STRATEGIC MANAGEMENT PRESENTATION
FAST FOOD INDUSTRY
Market Size and Growth Rates • Earning trillion-dollar per year. • In the United States, it is sharing 10% of the GDP. Canada- 13%, 13% - Mexico, 11% -European Union, 12% - Latin America and 14%- Asia (2007). Scope of rivalry Local to international Stage in Industry Life Cycle Curve is flatter- the stage of expansion.
Forces driving Industry Competition
Other Stakeholders
Suppliers
Relative Power of Unions, Governments, etc.
Weak Bargaining Power of Suppliers
Potential Entrants Threat of New Entrants
Industry Competitors
Relatively weak
Bargaining Power of Buyers
Moderate to strong
Rivalry Among Existing Firms Very strong Threat of Substitute Products or Services
Substitutes
Very strong
Buyers
• • • •
•
• • • •
Supplier Power Willingness of supplier Supplier-seller collaboration Supplies are mostly commodities Customers- industry leaders Barriers to Entry Economies of scale Unattractive market growth Competitors strong offensive moves Competitors expertise in marketing and efficiency
• • •
Threat of Substitutes Readily available Attractively priced Satisfactory in terms of quality Buyers power •A large number of small operators •High fixed costs, •Undifferentiated and replaced •Switching cost low •Consumer-price-sensitive, •Produce the product •Purchases in small volumes •Well-informed about sellers’ products, prices, and costs
Degree of Rivalry • Several competing companies. • Product and service differentiation inadequacy. • Aggressive in making fresh moves - Domestic demand is growing slowly - Competitors often rely on price cuts to boost volume - Low switching costs for consumers
INDUSTRY ANALYSIS
Offensive strategies and defensive approach Competitive pressure from substitute products, quick, convenient service Threat of new entrants and power of suppliers is not significant- capital to invest in real estate Driving force
McDonald’s Competitive analysis matrix
The competitive profile matrix defines the firm major competitor and their particular strengths and weakness & position
Competitive profile matrix Mc Donald’s
Burger Kings
Critical Success Factor
Weight
Rating
Weighted score Rating
Price
0.15
4
0.60
Financial Position
0.08
4
Customer loyalty
0.10
Advertising
Yum Brands
Wendy’s
Weighted score` Rating
Weighted score
Rating
Weighted score
3
0.45
3
0.45
3
0.45
0.32
3
0.32
3
0.24
2
0.16
4
0.40
3
0.40
3
0.30
2
0.20
0.10
3
0.30
3
0.30
4
0.40
2
0.20
Product Quality
0.10
4
0.40
3
0.40
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
Global Expansion
0.15
4
0.60
2
0.30
3
0.45
1
0.15
Grand Total
1
3.75
3.03
3.20
2.07
7
MCDONALD’S CORPORATION
• • • • • • •
Largest Chain of Restaurants serving nearly 47 Million customer daily with 31,000 outlet in 119 countries, employing 1.5million people. 15% owned and operated directly Franchisee and JV - revenues come from the rent, royalties and fees paid by the franchisees & sales in company-operated restaurants. Profit Grew Over 30% over three years ending to $52.8 billion. 9% Growth In Operating income to $5.9 billion. Main characteristic- local deviation from the standard menu Key success factors- Company Expansion Strategy
McDonald’s Vision, Mission and Value
MACDONALD OVERVIEW 1960’s: introducing Hamburger University., big idea- Big Mac 1970’s: introduced happy meal, thru drive. 1990’s: acquired stakes, web- McDonald’s.com- macdonalization 2003: revitalizing plan - Plan to Win strategy, with its strategic focus on ‘being better, not just bigger’.
Till 2008: 30496 outlets. ranked 5 most admired company in CRS . named as marketer of year by advertising age “ when and where you want it” & "Forever Young” For mobile population: offering more drive thrus- China and US double drive thrus- in Canada and Russia delivery services – Singapore, Egypt, India top 8 most powerful brand 2009: Plan to win strategy, focus on being one brand, one system and one plan.
