Report on mac donald final

Table of Contents
1. INTRODUCTION AND COMPANY BACKGROUND ................................................... 2
1.1. MISSION & VALUES................................................................................................... 2
PART I: EXTERNAL ANALYSIS ............................................................................................. 2
1. THE MACRO-ENVIRONMENTAL ANALYSIS ......................................................... 3
2. THE INDUSTRY ANALYSIS.......................................................................................... 6
2.1. COMPETITION ANALYSIS ...................................................................................... 6
PART II: THE INTERNAL ANALYSIS ................................................................................... 9
I. PRIMARY VALUE CHAIN............................................................................................. 9
II. SECONDARY VALUE CHAIN ACTIVITIES: SUPPORT ACTIVITIES............... 10
2.1. PRIMARY ACTIVITIES............................................................................................ 11
PART III: STRATEGIC ISSUES, PROBLEMS AND CHALLENGES .............................. 17
1.1. MCDONALD'S ANSOFF MATRIX.......................................................................... 20
Part IV: COMPANY BUSINESS STRATEGY....................................................................... 22
1. LOW PRICE AND LOW VALUE ADDED (POSITION 1) ....................................... 22
2. LOW PRICE (POSITION 2).......................................................................................... 23
3. HYBRID (POSITION 3) ................................................................................................. 23
4. DIFFERENTIATION (POSITION 4)............................................................................ 24
5. FOCUSED DIFFERENTIATION (POSITION 5) ....................................................... 24
6. RISKY HIGH MARGINS (POSITION 6) .................................................................... 24
7. MONOPOLY PRICING (POSITION 7)....................................................................... 24
8. LOSS OF MARKET SHARE (POSITION 8)............................................................... 25
9. EVALUATING STRATEGIC POSITION USING THE BOWMAN’S CLOCK..... 25
Part V: EVALUATION OF THE STRATEGIC OPTION FOR GROWTH AND
IMPLEMENTATION ................................................................................................................ 26
1. SFA MATRIX .................................................................................................................. 26
1.1. SAF Model of MacDonald’s ........................................................................................ 26
1.2. CONCLUSION............................................................................................................. 28
PART VI: REFERENCE ........................................................................................................... 29

1. INTRODUCTION AND COMPANY BACKGROUND
McDonald's is an American fast food company, founded in 1940 as a restaurant operated
by Richard and Maurice McDonald, in San Bernardino, California, United States. They
rechristened their business as a hamburger stand, and later turned the company into a franchise,
with the Golden Arches logo being introduced in 1953 at a location in Phoenix, Arizona.
McDonald's is the world's prime restaurant chain by revenue, attending over 69 million
customers daily in over 100 countries across the world approximately 36,900 outlets.
McDonald’s opened its first restaurant in the UK in 1974. It is still there today in Woolwich,
London. There are now 1,270 restaurants across the UK.
The first McDonald’s in the UK opened in Powis St, Woolwich in south east London. The first
three McDonald’s in UK are all former Burton’s shops. McDonald’s is not the biggest food chain
in Britain. There are now 1,249 McDonald’s in UK – not as many as either Costa (1,831) or
Greggs (1,671).
Although McDonald's is best known for its hamburgers, cheeseburgers and French fries, they
also feature chicken products, breakfast items, soft drinks, milkshakes, wraps, and desserts. In
response to changing consumer tastes and a negative backlash, the company has added to its
menu salads, fish, smoothies, and fruit.
The McDonald's Corporation revenues come from the rent, royalties, and fees paid by the
franchisees, as well as sales in company-operated restaurants. According to a BBC report
published in 2012, McDonald's is the world's second-largest private employer (behind Wal-Mart)
with 1.9 million employees, 1.5 million of whom work for franchises.
1.1. MISSION & VALUES
McDonald's brand mission is to be our customer’s favorite place and way to eat and drink. Our
worldwide operations are aligned around a global strategy called the Plan to Win, which center
on an exceptional customer experience – People, Products, Place, Price and Promotion. We are
committed to continuously improving our operations and enhancing our customer’s experience.
The objective of this report is to critically analyze and evaluate the strategic decisions that
McDonald’s India has taken since it began operations in UK.
PART I: EXTERNAL ANALYSIS
McDonalds has made a great comeback after having performed poorly for the last several years.
For the last several years its financial performance had been below expectations. However, as
soon as CEO Easterbrook took charge, the McDonalds story started reversing. Now, the fast food
brand’s performance is back on track and moving fast. McDonalds is targeting the Millennials.
However, its menu might need to be updated to suit their preference.
Still, McDonalds is the king of fast food world. Things might improve further given it focuses on
its target market.
Now we analysis those external factors which effects the company at two levels such as listed
and enumerated below.

