Macdonalds Business Analysis

Historically McDonald's has been a successful company, evaluate the strategies it developed in the recent past and compare its performance with that of its major competitors & Using theoretical models such as BCG or GEC matrices to illustrate your answer analyse the current position of the firm.

McDonalds, one of the largest food service companies in the world, and also one of the major players in the UK food retailing industry, officially known as McDonalds Restaurants LTD (UK). The company is wholly owned by the McDonalds Corporation based in the USA, dominating the market via their brand image with quality food, value for money and fast service. In the early 1990's McDonalds, the long-time leader in the fast food wars faced a crossroads situation. Domestically, sales and revenues were flattening as competitors influenced the market. McDonalds encountered new challenges, in addition to its traditional competitors - Burger King, Taco Bell & Wendy's.

Going back to the early 1940's, where Ray Kroc was so impressed by 2 brothers, who had opened a burger restaurant that relied on standardised preparation to maintain quality - The Speedee Service System. McDonalds used controlled experimentation to maintain the McDonalds experience, simultaneously expanding the menu appeal to a broader range of consumers. E.g. 1976 McDonalds introduced a breakfast menu as a way to more fully utilize the physical plant, then in 1980, rolled out the chicken McNuggets. Despite these innovations, McDonald's tremendous growth could only continue for so long.

McDonalds faced tough and heightening competition on several fronts. Traditional rivals such as Burger King & Taco Bell were eating into margins via promotions and value priority strategies. But McDonalds has always sustained prosperity due to willingness to innovate, even while striving to achieve consistency in the operations of its many outlets e.g. McSalads, chicken McNuggets & McLean Deluxe Sandwich, are examples of how they tried to appeal to a wider range of consumers.

At the end of 2000, McDonalds has 1,116 restaurants in the UK. Their main products are hamburgers, chicken sandwiches, French fries and beverages, but they have expanded their product portfolio to cover breakfast items & desserts. McDonalds retain their popularity through the concept of branding, the Big Mac is their flagship product but McDonalds also have collectable items with the children meals which appeals to the young cliental. With strong advertising campaigns to back up the brand image, McDonalds have an instantly recognisable logo.

McDonalds usually bases its television commercials around new products offered over a limited period of time, often coinciding with major sporting events. E.g. McDonalds was the official restaurant of 2000 Summer Olympics and launched an Australian menu, which included novelties such as boomerang shaped dippers. McDonald's memorabilia has become an even more collectable commodity with people bartering for items which were originally free.

Two main competitors in the UK, Burger King & KFC are also consistently launching new campaigns. KFC launched a number of advertising initiatives in 2001, which may help explain the renewed popularity of KFC. A Ј645 000 poster campaign was undertaken for popcorn chicken kids promotions included Pink Panther & Digimon giveaways. The company thus returned to Colonel Saunders icon to cartoon format to promote new line, such as Twister & Popcorn Chicken, having been replaced in recent years by well-known faces such as Tara Palmer Tomkinson. New TV campaigns for 2002 have once again ditched the Colonel and feature celebrity voices, starting with Samuel. L. Jackson, urging viewers to 'Give in to the chicken...'

TV adverting for Burger King tends to be concentrated on their flagship - Whooper burger along with their flame-grilled technique. Burger King also gave away CD-ROMS in its children meals for its summer promotion, Pop:BK. Cinema tie-ins have recently included Rugrats in Paris The Movie and the Lord of The Rings: The Fellowship of The Ring. Burger King also promoted BBC TV's award winning Walking with Dinosaurs series.

'The burger chain was chosen by the BBC as it had a more wholesome image the McDonalds'

Jossie Sekulin, Brand Manager of Walking with Dinosaurs

RESTAURANT COMPANIES RANKED BY SALES

Company Symbol Price Change Market Cap P/E

MCDONALDS CORP MCD

31.65 -0.41% 39.79B 20.04

YUM! BRANDS INC YUM

45.86 -0.09% 13.43B 19.48

DARDEN REST DRI

28.11 1.44% 4.42B 20.01

STARBUCKS CORP SBUX

58.06 -1.01% 23.22B 60.92

Whitbread Group PLC Private - View Profile

BRINKER INTL EAT

33.83 0.03% 2.92B 26.27

WENDYS INTL WEN

36.21 -0.44% 4.13B 16.25

KFC Corporation Private - View Profile

The following statistics show how well McDonalds is doing at present:

Direct Competitor Comparison

MCD PVT1 PVT2 YUM INDUSTRY

Market Cap: 32.86B N/A N/A 10.51B 41.14M

Employ¬ees: 418,000 32,0001 7302 71,550 2.11K

Rev. Growth (ttm): 11.30% N/A N/A 8.00% 5.60%

Revenue (ttm): 17.74B 1.12B1 500.00M2 8.55B 108.14M

Gross Margin (ttm): 30.75% N/A N/A 24.47% 18.82%

EBITDA (ttm): 4.17B N/A N/A 1.49B 5.27M

Oper. Margins (ttm): 17.00% N/A N/A 12.69% 3.37%

Net Income (ttm): 1.66B N/A N/A 642.00M -11.00K

Pvt1 = Burger King Corporation (privately held)

Pvt2 = Doctor's Associates Inc. (privately held)

YUM = Yum! Brands Inc

Industry = Restaurants

1 = As of