Stratigic-mgt-case-study-mcd Finals.docx

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

I. Case Background MCD was launched in 1940 when brothers Dick and Mc McDonald opened a restaurant in San Bernadino, California. However, the credit of growing the corporation into a franchised, global operation is attributed to Ray Kroc, who acquired equity from the McDonald Brothers and took the firm pubic in 1965. MCD has a really cool history timeline

called

“Travel

in

Time

with

us”

located

at

the

http;//www.aboutmcdonalds.com/mcd/our_company/mcd_history.html Web page. It reveals information such as the following: 1979

MCD Introduced Happy Meals

1981

MCD opened stores in Spain, Denmark, and the Philippines

1983

MCD entered its 32nd country

1984

Ray Kroc passed away

1987

MCD Introduced fresh salads

1990

MCD opened a store in Moscow, Russia

1992

MCD opened a store in Warsaw, Poland

1995

MCD’s new and was “Have You Had Your Break Today?”

1996

www.mcdonalds.com Web site introduced

1997

MCD’s new and was “Did Somebody Say McDonald’s?”

2001

The Big N’Tasty sandwich introduced

2003

MCD introduced Premium Salads and its “Plan to Win” strategy

2006

MCD introduced snack Wraps

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon II. External Factors i. Opportunities a. Socio-Cultural 

Major industry analyst rated MCD as a “buy” suggesting low levels of risk for investors



Low cost menu that will attract customers.

b. Demographic 

Globalization, expansion in other country especially in (APMEA and other countries and corporate).



International expansion.



Growth of the fast food industry.

C. Physical Environment 

Continued focus on corporate social responsibility reducing the impact to the environment and community linkages.

ii. Threats a. Political 

As recently as 2009, activist vandalized MCD’s restaurant during the G-20 summit in protest of the poverty and income inequalities brought about by globalization.

b. Economical 

Worldwide economic crisis negatively impacted MCD’s key competitors.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon 

As the U.S. dollar gained strength against most currencies, especially the euro, British pound, Australian dollar, Canadian dollar, and the Russian ruble. Foreign currency translation losses show the extent of damage that global companies like MCD



Encounter due to the uncertainties in the global environment that no one has control over.

c. Socio-Cultural 

Growing awareness among the medical and scientific community as well as the public of the direct relationship between diet and health.



Strength of competition



Health professionals and consumer activists accuse McDonalds of contributing to the countries health issue oh high cholesterol, heart attacks, diabetes and obesity.

d. Legal 

MCD continues to encounter lawsuits brought about around the word by activists and irate parents of children less than 18 years of age.

III. Internal Factors i. Strength a. Socio-cultural 

MCD has been listed among the “top 40 companies”



Major industry analyst rated MCD as a buy

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

b. Demographic 

Strong financial performance by geographic segment between 2008 and 2009.



MCD’s operations are organized into a geographical structure with four key segments.

c. Economic 

MCD’s foundations raise millions of dollar each year for children centered in the community

d. Technological Segment 

Strong global reach and brand recognition.

ii. Weakness a. Socio-Cultural 

High official in MCD turnover including the top leadership top management.



MCD’s consolidated decline in total asset hold by the company from among the amounting $29.02 B in 2005.



Unhealthy food image of MCD



Legal action related to health issues.



The position of controller stands vacant.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

IV. External Factors Evaluation Matrix Key External Factors Opportunities 1. International expansion. 2. Major industry analyst rated MCD as a “buy” suggesting low levels of risk for investors 3. Low cost menu that will attract customers. 4. Continued focus on corporate social responsibility reducing the impact to the environment and community linkages. 5. Growth of the fast food industry

Weight

Rating

Weighted Score

.12

3

.36

.11

4

.44

.10

3

0.3

.08

3

.24

.16

3

.48

.08

2

.16

.10

3

0.3

.09

3

.27

.11

3

.33

.05

2

0.1

Threats 1.Strength of competition 2. Health professionals and consumer activists accuse McDonalds of contributing to the countries health issue oh high cholesterol, heart attacks, diabetes and obesity. 3. Worldwide economic crisis negatively impacted MCD’s key competitors 4. Growing awareness among the medical and scientific community as well as the public of the direct relationship between diet and health 5.MCD continues to encounter lawsuits brought about around the word by activists and irate parents of children less than 18 years of age Overall Rating