1. The Macro-Environmental Analysis
2. The Industry Analysis
1. THE MACRO-ENVIRONMENTAL ANALYSIS
This is a PESTEL analysis of McDonalds. Since the fast food giant operates in a global
environment, its brand is influenced by several factors. These factors have an important bearing
on the brand’s sales and image.
Factor Main impacts Comments
Political
The global operations of
McDonald’s are
tremendous under
authority of a policy of the
separate state put into
practice by each
government. The
Company operates its
separate. The definite
markets concentrate on
various areas of anxiety
like various areas of
health and environment.
All these elements are
noticed keenly in the state
control of licensing of
restaurants.
But with the passage of time McDonald’s
is also affecting by the government
tensions between countries. For instance,
the United States’ relationship with the
United Kingdom has been strained as of
late. McDonald’s is an American
company. Complications amongst
governmental parties could shift current
trade agreements, creating a hostile
environment for McDonald’s to function
overseas.
Economic
The organizations in the
fast food industry have the
separate problems
concerning business
factors. It is required to
take out problems of
effects of economic
environment. In an
estimation of operations of
the company, the food
chains as McDonald’s be
likely to import the largest
part of the raw materials
to certain territory if there
is a delivery lack.
The recent economic recession was
incredibly disruptive for firms in many
industries, reducing revenues and profits
across the board, and decreasing
consumer demand for many goods and
services. However not all firms and
industries were adversely affected – some
actually saw revenue and profit
opportunities increase during the
economic downturn due to higher demand
– these tend to be firms and industries that
are seen to provide ‘value for money’, of
which the fast food industry is one.
Fast food restaurants can be seen as
imperfect substitutes for more traditional
restaurants;
McDonald’s continued to focus on its
more expensive standard menu options,
and actually increased marketing spend by
7%, as many companies cut back.

Socio-cultural
McDonald’s indulges a
special diversity of
customers with definite
types of persons. Also it is
noticed that the company
has given the markets like
the United Kingdom.
McDonald’s early stages
considerably valued set of
meal which offers a
certain degree of
excellence for the
corresponding market
where it works.
The growth of the coffee industry has led
McDonalds to develop a McCafe menu to
provide an alternative to Starbucks
Changing customer demographics mean
that McDonalds needs to meet the
changing demands such as the health and
price conscious nature of millennials.
In order to sustain demand and to increase
its sales, McDonalds will need to adapt
their menu choices accordingly to include
low fat choices
The continued concerns regarding obesity
have also meant that McDonalds has
needed to provide healthier choices for all
of its customers, and particularly children.
Technological
1) The impact of
Technological
factors: Less tech
but stronger
impact.
They also track their orders online and
make payments from their smart phones.
Companies have developed smart apps
that customers can use to shop from their
favorite brands
2) With the growing
importance of
technology for the
business world is
well known.
Technology is
virtually
everywhere.
Because it is at the
counter; it is inside
people’s pockets.
Apps have become especially famous
among the companies to attract customers
and sales. They have also become a great
tool to provide extra ordinary customer
service.

3) McDonald’s
makes a demand
for its own
commodities.
There are some
needs that
McDonald’s is
tending to concern
the younger
population more.
Game stains and
also toys in the
meal are offered
by the company.
Other expression
of such marketing
strategy is
noticeable in
advertising they
use. Operations of
McDonald’s have
significantly been
infused with new
technology
It is true that any brand can reach millions
of customers and engage them using the
social media. The brands like McDonalds
have a huge line of fans and followers that
follow it on the social media. Other big
brands have also developed great social
media strategies to engage their customers
Ecological/Environm
ental factors
Influencing
McDonalds
1. All around the
globe,
governments are
now focusing on
environmental
protection. The
focus is now on
sustainability. It is
not just a trend but
a change with a
long term impact.
The focus is not
just on brands but
on their supply
chains too. Brands
like Starbucks and
McDonalds are
focusing on having
environment
friendly and
sustainable supply
The environment friendly brands also
have a larger customer base. Such brands
are more popular among their customers.
Many of such brands that did not focus on
their environmental liability have suffered
a loss of reputation. It is why all the major
brands have a well-developed customer
sale recognition policy to handle their
environment related concerns.
Environment is a concern for all.
McDonalds too focuses on framing
policies that are more environments
friendly.

chains.
2. They may involve
charges of harm to
environment.
Some groups in
Hong Kong have
made activities to
make McDonald’s
privileges in Hong
Kong conscious of
the rather abundant
use of containers
of prolonged
polystyrene and
resultant abusing
by environment.
Legal factors
Influencing
McDonalds:
Because of these factors
McDonald’s is faced to
apply more secure
examination on their
corporate social liability.
As a whole it has
addressed to necessity of
the company to generate
its corporate position to a
more positive responsible
company.
If the legal environment of a nation is
favorable brands operate both safely and
profitably. Otherwise taxes and
compliance related factors can make it so
difficult that the brands find it impossible
to do business profitably. Slowly, the
Asian countries have started relaxing their
laws to invite foreign brands. Such an
environment will make it easier for brands
like McDonalds to earn their profits and
deliver their services. Poor state of law
also leads to the difficulties. Several
nations still do not have well development
employment laws. In such environments
employees may find themselves at the
receiving end
2. THE INDUSTRY ANALYSIS
To discuss the industry analysis, we have to view the competitive analysis such as
2.1. COMPETITION ANALYSIS
Analyzing competition is an important part of strategic position analysis. It is also important to
assess the strength of competition in a market, and try to understand what makes the competition
weak or strong.
I. A company should also monitor each of its major competitors, because in order to obtain
a competitive advantage, it is essential to know about what competitors are doing.

Porter’s Five Forces model provides a framework for analyzing the strength of competition
in a market.
It is not a model for analyzing individual competitors, or even what differentiates the
performance of different firms in the same market. In other words, it is not used to assess why
some firms perform better than others.
Here we discuss the theory to take the understanding about the external analysis by discussing
the Porter’s theory.
According to the Porter’s theory there are five factors playing the vital role which are listed and
enumerated below.
2.2. THE FIVE FORCES
Michael Porter (‘Competitive Strategy’) identified five factors or ‘forces’ that determine the
strength and nature of competition in an industry or market. These are:
1. Threats from potential entrants
2. Threats from substitute products or services
3. The bargaining power of suppliers
4. The bargaining power of customers
5. Competitive rivalry within the industry or market.
The Five Forces model is set out in the following diagram.

