Metro Manila, Philippines. Mcdo serves hamburgers, chicken, french fries, soft
drinks, desserts, pancakes, coffee, etc.
3. Technology
a. Level
The Mcdo technology level is very modernized because it helps to
speed up the food during rush hour like McDonald's self-ordering kiosks
are part of the company's modernization program called NXTGEN. The
kiosks allow customers to order and pay for their McDonald's favorites
from a touch screen.
b Rate of change
Because of the new technology that Mcdo uses the customers can
still pay in cash but they'll have to go to the front counter where they'll be
able to talk to employees. The company hopes to open 10% of its
restaurants with the new format by 2019, increasing it to 70% by 2021.
c. Technological threats to the industry.
Due to the increasing number of people, as well as the increase in
competitors and the implementation of the health protocol Mcdo thought
to use NXTGEN but of course, we can not be sure that it will work
because sometimes technical errors also occur so that becomes a threat to
the company but can be solved if it is always checking the system.
4. Political-legal-social factors.
a. Trends and government controls
McDonald's Corporation unveils Accelerating the Arches, a new
growth plan that includes all elements of the company's operations as the
leading global omnichannel restaurant brand. The plan contains a revised
mission to nourish and develop the communities served by McDonald's
and its franchisees worldwide, updated values that drive actions and
behaviors, and growth pillars that build.
Local, state, and federal governments have enacted rules and
regulations of many areas of the restaurant industry, including, but not
limited to, franchising, health and safety, the environment, zoning, and
employment. The Company attempts to comply with all applicable
existing legislative and administrative standards, but cannot anticipate the
impact of further requirements on its operations.
b. Specific regulations
McDonald's and other companies were required by law to provide
equal pay to people of all colors and genders, to provide safe working
conditions, to hire legal workers, and to create accommodations for
handicapped personnel. The Fair Labor Standards Act established a
minimum salary and overtime compensation for employees.
c. Social responsibility pressure.
● The Company intends to make an even greater impact on
communities through actions and communications by focusing on
four key areas: responsibly sourcing quality ingredients, driving
climate action to protect the planet, connecting with communities
in times of need, and increasing emphasis on equity by providing
opportunities for restaurant crew.
● Purchasing all fiber-based packaging from certified or recycled
sources. In nine of its largest markets, the company is serving 100
percent more fruits and vegetables, low-fat dairy, and healthy
grains. In nine of its major countries, the company is increasing
in-restaurant recycling to 50% and reducing trash.
d. Consumer perceptions of the industry.
McDonald's claims that changes in consumer perceptions
of the brand have contributed to the company's greatest sales
statistics in six years. In the fourth quarter, sales increased 5.5
percent year on year, marking the company's tenth straight quarter
of growth. In addition, full-year revenues increased by 0.3 percent,
the company's highest result in six years.
5. Industrial guidelines and trends.
a. Pricing policies
McDonald's pricing approach combines price bundling and
psychological pricing. The company sells meals and other product bundles
at a discount through price bundling. McDonald's employs psychological
pricing by using prices that appear to be substantially more inexpensive,
such as $__.99, rather than rounding it off to the closest dollar.
Outstanding customer service and reasonable rates that everyone
can afford McDonald's employs a skimming strategy. The goal of
McDonald's pricing is to grow market share. of its product, The promotion
is the most important thing for McDonald's.
b. Promotion
Among McDonald's advertising strategies, advertisements are the
most visible. Advertisements for the corporation are broadcast on
television, radio, print media, and web media. For example, to attract more
customers, McDonald's provides discount coupons and freebies for
specific goods and product bundles.
c. Product lines.
McDonald's menu features hamburgers and cheeseburgers, the Big
Mac, Quarter Pounder with Cheese, and Filet-O-Fish, as well as several
chicken sandwiches, Chicken McNuggets, Snack Wraps, French fries,
salads, oatmeal, shakes, McFlurry desserts, sundaes, soft-serve cones,
pies, soft drinks, coffee, McCafé beverages, and other items.
d. Channels of distributions.