1.0

2.98

Conclusion: A weighted score of 2.98 shows that MCD’s response on opportunities and threats is quite above average.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon V. Internal Factors Evaluation Matrix Key External Factors

Weight

Rating

Weighted Score

Strength 1. MCD has been listed among the “top 40 companies”

.08

3

0.24

.12

4

0.48

.11

4

0.44

.10

4

0.40

.09

3

0.24

1. High official in MCD turnover including the top leadership top management. 2. MCD’s consolidated decline in total asset hold by the company from among the amounting $29.02 B in 2005.

.08

3

0.24

.11

4

0.44

3. Unhealthy food image of MCD

.12 4

0.48

.10

3

0.30

.09 1.0

3

0.27 3.53

2.Strong financial performance by geographic segment between 2008 and 2009 3.strong global reach and brand recognition 4. MCD’s plan to win focuses on people product, place, price and promotion. 5. Large market capitalization amounting of $59.8 B in food service industry. Weakness

4. Legal action related to health issues.

5. The position of controller stands vacant. Overall Rating

Conclusion: A weighted score of 3.53 shows that MCD’s response on strength and weakness is quite above average.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon VI. Competitive Profile Matrix MCD

YUM BRANDS W

R

WS

R

Financial Position

0.25

4

1

Market Share

0.2

3

Customer Loyalty

0.1

Advertising

SBUX R

WS

3

WS 0.75

2

0.5

0.6

2

0.4

1

0.2

3

0.3

2

2

0.2

0.13

4

0.52

3

0.39

3

0.39

Innovation

0.12

3

0.36

3

0.36

3

0.36

Global Expansion

0.2

4

0.8

3

0.6

3

0.6

Total

1

3.58

0.2

2.7

2.25

Conclusion: Based on CPM, YUM BRANDS is the strongest competitor among the two companies resulting 2.7 of its own weighted score.

VII. Company’s Competitive Position MCD’s competitive position is quite good. Several strategies that have been implemented in an effort to repair the failing business was good, the company continues to underperform from the last quarter of 2009.

VIII. Problem Statement MCD’s in food industry experienced of decrease in their income in 2009 due to unhealthy food image of MCD here are some evidences: 1. A joint research study recently conducted at the University of California, Barketey and Colombia University concluded that he presence of fast food restaurant near in school have growing epidemic of obesity among young adolescents. 2. The documentary film supersize me, which argued that MCD menu was contributing to the obesity epidemic and that the company provided no nutritional about its product.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon IX. TOWS MATRIX SAMPLE Strength 1. MCD has been listed among the “top 40 companies” 2.Strong financial performance by geographic segment between 2008 and 2009 3.strong global reach and brand recognition 4. MCD’s plan to win focuses on people product, place, price and promotion. 5. Large market capitalization amounting of $59.8 B in food service industry.

Weakness 1. High official in MCD turnover including the top leadership top management. 2. MCD’s consolidated decline in total asset hold by the company from among the amounting $29.02 B in 2005. 3. Unhealthy food image of MCD 4. Legal action related to health issues. 5. The position of controller stands vacant.

Opportunities 1. International expansion. 2. Low cost menu that will attract customers. 3. strong global reach and brand recognition 4. Continued focus on corporate social responsibility reducing the impact to the environment and community linkages. 5. Growth of the fast food industry

SO S2, S5. O1, O5

WO W1,W5, O2

Market Penetration

Market Development

S4,O4

W3,W4,O3

Market Development

Product Development

Threats 1.Strength of competition 2. Health professionals and consumer activists accuse McDonalds of contributing to the countries health issue oh high cholesterol, heart attacks, diabetes and obesity. 3. Worldwide economic crisis negatively impacted MCD’s key competitors 4. Growing awareness among the medical and scientific community as well as the public of the direct relationship between diet and health 5.MCD continues to encounter lawsuits brought about around the word by activists and irate parents of children less than 18 years of age