When competition in an industry or market is strong, firms must supply their products or services
at a competitive price, and cannot charge excessive prices and make ‘supernormal’ profits. If
they do not charge the lowest prices, firms must compete by offering products that provide extra
value to customers, such as higher quality or faster delivery.
When any of the five forces are strong, competition in the market is likely to be strong and
profitability will therefore be low. Analyzing the five forces in a market might therefore help
strategic managers to choose the markets and industries for their firm to operate in.
2.3. THE FIVE FORCES MODEL SUMMARIZED
The Five Forces model is summarized below, showing some of the key factors that help to
determine the strength of each of the forces in the industry or market.
These forces determine an industry structure and the level of competition in that industry. The
stronger competitive forces in the industry are the less profitable it is. An industry with low
barriers to enter, having few buyers and suppliers but many substitute products and competitors
will be seen as very competitive and thus, not so attractive due to its low profitability.
Force Main impacts Strength
New
Entrants
1) The ease with which new competitors can
enter the market if they see that you are
making good profits (and then drive your
prices down).
Weak2) The threat of new entry is quite high. If
anyone looks as if they're making a
sustained profit, new competitors can
come into the industry easily, reducing
profits.
Suppliers
The ability of suppliers to drive up the prices of
your inputs.
Moderate
Buyers
1) The strength of your customers to drive
down your prices.
Weak, slowly getting stronger
2) Buyer Power is strong, again implying a
strong downward pressure on prices.
Substitutes
The extent to which different products and
services can be used in place of your own.
Strong
Rivalry
The strength of competition in the industry.
Strong
2) Competitive rivalry is extremely high. If
someone raises prices, he or she will be quickly
undercut. Intense competition puts strong
downward pressure on prices.
By thinking about how each force affects you, and by identifying its strength and direction, you
can quickly assess your position.
You can then look at what strategic changes you need to make to deliver long-term profit.
2.4. CONCLUSION:

The global environment is full of possibilities. However, the after effects of economic recession
are still looming large. Dollar has grown stronger since the recession. Due to it the situation is
not very profitable for brands like McDonalds.
However, it must make better use of technology to serve its customers. Moreover, the social
factors are to be paid attention too. The health changes sweeping through the society have also
made it necessary that the focus is placed on menu. If the menu is simpler, the millennial
customers would be more satisfied. Otherwise, the threat of obesity is another major problem
that has changed the attitude of the customers towards brands like McDonalds.
The legal and economic factors might not be under McDonalds’ control but the brand must still
focus on sustainability. This is an important area where the brand’s focus must remain. It would
handle the CSR part responsibly since not just the government but the customers are also looking
keenly for who is friendlier to the environment.
PART II: THE INTERNAL ANALYSIS
To understand the internal analysis about the MacDonald’s UK the following things are under
debatable which are enumerated below.
1. THE CONCEPT OF THE VALUE CHAIN
A framework for analyzing how value can be added to a product or service has been provided by
Porter.
Porter (‘Competitive Strategy’) grouped the activities of a business entity into a value chain. A
value chain is a series of activities, each of which adds value. The total value added by the entity
is the sum of the value created by each stage along the chain.
Strategic success depends on the way that an entity as a whole performs, but competitive
advantage, which is a key to strategic success, comes from each of the individual and specific
activities that make up the value chain.
Within an entity:
I. There is a primary value chain; and
II. There are support activities (also called secondary value chain activities).
I. PRIMARY VALUE CHAIN
Porter identified the chain of activities in the primary value chain as follows.
INBOUND LOGISTIC OPERATIONS OUTBOUND LOGISTIC MARKETING AND SALES SERVICES

This value chain applies to manufacturing and retailing companies, but can be adapted for
companies that sell services rather than products. Most value is usually created in the primary
value chain.
1. Inbound logistics. These are the activities concerned with receiving and handling
purchased materials and components and storing them until needed. In a manufacturing
company, inbound logistics therefore include activities such as materials handling,
transport from suppliers and inventory management and inventory control.
2. Operations. These are the activities concerned with converting the purchased materials
into an item that customers will buy. In a manufacturing company, operations might
include machining, assembly, packing, testing and equipment maintenance.
3. Outbound logistics. These are activities concerned with the storage of finished goods
before sale and the distribution and delivery of goods (or services) to the customers. For
services, outbound logistics relate to the delivery of a service at the customer’s own
premises.
4. Marketing and sales. Marketing involves identifying, informing and attracting
customers within the target market(s) in which an organization competes. Marketing
involves coordinating the 4 P’s of the marketing mix in order to satisfy customer needs.
‘Sales’ describes the transactional process of customers placing orders for goods or
services and organizations fulfilling those orders.
5. Service. These are all the activities that occur after the point of sale, such as installation,
warranties, repairs and maintenance, providing training to the employees of customers
and after-sales service.
II. SECONDARY VALUE CHAIN ACTIVITIES: SUPPORT ACTIVITIES
In addition to the primary value chain activities, there are also secondary activities or support
activities. Porter identified these as:
1. Procurement. These are activities concerned with buying the resources for the entity –
materials, plant, equipment and other assets.
2. Technology development. These are activities related to any development in the
technological systems of the entity, such as product design (research and development)
and IT systems. Technology development is an important activity for innovation.
‘Technology’ also includes acquired knowledge: in this sense all activities have some
technology content, even if this is just acquired knowledge.
3. Human resources management. These are the activities concerned with recruiting,
training, developing and rewarding people in the organization.
4. Corporate infrastructure. This relates to the organization structure and its management
systems, including planning and finance management, quality management and
information systems management.

