McDonalds Analysis

Business Report

Introduction:

'I m Loving it' a tagline known to every segment of the market, let it be kids, youngsters or elderly people. McDonalds is a global foodservice industry, which began its operations in 1940's. The concept of McDonalds was introduced by Brother Dick and Maurice McDonald, by opening a 'hamburger stall' in San Bernardino, California. They introduced an idea of selling their food cheaper than competitors by saving on the car hops and persuading customers instead to go to a counter to order their food. This concept helped in faster turnaround of the customers. This innovation proved successful and popular among the customers. McDonalds became pioneer in their industry by adopting 'Fordist' approach to the production of hot food. They focused on burger cooking as a production line rather than a kitchen task. The staff of McDonalds was committed to one task at a time. Mr. Ray Kroc came across McDonalds brothers burger, he had never seen so many people served so quickly than those at the McDonald's store. He was quite impressed by the speed of service that they used in catering their customers. Kroc suggested McDonalds brothers to open more outlets of their stall, but they refused as they were quite busy with their own store and were not in a position to open any store further. Kroc volunteered to run a new outlet himself, by paying them royalty for using their concept of business. McDonald's brother agreed for the same and a new McDonalds retail outlet was opened, which was a franchisee by nature.

Kroc was a person with aggressive and risk taking attitude. He realized that small things were often valued more by customers than some of other things. He introduced a concept of Cleanliness in his store. He termed cleanliness not only a symbol of hygiene but it also showed its customers that the business cared about detail. He started growing his business and started giving franchisee to other people. With the help of Ted Turner, Kroc visioned that the key success of McDonald's expansion rests on offering franchises.

The major domestic growth of McDonald's in USA began in 1960's, as there was a demand of cheap takeaway food. Through the franchisee concept, McDonald's made a move for a worldwide success.

Today the Company operates in more than 117 countries worldwide, serving more than 50 million customers per day. The company's retail outlets are either owned by the company or by franchisees. The company focuses on delivering high quality and value to its customers through its services, product range and constant quality check of its products.

Mission:

'McDonald's aim is to be the leader in the Quick Service Restaurant (QSR) industry by maximizing Profits and through our Principles of QSC & V (Quality, Service, Cleanliness & Value) consistent with the needs of our Customer, Employees and Community.' (corporate website)

Values:

'McDonald's mission is to be their customers' favourite place and way to eat - with inspired people who delight each customer with unmatched quality, service, cleanliness and value every time.' (corporate website)

Core Competency of McDonalds:

Core competency of McDonald's lies in providing fast food at a competitive price to its customers, focusing on delivering best value for money for its customers. It's speed for delivering food, quality, cleanliness are few of its core competencies.

McDonald's Industry analysis:

Industry analysis for McDonald's has been done with the help of the Michael Porter's five forces model. This model brings into picture five forces which determine the competitive intensity and its attractiveness in the market. This analysis highlights the facts that affect the ability of the company in serving its customers and generating profits through the sale. The change in any forces requires a company to re-assess the market place.

Intensity of Rivalry among incumbent firms:

McDonald's operates in a highly competitive industry, with large brands operating under the industry. The companies compete on the basis of the quality of the products, speed of the service and the variety of food. With strong brands such as Burger King, KFC, Wendy's, Subway and local restaurants and brands operating within different countries gives a tough competition to McDonalds. In a broader perspective the competition that is faced by McDonalds also includes quick service eating joints, pizza parlors, coffee shop, fast food centers, coffee shops, street vendors. According to the 10-K report of McDonalds the US restaurant industry is composed of 575000 restaurants having annual sales of about #370 billion. McDonalds in USA accounts for 2.4% of restaurants operating in US generating 8.1% of the sales. McDonalds operates in 117 countries having about 6262 company owned restaurants and 26216 franchised restaurants.

KFC is one of the one biggest competitor of McDonalds, having its operations in 108 countries with 5162 outlets operating in US and 11102 units operating across the globe. KFC is working on the same standards of McDonalds, except that KFC specializes in chicken food. KFC is a leader in chicken segment of the world.

McDonalds faces intense competition from local brands and local suppliers across the nation of its operations. Thus, the intensity of competition within the industry of its operations is very high.

Industry Growth:

Fast food industry has been marked with high growth rate, with the changing preferences of the customers, fast food industry has seen a tremendous growth in recent years. The industry had seen a slow down in growth recently with the economic crisis that had hit the world, but the industry has picked up its growth slowly. In 2008, the global fast food industry growth was marked by 6.6% with a value of $154.7 billion. The industry is expected to grow to $200 billion by 2013, with an increase by 29.3% since 2008.

Product differences:

Each firm operating in this industry are marking their existence by delivering differentiated products to its customers. Companies are adding value to their offerings by differentiating their product variety. Different firms operating in this industry focuses on specializing in their product offerings example, KFC specializes in chicken offerings and McDonalds specializes in burgers and Subway specializes in fresh baked footlongs