ST S1,S4,T1,T2, T4

WT W3,W4,T2,T4

Product Development

Product Development

Internal

External

STRATEGIES:

Product Development.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon X. Internal – External (IE) Matrix

EFE TOTAL WEIGHTED SCORE (EFE = 2.98)

High (3.0 – 4.0) Medium (2.0 – 2.99) Low (1.0 – 1.99)

IFE TOTAL WEIGHTED SCORE (IFE = 3.53) Strong Average Weak (3.0 – (2.0-2.99) (1.0 -1.99) 4.0) I II III IV

V

VI

VII

VIII

IX

Grow and Build- Cells I, II, IV: INTENSIVE, INTEGRATIVE Hold and Maintain- Cells III, V, VII: MARKET PENETRATION, PRODUCT DEVELOPMEN Harvest or Divest- Cells VI, VIIIIX: RETRENCHMENT, DIVESTITURE Grow and Build- INTENSIVE AND INTEGRATIVE STRATEGY

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon XI. Grand Strategy Matrix IFE – 3.53 EFE – 2.98

1 2 3 4 5 6 Weak Competitiv e Position

Rapid Market Growth Quadrant II Quadrant I Market Development 1 Market Development Market Penetration 2 Market Penetration Product Development 3 Product Development Horizontal Integration 4 Forward Integration Divestiture 5 Backward Integration Liquidation 6 Horizontal Integration 7 Concentric Diversification

1 Retrenchment 2 Concentric Diversification

1 Concentric Diversification 2 Horizontal Diversification Conglomerate 3 Diversification

3 Horizontal Diversification Conglomerate 4 Diversification 4 Joint Venture 5 Divestiture 6 Liquidation Quadrant III Quadrant IV Slow Market Growth

Conclusion: Based on Grand Strategy Matrix MCD is quite Strong Competitive Position.

Strong Competitiv e Position

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon XII. Summary of Strategies Strategy Options

TOWS

IE

GSM

TOTAL

1. Forward Integration

1

1

2

2. Backward Integration

1

1

2

3.Horizontal Integration

1

1

2

1. Market Penetration

1

1

2

2. Market Development

1

1

2

1

1

3

1

1

Integration Strategies

Intensive Strategies

3. Product Development

1

Diversification Strategies 1. Concentric Diversification 2.Conglomerate Diversification 3. Horizontal Diversification Defensive Strategies 1. Joint Venture 2. Retrenchment 3.Divestiture 4.Liquidation

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

XIV. RECOMMENDED ALTERNATIVE COURSES OF ACTION PRODUCT DEVELOPMENT MCD’s can add a new product development that may offer to the customers to fulfill their needs and wants every day with a nutritional value.

Functional Area

Objectives

Strategy

Time Budget Frame

Marketing

To achieve 6% increase in revenue

Advertising & Promotion

1-2 years

Finance

To pay the interest expenses according to product development that is to add a new menu item with a healthy food.

Improving the food in the menu item.

1-2 years

Expanding the new innovated product worldwide.

2-3 years

Operations To make food fast available to its customers at a healthy food menu and very low competitive price but to get profit as well by reducing the cost of the product.

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

Year

Revenues

2006

20,895.2

2007

22,786.6

9%

2008

23,522.4

3%

AVERAGE INCREASE Financial Projection Sales Forecast 2009 = 23,522.4 x 1.06 2010 = 24,933.74

Increase/Decrease

6%

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon

XV. MCDONALD’S INCOME STATEMENT MCDONAL'S INCOME STATEMENTS YEAR ENDING DECEMBER 31 2008 2009 REVENEUS Sales by company operated restaurant Revenues from franchised restaurants

2010

2011

$16,560.90 6,961.60

$17,554.55 7,379.30

$18,607.82 7,822.06

$19,724.29 8,291.38

Total Revenues OPERATING COST AND EXPENSES Company-Operated restaurant expenses Food and Paper Payroll and Employee benefits Occupancy and other operating expenses Franchised restaurant-occupancy expenses Selling, general and administrative expenses Impairment and other charges, net Other operating (income) expense. Net