2. MCDONALDS VALUE CHAIN ANALYSIS
2.1. PRIMARY ACTIVITIES
1. Operations McDonald’s operates Company-owned and franchised restaurants. About
80% of McDonald’s restaurants are owned and operated by independent franchisees.
2. Conventional franchising involves franchisees paying rent and royalties on the
percentage of sales along with the payment of initial fees when opening a new restaurant.
In this type of franchising, McDonald’s Corporation owns the land and building or
secures a long-term lease for the restaurant location and the franchisee pays for
equipment, signs, seating and décor.
3. Developmental license involves licensees providing capital for the entire business,
including the real estate interest. In developmental license agreement no capital invested
by McDonald’s Corporation. Royalty is paid by licensee on the percentage of sales in
addition to initial fees upon the opening of a new restaurant or grant of a new license.
This structure of developmental license ownership is used by McDonald’s in more than
70 countries with a total of 5,228 restaurants.
4. Affiliates as another form of franchising refers to a limited number of foreign affiliated
markets. McDonald’s receives royalties from affiliates on the percent of sales. Japan
accommodates the largest numbers of affiliates with close to 3,100 restaurants.
SUPPORT
ACTIVITI
ES
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INBOUN
D
LOGISTI
C
OPERATIO
NS
OUTBOUN
D
LOGISTIC
MARKETIN
G AND
SALES
SERVIC
ES
PRIMARY ACTIVITIES

5. Outbound logistics. Macdonald’s restaurants operate in the following formats: sit-down
restaurants, drive-thru, counter-service outlets in food courts and ski-thru. The process of
obtaining meals in sit-down restaurant format is conventional process of dining out in a
restaurant and it involves a waiter or waitress taking order and delivering the food.
McDonald’s counter-service outlets, on the contrary, involve self-service.
6. Marketing and sales. McDonald’s uses print and media advertising extensively in order
to communicate its marketing message to the representatives of the target customer
segment. Company’s advertising budget in the US alone equaled to USD 1.42 billion in
2014. Along with print and media advertising, this amount was spent on sales
promotions, events and experiences and public relations.
7. Service. High speed of the provision of customer service is one of the main competitive
advantages of McDonald’s. However, attempts of the company to provide excellent
customer services contradicts its practice of paying minimum or slightly above minimum
wages to its employees….
3. MCDONALD’S COMPETENCY FRAMEWORK
THRESHOLD COMPETENCY CATEGORY
DISTINCTIVE /SPECIFIC
COMPETENCIES
CORE COMPETENCIES
1. Change Orientation
2. Communicates Effectively
3. Continuous Learning
4. Customer Focus
5. Drives to Excel
6. Holds Self and Others Accountable
7. Problem-Solving and Innovation
8. Teamwork and Collaboration
Company
operated
resturents
19%
Licensed to
forign affiliates
10%
Developmental
Licensing
14%
Conventional
franchising
57%
Operational formats of McDonald’s
restaurants
Company operated resturents Licensed to forign affiliates
Developmental Licensing Conventional franchising

THRESHOLD COMPETENCY CATEGORY
DISTINCTIVE /SPECIFIC
COMPETENCIES
9. Values and Respects Others
LEADERSHIP COMPETENCIES
1. Coaches and Develops
2. Maximizes Team Effectiveness
3. Maximizes Business Performance
4. Strategic Perspective
FUNCTIONAL COMPETENCY MENU
(ELECTIVE)
5. Job Knowledge
6. Leverages Resources
7. Decisiveness
8. Gathers and Uses Information
9. impact and Influence
10. Negotiation and Conflict Resolution
11. Uses Technology Appropriately
12. Vendor Management
4. VRIO FRAMEWORK
STRENGTH
VALUAB
LE
RAR
E
INIMITA
BLE
ORGANIZE
TO
CAPTURE
VALUE
COMPETITIV
E
IMPLICATION
S
PRODUCT PRICING/
Mix
Yes No Yes Yes
Sustainable
competitive
advantage
Brand Name Yes Yes No Yes
Sustainable
competitive
advantage
SUPPLY CHAIN Yes No No Yes
Temporary
competitive
advantage
Advertisement Yes No Yes Yes
Temporary
competitive
advantage
Customer service Yes Yes Yes Yes
Sustainable
competitive
advantage
STANDARDIZED
ROCESSES/CONSIST
ENCY
Yes No Yes Yes
Sustainable
competitive
advantage
Network infrastructure Yes Yes No Yes
Temporary
competitive
advantage
DELIVERY
/DISTRIBUTION
Yes No No Yes
Temporary
competitive
advantage

STRENGTH
VALUAB
LE
RAR
E
INIMITA
BLE
ORGANIZE
TO
CAPTURE
VALUE
COMPETITIV
E
IMPLICATION
S
TECHNOLOGY Yes No No Yes
Temporary
competitive
advantage
Leading market
position
Yes Yes Yes Yes
CHILDREN
CENTRIC MENU &
ENVIRONMENT
Yes Yes Yes Yes
Sustainable
competitive
advantage
Three of McDonald’s Resources / Capabilities give them a sustainable/sustained competitive
advantage:
 Product Pricing
 Standardized Processes and Consistency of their product
 Children Centric Menu and Environment
 Product Pricing
 Standardized Processes and Consistency of their product
 Children Centric Menu and Environment
 Product Pricing
 Standardized Processes and Consistency of their product
 Children Centric Menu and Environment
5. SWOT ANALYSIS
Even though McDonalds is the world's largest fast food restaurant chain and is ranked as ninth
on the world's most valuable brands but even then analysis must be acknowledged such as given
below.
MCDONALDS CORPORATION
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
 McDonalds
has built up
huge brand
equity. It is
the No. 1
fast-food
company by
sales, with
more than
31,000
restaurants
serving
 Core product
line out of line
with the trend
towards
healthier
lifestyles for
adults and
children.
Product line
heavily
focused
towards hot
 Joint ventures
with retailers
(e.g.
supermarkets).
 Social
changes -
Government,
consumer
groups
encouraging
balanced
meals, 5 a day
fruit and
vegetables.

