Key Internal Factors Strengths 1. Globally recognized brand name. 2. Largest U.S.

restaurant chain in international markets with approximately 17,000 stores in 120 countries. 3. Consumption of food away from home accounted for 48.5 percent of total expenditures on food. 4. Total assets of $29 billion in 2006. 5. McDonalds serves nearly 54 million customers daily. 6. McDonalds beat out Starbucks, Burger King and Dunkin Doughnuts in a coffee taste test according to the Consumer Report. 7. In 2006 McDonalds return nearly $5 billion to shareholders through shares acquired and dividends paid. 8. McDonalds sells fast food in Disneys theme parks around the world as well as Ocean Park in Hong Kong. 9. In 2006, revenue and operating income reached a record high of $21.6 billion and $4.4 billion respectively. 10. McDonalds increased the companys dividends by 50 percent, raising the annual $0.67 per share to $1.00 per share totaling about $1.2 billion. Weaknesses 1. Lack of menu development 2. Publics perception of quality, service, and cleanliness at McDonalds units suffered over the past years. 3. McDonalds ranked last out of 25 fast-food chains in a recent study of drive thru order accuracy. 4. McDonalds 5 year average sales are 8.14 compared to 8.89 for the industry. 5. Operations loss in Islands of Jamaica, Barbados, Bermuda. 6. Long-term debt remains over $8 billion. 7. Low personnel productivity. 8. Yum Brands return-on-assets of 13.56 compared to McDonalds 9.74. 9. Website not user friendly. TOTAL

Weight 0.08 0.15 0.06 0.10 0.02 0.04

Rating 4 4 4 4 4 4

Weighted Score 0.32 0.60 0.24 0.40 0.08 0.16

0.05

0.20

0.02

0.08

0.12

0.48

0.04

0.16

0.03 0.08 0.08 0.02 0.01 0.02 0.01 0.05 0.02 1.00

2 2 2 2 1 2 1 2 1

0.06 0.16 0.16 0.04 0.01 0.04 0.01 0.10 0.02 3.32

General Strategy for 3 years 1. GET INTERNATIONAL We already know that McDonald's has extensive operations throughout the world with a large presence in China, Japan, Australia, Europe and Latin America. The Latin American operations are all under the control of a regional franchisee, Arcos Dorados /quotes/zigman/4725620/quotes/nls/arco ARCO -4.51% . So I am not saying that McDonald's needs to expand internationally. Rather it needs to satisfy the yearning for international tastes at home here in the United States. The company made a strategic decision in 2006 to divest itself of its majority holding in Chipotle Mexican Grill /quotes/zigman/395806/quotes/nls/cmg CMG -0.89% . In retrospect, I think that McDonald's should have kept that operation. Redesigned menus met the demand for healthier quick service meals in the last decade by introducing salads, more chicken dishes, wraps and other items. Now I believe McDonald's needs to spice up its menu by developing new offerings or differentiating its existing menu items to incorporate TexMex/Latin; Oriental; Indian and Russian flavors in a more aggressive and permanent manner. 2. VERTICAL ACQUISITIONS As I mentioned before, I thought that the company should have held its investment in Chipotle. Similarly, I believe that McDonald's didn't give Boston Market enough attention and patience. McDonald's also provided the seed money for Coinstar's Redbox movie and game rental kiosks. As you can see, the company wasn't afraid of investing in new or interesting concepts in the past. I think that it is time that McDonald's uses its strong balance sheet and cash flow to do so again. Specifically, I think that McDonald's should expand into small concepts with an eye on invading the strategic territory of Starbucks /quotes/zigman/20720/quotes/nls/sbux SBUX -1.74% and Panera Bread /quotes/zigman/65095/quotes/nls/pnra PNRA -1.08% . Here are some suggestions for acquisition: Au Bon Pain, Atlanta Bread Company; Einstein Noahs Bagels /quotes/zigman/106575/quotes/nls/bagl BAGL -1.40% ; and, Caribou Coffee .

2. McDonalds Japan Growth Strategies The Company is going to focus its management resource to below areas:

optimization of restaurant portfolio strengthen franchise business stronger marketing brand extension

optimization of restaurant portfolio Ongoing restaurant portfolio re-engineering is steadily yielding results, including restaurant development centered on large-scale & drive-thru restaurants, strategic closure of 433 restaurants, and relocation of 633 restaurants. Amid IEO market contraction the Company expanded its visit opportunity share, proving that our restaurant portfolio re-engineering is delivering positive results. Based on above, the Company is going to further optimize restaurant portfolios based on below 3 principles: stronger focus on opening of Gold Standard drive-thru restaurant Comparison with other store type clearly indicates that Gold Standard drive-thru restaurant has the competitive edge. Stronger focus on opening of Gold Standard drive-thru should bring significant increase in sales & profitability and build a solid base line. additional strategic restaurant closure In FY2013, the Company will strategically close 110 restaurants, in addition to routine closures. Further, many of our restaurants are still limited in sales, unable to provide full-menus and cannot expect to deliver long-term growth. Therefore, in addition to the planned 110 closures in FY2013, the Company will carefully review shareholders value, market share, relationship with land owners and continue with

strategic relocation & closures. acquisition of high-quality real estates Possession of land & building and building (on leased land) at promising areas are opportunities for enhancing restaurant profitability. Based on Company comparison, possession of land & building brings additional profit of approximately 6% or 1% with building ownership. As you can see, opportunity to acquire high-quality real estates is not small at all. strengthen franchise business The Company continues to implement aggressive franchising to enhance management efficiency and maximize investment at nationwide restaurants. We are going to speed up this process with a goal of reaching franchised restaurant ratio of 70% by the end of 2013. In addition, role of company-operated restaurants will be clarified to define best franchise ratio for stronger base line and execute franchising measures accordingly.
stronger marketing Analysis of sales structure revealed two types; one that generate profit and appropriately enhance product and brand value, and the other that yield temporary sales & profit but do not provide sustainable sales. Since the 3rd quarter, the Company has already began shifting investments to primary measures namely Value, Menu, Breakfast and Convenience to build sustainable sales with healthy returns (= business base line). VALUE: In addition to 100yen Mac, we will introduce the popular Nugget 15-pieces (started from 3rd quarter) and implement actions such asMcLunchthat contribute to weekdays lunch time sales to enhance overallvalueperception. MENU: Number of limited-time products will be optimized and balance with guest count capturing measures to achieve sales & profit growth. In addition, focus will be made on unique menus that only McDonalds can offer, such as Big Mac, French Fries, Chicken McNuggets. Aggressive brand campaign and store-front promotions will be leveraged to enhance business base line. BREAKFAST: Breakfast market will be positioned as strategic and primary investment target, and breakfast campaigns will be implemented throughout the year. Coffee Sampling has already begun from October 2012 and succeeded in capturing new customers (total of 3 million cups offered in 12

days). CONVENIENCE: Convenience will be enhanced through Gold Standard drive-thrus mentioned earlier and the following brand extension.

brand extension In addition to the ongoing business structure re-engineering process, the Company is going to make full-scale deployment onMacDelivery ServiceandMcCafe by Barista, as part of McDonalds brand extension. MacDelivery test is being conducted from last year at restaurants, delivering strong results. Starting from 4th quarter this year, this service will be expanded mainly at metropolitan cities, followed by nationwide deployment. Test restaurants confirmed positive results from McCafe by Barista as well, and our plan is to launch a full-scale nationwide deployment mainly at suburb drive-thru restaurants.

Needs Product Development 1.Experience 2.Product variety and 3. Price