McDonalds

The McDonalds Story - Genesis

The story of McDonalds started in 1954, when its founder Raymond Kroc saw a hamburger stand in San Bernardino, California and envisioned a nationwide fast food chain. Kroc proved himself as a pioneer who revolutionized the American restaurant industry. Today McDonalds is the worlds largest fast food chain serving 47 million customers daily. McDonalds is now one of the most valuable brands globally, worth more than $25 billion. The Golden Arches and its mascot Ronald McDonald have gained universal recognition. Though the company has roots in the US, McDonalds today has become an accepted citizen of the world. Year 1955 1957 Events Ray Kroc opens his first restaurant. McDonalds Corporation is created Quality, Service, Cleanliness and Value (QSC & V) becomes company motto 1963 1965 1968 1974 1996 Ronald McDonald makes debut The company goes public Big Mac is introduced` Happy Meal is launched McDonalds opens in India, the 95th country

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion McDonald's primarily sells hamburgers, cheeseburgers, chicken, French fries, breakfast items, soft drinks, shakes and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, wraps and fruit.
1|Page

McDonalds

COMPETITORS The principle competitors of McDonalds are BURGERKING and SUBWAY. Subway has already over taken McDonalds in Europe, which has been the fetcher of highest foreign currency for McDonalds. Since nowadays it is also treated as a place for hangout by youngsters, others food services like KFC, DOMMINOS etc are also being a strong competition to it, especially in India. Competition analysis

CEO
James Alan Skinner (born 1944 in Illinois) is the President and CEO of McDonald's Corporation. Skinner began his career with McDonalds in 1971 as a restaurant manager trainee in Carpentersville, Illinois Prior to becoming CEO, Skinner was President and Chief Operating Officer of the McDonald's Restaurant Group with corporate management responsibility for Asia, Middle East and Africa (AMEA), and Latin America. Prior to that, he was responsible for McDonalds Japan Limited, their second-largest market.

2|Page

McDonalds

Skinner held numerous positions in the U.S. Corporation, including Director of Field Operations, Market Manager, Regional Vice President and U.S. Senior Vice President and Zone Manager. He never graduated from college but served ten years in the United States Navy. Jim Skinner currently serves as Vice Chairman and Chief Executive Officer for McDonalds Corporation. Vice Chairman was a position that he held before becoming CEO in November 2004. Beginning his career with McDonalds in 1971, Skinner quickly advanced and held many leadership positions during his 39 years with McDonalds. These positions include President and Chief Operating Officer of the McDonald's Restaurant Group and President and Chief Operating Officer of McDonald's - Europe, Asia, Pacific and Middle East. Along with his current positions, he also serves on the Board of McDonald's Corporation, Ronald McDonald House Charities, the Walgreen Company and ITW (Illinois Tool Works). His greatest accomplishment, the Plan to Win strategy, managed to flip the company by reversing its falling profits. This strategy focused on improving on locations that already existed instead of expanding and building more. They hoped to achieve faster, friendlier service; tastier food; a more appealing ambiance; better value; and sharper marketing. By shifting strategies, Skinner and his team were able to increase McDonalds total sales, increasing from $50.1 billion in 2004 to $70.1 billion in 2008. Because of his outstanding leadership, vision and execution, Chief Executive Magazine named Jim Skinner 2009 CEO of the Year. In 2009, Skinner was considered one of "The TopGun CEOs" by Brendan Wood International, an advisory agency.

SWOT ANALYSIS
STREANGTHS a) McDonalds have strong brand recognition in the market. b) It provides and delivers customers according to their expectations. Hence the customers intimacy with the brand. c) It goes for product innovation and efficiently comes out with new products which are loved by all customers. d) It maintains strong supplier integrity. WEAKNESSES

3|Page

McDonalds

a) Low depth and width of product, i.e. McDonalds have a much selected range of products. b) Long queues and congestion. OPPORTUNITIES a) McDonalds has the opportunity to expand its business to 2 tier and 3 tiers cities. b) McDonalds can enter into the breakfast segment. THREAT a) The changing customers lifestyle and food taste can prove to be a major threat to the business. b) The increased competition from local fast-food outlets.

FOREIGN MARKET
McDonalds have strong market all over the world. Its total revenue in 2010 was 24.1 billion out of which 45% of the revenue came from foreign markets. Its main market is Europe (U.K, Germany, France). Out of the 45% foreign income, 25% of it came from Europe itself with highest sales being in U.K. The business has also taken up its speed in Asian and Middle East countries like Russia, India, and Australia etc.

BENEFITS OF GOING GLOBAL

a) b) c) d) e) A strong market place and recognition. A huge increase in sales and revenue from 14.7 billion in 2007 to 24.1 billion in 2010. Worldwide customers and new areas to venture and expand. New opportunities to explore new segment of market and go for new product lines. Led to innovation of wider range of products.