burgers and
fries in
almost 120
countries..
food and
burgers.
 Good
innovation
and product
development.
It continually
innovates to
retain
customers in
the business.
 Seasonal
 Consolidation
of retailers
likely, so better
locations for
franchisees.
 Focus by
consumers on
nutrition and
healthier
lifestyles.
 The
McDonalds
brand offers
consumers
choice,
reasonable
value and
great service
 Quality issues
across the
franchise
network.
 Respond to
social changes -
by innovation
within healthier
lifestyle foods.
Its move into
hot baguettes
and healthier
snacks (fruit)
has supported
its new
positioning.
 Competitive
pressures on
the high street
as new
entrants
offering value
and greater
product
ranges and
healthier
lifestyles
products. E.g.
subway,
supermarkets,
M&S.
 Large
amounts of
investment
have gone
into
supporting
its franchise
network,
75% of
stores are
franchises.
 Intimidating
market
saturation that
may also lead
to problems in
advertising
new products
 Use of CRM,
database
marketing to
more accurately
market to its
consumer target
groups. It could
identify likely
customers
(based on
modelling and
profiles of
shoppers) and
prevent brand
switching.
 Recession or
down turn in
economy may
affect the
retailer sales,
as household
budgets
tighten
reducing
spend and
number of
visitors.
 Loyal staff  Fast rising  Strengthen its  Pressure

and strong
management
team.
and
competitive
market due to
which
company has
to face income
problems.
value
proposition and
offering, to
encourage
customers who
visit coffee
shops into
McDonalds.
groups -
environmental
.
 The Income
problems and
large
competition do
not let the
spectrum of
manufacture
rise into value
ones but it
makes to
expand a range
of low-cost
and speedily
made ones.
 The new
“formats”,
McCafe, having
Wifi internet
links should
help in
attracting
segments. Also
installing
children’s play-
parks and its
focus on
educating
consumers
about health,
fitness.
 McDonald’s is
also a low
inventive
company.
 Continued
focus on
corporate social
responsibility,
reducing the
impact on the
environment
and community
linkages.
 International
expansion into
emerging
markets of
China and
India.
In analyzing this company, the strengths, weaknesses, opportunities, and threats were inevitably
explored to better understand the current situation. This SWOT analysis shows us that although
there are numerous threats against the fast-food industry, McDonald’s occupies a relatively

strong position in the global marketplace. According to the five forces model, the strongest
competitive force is between rival sellers in the industry. This SWOT analysis shows the many
strengths that Mc Donald’s employs to keep itself at the top of the fast-food industry. Although
there are various weaknesses, these can all be turned around following the McDonald’s Plan to
Win.
PART III: STRATEGIC ISSUES, PROBLEMS AND CHALLENGES
In recent time McDonald’s has underperformed in comparison to previous year’s achievement.
Its revenue growth has been in the decline and prior to April 2003 store sales fall for 12 straight
months. It is believed that this situation is a result of several aspects that include an increase in
competition, poor management, bad marketing and lack of response to the changes in the needs
of franchises and customers.
In the early 1970s, the UK was the only market left untapped by McDonald's in Western Europe.
The reasons for the company's late entry into the country were high real-estate costs and the
prices of raw materials such as beef. Besides, the unpopularity of drive-in restaurants, which
were relatively unknown in Britain till the 1970s, delayed McDonald's entry into the UK...
ISSUES AND
CHALLENGES
FACED BY
MACDONALD’S
UK
REASONS STRATEGY
Rising Issues-
Customer Service
1. As years have progress many
issues have arisen for
McDonald’s but the greatest
is probably its poor customer
service. McDonald’s has the
lowest the customer service
ranking in the fast food
industry and is ranked even
lower on customer service
than the IRS.
1. McDonald's chief financial
officer Matt Paull said the
issues in the UK 'may take
longer to resolve'.
2. He added that the company
was seeking growth in UK
through new menu items
and improved
communication on food
quality, and said there were
no plans to cut marketing
spend.
3. McDonald's plans to
refranchise 50 of its outlets,
which had been franchised
in the past before being
bought up by the company.
It also aims to revamp up to
70 other restaurants this
year
4. The company reported a 6%
fall in quarterly global
profits to $735m (£415m).
5. It is in the third year of a
2. One reason for this is a high
employee turnover rate.
McDonald’s has the highest
employee turnover rate among
its competitors.
3. Another contributing aspect to
the poor customer service is
slow service at the drive-
through window.
Opposing
Viewpoints
While McDonald’s feels positive
about its newly implemented changes
the critics are rather skeptical.
Health Factor
1. All fast-food hamburger
chains, McDonald’s included,

