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Mc. Donald’s Chase Mueller Tanner Gilreath Olivia Erwin Paige Stone Ashley Hoptay Anna Rendon Brandon Laviage
Overview Analyzed Mc. Donald’s and its three competitors, YUM! Brands, Burger King and Wendy’s, to assess the company’s standing in the industry. n Focused on the key company characteristics, its financial situation, each company’s organizational flexibility and culture, strategies used, and their ability to be able to compete in today’s market and economy. n
Corporate Social Responsibility Has become a way of doing business. n Understand that they must deliver responsible food to its consumers. n How it serves food. n Where the food comes from. n What people want from it. n Therefore, the company works closely with its suppliers, franchisees and employees to ensure products are safely delivered to consumers. n
Corporate Social Responsibility n Mc. Donald’s goes green: Since 2000, the company has opened up multiple “green” restaurants. n Rebuilding restaurants with a more innovative and efficient design that will reduce the use of water and energy. n Enhancing its packaging – 82% of its packaging is made from renewable resources n “Closed Loop Hierarchy for Packaging and Waste” n
Corporate Social Responsibility n Mc. Donald’s is…healthy? Three aspects involved: provide consumer-friendly nutrition information, bring consumers high-quality choices, and communicate responsibly n Offer salads, wraps, smaller portions and healthier sides. Zero grams of Trans fat in fried foods. n Can find all of the nutrition information on the Web. Also implementing a new packaging design where the nutrition information will be placed on the wrapper. n Strengthening its Global Children’s n Marketing Guidelines
Corporate Social Responsibility n Mc. Donald’s makes its presence known: n Gets involved with its communities in four ways: n Ronald Mc. Donald House n Sponsorships n Owner/Operator Involvement n Disaster Relief
Corporate Social Responsibility n Quality every step of the way: Takes great prudence to ensure that every aspect of the supply chain positively contributes to the safety, quality and availability of its products. n Uses a Social Accountability program to uphold its strict standards for its suppliers. n Not afraid to leverage its size and influence to raise questions about the suppliers’ methods and to encourage improvement in their practices. n
Forecasting and Speed of Response Mc. Donald’s plays a large part in its communities, and the company is constantly searching for new ways to get involved or help the environment. The company also tries to project future needs to lessen the impact that its business has on its communities. n Mc. Donald’s is able to quickly respond to its communities’ needs and wants: n n Mc. Donald’s was the only quick service restaurant to make Health Magazine’s list of America’s Top 10 healthiest meals at limited-service restaurants”
Entrepreneurial Orientation n 78% of Mc. Donald’s restaurants are operated by franchisees. Creates a strong entrepreneurial feel. n The only competitor with a larger mix of franchisees is Burger King – 90% of restaurants are operated by franchisees. n n Very selective when granting franchises or licenses. Will not franchise to passive investors that do not appear capable of matching the goals and requirements that Mc. Donald’s sets for all of its locations
Attraction and Retainment n Make that a Mc. Career please. n n n Supports development from the crew room to the board room. Promotes from within. Provides training for all levels. n n Service level receive on the job training where they learn the technology as well as customer service techniques Provide college level classes at Hamburger University for management training Mc. Donald’s Leadership Institute provides almost 200 employees from the Mc. Donald’s system to partake in the accelerated programs and learn how to be a corporate leader in the company Ranked as one of the Top 20 Global Companies for Leaders in 2007 by Fortune
Super Sizing Value n Value menu: no value cost trade-off n n Maintain a supply of high quality ingredients n n Dollar Menu, Yen for Great Value in Japan Ensured by the company’s size and strength over its suppliers Variety and selection of menu items to satisfy all tastes n Research and Development is essential to growth n Have three food studios located in Munich, Hong Kong and Chicago where chefs test and create their new concoctions
Delivering Value n Convenience and accessibility are important aspects that bring consumers more value Located in close proximity to each other n Found in areas with a high customer concentration n Expanding the number of 24 hour locations n Opening drive-thrus in areas such as Russia and China and adding double drive-thrus in the US n Kiosks in India and Indonesia n Delivery service in Singapore, Egypt and other Asian and Middle Eastern countries n
Reimaging Value Feel that its restaurants are the best way for the company to express its brand create the ultimate customer experience n Renewed about 10, 000 restaurants within the past five years n Design is contemporary and eco-friendly n Burger King is also re-investing in the design of its restaurants n
Marketing and Promotions n Relevant marketing and promotions strengthen its connection with its customers and build brand awareness and loyalty n “I’m Lovin’ It” campaign Promotions such as Monopoly and Uno evoke customer interaction and get them involved with the brand n Burger King is advertising more and is utilizing a more viral campaign n
Financial and Accounting Analysis Quantitative accounting disclosures are intended to effectively communicate the financial statements’ numbers n Certain legal manipulations and disclosures could give a company an unrealistic value as well as mislead its investors. n Tools n n Financial Ratios
Ratio Analysis 1. 8 Mc. Donalds Burger King Wendy's Current Ratio Yum! Brands 1. 6 1. 4 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 2004 2005 2006 2007 2008 n It is used to show the resources a firm and its ability to cover their current assets with current liabilities. n The higher a firm’s current ratio is, the more able a firm is to pay off its liabilities.