23,522.50

24,933.85

26,429.88

28,015.67

5,586.10 4,300.10 3,766.70 1,230.30 2,355.50 6.00 -165.20

5,921.27 4,558.11 3,992.70 1,304.12 2,496.83 6.36 -175.11

6,276.55 4,831.60 4,232.26 1,382.37 2,646.64 6.74 -185.62

6,653.14 5,121.50 4,486.20 1,465.31 2,805.44 7.14 -196.76

Total Operating Cost and Expenses Operating Income Interest expense-net of capitalized interest of $12.3,$6.9 and $5.4 Non-operation (income) expense, net Gain on sale of investment Income from continuing operating before provision for income taxes Provision of Income taxes Income from continuing operations Income from discontinued operations (net of taxes of $ 34.5 and $101.9)

17,079.50 6,442.90

18,104.28 6,829.46

19,190.54 7,239.24

20,341.97 7,673.59

522.60 -77.60 -160.10

553.96 -82.26 -169.7

587.20 -87.2 -179.88

622.43 -92.43 -190.67

6,158.00 1,844.80 4,313.20

6,527.46 1,955.49 4,571.97

6,744.72 2,072.82 4,671.90

7,334.26 2,197.19 5,137.07

Net Income

$4,313.20

4,571.97

4,671.90

5,137.07

$3.83

$4.06

$4.30

4.56

3.83

4.06

4.30

4.56

Per Common share-basic: Continuing operations Discontinued Operations Net Income Per Common share-diluted:

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon Continuing operations Discontinued operations Net Income Dividends declared per common share Weighted-average share outstanding-basic weighted-average share outstanding-diluted

3.76

3.99

4.23

4.48

3.76 1,625.00 1,126.60 1,146.00

3.99 1,722.50 1,194.20 1,214.76

4.23 1,825.85 1,265.85 1,287.65

4.48 1,935.40 1,341.80 1,364.91

2009

2010

2011

2,063,400

2,187,204

2,318,436

2,457,542.41

931,200 111,500 411,500 3,517,600 1,222,300 20,254,500 2,237,400

987,072 118,190 436,190 3,728,656 1,295,638 21,469,770 2,371,644

1,046,296 125,281 462,361 3,952,375 1,373,376 22,757,956 2,513,943

1,109,074.10 132,789 490,103 4,189,517.90 1,455,778.90 24,123,434 2,664,779.20

1,229,700

1,303,482

1,381,691

1,464,592.40

28,461,500

30,169,190

31,979,341

33,898,102

2,506,100 31,800

2,656,466 33,708

2,815,854 35,731

2,984,805.20 37,874.40

2,690,174 2,851,585 10,797,160 11,444,990 1,494,706 1,584,388 1,001,594 1,061,89.6

3,022,679.60 12,131,689 1,679,451.70 1,125,391.02

XVI – MCDONALD’S BALANCE SHEET MCD's BALANCE SHEET PERIOD ENDING 2008 Assets Current Assets Cash and Cash Equivalent Short Term Investment Net Receivables Inventory Other Current Assets Total Current Assets Long Term Investment Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deffered Long Term Asset Charges Total Assets Liabiliies Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Deffered Long Term Liability Charges

2,537,900 10,186,000 1,410,100 944,900

NORTHERN QUEZON COLLEGE, INC COLLEGE OF BUSINESS ADMINISTRATION Brgy.Comon, Infanta, Quezon Minority Interest Negative Goodwill Total Liabilities Stockholder's Equity Misc. Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stocks Capital Surplus Other Stockholder's Equity Total Stockholder's Equity Total Liabilities and SE

15,078,900

16,600 28,953,900 -20,289,400 4,600,200 101,300 13,382,600 28,461,500

15,983,634

16,942,652 17,959,211.20

17,596 18,652 19,770.87 30,691,134 32,532,602 34,484,558.12 -21,506,764 (22,797,169.5 -24,165,000 4,876,212 5,168,785 5,478,911.81 107,378 113,821 120,649.90 14,185,556 15,036,689 15,938,890.70 30,169,190 31,979,341 33,898,102