SWOT ANALYSIS Internal Audit Strength • • • • • • • • • •
Strong Brand name, image & reputation Large market share Strong global presence Specialized training for managers known as hamburger university Plan to win focuses on 4 p’s Strong financial performance& position Proven production methods & countless new innovation ( breakfast, café etc) Customer focus The company has favorable access to distribution networks Strong MCD performance in the global market place
Weakness • • • • • • •
Unhealthy food image High staff turnover including top management Customer losses due to fierce competition Legal actions related to health issues : use of trans fat & beef oil Uses HCFC – 22 to make polystyrene that is contributing to ozone depletion lack of product offerings to meet varied customer tastes and preferences Many restaurants are outdated
13
External Audit Opportunities • Growing health trends among the customer • Falling global trade barriers in attractive markets • Globalization , expansion in other countries • Diversification & Acquisition of other quick- service restaurants • Growth of fast food industry • Worldwide deregulation • Low Cost menu that will attract the customers. • Expansion of menu to meet healthier consumer preferences • Freebies & discounts
Threats • Health professional& Consumer activist accuse MCD of contributing of high cholesterol, heart attacks, diabetes & obesity • Relationship B/W MCD Corporate & Its franchisee • Anti- American Sentiments • Global recession & Fluctuating foreign currencies • Industry to struggle to meet the customers towards health & environmental issues. • Rivals copy McDonald’s innovations fairly quickly, eliminating first-mover advantages • The company has the propensity to induce shifts in consumer tastes away from the firm's products
PEST ANALYSIS Political and legal •Highly influenced by the individual state policies •Recurrent bellowing in opposition to the fast food industry. Economic •Exchange rate fluctuations •The rate at which the economy grows ; hit by inflation Social •With definite types of personalities. •Below the age bracket of thirty-five •Working within many social groups Technological •Inventory system and the management of the value chain •Quality standards Environment •Accusations of environmental damage.
THE BCG MATRIX
Mc Donald’s USA
Mc Donald’s EUROPE
Mc Donald’s ASIA
Mc Donald’s AMERICAS
ANSOFF MATRIX
Market penetration loyal consumer base and existing products Product development new foods and new burgers in their menu Market development established globally McDonalds new cafe style shops As it is something new McDonalds has introduced but still related to their food market : fast food company diversifying into selling coffee. can be a part of Related diversification strategy (McDonalds are already selling coffee so it could also be a product development strategy..??)
The McDonald’s Supply Chain Import Breath of supply process control equipment
Supplier performance index
No direct control over issues, positive influence by raising questions, bringing people to the table and encouraging improvement
PORTER VALUE CHAIN ANALYSIS OF MCDONALD’S The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin for McDonald's.
Inbound logistics
•Organizing the supply of food and materials to restaurants through approved third party logistics operators.
Inbound Logistics
•Production in huge plants denoted exclusive to McDonald’s control food distribution and packaging system
Operations
Firm
•R&D in field research needs of end users. • quality development in Relatively Few collaboration with good Management Layers to Infrastructure suppliers Reduce Overhead Effective Training Programs •Forward integration: to Improve Worker Efficiency and Effectiveness through franchisees with
Human Resource Management
Investments in Technology in order control over store to Reduce Costs Associated with presentation, menu Manufacturing Processes
Technological Development
items etc. and enhance
Procurement
Frequent Evaluation Processes to participation in process Monitor Suppliers’ Performances
Policy Choice of Efficient Order Plant Technology Sizes Organizational Learning
Small, Highly Trained Sales Force Products Priced to Generate Sales Volume
Service
Outbound Logistics
Operations
Inbound Logistics
improvement
Efficient Plant Delivery Schedule Scale to Minimize that Reduces Manufacturing Costs Costs Selection of Low Timing of Asset Cost Transport Purchases Carriers
Outbound logistics
Firm Infrastructure
•Is the concern of the franchisee.
•Outbound logistics are growing as a Human Resource Management part of McDonald’s recycling system Technological Development integrating in the logistics of Frequent Evaluation Processes to distribution center Procurement Monitor Suppliers’ Performances
Efficient Order Sizes
National Scale Advertising
Interrelationships with Sister Units
Marketing & Sales Service
Selection of Low Cost Transport Carriers
Effective Product Installations to Reduce Frequency and Severity Products Priced to of Recalls Generate Sales Volume
Outbound Outbound Logistics Logistics
Delivery Schedule Small, Highly that Reduces Trained Sales Costs Force
Marketing
Firm Infrastructure Human Resource Management
Outbound Logistics
Operations
Inbound Logistics
Procurement
M A •Country teams are RG given autonomy in IN marketing mix decision. •Advertising & PR is outsourced (Mudra agency in India)
Marketing & Sales Marketing & Sales Service
Technological Development
•Long term marketing objectives are broken down into shorter term measurable targets, which McDonald uses as milestones.