Ratio Analysis 1. 4 Wendy's Quick Asset Mc. Donalds Burger King Yum! Brands 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 n The quick asset ratio, or acid-test, uses the firm’s most liquid assets than can quickly be turned into cash for their book value amounts to pay off current debts. n The assets included in this ratio are cash, marketable securities, and accounts receivable. 2004 2005 2006 2007 2008
Ratio Analysis 40 Burger King Wendy's Yum! Working Capital Turnover Brands Mc. Donalds 20 0 2004 2005 2006 2007 2008 -20 -40 -60 n Working capital turnover is determined by dividing a company’s sales by its working capital: current assets less current liabilities. n It evaluates how efficient a company uses its working capital balance to create sales. -80
Ratio Analysis 20% Mc. Donalds Burger King Wendy's Net Profit Margin Yum! Brands 10% 0% 2004 2005 2006 2007 2008 -10% -20% n n n It simply gives profit as a percentage of net sales. It shows how much of each dollar of product sold is profit. By having a small percentage it shows that the company is not utilizing their resources well and their cost to produce the item are too high. -30%
Ratio Analysis 20% Mc. Donalds Burger King Wendy's Return on Assets Yum! Brands 10% 0% 2004 2005 2006 2007 2008 -10% -20% -30% n The firm uses the previous year’s assets to better reflect profitability for -40% the current year. n This is done because profits with the new assets will not be recognized until the next fiscal year and that is how it gives people a better understanding on how they either helped or hurt the company.
Ratio Analysis 4 Mc. Donalds Z - Score. Wendy's Burger King Yum! Brands 3. 5 3 2. 5 2 1. 5 1 0. 5 0 n 2004 2005 2006 2007 2008 The purpose of the Z-score is to help us make calculations that help us to understand where a company stands with their credit risk. n A company is considered to be bankrupt when their Z-score is below 1. 81. When a firm’s score exceeds 2. 67, the firm is considered to have low risks in the bankruptcy and credit categories.
Marketing and Management n Mc. Donald’s once focused on children for their advertising, but recent law suits and documentaries resulted in the company’s innovation and major changes to health related product ranges. Now more teenagers and adults rule the Mc. Donald’s ad world. n Mc. Donald’s had begun concentrating so heavily on expansion and growing big that it missed out on key factors like quality maintenance and R&D. n Mc. Donald’s strategic plan is influencing their marketing efforts by building better brand transparency. They want their image to be recognized globally. They are enhancing the customer’s experience.
Marketing and Management n The change in the top managerial level has created a new wave in performance and major changes have been implemented to retain and sustain the brand quality and innovation. As the new CEO rightly quotes: “The world has changed. Our customers have changed. We have to change too. " -James R. Cantaloupe, Chairman and CEO, Mc. Donald’s n Types of marketing mix that Mc. Donald’s use to achieve their marketing goals are longer operating hours, everyday value meals, and optimizing efficiency in the drive-thru.
Business Life Cycle: Mc. Donalds n n n n 1948: Richard and Maurice Mc. Donald open the first Mc. Donald's restaurant in San Bernardino, California. 1954: Ray Kroc gains the rights to set up Mc. Donald's restaurants in most of the country. 1955: Kroc opens his first Mc. Donald's restaurant in Des Plaines, Illinois; he incorporates his company as Mc. Donald's Corporation. 1961: Kroc buys out the Mc. Donald brothers for $2. 7 million. 1963: Mc. Donald's goes public. 1967: The company opens its first foreign restaurant in British Columbia, Canada. 1973: Breakfast items begin to appear on the menu, with the debut of the Egg Mc. Muffin. 1974: The first Ronald Mc. Donald House opens in Philadelphia.
Business Life Cycle: Mc. Donalds n n n n 1975: The first Mc. Donald's drive-thru window appears. 1985: Mc. Donald's becomes one of the 30 companies that make up the Dow Jones Industrial Average. 1998: The company takes its first stake in another fast-food chain, buying a minority interest in Colorado-based Chipotle Mexican Grill. 1999: Donatos Pizza Inc. is acquired. 2000: Mc. Donald's buys the bankrupt Boston Market chain. 2002: Restructuring charges of $853 million result in the firm's first quarterly loss since going public. 2003: Mc. Donald's sells Donatos in order to refocus on its core hamburger business.