ISSUES AND
CHALLENGES
FACED BY
MACDONALD’S
UK
REASONS STRATEGY
are forced to respond to the
shift in customer preferences
from high-calorie burger and
fries to healthier items such a
deli sandwiches and baked
potatoes.
turnaround plan that has
seen it attempt to refocus its
business around healthy
eating options, such as its
Deli Sandwich range, in
answer to criticism that it
has fueled the obesity crisis
in the West.
2. All the chains are expected to
be struggling for several years
to come to meet new
consumer health expectations
without compromising the
original menu items.
Competition
1. One of the major issues for
McDonald’s is it competitors.
Burger King is the second
largest hamburger fast-food
chain in the world and is the
number one competitor for
McDonald’s.
2. Wendy’s is the third largest
fast-food chain with 9,000
stores in 33 countries
worldwide. Wendy’s offers
several unique items including
the Frosty and Spicy Chicken
Sandwiches as well as
healthier items such as salads,
baked potatoes and chili.
3. Hardee’s is the fourth largest
fast-food chain in the nation.
It holds 2,400 locations in 32
states and 11 countries. In
2002 it reported 1.8 billion in
sales. Hardee’s greatest
strength is in its breakfast
menu which brings in 35
percent of its revenue..
4. Jack in the Box, another
major competitor in fast-food
industry, has of 1,850
restaurants in 17 states. In the

ISSUES AND
CHALLENGES
FACED BY
MACDONALD’S
UK
REASONS STRATEGY
fiscal year 2002 Jack in the
Box reported revenue of 2.2
billion dollars, which is up 4.7
percent from the previous
year.
5. Sonic yet another major
competitor owns 2,700
locations and reported in
2003, 2.4 billion in revenue
which is 6.2 percent increase.
Competitive
Forces
The quick-service sandwich industry
faces competitive pressures from a
number of forces
Substitute
Products
In addition to competition from rival
sellers in the industry, sandwich firms
also face intense competitive pressure
from firms in other industries selling
substitute products. The substitute
products for the fast-food industry are
probably some of the most diverse in
the world.
New Entrants
The threat of potential new entrants
and the bargaining power of suppliers
is not a significant competitive force
in the fast-food industry.
Occasionally, new entrants will come
along and compete with firms in the
fast-food industry and offer substitute
products.
Driving Forces
There are a number of driving forces
which have molded the current state
of the fast-food industry. In the
beginning, fast-food companies
typically focused on being the low-
cost provider and sought to expand
into as many markets as possible.
New Menu Items
Fast-food restaurants have, for the
most part, always been related to an
unhealthy lifestyle.
Strategic Moves
A number of competitors in the fast-
food industry have expanded beyond

ISSUES AND
CHALLENGES
FACED BY
MACDONALD’S
UK
REASONS STRATEGY
their traditional offering of generating
revenues from their fast-food
restaurants.
Strategic Groups
The fast-food industry is primarily
composed of national chain brands.
As a result, there are just a couple of
strategic groups associated with the
fast-food market. The major national
chain brands such as McDonald’s,
Burger King, Wendy’s, Hardee’s, and
Jack in the Box compete in markets
throughout the United Kingdom and
around the world.
Fast-Service
Over the past couple of years there
has been a growing trend in the
restaurant industry to provide
customers with a higher quality
product in a short amount of time.
These restaurants are typically
referred to as ‘fast casual’ or ‘quality
quick service.’
1.1. MCDONALD'S ANSOFF MATRIX
Existing Products New Products
Existing
Markets
Market Penetration Product Development
Consolidation
Withdrawal
Efficiency gain
hamburgers, cheeseburgers, chicken
products,
French fries, breakfast items, soft
drinks,
milkshakes and desserts.
More recently, it has begun to offer
salads, wraps and fruit.
Innovation in all products, Introduction of
new products (Brands)
Basic idea is to get more money from
existing customer.
Can be particularly good if using existing
resources, distribution channels etc.
New products could arise from R & D,
joint, ventures, buying in others peoples
products or licensing.
New Market Development Diversification

Existing Products New Products
Markets Uruguay
Venezuela
Yemen
This involves findings new markets for
existing products.
These could be new segments in
current markets (e.g. new age group) or
overseas markets.
CSF is markets attractive would the
firm have a competitive advantage in
the new markets , can barriers to entry
be overcome?
Pret A Manger
Chipotle Mexican Grill
This could be related to what we do at the
moment.(e.g. vertical integration ) or
unrelated (conglomerate diversification).
McDonald Corporation often uses Ansoff Matrix’s growth strategies, to focus on the firm's
present and potential products and markets & customers by considering ways to grow via
existing products and new products, and in existing markets and new markets.

Part IV: COMPANY BUSINESS STRATEGY
In order to elaborate the company business strategy, we have to understand some theories
regarding this in which one of the theory of “Bowman's Strategic Clock (Strategic Positioning)”
which is given below.
Bowman’s Strategic Clock is a model that explores the options for strategic positioning – i.e.
how a product should be positioned to give it the most competitive position in the market.
The purpose of Bowman's Strategic clock is to illustrate that a business will have a variety of
options of how to position a product based on two dimensions – price and perceived value.
Differentiation
Focused Differentiation
HIGH Hybrid
Low price Risky high
Margins
Low prices & Low
added value
Monopoly pricing
LOW Loss of market share
LOW HIGH
1. LOW PRICE AND LOW VALUE ADDED (POSITION 1)
Not a very competitive position for a business. The product is not differentiated and the customer
perceives very little value, despite a low price. This is a bargain basement strategy. The only
1
8
7
6
5
4
3
2
Perceivedvaluetotheconsumer