Service
Services Firm Infrastructure provided by the companies enrollment Human Resource Management standards
Technological Development
Marketing Service & Sales Service
Outbound Logistics
Inbound Logistics Operations
Procurement
Procurement
Firm Infrastructure Human Resource Management Technological Development
Marketing & Sales Service
Outbound Logistics
Inbound Logistics Operations
Procurement Procurement
Sought partners with expertise on down trade distribution
R & D
Firm Infrastructure Human Resource Management Technological Development
Service
Outbound Logistics
Operations
Procurement
Marketing & Sales
Inbound Logistics
Technology and development research in quality assurance, and packing readdressed at lower cost, faster delivery chain system and process control equipments, recycling system.
HRM
Firm Infrastructure Human Resource Management Technological Development
Service
Marketing & Sales
Outbound Logistics
Operations
Inbound Logistics
Procurement HRM specialists in R&D and expertise in food formulation, education to raise awareness of issues and raise demand. The addressing environmental issues and CRS.
Support Activities
Firm Infrastructure Human Resource Management Technological Development
Service
Marketing & Sales
Outbound Logistics
Operations
Inbound Logistics
Strong real estate portfolio. International organization more than 50000 employees works in more than 50 countries,
Grand Strategy Matrix
Rapid market growth Quadrant II Week competitive position
Excellent strategic Quadrant I position Concentration on current markets & products Take risk aggressively when necessary
Strong competitiv e position
Quadrant IV
Quadrant III Slow market growth
RECOMMENDATIONS
Recommended Strategy/possible strategies
Stay-on-the-offensive strategy Fortify-and-defend strategy Adaption strategy
Grand strategy matrixalternative strategies Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification
Focus on CSR .The 2009.Global Best of Green highlights - local innovations that can be shared and applied in other markets across McDonald System.
SWOT Matrix
1. 2. 3. 4. 5. 6. 7. 8.
Opportunities Growing health trends among the customer Globalization , expansion in other countries Diversification & Acquisition of other quick- service restaurants Growth of fast food industry Worldwide deregulation Low Cost menu that will attract the customers Freebies & discounts
Threats 1.Health professional& Consumer activist accuse MCD
of contributing of high cholesterol, heart attacks, diabetes & obesity 2.Relationship B/W MCD Corporate & Its franchisee 3.Anti- American Sentiments 4.Global recession & Fluctuating foreign currencies 5.Industry to struggle to meet the customers towards health & environmental issues
Strength 1.Strong Brand name, image & reputation 2.Large market share 3.Strong global presence 4.Specialized training for managers known as hamburger university 5.Plan to win focuses on 4 p’s 6.Strong financial performance& position 7.Introduction of new product 8.Customer focus 9.Strong MCD performance in the global market place
Weakness
S-O Strategies
W-O Strategies
Focus on the plan to win to
Minimize customers losses
1.Unhealthy food image 2.High staff turnover including top management 3.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 6.Ignoring breakfast from the menu
attract customers & expansion by providing low cost menu & in other countries(S5, O2,O6) discounts.(W3, O6,O7) Expansion in the market share by more investments in Asia (S2,O2) S-T Strategies
W-T Strategies
More control on franchise
Applying ) grams trans fat in
dealers to maintain MCD’s all world wide MCD’s. ( W1, reputation & quality.(S1, T2) W4, O1) Provide new product & keep Transfer from HCFC-22 to innovation. ( S7, T3) HFC – free.( W5, T6) 32
PEST ANALYSIS McDonald’s deemed as demigod in the fast food business in the international scene, what it preserves as revealed in its processes is the need for flexibility. Any business in spite of the muscle of the brand name or the size of its reserves could not afford any failures in their individual markets.
•To deal directly with the proper authorities •Acquainted with the law •Carry out a well conducted market research. •Obtain the relevant information from the target market. •Find out the shifts in areas •The cost-effectiveness, interactivity and real-time effects of the communications •Find out the environmental regime •Minimise the use of Styrofoam materials and plastic cups. •Hire local counsels
CONCEPTUAL STORMING Mr. Akshat Jain
‘Think global, act local’
PRESENTATION & Spade Work By Preeti Chaudhary
IDEAS FLOOD ANNUAL REPORT 2007,2008 http:/ivy thesis. typepad.com www.ccfplus.com www.about mcdonalds.com www.crmcdonalds.com McDonald's Environmental Report Crafting and Executing Strategy by Thompson, Strickland, Gamble