Business Life Cycle: Wendy’s n n n 1969: Dave Thomas opens the first Wendy's restaurant in downtown Columbus, Ohio. 1972: Wendy's franchising begins. 1975: First international restaurant opens in Canada. 1976: Wendy's International, Inc. goes public. 1977: Company begins national television advertising. 1978: The 1, 000 th Wendy's opens in Springfield, Tennessee. 1981: Thomas makes his first appearance as Wendy's advertising spokesperson. 1984: Famous and award-winning "Where's the Beef? " ad campaign is run. 1986: James W. Near becomes president and COO and launches a major reorganization. 1995: Wendy's International acquires Tim Hortons, a Canadian coffee and baked goods chain. 1997: The 5, 000 th Wendy's restaurant opens in Columbus, Ohio. 2002: Dave Thomas dies; Wendy's International acquires a 45 percent stake in Café Express.
Business Life Cycle: Burger King n 1954: James Mc. Lamore and David Edgerton establish Burger King Corporation. n 1959: The company begins to expand through franchising. n 1967: Burger King is sold to Pillsbury. n 1977: Donald Smith is hired to restructure the firm's franchise system. n 1989: Grand Metropolitan plc acquires Pillsbury. n 1997: Grand Metropolitan merges with Guinness to form Diageo plc. n 2002: A group of investors led by Texas Pacific Group acquire Burger King.
Business Life Cycle: KFC n n n 1952: The Colonel begins actively franchising his chickenbusiness by traveling from town to town and cooking batches of chicken for restaurant owners and employees. The Colonel awards Pete Harman of Salt Lake City with the first KFC franchise. A handshake agreement stipulates a payment of a nickel to Sanders for each chicken sold. 1960: The Colonel's hard work on the road begins to pay off and there are 190 KFC franchisees and 400 franchise units in the U. S. and Canada. 1964: Kentucky Fried Chicken has more than 600 franchised outlets in the United States, Canada and the first overseas outlet, in England. 1966: The Kentucky Fried Chicken Corporation goes public. 1969: The Kentucky Fried Chicken Corporation is listed on the New York Stock Exchange. 1971: More than 3, 500 franchised and company-owned restaurants are in worldwide operation when Heublein Inc. acquires KFC Corporation
Business Life Cycle: KFC n n n 1979: KFC cooks up 2. 7 billion pieces of chicken. There approximately 6, 000 KFC restaurants worldwide with sales of more than $2 billion. 1982: Kentucky Fried Chicken becomes a subsidiary of R. J. Reynolds Industries, Inc. (now RJR Nabisco, Inc. ) when Heublein, Inc. is acquired by Reynolds. 1986: Pepsi. Co, Inc. acquires KFC from RJR Nabisco, Inc. 1997: Pepsi. Co, Inc. announces the spin-off of its quick service restaurants - KFC, Taco Bell and Pizza Hut - into Tricon Global Restaurants, Inc. 2002: Tricon Global Restaurants, Inc. , the world's largest restaurant company, changes its corporate name to YUM! Brands, Inc. In addition to KFC, the company owns A&W® All-American Food® Restaurants, Long John Silvers®, Pizza Hut® and Taco Bell® restaurants
Mc. Donalds Corporate Structure n Management gurus often cite Mc. Donald’s corporate structure model. n The company's highly decentralized management runs its franchises. n Mc. Donald’s uses a functional structure, with the Chief Executive overseeing five major areas of activities. n Franchise candidates must sign an agreement with the firm, which gives them the right to operate a specific Mc. Donald’s location for a period of 20 years.
Mc. Donald’s Corporate Structure Chart CEO/Divisional Vice Chairman/Director VP/Other Executive Officer Chairman of the Board/Director Geographical President Executive VP/ Other Executive Officer President/COO President, West Division Director Senior Executive VP/Other Corporate Officer President, Eastern Division Senior VP/Comtroller CFO/Senior Executive VP Director
Mc. Donalds Corporate Culture n Mc. Donalds vision statement is quality, service, convenience, and value (QSCV). . n No one portrays Mc. Donalds culture more than Hamburger University, it is a place where Organizational culture is franchisees, managers, and assistant managers are indoctrinated into the culture that is Mc. Donald's. n This structure allows Mc. Donalds to export successfully not only its management system but a very distinct culture as well. n Inspectors continually reinforce Mc. Donald’s culture and by contests to determine whom best reaches the standards Mc. Donald's sets for all its franchises. n Mc. Donald's manuals emphasize the organization's motto, QSCV, and they define every task an employee needs to know. n These manuals ensure that efficiency, predictability, and control are involved in production and customer service.