McDonald's goods can be found most prominently in its
restaurants. Other locations where the firm sells its products include:
Kiosks
Website and app for Postmates
McDonald's mobile application
As a result, the firm employs a limited distribution channel while
maintaining a push-and-pull marketing communication strategy (Meyer
2015).
(Outbound Logistics -McDonald's restaurants are available in two
varieties: sit-down and fast-food. drive-thru. counter-service.)
e. Geographic concentration.
McDonald's is a multinational fast-food corporation. In this
example, it has restaurants not only in the United States but also in other
nations. People from various countries have very different eating habits
and cultural backgrounds. As a result, to maintain its global supremacy,
McDonald's must appropriately segment various areas. McDonald's
considers this. McDonald's used additional techniques to enhance its
marketing segmentation strategy. In reality, McDonald's menus vary from
country to country. McDonald's modifies their menu accordingly in
different nations due to varying meat tastes.
f. Increases or declines in firms or profitability.
As a consequence, the firm saved roughly $5 billion since it no
longer had to pay wages, benefits, rent, or upkeep. This move to a
franchise model led to the revenue drop since McDonald's no longer
reported revenue in its books but instead recorded franchise fees.
6. Financial indicators.
a. Financial ratios.
b. Working capital required
Most McDonald's Corp Stock investors today are seeking possible
investment possibilities by examining not just static indicators but also
numerous McDonald's Corp growth ratios. Consistent rises or decreases in
basic ratios generally suggest the presence of a prospective pattern that
may be successfully turned into earnings. When comparing two firms,
however, knowing each company's working capital growth rates may not
be enough to determine whether a company is a superior investment. As a
result, investors typically utilize a static breakdown of McDonald's Corp’s
working capital as a starting point for their research.
MCD WORKING CAPITAL
c. Capital structure.
As of December 31, 2019, McDonald's stock was selling at about
$197.61. The number of outstanding shares fell from 986 million at the
end of 2014 to 765 million at the end of 2019, but the market value grew
from $90 billion in 2014 to $152 billion in 2019. This is a favorable
condition for investors since it indicates that the market value of the
company's stock has increased, but at what cost? Over the same time,
market capitalization rose, and total debt more than quadrupled.
Long-term debt grew by around $32 billion, from $15 billion on
December 31, 2014, to $47 billion on December 31, 2019. Between 2014
and 2016, McDonald's repurchased millions of shares through a stock
buyback program, reducing the total number of shares outstanding.
d. Sources and uses of funds
McDonald's generates revenue from two sources: Restaurants
owned by the firm earned sales. Income from franchised restaurants in the
form of rent and royalties. McDonald's keeps the whole earnings
generated by company-owned locations. As a result, franchising is one of
McDonald's primary sources of revenue. Retained revenues and profits are
frequently utilized as a source of funding.
e. Sales
In 2020, McDonald's had total revenue of 19.21 billion US dollars.
When looking at McDonald's revenue by area that year, the country that
earned the most revenue - 7.66 billion US dollars - was the United States.
f. Profitability
McDonald's franchisees' gross revenues in the United States are
projected to be around $1.8 million per location. The ability to offload the
costs of running the restaurants is critical to McDonald's success.
According to Wall Street Survivor, the firm earned $27.4 billion in sales in
2014, with franchised stores accounting for $9.2 billion and
company-owned shops accounting for $18.2 billion.
7. Firm
McDonald's is the world's largest foodservice company, with over
30,000 locations in around 100 countries across six continents. For several
years, the firm has managed to satisfy its growth targets. The goal is to
capitalize on its capabilities to successfully serve more consumers in more
ways, more frequently.
8. Objectives
The main objective of the company McDonald's is to give its customers
high-quality food, rapid service, and good value for money. They also provide
stockholders a fair return.
