Cheryl WilcoxDale BrockwayMarc CamerlinBelisa Anzalotti

McDonald’s

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’sStrategic 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?

Wendy’s 36%*

Burger King 32%McDonald’s 21%

Best-tasting burgers?

Burger King 42%Wendy’s 32%McDonald’s 17%

* Percent of respondents

SWOT Analysis - Weaknesses

• Declining market share

• Weak product development

• Disgruntled franchisees

• Quality and taste of products

• Slowed revenue and income growth

Income TrendsReturns

6.7%

4.5%

14.7% 14.4%

9.1%

17.7%

12.3%

10.2%

16.6%

13.0% 14.6%

14.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1994 1995 1996 1997

Revenue Net Income Profit margin

Stock Price

$48 $50$58

$48

$63

$84

$-

$20

$40

$60

$80

$100

1996 1997 1998

McDonald's Growth S&P Industry Growth

• International expansion

• Only serving 1% of the world’s population

• Growing dining-out market

SWOT Analysis - Opportunities

• Mature/overstored industry

• Strength of competition

• More health-conscious consumers

• Changing demographics

• Fluctuation of foreign exchange rates; Economies

SWOT Analysis - Threats

1997 Competitor Financial Comparison

6.8%

4.0%

7.4%

4.4%

8.7%

16.3%

0%

5%

10%

15%

20%

Revenues Net I ncome

McDonald's 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

Cheryl WilcoxDale BrockwayMarc CamerlinBelisa Anzalotti

McDonald’s