way to remain competitive is to be as “cheap as chips” and hope that no one else is able to
undercut you.
2. LOW PRICE (POSITION 2)
3. HYBRID (POSITION 3)
Not a very competitive position for
a business. The product is not
differentiated and the customer
perceives very little value, despite
a low price. This is a bargain
basement strategy. The only way
to remain competitive is to be as
“cheap as chips” and hope that no
one else is able to undercut you.
Businesses positioning themselves
here look to be the low-cost
leaders
in a market. A strategy of cost
minimization is required for this to
be successful. Profit margins on
each product are low, but the high
volume of output can still generate
high overall profits. Competition is
usually intense – often involving
price wars.
Involves some element of low price
(relative to the competition), but
also some product
differentiation. The aim is to
persuade consumers that there is
good added value through the
combination of a reasonable price
and acceptable product
differentiation. This can be a very
effective positioning strategy,
particularly if the added value
involved is offered consistently.

4. DIFFERENTIATION (POSITION 4)
5. FOCUSED DIFFERENTIATION (POSITION 5)
6. RISKY HIGH MARGINS (POSITION 6)
7. MONOPOLY PRICING (POSITION 7)
A differentiation strategy aims to
offer customers the highest level
of perceived added value.
Branding plays a key role in this
strategy, as does product quality. A
high quality product with strong
brand awareness and loyalty is
perhaps best-placed to achieve the
relatively prices and added-value
that a differentiation strategy
requires.
This strategy aims to position a
product at the highest price levels,
where customers buy the product
because of the high perceived value.
This the positioning strategy adopted
by luxury brands, who aim to
achieve premium prices by highly
targeted segmentation, promotion
and distribution. Done successfully,
this strategy
can lead to very high profit margins,
but only the very best products and
brands can sustain the strategy in the
long-term.
A high risk strategy that likely to fail
eventually. Business sets high prices
without offering anything extra in
terms of perceived value. If
customers continue to buy at these
high prices, the profits can be high. But,
eventually customers will find a better-
positioned product that offers more
perceived value for the same or lower
price. Other than in the short-term, this
is an uncompetitive strategy.

8. LOSS OF MARKET SHARE (POSITION 8)
9. EVALUATING STRATEGIC POSITION USING THE BOWMAN’S CLOCK
Where there is a monopoly in a market,
there is only one business offering
the product. The monopolist doesn’t
need to be too concerned about what
value the customer perceives in the
product – the only choice they have is
to buy or not. There are no
alternatives. In theory the monopolist
can set whatever price they wish.
Fortunately, monopolies are usually
tightly regulated to prevent them
from setting prices as they wish.
This position is a recipe for disaster
in any competitive market. Setting a
middle-range or standard price for a
product with low perceived value is
unlikely to win over many consumers
who will have much better options
(e.g. higher value for the same price
from other competitors).
Three of the positions (6, 7
and 8) are uncompetitive.
These are the ones where
price is greater than
perceived value. Provided
that the market is operating
competitively, there will
always be competitors that
offer a higher perceived value
for the same price, or the same
perceived value for a lower
price.

Part V: EVALUATION OF THE STRATEGIC OPTION FOR GROWTH AND
IMPLEMENTATION
1. SFA MATRIX
The SFA matrix was developed by Gerry Johnson and Kevan Scholes and is a tool to analyse
strategic possibilities. The acronym SFA stands for:
 Suitability: this is the extent to which the strategic opportunity is suitable for the
company.
 Feasibility: this is the extent to which the strategic option is feasible. This involves
looking at strengths and weaknesses that arise from an internal analysis.
 Acceptability: the acceptability of a strategic choice arises by examining at two
criteria: financial aspects and the extent to which the choice fits in with stakeholders.
1.1. SAF Model of MacDonald’s
An analytical and planning method, Situation Analysis Framework (SAF) is adapted from
the Logical Framework Approach (LFA) and the Objective Oriented Project Planning
(OOPP
"The major components of SAF are the following:
i. Stakeholders (traditionally referred to as beneficiaries); These are the people the
project is trying to involve and assist through its activities
ii. Development problem; Also sometimes labelled the grand-problem, this defines a
major undesired and negative situation affecting a large number of people. Thus, a

development problem can include a number of different problems and issues being
tackled by various projects.
iii. Project goal; This is a statement of the overall aim of the project. It describes what
the project aims to achieve by addressing the development problem.
iv. Main problems: These are major specific problems or the undesired situation the
project is specifically addressing. Main problems are derived from the development
problem. They are the major causes of the development problem, or issues related to
it.
v. Project objectives: Also known as immediate objectives, these indicate what the
project aims to specifically accomplish in relation to the main problems and as a
contribution to the achievement of the project goal.
vi. The problem tree: This important tool assists in the cause-effect analysis of a
situation. The problem tree is the starting point of SAF as all the other components
of the framework are derived from it.
vii. Focal problems: Often referred to as root-problems, these are factors causing part or
most of the main problem.
viii. Communication objectives: These indicate what the communication intervention
aims to accomplish, specifically in relation to the focal problem and as a contribution
to the achievement of the project goal.
ix. Communication Mode Design: This includes a series of steps through which the
Interaction groups, communication approaches, design specifications, media and
activities are selected and refined.
x. Outputs: These are the measurable results of one or more activities. These are what
the project activities are expected to produce so that the project can achieve its
objective.
In order to define them more effectively outputs have been divided into two categories:
quantitative and qualitative outputs.
 Quantitative outputs.
These are the physical results of the activities such as the number of workshops held and of
people trained, quantity of communication materials produced, for example, number of
booklets and flipcharts.
 Qualitative outputs,
On the other hand, are the expected results to be achieved as a result of the physical outputs.
These are intangible but still measurable results, for example, participants' satisfaction and
level of awareness reached. For instance, if the output is 20 extensionists trained in
interpersonal skills, the quantitative output will be the actual number trained and the
qualitative one will be measured by how well the trained extensionists have learned
communication interpersonal skills.
Activities: These are the tasks/actions to be performed in order to produce the output
needed to achieve the project’s immediate objectives.
Inputs: These are the human and material resources (such as money, equipment, materials,
personnel and training facilities) necessary to carry out project's activities meant to produce
the outputs thus assisting to achieve the objective.
Indicators: These can be compared to road signs that indicate to a driver whether he/she is
on the right road and how far he/she is from the final destination.