9. Constraints
● Food has a bad reputation. McDonald's started a social media
campaign this week to defend the image of its cuisine, asking
customers to ask questions about the ingredients it uses.
● Lack of adaptability.
● Service that is slow and incorrect
● Prices are sensitive.
10. Management philosophy
Quality, Service, Cleanliness, and Value - It is an unwavering
McDonald's philosophy that our customers must always get quality goods,
delivered swiftly and with a smile, in a clean and pleasant atmosphere, and
at a reasonable price. We are committed to exceeding our clients'
expectations in each restaurant.
11. Strengths
● Strong brand name, image, and reputation.
● Large market share.
● Good marketing strategies.
● Technology Innovative.
12. Weaknesses
● Unhealthy food image.
● Dissatisfied Franchisees.
● High employee turnover rate.
● Customer losses due to fierce competition.
13. Target Market (s)
McDonald's primary target clientele is parents with small children,
young children, business clients, and teens. McDonald's marketing to
youngsters and parents of small children is perhaps the most visible.
14. Product considerations.
McDonald's menu features a combination of familiar and novel
meals and beverages. By increasing market sectors, product diversification
minimizes risk and enhances revenue stability. By being familiar with how
McDonald's products are promoted, you may use the same techniques for
your items, whether they are food or other consumer goods.
15. Promotion considerations.
To connect with its clients, the restaurant employs television,
newspapers, magazines, the Internet, and other forms of media. The firm
also employs sales promotion - methods of sales promotion.'
16. Pricing considerations.
McDonald's can set any price it wants for any of its locations,
regardless of what you believe is fair. Prices are determined by food
supplies and are frequently regionally modified. Keep in mind that
McDonald's only has to compete with franchise stores if it wants to.
17. Channel considerations.
In each country, McDonald's has a different distribution strategy. In
certain countries, the restaurant provides home delivery; however, this
service is not accessible in many. Many McDonald's locations are open 24
hours a day. This is an example of extensive distribution, which implies
making items accessible for sale through all conceivable distribution
channels. This benefits the restaurant and increases its sales and eventually
the total revenues.
18. Information and research considerations.
McDonald's takes a thorough approach to research and
development. This entails comprehending external elements like shifting
consumer requirements, macro trends, and the competitive landscape.
Furthermore, we examine internally to see what developments or launches
have been successful elsewhere in the world and why.
19. Managerial capabilities.
McDonald's uses division of labor and power to show Fayol's
management concepts. Classical management is the most frequent type of
management style in the fast-food business. Along with McDonald's,
Burger King and KFC place a premium on traditional management.
20. Assumptions about the current situation.
The CEO of McDonald's has declared the firm to be
recession-proof. KFC and Wendy's have struggled to keep up with the
drop in consumer spending. McDonald's is thought to have superior
financial ratios than its competitors. It is unclear, however, if the firm will
be able to continue in this manner.
II. Problems.
A. Primary problem (s) McDonald's is losing 30 stores.
1. Symptoms
Decisions are made based on Financial sustainability and expiring leases.
Last year, McDonald's Philippines closed 30 locations due to lease expirations
and worries about financial viability. Despite the epidemic, the firm established
16 new stores. Sales revenues plummeted 39% to P14.2 billion in the second
quarter, owing mostly to the impact of the tighter lockdown. McDonald's has 655
locations, down from 669 at the beginning of 2020.
2. Proof
According to GADC President and Chief Executive Officer Kenneth S.
Yang, it was one of the most hit by the shutdown last year. During the tighter
lockdown in March and April, just 38% of the fast-food giant's locations were
open, and 84 percent were working at a reduced capacity by May. He anticipates
economic recovery to be hampered this year by continuing lockdown limitations.
B. Secondary problem (s) Mcdonald’s health issues.
1. Symptoms.
McDonald's believes that consuming a lot of high-fat food might affect
gene expression and that a change in diet can cause withdrawal symptoms
comparable to nicotine and morphine withdrawal symptoms. The fast-food
corporation backs the President's HealthierUS initiative, which encourages
Americans to consume less fatty foods and exercise more.
