Mc Donald

McDonald’s Cheryl Wilcox Dale Brockway Marc Camerlin Belisa Anzalotti

Agenda Company Background SWOT Analysis Strategies: Past and Future

McHistory • Ray Kroc opens the Des Plaines restaurant in 1955. First day’s revenues - $366.12 • In 1965, McDonald’s goes public with the company’s first offering on the stock exchange • In 1967, Jim Delligatti invents the Big Mac • “Makadonaldo” first opened in 1971 (Japan)

McHistory • Egg McMuffin is introduced in 1973; Developed by owner operator Herb Peterson • In 1974 Fred Hill of the Philadelphia Eagles teams up with McDonald’s to create the Ronald McDonald House • Happy Meals (1979)

Fascinating McFacts • Today, the company operates more than 23,500 restaurants in 109 countries • Since its founding in 1955, McDonald’s has sold well over 100 billion hamburgers • McDonald’s prepares more than 6.8 million pounds of French fries every day • More than 50,000 students have graduated from “Hamburger University”

Franchising McFacts • Approximately 85% of McDonald’s restaurant businesses world-wide are owned and operated by franchisees • All franchisees are independent, full-time operators • McDonald’s was named Entrepreneur’s number-one franchise for 1997

McDonald’s Strategic Issue To Consistently Increase Shareholder Value through the Growth of Profits and Market Share in the Fast Food Industry

SWOT Analysis - Strengths • Brand Equity…world-wide • 42% of US fast-food hamburger business • Consistency of food • Successful items: Fries, Happy Meal, Big Mac, Egg McMuffin, Promotions • Overseas market • Balance sheet position

SWOT Analysis - Weaknesses • Declining market share • Weak product development • Disgruntled franchisees • Quality and taste of products

Whose food do Americans really like best?

Best-tasting food?

Best-tasting burgers?

Wendy’s Burger King McDonald’s

Burger King Wendy’s McDonald’s

* Percent of respondents

36%* 32% 21%

42% 32% 17%

SWOT Analysis - Weaknesses • Declining market share • Weak product development • Disgruntled franchisees • Quality and taste of products • Slowed revenue and income growth

Income Trends Returns 20.0%

17.7%

18.0% 16.0% 14.0% 12.0%

14.7% 13.0% 12.3%

16.6%

14.7%

14.6%

14.4%

10.2%

10.0%

9.1%

8.0%

6.7%

6.0%

4.5%

4.0% 2.0% 0.0% 1994

1995 Revenue

1996 Net Income

Profit margin

1997

Stock Price $100

$84

$80 $60 $40

$48

$63 $50

$58

$20 $1996 McDonald's Growth

1997

1998 S&P Industry Growth

SWOT Analysis Opportunities • International expansion • Only serving 1% of the world’s population • Growing dining-out market

SWOT Analysis - Threats • Mature/overstored industry • Strength of competition • More health-conscious consumers • Changing demographics • Fluctuation of foreign exchange rates; Economies

1997 Competitor Financial Comparison 20%

16.3%

15% 10% 5% 0%

8.7%

7.4%

6.8% 4.0%

4.4%

Revenues McDonald's

Net Income Burger King

Wendy's

Past McStrategies • Product Development – Successes: Fries, Happy Meal, Big Mac, Egg McMuffin, Promotions – Failures: McPizza, Fajita, Carrot Sticks, McLean, and the Arch Deluxe

Past McStrategies • Market Development – Success: International growth – Failure: Over-expansion in US • Alternative locations

• Forward Integration – Distribution through franchisees with control over store presentation, menu items • Joint Venture: Franchisees

New McStrategies • Leverage Brand Equity • Product Development: Focus on core business – Quality and taste issues • Food delivery methods • MBX (McDonald’s Big Extra)

– Family Value Meal

New McStrategies • Joint Venture (Franchisee): Change methods of dealing with franchisees – To better motivate owners and foster team spirit – Enhance owners’ participation in process improvements

New McStrategies • Market Penetration and Development – Continue International expansion

• Retrenchment – Home office cost reductions – Splitting into five geographic divisions

• Horizontal Integration – Purchase competition with differing target markets

McDonald’s Cheryl Wilcox Dale Brockway Marc Camerlin Belisa Anzalotti