GOALS
a) b) c) d) To serve good food in a friendly and fun environment To be a socially responsible company To provide good returns to its shareholders To provide its customers with food of a high standard, quick service and value for money

I think that McDonalds has lived up to its mission goals because the customers satisfaction, strong market reputation talks about its grand success. The environment prevailing in McDonalds is indeed very friendly and lively and refreshing. It serves the society well and is a socially responsible brand. The expansion of the company all over the world indicates the
4|Page

McDonalds

confidence of the investors on its performance and with the profit McDonalds earn. It makes sure the shareholders receive their due dividend. It maintains a high standard and healthy food variety and provides the customers with their full value of their money.

ORGANISATIONAL STRUCTURE
It follows a divisional structure. It is a centralized firm with the head being in U.S.A. 80% of its outlets all over the world are run by franchisees. Divisional structure of organisation divides the organization based on the products, geographical areas. The market strategy used by the McDonalds basically revolves on the concept of 5Ps of Marketing. The 5 Ps used are

1. Product 2. Place 3. Price 4. Promotion 5. People

Product:

Product is the physical product or service offered to the consumer. Product includes certain aspects such as packaging, guarantee, looks etc. This includes both the tangible and the non-tangible aspects of the product and service.
5|Page

McDonalds

So their market strategy suggests that they are functional and their products vary according to the location, peoples taste and income. Thus the divisional structure is best suited for the firm.

Place:
The place mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonalds outlet.

Price:

People: How to converge the benefits of internal and external marketing?

McDonalds understands the value of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald continuously does Internal Marketing. This is important as it must precede external marketing. This includes hiring, training and motivating able employees. This way they serve customers well and the final result is a happy customer. The level of importance has changed to be in the following order (the more important people are at the top): 1. Customers 2. Front line employees 3. Middle level managers 4. Front line managers
6|Page

McDonalds

The punch line Im loving it is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers

Promotion:

The various promotion channels being used by McDonalds to effectively communicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending.

People:
McDonalds understands the value of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. McDonald continuously does Internal Marketing. This is important as it must precede external marketing. This includes hiring, training and motivating able employees. This way they serve customers well and the final result is a happy customer. The level of importance has changed to be in the following order (the more important people are at the top): 5. Customers 6. Front line employees 7. Middle level managers 8. Front line managers

7|Page

McDonalds

The punch line Im loving it is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers

HIERARCHY
The company follows a flat hierarchical system with the head being the CEO himself. This is very efficiently working for the firm as it is a centralized one. The different division heads come under the CEO and the managers of the respective franchisees come under them. The managers head the employees of their respective franchisees. This type of hierarchy allows the company to spread and do business worldwide. Its worldwide name and market reputation speaks loudly about the successful implementation of such hierarchical system. The following flow chart shows the hierarchical system of McDonalds:

8|Page

McDonalds

CONTROL METHODS USED BY MANAGERS:

Organisational control refers to the systematic process of regulating organizational activities to make them consistent with the expectations established in plans, targets and standards of performance. The control method used by Mc Donalds firm is the feedback control model. As the top managers in Mc Donalds controls the system that consists four key steps. First they establish standard, measure problem, compares the problem and then makes correction. ESTABLISHING STANDARDS OF PERFORMANCE: The managers set a particular goal to achieve their targets. They set a turnover range to achieve within stipulated time keeping the quality of the products and customers into conatraint.

MEASURE ACTUAL PERFORMANCE: The company prepares formal of qualitative performance measurements that managers review daily , weekly or monthly..These measurements are related to the standard set and then the further measures are taken.The performance measurement includes employee participation , level of customer satisfaction etc... COMPARE PERFORMANCE TO STANDARDS: The managers use to identify whether actual performance meets , exceed or fall short of standards . TAKE CORRECTIVE MEASURES: Managers determine measures to be taken and the necessary changes to be made.These include encouraging employees to work hard, redesign the production process of fire an employee.

9|Page

McDonalds

The control methods used by the Mc Donalds i.e. Feedback control method are correlaleted with the structures and strategies of Mc Donalds. As being a fast food giant customer satisfaction is the basic aim of this firm , this controlling technique is quite apt. As we all know Mc Donalds is the biggest food giant all over the world. But despite of these facts it is not much successful with the rural segment of the society i.e. Tier 2 and Tier 3 sectors. So this firm should come with creative policies to expand its market in this section of society with certain corrective controlling methods.

SUCCESS JOURNEY:
With all the measures and innovative ideas by the top level employees clearly shows that this food giant is the one of the most successful firm on the globe. With its chain of restaurant surviving all across the world in the different cultural aspect and different mindset of people shows its dynamism and its flexible measures suiting the change.

10 | P a g e