2. Proof
McDonald's concurs with recent research results that fast food is "as
addictive as heroin." Several studies have found that consuming McDonald's food
might cause significant health problems such as heart diseases, diabetes,
hypertension, overweight, cancers, and a variety of other chronic illnesses.
III. Alternatives
A. Alternative 1. Product innovation via the development of an organic and healthier
meal
1. Strength and benefits
Product innovations can both attract new consumers and retain existing
ones. McDonald's can gain a competitive edge by offering organic and/or
healthier menu options. This will help to boost McDonald's image. If effective,
this may reduce the number of possible lawsuits filed against the firm. This will
postpone McDonald's product life cycle's apparent deterioration.
2. Weaknesses and costs
This will necessitate considerable study into the desires and varying tastes
of McDonald's consumers in each locality or nation. This will necessitate a
significant investment in product research and development. A good organic
and/or healthy menu reception in one region does not imply a successful product
innovation in all places.
B. Alternative 2. International expansion is possible with ongoing franchise options.
1. Strengths and benefits
McDonald's can use three of its primary strengths: great brand awareness,
a worldwide presence, and a successful franchise business model. The firm will
have additional outlets as well as an increase in its consistent income source.
McDonald's may gain cost savings through economies of scale by increasing its
sales volume through worldwide expansion, therefore increasing profitability.
2. Weaknesses and costs
The franchise has little influence over its operations. One franchise's poor
performance, operations, or reputation can harm the reputation of the entire chain.
It is tough to protect and sustain the Philippines’ property.
C. Alternative 3. Build every McDonald's accommodation by including technology
and a play area.
1. Strength and benefits
This will appeal to employees and teens who are always looking for a
method to connect to the internet. This will also create a safe environment for
parents to let their children play. Profitability will rise as more market segments
are covered.
2. Weaknesses and costs
This will necessitate the remodeling of existing eateries and may
necessitate major expenditures.
IV. Decision and Implementation
A. What.
The operations management (OM) of McDonald's Corporation helps the firm
maintain its position as the world's biggest fast-food restaurant chain. The ten operations
management decisions reflect the many operational strategy areas that must be integrated
for maximum productivity and performance. McDonald's global company necessitates a
wide range of strategic operations management requirements, such as strategic HRM and
supply chain growth. ( Design of Goods and Services, Quality Management, Process and
Capacity Design, Location Strategy, Layout Design and Strategy, Job Design, and Human
Resources, Supply Chain Management, Inventory Management, Scheduling,
Maintenance )
B. Who. Operations Management
C. When. At February 2017
D. Where. At McDonald’s Corporation
E. Why.
McDonald's maintains excellent policies and strategies for the ten key choices of
operations management to optimize efficiency and performance as a worldwide leader in
the fast-food restaurant business.
F. How.
McDonald's strives for optimum efficiency in all of its business sectors through
the ten strategic decisions of operations management. Some noteworthy productivity
measurements or criteria utilized in McDonald's company are as follows:
● McDonald's restaurant productivity (order fulfillment rate)
● Stockout rate (productivity of intermediaries/distributors)
● McDonald's delivery productivity (timely delivery rate)
V. Technical Appendix.
Writing the case report now entails filling out the details of the outline in prose form.
Clearly, like any other skill, it takes practice to determine the best method for writing a particular
case. However, simplicity, clarity, and precision are prime objectives of the report.
This technical appendix is about McDonald's Corporation's case analysis. It also includes
information on McDonald's environment, cultural and social factors, political and legal-social
factors, financial ratios, and the problems that the company is experiencing, as well as their
decisions and operations on McDonald's productivity. The objective of this Technical Appendix,
in addition to the content, is to give all information essential for properly duplicating the analysis
using the various techniques or assumptions.