Yum! Brands Corporate Structure n Originally an accumulation of restaurant chain accounts put together for not only the addition of Pepsi fountain accounts, but for profit from food sales. n Chains were acquired and managed virtually independently, essentially skipping the usual corporate practice of bringing them in line with the rest of the business units. n Now, the company operates its business through three geographical reporting segments: the US, the International segment and China segment. n n The US segment operates multi-brand restaurants, where two or more of the concepts, such as KFC, Pizza Hut, Taco Bell, Long John Silver's and A&W, are operated in a single unit. Outside the US the company and its franchisees use decentralized sourcing and distribution systems involving many different global, regional, and local suppliers and distributors.
Yum! Brands Corporate Structure Chart Chairman CEO and President Yum! Brands, Inc. President, Yum! Restaurants International Sr. VP, Chief Public Affairs Office, Yum! Brands, Inc. CFO, Yum! Brands, Inc. SVP, Gen Counse, Secretary, Chief Finance Policy Officer Cheif People Officer VP Worldwide Knowledge Transfer Sr. Vice President, Investor Relations and Treasurer COO and Cheif Development Officer Sr. Vice President Finance and Corporate Controller VP Public Relations Corporate Strategy and Treasurer Direct Public Affairs President of U. S. Brand Building Managing Director of Europe, Yum! Brands Chief Marketing Officer, Indian Subcontinent President and Chief Concept Officer, KFC President, Pizza Hut President, Taco Bell Cheif Marketing Officer, Australia Cheif Operating Officer, Taco Bell Managing Director of Mexico Chief Operating Officer, Pizza Hut, USA Chief Operating Officer, KFC, USA
Yum! Brands Corporate Culture n Over the past 12 years, Yum! Brands success has been driven by their focus on building leading brands in China in every significant category. n They strive to drive aggressive, international expansion and build strong brands everywhere. n They try to dramatically improve U. S. brand positions, consistency and returns, driving industry-leading, long-term shareholder and franchisee value, and build a unique, fun culture led by people who love the restaurant business. n They created the Yum! Dynasty Growth Model. n How We Win Together Principles are their corporate values and are built around a "People Capability First" philosophy.
Strengths Threats SWOT Analysi s Opportunities Weaknesses
Strengths n Franchises n n Brand Recognition n n Branding allows customers to recognize icons, thus becoming more brand loyal Product Uniformity n n Mc. Donald’s operates 31, 377 restaurants with 20, 505 of those restaurants being operated by private owners Offering the same consistent product creates customer loyalty Pricing Strategy n Value Menu
Weaknesses n Saturation n n pricing wars against competitors has caused a decrease in revenue Public Perception n unhealthy product offerings has lead to numerous lawsuits
Opportunities n Market share n n countries such as Latin America and the Caribbean’s, Europe, The Middle East and North America, Sub. Sahara Africa, and Oceana have very few Mc. Donald’s chains, creating a huge untapped market Younger Generation n tend to be on the go, and look for meals that are quick, cheap, and convenient, thus giving a huge opportunity to serve an adult crowd
Opportunities… n Innovativeness n n Continuously using technological factors, perhaps text message ordering can influence revenue or joining the going green movement Product Offering n Constantly seeking new product offerings allows new opportunities for growth and expansion of their brand recognition
Threats n Economic Slowdown n n Casual Dining Restaurants n n n Recessionary period and global economic slowdown has led to currency losses, inflation or deflation have decreased menu prices Cheddar’s burger: $4. 99 Imitation n new formats and new menu items are being imitated
Company Assessment Summary Focus Product Offerings Technology, Locations Marketing/Advertising Renovation of Exiting Restaurants Overall Cost Leadership High Marketing/ Advertising Cost Investment of Location property Increased Technology cost Implement Just-in-Time (JIT) Strategic Posture Differentiation Added lounges Premium coffees Modern facilities Defensive No marketshare of own company Only focus on themselves
Competitive Scope n Global Scale n n Local, regional, national, and international competitors Makes up 2. 4% of 575, 000 total restaurants in U. S.
Strategic Intent n Leader in QSR industry n Uses advertising, marketing, and public relations to promote brand image and focus on value, food taste, menu choice and customer experience
Market Share Objective n Focus on internal growth through expanding the number of restaurants as well as capturing new market share from other industries. n n Ex: coffee sector “Plan to Win” Designed to bring more value to shareholders n Ex: flat screen TVs, internet n
Competitive Position/Situation n Well-entrenched n Global leader n Keep position through expanding the number of stores, internal operations to new ventures, and customer experience.
Strategic Posture n Defensive Strategies - reactions to competition and to defend market share Dollar menu n Value meals n n Offensive Strategies - proactive approach to keep and secure its position as market leader New market ventures n Customer loyalty n
Competitive Strategy n Differentiation n Advertising and marketing n Recognizable name and logo n Social responsibility and commitment to community n Green movement n Safe and high quality meat n Technology n Speedee Service System