Means (or sources) of verification: These are the sources and nature of information
required to measure the indicators.
External factors (sometimes also referred to as Assumptions): These are variables that
are outside the control of the project management, but may determine the success or failure
of the project.
The diagram below summaries the logical linkages of the SAF components
"Use this logical relationship 'sequential chain' among SAF components as a checklist to
ensure that no element of the process is omitted and that all the linkages are consistent with
one another..."
The company needs to take several strategies for the improvement of the business. The strategies
are product development strategy, market development strategy and diversification strategy. The
SAF model can help to analyze whether the strategies are profitable for the company or not.
SUITABILITY ACCEPTABILITY FEASIBILITY
The new strategy can help to
overcome the situations which
are faced by the company.
The objective of the
shareholders is to grow the
business and more amount of
business.
the strategies will work in
the reality and it will
improve the business of the
company.
The company is not able to meet
the requirement of the customer.
New product development
strategy can help to attract more
customers.
Net strategies can fulfill the
expectation of shareholders by
growing and improving the
business
The company need not bear
huge amount of cost for the
implementation of strategy
The risk is also associated with
the implementation of
strategies is minimum because
the company has already
strong in the market.
It has already experienced
employees and strong
suppliers which can help to
implement the strategies
successfully.
1.2. CONCLUSION
From the above discussion and according to the market and analysis McDonalds’ have its worth
to do its objectives by own. It is capable to launch and offer new products plus services to the
public, McDonalds’ can enlarge its share by observing its worth.
Following are the points for strategies and Objectives, such as:
McDonalds should have “Order via Digital Screens” (On/Near Tables)
McDonalds should increase “Social Media Marketing Campaigns”
McDonalds focuses on “Vegetarian Meals and Salads”
McDonalds should focus “More Economical Price Products”
McDonalds should lunch “Order Customization”
McDonalds should focus on “Wheels on Meal”
Development Problem <===> Goal <===> Main Problem <===> Immediate Objectives
<===> Problem Tree <===> Focal Problems <===> Communication Objectives <===>
Communication Mode Design <===> Outputs <===> Activities<===>Inputs

PART VI: REFERENCE
1. Arnold, David (2003). Strategies for Entering and Developing International Markets. In
Mirage of Global Markets, the: How Globalizing Companies Can Succeed as Markets
Localize. Financial Time Prentice Hall, 2003.
2. Case Study of a Green Alliance. The Journal of Business Communication, Vol. 36
3. Crouch, A. (2004). Fast-Food Business Strategy. The Raw Prawn Blog
4. Howard, T. (1999). The Over-Arching Strategy-McDonald’s Global Brand Strategy Task
Force. Brandweek, November 8, 1999
5. Livesey, S. (1999). McDonald’s and the Environmental Defense Fund: A
6. McDonald’s Corporation (2008). About McDonald’s/McDonald’s History (online).
Available at: http://www.mcdonalds.com/corp/about.html. Retrieve April 28, 2008
7. McDonald’s Corporation UK (2008). Eat Smart/What’s On/Good News (online).
Available at: http://www.mcdonalds.co.uk/ Retrieve April 28, 2008
8. Moore, Jeri & Esther Thorson (1996). Integrated Communication: Synergy of
Persuasive. Mahwah, NJ: Lawrence Erlbaum Associates.
9. Moore, Jeri (1993). Building brands across markets: Cultural differences in brand
relationships within the European Community. In D. Aaker & A. Biel (Eds.), Brand
equity and advertising. Hillsdale, NJ: Lawrence Erlbaum Associates.
10. Edström. A., & Galbraith, J.R. (1977). Transfer of managers as a coordination and
control strategy in multinational organizations. Administrative Science Quarterly, 22,
June, 248-263.
11. Egelhoff, W.G. (1984). Patterns of control in U.S., U.K. and European multinational
corporations. Journal of International Business Studies, Fall, 73-83
12. Fatehi, K. (1996). International Management, New Jersey: Prentice Hall.
13. Geringer, J.M. & Hebert, L. (1989). Control and performance of international joint
ventures. Journal of International Business Studies, Summer, 235-253
14. Hodgetts, R.M., Luthans, F. (1994). International Management, New York: McGraw-Hi
15. Richard L.Daft,(2005).Organization Theory and Design, 8th edition, Thomson ,south-
western(Chapter 10)
16. Mead, R. (1994). International Management. Cross Cultural Dimensions, Oxford:
Blackwell.
17. http://baike.baidu.com/view/4676.htm
18. http://www.mcdonalds.com/
19. Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press.
New York.
20. Rowe, Mason, Dickel, Mann, Mockler; "Strategic Management: a methodological
approach". 4th Edition, 1994. Addison-Wesley. Reading Mass.

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